Catastrophe and Contracts (Understanding the “Act of God” Clause)

Imagine you’re sitting at home one day, making comics and minding your own business. You are working at a steady pace and you plan on finishing long before your publisher’s deadline. All of a sudden, the sky goes dark, the wind begins to howl and the lights go out. A couple days later you have no power, no water, no heat and there is a tree in your living room. On top of all that, you missed your deadline and your publisher is claiming you breached the contract. Now what?

The answer to that question depends on the force majure or “act of God” clause in your contract. If the language is written well, you shouldn’t have a problem. If the language is written poorly (or doesn’t appear at all) you might have to deal with a business dispute at the worst possible time.

What does it mean? Basically, a force majure clause extends the period of performance for the artist and the publisher if certain events occur. Most force majure clauses include events like fire, natural disaster, accidents, act of government, war, terrorism, industry wide shortages or any other event beyond your control and that directly impact you. For example, if you live on the East Coast, Hurricane Sandy probably qualifies as a force majure. If you live in Seattle, it probably doesn’t because you are not directly impacted. Keep in mind that a hangover is not a force majure, even if it does feel like an act of God when you are recovering. Getting the hangover wasn’t beyond your control, so force majure can’t save you here.

What do you have to do? When a force majure event occurs, you usually have to notify the publisher of the event’s impact on you and then follow whatever terms are specified in the force majure clause. Terms can range from an extension of time to cancellation of the agreement. While it is impossible to anticipate every potential force majure event and write a solution into the contract, it is better to have some guidelines in place that work for both sides, instead of waiting until your basement is full of water and the National Guard comes rolling in.

Often, a publisher or colleague will understand your situation during a crisis and won’t try to use it as a way to avoid paying you or to get out of your contract. However, it is always prudent to make sure there is a good force majure clause in your contract when you sign it. You never know when the lights could go out and you never know when your relationship with your publisher could fall apart.

Best

Gamal Hennessy, Esq.

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.comFOR A FREE CONSULTATION.

Ninja Turtles: From Comics Parody to $60 Million Dollar Property

I spend a lot of time on this blog talking about the importance of protecting the rights of creator owned properties. I discuss getting value for your creation and thinking long term about your potential licenses. The truth is that very few creator owned projects will ever become major characters on any level. But when you think about the potential of creator owned projects, one of the best examples to consider is the Teenage Mutant Ninja Turtles. The lessons that have come out of that title are ones that every artist should learn.

An Inside Joke

I first saw an issue of Turtles in my freshman year of high school. I distinctly remember rolling my eyes when I saw the cover and a guy in class explained the concept to me. In 1984, everyone who read comics knew the most popular comics were Daredevil, X-Men, Cerberus and Ronin. Kevin Eastman and Peter Laird didn’t agonize over trying to create something completely new. They combined all of the basic concepts behind all the most popular titles and came up with gritty, young, chemically altered, anthropomorphic martial artists. The idea was confusing to anyone outside of comics. To anyone who read comics, it was the best example of self indulgent parody. The book premiered at a small comic con in New Hampshire with an extremely small print run. Then larger publishers like IDW and Image got involved. Then the merchandise started to come out. After a short period, the inside joke wasn’t a joke anymore.

The Juggernaut

In 2009, Nickelodeon bought the rights to Turtles for $60 million dollars. Before that sale, the Turtles were the subject of four wide release movies, 175 hours of TV programming and 600 worldwide merchandise licenses. It has been one of the top ten toy franchises for years and has become a staple of youth pop culture. This fall, Nickelodeon is releasing a new CG version of Turtles that will coincide with 50 new merchandise licenses in the UK and Europe alone. Over the past 30 years, it is safe to say that Turtles have become one of the most successful character franchises in history. That is a pretty good result for a self published parody comic based on derivative tropes.

Secret to Success

As I have repeatedly said, there were a lot of factors that go into a successful creator owned program. Eastman and Laird had the input of licensing agents, advertising professionals and animators to help the project take off. Even with all that business support, there was still a considerable amount of hard work and luck that went into the growth of Turtles as a franchise. Obviously, not every character has the potential or support to sell for $60 million dollars. Even DC, Disney and Marvel have a ton of non starters in their character catalog. But each company protects the rights of each character as if it will be the next Spider-Man, Batman or Turtles because you never know what people will respond to. Eastman and Laird did the right thing from the beginning. They got the advice of professionals, protected their rights and adapted their creation to each new medium and market. As a creator, you need to take the same steps. Your character might not be worth $60 million, but if it is you need to put yourself in the best position to profit from it.

