Navigating Underlying Rights in Work-for-Hire OTT Productions
Authors
A film production house that has spent years developing original IP occupies a meaningfully different commercial position today than it did a decade ago. OTT platforms have created genuine demand for local content and a real acquisition market for the stories Indonesian producers have been building. The risk in this environment is not that the deals are structurally bad. It is that they are frequently misread.
When a platform commissions a production under a work-for-hire arrangement, the production house typically retains copyright in its source material while handing over rights to the specific deliverable — the film or series — to the platform. On the surface, this looks like a favourable structure for the production house, but it is rarely that simple. Everything depends on how the agreement is written. A production house may still be listed as the copyright holder, yet when it goes to make a sequel, develop a theatrical adaptation, or license its characters, it finds that those rights are already locked up in the prior agreement — not because there was an explicit assignment clause, but because the contract was drafted too broadly. The bottom line is that holding copyright on paper means nothing if the ability to commercially exploit it no longer belongs to you.
A. The Core Distinction Most Producers Overlook
OTT commissioning deals operate across at least three distinct layers of rights, and the confusion between them is where most structural problems originate.
The Underlying IP — the original literary work, screenplay, character universe, or format that exists independently of any single production. This is the creative foundation and the long-term commercial asset. Under Law No. 28 of 2014 on Copyright and its amendments ("Copyright Law"), the creator of an original work holds a set of exclusive economic rights in that work, including rights of reproduction, distribution, and adaptation.[1] These rights can be licensed or transferred. Their value, however, lies in what the owner can actually do with them after any given transaction closes.
The Adaptation Right — the right to transform the underlying work into a new format or expression: a novel becoming a film, a short story becoming a television series. This is a specific economic right that sits on top of the underlying material.[2] Licensing the adaptation right for one production does not automatically extinguish it for subsequent productions, but the terms of that license will determine whether the right survives in any commercially meaningful form.
The Commissioned Production itself — the deliverable that results from exercising the adaptation right. In a work-for-hire structure, who owns the production is a separate question from who retains the right to make the next production based on the same source material.
These three layers are legally separate. They are frequently compressed into a single commissioning agreement, where their interaction is either unaddressed or resolved — almost always in the platform's favour — through broad definition clauses and catch-all grants. The consequences of that compression tend to surface only when a producer returns to the same IP looking for the next deal.
B. The Four Clauses Producers Should Watch Carefully
1. Overly Broad Derivative Works Clauses
Most commissioning agreements grant the platform rights in derivative works. The platform's legitimate interest here is straightforward: marketing content, promotional material, platform-specific edits, clips, and ancillary production assets. The question producers should ask is how "derivative works" is defined in the specific agreement, because in many standard-form OTT contracts, the definition is drafted broadly enough to capture sequels, prequels, spin-offs, and substantially all future productions based on the same source material or the same characters.
A definition that reads "any work based on, derived from, or incorporating elements of the commissioned production or the underlying source material" is not a marketing rights clause. In commercial effect, it is a franchise rights grant. The production house retains the underlying copyright. It no longer has the practical ability to make the most commercially valuable thing in its portfolio — the continuation of that story.
2. Broad Exclusivity Provisions
Exclusivity clauses are standard in OTT agreements, and platforms have legitimate reasons for requiring them. When a platform invests in building an audience around a particular story world, protecting that relationship makes commercial sense. The problem is not the exclusivity itself, it is how broadly it is drawn. A well-drafted exclusivity clause should be limited to the commissioned production and its direct competitive context. What producers often encounter instead is a clause that bars them from producing or licensing any content featuring the same characters, settings, or narrative universe associated with the series — which goes far beyond distribution exclusivity.
In effect, such a clause locks the entire story universe. It prevents the production house from licensing its characters to a theatrical distributor, developing a short-format version for another platform, or producing a prequel for a different buyer. A story universe that has taken years to develop may become commercially unavailable for the full duration of the agreement and, depending on how trailing rights provisions are structured, for a period beyond it as well.
3. Sequel, Expansion, and Option Rights
First refusal rights, first negotiation rights, and automatic options over future seasons or related productions are among the most consequential provisions in any OTT commissioning agreement, and among the least carefully scrutinised.
