Michael Jones on Negotiating with the East Coast Council

History
The Low-Budget Contract
When you can't strike a deal...
Pros and Cons

As the number of independent films in production swells, so does the pressure for the unions to adjust and accommodate. The creation of a Low-Budget Contract and the rebirth of the East Coast Council has been the first major step in not only accommodating low-budget productions, but in demystifying the process of producing a film with union labor. States Chris Goode, who has co-produced numerous indies with Kerry Orent, including Flirting with Disaster, "I think there are strong reasons to go union. Not because they're going to beat the shit out of you or make your employees walk off the show. Generally they have better crews. And as you do bigger pictures, you want a good relationship with them."

Since its creation, the East Coast Council has helped facilitate the boom in independent film production in New York. Films like Smoke, Big Night, Bad Lieutenant, Fresh, upcoming projects like Boaz Yakin's Price Below Rubies, and European co-productions like Chantal Akerman's A Couch in New York, Goran Paskalejvic's Someone Else's America, and Robert Dornhelm's A Further Gesture are just a few of the films to take advantage of union labor by making a deal through the Council.

The first, and so far only, union mechanism in place specifically for low-budget productions is the East Coast Council in New York. The Low-Budget Contract it oversees was born from a rocky history of New York production. In the early '90s, New York had become a one-union town with the merger of NABET into the I.A. Before this, NABET Local 15, a single "vertical union" comprising sound, props, makeup and hair, wardrobe, and camera, was composed of mostly younger members, some of who couldn't yet get into the closed locals of the I.A. Like the I.A., they developed contracts for studio pictures but also dealt with others that were quasi-independent with budgets of $2-10 million. "The reason the unions did so well in the early '80s is that most productions came from L.A. and saved a lot of money by having one-stop shopping," explains Goode. "They could go to NABET or I.A. and they would know they would have a really top-notch crew." With the merger, NABET members went into the respective IATSE locals. As a result studios saw some of their competitive leverage vanish, and in the light of several failed negotiations, they stopped their productions altogether in a seven-month boycott. The I.A., seeing the amount of work sharply drop, re-developed their contracts.

With new changes made to studio contracts, independent film scale rates were also created for the larger indie film companies, and for low-budget films the East Coast Council was given new life with the creation of a Low- Budget Contract that addressed productions at and below the $6 million mark. More importantly, the contract introduced a new process of negotiation through collaboration and one-on-one contact, something unheard of before the boycott when unions more or less accepted or refused what was brought to them. With the revitalization of the ECC, "it was as if the Berlin wall came down," says Brick. "Things have changed 180 degrees from what they used to be."

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The East Coast Council of the I.A., or the IATSE (the International Alliance of Theatrical Stage Employees, Moving Picture Technicians, Artists and Allied Crafts), involves representatives from seven local unions whose members make up the below-the-line crew. Chairman of the Council is Matthew Loeb, the first contact a low-budget producer has to the New York unions. It's his job to corral all the production's parameters and help the producer present it to the council.

When looking at a new project, Loeb says, "I'd like to get a letter that says, 'We're in town, we're shooting this project, this is how many days we have, these are our problems.' And I'd like to get a budget from everyone regardless of the budget range. I've been asking more recently for scripts because it gives me more insight into specific problems. Everybody has a different perception of what's costly."

One key element of East Coast Council contracts is the concept of wage parity. Unlike the wage structures of larger films, separate tiers are set up for keys, seconds, and thirds so that a second electric isn't paid more than a second in the wardrobe department. Additionally, a substantial amount of the scale rate can be deferred. In return, the crew participates in the profits from the film's box office success in what is typically called the "backend deal." "So while the locals in this meeting are giving up some considerable concessions," explains Loeb, "we share in the profits if the show's successful."

"Theoretically," continues Loeb, "I don't negotiate the deal even though I spend considerable time bringing the parties closer together. Each union has its own bargaining rights." To negotiate the deal, the Council meets with representatives of the production, usually the producer, line producer, and/or production manager. They meet in the I.A.'s office in Times Square around a large rectangular table where a representative from each of the local unions is seated. Copies of the budget are passed out and line by line, dollar by dollar, the budget is combed as each local rep looks at the requested deferments - both in terms of wages as well as staffing requirements - for their particular group of members. Dialogue is exchanged, figures may be shifted and, if all goes well, a deal is struck. Afterwards, the deal that's been made is set and won't change (i.e., you can't slash rates or get rid of half your art department when you go over budget; likewise, a local isn't allowed to come back to the producer and renegotiate a deal agreed to by the Council), and seeing that the production goes ahead with the budget that was agreed on, no union-related problems will rise.

