Producer’s Guide: Pay or Play Clauses

On one hand, the pay or play clause is the single most coveted item in film and TV contracts around the world.

On the other hand, it might be the most dangerous too.

In this post, we put our palms together to help you get a grip on exactly what pay or play provisions are, why they matter, and how you can better protect yourself with (or from) their legal might.

But first –

Creating a pay or play contract template

Before we get into the juicy details behind everyone’s favorite film and TV contracts clause, a quick note--there really isn't such a thing as a one-size fits all pay or play template. They are often individually drawn up according to the very specific circumstances of a given situation. 

That being said, some law sites have pay or play contract templates that you can review to get a general idea of what they do and what they look like. 

In a later section, we’ll get into why it’s so critical to have a legal professional draft up these contracts so you avoid running into any trouble later. 

You can compare some of these samples with the contents of this post to help get a better idea of our pay or play definition from the ground up: what the clause is, what it isn’t, and what it can be. So this way, when it inevitably comes time for you to find a lawyer or create your own, you’ll feel more comfortable. 

Whether you're working on a Taft Hartley form or a play or play contract, you can draft up all of your digital startwork directly in Wrapbook, or upload existing documents into the platform.

Wrapbook is constantly growing to bring its users an innovative array of digital services that make the entertainment onboarding and payroll process easier than ever. You can watch the demo here.

Now, armed with that knowledge, let’s kick things off with an exploration of guaranteed contract definitions you must know.

What is a pay or play clause?

When searching for a pay or play definition or guaranteed contract definition, you’ll likely run into several variations that can sometimes feel confusing or contradictory. We’ll take a look at those nuances and why they might occur in just a moment, but let’s start with something simple. 

Here’s the nature of the pay or play clause explained in a nutshell:

A pay or play clause is an item in a contract that guarantees one party will pay the other, even if the latter is released from the contract and their services are not used.

In other words, a pay or play clause guarantees that someone will get paid, even if they end up not doing the job that they were contracted to get paid for in the first place. They either get paid or they “play” and get paid. 

Variations in the clause

Despite its prevalence in the legal jargon of our times, the term “pay or play clause” itself is used only informally, meaning that a search for “pay or play definition” or “guaranteed contract definition” will never return an actual, legal definition.

More to the point, the informal usage of the “pay or play clause” has led to the term’s blanket application in an unusually wide variety of contractual contexts. 

Indie producers

Take this independent producer for example. He wants to let his actors know that he’s serious so they don’t run off to another project. He writes up a provision that says he’ll pay them even if the production gets shut down or doesn’t go through.

He says he does this so it’s more attractive for them to stay and not run off to another project. But producers need to stay protected too. Working with a lawyer is generally recommended.  

The MLB

Or take Major League Baseball. They pay all players on a team’s roster their full contracted salaries, even if they never actually play a single inning for the team. The MLB’s policy is so sweeping that they offer a strict guaranteed contract definition in a glossary directly on their official website.

The NFL

Contrast that to life in American Football, where the guaranteed contract definition is notably malleable.

Players are usually guaranteed a variable portion of their salaries under heavy contract restrictions due to the sport’s extreme risk of injuries and the subsequently high turnover rate it creates among players. 

Admittedly, contracted salaries in the NFL are generally large, but the difference between total amounts contracted and amounts actually guaranteed by a contract can often be measured in orders of magnitude (i.e. still a lot of money, but significantly less of a lot of money, like the case of Kaepernick).

Meanwhile, to round out our illustration, a production assistant in the entertainment industry is considered extremely lucky when their deal memo guarantees even the smallest fraction of their day rate for last-minute shoot cancellations.

The differences between these cases are ample and obvious. But even still, their similarities do outline a blanket definition. The pay or play clause in each of the above cases guarantees some level of pay, even if the contracted employees are not ultimately given any form of play.

The pay or play clause in film production

Technically, any member of a filmmaking team could be bound to a pay or play provision in their contract, regardless of their film crew position. 

However, with below-the-line crew, this usually only occurs in the relatively simplified form of cancellation fees. They are also known as “cut fees,” “kill fees,” or - in the rare case of advance payment, “hold fees.” These are all paid in replacement of a rate for a scheduled shooting day that has been canceled.

To discover more about below-the-line cancellation fees, you can dig into the guaranteed contract definitions and rate guidelines as determined by the appropriate filmmaking labor unions. Familiarizing yourself with DGA rates and SAG rates is a great place to start. 

Of course, when it comes to above-the-line talent and crew, we’re talking about a completely different ball game.

Pay or play clauses in film and TV contracts are most frequently used to incentivize major creative talents, particularly actors and directors, to hold their schedule well in advance for a given project. If the project then falls through for some reason or the talent’s services are no longer necessary, the talent will still be compensated for the opportunity cost of their scheduled time according to a contract-stipulated rate.

Now that we have a functional pay or play definition in mind, it’s time to venture a little deeper into the rabbit hole. With the “what” out of the way, let’s turn our attention to “why.”

