investment point questions

I got myself confused on the whole "investor points" and need someone to untangle me!!

Ok, so lets say, my total budget is $200,000

I have two investors who want to invest into my movie.

Bill invests $10,000 (5% of the budget)
Bob invests $190,000 (95% of the budget)

1. How many investment points to Bill and Bob have?
(a) 5 points to Bill and 95 points to Bob.
(b) 2.5 points to Bill and 47.5 points to Bob.


2. If a distributor sends me a check for $200,000 (after distribution fees been taken out), do investors get an entire $200,000 to pay back their investment and leaving cast and crew pennyless?

3. If a distributor sends a check for 400,000 (after distribution fees been taken out), I will give $200,000 back to the investors, leaving $200,000 profit that I can now split 50-50 between producers and investors ($100,000 each).

Assuming the answer for question 1 is (a) , Bill and Bob will get $5000 (because he has 5 investment points) and bill will get 95,000 (because he has 95 investment points). Does this sound right???

Thanks for your knowledge everyone!
 
My main confusion is trying to understand how much money is one point of 250,000 budget.

Is it $2,500 (1% of a budget) or $5,000 (2% of a budget)?
 
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Bill gets his 10 large back plus 2% before anyone gets anything.
Bob gets his 190 large back plus 15% before anyone gets anything.

So you get a check for $400,000. Bill gets $10,000 and Bob gets
$190,000 leaving $200,000. Bill gets 2% of that ($4,000) and Bob
gets his 15% ($30,000). That leaves $165,000. So you have that
($165,000) as “profit” to give to cast and crew.

Their “off the top” percentage may be higher or lower but they get
their money back AND a profit first. They may also take a percentage
of the $165,000.
 
Thanks, directorik!

In my extremely simplified case I didn't add anything for "off the top", just to keep math as simple as possible. My main confusion is the Point system.
So, crudely speaking, a "point" is a percentage of profit, that is based on an initial investment?

If Bob and Bill invested 10k and 190k into 200k budget, they now have 5 points and 95 points each? Or 2.5 and 47.5 points each?
 
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So, crudely speaking, a "point" is a percentage of profit, that is based on an initial investment?
Yes. One "point" is usually one percent. But one percent of what?

If Bob and Bill invested 10k and 190k into 200k budget, they now 5 points and 95 points each?
No. If they take that they take 100% of anything the movie makes.
Not a good option.

Each case will be a little different. In my example Bob and Bill get 100%
until payoff and a percentage (points) until they make a specific profit on
their investment. This happens before anyone gets anything. In another
scenario they could get points (say 15 and 35) from day one and risk
more of their investment.
 
haha my bad!

Ok, I think I get it. In my case, investors own 50% of the movie. However, to own 50% of the movie, they must invest their money into an entire budget. So we take $200k, divide by 50, and get 4000. So one Point = $4000.
 
This is usually covered by a Disbursement schedule/document/agreement, which will be written depending on what the deal is with every element. Without this document, who gets what isn't clear and legal issues may ensue.

Yes. One "point" is usually one percent. But one percent of what?
investors own 50% of the movie.

What Rik said IS KEY. If this isn't defined, you may end up with issues. If you don't define what in particular they own, you may find yourself on the losing end of a law suit paying out 50% of box office takings.

What's common is 100% of Producers Gross up to a point and then a percentage of Producers Gross from there on, in a tiered manner. It gets a little more complicated when you have bonuses on performance, deferred pay and so on.
 
Ok, I think I get it. In my case, investors own 50% of the movie.
So in my original scenario the investors would get 100% of their
investment back plus an agreed upon percentage as profit. Then
they would own 50% of the $165,000 or $82,500 leaving $82,500
to be divided up among the cast and crew. IF they are given points.

So we take $200k, divide by 50, and get 4000. So one Point = $4000.
No. A point isn't always $4,000. If you offer an actor 2 points (2%)
it needs to be clear two percent of what? In my ongoing example
they would get 2% of $82,500. Not 2% of $200,000. One point is
one percent of profits. If the movie makes $1,000 in profits one point
does not equal $4,000 - one point is $10.

And even then they don't get $10 because in your case the investors
own 50% of that $1,000. So they get $50 and one point equals $5.
 
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