However, it's never that simple. The Council knows how to read a budget, perhaps more so than many first-time filmmakers. They look askance at a production that's paying half of a $4 million budget to a big (or not-so-big) star or which is renting expensive, heavy equipment without budgeting for the proper qualified staff to operate it. The council looks for fairness across the board. "They want to make sure you've done a real budget," says Shooting Gallery C.E.O. Larry Meistrich, who has appeared before the Council numerous times. "They want to know that your production design numbers make sense next to your grip and electric numbers next to your postproduction numbers - and that you don't have any single line item significantly sticking out where it looks like you've buried money." And, says Brick, "They don't want to see actors, directors, or writers making out big time. They want to see minimal salaries above the line. They want to see proportion and equity." The union will also want to see a separate line in your budget for Pension and Welfare (P&W), money that provides for retirement and vacation pay for its members.

Staffing is also a sticking point, and often times a difficult one to negotiate. For many indie films, smaller crews are the result of an overall production philosophy. A low-budget indie producer would typically love to save the cost of hiring a camera operator if the d.p. wants to operate, but with the I.A. that can't happen. The council doesn't negotiate on whether a d.p. is allowed to double as camera operator, a work rule that's particularly mind boggling to both Europeans and independents who often choose a d.p. based on the beauty of his or her moves. Other staffing positions are also off limits. A set scenic is the only person allowed to handle a paint brush for even the most minor touch-ups, for example.

For a number of producers, these staffing requirements remain a big concern. "This is the constant fight I have," says Goode. "If you're talking about paying people really low rates, not full wages and all that, why start padding your crew with a [camera] operator? They have been very tough about that lately." Responds Loeb, "We're trying to get as many jobs as we can without increasing your budget. Most people, once they get the concept and know up front to budget that way, come in with a proposal where they rake the money across a different way."

"My feeling," responds Goode, "is that it's a ridiculous position on their part. Basically they are taking money out of P&W (pensions and welfare) or money out of other crew members' pockets to pay for somebody that's not needed. Same thing with set scenic. If there's very little scenic work to be done on set, your designer is part of the same local. I see no reason why the designer couldn't pick up a brush and touch something up."

The bread-and-butter of a Low-Budget Contract, the backend deal, is the essence of an ECC negotiation. Based on the agreed deferment, the Council will set a pre-defined threshold on the film's assumed box office success. When the North American box office gross as reported in Variety reaches a certain number, which the Council is now pegging at two-and-a-half times the budget, the entire crew gets 125% of their full scale pay and full pension and welfare benefits. Recent Council films that have hit this mark are Flirting with Disaster, Big Night, and She's the One.

Does the Council try to get a bigger deferment if they think the film will be a hit? No. Assures Loeb: "We don't get into much artistic content at all. We can't."

Because it is the producer who makes the deal with the ECC, it is usually his or her responsibility to pay the deferments. When a distributor becomes involved, the ECC deal is "structured so that the producer is really jointly liable with the distributor," says Loeb. "Of course, we don't know what the arrangement between the producer and distributor is. What they're supposed to do is assume the obligation or transfer the obligation or arrange somehow to share the obligation."

But this structuring of the back-end deal remains a sticking point for many indie producers. In the past, the Council has cut gross corridor deals tied to producer's net profits, but now the ECC is structuring deals around the North American box-office gross. The problem: not all indie producers have the leverage to pry payments from recalcitrant distributors. If an ECC film underperforms at the box-office, an unscrupulous distributor might have their highly paid house legal staff forestall payment until more ancillary revenues come in. And as the producer may have made less than some crew members on a low-budget labor of love, he or she will have few resources to correct the problem.

If a film is a negative pickup, the producer can sometimes get the distributor to sign the sort of assumption agreement Loeb refers to above. Then, "presumably, the ECC could go after the distributor," says entertainment lawyer and indie executive producer John Sloss. In his experience, however, he has never negotiated such an agreement signed by a distributor who didn't put up the original production costs.

But if a film is produced truly independently with private equity investment, the producers must either include the deferment payback costs in the film's price or assume the cost out of their own take from any distribution agreement. And unless the distributor includes the ECC in an acquisition agreement - as Sloss notes above, a highly unlikely scenario - the only way the union can collect on deferments is by going after the producer, the only party they have a signed agreement with. The producer, in turn, would have to sue the distributor.

"Who wants to come up with what could be a half a million bucks?" empathizes Loeb. "The problem is [the distributor] would like to re-negotiate in the end and we've already negotiated once."

Another back-end deal problem concerns the triggering point for deferral payments - that "two-and-a-half times Variety gross" figure. The Council has set this figure in an attempt to circumvent Hollywood accounting, where films like Batman never seem to edge into profit. However, for any small film that has a chance of breaking out, the larger specialty distributors will often spend prints and advertising monies several times the cost of a film's budget. Sometimes the strategy works and a small film breaks out and becomes a mass hit. Often the strategy results in a sea of red ink on the distributor's balance sheet. With the distributor receiving back from the exhibitor anywhere from 30 to 50% of gross receipts, it's not hard to do the math and realize that even seemingly successful indies don't make money in their theatrical release.

