THESIS ON SYNDICATE CONTRACTSThe following is the 120 page thesis (without the footnotes) that I wrote in 1997 at Harvard Law School. Please note that this is an academic research paper and does not constitute legal advice. Feel free to contact me ( stu@stus.com ) with comments on the paper and your specific contract issues. To download your own copy of this document (with footnotes), go to the RESEARCH page.
Table of Contents
IV. CONCLUSION Author Biography APPENDIX I: Universal Press Syndicate Boilerplate Contract APPENDIX II: "Fair" Contract
This paper provides a detailed analysis of syndicate contracts and the business factors which shape them. Particular attention is given to claims made by both creators and syndicates about issues of bargaining power, "fairness", artistic control, business pressures, enforcement, and extra-contractual power.
The goal is to provide syndicates, creators, and their attorneys with the information necessary to draft fair and efficient contracts.
Creators need this paper because most cannot afford a lawyer and must therefore represent themselves. This paper provides self-representing creators with enough legal guidance to handle typical negotiations. The lawyers who represent the few wealthy creators tend to practice general law and so need this paper for its in-depth review of issues unique to the syndication industry. Syndicates have expert lawyers, so admittedly have less need for this paper than the creators do. Moreover, the paper contains more suggestions in the creators’ favor than in the syndicates’ favor. Even so, the paper offers recommendations for numerous pro-syndicate improvements in the contract. Syndicates may also benefit from the suggestions for contract language that educate creators about their rights and responsibilities; this educational element is important to reducing the misunderstandings that poison many creator/syndicate relationships. Overall, this paper fills a recognized void in the legal community’s analysis of creator contracts.
This paper is intended to be a dispassionate analysis of the legal and business considerations which affect the contract drafting process between syndicates and creators. However, the reader may note an emphasis on the creators’ perspective. This tilt stems from two factors. First, most creators are unpracticed negotiators and can afford little or no legal advice. Thus, creators are likely to rely on the paper, and it is written so that they can use it easily. Second, at least as of this version, I have been substantially more successful in obtaining information from the creators than from the syndicates. Thus, by extension, I understand and can write about the creators’ concerns more thoroughly. If this paper generates the hoped-for interest among the syndicates now that it is a completed document in the hands of creators, future versions will likely benefit from substantial comment by the syndicates. Some creators and syndicate executives will undoubtedly wish to challenge certain factual assertions, legal interpretations, and determinations of "fairness." I welcome comments, and hope for a lively debate which will benefit future versions of this paper. Please feel free to contact me at stu@stus.com or 781-324-4533.
Current Negotiations: Focus on Distributing Value, not Creating Value Most contract negotiations between creators and syndicates focus on distributing the value of the comic feature. This paper provides a detailed analysis of each contract provision and is therefore useful in such negotiations over the distribution of value. An equally important goal for this paper is to find ways to ADD value through the contracting process rather than merely distribute it. This is done in three ways. First, the paper details how changed ownership or changed incentives can encourage the more efficient use of several important resources. For example, the very low use of merchandising rights by the syndicates in non-blockbuster comics suggests that the syndicates may not be the best caretaker of merchandising rights to non-blockbuster comics. Second, the paper shows that the creators and syndicates value the same contract provisions differently. This creates the opportunity for mutually-beneficial trades even when there is no prospect of generating additional revenue. For example, syndicates seem to care more about contract duration for the syndication to newspapers than about the merchandising rights to non-blockbuster strips. (NOTE: syndicates obviously care about both, but for a typical 250-newspaper strip most syndicates would fight harder against losing three years of contract duration than they would about losing the merchandising rights. Creators, on the other hand, may be willing to grant three more years in return for retaining the merchandising rights.) Third, the paper provides syndicates and creators with the tools both to better draft and to better interpret contracts. From better drafting, both parties gain because the possible sources of litigation over the meaning of contract terms decline. From better interpretation, the creators gain because they understand the true meaning and effect of each provision--something that even the few well-represented creators probably do not. For example, the allocation of copyright ownership is not all-or-nothing: in fact, various pieces of a copyright can be carved out in the contract such that the technical "owner" of the copyright has signed away most of its value. In this and other matters, creators need the tools to understand the non-obvious differences in contract language.
The extremely difficult process of conducting research for this paper illustrates the very reason why the paper is important and long overdue. The first problem is the lack of information available directly from the syndicates. Many of the key syndicates are privately held and, therefore, are not required to provide meaningful public disclosure. The other syndicates are only a small piece of giant public company conglomerates, so the information in public reports is too general to be of significant research value. The second key problem is that the newspaper comic strip industry is small; it has an annual revenue of less than $200 million. The industry’s small size has contributed to a complete lack of meaningful studies concerning either the law or business of cartooning. The art and cultural influences of cartooning are heavily studied, but these are off-topic. No reported court cases between creators and syndicates are helpful. There are two good sources of print information. One is the self-help books which teach aspiring creators both the business and art of cartooning. Your Career In The Comics by Lee Nordling is one particularly good self-help book. It is designed to help aspiring creators by presenting the (often-conflicting) thoughts of important industry personnel on a wide range of issues which affect creators, including contract terms and the need for a lawyer or agent. This paper uses Your Career In The Comics extensively. The other important source of information about the syndicate industry is the weekly article in Editor & Publisher Magazine about the syndicate industry written by David Astor. There is some other miscellaneous written material such as newspaper articles, company reports, magazine articles, and World Wide Web sites, but all of these are of only modest importance even as a group. Because published information so scarce, most of the research material for this paper comes from two primary sources: personal interviews and creator contracts. The response of syndicate executives and creators to my requests for interviews and contracts differed greatly. Syndicate executives often were willing to answer specific questions in interviews. Unfortunately, only Universal Press Syndicate sent out its "boilerplate" contract. The other four major comic strip syndicates and some smaller ones refused, generally citing as a reason one or both of the following: "each contract is different, so we really don’t have a boilerplate contract," or "we don’t release that information as a matter of policy." These stated reasons have three fundamental motivations. First, the creators typically sign the offered contracts with very little negotiation, so the syndicates see very little upside to promoting an exchange of information. This paper is dedicated in significant part to showing the syndicates how to draft better contracts, but it admittedly took a lot of hard thinking to create material improvements for them that are fair to creators. Second, creators constantly criticize the syndicates about their contracts, which are seen as unfair and possibly illegal. Since I am unknown to the syndicates, they may worry about this paper turning into a "hatchet job." This fear should subside when syndicate executives actually read the paper, and it is hoped that future versions of the paper will benefit from substantial syndicate input. Third, several syndicates seemed concerned that their contract might look harsher than the other syndicates’ contracts. This concern may or may not be justified, given that the syndicates also differ in the services they provide and the degree to which they are willing to negotiate from their boilerplate. Nevertheless, being seen as relatively harsher is a very real and valid concern in such a small industry where reputation is vital. This may also explain why Universal Press was willing to send out its contract: judging by the contracts from other syndicates reviewed for this paper, Universal arguably has the most reasonable boilerplate contract of the major syndicates. This is especially true after factoring in that they offer a strong syndication capability and an unmatched book publication division. Unlike the syndicates, the creators were astoundingly forthcoming both with interviews and contracts. Approximately twenty have granted interviews, and a significant number have provided their contracts. This overwhelmingly positive response to discussing private contract issues is surprising for three reasons. First, the creators are petrified of the syndicates. Criticizing the syndicates publicly is seen as similar to an employee in any other industry criticizing his boss in a press interview. Second, most people do not feel comfortable talking about their financial affairs with anyone, especially a stranger. In particular, asking for someone’s contract seems only a couple of small steps removed from asking for his tax return. (In some senses it is worse. There is very little downside to showing a tax return, whereas showing a contract might poison a creator’s relationship with his syndicate.) Third, creators are busy people, and interviews mean extra time working for no pay. Despite these good reasons for not helping with this research project, most creators did help. Creators have several motivations for cooperating. First, many and perhaps most creators feel exploited by the syndicates. These creators are frustrated and want to talk. Second, this project is the first serious study of contract issues in the syndication business. Creators hope that the paper’s findings may have the strength to motivate positive industry-wide change. Third, many creators hope to learn something from this study which will help them in their future negotiations. By helping with the research, these creators rightly believe that the issues they raise will be addressed. Although they generally resolved their conflicting feelings about providing help in favor of doing so, creators unanimously demanded anonymity. Thus, all of the information they provided is on background or for unattributed quotation. Further, I have deliberately omitted any references to anecdotes or contract terms that might reveal the creators’ identities. In all cases where a story about a specific creator is mentioned, the information was received from another party. These precautions have resulted in some loss of clarity and the weakening of supporting examples, but the changes were necessary. All attributed quotes from creators or executives are from print sources such as Your Career In The Comics by Lee Nordling.
