Co-production Agreements In Theatre: Practical Issues To Consider

Co-productions – that is, productions devised by or produced by more than one theatre company – are a vital part of the theatre eco-system, facilitating the presentation of theatrical works that one theatre company alone might not have the resources to present.

Co-productions are particularly relevant in the current climate, given the increasing financial pressures faced by British theatres (increasing costs; smaller audiences), and the ongoing reduction in funding for the arts generally.

Most co-production agreements (in theatre and otherwise) will lay out the terms upon which the parties will work together to develop, produce, finance or stage a production. Co-productions are however often complex, involving difficult decisions and negotiations across every aspect of a production. As such, it is important that a co-production agreement clearly specifies the roles, contributions and ongoing obligations of each party and that such agreements are put in place before development or production begins, in order to mitigate the risk of any issues emerging down the line.

Below is an overview of the key issues that parties should be thinking about prior to entering into a co-production agreement. There are of course a number of other relevant provisions that require to be contemplated in any given negotiation, and what follows is an overview of some (but not necessarily all) of the material issues parties might wish to consider before and during the negotiations.

1. Contracting Parties

As a practical starting point, thought should be given to the identity of the contracting parties – in particular, their financial position, their experience, and their location. A Companies House check should be carried out as an absolute minimum.

It is not uncommon for creative partners to set up new companies specifically for the purposes of the new production – this may be necessary from a tax / accounting perspective. However, in such cases, due diligence is required to ensure that the directors of the company are suitably experienced. Oftentimes, the director of such a company will be a well-known producer who is well versed in the art of the co-production. However, if the newly established company has no assets, there remains a degree of risk which should be factored into the deal decision, as if a dispute were to emerge, the liability of the director(s) would be limited and (generally speaking), any recourse would derive from the company itself, not the director (no matter how well-known or wealthy the individual behind the company might be).

Parties should also be mindful of the respective locations of the parties and ensure that they have given thought to the applicable law governing the contract. This will be straightforward where both parties are in the same place but is a point to negotiate in circumstances where the parties are in different jurisdictions and becomes particularly relevant in the event of a dispute. In certain cases, the place of performance of the contract would take precedence over the location of the co-producers and so a co-production agreement for a production set to take place in Scotland should, as a general proposition, be governed by the law of Scotland.

2. Scope of the Project

Efforts should be made to specify – as precisely as possible – the nature and scope of the project, possibly in a preamble at the beginning of the contract. The exact details will of course depend on the nature of the project.

For a film or TV co-production agreement, we might expect to see details of the format (feature or television show), the runtime, etc. For theatre specifically, the preamble may include details of whether the production is a musical production, a dramatic play, an immersive experience, etc., as well as providing details of the genesis of the project – e.g., has it derived from a literary work or from a television show and who specifically has been involved in its evolution from book/tv to stage? This would also be the place to cover off other relevant details, including the working title, the anticipated run length, the date of the announcement (and who will make it), and which season of work the project forms part of.

It will not necessarily always be possible to specify all of the above, but a clear, specific preamble can help focus parties’ minds and lay the foundation for the rest of the agreement.

3. Form of Contributions

There are various ways that the financial elements of a co-production agreement can be structured. Typically, the arrangement is a form of co-financing, with the parties committing to share the development and / or production costs, not always equally.

This may look like each party contributing a fixed amount to the costs of pre-production, with a separate agreed weekly amount towards running costs which is often met by the host theatre. The host theatre will also, usually, assume responsibility for costs of front of house staffing, operation of the theatre, and the costs of executing a local marketing campaign.

For larger productions that debut in Scotland (with a view to going to the West End), it is common for the London based co-producer to contribute a larger amount up front in exchange for the right to remount the production following its run in Scotland (at which point the Scottish co-producer is typically no longer involved but may (depending on the circumstances) retain the right to receive a share of weekly operating profits in respect of any future production).

The respective contribution of each co-producer will depend greatly on the production in question, the negotiating power of the parties, and what the intentions are for the production moving forward. 

