This roundtable was originally published in the November/December 2011 issue of The Dramatist.
David Faux: Tonight’s panel is on subsidiary rights. To my immediate left is Stephen Schwartz. He’s the current President of the Dramatists Guild. He’s the composer and lyricist for Wicked, Godspell, Pippin, and The Magic Show. His awards include four Drama Desk Awards, three Academy Awards, and four Grammy Awards.
Next to him is Ralph Sevush, the Executive Director of Business Affairs. He’s been with the Guild since 1997. Before coming to the Guild, he was the Director of Business Affairs and an associate general manager for the Broadway production of Big, the Musical, Bill Irwin and David Shiner’s Full Moon, and Julia Sweeney’s God Said “Ha!” He’s also worked with Sony Pictures: Cinema, Five Films, and New Line Cinema.
Also, we have Bruce Ostler of Bret Adams Limited Literary, which is a theatrical agency representing writers, directors, composers, and designers. He’s a founding member of the Practical Theatre Company in Chicago and he’s worked as a producer on a number of documentaries and industrial films.
Before we jump into the panel, I wanted to make sure that we were all on the same page when we use the words “subsidiary rights.” By and large, people who have been in the theatre industry for only a short amount of time get an instinctual sense of what a subsidiary right is. As we all know, when you write a script, when you author a musical or a play, the author owns the copyright. The copyright can be disposed of in various ways: publishing, production, adaptations, et cetera. Those are the various dispositions.
Subsidiary rights refer to dispositions made subsequent to a production for which you’re contracting. The author is under no obligation to grant subsidiary rights to a producer. And as we all know, sometimes the producer is correct or at least warranted in making a request for these rights.
The philosophy behind subsidiary rights is that, when a production substantially enhances the market value—not just when a production of a play happens or when the value of a play is enhanced, but when the value of a play is substantially enhanced—then the subsequent dispositions are at least considered, in part, to have been the result of that production.
The producer presents the production, and it’s of such a high quality that it’s going to lead to bigger and better things. So why shouldn’t the producer get a piece of that?
Now that you have sort of a general idea of what subsidiary rights are, I was wondering if Ralph Sevush, having been with the Guild since 1997, and in theatre well before that, could talk a little bit about the history of subsidiary rights: where they came from, how they evolved, and where they are now.
Ralph Sevush: No. [Laughter]
David Faux: Thank you all for coming.
Ralph Sevush: Just to clarify a little bit of what David was saying: “subsidiary” is, by definition, a relative term. So the rights that an author retains when he or she licenses their work to a producer are those rights that will then be subsequently exploited, and are subsidiary to that production. The rights that the producer has are by definition not subsidiary rights. You may have granted such a broad range of rights that there may not be many subsidiary rights left. But that’s a discussion to be had a little later.
Let’s step back and talk a little bit about where this comes from. I think that when you think about why the rights were granted, it gives you a context for understanding when they shouldn’t be granted. So, as with many things, it begins in a far distant past. In 1926, the first Broadway contract with authors was pursuant to the Guild contract, which in those days was called the Minimum Basic Production Contract, or the MBPC.
The MBPC arose because writers got together and said, “You know, you just don’t pay us enough for you to own what we write. So we’re going to keep what we write and we’ll just license the rights. Limited rights for a limited time and in limited territories to produce it on the stage.” The deal was you produce it, we own it, and you’ll make your money. If later, we make some more money off our property, we’ll give you some of it, because you have added value to our copyright.
All right, so I own the property, why should you produce it? Because you’re ultimately going to make money on both the profits from the production and from my future uses. You’ve added, theoretically, a value to my copyright because you’ve spent all this money to put it on Broadway. You’ve paid for all this advertising. You’ve run the show. You’ve created a brand from my show that I’m now going to capitalize on.
Therefore, you will participate. And even under those circumstances, there is an understanding that you’re not going to participate in everything. And you’re not going to participate forever. You’ve added value but as the years go by, the value you’ve added becomes less and less relevant. There are other people doing productions that have nothing to do with your productions. There are lots of uses that will no longer bear any relationship to what you may have added 20 years ago or 40 years ago.
The MBPC became the deal for Broadway. This notion of subsidiary right participation by the commercial producer was built into it. And the rights that the authors agreed to participate with the producers on were audio/visual rights: movies, television, and all those rights relevant to that pool of uses. Even in the initial conception, subsidiary rights in audio/visual uses were granted in perpetuity. That is, forever.
The other rights were granted for a limited time. For stage rights, if we do stock and amateur licensing later, you can originally participate for a term of eighteen years. The first ten years, you’ll get forty percent of what we make. And then that number will decrease every few years until eighteen years has elapsed and then you will not be participating at all. The other uses were called tab versions, or tabloid versions.