II. The Newspaper Features Syndication Business Contracts for syndicated creators are heavily influenced by the business environment. This section of the paper discusses that environment in terms of the industry structure and its competitive pressures. The goal of this section is to frame the Chapter III discussion of contract provisions. If this section seems somewhat long for a law school thesis on drafting contracts, it is because the considerable space devoted to understanding the business of syndication serves three important purposes. First, it assures industry participants that the law-related contract analysis is grounded in their business reality. Second, it provides attorneys with an understanding of the unique business factors affecting syndication contract negotiations. Third, it helps creators to understand the logic behind the syndicates’ goals. The creator can then make his own decisions about what’s important to him and where the syndicate can afford to be flexible. Of the three reasons, providing the creator’s attorney with industry knowledge may intuitively seem like the least important goal. After all, isn’t an attorney capable of advising on a wide range of topics? Not all attorneys are created equal, just as not all graphics artists can perform equally in various specialties: animation, editorial cartooning, comic strips, comic books, caricatures. While a good attorney who understands copyright law, merchandising, and contracts could learn the industry in a relatively short time, creators generally do not earn salaries which support large legal bills, and they cannot afford for their attorney "to go to school about the industry." Thus, an attorney for a creator must know this industry, or at least have a primer such as this paper. Another important reason for teaching attorneys is that they actually create problems when they offer advice without understanding the industry. Both creators and syndicate executives become frustrated when the attorney offers "canned" advice that may pertain to other entertainment industries, but not to comic strip syndication. According to a leading self-help book for creators,
Numerous creators and agents have echoed these sentiments, as the following quotations show.
-- David Hendin, Literary Agent (former executive at United Media)
A creator who can afford an attorney but who cannot find an attorney who understands the industry will probably hire an attorney just to make sure that the contract is well documented. This is a good idea, but the creator should read all of the documents carefully and not assume that the attorney knows what he is doing—he doesn’t, he’s just doing his best with the limited information he has.
Each of the following subsections describes a key feature of the newspaper comic strip syndication industry’s structure: blockbusters drive the business, the role of the syndicate, markets and market share, economies of scale, customer demand, vocal readership, syndicates’ resources, and increasing value with increased use of the comic property in merchandising.
Blockbusters Drive the Business The syndication business relies on its five to ten blockbuster comic strips for most of its profit. In particular, these blockbuster comic strips create the licensing opportunities from which one half to three quarters of a syndicates’ revenues are derived. Not surprisingly, each syndicate crafts its contracts with new creators so that the syndicate can capture a sizable amount of the profit should the new feature become a blockbuster.
The syndicates are perhaps best described as the intermediaries between creators and the two purchasers of cartoon rights: newspapers and licensees. Each creator and each syndicate, however, has its own view about the specifics of the role that syndicates should and do play. The following thoughts of Johnny Hart about Creators Syndicate reflect the ideal.
Johnny Hart is a major creator who undoubtedly commands the best contract terms and the most attention. Still, the functions he describes are the ideal services and attitude for a syndicate to offer. A syndicate’s functions can also be viewed at a higher level of abstraction; according to the founder and president of Creators Syndicate,
--Richard Newcombe, President of Creators Syndicate As the quotations imply, the comic strip industry divides itself into four sellers of products and services: creators, syndicates, newspapers, and licensees (which includes merchandisers, manufacturers, advertisers, and book publishers). Thus, the flow of cartoons from creation to consumption looks as follows:
Figure 1
[not available in the online version]
Although best described as intermediaries, the syndicates actually drive the entire process because they provide direct services to all three of the other main industry participants: the creators, the newspapers, and the licensees. For the creators, the syndicates handle all of the business aspects associated with developing, marketing, distributing, and administering the comic property. This includes selecting the creators, making sales calls to newspapers, advertising and promotion, selecting among competing bidders, determining price (and all other terms), evaluating licensing opportunities, editorial supervision (often including some training), production, distribution, contracting, art design, billing, collection, accounting, reporting, and some legal services. This set of services can be very expensive, although the appropriate allocation of these costs among features generates considerable debate, as does how effective the syndicates are at each function. Both issues, and how they affect the design of the contract, are discussed below. To the newspapers, the syndicates offer good quality products at low cost. The high-quality, low cost offerings result from the scale economies created as the production cost of each comic feature is spread among one hundred or more newspapers. Also, the syndicates are the taskmasters who make sure that the comics are on time and do not contain offensive material. For the licensees, syndicates generate a national audience for comic properties and thereby build a sufficiently large customer base to generate significant merchandise sales. Licensees also value the fact that syndicates manage the amount and type of exposure comics get so that licensing is mutually reinforcing, or at least not inappropriate (i.e. United Media probably will not license Snoopy for tobacco advertising).
Newspaper comics reach a very large number of Americans. Approximately fifteen hundred U.S. newspapers include daily comics pages, and six hundred-odd of these also carry Sunday funnies. Thus, the total potential readership is close to every person who gets a newspaper. Among this potential readership, comics are very popular; they are frequently the second or third most-frequently read section of the newspaper. Many comics are also strong sellers internationally. Due to a period of consolidation in the 1980’s, the top five syndicates control roughly ninty-six percent of the comic features syndication market.