These mechanisms are not inherently problematic. A platform that has invested in producing the first instalment of a franchise has a legitimate interest in maintaining a preferential position over what comes next. The risk is in the mechanics. A first refusal right with no defined pricing floor, exercisable at any point within a five-year window, gives the platform de facto control over whether the next production happens, and at what value. An option to commission the next season priced at the same rate as the original agreement, regardless of how the IP has grown in the interim, does not preserve the producer's commercial position. It prices the franchise's future against the original commission's economics.
These clauses function, in commercial terms, as franchise governance mechanisms. They should be read and negotiated as such — with defined exercise windows, pricing benchmarks, and explicit carve-outs for productions that fall outside the specific format or territory covered by the original deal.
4. Licenses That Function Like Assignments
The Copyright Law distinguishes between an assignment — which transfers ownership of economic rights permanently — and a license, which grants a right to use those rights within defined parameters.[3] The distinction is legally clear. Commercially, the boundary is more permeable.
Consider a license that is exclusive, perpetual, irrevocable, sublicensable, and covers all purposes and all territories. Despite being called a "license," its commercial effect is identical to an assignment. The production house may still be listed as the copyright holder, but the economic value of those rights has effectively and permanently changed hands.
Platforms sometimes deliberately prefer the license structure for precisely this reason — they obtain the same outcome as an assignment without requiring the production house to explicitly acknowledge that a transfer of rights has taken place. So when a producer is assured that they are "retaining ownership," what matters is not the label, but what they are actually still permitted to do under the specific terms of the agreement.
C. Why OTT Platforms Seek Broad Rights
It would be a mistake to treat platform demands for expansive rights as simply being greedy or adversarial. In reality, these demands reflect how OTT production actually works economically.
Platforms pour significant amounts of money into original content with no certainty that audiences will show up. When a series does find a committed viewership, it becomes a franchise with real commercial value. That value is not built on the source material alone. It is built on everything the platform has put in — from production quality to marketing spend to audience development. Being able to continue a successful series, expand it across different formats, and manage that growth in a coherent way are all legitimate business interests that need to be factored into the original deal.
For producers, the takeaway is not that these deals are unfair. It is that what is actually being exchanged goes well beyond just the commissioned production. Both sides need to go into the agreement with a clear and honest understanding of what is truly on the table.
D. What Producers Should Protect
The most important protection a production house can have is clarity upfront — knowing exactly which rights are being granted and which are being kept. On derivative works, the definition should be kept narrow. Marketing assets, promotional content, and platform-specific edits are fair game, but sequels, prequels, spin-offs, and theatrical productions should be explicitly carved out. The right to build further on the same IP is a separate, high-value right and should be negotiated as one. On exclusivity, the scope should be tied to the specific format and platform, not to the characters or story universe as a whole. Preventing a direct competitor from licensing the same production is reasonable, but locking the entire story world across all formats and partners is a different matter entirely and needs its own justification and a defined end date.
On options and first refusal rights, pricing parameters must be defined. Whether it is a minimum floor, a formula tied to the original commission, or a fair market value obligation, there needs to be a number attached. An open-ended option with no defined price is not a preferential right — it is a veto. Production houses should also maintain a reserved rights schedule — a document that clearly sets out which rights are licensed, in what format, for which territory, and for how long, and which rights are retained. This is standard practice in international co-production deals and should be treated the same way in domestic OTT contracts. A clear schedule at signing is the simplest way to avoid disputes down the line.
Conclusion
The OTT market has created real commercial opportunity for Indonesian production houses, and that opportunity is worth approaching strategically. The deals that allow for franchise building, multi-format exploitation, and long-term IP growth are structured that way deliberately — with careful attention at the commissioning stage to what is being licensed and what is not.
Ownership that cannot be exploited is a legal position, not a commercial one. A production house that holds the copyright to a valuable story universe but cannot produce the sequel, cannot license its characters to a theatrical partner, and cannot develop the same world for a different platform has effectively given away the most valuable part of that ownership without it ever appearing in the agreement as a transfer.
The time to address that is not when the next deal surfaces. It is before the first one closes.
Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.
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