Have fun.

Gamal

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.com FOR A FREE CONSULTATION.

Meet with Creative Contract Consulting at New York Comic Con

I will be attending the New York Comic Con this year. If any artist, writer or comic professional would like to set up a meeting for business consultations or the inevitable drinking to discuss future projects, please contact me at gamalhennessy@gmail.com to set up a meeting.

I’ll see you on the Exhibition Floor.

Have fun.

Gamal Hennessy

Related Articles

An Introduction to Creative Contract Consulting

Gamal Hennessy Biography

The Current C3 Client List

Your Slice of the Pie Part 1 (Gross and Net Profit Concepts in Creator Owned Deals)

A couple of weeks ago I introduced the different types of rights you could license as a creator and the different types of revenue you can get from a licensed work. In that post I hinted that there were specific concepts that impact how much you’re paid on any given deal. This post (and probably the next few posts) will go into more details about the economics of creator owned deals.

Types of Revenue

As a refresher from the earlier post, I need to point out that the various ways that creators are paid in creator owned deals. The three major ones are:

• A royalty is a percentage that the artist earns for every finished unit that is sold. For example, an artist might receive 30% of every one of their comics that is sold to the public.
• An advance is money that is paid before the work is finished. For example, a writer of a novel might receive money up for her novel based on the proposal not the finished product.
• A minimum guarantee (MG) is money paid up before the work is finished, based on anticipated sales. For example, if a toy company plans to sell a new licensed toy for $10 and the creator gets 10% of that sale, then the creator gets $1 per unit sold. If the company expects to sell 100,000 units, then the MG that the artist gets for this deal is $100,000.

Definitions of Revenue

In general there are two ways that revenue is calculated for your royalty or minimum guarantee. There are gross profit and net profit.

• Gross revenue or gross profits is the pure income that a product or service generates.
• Net revenue or net profits is the income that a product or service minus certain expenses.

In the vast majority of cases, publishing deals are calculated by net revenue. The key for a creator is to know what is being included in the definition of net revenue and avoid situations where the expenses are always greater than the revenue generated.

Examples

Question: Let’s say you produced a comic called the Greatest Comic Ever (GCE for short). A publisher says they are willing to make a deal with you to publish GCE. They offer you 50% the wholesale profits as part of the deal. The comic sells for $2 wholesale. Is this a good deal?

Answer: That depends. The truth is there is no way for you to know if this is a good deal or not until you understand how the contract defines profit.

• If the contract says you get 50% of the gross profits then you get $1 per book sold.
• If the contract says you get 50% of the net profits then you have find out what is deducted from the gross to calculate the net.

The Net Revenue Trap

It is a fairly common business practice to deduct the cost of goods sold from the gross to determine the net. Cost of goods sold means whatever the publisher has to pay to produce and distribute your book. Those costs can include editing, printing, shipping, advertising, returns and a few other items. Most publishers track their costs in a document called a profit and loss sheet, so they know what percentage of every book goes into the cost of goods sold. Many publishers will list exactly what goes into the net calculations. This is helpful for figuring out where the money is going.

The problems occur when the creator has no idea what goes into the net calculations or the definition of net is so broad that it wipes out any potential profit for the creator. In the most unscrupulous contracts, the publisher will creatively expand the definition of net revenues to the point that the creator never gets any profit for his work even if it sells millions of copies. For example, if the wholesale price of GCE is $2 but the net deductions are $3 per book then the net profit is -$1 per book. That means you get $0 no matter how many copies the book.

Playing Your Position

It is unrealistic for an artist or creator to understand the nuances of licensing revenue, especially when they first enter the market. You need to focus on your craft and create the best property you can. You also need to have access to financial and legal professionals who can explain potential deals to you and allow you to make informed choices. That is why it pays to break down each contract and understand its implications before you move forward.

Next week, I’ll try to explain the concepts of recoupment and payment cycles to give you a better idea of when you can expect to get money from a deal.

Best

Gamal Hennessy

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.com FOR A FREE CONSULTATION.