TABLE 1
These syndicates also sell text features, but those are not part of this study. Three of the five key syndicates are part of major publishing and broadcasting conglomerates. In these cases, the corporate parent owns a syndicate, some newspapers, and often other media businesses. Surprisingly, the syndicates operate entirely separately from the other businesses of the conglomerates. For example, United Media’s salespeople must make sales calls on its corporate parent’s newspapers. Although one would suspect that a syndicate’s salesperson stands a better chance of making a sale to a sister company newspaper, both creators and syndicate executives universally refute such logic. There are, of course, exceptions where senior personnel get involved on a particularly important decision. But the rarity and extreme circumstances of these stories supports rather than undermines the claim that the syndicates are almost entirely on their own within the conglomerate. Universal Press Syndicate and Creators Syndicate are the two standalone syndicates among the five leaders. They are also the newest major syndicates, started in 1970 and 1987 respectively.
The five giant syndicates freeze out most smaller syndicates because there are large scale economies in sales forces, marketing plans, contacts, and mailings. Furthermore, the large syndicates are able to hire the highest quality editorial and managerial personnel. Also, in the search for the next blockbuster strip, a higher volume of new strips means a better chance of landing a winner, the security to take larger risks, and the power to support a winner that is starting slowly. Finally, when a smaller syndicate such as Chronicle Features discovers a blockbuster, as it did with The Far Side, the creator is likely to move to a larger syndicate for the better sales force as soon as the initial contract expires. On the other hand, once a syndicate reaches the minimum efficient scale of approximately 15% of market share, the scale economies to additional size decline dramatically. In fact, King Features’ leading 30% market share may create diseconomies of scale because newspaper editors want to diversify their comics in order to prevent any syndicate from developing undue power over the newspaper. Fear of syndicate power is justified; most syndicates provide features on a short term contract, typically 30 days, so newspapers editors in a competitive business environment rightly worry about whether a syndicate will continue to supply critical features. Hence, syndicates need to be big enough to get in the newspaper editors’ doors but not so big as to scare the editors.
Comic strips have withstood other forms of entertainment because comic strips are different in two key ways: comics are a quick read and comics are delivered in the newspaper. The quick read fits many peoples’ breakfast or other daily routine and differs markedly from the time commitment of movies, TV shows, books, sports, and video games. In a world of seven-second attention spans, comic strips are a five-second read. The delivery through newspapers means that comics are free and are actively put in front of the consumer every day. On the downside, the delivery through newspapers means that customer demand for newspapers more or less determines the audience for comics readers. This is important, given that newspapers have faced sluggish sales growth for years. (Ancillary markets such as the World Wide Web may become significant but at the moment are very underdeveloped.)
Casual observers might expect that all but the blockbuster strips are replaceable at the whim of the editor. In fact, even longstanding minor comics have a vocal readership which complains when newspapers drop the strip. In interviews, several newspaper editors commented on how remarkably loyal comics readers are. Simply moving comics to a different slot on the comics page throws people off enough to provoke complaints, despite the fact that a quick look would reveal the new location of the comic. People even complain when the newspaper carries strips the readers dislike, regardless of the fact that the readers can just ignore the unwanted strip. An example of intense reader loyalty is animal strips, which may survive even after their quality declines. As Sue Smith of the Dallas Morning News states, "[o]nce an editor buys an animal strip—like a cat or a dog strip—God, it’s hell to get rid of. The readers come out of the woodwork." Dovetailing with the vocal readership is newspaper editors’ generally high aversion to reader complaints. The result is that the resistance to dropping comics is greater than it theoretically should be. This is great for longstanding minor strips, cult strips, and mediocre comic strips, all of which might otherwise get replaced. New strips, however, suffer because newspaper editors will kill them quickly if they are not superb—the editors often realize that if they do not kill a strip quickly, it will develop a following that makes dropping it harder in later years.
Syndicates bring to the contract negotiations an important basket of resources, including a sales network and financial strength. A better understanding of the advantages and limitations of these resources can help both syndicates and creators design effective contracts. What’s more, some of these resources are employed by the syndicate on the creators’ behalf, whereas other resources are primarily used by the syndicates to compete with one another. Often these pro-creator and pro-syndicate resources are the same, such as an effective sales network; in other key areas they actually conflict. The syndicates resources can be roughly categorized as tangible and intangible, although the intangible assets dominate.
Tangible Assets Major syndicates’ principal tangible asset is financial strength. This resource is obviously vital considering the high cost of developing, selling, and servicing strips. Small syndicates and self-syndicating creators are at a large disadvantage relative to the major syndicates simply based on differing financial capabilities. Of course, this standard resource provides the major syndicates with little competitive advantage relative to each other.
Intangible Assets Syndicates’ intangible assets include:
1. Copyrights and Trademarks: Each syndicate either owns or has a long term contract for each comic strip and its licensing rights. This is by far the syndicates’ largest resource. Copyright and trademark law protect both the actual published strips and the characters which appear in them. Since only expression and characters are protected by copyright and trademark, many creators try to imitate the idea behind the blockbusters. This imitation is usually unsuccessful because a blockbuster’s humor flows from its creator’s expression and characters rather than his general idea. For example, Dilbert is not the only strip about an office setting nor is Peanuts the only strip populated with child characters.
2. "Shelf Space": Once a comic strip makes it to the comics page for a few years, it develops a following. Newspapers become reluctant to pull it because fans complain. Hence, comics become almost an annuity. (As mentioned above, newspaper editors try to prevent this entrenchment by dropping new strips very quickly if they do not live up to expectations.) 3. Accumulated Learning: Key company personnel are experts in the syndication business.
4. Company Reputation: The big syndicates are well known as quality businesses. Because these major syndicates screen new cartoons well and ensure timely delivery, busy newspaper editors are far more likely to receive salespeople from them than from small syndicates or individual creators.
5.: Relationships: Another reason newspaper editors will see salespersons from the large syndicates is established business and personal relationships.
6. Syndicate Power: Newspapers have come to rely on the syndicates for a significant percentage of their popular text and comic features. This dependence has grown over recent decades as newspapers trim costs by shifting from in-house production to the much cheaper syndicated material. Sometimes a newspaper will have a contract to purchase a certain dollar value of features from a syndicate. This arrangement with major content providers is yet another reason the newspaper editors limit sales calls primarily to the major syndicates.
Increasing Value with Increased Use Comic strips share with several other entertainment products the remarkable trait that they often increase in value with increased use or time in existence. This pleasant feature has been expressed in academic research using three slightly different concepts: capacity, durability, and specificity.
Capacity is the most obvious of the three and relates to the brand-name enhancement that comes with careful use. Comics such as Garfield exemplify this tendency of increased publicity to enhance the recognition and, consequently, value of a comic property. Of course, there is always some risk of overexposure, so the possibility exists of a tension between increasing the number of endorsements and decreasing the value of each endorsement.
