Producers share...

[dr stilly]

Hi,

I have to be quick. Me and my bro co-own my film company. We both invested in the equipment etc. Now there is a third party, named T. T is a great salesman and he has started getting support for my script. he's gathering actors etc. So he is a producer right. But T is also talking about putting his own money into the film (more money than me and my bro initially invested) so what do we give him? I thought a share of the films gross (which is how much?). however it has been suggested by a friend that we give T a stake in the company itself. If so, how much? i mean we cant give him less than us as a share seeing as he's putting so much money in. not quite sure what the best thing to do here. any advise?

 

[directorik]

This is so personal there is no "standard".

"T" should get his investment back plus a percentage - a
percentage you all agree to. A share of the gross is foolish,
but a share of the producers net is a good way to do business.
there is no standard percentage so use your best judgment.
A stake in the company makes sense if you and your bro
believe "T" deserves it and will be a financial asset to your
company. How much is way too personal. You say you can't
give him less than you are getting so give him an equal share.

My advice: put everything in writing.

 

[dr stilly]

thanks for the feedback i really appreciate it. we decided to make him an equal shareholder. sorted the web filing with company house to make him a company director with me and the bro (although not sure how to allocate him a share yet but will figure it out). god i hate business...

btw directorrik you mentioned that a percentage of movie gross is foolish however we have a couple of pretty well known actors on board and they know they won't get paid unless the film makes money (luckily they like the script to go for it). I thought that actors got a gross from the movie or is this not the case. do we just promise their fees once the film makes money? im sure T will do all this research but i know nothing of all this so just curious...

man you must think we're clueless...guess what...you're right...i need to read a book

 

[Blade_Jones]

The standard model for a pure film investor who has no involvement in the making of the movie is for the investor to earn 100% of "first monies" and THEN 50% to 70% of "2nd monies". 1st monies are all net profits earned up until the total investment amount is paid off. 2nd monies are all net profits earned thereafter.
Of course you can work out alternative deals. Most people who invest in movies are throwing away their money especially in this market environment, so don't be afraid to let them earn their money back.

 

[directorik]

btw directorrik you mentioned that a percentage of movie gross is foolish

The short version:

Your company puts up £30,000 and “T” puts up £60,000 for a total
budget of £90,000. If you give him a “share” of the gross (say 10%)
and you sell the movie for £100,000 he will get £10,000. If you have
agreed to pay him his investment back he will get a total of £70,000.

If your agreement is 10% of the net he will get his investment back,
you will get your investment back leaving £10,000. He gets £1,000
for a total of £61,000 returned to him.

It’s much more complicated than that. There may be deferred payments
and interest payments and business costs that will be deducted from
the gross before there is any net profit.

however we have a couple of pretty well known actors on board and they know they won't get paid unless the film makes money

So if two actors are getting 5% each of the gross that's another £10,000
from the £100,000. “T” gets £10,000 the actors get £10,000 and that
leaves you with £80,000 and you still need to pay back “T” his £60,000

Offering a percentage or share of the gross is quite foolish.

 

[Boxt]

You should not offer anyone a percentage of the gross as it is not yours to give but the distributor's. The only time people are included on the gross is if someone is such a draw that the distributor dies not have to worry about cutting a corridor from his receipts. Lots of indie producers offer people gross and then either have to renegotiate those terms when they want distribution or not get it at all.

From what you have said above, I take it that you are only setting up a company now and you are all putting the money in at the same time. If so, you will have to allocate a nominal value to each share in when you set this up. Then you divide the amount of money your friend is putting in by the nominal value of each share and that is how many shares you give to him. You do the same to work out your share. This ensures that the per share value of each share is the same and that you don't overprice the shares to him.