Addition by Division (Separation of Licensing Rights for Creator Owned Deals)

by Gamal Hennessy

Most of the contracts that my clients send me from publishers are fairly broad blanket licenses. Although the language of each one is different, it boils down to the same concept; the publisher looks for the artist to license all of the rights to all of their property in exchange for one fee. While this simplifies the contract for both parties, it also limits the earning potential for the creator by reducing the number of licenses his comic can exploit. A more experienced and profitable approach is to divide the property into as many licenses as possible to maximize the revenue and minimize the dependence on one licensing partner.

Separation of Power

As I discussed in an earlier post, creators can use the trademarks created from their work to license to product manufacturers. Instead of granting blanket rights to the publisher of the print comic, a more granular division of rights gives the creator more options and potentially more revenue. Licenses can be divided in the following manner:

• Property: or what title or characters you are actually licensing. A license could be for all the characters and settings in a particular book, but it could also be limited to just one character or a group of characters or in some cases just a particular image from a particular book (like a cover image)
• Licensed Good: or what you are permitting the licensee to create. You can be as specific as you like with the type of license you are providing. For instance you could grant a broad license for “clothing” or make it narrower by limiting it to “T-shirts”, “men’s T-shirts” or “men’s short sleeve cotton T-shirts”
• Term: The time limit on how long the license will last. This is usually measured by years, but it could also be as short as a few months.
• Territory: The geographic area that the license is limited to. This could be something as broad as a worldwide license, or it could be limited by countries (i.e. USA), groups of countries (NAFTA or the English speaking world) or continents (Europe)
• Outlet: This is the type of venue that the licensed can be sold in during the term in the territory. It could be a broad concept like “retail outlets” or “online sales” or it could be a specific type of store (high end, mid market or discount chains)

For every license granted, there is a separate fee and a separate royalty for every item sold. There is also a separate negotiation for rights.

Example

Let’s suppose you have a popular title and you start negotiations with a clothing company to produce T-shirts with your main character. There are several approaches you can take including:

1. You might have granted the merchandise rights to the publisher, which means you get a portion of what ever he reports to you for a deal you had little or no input on. 
2. If you kept the rights for yourself, you could grant the T-shirt company a world wide perpetual T-shirt license for a $10,000 advance and an 8% royalty off the suggested retail price. 
3. If you split the rights up, you could grant the T-shirt company a two year, US only, mass market T-shirt license for a $5,000 advance and an 8% royalty off the suggested retail price. You could then go to a Canadian company and do the same thing. And do it again with a European company, and an Asian company. Instead of one advance of $10,000 you could be looking at $20,000 in advances from four companies for the T-shirt rights alone. You could potentially have dozens of clothing, toy, game, poster and other licenses for your property with licensees all around the world that generate revenue that dwarfs what you make from the actual book, all because you separated the licenses to increase the revenue.

Enforcement

While it is a giddy thought to think that your character could be on licensed products from New York to Cairo to Hong Kong, keep in mind that there is significant work involved in keeping track of a vast licensing empire. You not only have to keep track of what license you granted to which company, you have to monitor each one to make sure they don’t violate the agreement. It is not easy to make sure your American licensee isn’t shipping goods to South America, selling them and then not reporting the sales to you or paying for them. It is even more difficult to monitor and keep track of counterfeit knock off goods in far flung countries that will reduce your revenue and dilute your license. The cost in time and money to manage a diversified licensing plan is huge, but think about it; if your book was that big wouldn’t it be worth it to manage and control the licensing program?

Negotiating Power

I have already pointed out that new artists are often not in a position to reject a blanket license and negotiate divided license rights. When you are trying to get enough money to pay your bills, you can’t worry about holding onto the bobble head doll rights for South East Asia. But if you want to make the most of your creator owned deals or you are in a position to choose between a partner who wants a blanket license versus one who is more flexible with the rights structure, you might be inclined towards addition by division.

Best

Gamal

See Also:

David and Goliath (Negotiating Power in Comic Book Contracts)

Image and Story (The Role of Copyrights and Trademarks in Comics)

Please Note: I will be attending the New York Comic Con this year. If any artist, writer or comic professional would like to set up a meeting for business consultations or the inevitable drinking, please contact me at gamalhennessy@gmail.com to set up a meeting.

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 at gamalhennessy@gmail.com FOR A FREE CONSULTATION.

Get What You Give (Rights and Revenue for Creators)

By Gamal Hennessy

A contract is basically an agreement between one or more groups for the exchange of resources. The exchange could be time and skill for money, goods for services, property for future gains or any combination of those things. The best agreements exchange roughly equal resources. The worst ones have one side trading large amounts of resources for little or nothing in return.