Durability relates to the strength of the product over time. Many entertainment products possess notoriously short lives and must generate most of their income within weeks or a few months of initial release. Movies are a particularly extreme example where the first month at the domestic box office accounts for a large percentage of revenue. Comic strips stand apart from these fleeting products; people often become emotionally attached to their favorite comic strips and will read them for life. For an example of this longevity, one need only look at the top selling features.
TABLE 2: Top Selling Newspaper Comic Features
No strip started in the 1990s made the list, and only two are there from the 1980’s. The intense loyalty of comics readers is the most important explanation for the continuation of many of these old strips which are well past their prime, and not as funny as many newer-but-unestablished strips. Moreover, while a strip may seemingly have the opportunity to last for generations, the creators themselves may burn out as has happened with some of the most popular strips from the 1980’s: The Far Side, Calvin & Hobbes, Bloom County/Outland. A downside is that, although high durability may benefit the owners of successful comics, high durability creates problems such as increasing the difficulty fresh talent faces in landing space on the comics page. As a result, the comics page as a whole tends to become stale.
Specificity refers to ease with which a product can be leveraged out of its original form and into other products. Comic strips vary in subject matter and characters, but in general benefit from a low specificity. The multitude of licensing opportunities for popular strips is a good example of the low specificity of comic characters. For example, Garfield endorses cat food, coffee mugs, stuffed dolls, greeting cards, and endless other goods. Overall, the capacity, durability, and specificity of comic strips show very positive traits as business products. These strongly affect contract drafting because the allocation of rights between the syndicate and creator determines both parties’ compensation and incentives. If this paper is to succeed in suggesting new contract terms which on average make both parties better off, it will be in considerable part because the realignment of rights encourages better use of the favorable features of comic strips’ capacity, durability, and specificity.
Why is the Syndication Business So Competitive? The preceding analysis focuses on the largely neutral or positive structural traits of the comic strip syndication industry. Unfortunately, the syndicate business suffers from two major problems: 1) the limitations imposed by the newspapers and 2) the supply of creators.
Limitations Imposed by the Newspapers The syndicates are squeezed both by the ways in which the newspaper industry is changing and by the ways it is not. For years the newspapers have faced stagnant sales volume and rising costs. A large portion of the rising cost is attributable to price increases for newsprint. As a result, newspapers have continuously cut the size of comic strips in order to fit more features into the same space. Other responses include actually shrinking the space devoted to comics, especially the Sunday funnies.
What’s worse, whereas major cities typically had numerous competing newspapers fifty or a hundred years ago, now but one or two survive. With both the budget and the space for comic strips declining in real terms, and with the total number of major papers seeking strips declining, the syndicates face extreme pressure in their primary market. At best, the syndicates compete in a zero-sum game for slots on the comic page. In many respects, this competition is similar to the fight for "shelf space" in grocery and retail stores. This situation might be resolved if the newspapers raised revenue through advertising in the comics section. For legitimate formatting and administrative reasons, as well as for less legitimate historical and visceral reasons, the funny pages remain non-revenue generating Monday through Saturday. Of course, the funny pages are very popular and increase newspaper sales. But these positive effects are difficult to measure directly, whereas the costs of producing a comics page are quite well defined. Thus, many newspapers view comics as a cost item. Pundits also regularly make the argument that editors of high quality newspapers resent "lowbrow" "kid’s entertainment" stuck in the middle of their fine paper. For this or other reasons, neither The New York Times nor The Wall Street Journal, the two most highly-respected (and serious) newspapers in the country, offer a comic page. At newspapers which have comics, many editors simply choose to ignore and under-budget them. Newspapers further restrict the flexibility of syndicates by content control. Each newspaper picks the cartoons it wants from the portfolios offered by the various syndicates. Consequently, the comics page has traditionally reflected the tastes and lifestyles of the older middle class that made up the newspapers’ target market. The assumption by most editors is that the funny pages should be an oasis from the harsh reality carried in the newspaper’s other sections. Readers, whether as a result of being conditioned to expect the "family" orientation or because of an innate desire for it, generally support the editors’ choice. Doonesbury, and the few similar comics which address controversial topics take an inordinate amount of criticism for expressing opinions. Newspapers’ new desire to appeal to a broader range of ethnic groups and the 20-35 year old age category has led to some shift in the comic product mix, but not much. Comics which appeal to other demographic groups still reflect the same middle class family values and issues as most other strips. This homogeneity of strips and tame subject matter perpetuates itself because it dictates the type of new comic that the syndicates seek: creators outside the mold stand no chance, even when they are more talented than existing creators. Overall, the limitations of selling to newspapers show that there are substantial downsides to reliance on newspapers.
The Problem of the Supply of Creators The problem of the supply of creators is that there is an overabundance of pretty good ones but very few blockbuster-level stars. Each year more than 5,000 creators submit their portfolios to the five major syndicates, and as many as 500 are recognized to be of pretty good quality. Because syndicates face high costs for launching each strip and compete for limited space on the funny pages, there are at most twenty syndication openings annually among the five major syndicates. As a result, at best four percent of qualified creators (and 0.4% of all hopefuls) get contracts. Of the twenty new comics, only five or so survive five years. Perhaps three or four each decade become blockbusters. This brutal numbers game is frustrating and a great waste of time for both syndicates and aspiring creators. Also, the next section shows the enormous impact that this difficult business environment has on the drafting of syndicate contract contracts with unknown creators. The scarcity of blockbuster creators is exacerbated by two structural problems. First, since it is very difficult to tell at the outset which strip will be a blockbuster, the fact that very few new creators get a syndication deal means that many strips which would have been blockbusters never get a chance. Second, high quality strips that the syndicate executives believe would be popular with the public are never signed because the syndicates feel that the newspaper editors will not buy risky or different material.
The Cost of Launching a Feature There are actually two ways to measure the cost to a syndicate of launching a feature: the financial cost and the opportunity cost. The financial cost is the dollars and time spent on developing and promoting the comic. Launching a new strip requires a significant commitment of resources from the syndicate in relation to the immediate prospect for profit. The key expense is making sales. A syndicate’s sales staff makes three or four calls annually on each major client, and during these calls the salesperson highlights two or three new products. These sales calls reportedly average $1,000 for time and expenses, so keeping 4-8 salesmen on the road is extremely expensive. The opportunity cost that syndicates face is using one of the three or so slots each major syndicate has on its annual release schedule. Syndicates know that only one or two of their strips each decade will become blockbusters, yet each launch carries with it the hope that this will be that special strip. Even if the new comic is a modest success, the syndicate editors must wonder whether a different pick from the pile of 5,000 submissions would have been a bigger success or even a blockbuster. Although it seems somewhat less than credible, several interviewees stated that syndicates often select strips without focusing on the possibility of creating a blockbuster and spin-off merchandise.
The following contract analysis walks the reader through the November 1996 version of Universal Press Syndicate’s boilerplate contract, which is reproduced in Appendix I and should be read now in its entirety as an overview. This contract is compared and contrasted to signed contracts sent by creators from Universal and other syndicates. Appendix II contains a sample "fair" contract which incorporates this paper’s recommendations.
