That's what a distributor offered me. 50% of all profits to distibute my film. That's awful, right?
Likely it is.
Most people don't know the difference between all sorts of hair-splitting finance terms.
"Less" is a fancy way of saying "minus". (@ssholes).
Sales, Revenue & Income = Same thing, the three words are interchangeable.
Expenses = Film-wise, those are the "Direct costs" to make "A" or "The" film, such as permits and paychecks.
It does NOT include things like the camera, tripod, computer or editing software which can be used for more than a single film.
Sales/Revenue/Income (DVD & VOD sales)
- Direct Costs/Expenses (The costs to make that one film that generated the DVD & VOD sales)
= Gross Profit
So, for you as a filmmaker you spend $20k to make a really cr@ppy horror flik.
Great.
You spend another $10k to promote and advertise your really cr@ppy horror flik.
Your EXPENSES which can be DIRECTLY associated with your really cr@ppy horror flik = $30k.
You didn't spend $20k did you? No. You spent $30k total. Kinda.
With distribution your really cr@ppy horror flik sold $50k in DVDs and VOD.
Great.
$50k Revenue
- $30k Direct Costs
= $20k Profit, right? Kinda.
You have to (or should) allocate a portion of the expense for your camera(s), tripod, lights, bounce boards, sound blankets, external audio recorder, boom pole, mics, audio lines, computer, monitor, NLE and image software, office time for ongoing activities, just all the stuff you use for more than one film - to any single project.
Just a reasonable portion.
Camera will last you five years. Figure how many films you'll make in five years (two? three, maybe?) and allocate 1/2 or 1/3 of the camera expense to your cr@ppy horror film.
Tripod? Probably ten years.
Computer? Maybe five years.
Blah blah blah... this sh!t adds up pretty fast, especially if you want to consider this an occupation rather than a hobby, in which case you should also factor in your mortgage/rent, utilities, auto/home/health insurance, car payment, food, piano lessons for junior, dog food and vet bills, blah blah blah...
These are your "Overhead Costs", the costs that keep a roof OVER your HEAD.
It took you two years to make your cr@ppy horror film, your overhead costs are what it cost you to purchase and maintain your long term investments and their associated expenses over that two year time frame.
If making your cr@ppy horror movie is a avocation let's call it an easy $5k.
If making your cr@ppy horror movie is a vocation let's call it an easy $25k.
$50k Revenue
- $30k Direct Expenses
= $20k Gross Profit
- $5k Overhead Hobby Expenses
= $15k NET Profit, or the profit after ALLLLLLL of your other sh!t has been subtracted from the revenue/income.
Now let's say you had quit your day-job two years ago and this is now much more than a hobby.
It's your new career! (Pfft! Fool.)
$50k Revenue
- $30k Direct Expenses
= $20k Gross Profit
- $25k Overhead Hobby Expenses
= -$5k NET Profit, AKA a $5k NET LOSS
Hmm.... well that sucks.
Well, don't despair. It gets worse.
If YOUUUUUU can have overhead costs the distributor can ALSOOOOOOOO have overhead costs.
And this is where they F***********CK you over!
Your cr@ppy horror film actually generates $50k in DVD and VOD sales/revenue/income.
The distributor's DIRECT EXPENSES are for processing, review, and data storage. Fine. Peanuts.
Let's say that's $2k.
$50k Sales/Revenue/Income
- $2k Direct Costs for the Distributor
= $48k Gross Profit
Great.
But in order to generate that $50k in Sales/Revenue/Income the distributor "had" to spend $80k a year to promote your and fifty other films. Or was it five? Or eighty-five? Or two-hundred-eighty-five?
H3ll, you'll never know.
But I do know they're gonna call dibs on 50% of what's left over of the Gross Profit.
$50k Sales/Revenue/Income
- $2k Direct Costs for the Distributor
= $48k Gross Profit
x 50% Overhead Costs
= $24k NET Profit
That's your $24k.
That's your $24k Sales/Revenue/Income.
From which you will deduct your own Direct Expenses/Costs.
From which you will ALSO deduct your own Overhead Expenses/Costs.
(This is gonna hurt. It's a financial horror story! MUA-HA-HA-HA!!)
$50k Sales/Revenue/Income
- $2k Direct Costs for the Distributor
= $48k Gross Profit
x 50% Overhead Costs
= $24k NET Profit to YOU!!!
$24k Sales/Revenue/Income
- $30k Direct Expenses/Costs
= -$6k Gross Profit/Loss
- $5k Hobby Overhead Expenses/Costs
= -$11 NET Profit/Loss!!
LOLOLOLOL!!!!
Lettuce do it as a full time J. O. B!
$50k Sales/Revenue/Income
- $2k Direct Costs for the Distributor
= $48k Gross Profit
x 50% Overhead Costs
= $24k NET Profit to YOU!!!
$24k Sales/Revenue/Income
- $30k Direct Expenses/Costs
= -$6k Gross Profit/Loss
- $25k Occupation Overhead Expenses/Costs
= -$31k NET Profit/Loss!!
L!
M!
F-ing!
A!
O!
Best O' Luck!