As a filmmaker, one of the most common negotiations that will come up in the course of your career is film profit sharing. These agreements represent your acceptance to provide your services. In exchange for a percentage of the profits in the future. Rather than for payment upfront. It’s actually quite common for a filmmaker to agree to profit sharing. And in some cases, the film profit sharing agreement can be quite valuable to the filmmaker.
The first consideration between whether to accept a film profit sharing agreement is whether or not this is truly the method of compensation that you want for your work on the motion picture. You have to consider the risks that come with taking a profit sharing agreement.
And those risks include the potential for the film never to reach a breakeven point. And for you to never actually get paid. Additionally, you must consider the limited liquidity of your funds. As you will not have immediate access if you choose profit sharing.
Likewise, with a fixed payment arrangement, you’ll likely take a set amount upfront. Potentially less than you “could” make long term. It’s really all a matter of whether or not you want to gamble with your money.
A fixed payment could be more, or less, than you would otherwise receive. Generally, it’s negotiated to be less than you would make on a profit sharing agreement but things could (and do) go wrong in those deals too.
Before you consider negotiations for a film profit sharing contract you should consider carefully the benefits. In an optimal situation, those involved in the profit sharing will take on a percentage of profits beyond the breakeven point of the film.
Those percentages will vary based largely on how much work you put in, and of course the individual terms of your agreement. Thus you’ll want to carefully consider this during your negotiations to ensure you get the percentage that is “ideal” for your effort.
There are several potential benefits that come from a film profit sharing deal. First, the producer gets to keep funds that are currently allocated for production. Which allows them to invest more into the project upfront.
And which could result in a higher likelihood that the project will be successful. Likewise, you could see higher returns by waiting for your compensation to come as a percentage of profits. Rather than as an upfront payment for your hourly time or flat-fee.
Many filmmakers have seen huge successes with film profit sharing. But not always. Fundamentally, where a filmmaker takes a stake in the film’s final profits, they are more likely to give it their all. Sacrificing nothing to provide their absolutely best work.
As with anything that has benefits, there are potential risks involved with a film profit sharing deal too. Naturally there’s the risk that the film never achieves a profit. There’s also the risk that the producer doesn’t equitably provide shares as agreed.
Although this can generally be mitigated with a contract and legal representation. There’s also a risk that the film never makes it out of production, and therefore never even has a chance to profit.
Again, this risk can largely be mitigated by requiring a completion agreement upfront before negotiating your profit sharing.
As you can see, film profit sharing is definitely a process that you’ll need to carefully consider before you negotiate the terms and take on the potential risks involved but it can be incredibly rewarding in the right circumstances. So what will you choose?