The Calvin and Hobbes Battle: An Illustration of Contract Disagreements Calvin and Hobbes creator Bill Watterson wrote a fascinating essay examining his contract battle with Universal Press Syndicate, the same syndicate whose boilerplate contract this paper analyzes. As an introduction to the operation of syndication contracts, this essay serves the purpose of showing what happens when the syndicate and the creator fight in later years over contract interpretation or allocation of rights. Such a case study highlights the important issues at stake during the negotiation and drafting of the contract. It also provides a feel for the emotions involved. Watterson’s perspective is particularly fascinating because he grew from a typical aspiring creator into a veteran superstar who was locked into an unfavorable long term contract. Moreover, this contract did more than give the syndicate huge profits: its merchandising provision offended Watterson’s need for artistic control. Consequently, the case of the Calvin and Hobbes raises succinctly many of the key issues that must be addressed in drafting any syndicate contract: bargaining power, fairness, artistic control, business pressures, enforcement, and power from non-contract sources. It is also one of the rare instances of a creator going public with a detailed account of his dispute with his syndicate.
As mentioned above, these excerpts raise the issues of bargaining power, fairness, artistic control, business pressures, enforcement, and power from non-contractual sources. These issues are relevant to all creator contracts.
The first thing to notice about syndicate contracts is that they are always written by the syndicate. This makes sense because the syndicates know the business best and can spread the drafting costs by using the same template with all creators. Still, as noted throughout this section, the creator must be aware of the meaning behind numerous word choices. Possibly even more important than analyzing what’s in syndicate contracts, this paper notes the many instances of the syndicates leaving out important issues which work against them; even a sharp creator who understands the legal impact of each provision in his syndicate contract may well miss subtle issues which never make it into the contract. The suggestions in this paper may appear unrealistically detailed. Many creators might state that they lack both the negotiating strength (and the money for an attorney) to revise boilerplate contracts so substantially. With regard to the creator affording the time of an attorney to negotiate the contract, the hope is that this paper is thorough enough to permit creators to handle many issues personally, as well as to know when legal advice is truly needed. With regard to negotiating strength, it is certainly true that no creator could fully implement these suggestions. Nor is that this paper’s goal. This paper covers all issues with the understanding that creators with modest bargaining power may chose to use it to get concessions on different issues, so all issues need to be covered. Further, thorough analysis improves the chance that the different possible contract terms of each major syndicate will be addressed. Finally, full implementation of this contract’s suggestions might make the contract unfair to the syndicate in some cases. Italicized text indicates an excerpt from the Universal contract. All sections of the contract are in precisely the same order as in the actual contract, but these sections are often cut into smaller pieces in order to isolate specific legal issues. Underlined text indicates suggested alternative wording. The contract refers to the creator as "Producer" and Universal Press Syndicate as "Syndicate." The Universal contact was compared to that of many other syndicates. Material differences among the syndicates are discussed in detail.
Section 1: Preparation of the Feature The first provision of the contract is an innocuous identification of the feature.
The reason Universal seems to over-define the feature as anything conceivably related to the strip is so that it is clear that the agreement encompasses all rights. Otherwise, a creator might feel that certain tangential elements of the strip fall outside the contract, such as spin-off characters. This is the first example of the syndicate using the contract not only to allocate rights, but also to explain them to the creators. The next provision addresses concerns of both the syndicate executive and newspaper editors; they worry about either a drop in the quality of the cartoon or a change in its subject matter.
This is the first of several provisions through which the syndicate seeks to exert some editorial control. The syndicate can point to the clause in order to browbeat the creator into working harder or modifying the subject matter. In more extreme cases, if the syndicate has the right to have other creators prepare the strip (see Section 4), then the syndicate could use the two provisions together to bypass the creator. Syndicates are unlikely to take such dramatic anti-creator measures, but it is possible and may be threatened if relations sour. If the issue were to go to court, proving either a drop in quality or the reasonableness of a syndicate’s requirements would be an extremely difficult factual investigation. On the other hand, even successful creators would be hard pressed to defend a court action against a wealthy syndicate. Overall, this provision sets the tone for the type and quality of work a creator should produce, but it would be employed only as a last-ditch weapon. The next provision recognizes that the creator and the syndicate are likely to have a vested interest in the title of a feature. From a business standpoint, the title of a comic is like a brand name or trademark. From an artistic standpoint, titles may be a part of the creator’s artistic expression. The following provision acknowledges the "mutual" interest of both parties.
Other syndicates merely require that the syndicate consult with the creator but do not seem to give the creator veto power. Adding the word "only" to the Universal contract language would clarify that the consent of both parties is necessary to make a title change.
This type of modification may seem of very small importance, and it is. It is also costless to make the clarification, so there is no reason not to be clear. The next provision addresses ownership of the original artwork drawn by the creator. In recent years, sales of original comic strip art have begun to occur in art galleries and by special request. The price typically ranges from $100 to $500, so the issue is nontrivial. Here, Universal releases any claim to these originals.
Many syndicates follow Universal’s lead, recognizing that creators have a fairly strong moral claim to their actual art. But the practice is not industry-wide. Some syndicates reportedly still retain over fifty percent of originals in typical contracts. These originals are used as promotional gifts to newspaper editors and others. The only significant issue with the Universal language is that a new clause should clarify that the creator retains the right to possession at all times when his method of delivering the feature is electronic rather than through the mailing of original art. Although one might be inclined to quibble over the lack of precision in the language "after any such drawing has served the Syndicate’s purpose," this will likely become a negligible issue as electronic submission becomes standard. After incorporating the electronic submission change, the paragraph would read as follows:
Overall, the negotiation over ownership of original artwork ranks as of moderate importance. Some creators and syndicates may feel more or less strongly about the issue, but on average the creator appears to have an unusually strong moral claim to the ownership of his art. It is interesting to note that Universal includes a sentence to state that creator’s ownership of the original artwork does not affect the transfer of any other rights to the Syndicate. This is an obvious attempt to educate the creators as to the operation of copyright law, which states that ownership of original art does not give the holder the right to publish reproductions. This is effective draftsmanship. By stating the law, the syndicate prevents any later misunderstandings with the creator.
This provision, which fixes the duty owed by the syndicate to the creator, is one of the most important parts of the contract.
