Tuesday, May 20, 2008

I will gladly pay you Tuesday for a hamburger today

When I was a kid I would (occasionally) shoplift a candy bar from the corner store in my neighborhood. It seemed logical at the time, after all these were adults with a great big store – they would hardly miss my 50-cents, right? Going past that place as a grown-up I marvel that it is still in business. So tiny, so few items for sale and how much effort must those people put in to be open so many hours every day. My perspective on that candy bar theft has clearly changed.

Young directors often see a big production company (and they all look big when you wanna get signed) as their golden ticket. The production company has a cool office, maybe there is even a vintage motorcycle parked in the lobby. To a wannabe Fincher – these people at the prod co must look like they have an endless supply of candy bars.

But … Record labels are truly massive enterprises, huge conglomerates with budgets for executive parking and office redecoration that dwarf even the wildest prod co office spending. No wonder they want to make more off the downloaded iPhone 2.0 songs.

So why would a major label screw with the relatively tiny production company? Because they can, and it saves them some cash. Same reason that an employer waits to hand out the checks to its employees until after the banks close on Friday to garner another night or two of interest before the payroll clears.

When a label hires a production company to make a video for them, the usual deal is that the first fifty percent of the budget gets paid to the prod co when the contract is signed – which seems to happen closer and closer to the actual shoot day, but that is another post. Then the next payment (usually 25%) is due when the first rough cut is delivered to the label. The final portion of the payment is owed to the production company when the final video is delivered along with all the elements (reels of film, video tapes, etc.) If the budget is really tiny the producers may get the entire amount (8 grand or whatever) up front. Makes sense, right?

That brings us to – record labels NOT paying production companies. Sure that first 50% shows up when they want to get the video made. The label knows that locations need to get booked and caterers (and deluxe hotel suites) must be paid for to service the “needs” of artists and label types alike. And the completed video isn’t in their hands, so - at least at this point - the label still needs the production company.

A lot of times that second payment also arrives as scheduled after the rough cut is viewed – after all the label still needs the producer and director to finish the damn video. But, when the video is done (and maybe even already on MTV or BET) – the last 25% seems to come just a bit slower.

The first line of label defense is to claim that they have yet to receive all the elements from the shoot, a provision specifically listed in the contract. In a hurried, complex production it is not surprising that the producers might have forgotten to send off one of the reels of film from the telecine house, or a DAT tape of audio recorded on set, a copy of the third different MTV re-edit or the final close-captioned version of the video that needed to be re-done because the original lyric sheet given by the label was wrong. What if the label acts like it didn’t get one of the legally required elements when it actually did, that would be shady, wouldn’t it?

There are lots of ways that the label can drag and drag their feet about paying that last bit of money. This is not just days, but often months of delays while the production company is getting invoices from vendors and crew members. This is obviously hard on the production company but what can they do?

The prod co can bitch and complain, but they don’t want to anger the label too much – because they are still waiting on the overages to come through. On a video shoot, if the production is going to go over the contracted budget – the label executive on the set can sign a form that they have authorized an overage of a certain amount of dollars to pay for a couple of hours of over-time or a dozen more extras (or bags of substances) as needed.

The problem with overages, at least from the prod co’s perspective, is that those payments are not due as part of the 50/25/25 contracted schedule. The label person (usually commissioner but sometimes another person) that signs doesn’t give over a stack of cash on set – this is just a promissory note, and more up-front spending by the production company.

The overage payments can take forever to come through from the label. I have seen checks arrive more than a year late. Some of this is to protect the label from fraud – they want to triple check to be sure they are not getting scammed by the video's producers (who would do such a thing?). I understand caution from the labels but …

Labels have claimed that the person who signed the overage sheet on set was not authorized to do so, or that the signature was forged. There can be confusion around this potentially pricey decision to spend more money – these overage calls are often made late at night after a long day of arduous shooting. Some prod cos have taken to having the signing of overages done while being video-taped – like a barely legal porn star showing her ID to the camera to be sure there will be no Traci Lords issues.

Adding to the likelihood of long-unpaid overages is the fact that labels are getting tighter and tighter with the budgets during the original planning stages, making it more and more likely that the trimmed and clipped budget won’t cover the actual cost of getting the video made. Everyone knows this going in, and assumes that overages will swoop in to save the financial day.

I have heard (rumor alert) of a label insisting on a certain budget number so the prod co rigged their budget for a seven hour day. All involved knew that the shoot would go more than 12 hours – but putting the ‘real’ cost in the budget would have made the number too high and the upper-level label folks would not have signed off. It seems that the ‘overage’ and ‘budget’ accounting is separate – not sure why it works this way. Doesn’t really make much sense. So a fake starting number is created, and then once the label is ‘pregnant’ with the video – they will have no choice but to sign the overage or face the prospect of a half-finished clip.

Overages are intended (in my amateur opinion) to cover events that happen on the set, so if you need an extra hour of overtime the director can get it and the fact that a couple grand is an ‘overage’ and thus gets paid slightly later is not a big issue. But as more and more of the genuine costs of the video get pushed into the overage category, carrying that debt is harder and harder for the prod cos. It has shifted from ‘putting one nice meal on my credit card’ to ‘paying my rent and utilities with my credit card.’ And this has helped kill off some production companies.

So why do production companies put up with this system? Why not insist on getting the money up front, or something, anything better than the current set-up? Because prod cos are scared and don’t want to lose even one job. Labels like the way the system is, so if one company raises a stink and wants all the cash up front, the label is more than happy to go to a different director at a more malleable prod co.

Many production companies are walking a fine line these days, and getting paid for that hamburger next Tuesday (even if we all know the payment won’t come until Saturday) seems better than selling no hamburgers at all.

Update: Over on the 'Ville, kalstark shares his own tale of woe and owe at the hands of his grateful clients. Check it out here.

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