The revivals were not part of subsidiary rights. The notion was, if somebody else came along and produced a Broadway version, the original Broadway producer was no longer in the picture, and now there’s another person who’s adding value and creating, spending a lot of money and doing all those things. Over the years in the early 1980s, a new contract was agreed to. That contract was called the Approved Production Contract: the APC. That had a much more complicated menu of options for producers to select, depending on what they thought the value of the property was.
If they thought it was a good property for schools and not for amateur markets, and it would last a long time, they might select the option that maximized that money. If they’d have thought it was not likely to get a movie, they would take the deal with the less movie money and more stage money and such. So that model had been in existence since the ‘80s.
The other participant in subsidiary rights evolved over the last 20 years and has been the non-profit theatres. This was eventually created as an incentive for commercial producers. Let’s remember that. It was a financial incentive for commercial producers to produce their work, because they didn’t own it. Now you have non-profit theatres that already have an incentive to produce new work. It’s called non-profit tax status.
They were given 501(c)(3) non-profit status to produce and develop new works. On that basis, they write grants and applications. Then they turn to the authors, the very people whom they are working for, and ask them to subsidize what they’re doing through a subsidiary rights clause. We can talk more about that, but that’s been the evolution, the history of the subsidiary rights to date.
David Faux: We’re certainly going to talk about non-profit theatres in the area later tonight. I was wondering, Stephen, if you might talk a little bit about your experience with subsidiary rights. Was there a large contrast between what you agreed to in Godspell versus Wicked?
Stephen Schwartz: The shows that I have done have all had subsidiary rights agreements with the producers based on what the contract was at the time. For instance, Godspell, Pippin, Magic Show, and Working were under the Minimum Basic Production Contract.
The nice thing about that was that after a while, the producers’ subsidiary rights went away. Now, for instance, there are no original producers of Godspell, because it’s 40 years later, so they don’t share in any of the subsidiary rights anymore, period.
It makes a big difference, bigger than I had anticipated. But you know, there are other issues that we can talk about beyond the originating producers. Does anyone else deserve a share of your subsidiary rights? Are there cases in which a director is justified in asking for it?
I personally have found a couple of cases where I thought it was justified and have granted a share of my subsidiary rights to certain directors under certain circumstances.
The only other thing I think that we should mention, just because it’s come to be common practice, has to do with revivals. When there is a major revival, and there are no subsidiary rights to grant anymore, what the producers of that revival ask for is what’s called a “percentage of the overage.” It means that you take what the subsidiary right income of the piece has been for the last five years, and you average it. If, subsequent to this new production, there’s a big spike in revenue for subsidiary rights, it seems to indicate that it happened because of this production. Therefore, the producers of the revival get a percentage of the additional amount that comes in for subsidiary rights.
Now, what we were talking about here is a Broadway production or a major production that gets a lot of attention. I think one of the things we may want to discuss later is if there are any other circumstances in which authors should consider or might consider granting some participation in their subsidiary rights.
David Faux: Bruce, maybe you could say a few words about how subsidiary rights work as an incentive, in some cases. I’m sure that they might sometimes also work as an incentive against making certain deals.
Bruce Ostler: You know, it shouldn’t be every director, but a lot of directors feel like they own a piece of a musical. I find it’s less with straight plays, but almost always with musicals.
Well, there’s a point where you might take off your hat and say, “Okay, sir, how much do you want?” because he will add some value to it.
However, we find that at every level, people are asking for subsidiaries. And in non-profit situations, there’s a rather broadly held belief that five percent for five years is fair if they originate a production.
Unfortunately, we’re starting to get to the point where people are asking for subsidiaries for doing readings. We had a big fight with the Lark Theatre. The way to attack this is with rationality: what value are you adding with a reading? I could do it in my living room. Am I going to give my mother five percent? [Laughter]
David Faux: I think it’s a good point because the notion started with commercial producers presenting Broadway productions. Think of the value; think of the investment required for them to do that. Think of the fact that they do not own the property. They’re used to owning the work they produce in Hollywood and on TV.
Stephen Schwartz: Huge difference.
Bruce Ostler: So, what would they get out of it? They get a share of some rights from some territories for some time. That has changed and morphed. Now look at the chain of development of a show. Start with a reading. Sometimes you’re getting these subsidiary rights demands. Well, again, what is the value added? Certainly not publicity.
Ralph Sevush: Everyone wants a piece. Then you start to add that up. Then if a commercial producer gets in, they go, “Well, I didn’t authorize that. I still need my amount so I can raise the money.” They sell this to their investors.