Many serious creator complaints boil down to a claim that the syndicate is not properly managing the feature with regard to either syndication sales or licensing. The exact duty owed by the syndicates to creators varies among the syndicate contracts. A few syndicates grant an unqualified "best efforts" clause. On the other end of the spectrum, many syndicates promise only "reasonable effort." Universal’s wording is substantially more complex; it is divided into a section regarding syndication sales and a section regarding everything else, such as licensing and reprint rights sales. The first half of the Universal sentence addresses syndication sales. The difference from the other syndicates is that Universal ties its duty to the "customary practice in the conduct of its business." The first ambiguity is whether Universal means the customary practice of Universal or the customary practice of the syndicate industry. This is probably an unimportant question given that the syndicates all operate in a roughly similar fashion and, in either case, the creator is prevented from demanding special attention. The important point here is that Universal recognizes that a "best efforts" clause can have real teeth. A good lawyer for a creator could make a strong argument for judging the syndicate’s efforts on some objective scale which is stricter than common syndicate industry practice. Thus, Universal wisely inserts language which prevents such claims. Universal’s "best efforts" clause actually means: "The Syndicate shall sell the Feature to newspapers (both print and electronic) in a manner consistent with good practice in the syndication industry." The second half of the Universal sentence is even more interesting because it disavows any duty for work other than newspaper syndication, such as licensing and reprint rights sales. To someone unfamiliar with the industry this denial of any standard of duty may seem surprising, but to insiders it makes sense based on the way the syndicates operate. A few passages from interviews with creators explain this.
Universal recognizes that its strength and interest lies in selling to newspapers and not in merchandising. The question is whether the creator should be granting exclusive merchandising rights to the syndicate if the syndicate does not intend to make "best efforts" use of them. The next provision addresses the syndicate’s main function of selling to newspapers, so is less controversial.
All syndicate contracts have similar language regarding the syndication of their features. It make sense that the syndicates feel strongly that their creators should not be second-guessing the syndicates or pestering them over the details of each sale. Many creators actually like the fact that they get to do the "fun" part of creating the strips and can pass off the business details to the experts—the syndicates. However, Universal’s contract language goes one step further into more controversial territory. The contract also allows the syndicate to license any merchandise without creator approval. With the notable exception of Bill Watterson, virtually all creators want the revenue generated by license contracts. However, like Watterson, most creators feel attached to their creations and want approval rights to ensure the integrity of their art. Some syndicates grant such rights on the condition that approval not be unreasonably withheld. Even syndicates which typically have absolute rights to license are often sensitive to issue of artistic control. A revised provision which is fair to both parties might look like this:
The syndicates may not want the annoyance of having to ask permission of creators for each licensing deal, but at least they understand the creator’s position and are less likely to be offended by this request than by others. The syndicate also wishes free transferability of its rights in the event that another party can perform the job better or will pay highly for the opportunity.
This free transferability provision may help the creator. For example, smaller syndicates sometimes enter a sales agreement with a large syndicate that has a better sales force, as was the case recently with Chronicle Features before it was sold. On the other hand, the creator may have entered into the contract with the particular syndicate because he liked its personnel, capabilities, or atmosphere. Subcontracting by the syndicate may ruin any or all of these. In this era of corporate restructuring and outsourcing, the syndicates are likely to feel very strongly about such provisions. Granting the creator any right of approval would create barriers to both the sale and the most efficient operation of the syndicate. Very few creators have the power to negotiate such a concession, and those that do should probably save their bargaining chips for other issues. The best creator remedy for ownership or personnel problems is to own his copyright and have a short enough term on the contract to permit escape within a reasonable number of years. Another issue with the clause is that the specific legal terminology used in Universal’s provision does not observe the formal distinction between delegation and assignment: the contract permits the syndicate to "delegate" its "rights." If the contract used precise legal terminology, it would allow the syndicate to delegate its duties on one hand and assign its rights on the other. A leading contracts treatise explains:
Despite the fact that the language in the Universal contract does not distinguish between rights and duties, the parties’ intention is otherwise clear. From the context of the contract provision, the language obviously grants the syndicate the right to use third parties to carry out portions of the syndicate’s work. Thus, the syndicate is actually allowed to delegate any of its duties. Because the intent is clear, courts will ignore the imprecision:
Syndication contracts differ somewhat from general commercial contracts in that in order for the syndicate to have a third party to carry out most of its duties to the creator, the third party must also own the related contract rights given by the creator. This odd circumstance arises because all rights given by the creator have an associated duty to pay the creator fifty percent of what is earned through their sale or license. This means that the syndicate must be able to assign its rights as well as delegate its duties. Under common law, this discussion and the provision are irrelevant since the syndicate will automatically have the right to transfer. Since it is costless, the syndicates should confirm this with a variation on the Universal wording:
This provision prevents the creator from claiming under common law that the syndicate’s personal performance of the contract was a material element of the deal. As importantly, this provision provides notice to the creator as to what common law permits unless overridden by a provision in the contract. This prevents misunderstandings. From that standpoint, the provision reflects a key theme of this paper, which is that the contract can be used to educate the parties about their rights and duties. Such knowledge improves efficiency and fairness by avoiding unnecessary conflicts that consume resources and leave at least one party disappointed. The flip side of the syndicate’s right to delegate is that the syndicate remains responsible for any delegated duties unless the creator actually releases the syndicate. The following treatise passage explains:
Thus, if the third party exercising the syndicate’s rights or servicing the syndicate’s duties violates the creator-syndicate contract, the syndicate remains liable to the creator.
Section 3: Rights Granted Syndicate This provision allocates ownership of the copyright and defines the scope of the syndicate’s rights. This is the heart of the contract.
The simple interpretation of the provision is that the syndicate is allowed to hold the copyright and exercise it in any way during the course of the contract, although the ownership reverts to the creator at the termination of the contract. For most creators, ownership of the copyright to their comic is the single most important part of the contract. Retention of the copyright by the creator is now common, whereas as ten years ago it was very rare.
Creators must realize that this is a major concession by the syndicates. Not all syndicates may offer copyright ownership in their boilerplate contracts. Further, syndicates which grant copyright ownership prefer to hold it in their name during the contract term, subject to the agreement to return the copyright to the creator at the termination of the contract. The usual argument goes as follows:
This is not a strong argument. Since works are automatically copyrighted upon being fixed in a tangible form, the copyright burden is nonexistent. Furthermore, a trademark filing is usually trivial. The real issue is the ownership of exclusive rights to exploit the feature during the term of the contract. The syndicate has these key rights, and ownership of the copyright in the syndicate name is one more way for the syndicate to impress that fact upon creators. Otherwise, creators unfamiliar with copyright law might believe that holding the shell of the copyright somehow reserves rights that were signed away in the contract. For example, a creator who owns both the original art and the shell of the copyright might feel that he could republish that art. The next provision states that the syndicate may hire other companies to perform services the syndicate owes to the creator.
It is unclear how this provision differs from the delegation of duties and assignment of rights permitted under Section 2. It is likely just a redundancy, which can be beneficial if it reinforces an unclear point. Even when the syndicate has broad rights by contract, potential licensees often feel nervous about dealing with just the syndicate. Therefore, the syndicate inserts the following provision in order to ensure the marketability of its rights.
