Q: Hello, I just read the article on what “defined net profits” is/means. I’ve just signed a deal memo and am concerned with the wording…actual proceeds, no mention of gross or net (which may be a good thing). Please let me know what might be next steps…
A: The basic difference between gross and net is the off the top deduction of expenses and fees in calculating net. Speaking of off the tops, I just came from a bris. It was a particularly good one. Have you ever been? If not, find one on Facebook or Craigslist, grab a few friends, and attend. You’ll enjoy it. Mohels tend to have a great sense of humor.
Anyway, your deal is probably with a production company that will not distribute the film itself. And the term “actual proceeds” probably refers to the revenues received by the production company. The blog about “defined net proceeds” focused on a distributor or studio definition of back-end, which is basically distribution revenues less distribution costs. In your case, if in fact your deal is with a production company that will not distribute the film itself, you will be participating in the production company’s revenues.
Here is how this might work. The production company, with hope, will find a distributor for the movie. The production company will sell to the distributor the exclusive right to distribute the movie either in all media and territories or in some media and territories but not others. For example, the production company may sell the domestic distribution rights to the studio and reserve foreign rights to itself.
The distributor will typically pay an advance to the production company against a percentage of some form of the distributor’s “defined net proceeds.” It is the production company who will be participating in the “defined net receipts,” not you.
Now you finally come in. The money received by the production company is probably what your deal memo means by “actual proceeds.” Typically, the production company would want to deduct its costs off the top. If the production company’s costs are not deducted, then you will be participating in the “actual proceeds” before the production company makes its money back. Good for you; bad for the production company.
It’s hard to believe, though, that a production company will give you a percentage of its “actual proceeds” without deductions. So maybe something else is going on here. Maybe your deal is with an individual producer who’s giving you a piece of his “actual proceeds.” He will not be putting any money into the project, and so there is no need to deduct anything. For example, you can “sell” a script to a producer for $1, and the producer will pay you a percentage of his “actual proceeds” from the film if it’s ever made. Good the for the producer; not great for you, in most cases.
Like your deal memo, a bris is a contract or a “covenant” between God and his people. And the basic lesson of a good bris, performed by a good mohel, relevant to signing deal memos: no matter how small the off the tops may be, don’t sign contracts without an experienced professional involved. So the next step might be to try not to sign deal memos in the future without having someone take a look first.
This blog was originally published as part of Legal Ease, Film Independent’s weekly column on legal matters pertaining to the entertainment industry. To see other LEGAL EASE columns please click here.