Advertisers' Biggest Wins in the New Commercials Contract With Actors

New Pact Recognizes That Not Everyone Onscreen Is Always an 'Actor'

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The recently ratified SAG-AFTRA Commercials Contract, which governs all union commercials produced in the United States, includes a 6% pay hike for actors, increases in meal allowances and per diems and higher contributions for pension and healthcare -- all retroactive to April 1. But the new contract also gives brands greater flexibility and new opportunities to save money, affording advertisers more production, editing, and usage options than ever before.

Production for the web
The rule changes regarding production options are perhaps advertisers' biggest win under the new contract. For the first time, advertisers have a number of cost-free production options at their disposal when creating content for the internet and new media -- specifically live events, "man on the street" or "hidden camera" videos, and user-generated or crowd-sourced content.

If an advertiser uses any of these options, SAG-AFTRA must be notified and sent a copy of the commercial. But the exclusion of live events, "man on the street" videos and "hidden camera" clips recognizes that the people on screen in some situations are not truly "actors" and don't need to be paid under the union's collective bargaining agreement. And advertisers now have the choice of showing user-generated or crowd-sourced content that was created as entries to a contest, which is becoming an increasingly popular option for many brands. So long as these entries are displayed only for the duration of the contest, advertisers are not responsible for paying previously required fees to union talent appearing in the user-made commercials. (Brands do still have to clear publicity rights to use an individual's name, image, or likeness in the commercials.)

Re-cutting that commercial
Advertisers also gain flexibility under the new contract with regard to editing and using commercials that they film. They can now create a second, shorter or longer version of the same commercial and pay only a small, additional fee to each principal performer in the second version. Multi-brand retailers may re-edit their commercials to reflect special offers or promotions. Although advertisers taking advantage of either of these options will be subject to various restrictions on how they can use the new cuts, this arrangement offers an improvement from the previous contract -- which counted this edited material as a second commercial, forcing advertisers to pay double residuals and fees to retain performers' exclusivity to the advertisers' products.

On top of these new options in production and editing, advertisers have gained flexibility in when they can use the commercials they create. Advertisers distributing commercials on the web used to have to do it quickly, no later than immediately after the ads' first cycle. The new contract allows advertisers to use commercials they move over from TV later. Specifically, as long as they pay for the option to continue to use the commercial and as long as everything happens within the contract's maximum range, the new cycle doesn't have to be consecutive with the prior one. Advertisers can also negotiate for this right in ads originally made for new media.

The public service announcement rules have changed too. The old contract required celebrities to be paid certain minimum fees for PSAs; the new contract lets stars waive those fees for PSAs, so long as the union is notified. New rules also permit advertiser logos on non-profits' websites.

Other issues
Some legal aspects of the contract will change as well -- and again in marketers' favor. Although advertisers are subject to increased predetermined damages for late payments, they will mainly benefit from revisions that reduce uncertainty and assist in resolving disputes. In addition to offering enhanced remedy options for breaches of exclusivity, the 2013 changes also make arbitration for pension and health allocation disputes a permanent provision of the contract, and set a six-month time limit for claims involving any production-related issues.

Advertisers should be aware that the contract also imposes new disclosure requirements. Along with the mandatory notifications to SAG-AFTRA already mentioned, copies of renegotiation letters and talent payroll company reports filed with pension and health plans must now be filed electronically with the union.

But the changes to the contract on the whole provide the opportunity for creative savings in various aspects of production, editing and use. Most importantly, the new contract provides more flexibility for advertisers to structure agreements with performers in a way that makes the most sense for them.

You can find further information on the revised contract here and here.

Matthew Savare is a partner at Lowenstein Sandler, where he practices intellectual property, media, entertainment, technology and privacy law with a particular focus on new media. John Wintermute is a summer associate at Lowenstein Sandler and a third-year law student at Seton Hall School of Law.
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