This is the problem that artists run into with many of the contracts that I see. The most important service I provide is showing my clients what they are giving up in comparison to what they are getting. I’d like to provide an overview of the different types of rights and revenue streams as a general overview for creators looking to get their projects into the market.

Types of Rights

As discussed before, copyright law gives the creator of an original work the right to benefit from the distribution of that work. There are various types of ways currently available for creators to exploit their work, especially when we consider comics. Some of the major distribution methods include:

• Publishing (Print, novelization and Digital)
• Public Display (gallery displays and public performances of some of the methods listed here)
• Theatrical (Movies whether live action or animated)
• Television (including network, basic cable, premium cable, PPV whether live action or animated)
• Home Video (including DVD, Blu-Ray, etc.)
• Live Performance (including Broadway performances and theme park performances)
• Interactive (including console computer or mobile video games)
• Merchandise (as discussed in last week’s post)
• Audio (soundtracks and audio novelizations)

As new forms of distribution are created, new rights are created for the artists. These rights are universal, but they can be divided or carved out by geographic area, time frame, distribution channel, language and other factors. (This division can be complicated, so I’m going to save that for another post)

Types of revenue

Just as there are different rights that creators can use to get their work into the market, there are various ways that they can be paid. Creators need to focus on three ideas:

• A royalty is a percentage that the artist earns for every finished unit that is sold. For example, an artist might receive 30% of every one of their comics that is sold to the public.
• An advance is paid before the work is finished. For example, a writer of a novel might receive money up for her novel based on the proposal not the finished product.
• A minimum guarantee (MG) is money paid up before the work is finished, based on anticipated sales. For example, if a toy company plans to sell a new licensed toy for $10 and the creator gets 10% of that sale, then the creator gets $1 per unit sold. If the company expects to sell 100,000 units, then the MG that the artist gets for this deal is $100,000.

These are broad revenue concepts. They are often altered and refined by concepts like gross, net, recoupment, offsets and other variables. (This is another complicated subject that I can talk about later.)

Choices that Artists Must Make

In certain creative circles, the types and amounts of revenue are fairly straight forward. Writers for some mediums often get an advance. A work for hire artist for comics often gets a page rate. There is more confusion for creators pursuing creator owned deals. There is often no advance, no MG and a blanket royalty rate for all forms of distribution. This puts them creators in a dangerous position since the lack of up front money and the uncertainty of any profitable sales in the future means that the creators are really working on spec while at the same time giving up all their rights to their property.

From the publisher’s perspective, it is understandable why they would take this stance in their contracts. Publishers protect themselves from risk by limiting exposure to projects that might not be financially viable. At the same time, they maximize their potential gain by securing as many rights as possible for projects that are financially viable. Artists need learn the same lesson. They need to counter the publisher’s position by attempting to limit the rights that a publisher gets for projects that are financially viable and maximizing revenue for every project they do.

I know negotiating power is often limited for artists. But having a clear understanding of the relationship between revenue and rights and clear goal of where they want to go can help maximize their limited negotiating power and increase their chances of success.

Best

Gamal

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.com FOR A FREE CONSULTATION.

Making Comics Isn’t Really About Making Comics Anymore (Comics, Movies and Merchandise)

by Gamal Hennessy

Last week I talked about the difference between copyright and trademark. I wanted to explain that first so that this post would make more sense. The development of comic book properties as major licensing programs has implications on the way comics will be produced going forward. It will also impact the way creators should look at their properties and their creator owned contracts.

The list of mainstream cross over comic book properties is familiar to everyone in the industry. The list includes the X-Men, Batman, Fantastic Four, Spider-Man, Green Lantern, the Avengers, and Superman. It will soon include Guardians of the Galaxy and maybe even Ant Man and the Justice League.  Everyone in the industry is aware that there is more potential for explosive success now than any other period in the industry. What does this mean for comic creators? What do you need to do if you want to thrive in this new golden age?

Comics as an Independent Business

There was once a point where the comic book business was purely about selling physical print copies of single issue comics. When I was a kid (back before TV had remote controls and everyone rode in a horse drawn carriage) a comic book was $.25 and it had very little competition in terms of entertainment. There was no cable TV, no cell phones, no home video game systems, no DVD’s and no internet.  People read comics because there was little else to do. As little as 15 years ago, the top 300 comics sold 6.64 million units. Very little money that the comics industry makes actually comes from selling comics. Monthly sales figures have risen in recent months, but the revenue from this activity is dwarfed by the “ancillary market.”

