Friday, July 13, 2012

Show me the money: what you need to know about getting paid

If you're creating valuable content, you may someday want to get paid. And that means you'll need to know something about how payments are structured in entertainment contracts. I know, this could be tedious. But when we get to talking about money, and especially in future posts when I go into net profits clauses, knowing the basics will be really important.

Oversimplifying drastically, there are two basic types of payments:
  • Flat fees
  • Payments over time (royalties and advances)
First I'll talk about flat fees. Then I'll cover royalties and advances.

One thing to note: I'm going to use books as my example for the next few posts. That's because the relationships are easiest in there: you have a writer and a publisher and that's pretty much it. But the principles remain the same for most creative industries. In things like app development it's almost identical: if you're making your own apps for iTunes then it's you and Apple, if you're making them for companies buying them from you it's you and the purchaser. If you're making a movie or web series you can probably see how these analogies will work too.

A flat fee is simple, and is the way a lot of freelance writers and photographers get paid: $500 for your magazine article, $300 for your photograph, etc. There's nothing wrong with these fee arrangements and sometimes there's a lot right with them: even if the newspapers would let you, figuring out how much to charge per-download for a newspaper article would be crazy. But don't think because my examples involve low numbers that flat fees have to be low: I've done flat-fee deals where the payments were hundreds of thousands or even millions of dollars. This is a method of getting paid, not an amount.

Flat fees are also often the way you get paid in a work-for-hire situation, although not always, and don't let people convince you otherwise.

  • A contract can be flat-fee but not work for hire. Many publishing deals are this way: the author licenses the first-run rights to a magazine article for $1,000, but retains the right to place it again after a certain period.
  • A contract can have you paid advances and royalties but the work can still be work for hire. Most if not all Hollywood movies are works for hire, and everyone from actors to writers to producers regularly take percentages of the net or even the gross profits.
You can take this to the bank: anyone who tells you that you have to be paid a flat fee because the contract is work for hire is trying to pull a fast one on you.

This raises the next question: how do you determine whether you're getting offered a fair fee? That, and more, in the next post.

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