Vesting of Contingent Compensation in Pay or Played Television Director Agreement: What is 20/60/10/10 Formula?

 

IP Law Click, an Entertainment and IP Law Firm 

One of the issues in negotiating director agreements in television is whether contingent compensation provision applies in situations where a director is pay or played off a film.  The question becomes will the director be entitled to any portion of the negotiated contingent compensation since she has been terminated and is no longer with the project.  The director would argue that she was fired from the project without cause and wasn’t allowed to render services.  In some situations, the termination may have occurred halfway or more through the production and the studio may very well plan to use some if not all of the footage directed by the director which arguably entitle the director to back end participation or contingent compensation.

The studio’s position is likely to be that to the extent the director has been terminated prior to the completion of her services, she should not be entitled to any back end participation.  The studio would argue that even if the director didn’t breach, and her termination was purely on the basis of creative differences, the studio believed it needed to improve the quality of the movie and that any payment beyond the guaranteed fee is inappropriate.

Often times, parties agree to a schedule in which negotiated contingent compensation will be payable.  This is the so-called vesting schedule.  Studios almost always refuse to entertain a vesting schedule at all unless the director was replaced after the principal photography began.

A few common methods of vesting contingent compensation exist.  One of them is payable pursuant to what’s known as the 20/60/10/10 formula (which is used for director’s fixed compensation).

  • 20 percent of the fee is payable in weekly installments during the eight-week period preceding principal photography.
  • 60 percent of the fee is paid in equal weekly installments over the period of principal photography.
  • 10 percent is paid upon completion of the director’s last cut of the film.
  • 10 percent is paid  upon delivery to the studio of the answer print.

The payment schedule is commonly referred to as 20-60-10-10 payment plan by industry insiders.

Article by Dorisa Shahmirzai, Esq.

Founding Entertainment Attorney at IP Law Click

http://www.iplawclick.com

 

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