Ironically, the tool low-budget producers use when coaxing deals out of both crew and vendors - the threat of withholding future higher-paying work - is not available to the East Coast Council when dealing with delinquent distributors because a broad contract already exists covering higher-budget films. Thus, the producer is left holding the bag. For this reason, indie producers should make sure, especially when producing a negative pickup for a studio, that their contracts with both the union and any distributor are as well crafted as possible to avoid any future liability.

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There are some films the ECC can't tailor a deal to, usually projects of $1 million or under. "It really depends on the project," says Loeb. "If you have $1 million it sounds like you're going to have a problem making a deal, but that depends on whether you have 15 speaking roles, 30 locations, or are shooting one person in one room with no scenery. Obviously if you're doing that a million dollars goes a long way." The ECC has made very few deals in the $1 million range, but Loeb stresses the importance of that initial contact when "you've told us that you're going to be in town; that you'd love to work with us but you can't afford it. That's a really good building block for a relationship down the road"

All filmmakers interviewed for this article agreed that it's extremely important to establish a good line of communication with the unions at the earliest stages. And if a producer's shooting his or her low-budget picture in any major East Coast city between Maine and Florida, a phone call to the Council is a must.

And there remains, of course, non-union production. Outside of New York, many producers feel that they can attract qualified crews whether they are union or non-union. States Goode, "There's no real reason to go union in, say, West Virginia. As long as the pay is what they'll work for, you'll pretty much attract a quality crew whether they're union or non-union."

Attempts to organize non-union crews and picket lines can happen despite any understanding with the unions, says Loeb. "A crew could call us up and say 'Hey, these guys actually have $4 million' or 'They're killing us. We're working 20-hour days and it's not safe.'" Or, one local might try to gain the support of the others on a production using a mixed union and non-union crew. "Which is fine," replies Goode. "I'm a big supporter of unions. I have no problem with that, but generally if you've chosen the right route, your crew is going to be happier with how you've set it up originally. If your crew desires to be organized, then you should have signed a union deal to begin with."

When it comes to particular state laws concerning unions, Meistrich agrees that the term "right-to-work state" is relative to the area. "It's just really a matter of how powerful the unions are in the area where you're working." Most of these laws were made for the event of a strike, and the careful producer should be aware of them, but shouldn't structure a production around what safety they may give against the union. If the producer were to bring a bigger budgeted project to the same area, one that required the assistance of a qualified union crew, then they're going back to an already soured relationship.

Although the issue is being addressed, a low- budget indie doesn't yet have the avenue of a tailored contract in California. The unions there have a close relationship with studios and television networks (t.v. movies-of-the-week have there own special contract). The unions have adjusted to the different types of production landscapes, but union members, if the pay is right, often work non-union films as well, sometimes more so than contracted films. The unions are active in organizing non-union shows and picket lines do go up occasionally, but some members find it hard to picket their associates across the line. As one I.A. member put it, "since most members also work non-union they understand why their fellow members are doing a nonunion show. It's not as though they are scabs really because everybody would be a scab."

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"I'm actually pro-union," state Meistrich. "It's my opinion that one of the reasons the film industry is so dominant is that there's a highly skilled workforce that is relatively cheap compared to what they deliver. I would much rather have a union crew that knows what they're doing than be training people." "And [the union] is better for the employees," adds Goode. "It's great to have a pension. This business sucks from the point of view of any job consistency and health care and all of that. The unions provide that."

"There are a number of reasons (the ECC) works," says Loeb. "One, is that we develop relationships with producers; crews get relationships with producers, and the producers in turn have been pretty good in bringing those people up with them when they get more money, not skipping over them for the higher paid people."

But a major problem, say many filmmakers, is that the lowest budgets the ECC can make deals for aren't low enough. "Many producers have made an ECC deal for $2 million, but they were special pictures," says Goode. "They either involved limited locations or they went vastly over budget on post. If you make an ECC deal for a pic with a $1 million budget, and you have the normal production expenses and problems, then you're going over budget."

Perhaps the best piece of advice for first-time filmmakers looking to crew their low-budget film is to find a producer or production manager who's done it before, hopefully in the same budget range, and one who has dealt with union negotiation. The keys to a successful negotiation lie in how well the producer has scrutinized the budget from the union's perspective, how prepared he or she is to answer frank questions about the numbers, and how good their relationship has been with the union in the past. "I think they are very collaborative," says Goode. "But don't mistake that for what their job is: their job is to get as many of their members work at the highest rate possible."