Stephen Schwartz: You know, I just want to take a step back for a minute, because we’re addressing a lot of specifics. I think there’s a major issue to discuss as writers, which is why do we care? Why does this matter? Why do we fight about this? Why do we get upset about this?
There’s a famous saying, “you can make a killing in the theatre, but you can’t make a living.” It’s subsidiary rights that allow writers to make a living. That’s what makes a writer a professional writer. That’s what you use to put your kids through college. That’s what you retire on.
The life of most Broadway shows is relatively short. And many shows that we’re talking about never even have a Broadway production. And, yet, it’s the fact that those plays are out there, it’s the fact that there are theatres around the country—and if one is lucky, around the world—who want to produce these shows that provide an ongoing stream of income for a writer.
As you get a few pieces out there, the accumulation of that stream of income unfortunately may be what you live on. So, when everybody comes along and chips away at it, that’s really shrinking your ability to make your livelihood writing for the theatre. That’s why this is so important.
Bruce Ostler: I’ll give you a specific example of exactly that. I had a client who had a successful show off- Broadway. We sold it and it was commercially done.
Ralph Sevush: So, you gave up 40 percent.
Bruce Ostler: Forty percent is what we gave up. And this one also had a previous theatre that had developed it, so that was an additional five percent. Plus, don’t forget I’m getting my ten percent. But we’d done this whole negotiation to sell it into sub rights for publishing. It was good money. It was $100,000, and it was an exciting deal for him. It was his first big show. When the check comes in, I say, “John, you’ve got the check. Come on over.”
He comes running over to get it. He opens it up, and his face falls. The difference between 100 thousand and 55 or 50 thousand is tremendous. It literally means that kind of money when you look at it. From an author’s point of view, they get two, three productions a year, and it might generate $30,000. Well, that’s not bad for a writer. You can buy a lot of time to write for that. But you’re giving—
Ralph Sevush: Half of it.
Bruce Ostler: —40 percent of it away. 50 percent, 20 percent, whatever it is, it starts to really pinch. That’s where it is really important that you fight to extend the periods of time that you have to run a show, so you have a big success. It has to be guaranteed success. You always want that.
Stephen Schwartz: Ralph and others on the panel have made reference to the fact that commercial producers are taking this front-end risk. They’re into the show for millions.
That does show a certain proof that they’re taking a risk with the author to try to build value. And that means something. And Ralph also referenced that all non-profit theaters have a different risk model.
They’re getting their money from not paying taxes, and they’re also accepting money in the form of donations and grants. And we recently had a victory in New York City with certain non-profits that had sub rights provisions that we thought were onerous and unfair and are now substantially more favorable to the author. As Ralph says, this may be paperclip money to the not-for-profit theatre but it’s grocery money to the author.
David Faux: So, it’s very important when, recently, the Public and the Roundabout changed their subsidiary rights clauses. I was wondering if maybe Stephen or Ralph could talk about what happened, and why it was important.
Stephen Schwartz: As we’ve said, subsidiary rights are what allow a writer to make a livelihood, to be a professional. I think the Public Theatre has its heart in the right place. And Oskar Eustis, who now runs the Public Theatre, really does care about writers.
That’s why the argument that Ralph made to him was very compelling. The argument basically was this: if there is a show that you produce, and it becomes A Chorus Line or it becomes Hair, and the writers are making millions of dollars, and everybody is getting rich from it, of course that show should generate some income for your theatre so that you can use that money to produce other shows.
But most of your shows are not going to do that. So, what the Public Theater set up in discussions with us, was what we called a windfall situation: the author has made, within ten years of the presentation, $75,000—that’s not a fortune, over ten years, it’s $7,500 a year…
Ralph Sevush: Actually, it goes up $500 every year. So it goes up to $80,000.
Stephen Schwartz: If that’s come in, we can say, “All right, the author has done pretty well from this show.” So at that point, the Public Theatre can then share, for a certain period of time, a certain percentage of the next money that comes in to the author. But what if the author doesn’t make that much? Let’s say that the author makes $50,000 from his or her play over the period of ten years. Then the author keeps all of it.
Audience Member: Do they have to wait ten years to collect? I mean if the author made $75,000 in the first two years—
Stephen Schwartz: Then it kicks in. The idea is that if the author’s doing well enough that they can be a professional writer, that they can make a livelihood, and the production at the Public Theatre has helped create that for this particular work, then great.
But if the production at the Public Theatre got them something, but not really something that would be considered a windfall, then they don’t share. To us, that seemed to be a very good deal, and fair for everybody. So, we’re very happy about that. And we’re hoping to spread that model to other theatres. The new deal at the Roundabout is a slightly different deal, but in a way, does kind of the same thing. Wouldn’t you say, Ralph?
