You can hire a writer on a work-for-hire basis, to write a screenplay based on your idea, other material assigned by you, or to write the screenplay the writer pitched to you. “Work-for-hire” means that you are paying the writer and, as a consequence thereof, own the screenplay and its copyright outright. You must enter into a written Work-for-Hire Agreement prior to the writer commencing work so that the copyright to the writer’s work automatically vests in your production company or you. Note that the copyright will vest in the writer if you do not enter into the Work-for-Hire Agreement beforehand. The writer will need to execute an assignment that transfers her rights in the screenplay to you if you do not enter into the Work-for-Hire Agreement prior to the commencement of services. Obtain the proceeds of your writer’s services upfront because attempting to do it afterward puts the writer in the power position.
The Work-for-Hire Agreement is one of the more important agreements you will enter into as a producer because the entire production and your ability to distribute the completed picture hinges on the screenplay’s chain-of-title. Retain legal counsel to negotiate and draft the Work-for-Hire Agreement for you. No matter how tempted you are, do not let the writer start the writing process before the writer has signed the Work-for-Hire Agreement.
Writers who are members of the Writers Guild of America (“WGA”), the union professional writers join, are precluded from selling their screenplays to, or working with, companies that are not signatories of the WGA. A WGA signatory company is a production company that has completed the WGA Signatory Application and been granted signatory status by the WGA. By becoming a signatory, your production company agrees to adhere to the rules and regulations of the WGA. Your production company is restricted to only hiring WGA members; may not pay WGA members less than the minimum compensation prescribed by the WGA Basic Agreement; and is required to make pension and health contributions on behalf of the writers you hire (17% of the compensation paid).12 The aforementioned is not an exhaustive list. Please refer to the WGA’s Basic Agreement for all of the rules and regulations of the WGA, including the Schedules of Minimums for rates of pay.
You are free to hire whomever you like when you are not a union signatory. It is the union member who is precluded from working with you—not the other way around. Notwithstanding, I recommend against hiring union members since it is usually more trouble than it is worth unless the union member has “Financial Core” or “Core” status. Core union members have the ability to work with non-signatory companies, which may offer them lesser compensation and benefits than those guaranteed by their union. Hiring a Core member is like hiring a non-member of the union.
Non-Members of the WGA
A writer who is not a member of the WGA is likely to be one with little or no experience or has sold to and/or worked for companies that are not signatories of the WGA. You are not bound by the rules of the WGA when you engage the services of a non-member, as long as you are not a signatory of the WGA. You can pay a non-member as little as she will accept because she is not bound by the rules and regulations of the WGA.
Anyone willing to work for “free” or on “spec” (to be paid when, and if, you sell the screenplay) is someone you likely should not hire. Only the inexperienced and unproduced writer will invest and gamble his time to write a screenplay he will not own and control. All around, it is best if you do not waste your time and creative energy engaging non-professionals. Hire an experienced writer who knows how to deliver a production-worthy screenplay. Hiring a writer when you have limited funds is feasible if you are creative.
If you want to work with a more experienced writer and can afford it, hire a WGA member. Offer to pay her the low budget versus higher budget minimum rate, since you can make an argument for the fact you do not know the production budget prior to the screenplay being written. Remember that you have to make a pension and health contribution on behalf of the WGA writer equal to 17% above and beyond the compensation you pay under the work-for-hire agreement.
If hiring a WGA writer is beyond your financial means, hire a non-member of the WGA and pay what you can afford. Just be reasonable. It does you no good to pay the writer less than she needs to be able to deliver a quality screenplay in the time frame you require. A writer willing to work for less than $10,000 upfront is likely not worth your time and money.
Flat Fee versus Step Deal Compensation
It is always best to pay writers, whether they are members of the WGA or not, on a “step deal” versus a “flat fee” basis. The step deal gives you the option of deciding whether you want to proceed to the next step in the writing process with the writer you hired. In a $22,500 step deal, where you have agreed to pay the writer, $5,000 for the treatment, $10,000 for the first draft, $7,500 for the final draft, you only have to pay the writer the $5,000 for the treatment if you decide to not proceed with the writer beyond that initial step. If you decide to advance to the first draft of the screenplay, but decide not to go on to the final draft, you do not have to pay the writer the additional $7,500 for the last step. On the other hand, if you agree to pay the writer on a flat fee basis, you are contractually bound to pay the writer the entire $22,500 even if you want to fire the writer after the treatment.
I suggest that you offer the writer additional compensation in the form of a deferral if you have to pay the writer less than a competitive rate for his services upfront. Deferred compensation is usually paid either upon the commencement of principal photography or from the picture’s first revenues on a pari passu basis with the other parties receiving a deferral “Pari passu” means dollar for dollar. If you are paying deferred compensation to five other people, the writer, and the other four people will equally share all the revenues until each deferral is paid in full. For example, assuming you owe the writer a $100,000 deferral and the four others $5,000 each; when you receive $25,000 from the picture’s distributor, you pay the 5 parties $5,000 each. The result is that you pay in full four of the five parties and are left owing the writer an additional $90,000. Deferred compensation is usually paid prior to investor recoupment because it is considered part of the cost of production.
You can offer the writer a “Set Up,” “Box Office Bonus” and/or “Nomination/Awards Bonus,” which help sweeten the deal and do not cost you anything out-of-pocket. The Set-Up Bonus is paid when, and if, the screenplay is set up at a major or mini-major studio and maybe applicable against the purchase price. The Box Office Bonus is paid when the picture grosses beyond a negotiated threshold, e.g., $50,000, or when the motion picture’s total and domestic and foreign box office gross exceeds the production budget by three times. The Nomination/Award bonus gets paid when the screenplay is nominated or wins an award, e.g., $25,000 if the screenplay is nominated for an Academy Award and an additional $50,000 if it wins the Academy Award.
