Lawyers who represent successful clients in the entertainment industry will, sooner rather than later, be called upon to draft or edit agreements regarding the services of those clients. Examples include agreements for an on-air personality to appear in a TV show, agreements for a musician to record songs for a record album, and agreements for a celebrity to endorse someone else's products or services. While the particulars of these agreements may vary widely, they raise certain common issues, and it is these issues-in-common which are the subject of this article.
What is Your Leverage?
The first and foremost issue has nothing to do with how good the lawyer is; it has a lot more to do with how in-demand the client is. We usually call this element "leverage. " Leverage means nothing more than whether the client/personality is being hungrily sought after by the other party (the "suitor", let's call it) or, on the other hand, is sitting silently by the telephone most of the day waiting for someone to call. Put otherwise, who wants whom more in the particular scenario? If the client is really in demand, it is relatively easy for his or her lawyer to look like a genius in negotiating the "deal." Conversely, if the client is barely making an impression as an in-demand personality, there is only so much the negotiating lawyer can do to improve upon the typical "take it or leave it" deal terms in the suitor's first draft. As a concrete example, you can imagine how nice it is to hear that my client has two - or even three - suitors simultaneously seeking his/her services for the same time-period. With apologies to my fellow entertainment lawyers for blowing their cover, it is this element of leverage which is, far and away, the key to success or failure in negotiating an advantageous deal for the client.
Hot on the heels of, and often related to, the "leverage" calculation is the issue of whose lawyer should undertake the first draft. This question answers itself if the suitor is a big outfit with all kinds of form agreements (like a record label). On the other hand, if a first-time national TV producer wants one of my clients to put his or her series on the map by starring in it, it may be better for our side to frame the playing field on which the subsequent negotiations are going to occur. Also involved here, of course, is the factor that the drafting process is relatively time-consuming (i.e., it costs a lot of lawyer-hours at God-knows-what per hour) compared to the editing process. Also coming into play is that it may be in the client's interest to let the suitor have the first crack at drafting to give our side a measure of how sophisticated and well-represented the other side may be.
Now, once we have the parties and their relative leverage and resources in hand, it is obviously necessary to determine what kind of agreement we are negotiating: Is it, for example, an agreement for:
- the client's active services;
- his or her endorsement of a product or service; and/or
- a mere license of his or her "name and personality"?
It may have elements of all three. But no matter what specific kind of agreement it is, there is one cardinal rule that any good entertainment lawyer should always follow:
ALWAYS SLICE UP (AND, CREATIVELY, MAKE UP) THE MAXIMUM TOTAL OF VALUABLE RIGHTS TO BE ASSOCIATED WITH THE CLIENT; AND LICENSE ONLY THOSE WHICH ARE NEEDED TO MAKE THE PARTICULAR DEAL.
Everything else, you save for another day. For example, let's say that the client, like many of my clients, is fortunate enough to be fluent and fun to listen to in both English and Spanish. If the TV producer/record label/consumer brand that wants to associate with the client really only has the English-speaking consumer in mind, limit the rights you license to that language group. Keep the Spanish-language rights in the same "suitor-category" for another day, another suitor, and another paycheck for the client. Similarly, if the suitor is interested in North America only, it would be careless to license worldwide rights. These slices of rights are areas where a good entertainment lawyer can be most creative and most useful in maximizing the client's revenue potential. When I lecture about these things, I always say that you should slice the total salami of rights as thinly as possible; stop creating new categories only when you can begin to "see through" the slices, if you know what I mean.
Common Considerations
As noted above, there are any number of considerations common to each type of agreement that a celebrity client might be asked to consider. One is the question whether the client should obligate himself personally or only through a "loan-out" corporation that the client may establish to wheel and deal in his or her talents and services. While some ramifications of this choice (for example, tax consequences) are beyond the scope of this article, others - like the fact that the client will want to be insulated from having his or her personal assets attached in litigation - are certainly easy to fathom. Generally, and especially given the ease, low cost and prestige factors of having a loan-out corporation, it is advisable for the client to establish one. Other common elements are the language and territorial rights discussed above. Still others might be the length of the term of the agreement, the range of media it covers (Does it require exclusivity against ALL other "television series," or can you negotiate for exclusivity in just "over-the-air" television -- that is, non-cable, non-satellite, etc.); whether the endorsement covers ALL restaurants (thus depriving your client of later endorsement deals for every type of restaurant) or can be limited to "fast-food" restaurants; ALL snacks or just "salty" snacks? Remember, with each kind of limitation on the suitor's rights in your client's services, a blank space has been created for future deals which carry the opportunity to fill that blank with another endorsement, leading role, medium or whatever.
Along with all of these opportunities for creative lawyering, of course, there are the more traditional "protective" aspects which most entertainment clients think of first when they consider whether they "really need" a lawyer to look over their next deal. These include matters like the talent's right to inspect the other side's books in a royalty-type deal; the schedule under which the client will be paid (the mostest the soonest is the bestest): the nature, territorial scope and length of any non-compete clauses (these are commonly called "re-recording restrictions" in the music industry); where the court or arbitration panel will be located in the event of litigation (Heaven forbid); and whether or not the talent gets a share if there is revenue from sidestream sources - like little dolls who look like your client which are sold at Christmas because the TV series is such a hit. But these are only a few examples.
Interestingly, the best indicator of success in negotiating a talent's deal - save only the "leverage" point covered at the outset - is the pool of creative thinking which the lawyer and client can develop. "Standard forms" are of only limited assistance in this regard, particularly with the neck-snapping pace of technological advance in the entertainment field (anyone remember vinyl records? Will anybody remember CDs in five years when music is routinely downloaded via the Internet?).
Whatever you do, don't stop slicing that salami of rights until you can see the other side's negotiator through the last slice you made.