Ralph Sevush: Yes, they arrived at the same ideas via different routes. They had different political ruminations, so they ended up looking different. Our interest was simply in allowing theatres to come up with whatever model makes sense for them that would minimize the impact on the authors.
We did some number crunching ourselves, and we found that in 95 percent of the non-profits around the country, 90 percent of their operating revenue had nothing to do with money from subsidiary rights.
So, it was a very small percentage of their operating revenue. $5,000 to Lincoln Center is meaningless, but
$5,000 to a writer is rent. It’s groceries. It’s the time it takes to keep writing without having to get a different job and move to LA and write for television where you can actually put braces on your kids’ teeth. [Laughter]
So, they were persuaded by that notion that they had a mission to invest in writers, not to exploit them. The Public had one way to do it; the Roundabout wanted to do it a slightly different way. But in New York, which is higher profile than a regional theatre, five percent for five years is more customary.
The Roundabout used to take up to 40 percent for ten years and their contract allowed them to extend indefinitely. If they ran it long enough, they could take up to 40 percent. When you think about if there had already been a regional production, or an Equity workshop production—
Stephen Schwartz: And there’s a director involved, and there are agents and lawyers involved, then this author gets this check, and then has to give a third of it to Uncle Sam, you might as well be digging ditches. You’d do much better. You’d actually be doing better pulling the curtains in the theatre your show is running in.
Ralph Sevush: So at the Roundabout, what Todd Haimes agreed to do—although if you read The New York Times, you would think he had an epiphany, and we had no role in it—what they’re doing there is, instead of taking their 40 percent, they’re going to take nothing.
We thought this was a good compromise. [Laughter] What they’re doing is, instead of paying on the gross, as The Public does, as Lincoln Center does, they’re going to pay a flat fee, which is roughly equivalent to what an author would make if the show was selling at 50 percent capacity.
That’s for the initial subscription run. That’s about twelve weeks. They can extend up to six weeks if they pay a gross royalty. Five to six percent, I forget. And for that entire eighteen weeks, they get zero sub-rights.
Meanwhile, you get a Broadway-eligible production.
Stephen Schwartz: They’re almost always revivals, which was the argument they made.
Ralph Sevush: We’ve just learned that the New York Musical Theatre Festival (NYMF) is asking for sub-rights.*
David Faux: What do you do about that?
Ralph Sevush: We tell our members not to do it.
Stephen Schwartz: We emphatically object. We tell our members not to work with them.
Ralph Sevush: Produce your own show at those prices.
Stephen Schwartz: Right.
Ralph Sevush: The New York Fringe Festival was the first one in New York to do that; a producing entity that, because of Urinetown, got put on the map. It took two percent for seven years. Now NYMF wants to take two percent from the author and two percent from the producer, who are often the same person. So, they want huge parts of the box office. Additionally, you have to pay the fees for you to produce them. And—
Stephen Schwartz: So that’s what you’re facing with the sub-rights issue. But right now, there’s been this countermovement, led by people like Richard Nelson and Craig Lucas, and others, who’ve just said, “No. We’re not going to do this.”
David Faux: But would you tell people like NYMF that the Guild will not permit a writer of theirs to participate in their festival?
Stephen Schwartz: We’re not allowed to do that. We are not a union, unfortunately.
Ralph Sevush: Yes, but Equity is a union. This is something important for you, our membership, to know. It speaks to the necessity of solidarity. Because we own our own copyrights, we are not allowed to unionize any more than doctors are allowed to unionize.
We are considered independent contractors. Having a union would be considered a violation of the Federal antitrust statutes. We’re the only ones in the theatre that are not allowed to unionize, but then we do have the advantage of owning our own work.
Because we are a Guild, and not a union, we depend on the solidarity of our membership. So, what we can do, and what we will do, if New York Music Theatre Festival does not change its policy, or institutes this policy, is we will recommend to our membership that they not participate in the festival.
Hopefully, the lack of quality the festival would incur as a result will encourage them to change their policy.
However, we cannot require our members to do anything, the way a union can.
Audience Member: [At a] general meeting, you said something about how you were talking to Congress about getting an exception especially for the Guild to make it into a union.
Stephen Schwartz: Yes, but has anyone looked at Congress lately? [Laughter] So we don’t have high hopes of anything getting done at all in Congress. But there are other avenues that we are investigating.
* Since this panel occurred, NYMF and the Dramatists Guild have discussed its subsidiary rights policy and the Festival requires subsidiary rights only from the producer, no longer from the author.
Guild members can access part two of this roundtable in the Business Affairs Archive on our website: www.dramatistsguild.com/ba-archive