Net profits are paid to the writer once the picture is profitable. They are usually calculated by subtracting all of the costs incurred in the making, marketing and distribution of the picture, e.g., the production budget, financing costs, legal fees, bank interest expenses, production company overhead, collection costs, distribution expenses, union residuals, etc.
Writers are typically allocated 5% of the picture’s or producer’s net profits. Note that there is a difference between the picture’s and producer’s net profits. The producer’s net profits equal 5% of 50% of the picture’s revenues. Picture’s net profits equal 5% of 100% of the picture’s net revenues, which works out to 10% of producer’s net profits. I always allocate net profits from the producer’s share of the profits, since the producer only retains 50% of the picture’s net profits (the other 50% goes to the picture’s financers).
The screen credit of WGA members is governed by the WGA.13 Obviously, if you only hire one writer, then that writer is going to be entitled to the sole screen credit. But what if multiple writers worked on the screenplay? The WGA allows the writers to unanimously agree on their credits, as long as the screen credit adheres to the terms of the WGA.14 If the writers cannot come to an agreement, the WGA will step in and determine credit via its credit arbitration process.
The “Story By” credit is allocated to the WGA writer who wrote the treatment/story for the screenplay, but not the screenplay itself. The “Written By” credit is given to the writer of an original screenplay not based on source material; i.e., the screenplay is not an adaptation or based upon any pre-existing material. The “Screenplay By” is given to the writer of a screenplay based on source material. Any WGA writer you engage to rewrite a screenplay must rewrite 50% of an original screenplay and 33% of a screenplay based on source material in order to receive a screen credit.
You can allocate credit any way you like when you hire a non-member of the WGA to write your screenplay. Notwithstanding, since I find the WGA’s credit rules so equitable, I suggest that my clients implement them for credit determination. I include a clause in the Work-for-Hire Agreement that states that the screen credit will be determined pursuant to the rules of the WGA.
The writer’s credit appears on screen in the position just prior to the director’s credit, and in paid ads whenever the director or producers are credited, subject to the distributor’s customary exclusions, which exclude paid and award/congratulatory type ads.
The WGA may determine that the writer is entitled to “Separated Rights” if you paid the writer to write an original screenplay based on the writer’s pitch. “Separated Rights” are a bundle of rights that the WGA has determined belong to writers of original screenplays.15 Dramatic stage and publication rights are both included in separated rights, as is mandatory first rewrite of the writer’s original screenplay and WGA minimum compensation therefor; the right to meet with a senior production executive if the producer wants to replace writer; the right to reacquire the screenplay if it has not been produced within five years; and, WGA minimum payment for sequel theatrical motion pictures, television movies, and television series.
As far as the dramatic stage rights are concerned, the writer is entitled to a royalty-free license to produce the screenplay as a dramatic stage play after the producer’s holdback period of two years from the picture’s general release or five years from the purchase agreement.
A “holdback period” is a period of time during which the producer has exclusivity to exploit the right. If the producer exploits the dramatic stage rights prior to the expiration of the holdback period, then the writer has to be paid 50% of the minimum sum paid to authors under the Minimum Basic Contract of the Dramatist Guild of the Authors
League of America, Inc.
Regarding the publishing, the writer will be able to publish the script or novelization of the script subject to a holdback period equal to six months from the picture’s general release or three years from the date of the purchase agreement. The producer has to give the writer the opportunity to negotiate directly with the publisher to write a novel based on the screenplay if the producer publishes it during the holdback period. The producer has to pay the writer WGA minimum if the writer does not write the novel and it is published.
Remember, that the compensation and the rights guaranteed via the WGA Basic Agreement are the bare minimum to which WGA members are entitled. Sometimes industry standards are higher, as may be the case for passive payments for sequels and remakes.
It is industry standard to pay writers a “passive payment” on behalf of sequels and remakes based on their original screenplays. A “passive payment” is compensation that is paid to the writer when the producer exploits derivative works based upon the writer’s original screenplay. In other words, the writer is being paid the equivalent of a royalty for future uses of the screenplay that do not require his writing services. The writers cannot write the sequel and also earn the passive payment—it is one or the other. The industry-standard passive payment is 50% of the original purchase price and profit participation for sequels and 33 ⅓% of the original purchase price and profit participation for remakes. Notwithstanding, WGA writers who qualify for separated rights may not be paid less than the WGA minimum for sequels. WGA writers are entitled to passive payments on remakes, but the extent of the payment depends on the credit they receive on the remake pursuant to the WGA credit arbitration process, e.g., “Story By” credit. WGA members entitled to separated rights are paid passive payments on behalf of any TV series based upon their screenplay. Please refer to the WGA Basic Agreement for more information on passive payments.
Right of First Refusal
The writer of an original screenplay may want the Right of First Refusal to write sequels and remakes based on the writer’s original screenplay. When I grant the right, I make it contingent on the writer receiving sole credit. The terms for these subsequent writing services will not be negotiated until a later date, when you require the writer’s services. This is only a right of first refusal, which means that you are not bound to hire the writer if you cannot come to an agreement with her.
No Injunctive Relief
The writer is precluded from attempting to obtain injunctive relief if you breach the Work-for-Hire Agreement. An “injunction” is a court order that forces the opposing party to perform or cease performing an activity. Without this clause, the writer may be able to secure an injunction and halts the picture’s distribution if her credit is mistakenly excluded. A “No Injunctive Relief” clause states that the writer may only secure money damages from you if you breach the Work-For-Hire Agreement, but may not petition a court for injunctive relief.