CREC010510 - Overview and definitions: rights payments
Book rights听
Expenditure on the rights to use a story or book as the basis of a film, TV programme听or video game听is production expenditure. Expenditure on wider rights听beyond what is necessary to make the production is not. For example,听the right to use and exploit characters from a book听for commercial purposes听outside of film, TV听or video game production.听
Each case must be considered carefully, but in general a payment for an option听over the right to use a book or story would be speculative, while the purchase of the actual rights needed to make the production听is not speculative expenditure, it is core expenditure.听
Example 1听
A听producer likes a book and thinks that a video game听might be made based on it.听
She does some preliminary work, including setting up a company through which any costs associated with the game will be channelled,听and seeking initial opinions from colleagues and financiers.听
All seems听favourable, so the company pays for an option over the game rights.听This is purely to protect its position and is speculative.听
There follows further development work, including commissioning听game developers to work on potential gameplay. Finance is found.听
At this stage听the company exercises the option听so that it can make the game.听
The 肠辞尘辫补苍测鈥檚 payment for the rights is core expenditure, but not its payment for the option.听
Example 2听
A studio buys outright the intellectual property in a series of popular children鈥檚 adventure stories and sets to work to make films of them. It does this by engaging separate production companies to produce and deliver a film of each individual book.听
Included with the costs borne by each production company is a recharge by the studio of the book rights relating to the film it has been engaged to produce. The studio retains听all other intellectual property including merchandising rights.听
The payments from each production company to the studio are core expenditure.
Musical, literary听and stock film rights听
Similar considerations apply to payments made for options and rights connected to music, songs, literary works听and stock footage that may be incorporated into the film听or TV programme听during principal photography or post-production, or into the video game during production.听