Comics as a Mainstream Springboard

Several factors helped comics evolve out of a purely print model to a more integrated business. The most significant factor is the jump to movies. When direct market comic book shops became an economic liability to publishers, there was a move to gain more access to major bookstores. This led to a higher volume of graphic novels (because a GN could survive on the shelf of a bookstore where a flimsy comic couldn’t). Works in this medium, most notably the Dark Knight Returns helped spark interest in Hollywood to create a major motion picture in 1989 with Batman. That began a push for more films based on comics. Now the summer movie schedule has 2-4 comic movie releases almost every year. Major comic book conventions that used to focus on buying rare comics and meeting artists are now more about upcoming film trailers and meeting actors. As of this month eight of the top 25 grossing films of all time are based on comic books. Comic properties have clearly developed from an insular type of entertainment to widespread popularity.

The Secondary Market

Comic based properties can generate money in several ways when they are associated with a movie. A film creates a retail environment where there is a higher demand for licensed merchandise.  Merchandise is a broad concept here that covers everything from clothing to household items to food to games and many other consumer articles. Depending on the film, the merchandise deals can generate more money than the movie itself. When I was with Marvel in 2002, I worked on the licensing program for the Hulk. The film made two hundred and forty five million. By comparison, the licensing program made more than one billion dollars. A single issue of the Hulk comic in 2012 comes in a distant third generating less than $184,000.

Your Comic in the World Beyond Comics

As film, television and video game producers look for new properties with strong stories and an established audience they will continue to look to comics for inspiration and opportunity. It is not just DC and Marvel capitalizing on this trend. Since the mid 80’s, independent comic properties like Teenage Mutant Ninja Turtles, 300, Spirit, Spawn, Hellboy, Scott Pilgrim and Kick Ass have all found producers willing to transfer the stories from the page to the screen. Comic creators need to be aware that the potential for a wide market is possible for any property. It is true that the vast majority of comics will not get big screen exposure but it is prudent to consider the life of your property beyond the comic when you are considering a deal with a publisher. This means not agreeing to contract terms that do not compensate you for exposure of your property in the world beyond comics.

I am aware that the main focus of fledgling creators is getting their work out there and closing a deal with a publisher. I know that many creators do not have a great deal of negotiating power in their dealings with large publishers. But as the owner of a potentially profitable property, you need to weigh the benefit of short term exposure and financial gain with the potential for film, TV and merchandise revenue. You will be able to make a prudent decision about your property once you take all the factors into account.

Best

Gamal

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 atgamalhennessy@gmail.com FOR A FREE CONSULTATION.

Image and Story (The Role of Copyright and Trademark in Comics)

By Gamal Hennessy

The storytelling method of comics primarily involves using images to tell a story. The writer and artist (and others) work together to create narrative sequential art. In a business and legal context there are two legal creations formed with every comic; a copyright and a trademark. Knowing the difference between the two and their complimentary roles will help you grow your business and might help improve your stories.

Definition and Examples

Before we talk about the relationship between copyrights and trademarks, it would help to define what we are talking about.

Basically, a copyright (normally represented in the US with the symbol © ) is the intellectual property right that gives the creator of an original work the ability to control how that work is used. In its most basic form a copyright gives the owner the right to make a copy, but it also governs who can use or exploit the work for any type of gain.

By contrast, a trademark (normally represented in the US with the symbols TM or ®) is a symbol or word used to identify a particular individual, organization, product or service in a commercial context.

The easiest way to show the difference between the two is with an example. Let’s say someone (we’ll call him Bob) writes a story about a boy whose parents are killed right in front of him on the way home from the theater. This boy grows up obsessed with fighting crime and making criminals feel the same fear he felt in that alley. He takes a secret identity and creates a persona modeled after an animal associated with the night (just for the sake of the example, let’s say this guy decides to use a bat). He creates a series of tools that utilize his symbolic totem. While many people see this mysterious man as a vigilante and a criminal, he becomes the one thing that keeps the city from descending into chaos.

Perhaps the story is a little far fetched, but as an example it works very well. There is a copyright created for every story of the masked crime fighter. The images associated with him and his story becomes trademarks.

