BY:
Elliot H. Brown(Previously published in Entertainment and Sports Lawyer, a publication of the American Bar Asssociation, December 2003.)
In early June, a critic for the Portland (Maine) Post Herald praised a new musical stage version of the Frank Loesser movie musical “Hans Christian Andersen” by declaring: “Making Broadway musicals out of movies is a deplorable trend nowadays, but the new ‘Hans Christian Andersen’…is the exception that proves the rule.”1 The musical was, indeed, worthy of praise. But the practice of basing musicals on motion pictures is neither recent nor deplorable. In fact, the history of the modern American stage musical roughly tracks the history of the modern talking motion picture.2 And Broadway has drawn on Hollywood without hesitation for decades, just as Hollywood has drawn on Broadway.
Everyone knows famous movies based on stage musicals: “My Fair Lady,” “The Sound of Music,” “Oklahoma,” “South Pacific.” But just as noteworthy are the many famous stage musicals drawn from movies. Consider “Carnival” in the 1950’s (drawn from the screenplay “Lili” which was itself adapted from an earlier story), “Sweet Charity” in the 1960’s (based on the screenplay of Fellini’s “Nights of Cabiria”), “A Little Night Music” in the 1970’s (drawn from the screenplay of Bergman’s “Smiles of a Summer Night”), “42nd Street” in the 1980’s, “Sunset Boulevard” in the 1990’s and, most recently, “The Producers” and “Hairspray.” This list, of course, is just a sample. Theatre historians could go on and on.
In fact, a Broadway musical not based on some underlying source material is a rarity. Books, plays, life stories, magazine articles, songs and histories have all served as the basis for beloved and successful musicals.3 Movies are just one more source for Broadway musicals. A musical stage play based on underlying copyrighted material is a derivative work and, as is the case with all other derivative works, rights in the copyright in the underlying work must be acquired before the derivative work can be exploited. However, the acquisition of rights in movies entails special considerations and challenges as discussed below.4
Recent History
Hollywood’s relationship with Broadway across the last 20 years has not been smooth. Up to the late 1970’s and early 1980’s, Hollywood studios were actively involved in the business of producing and/or investing in Broadway with an eye, among other things, to acquiring motion picture rights in successful stage properties. “The Best Little Whorehouse in Texas,” “My One and Only” and “Sugar Babies” are examples of musicals from that period produced with the substantial involvement of Hollywood studios.
More recently, that sort of involvement has been in short supply. In fact, by the mid 1980’s, studios so lost interest in Broadway that it became increasingly difficult for Broadway producers and creators even to make deals to acquire the underlying rights in motion pictures so they could be turned into stage musicals. Asking a studio to be actively involved or even to invest in a production had normally become a waste of time.
However, led by the success of the motion picture “Chicago” (based on a musical which had essentially been dormant for over 20 years, which musical is, in turn, itself based on a Broadway play) and “Moulin Rouge” (which, while not based on a stage musical, showed how successful a modern musical motion picture could be), Hollywood’s interest appears to have revived to the point where many studios are actively seeking to exploit their film properties by encouraging the creation of stage musicals based on those film properties.
Basic Financial Structure
A brief explanation of the typical compensation arrangements for the creators of a Broadway musical might be useful in considering aspects of Hollywood to Broadway deals:
Creative “Departments”
A Broadway musical as written consists of three, and potentially four, “departments”: book, music, lyrics and, in most instances, underlying rights. Twenty years ago, the general practice in the Broadway theatrical business was to treat underlying rights as a less valuable “department” than the book, music and lyrics (which are often – but not invariably – treated equally). Consequently, there might have been allocated for each of the book, music and lyrics a post-recoupment royalty of 2% of gross weekly box office receipts while underlying rights was allocated only 1% post-recoupment. This had ramifications not only for the amount of royalty payable for the underlying rights in connection with the Broadway production, but also for subsidiary rights (such as stock and amateur rights) because the authors’ share of subsidiary rights (after the producer’s share is paid) normally is divided in proportion to the royalties each “department” receives. In former times, by way of example only, if the book, music and lyrics each received 2% post recoupment and the underlying rights received 1% post recoupment (for a total post recoupment royalty “package” of 7%), the underlying rights would only have a 1/7 share of that “package” and each of the book, music and lyrics would have a 2/7 share of that “package.”