The purpose of the pay or play clause (why you need them)

As we’ve seen the pay or play clause explained and explored thus far, you may have noticed one word, in particular, creeping up more often than others. No, it’s not “pay” or “play.”

The magic word is…

“Guarantee.”

The concept of a guarantee is at the heart of the pay or play clause and it’s exactly what makes the contract item both valuable and risky.

Example of when you might need one

Let’s illustrate with a hypothetical situation.

Say you work for a major talent agency, and you’re negotiating a future deal for heavy-hitter client (and national treasure) Edie Falco. 

Calculating the best pay for any actor is a difficult task, full of all sorts of math. You’re dealing with SAG rates, profit sharing, television residual pay, and all that’s on top of the raw fact that- in this hypothetical situation- you’re representing the jaw-dropping, prestigious talent of (again, national treasure) Edie Falco.

The hypothetical future deal you’re negotiating is for Edie Falco to star in an epic, twelve-part television mini-series. The offer currently on the table is a fantastic role paid at an even better rate. 

But there’s a catch.

The project hasn’t been greenlit.

Principal photography is set to commence in one year and is scheduled to last approximately six months, not counting potential reshoots. That means that if Edie Falco takes the gig, her commitment to the project would bar her from taking on a baker’s dozen of other roles in the meantime. 

And if the project, in turn, falls through, Falco could be left hanging high and dry with a deserted schedule for the next year and a half.

But she wants the role. And you’re her agent. What do you do? How do you guarantee the future value of a national treasure’s time?  

Yep. Say it with me: Pay or Play Clause.

To be clear, a pay or play clause in no way guarantees that the imaginary mini-series will actually happen, but it does guarantee that Edie Falco will be compensated for her time regardless of the show’s fate. In that way, it’s not so much a perfect solution as it is a way to mitigate risk, and that’s the key.

Individuals and corporations utilize the legal guarantee provided by pay or play clauses to minimize financial risks associated with uncertain future conditions.

In the above case, Edie Falco represents a party contracted to do a future service, but- make no mistake- pay or play clauses are a two-way street. 

Let’s flip this hypothetical pay or play clause example to see how it might work from the perspective of the other party, the one doing the contracting.

From the producer’s perspective

This time around, pretend you’re the producer, a card-carrying member of the PGA with a solid track record of hits and hunger to beat your personal best. Your next project is an epic, twelve-part television mini-series that you just know is the monumental work that people will remember you by. 

But there’s a hitch.

You’re not yet able to greenlight the project.

The trouble is that you’re financing the mini-series with a patchwork of partners, and, crucially, one of them is refusing to commit. So now the production is just short of being fully funded. 

You want to begin your six-month location shoot one year from now- right in the sweet spot after New Zealand’s rainy season. But this partner has made it clear that they absolutely will not buy in until you’ve secured the involvement of the perfect lead actress, Edie Falco. And her reps are understandably skeptical about committing to a project that currently looks like it’s not going to happen.

In other words, there are no fully funded mini-series without Edie Falco, and there is no Edie Falco without a fully funded mini-series.

You’re the producer. How do you solve this catch-22? How do you guarantee a living legend that your project will make her risk worthwhile?

Like Jimmy Two-Times, you can say it again: Pay or Play Clause.

From this perspective, the clause boils down to a simple exchange. 

You, the hypothetical producer, are offering a portion of risk (in the form of guaranteed earnings) in exchange for a portion of Edie Falco’s risk. Here that would be time and opportunity.

The exact reasoning behind a pay or play provision may vary wildly across different circumstances, but the broad strokes will always remain more or less the same. The clause represents an exchange of risks performed so that one party will gain some form of leverage or assurance that they would not have had otherwise.

In a perfect world, the pay or play clause always leads to a win-win. The epic, twelve-hour mini-series gets made right on schedule, with a Hollywood icon leading the charge. And a horde of Emmys and appreciative think-pieces brings up the rear. Not bad. 

Everyone lives, laughs, and most definitely loves Edie Falco in the upcoming third installment of American Crime Story.

But this isn't the real world. 

Things rarely work out as planned. Situations become complicated; waters get muddy. Contractual obligations turn litigious. 

Let’s take a brief look at a few real-life examples in which pay or play clauses were put to the test.

Real world pay or play clause examples

Before we jump into our examples, it’s important to repeat that “pay or play” is only an informal term.

While the cases below demonstrate some element related to what we’ve covered in terms of pay or play clauses, the exact details of the contracts in question are private matters. 

Any analysis here is only speculation meant to illuminate pay or play clauses as a concept. As you read along, remember that these examples are presented merely as illustrations, not in-depth case studies.

With that in mind, let’s dive into our first example.

Example #1: Martin Scorsese and Silence

Silence (2016) was decades in the making. The historical epic began as a passion project for Martin Scorsese in the early ’90s. But the film slowly evolved into a financial nightmare, as a series of events forced him to push the project further and further back in his schedule.

