Getting Paid (Part 2 of 4)

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.

Related posts:

  1. Getting Paid (Part 1 of 4)
  2. Most Favored Nations (PART 1 of 2)
  3. Most Favored Nations (PART 2 OF 2)
  4. Do Actors Need Attorneys?
This entry was posted in Actor Contracts and tagged , , , , , , by Lynn Elliot.
Lynn Elliot

About Lynn Elliot

As a former member of The Actor’s Network, Lynn Elliot knows firsthand there is no better organization for supporting and encouraging actors in building their acting careers. Lynn currently practices as an entertainment attorney in Los Angeles and New York City. She concentrates on representing talent in film, television and music, and performs production legal work on independent films. Her areas of expertise are film and television production agreements, talent and development agreements, music licensing and recording agreements. Her clients include actors, production companies, producers, directors, screenwriters, musicians, music managers and producers and record labels. In a former life, Lynn was a filmmaker, actress, model and film producer. Lynn strongly believes the law should be accessible to everyone and encourages her clients to understand the business aspects of their creative profession.

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