Thoughts on Producing

I have a discussion on Linked-in on the subject of Ancillary Rights. Well, I posted there this morning, only to have what I was writing disappear when Linked-in logged me out in the middle of what I was writing. So I will not be doing that again. Rather I am going to try to recover that train of thought here.

The issue was wether or not an investor or a producer should expect the Ancillary Rights to be attached to a property that is being produced on Broadway.  My argument is that all the Ancillary Markets are separate from, not only each other, but also from the theatrical runs.  Each marketplace is unique to itself and has specific finance and management concerns. Because of this I feel it is inadvisable to commingle the operations of  the core production with that of the ancillary markets.  From my standpoint, the ancillary markets provide income to the studio via a license to manufacture and distribute in which partners buy a license to a market, either exclusive or non-exclusive.  In that license certain terms and conditions are specified, one of which is that there will be a return to the studio which is represents as a certain percentage of the gross sales. Other terms will come into play that pertain to manufacturing, inventory, distribution and marketing, but the essential point is that the ancillary market will provide a return to the studio. It is the combination of licensing fees, deposits against sales, and actual percentage of the product shipped for resale that make up the income from any given ancillary market.  That income belongs to the studio alone, not any other investor or producer. It is with that income that the expenditures of the production are met, including the return to the investor, which is fixed under certain terms contained in the investment agreement(s).

The agreement structure for a production extends beyond the simple investment agreements, of which there are numerous types which may come into play. Each agreement which is involved in a production effects the other agreements, but there is a tiered structure in which the core product is placed at the top, for it is the source of the production.  All of the contracts represent the roles of the participants and the investors are but one group of people needed to implement a production.

This does not discount the importance of investment and the role of the investor, for surely financing is an essential part of a production and the agreement under which a person becomes an investor, is such that- the investor is rewarded for their essential contribution to the project as a whole.  But there are many other obligations that need to be met besides those of the investor who provides working capital. There are those investors who have contributed to the advancement of the production with resources and services other than working capital, by means of in-kind contributions of resources, supplies and facilities as well. Accommodation must be met in the production to compensate these people for their faith in the work which has or is being done.

And so, in addition to the simple fact that finance and management of the ancillary markets must remain separated for matters of practicality and good policy, the income derived from the ancillary markets needs to be provided to the studio/producer to manage as needed to meet obligations that are unseen by the investors who are not engaged in the daily operations, nor have been involved in the development process.

In the instance of The Gnomes of New Hope - this show has been in development since 1990, gradually progressing, as the resources allowed, to the point of fullness which it has reached. A great deal of time and money has already been invested in, not only the production, but the studio facilities with which this production can be implemented.

Therefore, the ancillary markets and all rights thereto are reserved and are not attached to a theatrical license to produce this show.  In fact, the theatrical production, meaning a first class, second class or regional, and even community theatre run can be viewed as an ancillary markets in themselves, since the composite of this show, although designed to be a theatrical presentation, is much larger that that and does not depend wholly on the theatre as an outlet. Rather it is the conjunctive effort of numerous marketplaces in a carefully timed implementation that brings about the success of this project.

 So in response to the line of conversation being conducted in the Theatre Producers forum on Linked-In, the ancillary rights to a project would very likely be attached to the core product if there are no other obligations or the ability to implement or pursue other markets, but in the instance where, as in this case, development has taken place over a period of years and the numerous markets are already identified and under pursuit via a clearly defined organizational structure, then those ancillary markets must remain separated from the core production, for the reasons sited.  Remembering that the ancillaries do contribute to recoupment, but that no rights to those markets exist with the anyone but the licensee to the market, under the terms of the license and that direct participation, gaining greater advantage  in any market, requires investment in that specific market.

There certainly is more to be said on the subject.  AG