By Gamal Hennessy
Many people don’t read the contracts they sign. Even fewer people read the “boilerplate” language often found at the end of the agreement. People want to know things like when they’ll get paid, how much they’ll get paid, and what they have to do to get paid. Avoiding so-called “boilerplate” might be a natural response to getting a contract, but the clauses at the end of an agreement have a significant effect on, and could completely alter where and how the money flows.
Over the next few weeks, I plan to shed some light on typical boilerplate clauses in entertainment contracts. This isn’t going to be a definitive treatise on legal concepts or the final word on the current status of contract provisions. This also isn’t going to be a replacement for actual legal advice about your specific contract. My goal here is to help artists, writers and other creative people become better informed about various aspects of contracts they might be confronted with.
In this second installment, we look at the concept of exclusivity.
The word “exclusive” is often used in entertainment marketing to trumpet some special event or limited time offer. We hear about exclusive engagements in theaters, exclusive releases in video games and exclusive production deals in film and television. While the word designates a special event in ad copy, the term exclusive has even more impact when it comes to creative contracts. The restrictions and the costs of exclusivity are important considerations for any artistic professional.
Exclusivity is a concept modifying a grant of rights or access to goods and services. You are in essence, excluding everyone else from the right, good or service. The opposite of exclusive is non-exclusive.
The easiest real world example I can offer is a car vs. a cab. When you buy a car, you and the people you designate are the only people who can use the vehicle, until it is repossessed, stolen or destroyed. When you hail a cab, you can use the vehicle for a little while, but before you got in and after you get out anyone can use that vehicle, assuming the cabbie will stop for them.
The entertainment industry is filled with examples of exclusivity. When I worked at Marvel, we often signed A-List writers and artists to exclusive deals to keep them from working with DC. Film distribution companies always push for exclusive domestic distribution rights to a film. Publishers can obtain exclusive rights to an image used in a cover. An actor or director could be retained on an exclusive basis for a period of time for a particular project. Almost every avenue of entertainment and media has some relationship with exclusivity, so understanding its impact is important to everyone.
In any exclusive agreement, there are at least two parties who need to deal with the scope and the cost of the contract: at least one side gives exclusive rights and at least one side gets them. The side you’re on dictates what your goals and obstacles are and how you can massage them in your favor.
The person or company giving away exclusivity limits their ability to generate revenue based on the rights granted. For example, if you release a book through Amazon’s KDP select program, you can’t publish the book on any other platform for at least 90 days. Likewise, a screenwriter who has an exclusive deal with a production company gives up the ability to generate multiple streams of revenue by writing for other artists. Parties in this position naturally try to charge more to get into an exclusive deal to cover the lost revenue streams. At the same time, they try to limit the length or term of the exclusivity to reduce the financial impact of the arrangement (See Eternity is a Long Time in Creative Contracts)
The person or company getting exclusivity limits competition in the market. If only one company can show a movie, release a game or throw a concert, that entertainment is perceived as more valuable because of its scarcity. Exclusivity doesn’t always work directly. In video games, an exclusive PS4 title still sells at the same price as a multi-platform game, but if the system has more high-quality exclusives compared to the competition, the value of the PS4 system increases, not just the value of the game. To maximize the benefits of an exclusive, the side who gets it often tries to keep their rights forever.
The Shell Game
Like most legal concepts in contracts, there are situations where the impact of a word changed its initial meaning. Under certain circumstances, the grant of an exclusive license in certain media can amount to a change in overall ownership and control, especially if the rights granted are broad and the term is forever. For example, I’ve reviewed graphic novel licenses for my clients where the publishers wanted exclusive print publishing, film, television, video game, internet, stage play and other rights everywhere, forever, amen. In this case, a simple deal for print publishing is an attempt to tie up the property in every conceivable form. I try to advise my clients to avoid these types of deals, especially when there is no compensation. (See Get What You Give: Rights and Revenue for Creators)
Even parties who get exclusive rights need to be careful, especially when services are involved. Hiring an independent contractor is easier from a legal perspective than hiring an employee, but getting the exclusive rights to a person’s services might change your legal relationship with them depending on the nature of your working relationship. Producers in film, television, music and even publishing should be familiar with their state’s labor laws and withholding requirements whenever they consider bringing in exclusive talent, or they could find themselves on the hook for several unforeseen costs.
Exclusivity is a powerful aspect of entertainment law. Like fire, nuclear energy and love, it should be handled carefully to make sure no one gets hurt.
PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT firstname.lastname@example.org FOR A FREE CONSULTATION.