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Old 09-03-2012, 09:56 PM   #1
dlevanchuk
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A percentage off the profit

So i'm stepping into the area where I've never been before and need some guidance :-D so be gentle!

I'm making my first feature movie with an intention to self distribute it. All of my cast and crew are non-paid volunteers. Now, if I want to do "you get paid a certain percentage if we sell a movie" type of a deal with them, how does that work?

Lets say I make a deal with an actor that he will get 10% off the profit, and I sell only one copy for 10 dollars, and will pay 1 dollar to the actor (yaay). How can that actor verify that I've sold only one copy of the movie?
Do i need to disclose some sort of financial papers to the crew and actors? No idea how this whole indie scene and finances work..
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Old 09-03-2012, 10:47 PM   #2
jax_rox
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whole lotta contracts and paperwork and all that jazz.

Deferred payment stuff I've worked on tends to guarantee x% of the profit after the movie makes $x (often, $x covers the budget for example).

Selling one DVD would not be profit, would it? Let's say you have a micro budget of $20,000. To make back your money, you'd need to sell 2,000 DVDS at $10 each. Then, the sales after that would be profit, though again some of the money coming in would go towards DVD duplication, for example.

In basic terms, let's say you have 30 crew, and your contracts state that the crew share 50% of the profits. If your film made $1 million each crew would get ~$16,000 ea. How likely is it that your film will make $1 mil? Let's say more realistically your film brings a profit of say $10,000. Now your 30 crew are going to make ~$160 each.

Most people working on deferred payment don't expect to end up paid, but you do work on the good scripts because you love it, and because the better the script the more chance of making money eventually. Realistically though, running the numbers of Sundance, you've got a miniscule chance of making any kind of dramatic money, and that chance decreases as the budget goes up. If you happen to make a $10,000 film that gets picked up at Sundance and goes on to make $30mil at the Box Office, then you stand to earn a lot more than a $5mil film that goes on to make $30mil.
But then, if you've made a $5mil film, you're probably going to have paid crew anyway
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Old 09-03-2012, 10:57 PM   #3
Andrew McCarrick
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Quote:
Originally Posted by dlevanchuk View Post
So i'm stepping into the area where I've never been before and need some guidance :-D so be gentle!

I'm making my first feature movie with an intention to self distribute it. All of my cast and crew are non-paid volunteers. Now, if I want to do "you get paid a certain percentage if we sell a movie" type of a deal with them, how does that work?

Lets say I make a deal with an actor that he will get 10% off the profit, and I sell only one copy for 10 dollars, and will pay 1 dollar to the actor (yaay). How can that actor verify that I've sold only one copy of the movie?
Do i need to disclose some sort of financial papers to the crew and actors? No idea how this whole indie scene and finances work..

Firstly, you should form a new LLC or corporation for the film, and actually have the actor or crew member own an actual stake in that company; that'll cover your ass and theirs in any legal matters. Basically they're minority corporation share holders, or LLC members. Then actual profit, after company expenses, would be sent straight through to the owners (in an LLC, as it is a pass-through tax entity) or a dividend paid to the share holders (if a C-Corporation).

Doing so will require a operating agreement contract, so you can make decision on behalf of the business, without the other individuals direct input. From there they could request an audit from an external auditor, if they thought you weren't be truthful with your numbers.

Last edited by Andrew McCarrick; 09-03-2012 at 11:02 PM.
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Old 09-04-2012, 12:30 AM   #4
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Excellent. Thank you for your help everyone!
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Old 09-04-2012, 04:51 AM   #5
Blade_Jones
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Don't over pay in points to crew and actors. There's so many man hours that go into making a movie.

Say X% of 2nd monies (real profits after your expenses have been recouped) go to actors. You might divide that percentage by the total days worked by each actor. Maybe that total might come to 300 actor days. If you give 10% to actors, then that's .03% per day. If an actor worked 3 days then they'd get almost 1 tenth of 1% (.09 actually). So if the movie netted $100,000, then $10,000 goes to actors, and the guy who worked 3 days would get $90.
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Old 09-04-2012, 08:15 AM   #6
dlevanchuk
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Is there more info on point payment system with standard rates that I can find somewhere? I would assume that lead actor would have higher percentage than someone with a supporting role? Or the numbers are so little that everyone gets a flat rate of .03% a day?
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Old 09-04-2012, 10:05 AM   #7
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Oh never mind. I went through the forum search and found many posts about it. Came to conclusion that deferred payment is pretty useless in my case. No star cast + no budget. No point even metioning it to the actors. I ll just tell them its for. Movie credit and a DVD copy. But thanks for clarifying it a bit!
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Old 09-04-2012, 10:38 AM   #8
directorik
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Quote:
Originally Posted by dlevanchuk View Post
Oh never mind. I went through the forum search and found many posts about it. Came to conclusion that deferred payment is pretty useless in my case. No star cast + no budget. No point even metioning it to the actors. I ll just tell them its for. Movie credit and a DVD copy. But thanks for clarifying it a bit!
It's a bookkeeping nightmare to offer (as an example) 10% (or
10 points) to everyone. And since you will not likely make any
profit offering a percentage (or points) may create expectations,
confusion and even animosity among the profit participants.

