Are there any industry standards for points?

Cracker Funk

Cracker Funk

I'm getting pretty close to approaching my first potential investor, and one of the biggest question-marks I have is for compensating myself. Upfront, I don't want one penny, because the budget will be small, so I want to stretch it as far as possible.

Needless to say, I want a percentage of any potential profit. Is "points" the right word to use for that? The bigger question, though, is whether or not there are any industry standards? I'll be again playing 4 key roles -- writer/producer/director/editor.

If it helps answer the question, I won't be investing any of my own money. I'm seeking an Executive Producer, and I'll be the Guy-Who-Gets-Shit-Done Producer. I read one website that suggests the standard is that you're selling half of your movie to investors, so that would mean that I, as Managing Producer, would keep a full 50%? Seriously? That sounds like a lot, is that normally how it works?
 
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Reading and citing books is a very small part of what actually
happens when financing a production.

The 50/50 split is just not realistic. We are not discussing an
established filmmaker making a project for theatrical release. We
are talking a high risk project from a filmmaker with no track
record of returning a profit.

For those of you who have gotten investments of above $100,000 and
got a 50/50 deal, I applaud you. I have never done it. I can not
afford to stand on principle. If my investor wants 125% recoupment
and 25% of everything after that - I give it to them. I envy those
of you who can turn that down for a better deal.

Independent Feature Film Production is an excellent book. But it
does not reflect what CF is doing. Not even close. And it does not
reflect the current market. Not even close.

Regarding “high risk”; it is essential that you tell any investor
up front that this is a high risk investment that is most likely
to not return anything at all. This is the only legal way to
approach an investor. If you do not you can be accused of fraud.
Note I did not say you “will” - only that you “can”. You can sell
all you want (and you should) but you must fully disclose any and
all risks.

What CF is doing is not an “increased risk” investment, it is a
“high risk” investment. To not say so in writing (even if the
investor know this) is opening up a potential law suit.

This is when you leave the world of hobby filmmaking and enter
the professional business world. Treat it that way, including your
crew and YOUR pay. You should never approach an investor and
then not include a salary for you.

I know, I know; you're so serious about this you are willing to take
no pay for your hard work. That sounds great to an artist - it sounds
foolish to a business person. They wonder what you will be living on
for the three/four months you're making this project. They wonder
if you are wealthy enough to go without pay for four months. They
wonder if you will have to stop two months in to make some money
to keep going.
 
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How do you guys do it? I'm looking at a take home of like 6% maximum. The guy who wrote the book is only in for 1.7%. Once you've peeled off 50-70% for investors, profit sharing seems like it will nuke you back to the stone age. I've found investors unfriendly towards the concept of "I put in 110k, you put in 10 million, and we split it 50/50". I've heard of directors walking away with 2% gross. (at least that's good money at the release level)

And of course Rik is right, and you have to make the investors salary everyone in return for their egregious percentages. You gotta eat!
 
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Nate North said:
How do you guys do it? I'm looking at a take home of like 6% maximum. The guy who wrote the book is only in for 1.7%. Once you've peeled off 50-70% for investors, profit sharing seems like it will nuke you back to the stone age. I've found investors unfriendly towards the concept of "I put in 110k, you put in 10 million, and we split it 50/50". I've heard of directors walking away with 2% gross. (at least that's good money at the release level)

And of course Rik is right, and you have to make the investors salary everyone in return for their egregious percentages. You gotta eat!
Click to expand...

Well, at a smaller level (100K or Less) it's not that hard to claim an 80/20. The fact of the matter is that someone's 30-50K isn't nearly enough to match your hard assets. But, you're right, after you pay everyone you owe after you're blacked, you're making nothing unless it's a huge hit.

At this point, we should all be looking for 50/50 with investor premiums. There just isn't enough money in this game to justify less if you dont' have money to begin with.
 
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Regarding “high risk”; it is essential that you tell any investor
up front that this is a high risk investment that is most likely
to not return anything at all. This is the only legal way to
approach an investor. If you do not you can be accused of fraud.
Click to expand...
If you don't have much money to sue for then the investor will be just out of luck. That's what usually happens. Proving fraud in court is very difficult and costs about $100,000 to HOPEFULLY win a case, then will they ever collect? I think I heard that like 71% of victorious plaintiffs never collect. That's why investors are more likely to just walk away.
 
