10 TOP TIPS FOR CO-PROS

WILL THE CREDIT CRUNCH MAKE 2009 THE YEAR OF THE CO-PRODUCTION? 10 TOP TIPS FOR SUCCESSFUL CO-PRODUCTION

With production budgets predicted to tighten in the year ahead, co-production is a much more attractive proposition than belt-tightening. Most film-makers already run a pretty tight ship when it comes to budgetary control so when it comes to cutting costs it’s the production values and on-screen quality which are likely to feel the pinch. And down the line this will affect the film’s marketability and distribution prospects with the result being felt in the “back-end” share of net profits.

As well as the obvious benefits of reducing production costs through the pooling of resources, international co-production can unlock access to the Aladdin’s cave of international co-production treaty finance. At the same time, the discipline of being forced from the outset to consider the requirements of international markets and foreign language versions of the film is likely to pay dividends when it comes to seeking distribution.

So if co-production is such a no-brainer why aren’t more film makers doing it? The answer is that co-production, especially if treaty finance is involved, needs a little more thought and care at the contractual stage if you want that co-production agreement to stay in the filing cabinet longer than a pre-nup agreement after a celebrity wedding.

Here are my top 10 tips for navigating the choppy legal waters of international co-production.

1. Know your co-producers! We’re talking due diligence here! It’s surprising how many film-makers are hazy about the correct legal identity of their co-producers/financiers. You should establish the precise legal entity with which you are contracting by carrying out company searches and making other enquiries. This is particularly important given the tendency for SPVs (special purpose vehicles) to be set up for individual productions. These are invariably shelf companies with no assets. You may be jointly and severally liable to financiers/broadcasters for any breach of warranty of your co-producer and if it has no assets guess who they will come after! Just as well you thought about this at the outset and remembered to get that guarantee/indemnity from the parent company!

2. Financiers’ security requirements. On a similar note, if financiers are going to cashflow their contributions to the budget they will need comfort that the production will be fully funded and they will get delivery of the film. Will that comfort be in the form of a completion guarantee and is there provision in the budget for this? Will any of the financiers require a charge over the film? Check out the requirements of the financiers early on so that their requirements can be built into the contractual documentation.

3. Structure. Consider, before instructing your lawyer/drawing up the contractual documentation, how the various contracts with producers and financiers will be structured. If the producer is contracting separately with financiers/broadcasters will there be an inter party /mutual funding agreement under which all parties will undertake directly to the other parties to provide their contribution to the production? Will all financiers be party to this or just the major financiers?

4. Treaty/government funding requirements. If treaty or other government finance is involved make sure that you familiarise yourself with what you and your co-producer(s) will need to do in order to ensure eligibility for the funds and cover this off in the contracts. Yes, the document setting out the criteria is not going to be a page-turner but you will be glad you’ve read it when you realise that you’re not going to be able to use that much archive footage and you need substantial revisions to the treatment/script. There may also be requirements/restrictions relating to division of copyright and rights of exploitation which may need to be reflected in the contractual documentation.

5. Distribution/pre-sales. If a distribution advance or pre-sale licence income is being used to fund the production make sure there is not going to be a conflict between the rights and territories being granted to distributors/pre-sale licensees and the rights which may be granted to co-producers (including any holdbacks on exploitation which may be required by financiers/broadcasters).

6. Language versions, delivery material and delivery dates. Be clear as to how many versions of the film there will be and the delivery materials that will need to be delivered to each stakeholder and when. Be aware of any editing/versioning which may be necessary to render the film suitable for its particular market (having regard, amongst other things, to any material of cultural or religious sensitivity).

7. Editorial control, creative approvals and credits. It is crucial to consider from the outset and provide in the contracts who will exercise editorial control and the creative approvals each of the parties will have at the various stages of the production. Where editorial control is joint set out a procedure for resolving deadlock –it’s always easier to agree this when the parties are still on speaking terms rather than after a dispute has arisen! Take the opportunity to set out the agreed financier/co-production credits at this stage and save yourself those panicked calls/emails (or some of them at least!) when the delivery date is looming.

8. Financial Provisions. It goes without saying that there will be a detailed cashflow and budget and that the cashflow of the various contributions to the budget should be specified. The parties will need to agree the commissions and distribution expenses which may be deducted from Gross Receipts, what proportion of their investment in the production will be recouped from Net Receipts and what their percentage share of Net Receipts will be. The agreement will also need to detail provisions for accounting, reporting and auditing including any collection account arrangements.

9. Copyright and distribution rights. Ownership of copyright and distribution rights should be clearly set out and should reflect any treaty/government funding requirements.

10. Responsibilities and obligations of the co-producers. It should be clear from the contract and the documents scheduled to it precisely which obligations will be undertaken by each of the co-producers. This may sound obvious but it’s surprising how many co-producers don’t commit their understanding of the other party’s obligations to writing until they’re exchanging emails blaming each other for what’s gone wrong!

© Forte Law 2009. All rights reserved.

The above article was first published on Broadcastnow.co.uk (with an edited version being reproduced in Broadcast) in February 2009. The above tips are general guidelines and should not be regarded as a substitute for legal advice on any particular agreement.