Relationship between © and ®

When your stories create a strong emotional connection with the readers, many of them will choose to associate themselves with your creation. In modern societies, that association is expressed in material goods, especially with younger audiences. The reason that licensing and merchandise programs are tied to film and television releases is because the owners of the intellectual property are attempting to profit from the emotional creation that their stories create. In many cases, the licensing program for a character can generate far more revenue than the actual stories, if only because the potential number of merchandise products is far greater than the media outlets and they can be accessed at a far lower cost. But there will not be any demand to create merchandise if there isn’t a strong story creating a meaningful connection.

Legal and Business Impact

When a comic creator is trying to get their stories published, many of them are focusing exclusively on the terms and conditions for the actual publishing rights. Very few of them take into account the potential impact of the secondary media and merchandising rights. This makes a certain amount of sense, since very few comics ever produce a meaningful merchandise program.

The result of this lack of focus often creates a situation where a creator gives away most or all of the trademark rights to their story to a publisher that may not have any ability to exploit them properly. Even worse, the publisher may have a significant licensing program that excludes the creator from any future profits. It is beneficial for creators to protect their potential trademarks with the same diligence that they protect the copyright to the underlying story.

Impact on Story Development

Early in the development of comics, it might have been accidental that so many characters have distinctive symbols prominently displayed on their chests. It might have been pure coincidence that every item or tool that they used related back to an image that could easily be affixed to a wide array of products. But creators can be more deliberate now. The development of a story with a strong image system could improve licensing potential of a creator owned property down the line. I’m not suggesting that you compromise your art by forcing a logo where it makes no logical sense in your narrative. But there is a commercial reason why so many heroes have a symbol on their chests. It helps to sell T-shirts later.

Have fun.

Gamal

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 at gamalhennessy@gmail.com FOR A FREE CONSULTATION.

David vs. Goliath (Negotiating Power in Comic Book Contracts)

By Gamal Hennessy

When I analyze contracts for my clients, I point out all the language in the agreement that has been written to favor the publisher. I point out all the ways that contract clauses are used to limit their control over their work and their ability to make money. I offer them suggestions on how to make the contracts more equal and level the playing field. But I am aware that the terms of most of these deals will never be changed. As a comic book creator, you often must deal with the reality that you have little or no negotiating power relative to a publisher. Taking this fact into account will help you make decisions about what deals you will or will not get into and help you understand how they will impact your career.

Scarcity Breeds Power

Publishers have to take the financial risk of releasing an unknown and unproven book. In order to mitigate this loss and to give themselves the potential for substantial revenue and control on the back end, many of them incorporate biased language into their contracts. Many creators sign those contracts because of their lack of power.

It is easy to understand why comic creators normally have very little negotiating power. It boils down to supply and demand and market scarcity.

• The publishers currently corner the market on supply. They control the means of production (printing) and direct distribution (comic shops, bookstores, online and digital) and often control secondary distribution (merchandise and media licensing)
• The number of comic creators who want to gain access to the publishers supply is massive compared to the number of publishers. Who knows how many potential artists and writers are out there dreaming of getting their books in print, movies and games?
• The scarcity of publishers relative to the abundance of creators produces a situation where publishers can afford to offer one sided deals. Every unknown creator who demands a superior deal can be rejected by the publisher because there are ten or twenty other creators willing to accept an inferior deal. Since the publisher is primarily looking for books to fill their publishing plan, one unknown book is just as valuable as any other from their perspective.

Options for Creators

In light of the reduced negotiating power that undiscovered creators have, does it make sense to push for a bigger deal for a creator owned project or page rate? Yes and no. While you might not be able to wrestle a six figure advance out of Marvel, there are options you can pursue to make the most of your work.

• Establish your reputation in the industry by taking on work for hire projects that will get you exposure for your skill without exposing the characters and story lines that you are saving for a creator owned work.
• Find a more flexible small press that will offer more reasonable terms for new creators.
• Explore self-publishing if only to increase your name recognition in the market.
• Accept the biased deal as a means of name recognition.

While none of these methods is a quick road to fame and fortune, they can boost your negotiating power over time. An unknown creator has almost no leverage with a publisher. A creator with a following who represents tens of thousands of copies sold per month can command lucrative exclusive contracts, back end participation deals and creator owned contracts that give them considerable revenue and control potential. The best analogy is the contract situation in professional football. As a player, you may not make very much on your first deal but once you prove yourself as a marquee player, your subsequent contracts can be huge.

