Is a Pay or Play contract really all it’s cracked up to be?

One of the most coveted clauses in entertainment industry contracts is the Pay or Play Clause. But, the term “Pay or Play” is a commonly misunderstood term. Or, more precisely, it's a commonly misused term, and those who use the term often have meanings in mind that won't find support in the la

What is a Pay or Play Clause?

A rather detailed explanation of the Pay or Play Clause can be found on Wikipedia under the heading “Guarantee (filmmaking)”. Fundamentally, though, “Pay or Play” is an informal term included in an actor, director or (usually junior) producer's contract that guarantees payment if the person's services aren't used, and the person is released from the contract through no fault of his or her own.

This is fairly consistent with what most in the entertainment industry consider when discussing “pay or play”, but it lacks the kind of legal precision that Courts prefer to see. “Guarantee” suggests the involvement of a third-party who's promising to pay if the primary party to the contract fails to perform. One can't really guarantee his or her own performance or payment obligation. So, technically, a Pay or Play clause is a “promise”, but not a guarantee. Similarly, “through no fault of his or her own” is a bit narrow, because the clause could/should be triggered even when the person is not formally “released” from the contract.

What we really want when we say “pay or play” is an unconditional promise to pay, whether or not the services are ever used.

But that's pretty onerous for producers who are trying to get a project set up, and often don't know whether financing will come through, or other pieces of the puzzle will fall into place.

Conditions… conditions

As a result, most Pay or Play provisions are dependent upon a number of other things happening before they become effective. (In legal parlance, these are called “conditions precedent”). Some examples of these conditions include the project being funded, or a performer being available and legally permitted to work on the project. The nature of these conditions can be as varied as a producer's imagination ( and bargaining power).

Danger ahead

This is where extreme caution is warranted. If the provision is effective too early, it ties the producer's hands, and creates liabilities. If the pay-or-play provision isn't triggered until late in the process though, it might still possible for the person to be fired or otherwise excluded. Another important consideration is the timing involved. A pay-or-play provision that doesn't specify when the payment must be made could prove useless if the film never gets produced. The producer might claim that even though the “pay” portion is applicable, the “play” aspect remains open, so the payment isn't yet due.

So, merely getting a pay-or-play clause into a contract isn't the point. The clause has to be tailored to the specific situation, and provide the desired protections, yet still afford the producer sufficient flexibility to maneuver toward ultimately getting the picture made.

Other ways to protect yourself

Ultimately, there may be better solutions available. For example, a producer could offer an in-demand star a “holding fee', or a “kill-fee” or both, in lieu of a pay-or-play. With a Holding Fee, the actor isn't fully bound by contract until a later date, but agrees to hold open his or her availability for a certain window of time, in exchange for a payment made at the start of the discussions. (similar to an option). This compensates the artist for the possibility of lost opportunities, while generally reducing risk to the producer.

With a “Kill Fee”, the producer and actor simply agree on a fixed sum that will be paid if the actor ultimately isn't used in the project. This can often be lower than the actual fee paid if the artist performs. Sometimes, the size of the kill fee increases incrementally as the start-date for the picture approaches, and other work opportunities become unavailable.

When negotiating contracts such as contemplated in this article, it's always best to consult an experienced entertainment lawyer who can lay out the various possible approaches.