4. Rights

The question of rights is often tied into the form of contribution and will require parties to think about i) the rights that exist prior to the establishment of the co-production (for example, rights in a screenplay or manuscript which will likely require a separate licencing arrangement) and ii) the percentage split of any copyright subsisting in the creative output (i.e., the finished product), which will have a direct impact on royalties.

In theatre, it is common for the party investing more money to own more of the copyright (and in turn to receive a greater share of the royalties) and to retain the right to remount the production in the future. Such arrangements are common in Scotland, where London based companies will co-produce on the basis that in exchange for their investment, they retain the right to take over if/when the production moves to London.

5. Crediting

This is a practical point but it is worth noting that the wording of any crediting should be agreed at the outset – in particular, who should be credited (typically the producers, the theatre, and any relevant individuals including screenplay writers, musicians, and directors) and the form of wording for such credit. If it is anticipated that a production may transfer from Scotland to the West End, it is also worth factoring in how the Scottish theatre expects to be credited in any future production.

6. Future Life

The anticipated future life of a production is an important consideration when negotiating a co-production agreement, particularly where it is envisaged (or hoped!) that a production will transfer from a region to the West End, Broadway or internationally which raises issues in relation to finance and tax (on which advice from a suitably qualified accountant should be taken).

In particular, parties should consider which of them has the right to remount the production after its initial run and the extent to which the other party (as an originating producer) is entitled to any shares of net weekly operating profits flowing from any future presentation of the production.

7. Profits, Accounting and Finance

Profit will always be a key consideration for all parties. Investors will be looking to recoup their investment and revenue splits will usually reflect the level of respective investment. Screenplay writers will also, typically, be entitled to a share of the revenues as well as the writers of the lyrics and the music and all of this may require to be factored into the revenue share between the co-producers. It should also be clear from the co-production agreement which of the parties is responsible for revenue collection and administration (this is typically the host theatre but will depend on the circumstances).

Finally, the co-production agreement should cover off which of the parties shall be “the claimant” with regards to Theatre Tax Relief for the production, as well as how the proceeds of any successful claim shall be split. The split will typically be reflective of the parties’ respective contributions to the production itself. Specialist advice should be taken if any questions arise in relation to the application of Theatre Tax Relief, but it should be thought about early as HMRC may look to the original co-production agreement in order to ascertain the parties’ intentions at the outset and therefore whether and to what extent the relief applies.

8. Marketing and coverage

This will depend on the nature of the project and the location of the parties but typically, one of the co-producers will take the lead in marketing the production. There will generally be a degree of collaboration in relation to the generation of marketing assets, including any artwork and video content. Parties should set some clear boundaries in relation to budget (which will form part of the overall production budget) and should also look to ensure that if the production is moving on (for example to the West End), that any future producer (typically, the co-producer) has the right to utilise the marketing materials as appropriate. Consideration should also be given to approvals – in particular, who has the right to sign off on the marketing materials? What other matters are likely to require approval during the lifecycle of the production and who will be the final decision-maker? Approval may, for example, be required in relation to “business decisions” (that is, budgets, finances, etc.) and those that are more “creative” (for example, casting decisions, marketing approvals). All of these questions should be considered at the outset.

Another point of discussion should be the invitations to the press. It is commonplace within co-production agreements, particularly those involving a London based investor, for that investor to wish to retain the right to invite the press to any London opening (as opposed to any regional opening). This is to enhance any recoupment that might flow from national coverage (versus local) on the basis that there is typically only one opportunity for press reviews, since the press do not tend to review the same production twice.

Conclusion

The above list represents only a selection of the issues that might arise when negotiating a co-production agreement. There are of course more broad contractual issues which must be considered, including termination provisions, warranties, and indemnities, as will be the case in any commercial contract negotiation. Co-production is an essential, and increasingly common, part of the theatre infrastructure but can present a number of complex issues which must be addressed early in the lifecycle of a production.