Box Office Bonuses: While back end points are based on a percentage of the profits, box office bonuses are usually a flat rate, based upon Daily Variety’s weekly box office chart.  They work as follows: If your film earns $1 million dollars in the box office as per Daily Variety, then you will get a $10,000.  Then, for every additional $1 million the film earns, you will get an additional $10,000.  These bumps are negotiable, and vary in how much the bonuses are and how often, and often the producers will try to put a cap, so that the actor stops earning any bonuses after $50 million.  The reason why box office bonuses are attractive for talent are that they are easily verifiable.  There are no auditing statements to look at, no accounting to do, you can simply open the trade and see when you should start bugging your agent to get you your check.

Back End Compensation v. Box Office Bonuses:  Depending upon the success of the film, the size of the budget and the drafting of the profit definitions, sometimes it is better to have profit participation over box offices bonuses or vice versa.  You can imagine that even when a film does very well, if the film had a high promotional budget, or if a star was taking a big chunk up front, it would take longer for the film to earn profits, as the investors get paid in full before anyone can earn their profit participation revenues.  It is not uncommon for a film to do very in the box office but barely break even because it was so expensive to make.  Not to say this is all guesswork, and an experienced attorney and/or producer would be able to advise you regarding the likelihood of what the film can make.  Sometimes, an actor will get both back end and box office bonuses, and then they don’t have to predict, they are covered on both aspects.

Please note: The information contained herein does not constitute legal advice and is intended for educational and information purposes only.

Interchangable Terms:  When negotiating a profit provision in a contract, the definition of profits must be well worded, clearly defined and negotiated very carefully.  Net profits, gross profits, gross revenue, gross points, adjusted gross profits, adjusted net profits, producer net profits—these terms can necessitate extremely different calculations or very similar accountings, depending how they’re worded, when they are calculated (i.e., before or after certain other profit participants) and what deductions are or are not acceptable.

Percentages: Many indie films will offer their actors a percentage of the producer’s net profits, and usually that is defined as 50% of 100% of the total profits.  This isn’t always stated clearly, and it obviously makes a big difference if you’re getting 2% of 50% or 2% of 100%.  These nuances become significant when and if the film earns a profit, and that is why a considerable amount of time is spent negotiating these definitions.

MFN in Profit Definition: If there isn’t time to come to an agreement on the definition before a client agrees to take the role and signs a deal memo, I will push to have the deal memo add a phrase that obligates the producers to give Most Favored Nations (MFN, further discussed in a previous posting) on the definition, i.e., “2% of Producer’s Net Profits, to be defined no less favorably than any other profit participant, including all cast members and producers.”  This way, no matter how they define ‘Producer’s Net Profits,’ as in this example, I know that the actor will be participating in the same pool as all the participants, including the producers. There is no doubt the producer’s will negotiate the most favorable definition they can draft for themselves.

Please note: The information contained herein does not constitute legal advice and is intended for educational and information purposes only.

Profit Participation on Lower Budgeted Films:  Sometimes actors receive back end points if they are working below the SAG minimum and on a lower budgeted film.  SAG has 3 alternatives for films budgeted under $2.5 million: Low, Modified Low and Ultra Low Budget Agreements.  These agreements allow producers to pay less in up front fees, so if an actor agrees to work under “scale,” sometimes the producer will add profit participation to the deal to attempt to make the actor “whole” by allowing them to earn their fees if the film does well.  Profit participations attempt to make up the difference between what the actor should have made at full union rates and what the actor actually earned with the reduced fees.  Also, profit participation ‘rewards’ the actor for agreeing to the reduced fee, and allows the actor to participate in the profits of the film for their contribution in its success.

Defining Profits: Now we have to take a brief moment to discuss the definition of ‘profit.’ While it is no surprise that most independent films rarely see a full return of their investment, let alone make a profit, negotiating profit participation becomes one of the most important provisions in a talent agreement.  Frankly speaking, that’s the whole ballgame, folks.  How the profits are defined could make the difference between you getting paid or not.  There have been numerous lawsuits regarding Hollywood accounting practices and the major studios’ creative accounting methods, where it is common practice to inflate the film costs in order to reduce or remove the production company’s obligation to pay profit participants.  What this means is that even if you are entitled to receive profits from a film that is doing well, you may not see dime one if your definition of profits (if any) is overly broad, one-sided or otherwise prohibitive.

Please note: The information contained herein does not constitute legal advice and is intended for educational and information purposes only.

There are different ways an actor can get compensated on a feature film: 1) Flat compensation, which is an “up front” daily or weekly rate, payable in lump sums or on a weekly basis; 2) back end compensation, which pays an actor out on the “back end” of a project, once the film has been released and starts to earn money (if ever); and 3) residuals, which compensates an actor for re-use, after a project’s initial release (I’ll tackle this topic in another posting).

Flat Compensation:  This is a flat rate you will be receiving on a weekly or bi-weekly basis.  Sometimes you can get your fee all in one lump sum upfront, which your representatives should negotiate for you in the event the production company is not established or well known, and there are concerns about their ability to pay their cast and crew.  As a SAG member, producers must comply with the union’s minimum day/weekly rates, with a reduction in those basic minimums for projects under $2.5 million.

Profit Participation: Deferred compensation, contingent compensation and box office bonuses are all different ways an actor can make money on the back end after a film’s release.  When someone mentions “back end” compensation, they are usually referring to contingent compensation or profit participation, where if the film makes a “profit,” then the actor gets a percentage (a/k/a “point”) of the profits.  Back end compensation provides actors additional opportunities to earn money on a film dependent upon the profitability of the film.  Actors receive back end participation if the producer’s are trying to sweeten the deal and give the actor more incentive to take the job and get them fully behind the project.

Please note: The information contained herein does not constitute legal advice and is intended for educational and information purposes only.

You have a camera. You have a great idea. You know a guy at a great high traffic site who promised to post your hot new show as soon as it was done!

Making a webisode is easy.

Kind of. But keep in mind that in order to do a webisode and post it online with even one SAG actor, you need to file the production through SAG and use a New Media contract. Yup. SAG has a new media contract. (more…)

So it is November 13th today, and conventional wisdom has it that there is maybe a week or so of legit “busy time” left before we ALL mentally just depart for a flippin’ 5-week stretch.

NOT SO FAST MY FRIEND.

Dorothy ain’t in Kansas… and it isn’t the 90’s.

People, do not be like everyone else.  Don’t do and think like everyone else… because when you’re an actor “95% of the everyone else” are people who’ve never really worked or really ever began building a career. (more…)