In recent years, motion picture studios (and many other owners of important underlying rights) have insisted on equal treatment with the book, music and lyrics and, at present, that would appear to be the rule rather than the exception. Consequently, assuming the modern practice of paying royalties based on weekly operating profits rather than gross, if each of the book, music and lyrics receives a post recoupment royalty equal to 5.9% of weekly operating profits in a royalty pool, the underlying rights would receive the same amount (for a total post recoupment “package” of 23.6% of weekly operating profits) and the underlying rights would be entitled to 1/4 of the authors’ share of subsidiary rights.5
Nature of Underlying Rights
Many motion pictures are themselves based on underlying works such as novels or original stage plays. Assuming the underlying rights are entitled to be a full and equal “department”, both the producers and the authors of a Broadway musical will insist that all of the elements which constitute the underlying rights “department” share in the royalty allocated to that department. Consequently, the underlying rights “department” will normally not receive more than an amount equal to the amount allocated for each of the book, music and lyrics. The reason for this, of course, is that the creation of a Broadway musical is a major undertaking, and to ask a composer, bookwriter and lyricist to accept a smaller participation than the owners of underlying rights would render the project unattractive to those creators. There are exceptions, of course. In particular, a motion picture of particular importance may command for its owner a net profit participation not paid to the composer, lyricist or bookwriter of the stage play.
It follows then that, if a motion picture is based on a book, both the studio and the owner of the underlying book must divide the share allocated to the underlying rights. Determining how that share is divided among the underlying rights owners can make negotiations difficult and is dependent on the power of each underlying rights owner. Take, for example, a motion picture which is based on a book which is itself based on an earlier magazine article. It may be that the motion picture contains the elements of most importance to the creators of the stage musical, or it may be that the book contains all of the elements which the creators of the musical would need without regard to the motion picture. In the latter event, an attorney would have to consider whether it would be possible to make a deal for the book alone without acquiring rights in the motion picture (assuming the motion picture studio had not acquired stage rights in the book or caused such rights to be frozen).
WGA Separation of Rights
An important element to consider in many film to stage deals (and one which is often misunderstood) is the effect of the “separation of rights” provisions of the Theatrical and Television Basic Agreement of the Writer’s Guild of America. Separation of rights applies when a theatrical screenplay is original and not based on underlying materials. Under those circumstances, pursuant to the WGA agreement, certain stage rights are reserved to the screenwriter if not exercised by the motion picture company within a certain period of time. Many screenwriters and their representatives believe that this language reserves for the screenwriter all necessary stage rights. In fact, a reading of the WGA agreement indicates that this is clearly not the case and that, under the WGA Agreement, substantial stage-related rights are reserved by motion picture studios even if the writer gains “separation of rights” for the stage.6
Specifically, a reading of the 2001 WGA Agreement suggests that the stage producer and authors of a new stage musical based on a motion picture where “separation of rights” applied would need an agreement with the motion picture studio to:
While there is some dispute in the industry about whether all elements of this interpretation are correct, in fact, few authors would undertake to write a stage musical while threatened by this risk, nor would any stage producer undertake to raise the six to twelve million dollars required to produce such a musical. Consequently, even when separation of rights applies, deals invariably are made with both the studio and the screenwriter. Regardless of the original intention of the WGA, at least on a practical basis, screenwriters have not truly reserved stage rights for themselves. They simply have succeeded in freezing them (thus assuring that both they and the studio will share in future stage musical exploitations).
Current Considerations in Acquisition of Rights
Two major elements of the acquisition of rights in motion picture properties have changed across the last 20 or so years:
The degree of exclusivity which can be achieved.
