We have seen a growing trend of dramatists granting producers production rights by signing “deal memos” instead of fully negotiated production agreements. A deal memo is a short form contract that lists the major points of a deal but often excludes or defers the negotiation of many important terms that are customarily addressed in a production agreement. Such memos are used by producers to show potential investors that they have rights in the work, and they are authorized to pay artists (including the writers) upfront commission fees and option payments to begin the work of creating a show. We understand the efficiency of this practice, allowing everybody to “get going,” but there are certain precautions to consider when granting rights in this manner.
First, the primary issues of what, where, when, and how (the “why” is self-explanatory… profit) need to be described specifically enough for some reasonable third party to be able to read it and understand who is getting what rights, for how long, in what territories, with what restrictions, and for what sort of compensation payable to author.
Then, if certain terms are to be negotiated later, those terms should be identified and, rather than leaving it to “good faith negotiations” at some unknown future date (as these memos tend to do), those negotiations should be keyed to specific, objective criteria. For example, terms for production of a play in a particular territory or level of production could be keyed to terms that are no less favorable to author than that of other similarly sized productions in the current or prior season in that territory/city presented under similar economic conditions, or terms based on a prior production of your work, or a prior production presented by the producer, or based on recommended terms in the applicable Guild contract.
Also, such deal memos often state that the intent of the parties is to negotiate and execute a “long form agreement” which will include all the contract terms that were excluded and/or deferred, but, until that time, the deal memo will be governing the relationship of the parties. That, however, is HIGHLY problematic for the author. What incentive is there for the producer to enter into a long-form agreement? Such lengthy and complex agreements are expensive and could end up in a place the producer doesn’t want to go. Better for them to just live with the deal memo for as long as possible, until the show’s economic viability can be more realistically assessed. This is not an uncommon situation.
That is why it is important to include language in your deal memos which provides that the rights granted by the author will revert back to them if a more formal agreement is not executed by a particular date or within a particular timeframe (like first rehearsal). In addition, a DG member who is asked to sign a deal memo granting a producer an option on first class production rights in the U.S. or Canada should make the grant subject to Guild certification of their contract. While a producer is not obligated to enter into a certified Guild contract (called the “APC”), a DG member is required to do so as a condition of ongoing membership under the Guild’s bylaws. So, the failure to make the grant of first class rights subject to a certified APC could endanger a writer’s Guild membership.
We’ve seen shows open on Broadway with only a deal memo in place, but even memos that say the first class rights will be granted under a DG-certified contract may both open and close before such a contract is ever completed, much less certified. And so, the authorial protections under the APC will never have been made available to the writer during the years after signing the deal memo. Such agreements may provide conditions that are adequate for certain levels of production but would not be certifiable for a Broadway/first class type production, yet the writer is stuck with those substandard terms until an APC is completed and certified… which may be never.
If a Guild member’s deal memo includes an option for first class production rights, the deal memo needs to protect that writer’s Guild status and provide them with at least some parameters for further negotiation. Therefore, we would suggest a provision be included in any deal memo that includes a grant (or an option) that allows a producer to present first class performances (at least in the U.S. & Canada, but, ideally, for London’s West End as well) that provides substantially as follows:
“The Author’s grant of first class rights under this deal memo shall be of no force or effect unless and until such grant of rights is made pursuant to a contract that is certified by the Dramatists Guild of America as being substantially consistent with the terms of the Guild’s Approved Production Contract (the “APC”) then pertaining. If, prior to the certification of an APC, the producer forms and fully capitalizes a company for a first class production of the Play, or commences rehearsals for such a production, then the minimum terms of the printed form of the APC then pertaining shall be deemed incorporated herein until such time as an APC is negotiated by the parties and certified by the Guild. Upon certification, this deal memo shall be terminated and the APC shall govern the relationship between the parties thereafter. However, any terms herein regarding the producer’s future participation in the author’s subsidiary rights shall survive the termination of the deal memo and continue in full force or effect unless and until the producer fully vests in the author’s subsidiary rights revenues under a certified APC.”