The new 2010 contract for participants at the high-profile New York Musical Theatre Festival (known as NYMF) — an annual and increasingly popular showcase of new musicals in various stages of development — includes a new clause claiming a percentage of any applicant and author's future proceeds from the shows presented, including "2 percent of the Applicant's gross on all income received from the play in excess of $20,000 over ten years," plus, "2 percent of the Author's gross on all income received from the play in excess of $20,000 over ten years."

On June 3 The Dramatists Guild of America sent a letter to its membership blasting the change. "You may have heard that there is considerable controversy surrounding the 2010 NYMF contract," began the letter, a copy of which was forwarded to Playbill.com. "After analyzing it, it is clear to us that NYMF has made significant modifications to its contract this year, to minimize the risk and cost to them of presenting your self-produced production in their festival while maximizing their control and revenue. It appears that NYMF has adopted a philosophy in taking for itself financial terms that are more appropriate for a LORT or commercial Off-Broadway producer actually paying to produce your play. While the Guild has spoken with the NYMF administration, they have only conceded that they might adjust their contract with respect to script and creative approval. They appear, though, to be resolute in maintaining the financial terms of their contract which allow them benefits superior to those reserved for LORT, commercial Off-Broadway, and, in at least some instances, first-class/Broadway producers."

Claims on future subsidiary rights for new plays and musicals first produced at nonprofits are common at large houses like the Roundabout Theatre Company and the Public Theater. However, recent efforts by the Dramatists' Guild have caused those companies to loosen their long hold on new works.

The Guild sees NYMF's claim as acutely overreaching, however, because the Festival is not a producing organization, but a presenting entity. "In those situations involved future rights, we were dealing with producing companies," said Ralph Sevush, executive director of business affairs at the Dramatists' Guild. "With NYMF, they are not even a producer. They're presenters. They are paid to allow people to self-produce. They reduce their risk, but want all the benefits of a producing company."

The costs of self-producing at the Festival can be steep. The financial terms, according to the Guild, include: a $500 participation fee; $575 for insurance; $1,000-$2,250 as a venue fee; $1,000-$4,000 as a sound fee; an ambiguous fee of $100 per performance; and $100 for a sound engineer. "This puts your out-of-pocket present costs at a minimum range of $3,275-$7,525," wrote the Guild in its letter, "plus the significant bite from the box office given over to NYMF. This, of course, doesn't include the costs of actually producing the show (cast, crew, sets, props, etc.), which are the sole responsibility of the applicant to the festival."

But the Guild's real concern over the new contract are not those fees, but the subsidiary issue. "What is paper clip money to an institution is grocery money to a writer," said Sevush.

The Festival defended the new contract, saying it was the only way the organization could keep its door open into the future, and keep "doing what we're doing."

"Our approach to this is that the primary beneficiary to the NYMF process are writers," said Isaac Robert Hurwitz, executive director and producer of NYMF. "In trying to find a solution that enables the festival to become more self-sustaining, we thought it was more appropriate that the funds come from the most successful of our alumni, rather than hitting the shows that hadn't yet made it." Hurwitz added that the rights clause was applied to a few of last season's shows.

Regarding Sevush's charge that, as a presenting body, NYMF had no right to such a long-reaching claim on rights, Hurwitz responded, "I would say we are not commercial producers here, but we do produce the festival. The structure of the festival is really a hybrid. We don't just say, 'We're throwing a festival, come as you are.' And certainly we're not paying for everything. But we do put a lot into each show. The reality is we have to put a lot of resources into these shows, and in order to continue to do that, somehow, somewhere, someone has to pay for that."

In a formal response to the Guild charges, NYMF posted a letter on its website saying "Musicals — even on a NYMF level — are expensive, and we spend as much as $30,000 on each show in the festival. That's more than some individual producers raise or spend on their own shows. And it's not counting donated equipment and services from festival sponsors, or the additional assistance NYMF gives to writers to help them raise money... We specifically chose not to demand income from future third-party producers, as many other theatre companies do, because doing so would encumber the project — making it less likely to be optioned or produced.  Instead, we carefully structured our contract so that if — and only if — writers benefit substantially from NYMF's support, they give back a small percentage so that we can provide similar opportunities to future generations of writers. We think that's fair."

Sevush did not buy NYMF's economic-necessity argument, saying that finding sustaining funding from the artists you host was a self-defeating approach and contrary to the festival's purpose. "You are ensuring your future on the backs of people who you've been given a nonprofit structure to benefit," said Sevush. "If [NYMF] can't make a go of it without doing that, then they'll go out of business, and someone else will pop up. Then they're not managing themselves very well, and the market will take care of them. But what they shouldn't do is tax the writers who they've given a special [nonprofit] status to benefit. Everyone's hurting today, including the writers."

The New York Musical Theatre Festival is arguably in a position to ask for whatever it wants. Over the past six years, NYMF, which began in 2004, has become a prime showcase for young composers and lyricists. Shows that have seen festival workshop springboard into praised nonprofit and commercial productions include [title of show], Gutenberg: The Musical, Next to Normal, Room, Yank! and Altar Boyz. The few dozen or so available slots in each autumn presentation have become highly sought after. This year's festival runs Sept. 27 to Oct. 17.

However, the subsidiary rights issue may cost the festival in other areas, particularly losing its support from the musical theatre community. On his blog, Tony-winning composer Jason Robert Brown, an artistic advisor for the Festival, wrote: "I have been associated with New York Musical Festival (NYMF) in the past, and therefore I feel a certain responsibility to make sure that they are held accountable for detestable practices and abuses." Sevush said that he had heard from other prominent Guild members, such as composer Stephen Schwartz, who planned to take up the topic with the Festival. Many Guild members function in advisory or juror capacities at the festival. Sevush said he expected many members to withdraw their support or participation.

"It would be great if someone could endow us," said Hurwitz. "But that's not reality. This was the most fair option we could come up with."

It is not yet clear if applicants whose shows have been accepted into the 2010 festival will withdraw due to the subsidiary rights issue.