This is a reasonable provision. Potential licensees may request that the creator also be a party to the agreement even if the syndicate claims to have full legal authority. This prudent risk management protects the licensee from becoming a party to any later fight between the syndicate and the creator. Moreover, it assures the licensee that its rights will survive a termination of the syndicate/creator contract. However, creators should consider certain risks associated with this provision. Any grant by the syndicate of a license which exceeds its authority will become valid if the creator also signs it. A creator who expects substantial licensing may wish to insert a clause which indemnifies him in the event that the license exceeds the syndicate’s authority. Such a provision might read:
If the syndicate will not agree to this modification, the syndicate is essentially retaining an option to violate the agreement at will. The next portion of the contract addresses the fact that publicizing the creator can be an important part of selling the feature. Scott Adams, for example, has been the subject of many newspaper articles. Such exposure generates excitement about the product and may lure readers to the funnies pages in general. Most syndicates include a provision to facilitate such publicity.
Because of the potential importance of publicity to a creator’s career, the creator may wish to ask for final approval rights over his biography. A few creators dislike some or all aspects of publicity. If this is an issue, the creator ought to seek the deletion or modification of this provision. Syndicates are unlikely to be particularly stubborn on this minor point.
Section 4: Editing: Failure To Deliver The right of the syndicate to edit or reject a creator’s cartoons occasionally flares into a source of significant tension. Syndicates head off many arguments by including an unambiguous editorial provision.
All syndicates require a similar provision. The provision is balanced in the sense that the syndicate is prevented from changing the comic, but is not under any obligation to run a comic the syndicate cannot support.
A third reason for the provision is that if the syndicate releases an objectionable comic, then the newspapers must choose between the unattractive options of running a questionable strip or omitting it for the day. Newspaper editors would rightly feel unfairly burdened by such problems and may be less inclined to purchase other features from a syndicate that cannot control quality. This would unfairly hurt the other creators in the syndicate. Some creators are very possessive about their cartoons and do not want anyone touching their art. These creators need to define what they consider "substantive" changes so that there is no misunderstanding with the syndicate. A number of creators interviewed for this paper objected strongly to re-sizing and colorization of their work. Such issues will all be resolved in favor of the syndicate unless very specific provisions are in place. The next section addresses deadlines. Many creators interviewed for this paper stated that deadlines are what motivates them. The following provision provides the penalty for missing a deadline.
Not only is it fair to permit the syndicate to charge back additional costs, but also the creator benefits in that it increases his incentive to stay on schedule. On the other hand, there have been some horror stories, such as enormous overnight delivery bills of questionable necessity. The possibility of unfair charges can be tempered with a couple of extra provisions. First, since a portion of the syndicate’s job is effective editing, a problem arising from a failure in the syndicate’s editing process should be the syndicate’s responsibility. Second, expedited delivery charges to a large number of newspapers could seriously hurt a creator financially, so such charges must be truly necessary. Many business routinely overuse such services, and there would certainly be a strong inclination to do so in the event of a late change that the syndicate was not paying for. Reasonable language might look as follows:
Other possibilities include some sharing arrangement for costs or a cap, but these are more a matter of individual preferences or negotiating strength than of fairness or efficiency. The following provision serves as the key contractual remedy available to a syndicate.
This provision is tremendously important to both the creator and the syndicate. The wording covers both the case in which the creator is unwilling to submit material and instances in which he is unable to submit, such as due to disability or death. Many creators regard the preparation of their feature by syndicate "henchmen" as abhorrent for artistic reasons. The provision also seriously weakens a creator’s potential threat to "go on strike." On the other hand, the syndicates have a strong fairness claim to the full benefit of the contract as compensation for their work in launching and supporting the feature. If a creator were unable or unwilling to produce after the first year, then the syndicate would lose both its financial investment in the publicity campaign plus the opportunity cost of having launched a different feature. Several middle range solutions could narrow the scope of disagreement. First, the creator might request the authority to select a substitute creator who would take over in the event of death or disability. This could be made subject to the syndicate’s reasonable right of approval. In cases where the creator refuses to submit a cartoon, the syndicate would retain the right to select its own replacement creator. Second, the amounts paid to another creator should be limited to revenue generated by the actual substitute cartoons. Thus, if the syndicate owes the creator for the previous month’s strips or licensing revenue, the syndicate should not be allowed to offset against that income. Future income should be likewise protected after the creator resumes production. A provision including these changes might look as follows:
The above phrasing permits the involuntary continuance of the feature after the death or permanent disability of the creator. Syndicates obviously prefer this. So, too, a creator may want his family to receive the income that results from continued production. On the other hand, many creators abhor the thought of their feature continuing after their death or disability. Some syndicates’ boilerplate contracts apparently do not require continued production, and other syndicates are willing to negotiate. A provision reserving more rights to the creator might look as follows:
The last sentence ensures that the death or disability do not become an opportunity to escape the contract with the syndicate or to demand renegotiation. Creators who definitely wish their strip to end at their death face yet another problem. If the creator owns the copyright to the strip, then such rights automatically flow into the estate. Because it is property, the copyright may be sold to satisfy the creator’s debts or by relatives who are more interested in the profit than the deceased’s desire to see the strip end for artistic reasons. Any attempt through the syndication contract to restrict the creators’ heirs or creditors from selling the rights to a syndicate or merchandiser would be awkward and possibly unenforceable. An estate planning attorney or corporate attorney may be able to devise a trust, corporation, or other suitable vehicle that would ensure that the strip ends at the creator’s death.
Section 5: Producer’s Warranties and Indemnification The following requirement that the creator warrant originality and non-infringement of others’ rights is one of the most surprising provisions to new creators, but it is absolutely standard and relatively fair.
Contracts from other syndicates often list the "other rights," such as: unfair competition, trademark, trade name, conflicting contract obligations, plagiarism and literary piracy. According to one creator,
A syndicate not taking responsibility for its own changes certainly would be unfair. Universal and most of the other syndicates accept responsibility in their boilerplate for their own unapproved changes. Also, despite the fact that the syndicates are the "deep pockets," the indemnification provision makes sense. Syndicates and creators alike should fear the possibility of lawsuits given the many theories of liability mentioned above. By keeping the creator responsible, at least on paper, the syndicate encourages the creator to take great care to prevent claims. In the event of a claim, the creator’s interests are more closely aligned with those of the syndicate. Finally, if the creator is uncooperative, then the provision provides the syndicate with extra leverage. The next part of the provision merely states that the effect of the warranties is that the Producer must indemnify the syndicate.
The problem is that the "expenses and damages" provision needs greater precision in its definition. Payments to the claimant are obviously covered, as are attorneys fees. Presumably, court costs are also included. Other issues are not so clear. How are the time and expenses of syndicate personnel to be handled? Is the creator responsible for damage to the syndicate’s business? Even if the syndicate would not pursue the creator for such non-obvious costs, the current wording permits the syndicate’s delegatees who are damaged to do so. An additional sentence taking care of these problems might look as follows:
This language strikes an appropriate balance between the syndicate’s reasonable need for indemnification and the creators’ need to prevent overreaching. The next section of the indemnity provision can be seen justifiably as either outrageous (by the creators) or perfectly reasonable (by the syndicates). The provision provides the syndicate with total control of all disputes.