Now when your movie does make a profit - everything you put
in has been paid back - then you can send money to the people
who worked on your movie. Even if you send then $5 they will
be thrilled because they didn't expect it. Put yourself in their
shoes; you work for free because you believe in the person and
the project and then in nine months of a year you get a check
for $5 or $10 and a little "thank you" because the filmmaker
made a little profit on the movie. Now imagine the movie does
quite well and you get a check of $500.

Pretty cool.
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Old 09-04-2012, 11:03 AM   #9
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Might be something here useful to you: http://www.indietalk.com/showthread.php?p=275779

Basically, get to know your spreadsheet program very well and keep up with your true expenses.
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Old 09-04-2012, 11:29 AM   #10
dlevanchuk
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Thank you for your repliesw.

I was just a bit worried because one of the questions I was asked is "what is an intention after the movie is made". Which is, of course, is to submit to festivals and after the movie is done it's curcuit - trying to sell it via self distribution. I want to be ready to answer a question from cast and crew such as "well, what will be my cut then?".
Or should I just say its for festivals, and not to mention that I will try to sell it later on? That would be sort of sh** y of me to lie to people who want to help me and quickly gain some bad rep :-S

Last edited by dlevanchuk; 09-04-2012 at 11:35 AM.
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Old 09-04-2012, 11:35 AM   #11
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If you're really unsure, ask a lawyer. If you lie to them and they find out later on that could leave you open to lawsuits if you make any kind of money.
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Old 09-04-2012, 12:02 PM   #12
directorik
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Clearly you never lie.

When people ask you what your intention is with the movie you tell
them. It is not a lie to say you are planning on entering festivals and
would love to get a distribution deal out of it. It’s not a lie to tell anyone
working on your movie that an actual sale that brings you into profit
is very unlikely but you sure hope it happens. When they ask about
their “cut” tell them you are not offering any points or deferred pay.
If they will ONLY work with you if they get points then that person
might not be the right fit for your and your project.

No need to bring in a lawyer in this case. If you have contracts that
do not offer profit participation then no one can sue if you do not pay
them when you make money. But let’s be serious for a moment; most
likely you will never see a big profit - “big” meaning all your money paid
back plus a percentage and then 30% above that. But if it does, if it
really takes off and you make a LOT of money then you will pay the people
who worked with you before they even know about the distribution deal
you made. You’re that kind of guy. And it isn't a lie if you don't tell them
your plans. The day you get the check for distribution you start cutting
checks to the people who worked on your film.

Now a word of “deferred pay”. This is a legal term. If you offer deferred
pay you MUST know exactly what the legal term means and a lawyer
might be needed. Deferred pay does not mean a percentage of the profits.
An example: Your DP want $450 per day so you pay $100/day with $350
deferred until a later, set, agreed upon date. The DP will get all the money
no matter what happens with the movie. Points (or percentage) is a
promise of money IF the movie shows a profit.

In your case you cannot offer deferred pay and points is a bookkeeping
nightmare.
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Old 09-04-2012, 12:16 PM   #13
dlevanchuk
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This makes perfect sense, directorik . Thank you!
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Old 09-04-2012, 12:23 PM   #14
Mannie Bothans
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No need to bring in a lawyer in this case. If you have contracts that do not offer profit participation then no one can sue if you do not pay them when you make money. But if it really takes off and you make a LOT of money then you will pay the people who worked with you before they even know about the distribution deal you made. You’re that kind of guy. The day you get the check for distribution you start cutting checks to the people who worked on your film.
You can plan to pay everyone if you make all your money back plus a percentage -- just don't tell them that up front! That could (at worst) constitute a verbal contract, or (at best) setup expectations that aren't likely to pan out.
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