Buy-out contracts: a dangerous threat to European creators

This is a fundamental problem for authors’ rights. In WHF contracts, producers, not creators, own the rights to musical works. With such contracts and buy-out clauses, the creator, or author, forever loses control of his or her work, for all uses and all territories.

As a result, creators are not associated with the success of the audiovisual works (series, TV shows etc.) that incorporate their composition and do not receive their fair share of the revenue it generates.

The initial fee paid by producers in exchange for work has no relationship to the value which that work generates for the producer.

Example: Let’s imagine a composer having written the music of a feature-length film which sold 450,000 movie theatre tickets (i.e. the film is a success). The film soundtrack is available on audio streaming platforms. The composer has signed a WFH contract whereby the film producer has agreed to pay a fixed composing fee of €15,000. This €15,000 typically serves to cover the cost to produce the work, to hire musicians, orchestra, editors, studios etc. The composer is likely to see very little, and in some instances, nothing of that amount even at the beginning. And then he/shee will receive nothing more whereas she/he could have earned over a 10-year period as much as €80,000 in copyright royalties for the exploitation of his work each time the film is broadcast on TV or Subscription VOD platforms or his music is aired separately on radio or audio streaming platforms.

WHF contracts originated in the United States and then spread to Latin America, India and Asia. They are
now affecting European creators
whose works are exploited in
Europe in spite of national laws
which protect authors against
buy-out practices. This sets an
extremely dangerous precedent
in the entire audiovisual market,
and even beyond, for music
creators.

This trend has spread throughout Europe because of international contracts that creators are signing with foreign entities, which include a choice of applicable law, e.g. US law, where WFH contracts are recognised and buy-out mechanisms admissible.

Refusing such contracts is very difficult as there is a very real fear of being blacklisted; i.e. of being put on the list of creators who have refused a buy-out and will no longer be offered work. Often, creators options are limited to two choices: accepting the terms of contract, however damaging, and thereby give away the main source of revenue and all the future rights against an initial one-off payment, or never work again for platforms that are quickly becoming the main outlet for audiovisual works.

For many creators who don’t receive regular streams of income, the second option is out of the question.

Buy-out fee mechanisms are a glaring example of the ubiquitous power imbalance between major commercial users (in this case Video on Demand (VoD) platforms) and creators when it comes to contract negotiations. This is why creators grouped together in the form of collective management organisations more than a century ago to ask for rules providing adequate protection.

The EU Commission and EU legislators play a decisive role in preventing these practices. The newly adopted Directive on Copyright in the Digital Single Market, in its Article 18, provides a unique opportunity to take the first steps in addressing this problem. It lays down the “principle of appropriate and proportionate remuneration” to the benefit of creators for the exploitation of their works.

Recital 72, explaining the logic behind Chapter 3 of the directive, notes that creators “tend to be in weaker contractual position when they grant a licence or transfer their rights, including through their own companies, for the purposes of exploitation in return for remuneration, and those natural persons need the protection provided for by this Directive to be able to fully benefit from the rights harmonised under Union law”. This applies to the entire chapter, including Article 18.

This provision needs to be implemented in such a way that buy-out fees are unenforceable in Europe.

GESAC therefore calls for making the principle of appropriate and proportionate remuneration a mandatory rule applying to all copyright contracts, whether national/European or international. The Commission can be instrumental in this, as can Member States during the transposition process.

This would mean that the VOD platforms and producers would not be able to rely on the laws of third countries, such as e.g. US law, to impose contractual provisions that deprive creators from claiming or using already existing mechanisms that ensure appropriate and proportionate remuneration for the use of their works.