Need to Understand Your Agreements

Whether you make the choice to accept a one sided deal, negotiate better term or walk away, you need to understand what the terms are for the deal you are being given. It might make sense to take a bad deal now if it will boost your career later. The key is making an informed decision about what you are doing. Whether you decide to use a service like mine or not, knowing what you are signing and why is key to building and leveraging your negotiating power.

Best

Gamal Hennessy

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 at gamalhennessy@gmail.com FOR A FREE CONSULTATION.

All for One and One for All (Collaboration Agreements in Comics)

by Gamal Hennessy

Most of the contracts I deal with are between an artist and a publisher. I take the publisher’s standard contract and explain it to the artist in language they can understand so they know what they are getting into, for better or worse. What clients don't normally ask me to do is is create agreements between the artists working on a creator owned book that define their relationship with each other. What they often don't realize is that this type of contract is just as important as the one between the artist and the publisher. Without this type of agreement a otherwise successful partnership can lead to misunderstandings, conflict and disputes down the road that can be just as costly as any disagreement with a publisher.

Keeping the band together

Comics are like movies, films and theater because they are artistic works that are normally created through a collective effort. While there are some creators who do everything, most books are created by the continuing collaboration between the writer, artist, inker, letterer and colorist. In the same way that a band combines the talent of each instrument to make music, a creative team comes together to make comics (even if they only come together in a cloud server that they upload the work to).

Just like a band or a movie crew; each member of the team should know what he or she is getting out of any deal that involves the property they work on. This might not be significant when you are selling a couple hundred books a year on your website and losing money on the cost of production. This becomes a huge issue when a property is picked up for a film, TV show, video game or merchandise deal. It helps to have all the issues squared away before Hollywood starts calling. If you wait too long, anger, resentment and actual litigation could tear the team apart just when things start to take off.  That is where the collaboration agreement comes in.

Putting the ducks in a row

A well drafted collaboration contract contains six elements:

1. Who is responsible for creating each element of the property
2. How is the copyright for the property going to be distributed between each creator
3. How will the revenue be distributed between each creator
4. Who has decision making authority for the property
5. Who is the primary contact for the property
6. What happens when someone leaves the creative team

While the contract can be overly complex with just these elements, the best ones address these issues without a large amount of legal gymnastics. At the same time the elements of a collaboration agreement should not conflict with the terms of any agreement with a third party publisher or licensee of the property. Your legal advisor can review both contracts to ensure there is harmony between them.

Other options

Of course, there are cases where only one or two of the artists on a book will actually own the copyright and the other participants may participate on a work for hire basis. Also there are some instances where the creative team actually forms a separate company to manage and exploit the property. In those cases, as with the collaboration agreement described here, a contract should be in place before any work is done to protect the rights of each artist in relation to each other as well as to a publisher.

Have fun.

Gamal

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 ATgamalhennessy@gmail.com FOR A FREE CONSULTATION.

Saluting the Comic Creators Bill of Rights

The San Diego Comic Con opens today. It is a huge, multi industry event that encompasses film, television, video games, merchandise and of course, comics. In a year when the second most successful movie of all time is based on a comic, it is clear that the comic industry and the professionals in it have a lot to be proud of.

As artists and fans flood the convention center, independent creators should keep in mind the changes in the industry that make the potential for long term success much more viable. In the past, comic writers and artists had very little control over the stories and characters they created. While there are still major challenges in the industry, the current situation is a major improvement from what was 25 years ago.

In the 1980’s artists struggled with big and small publishers over everything from credit to payments to getting their original art back. In 1988, a group of comic professionals including Scott McCloud, Dave Sim and Richard Pini drafted a Creators Bill of Rights which is analogous to a US Declaration of Independence for comic professionals. It lays out the minimum benefits a creator should expect from their publishing partners and has been adopted by the Comics Creators Guild. Since its inception it has led to successful creator owned imprints including Dark Horse, Epic and Vertigo.

When I was at Marvel, many creators sought to establish themselves with work for hire projects so they could pursue their own creator owned deals. The Creator Bill of Rights made that situation much more possible lucrative. When you are licensing your property, it pays to compare the language of your contract to the Bill of Rights. Any provision that reduces or eliminates the rights to your property should be questioned and if possible, removed the contract.

