Start-up costs are a familiar device, by which an agency and production company agree to commence the production process, even though they are not yet able to enter into a production contract.
That might be for example because the script or treatment has not been finalised, the budget not yet agreed or it is unclear when some element required for a production will be available – but all that matters here is that the parties are agreeing to pay start-up costs in an agreed sum, on the part of the agency and to undertake the preliminary work needed by the production company; usually so as to ensure that if the production does become contracted, it can be completed by the planned air date.
“Start-up costs” does not have a defined meaning though. So, say the agency and production company agree that the start-up costs will be £100,000 – it is clear what happens if the production becomes contracted; those costs become part of the budget agreed.
It isn’t clear (and this is where problems will arise unless the terms are agreed in writing) if the production doesn’t go ahead. Typically the production company and the agency will have a different view; the production company believing it should keep the £100,000 and the agency believing that the production company should return what it hasn’t spent. So without a written agreement, there is substantial scope for disagreement and ill-feeling.
The answer is to have a simple contract that sets out the fee, the work to be undertaken and provides for what happens to the start-up fee if the production does not go ahead.
You and the agency are free to agree what you wish, but a formulation we have used to help members and which we consider fair is to set out in the draft:
what element of the start-up fee is the director’s fee for the start-up work,
what part of the start-up fee is the producer’s fee for the start-up work,
in both instances, what part of the start-up fee is for making themselves available for the proposed shoot dates and therefore reducing their prospects of being available for other work
saying that the above must be paid in full and is non-refundable but the other costs can be paid as actuals and the mark-up specified.
That is the approach set out in the Start-Up costs agreement which is part of our bank of template contracts available to members.
It is up to you whether you use this formula or not, but whatever you do please ensure that you have Start-Up costs set out in writing, with the consequences of the full production set out so they are clear and you know your entitlement, with the agency knows its obligation.