Guideline To Co-Productions: A Practitioner’s Checklist
Dr. Gregor Schmid, LL.M. TaylorWessing, Berlin
Warsaw Film Festival 13 October 2006
Overview
1. 2. 3. 4.
Why Co-Produce? „The“ Co-Production: Types of Co-Productions Co-Productions: A checklist Questions
2
1. 2. 3. 4.
Why Co-Produce? „The“ Co-Production: Types of Co-Productions Co-Productions: A Checklist Questions
3
I. Why Co-Produce?
Variety of reasons: • • • • • Artistic Financial Access to subsidies Risk sharing Know-how
4
1. 2. 3. 4.
Why Co-Produce? „The“ Co-Production: Types of Co-Productions Co-Productions: A Checklist Questions
5
II. The Co-Production (1)
• • • Note: There is no such thing as „The“ Co-Production Def.: „Joint Production by two or more partners of a film“ Main factors: • Decisions and organisation • Economic risk „Real“ co-production „pseudo“ co-production / mere co-financing Co-Financing: • Financial contribution • Exploitation rights (e.g. theatrical distribution) - licence • (Potentially) certain approval rights • E.g.: negative pickup deal Consequences of qualification as co-producer: • Qualification for subsidies • Copyright (German law: sec. 94 Copyright Act – „producer“ owns a „neighbouring right“ in the film; statutory presumptions in favour of the producer) • Tax treatment
•
•
6
II. The Co-Production (2)
•
Main factors („ideal“ co-production): ♦ Decisions and organisation, e.g.: story, script, cast and crew - Co-decision - Influence on production - Control of photography, cutting & editing - Joint ownership of rights and materials (subsequent allocation to co-production partners common) Economic risk (esp. cost overruns)
♦
7
II. The Co-Production (3)
• Distinction: national / international / European CoProduction • Various consequences: • Applicabilty of bilateral/ mulitilateral coproduction treaties (e.g. European Convention on Cinematographic Co-Production: 3 coproducers) • Subsidies: applicability of EURIMAGES scheme • Tax issues: permanent establishment („Betriebsstätte“)
8
1. 2. 3. 4.
Why Co-Produce? „The“ Co-Production: Types of Co-Productions Co-Productions: A Checklist Questions
9
III. Co-Productions: A Checklist
• As there is no such thing as „the“ co-production, the following checklist provides guidance for the main issues to be considered when drafting a co-production agreement – not all issues necessarily to be regulated in each contract Basically: Covering all stages of production and explotation ♦ ♦ ♦ ♦ ♦ Development Pre-production Principal photography Post-production Exploitation (Copyright term!)
•
10
III. Check List Co-Production Agreement (1)
1. Legal status of co-production (“real” and “pseudo” co-production, tax law issues, “media decree”, coproduction as partnership or “Gemeinschaft“ respectively, ”no partnership“ clause) National/international/European co-production (structure of co-production, bilateral and European co-production treaties, preliminary and final certificate of origin) Essential elements (feature film, TV movie, series etc.; final screenplay, budget, director, cameraman, principle cast, nationalities of cast and crew, length, material, locations, PG (Parental Guidance) rating – e.g. prime time language version(s), time schedule – e.g. start of principal photography, delivery date) Chain of title, contribution of pre-existing rights and materials (story, script; “single picture license”/ remake right; contribution or retention of certain rights, different options of contribution and their consequences, evaluation and compensation of advances etc.)
4.
3.
4.
11
III. Check List Co-Production Agreement (2)
5. Financing plan and budget (financing plan; preliminary budget, final/audited budget, final account, contingency reserve, producer´s fee and its allocation, evaluation of other goods on own account (“Eigenleistungen”) and supplies (“Beistellungen”)) 6. Co-production contributions and financing (sources of financing: equity, reserves, subsidies, presales, minimum guaranties, gap financing,bank financing, funds or investors, securities in favour of banks/investors, evaluation of “reference funding” and other subsidies as co-production contributions, financing deadline and exit clause, safeguarding financial contributions (letter of credits etc.); sales estimates)
12
III. Check List Co-Production Agreement (2a)
Note re subsidies (1): German–Polish Co-Development Fund • • • • • • Funded by Polish Film Institute, Mitteldeutsche Medienförderung (MDM) and Medienboard Development of feature film, feature-length animation film, creative documentary, potentially TV productions (exception) 150 k € per year in total, 30 k € per project Producers’ share of co-development-costs: at least 30%, subsidy not to exceed 70% Subsidies are allocated to Polish and German producer proportional to their respective share in the total codevelopment costs Paid as limited recourse loan in three instalments, repayable by start of pp or sale of rights
13
III. Check List Co-Production Agreement (2b)
… German–Polish Co-Development Fund (contd.) • Application: joint application by at least one Polish and one German producer (having its seat in Saxony, Saxony-Anhalt, Thuringia, Berlin or Brandenburg) bound by a co-development-agreement. The share of each producer in the total development costs has to be at least 20%. One coproducer to be named as “responsible” partner. To be submitted (amongst others): • Treatment and one elaborate dialogue • Synopsis • Detailed budget (calculation) • Financing scheme • Signed co-development agreement Application form: www.medienboard.de/WebObjects/Medienboard.woa/wa/CMSshow/10993 38 Recent decision (13 Sept. 2006) : 3 projects, total of ca. 70 k €
•
• •
14