The right to exploit a musical motion picture version of a new stage musical.
Up until about 20 years ago (after which movie companies became increasingly reluctant to grant stage rights at all), agreements normally provided that when the musical stage rights in the motion picture and the new stage musical itself “merged,” there could never be another stage musical version of that motion picture. Often, this would occur after about 21 to 64 paid public first-class performances. “Merger” meant to the creators of a stage musical that they could exploit their stage musical forever following merger without competition from another stage musical based on the same movie. “Merger” meant to a motion picture company that, even if the stage musical was monumentally unsuccessful and closed in just a few weeks, the stage rights in that motion picture were gone forever and irretrievably tied to the stage musical for better or worse.
One reaction by the studios to this practice was simply to stop granting rights. That became a common response unless a famous and accomplished composer, lyricist, bookwriter, director and/or producer was involved with a potential project from the very beginning. Of course, the participation of an important producer and/or creator is still useful in getting a motion picture company to make a deal, particularly if the motion picture is an important one.
As the interest of studios in Broadway began to revive, studios took the position that, in effect, there could come a point (even if the musical was written, fully financed and opened on Broadway) at which absolute reversion of rights could occur and the composer, bookwriter and lyricist would have no further right whatsoever to exploit their stage musical. This was completely unpalatable to both stage creators and producers. The point was rightly made by stage writers and producers that, for example, the stage musicals “Chicago” and “Cabaret”, both of which had been essentially dormant for decades, were spectacularly revived to great financial success long after, under the studio’s proposal, rights would have reverted and those musicals would have been lost forever.
In recent years a new trend has begun to develop: the concept of “non-exclusive merger” at a relatively early date (say on opening night on Broadway) to be followed by “exclusive merger” after a significant run (say six months on Broadway) but subject to the possibility that in the future rights in the underlying motion picture could become non-exclusive once again. The circumstance under which the rights would become non-exclusive might be, for example, a period of five years after the close of the last first-class company of the musical during which the motion picture studio did not receive a certain minimum dollar amount as its share from the exploitation of subsidiary rights (perhaps $10,000 to $20,000 a year averaged across that five-year period).
The non-exclusive/exclusive/non-exclusive solution was an effort to solve this problem for both sides: The creators would never lose their rights completely in their stage musical, but the studios, except in the face of tremendous success by a stage musical continuing over a long period of time, would never completely lose their right to authorize another stage musical based on their motion picture. This appears to be the pattern that recent deals are taking.7
Motion Picture Rights
Up until about 20 years ago, when a motion picture company made a deal for a stage musical, that deal normally included the right for the composer, lyricist and bookwriter to exploit their stage musical as a musical motion picture. The motion picture company would have been likely to negotiate for itself a first negotiation/last refusal to acquire those motion picture rights at a substantial discount (say 30%) off the asking price for that stage musical. If the motion picture company passed, the rights could have been acquired by a different motion picture company, but a substantial additional share of the monies realized from that motion picture sale would have been payable to the original motion picture company. In other words, if a motion picture company would have been entitled to 1/7 of the author’s share of subsidiary rights, instead the motion picture company might insist on as much as 30% of the income from the motion picture sale if a different studio bought those rights, leaving the other 70% to be shared among the producer, composer, bookwriter and lyricist. So, for example, if the purchase price was $1,000,000 (net of agent’s commissions), the motion picture company might take $300,000. Of the $700,000 balance, the stage producer might take 40% ($280,000) leaving $420,000 to be split three ways among the book, music and lyrics ($140,000 each).
In recent practice, motion picture companies, all things being equal, are simply freezing all audiovisual rights in the new stage musical, except, of course, the right to advertise the new stage musical on radio and television. While not expressly stated, the studio’s greatest fear, it would appear, is that a competing motion picture could emerge from a new successful stage musical and that the new motion picture would be produced by a competitor. Whether or not the original studio passed on the right to do this itself is immaterial — the fear of this happening is enough to cause the rights to be frozen. The assumption is that, if the stage musical is successful, the studio and the creators of the stage musical will negotiate later regarding motion picture rights. The studio, of course, cannot use any of the copyrightable work of the composer, bookwriter and lyricist without their approval, but similarly, the composer, bookwriter and lyricist cannot go ahead without the studio.