As you enjoy the trailers, panels and energy of Comic Con, remember that there is a foundation that you as a creator can use to be a part of and benefit from the fruits of your creation.

Have fun.

Gamal  

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.com FOR A FREE CONSULTATION.

Entertainment Contracts 101: Creator Owned vs. Work for Hire

In the creative marketplace, one of the first things that an artist needs to learn is the difference between a license agreement (often referred to in comics as a creator owned agreement) and a work for hire agreement. These are fundamentally different animals and signing the wrong one at the wrong time could be devastating to your future.

Definitions:

A work for hire (WFH) is an agreement where you offer your creative services to intellectual property that you do not own in exchange for a fee.

A license is an agreement where you give someone else the right to distribute your intellectual property in exchange for various types of payments.

Example:

WFH: You are an artist. Marvel Comics hires you to draw an issue of Spider-Man. You do the pencils. They give you money.  You walk away. You don’t own Spider-Man. You don’t even own the pages you created. Your name will appear as the artist, but that’s as far as it goes. This is pure mercenary work.

Creator Owned License: You are an artist. You have an idea for a new story. Dark Horse likes it and gives you a CO deal. You create the book. You might even eat the cost of creation. They sell the book. You get a cut, they get a cut. When you walk away, you walk away with the property. You can do whatever you want with it because you own it.

Historical Example:

Frank Miller offers one of the best examples of the difference between these two types of deals. In 1986, Miller signed on with DC to release the Dark Knight Returns. That book reanimated the Batman franchise, solidified a darker vision of comics across the board and was instrumental in redefining the genre of super hero movies. But at no point could Miller claim to own Batman. He had no rights to any of the subsequent film, video game or merchandise revenue that came out of the Batman property. To the best of my knowledge, he got a page rate and he got credit for doing the work. That’s it.

Actually, that’s not it. Because he got so much exposure and critical acclaim for the work he did on Batman (as well as other properties) it was much easier for him to land creator owned deals later on. Frank Miller owns most if not all of the Sin City and 300 franchises. He had major input, control and license fees from those books and subsequent films. That was money he was entitled to because he owned the rights to that intellectual property.

Take Away

There are several successful writers and artists who have done work for hire deals first to establish themselves in the industry and then done creator owned deals once they had the right leverage. Many of them jump back and forth from one type of deal to the other depending on the project. Jim Lee, Todd McFarlane and Greg Rucka are all good examples of this. I’m not suggesting that an artist should never sign a WFH. I am suggesting that you need to know the difference between the two and make sure you are not signing a WFH for your own property because then you are signing away all your rights for little or no money.

And keep in mind, just because a contract says Creator Owned Agreement or License Agreement on the top doesn’t make it a creator owned agreement. It is the language in the agreement and the way the rights are divided that is the key to the contract. When you analyze your agreements (or ask me to do it) always keep in mind who has control over the property. This will be vital when your idea becomes a movie.

Best

Gamal

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.com FOR A FREE CONSULTATION.

An Overview of Contract Analysis

Before you sign on the dotted line...

When an artist, writer or other creative person gets a contract from a publishing or distribution company it can be a confusing and stressful situation. Almost all artists dream of the day when a large company is ready to give them a deal for their work, but very few of them understand the language in contracts and how that language will affect thier ownership of their creation or the money they can make. This is the point where an artist needs professional advice from someone who understands how contracts are written.

This is the service that I provide. My main legal specialty is providing legal analysis of contracts for artists and creators. I break down and explain each paragraph of the contract in straightforward terms, so you can make an informed business decision on what conditions you can and can't agree to. This will give you the confidence you need to discuss the agreement with your potential business partner and sign a contract that protects your rights and puts you in a position to profit from your creativity now and in the future.

There is a long list of creators in music, publishing, television and film who signed away all the rights to their original work because they didn't understand what the contracts they signed. The analysis that I provide is designed to prevent that. Of course, there are many situations where the main goal of the artist is up front payment or exposure. There are times when you might be willing to accept a deal that is not set up in your favor. But even in that case, it is better to know what you are signing and how it will affect your rights and income going forward. A C3 review will give you that.

If this is something you are interested in, please leave a comment below or contact me at gamalhennessy@gmail.com and we can set up a free call to discuss the specifics of your situation.

Best
Gamal Hennessy, Esq