III. Check List Co-Production Agreement (2c) Note re subsidies (2): New German subsidy scheme 2007 - “Incentive for the strengthening of film production in Germany”: • Necessary primarily due to change in tax law which changed the framework for media funds new sources of financing needed • 60 mio. € per year, starting in 2007 • 15-20% refund on productions costs spent in Germany
15
III. Check List Co-Production Agreement (2d)
… New German Subsidy Scheme (contd.): • Criteria are currently being elaborated Presumably: • Feature film or documentary (not: TV) • Budget at least 1 mio. € (for feature film) • “Experienced” producer • German producer or co-producer (German coproducer to bear at least 20% of production cost) • Distribution agreement with “experienced” distribution company To be notified to European Commission (Art. 87 EC Treaty) Watch this space… www.kulturstaatsminister.de
16
• •
III. Check List Co-Production Agreement (3)
7. Cash-flow (cash-flow plan, maturity of co-financing contributions, discounting of bank financing of total budget, avals; hedging against currency risks; separate accounting; book keeping and reporting obligations, audit rights; securities) Realisation of production (artistic, technical, organisational, financial aspects; respective role of coproducers, fixing of responsibilities, who is responsible for completion, who is liable for violation of (time) limits, consequences of liability, completion bonds, authority and power of attorney, co-producer in charge (“executive producer”), commissioning of a production service provider, powers of coproducers including decision right, co-decision process, avoidance of stalemate situations, contracts with third parties; responsibility for acquisition of rights; definition of rights) Completion and material to be supplied (production schedule, necessary material to be supplied, language versions, storage, laboratory access letter etc.)
17
8.
9.
III. Check List Co-Production Agreement (4)
10. Assignment / allocation of rights (copyrights and neighbouring rights, property and access rights, split between territories – e.g. of exclusive and/or joint exploitation, split of exploitation rights, definition of exploitation rights – e.g. theatrical, video/DVD, VoD, NVoD, database right, dubbing and right to make changes, merchandising, ancillary printing rights, advertising and tie-ins, theme park etc.; certain times of exploitation; language versions) 11. Ownership of material (master negative and other material, e.g. proportional to co-production share) 12. Distribution of proceeds and profits/ recoupment plan (definition of recoupable costs/investments/loans, sources of revenue, determination of waterfall, pro rata pari passu and other models, participation and recoupment by third parties and subsidizing institutions; definition of proceeds/net proceeds; allocation of proceeds, residuals, etc.; (mutual) auditing rights)
18
III. Check List Co-Production Agreement (5)
13. Awards, prizes, reference moneys (allocation of awards, prizes, reference moneys) 14. Credit obligations and marketing (crediting co-producers, different crediting in different territories in opening and end credits, press material and other media; presentation credits, consideration of obligation of crediting of third persons (e.g. author of novel), subsidizing, WGA-regulations etc.; coordination of marketing, confidentiality and nondisclosure) 15. Exploitation and exploitation agreements (theatrical distribution agreements, territorial/worldwide distribution agreements, broadcasting licence agreements, approval rights, caps, etc., responsibility for repayment of subsidies) 16. Chain of exploitation (Holdback periods: Theatrical - Video/DVD – VoD/NVoD – pay TV – free TV; primary broadcasting rights, international video sales and distribution, ondemand and internet exploitation, territorial segmentation etc.)
19
III. Check List Co-Production Agreement (6)
17. Insurances/completion bond (necessary insurances – e.g. third party liability, E & O, responsibility for closing insurance contracts, inclusion of other co-producers, financiers and third parties as beneficiaries) 18. Collection agency (function, benefits and costs, examples of collection agencies) 19. Representations, warranties
20
III. Check List Co-Production Agreement (7)
20. Termination of co-production (ordinary termination of co-production, e.g. by completion of master negative, automatical termination of partnership, consequences for tax purposes (trade income tax); exit of co-producer, early termination for cause, e.g. violation of contractual obligations, insolvency (valid?) etc.; consequences, e.g. automatic accrual of shares, call right for co-producer’s share; consequences for rights, ownership and proceeds; takeover of existing contracts) 21. Other provisions (assignment of agreement; no injunctive relief (valid?); notices; entire agreement, abrogation of deal memos and other preliminary agreements, „further documents-clause“, i.e. execution of further documents; written form clause; severability clause; execution of counterparts) 22. Applicable law (law of a country of a co-producer, fixing of “neutral” law (valid)) 23. Jurisdiction, arbitration (exclusive/non-exclusive jurisdiction, arbitration – e.g. IFTA-(formerly AFMA) arbitration, Paris Chamber of Commerce – arbitration)
21
III. Check List Co-Production Agreement (8)
define your interests…
22
1. 2. 3. 4.
Why Co-Produce? „The“ Co-Production: Types of Co-Productions Co-Productions: A checklist Questions
23
IV. Questions
?
24
Thank you for your attention!
Dr. Gregor Schmid, LL.M. g.schmid@taylorwessing.com TaylorWessing Jägerstraße 51 10117 Berlin Tel: +49-30-88 56 36-0 Fax: +40-30-88 56 36-100
25