Not surprisingly, most current deals also contain some restriction on the studio’s right to turn their own motion picture into a musical motion picture (at least for some term of years) in the hope of creating a restricted period of time during which efforts can be made to work out a motion picture deal for the new stage musical without competition from the studio itself.
Additional Issues
As usual in the entertainment business, issues of billing and control must be negotiated in connection with the acquisition of stage rights in a motion picture.
For a stage musical based on a movie which is based on a book which is based on a magazine article, credits for the underlying rights can be lengthy, and great consideration must be given to the form they will take and where they must appear.
With respect to control, at a minimum, the studio will want approval of the composer, bookwriter and lyricist and, for important properties, may even seek approval over the book, music and lyrics. Again, consideration must be given to how control is shared among all of the underlying rights owners.
Other issues to be considered include whether or not the studio will require a first negotiation/last refusal in certain areas (such as the right to produce the cast album, the right to merchandise the stage play, etc.), whether or not the studio wishes to have a right to invest in the stage musical, and the option periods during which the stage musical must be mounted before a paying audience (which is how option are exercised in the theatre business). These issues, of course, are not unique to negotiations with movie studios, but apply whenever underlying rights are acquired for the creation of a stage musical.
Conclusion
Despite the misgivings of the Maine critic, the renewed willingness of many motion picture companies to deal with Broadway is a heartening and important development – it opens once again to Broadway creators a rich trove of underlying material on which to base stage musicals. The recent openness of the studios to these deals and, in fact, the studio’s encouragement of them can only be viewed as a positive recognition by the studios of both the importance and the potential profitability of Broadway exploitation of motion picture properties.
1 Christopher Hyde, “MUSIC THEATER DELIVERS FAIRY-TALE PRODUCTION”, Portland Press Herald (June 7, 2003) page 5B. Hyde’s review went on to state that the play “is an improvement over the 1952 film starring Danny Kaye – with more clever dialogue and a new book by Tony Winner Maury Yeston, better costumes and choreography and even more Frank Loesser songs…”
2 “The Jazz Singer,” the first partial talking picture, was released in 1927. “Showboat,” which has been described as Broadway’s “major breakthrough: a dramatic musical with a dramatic – and bountiful – score” and Broadway’s “first mature musical” also opened in 1927 (Opening Night on Broadway; Steven Suskin (1990) Schirmer Books, page 6).
3 Examples of musicals based on underlying works will and do fill pages and pages. Consider “South Pacific” based on the James Michener’s novel “Tales of the South Pacific”; “Oklahoma” based on Lynn Riggs’ play “Green Grow the Lilacs” and “Fiorello” based on the life of Fiorello LaGuardia.
4 This article will focus on Broadway musicals. Broadway non-musical, straight plays drawn from motion pictures, while examples do exist, are much less common.
5 Until the early or mid-1980’s, weekly royalties on Broadway musicals were calculated on the basis of box office gross, less only certain specified deductions. Commencing in the 1980’s, Broadway musicals, almost without exception, began calculating royalties in a so-called “royalty pool” pursuant to which royalty pool participants received a weekly royalty based on weekly operating profits (gross less weekly operating expenses) rather than based on gross. The theatrical business still talks in terms of “points” as if royalties were still being paid on gross, even though that is not the case. However, a reference to “points” is a useful way to determine proportions for purposes of sharing both a royalty pool and monies available from subsidiary rights.
6 Writers Guild of America 2001
Theatrical and Television Basic Agreement
(Effective May 2, 2001 through May 1, 2004)
Article 16 Separation of Rights
A. Theatrical
1. Definitions
a. The term “dramatic rights” means the right of presentation in dramatic form on the speaking stage with living actors appearing and performing in the immediate presence of an audience, without any recordation, transmission or broadcast thereof intended for or permitting concurrent or future aural, or visual and aural, reception or reproduction at places away from the auditorium or other place of performance.