Scorsese reportedly agreed to shoot Silence at least as far back as 1997, with an attached production company investing over $750,000 toward that specific end. But he was unable to shoot the movie at that point and gradually pushed the project further and further behind a slate of others. Much later, in 2012, the original company filed a lawsuit against Mr. Scorsese, alleging that he had breached a contract made in response to this initial delay.

This particularly torturous tale from development hell is educational for us. It demonstrates the potential complexity that can arise when one party violates a specific (and seemingly labyrinthine) form of pay or play clause.

The production company claimed that to avoid a lawsuit, Scorsese would have to pay millions to the company in compensation, many times the amount they themselves report to have invested in the initial transaction. So Scorsese made a series of deals to mitigate this. 

We’re not in a position to verify the veracity of these claims, and Scorsese’s representatives actively refuted them. But we do know that the production company at least felt they had enough legal grounds to take him to court.  

Fortunately for all of us, Martin Scorsese kept the faith and endured. The lawsuit was settled in early 2014, and Silence finally premiered to critical acclaim only a few years later.

Example #2: Cheryl Cole and The X Factor

And what happens if the tables turn?

Back in 2012 (a banner year for pay or play, apparently), the U.S. adaptation of Simon Cowell’s hit series The X Factor was entering its second season.

British singer Cheryl Cole had been slated to star on the show’s panel of celebrity judges but was released from her two-year contract very early on due to fears that American audiences wouldn’t understand her Newcastle accent. She made a brief appearance in The X Factor’s American pilot, after which the show was seemingly done with her.

Cheryl Cole, however, was not quite done with the show.

It turns out that Miss Cole had an explicit pay or play clause within her contract. She was guaranteed pay for starring in not one but two full seasons. She was paid for at least part of the first season but had to take the show’s producers to court over payment for the second, pursuing more than $2 million in lost wages in the process. The suit was settled out of court just under a year later, with the production company paying an undisclosed sum.

Now that we have some idea how a guaranteed contract plays out in the real world, let’s examine a few things you might want to be familiar with if you want to draft your own.

How to draft pay or play contracts

On the subject of drafting pay or play clauses (or any other contract item), one and only one piece of advice reigns supreme:

It’s always best to see what an entertainment lawyer thinks.

Seriously, that fact cannot be stressed enough. The reality of any contract item is that it has to be tailored to the specific situation at hand, and only a qualified legal professional will be able to perform that task confidently within the bounds of the law and a reasonable margin of error.

In other words, without the input of a lawyer, your pay or play clause could leave you vulnerable to a world of financial hurt that- trust me- you do not want to experience.

So how do you draft pay or play clauses for yourself? Unless you're negotiating juice box payments for that little league team you coach, it’s highly recommended that you simply don’t.

Choose to lawyer up, before you’re left with no choice but to lawyer up. 

And once you do, if you have a Wrapbook account, you can take that contract and add it directly to the software to disseminate it out to the actor(s) of your choice. Add mandatory signatures, including a signature for a party’s representative, if ever needed. Get in touch with us for a live walkthrough or watch a demo on your own.

Contents of the pay or play clause

Once you and your lawyer have worked out the terms of your pay or play clause, you should recognize most of the legalese you’ll likely find within its text from any other contract you’ve faced over the years. 

This clause will list out the parties involved, the offer terms, the agreement to those terms, and the specific goods or services exchanged in consideration of the contract.

There are, however, a few unique details in a pay or play contract that are worth keeping an eye on.

1. Default payment clause

The default payment clause details what will happen if either party in the pay or play contract violates the agreement. It describes a course of action to be taken in that event and generally provides some guidance for payments that may be sought.

A well-written default clause streamlines a pay or play contract’s enforceability, while a poorly-written default clause could lead to years of litigation if the contract is ever brought to court.  

2. Conditions precedent

Conditions precedent describes any events that need to take place before a pay or play contract actually kicks in. That could mean anything from passing a certain date on the calendar to passing a criminal background check.

Conditions precedent are of particular note to producers in the pay or play equation. They can be used to further mitigate risk by placing requirements upon the opposite party and preventing them from sly derelictions of contracted duties.

3. Exceptions

Exceptions are any events or conditions that might render a contract null and void.

The most common examples of exceptions are those described as force majeure- a term referring to events that prevent a contract from being fulfilled but are outside the control of either party in the contract. An example of this could be a natural disaster or sudden change in the law).

However, other exceptions may be written into the contract as deemed necessary. In this way, you might think of exceptions as a kind of antithesis to conditions precedent.

Wrapping Up

Pay or play clauses can be incredibly powerful and beneficial within the right circumstances. However, it’s important to remember that they also carry substantial risks to all parties involved.

Always seek guidance from a qualified entertainment lawyer before placing yourself under obligation to any kind of pay or play clause.

In the meantime, if you’re interested in learning more about contracts in film and television, be sure to check out our blog’s guide to film production agreements.