Since almost all civil liability cases are settled out of court, if the indemnity provision did not include settlements, then the syndicate would face the unattractive choice of taking the case to court or settling and paying the loss itself. Taking a case to court might well be uneconomical after attorneys’ fees and it could expose the syndicate to the risk of a large award, including punitive damages, that exceeds the creator’s ability to indemnify. On the other hand, it seems unwise for the creator to hand over a "blank check" to a syndicate, permitting it to settle on whatever terms it likes. It creates a very odd set of incentives encouraging settlement, especially for smaller cases in which the syndicate believes that the creator could actually pay. Lawsuits are inherently uncomfortable and distracting to senior management, so why would the syndicate fight a plausible $5,000 claim if the creator can pay it? At least one syndicate routinely accommodates the creator concerns by omitting the settlement language. A reasonable provision here might look as follows:
Creators are likely to be frightened of litigation, so this provision merely protects them from overreaching by the syndicate and permits the creator the right to fight if he feels strongly and can afford it. Another unusual part of the broader indemnity provision is the following one-half reimbursement clause for a successful defense.
The one-half indemnity for a successful defense in court is subject to several interpretations. It looks like a generous offer by the Universal (an offer not matched by many syndicates) to share costs in the normal 50/50 fashion that revenue is shared. It also makes sense to wait until final judgment before the syndicate agrees to a limited indemnity. Under this logic, however, it is unclear why the language appears to exclude instances where the adverse party abandons the claim. This may be an unintentional oversight. To correct it, the creator might use language such as:
Another downside to all of the above options is that they leave the creator solely responsible for the Syndicate’s expenses in the event that a court finds some small liability but clears the creator of most claims. Only an absolute victory triggers the reduced indemnity. It might be possible to cap expenses at some negotiated figure, such as twice the award, but this is an issue of low importance and likely to not be worth wasting time or bargaining leverage over unless there is reason to believe that an harassment suit is likely. Many of the syndicates also require a separate representation that the creator has authority to enter into the contract and has no related contractual obligations to others. This is substantially the same issue as in the above warranty. Creators who are switching syndicates need to be careful here because many of the provisions that allow early release from a contract also grant the syndicate some form of option. For example, if the creator has exercised his termination option due to the failure of the strip to reach a certain gross revenue figure, syndicates usually have the right to make of the difference between the hurdle rate and the actual amount of receipts. The wording of the contract often does not restrict the syndicate from exercising the option. Other syndicates’ contracts occasionally mention the creator’s responsibility as a journalist. It makes sense that a syndicate would be concerned that the creator might use his strip as a platform to communicate with millions of people about inappropriate personal beliefs. On the other hand, creators’ experiences and beliefs are often woven into their cartoons in legitimate ways that add to or personalize the feature. Reasonable language accommodating both syndicate and creator concerns might looks as follows:
The wide latitude granted to creators is not threatened by this language, but the creator also may not insert a product placement for Burger King without approval. This provision also protects the creator in the sense that readers often complain to newspapers when creators bring personal biases into their comics. Since newspaper editors hate complaints, a creator risks moving up in the potential "drop list" if the editor can reduce complaints by dropping the strip. Critics of lawyers might assert that adding the above provision is "overkill" in light of the fact that the syndicate is allowed under Section 4 to refuse to syndicate installments of the feature. Further, self-preservation would logically seem enough incentive for creators to self-edit their material of all subjects likely to annoy readers or newspaper editors. In reality, the issue does arise: Johnny Hart reportedly has a specific exception to this provision which allows him to express his strong religious views. Most creators do not have his negotiating power, and so for the majority of creators the provision serves two useful purposes. First, the provision helps to educate and sensitize the creator to possible conflicts of interest. Conflicts of interest are often surprisingly complicated and not mere "common sense." If the provision simply prompts some creators to ask the syndicates questions about what is appropriate material, the provision has served its purpose. Second, the provision settles in advance many potential disputes over questionable material. Creators may understand the conflicts of interest issue but disagree with the syndicate on a particular installment of the feature. Contract disputes are best resolved with specific language covering the issue—the more general the provision relied upon by one party, the more likely the other side is to see room for argument or be taken by surprise. Here, resolving a specific conflict of interest dispute under the general editorial supervision clause in Section 4 of the Universal contract seems heavy-handed. Undoubtedly this provision is irrelevant to many creators. Just as certain, however, is that it will serve one or more of the useful functions described above for some portion of each syndicates’ portfolio because creators vary in temperament and in knowledge of legal and business issues. One of the more surprising aspects of the indemnity provisions in syndicate contracts is that most syndicates fail to include a clause clarifying that the indemnity and warranty provision will survive the contract. For example, it appears an open litigation question as to whether the warranties and indemnities in Universal’s contract would survive based on the existing language. A survival provision may prevent some strategic moves where the creator terminates the contract in order to improve his chance of escaping from a large claim. More realistically, such a provision permits the syndicate to terminate a contract without worrying about the effect on the indemnity. Reasonable language might look as follows:
As the creator quoted above mentioned, the syndicates have the "deep pockets" and will probably be held liable if anything goes seriously wrong. Short of a serious problem, however, the above provisions provide effective management tools.
Section 6: Exclusivity; Rights of First Refusal Syndicates include the following provision in order to make sure that they have control over both the feature and the creator.
This provision, which is common to all syndication contracts, has three important effects. First, it provides the syndicate with an exclusivity on anything the creator does related to the feature. Second, the creator grants the syndicate a right of first refusal on other syndication concepts. Third, by negative inference, the creator remains completely free to pursue non-syndication ideas which are not related to the feature. However, it is far from clear that the provision covers all of the important sub-issues or strikes a fair balance of interests between the parties. Each issue deserves further study. The heart of the exclusivity provision reads as follows:
Syndicates feel that they are partners with their creators in creating the value of the feature. This belief leads to four reasons for this provision. First, syndicates feel entitled to share in the revenue generated by the feature whether directly or indirectly. Second, syndicates wish to prevent the creator from somehow damaging the feature. Third, an additional similar feature could "cannibalize" the first feature because of the limited amount of space in newspapers. Such an effect could occur because at least some newspapers will only take one of the strips. Fourth, the creator’s good ideas would be spread among two strips. For example, all of the above four issues would arise if Scott Adams were allowed to spin off from Dilbert a second strip named, say, Cubicle Man. The main problem with the provision’s "similar name or appearance" language is that the "similarity" requirement defies objective definition. Any attempt to articulate standards defining "similar" is likely to be clumsy and imperfect. Consequently, the provision should probably be left unchanged since it already provides enough guidance so that a wise creator can avoid problems by simply staying outside of the gray area. Note how the language performs a guiding function which helps both parties by steering them away from conflict; the provision preserves the relationship and neither party wastes time or money in fighting. In contrast to the first half of Section 6, which merely serves to protect the syndicate’s interest in the existing feature, the second half extends the syndicate’s claim to a right of first refusal on the creator’s other syndication ideas.
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