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Yeah, as stated in the OP, my intuition was telling me that 50% was a bit high. Before starting this thread, the number that I basically just picked off the top of my head was 20%.

As for "high risk" vs "increased risk", I do appreciate the conversation that has taken place, if for no other benefit than other people who might be in my shoes reading it, but for me, it's a moot point. There is absolutely no chance in hell I would do anything even remotely resembling misleading this particular investor (or any, really). I'm big on ethics, so the thought of lawsuit doesn't even really enter my mind -- I just want to do right. The investor needs to know that this is a major gamble, period.
 
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I’m with you CF. I know you are making sure everything is on the
up and up. It’s Mr. Jones who feels it’s okay to be less than
fully forthcoming and perhaps beat the odds. You wouldn't do it - I
wouldn’t do it.

What often happens to less experienced filmmakers soliciting
investors is they make an honest mistake not even realizing it is
a mistake and the investor pounces. I have over a dozen stories
along those lines.

The reality is your film will not return 100%. So you are not
giving up anything by taking a salary and getting your movie
financed and taking a tiny percentage of the back end. The risk is
all the investors. All of it.

Look at the “glass half full” aspect; you make the movie for
$100,000, you take a salary of $600 per week (less than minimum
wage) and a measly 5% on the back end. the movie does $250,000,000
in business. Poor you, you only see $125,000 and not $12,500,000.

However...

You are the writer, director, producer, editor of a $100,000 movie
that made $250,000,000. I suspect that means you can call the
shots on your next movie.

Bad business?
 
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I agree, if you make a successful movie under any circumstances, that's a major win that few will see in their lifetime. And while investors can have a hard time parsing a "good idea", they can latch on to "I turned a buck into $2.50" very quickly. Play for the love of the game.
 
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Yep, I see it the same way. Only, I would re-phrase what directorik stated as "glass-half-full", to "my cup runeth over". If I can get someone to finance this project, and if the movie is any sort of success, I'll be thrilled, period.

I forgot to mention -- that's a very good point you make, regarding me putting a salary for myself in the budget. My thoughts of taking no up-front pay had nothing to do with integrity of the art, or anything silly like that. I just want to be able to stretch the budget as far as I can. By the time I shoot this thing, yes I actually would be able to afford to take a few months off of (paid) work. I do see how that could be a concern to a potential investor, however.

So, maybe my solution is to put myself in the budget, but I don't pay myself until the end of production. If we stay on-budget, I get a check. If we run over-budget, I defer pay, or just plain pay for it with my salary, in order to keep it going.
 
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When we're budgeting our feature we're asking our entire team "what's the least you can be paid to take off work for 3 weeks and still pay rent/bills/food etc". That's the peoduction crew. Pre and post crews need a bit longer. Everyone on the team is getting some amount of points to supplement that, but we all own it so it's reasonable. It would be unreasonable though to expect anyone to do all that work and not be able to pay bills.

If you want to defer a chunk of your pay to the end that's fine. But you're hurting the project and the investor's chance of seeing a return if you don't have money to live so you're working other places, etc.
 
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Excellent point, Paul.

Even if the filmmaker understands their sacrifice, the investors
rarely do. They think in terms of business and money. It brings
up concerns when they see the writer/director/producer/editor
working for no money for four months.

I've been in meetings with investors who raise concerns when
people are paid too little. Not that they want to invest more, just
that they are money people and often feel people are paid what
they are worth. A DP who will work for $600/wk may look to them
as less talented or professional as one who insists on $2,000 but
settles for $1,250 because they believe in the project.

I'm not suggesting that is the case - investors don't know.
 
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PaulGriffith said:
If you want to defer a chunk of your pay to the end that's fine. But you're hurting the project and the investor's chance of seeing a return if you don't have money to live so you're working other places, etc.
Click to expand...

I second this. They want you working full time on their investment, so even if you don't need it, you should take a salary. Remember, working for free is contradictory to any businessman's mentality, and that's who you're dealing with. People are more willing to do business with you when it appears that you think alike.
 
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