Are "offset" and "overhead" exclusions by production companies (lead producer) re: other producers?
It's slightly different, but the OP is from California.I'm sure that entertainment law is a different down under.
Your question isn't clear. But I'll take a stab at it.Are "offset" and "overhead" exclusions by production companies (lead producer) re: other producers?
Sorry-- my question is are
"offsets' and 'overhead" exclusion clauses standard in the industry? Lead producer wants to exclude my sharing in those sources of revenue.
So... Canadian or Australian 'offsets' are actually a tax rebate/credit taken at tax season. Running at 20-40% of the budget, that's a handsome chunk returned to the producer.
What had concerned me were articles that state: Ok, say the budget is 10M--that's what it takes to physically make the film. A producer may ask the financier to finance 11.5M-- (as an example) so that the producer has some built-in producer fees/profit certainty. Is that typical or nonsense? Puzzled, cuzz it would seem to me that producer fees already built into the original 10M budget should suffice as compensation. Any truth to this methodology? Again-- thank you most kindly for the 411!!
You say the rebate is usually a security for a loan... OR the amount for the producer's fee. It being the amount for the producer's fee is exactly my concern. I'm to participate in a % of the production comapany's producer share... if participation is excluded (as presented to me in agreement) then that would be substantial dough I don't see.
I appreciate the brutal honesty; I'm a novice. The type of producer I am... I'm bringing the film rights to my book on which the film is based. I'm also bringing the life rights of the subject of the film. In your experience... what is fair producer compensation for someone in my shoes?
I'll definitely pick up a few books on film financing; but it appears that since I am a novice--I should steer clear of any %'s and perhaps seek a sum certain or floor. Appreciate any advice. Thanks for your valuable time and insights.
IvonV-- I hear you loud and clear. Get a sum certain, or any other monies ar 'if come" in nature and may never manifest themselves. The agreement speaks to 'all ancillary' rights being included. I believe that by the structure of this film, a vast and fertile expanse exists for a possible TV series. I see where "Hannah" and several other films are now running series based on the original source material; so I'll be sure to adjust that clause so to be included in any related future deals. Thanks a million. Clarity forthcoming bit by bit.The subject is complicated and ultimately depends on the unique arrangements of THIS deal, but I'll add a couple of thoughts here.
The only tax credit I have personal experience with is the NY state credit. A producer can earn it for production and post-production expenses if they meet the tax credit guidelines. The tax credit is a rebate, paid by the state to the Producer. It is not a credit on the producer's taxes or anything like that. It's a check written to the production company. It can take a year or two to get the credit paid.
So, if the credit contemplated in your deal works like NY State, it would not be unreasonable -- but possibly negotiable -- to exclude it. Whatever deal you have, I'm certain that whoever is putting the money up gets their money back first. The tax credit would likely be used to do that and/or pay the Producer's expenses. It's possible as someone else said, the Producer might borrow against the promise of the credit. So, again the credit would serve to repay a loan.
You definitely want to negotiate a reasonable fee for your contribution to this endeavor and leave less of your remuneration to a backend payment. Consider what you think you can live with if there is never another nickel coming your way after you receive that fee. That said, if you hold the IP, you definitely want some share in the rewards if they ever materialize. In fact, do you have anything in the deal to insure you are a part of future deals if there are sequels or spinoffs? Highly, highly unlikely, but if you are the original source for the film's material, you should have a stake in the films/TV shows/animated series that follow.
The budget is not yet set in stone... (or perhaps my thoughts were based on it being something of a character study. With a strong A-List lead... proven director, writers and production company. Non-studio at the moment. So my guess was a $10M budget, minimum. (Being a bit of a period piece would also tend to add heft to the budget) Perhaps I'm far off. Two co-stars that I know of are strong, but I'm a novice; so there's that.I don't think I've ever seen it written like this.
It's usually written as a percentage of producers nett. It's pretty much always defined in an agreement. Some agreements have speficially how it's calculated. Basically it's gross takings less expenses. Calculating it can often appear to be complicated to the layperson. It's really not. What can make it difficult to know if you're getting your fair share is it depends on other agreements (like distribution/marketing/talent deals) which you may not have the ability to read or control. Eg. Some talent can earn percentage of gross.
You also need to be aware, the word producer is so wide in the industry. It can have different meanings in differing contexts.
It could be a dollar. It could be a Harry potter deal netting the author 10 figures. Most lean way towards the first number.
There's very few companies doing successful $10 mil range films. There's rarely any profit in that budget range but it really depends on the attachments. These days I understand it's leaning towards the IP and/or Producer attachments... Obviously the named actors and directors have significant value. That being said, if there's guaranteed distribution, that's a different ballpark.
It's not my area of knowledge, but my gut would say you're probably getting a good deal if you could negotiate $200k up front. You'd be doing better with your percentage with a $200k mg. Just remember, I'm blind. I don't know the specifics of your IP/film/attachments or who your partner(s) are. Your IP may have no profit potential (in which case, get what you can)... or you may be joining up with Jason Blum (in which case, take a percentage deal, he's one of the few rain makers in this budget range but it's still no guarantee).
I know this isn't exactly a real answer. There are so many variables. Deals usually have many moving parts and are situational and it's tough to know when it's best to take whats offered and when to push.... What has a lot of potential value and what doesn't. Understanding what to ask for (like sequel rights) and the consequences of failing to ask for it. Knowing when the deal is at the breaking point and when they'll walk away. Knowing the current market and also being able to predict the market for when the film will be ready for market. There are some more quirkier considerations that can come up too. Also knowing where you can shop your IP around is especially useful.