2. Final Qualification
b. Dramatic Rights.
(4) If the writer exercises the dramatic rights licensed to him/her hereunder, the Company shall be the copyright proprietor of the dramatic work and, if the dramatic work is registered for statutory copyright, copyright therein shall be taken and remain in the name of the Company or its nominee. Whether or not writer registers the dramatic work for statutory copyright, the Company shall acquire all rights of every nature in and to the dramatic work, including the right to extend and renew the copyright, except for such rights, if any, as may have been expressly reserved by the writer under and pursuant to his/her employment agreement or in the agreement for the purchase of unpublished and unexploited material from a Guild member and except for the publication rights and dramatic rights therein (but only to the extent that such publication rights and dramatic rights are licensed to and permitted to be used by the writer under all of the terms and provisions of this Article 16.A.) and except for such musical compositions interpolated in the dramatic work (but not contained in whole or in part in the story, screenplay, or motion picture nor acquired in whole or in part from the Company), which neither contributes to nor forms a part of the story line of the dramatic work. With respect to the musical compositions in which the Company acquires rights under the preceding sentence, nothing contained in such sentence shall be construed to grant to Company any rights in any such musical compositions which are greater than the maximum rights therein at ay time acquired or controlled by the writer.
(6) If the writer exercises the dramatic rights licensed to him/her hereunder, he/she will, prior to the first performance of the dramatic work, submit to the Company a copy thereof, and the writer will not, without the consent of the Company, use the title of the motion picture or the story or screenplay, as the case may be, as the title of the dramatic work. If the Company requests the writer to do so, the writer agrees to use the title of the motion picture as the title of the dramatic work.
(7) If the writer shall exploit the dramatic rights licensed to him/her hereunder, and shall require financing from any source, the writer shall first offer the Company the opportunity to provide such financing by a written notice to the Company, setting forth in detail the terms and conditions upon which the writer proposes to obtain such financing. Within thirty (30) days after receipt of such notice, the Company may notify the writer that it elects to provide all or any part of such required financing upon the terms set forth in the writer’s notice. If, within such period, the Company notifies the writer that it does not elect to provide such financing, or fails within the thirty (30) day period to respond to the writer’s notice, then the writer may obtain the required financing elsewhere, but the writer agrees that he/she will not offer to any lender or investor terms or conditions more favorable in any respect to such lender or investor than those set forth in writer’s notice to the Company, without again notifying the Company of such more favorable terms or conditions, and permitting the Company a period of thirty (30) days within which to accept or reject the writer’s proposal in the manner above provided. The provisions of this subparagraph shall apply in each instance in which the writer makes any change in any term or condition of his/her financing offer more favorable to the lender or investor than those set forth in the writer’s last notice to the Company.
4. Separable Material
Separable material, in which a writer or writers entitled thereto shall have separation of rights hereunder, refers to those portions or elements of the story (or story and screenplay) which are the original creation of such writer or writers. Separable material shall not include any assigned material or source material, and nothing herein contained shall be interpreted or construed as granting to the writer any rights of any nature in or to such material. The writer agrees that he/she will not make, or permit to be made, any use of any separable materials that would infringe upon the copyright (either common law or statutory) or any other rights of the copyright proprietor or other proprietor of any literary, dramatic or musical material. With respect to public domain material incorporated in the writer’s story (or story and screenplay), nothing herein contained shall impair the Company’s right to use or deal in or with such material at any time, in any manner or to any extent, without the necessity for the writer’s consent, and without any obligation to the writer.
7 Of course, this entire discussion is couched in terms of dealings with a studio. However, as noted, to the extent there are other underlying rights owners, unless the studio controls all underlying rights, those underlying rights owners will also have to be part of the discussion and the agreement.