Executive producer cut

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I just got offered approximately 25,000 to do a film from someone who wants to executive produce my film. We are finalizing things but I am trying to figure out how much their return should be. Is 50 percent of gross profit fair for an executive producer who is putting up all of the money? Should it be of net or gross? How should payment be structured?
 
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Depends on the agreement you guys structure, but I am guessing he will want his principal back out of "gross". Once he is paid back THEN he will get a sizeable percentage of Net. You don't really hit "Net" until he gets his 25K back.
 
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You're essentially dealing with what sounds like an active equity investor. Have you put in any money yourself? What would you consider your "good will" and "sweat equity" to be? A 50/50 split seems decent.

Technically speaking you should form a new LLC and split ownership of the company, and then all revenue coming into the company would directly flow through to you two (the owners/members of the LLC), since LLCs are pass-through entities.


Good Will: What you bring to the table in experience, and your ability/desire to keep the project on track and be completed.

Sweat Equity: Sweat equity is a party's contribution to a project in the form of effort -- as opposed to financial equity, which is a contribution in the form of capital. In a partnership, some partners may contribute to the firm only capital and others only sweat equity.


If you find your good will and sweat equity are valued at more than $25,000, you may be able to lay claim to more than 50%.
 
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directorik said:
The person putting up the money gets all of it back plus a percentage
of the gross. After payment and profit the profits are split how every
you want. If the EP agrees to a 50/50 that's great.
Click to expand...

I think it depends on the project. For example, I offered someone some cash for a documentary. My offer was that I would put up all the cash in return for 50% of all returns, also I would do some work on it with him (I have some expertise in certain areas). The guy rejected my offer on the grounds he thought he could make money out of it himself and keep everything.

And frankly, I think he has a great idea. I would have negotiated on it and taken less, maybe 33% because I thought his idea was so good. He's a really outstanding, smart, hard-working DoP in the UK who is amazingly talented. He's a young guy but is already becoming successful.
 
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Of course it depends on the project. It always depends on
the people involved and the agreement between them. There
are hundreds of different ways the percentages can be handled.

Some EP's are happy to take very little in return for putting
up their money because they believe in the filmmaker. It
depends on the people.
 
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What role are you? Producer? Director? Writer? All 3? More than that?

As people have said, it depends on the people.

Common deals are often: Investors 50% Profit Producer 50% Profit.

The above the line talent that get a percentage, often come out of the Producers cut.

In these deals, the producer usually also gets paid from the investment money.

Its also common for investors to get paid first + 10% (or whatever is negotiated) on their investment before any profits are paid.

But that being said, agreements can come in many shapes and sizes depending on the material, the production staff and how savvy the investor is, the deals can wildly swing.

It can get even more complicated when there are development investors too.
 
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Just as a note if you're doing a 100% + 10% (or whatever) then slide to another percentage after the investor makes back their money... you're doing a convertible debt offering not a straight equity offering. You're issuing a corporate bond with an interest rate (say 10%) and then once they receive their money back + interest their bond converts to an equity stake.

With a convertible debt offering the investor is a debt holder and if you don't pay back the bond they could foreclose on the deal and you lose the rights to the film. There is no other legal way structure a deal like this.

So if you do it this way make sure your PPM is clear about that.
 
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