It may be worth talking to an entertainment attorney (not a general attorney). They can help you know where these pain points are and they're usually better equipped to know where else you can sell your IP. They'll also be in a position to better know whether you're getting a great deal or whether you're being taken advantage of.
Last thing to take into consideration. Covid is turning the world upside down. It's unpredictable. How would talent being entitled to a % of the gross affect me more than relatively marginally?
Note. This is all very much simplified.
Can I just say a big hello and thank you to OP et all for this threadAre "offset" and "overhead" exclusions by production companies (lead producer) re: other producers?
I highly recommend getting an entertainment attorney. While an agent or manager can help you navigate a career (or part of it), the entertainment attorney can make sure this deal is favorable to you. An attorney won't be cheap, but unlike an agent you won't have to sell yourself for them to take you on. They will take you on if you pay them (an agent makes their fee as a percent of the fees for work they bring to you). This sounds like an important step in your life and it should not be made solely on forum advice. Don't get me wrong, I think there are some very smart people in this forum and a few of them have made their points here, but it will be nothing like the skill an entertainment attorney can bring to explaining what's in the contract, helping you determine if you are getting terms that are reasonable and "customary" and insuring that the proper language is included in any terms you want to negotiate.I wish I could have had an agent/manager to help me navigate. But I queried and just got "crickets". I did just get another deal last month. But it was a clean-cut $10k option feeup front for screenplay... with nice contingecies should it get made. On this... I had a screenplay... but I'm not the greatest screenwriter--so... it won't be used, so no dough for that. But I factor in the whole package that I walked in with. Book. Life/character rights. Screenplay. So that's why I'm trying to see what compensation would be fair. The exclusion clauses threw me for a loop. No greed. Just looking for the going rate.
Word. That's the bottom line. I f I can't get ther flavor I'm looking for, I'll just pass it to an EA and let them iron it out. His 5% will get me far more in the scheme of things. Also... it's just biz and this way no direct conflict or hard feelings with the Prod. Co and I --just like other elements had their guy negotiate.I highly recommend getting an entertainment attorney. While an agent or manager can help you navigate a career (or part of it), the entertainment attorney can make sure this deal is favorable to you. An attorney won't be cheap, but unlike an agent you won't have to sell yourself for them to take you on. They will take you on if you pay them (an agent makes their fee as a percent of the fees for work they bring to you). This sounds like an important step in your life and it should not be made solely on forum advice. Don't get me wrong, I think there are some very smart people in this forum and a few of them have made their points here, but it will be nothing like the skill an entertainment attorney can bring to explaining what's in the contract, helping you determine if you are getting terms that are reasonable and "customary" and insuring that the proper language is included in any terms you want to negotiate.
The budget is not yet set in stone... (or perhaps my thoughts were based on it being something of a character study. With a strong A-List lead... proven director, writers and production company. Non-studio at the moment. So my guess was a $10M budget, minimum. (Being a bit of a period piece would also tend to add heft to the budget) Perhaps I'm far off. Two co-stars that I know of are strong, but I'm a novice; so there's that.
Yes, it's written as a percentage of the producer's net. And with the folks involved,-- though again, I'm a novice--one would think it would get guaranteed distribution. I like your gut instinct: I'm thinking to ask --forget the flat % with the myriad exclusions-- let's make it simple--$200k range as a floor (mg--just found out what mg means today--I've been studying non-stop as you suggested) that way if the % just so happens to blossom, I'll ask that I'm entitled to the greater of the two--and keep in place the same % of any producer profits that may happen to land in the future.
My biggest mystery is what is the % of the budget that the lead producer gets FROM the budget.
Heard they get paid 20-60-10-10% as production moves forward. Is it 10%? 15%?
AND can the lead producer ever alternatively be paid a Producer Fee separate from the budget? If so, lead producer compensation would no longer exist in the 'budget', so how would it affect the other producers fees--especially if they were due a % of the budget? Their share would ballon. It seems there would surely be a method to preclude that-- perhaps a clause deducting the separate Lead producer fee for purposes of figuring %'s for the remaining producers in the budget.
Again--many, many thanks!
I wish I could have had an agent/manager to help me navigate. But I queried and just got "crickets".
I did just get another deal last month. But it was a clean-cut $10k option feeup front for screenplay... with nice contingecies should it get made. On this... I had a screenplay... but I'm not the greatest screenwriter--so... it won't be used, so no dough for that. But I factor in the whole package that I walked in with. Book. Life/character rights. Screenplay. So that's why I'm trying to see what compensation would be fair. The exclusion clauses threw me for a loop. No greed. Just looking for the going rate.
I highly recommend getting an entertainment attorney. While an agent or manager can help you navigate a career (or part of it), the entertainment attorney can make sure this deal is favorable to you. An attorney won't be cheap, but unlike an agent you won't have to sell yourself for them to take you on. They will take you on if you pay them (an agent makes their fee as a percent of the fees for work they bring to you). This sounds like an important step in your life and it should not be made solely on forum advice. Don't get me wrong, I think there are some very smart people in this forum and a few of them have made their points here, but it will be nothing like the skill an entertainment attorney can bring to explaining what's in the contract, helping you determine if you are getting terms that are reasonable and "customary" and insuring that the proper language is included in any terms you want to negotiate.