Can somebody explain how NET PROFITS work?

F

FilmBoy77

Veteran
assume your first movie has garnered the attention of a major distributor and they tell you they want to do a 50-50 net deal. well, what is a 50-50 net deal and how does it work?

from what i understands this means the distributor has in writing that "We're partners, and you will get 50 percent of the net profits from your movie....AFTER expenses."

someone said NEVER accept this deal no matter from what distributor or hollywood studio unless there is some cash paid upfront in advance because there will be no net profits after expenses.

wouldnt expenses just be considered the production budget?
 
No, you've got that one a little backwards -- the production budget is the one actual expense that they DON'T count.

The expenses he's talking about are the expenses that he encounters to make and distribute the picture. So DVD cover art, DVD replication, phone calls and mailing expenses, plane trips to various markets, all manner of marketing expenses, anything and everything that he spends (whether he actually spends it or not is another debate entirely).

The production budget? Too bad, that's on your shoulders. Distributors don't care what you spent. They only care about what they spend, and what they receive. If you ever (or never) make your money back, that's not their concern.

In common practice, or at least common lore, a distrib will always make sure that there are enough "expenses" (legit or phony) that they absorb all revenues. Which means that you'll end up with nothing, no revenues whatsoever. Common wisdom says that whatever cash advance you receive is pretty much the only cash you'll ever see. If you get no cash down, you get no cash EVER.

Now, we can't necessarily lump all distributors together, or indict this particular distributor unfairly. You'll have to evaluate them based on their record, talk to other filmmakers who've taken a similar deal and see how they've fared, etc.

But I can tell you this: I know a producer who has "net profit" points in a Hollywood film that stars two of the biggest actors in history, won four Oscars ("Best Picture", "Best Director", "Best Actor" and "Best Screenplay"), was nominated for four more Oscars, had a reported budget of $25 million, and ended up with a worldwide box office gross in excess of $350 million.

Think he's seen a penny? Of course not. The film still hasn't shown a "profit" according to Hollywood distributor accounting principles; the "expenses" keep eating up all the revenues.

So take whatever deal you want, but wisdom and experience dictate that the amount of cash you receive as an advance is the entire limit of all proceeds you can ever expect to see. If they offer no advance, then you'll likely never receive a dime.
 
ah, i see now. it's a good thing i'm in this for the love because being in it for the $$$ i see now will leave you broke most likely. :)
 
I second what Barry says. I have also known people like this with huge tentpole movies that "never saw net profits."

You can be in it for the love but you also should be smart about the money. If your film is worth something to a distributor, they should pay. Just remember "net profits" means "zero" in the film world.
 
Expect? Zero.

It depends on the film of course. If you're "the Blair Witch Project", those guys got a million dollars down, and a "net profits" deal that actually paid off; they ended up clearing something like $12 million. But they're the extreme exception. I mean, someone's gonna get that deal, but don't count on it being you. Someone's gonna be elected president too, right, but it's not likely gonna be you or me... :thumbsup:

I've talked with plenty of filmmakers and distributors to know what the basic "deal" is, and it's this: there's so much supply, and so little demand, that they'll always find someone who will give them the film for "free" (meaning, no down payment, no cash advance, just a "net profits" deal). Because if you won't do it, the next guy will, just for the "prestige" of saying "my film's in Blockbuster" or whatever.

On a total no-budget type of film (meaning, $20,000 and below, no name actors etc) the best you can hope for, on average, is maybe $10,000 over the life of the film.
 
Barry_Green said:
On a total no-budget type of film (meaning, $20,000 and below, no name actors etc) the best you can hope for, on average, is maybe $10,000 over the life of the film.
Click to expand...
and that film does well and garners a strong buzz like uh, Donnie Darko or hell, El Miriachi?

then you get a nice fat one on the next deal most likely or have a better chance at it right? :)
 
Yes, if you're the 1-in-10,000 flash-in-the-pan super-successful "Following" director, then you can expect to make Memento, and then "Insomnia", and then "Batman Returns".

But that's not exactly a business plan, y'know what I mean? I mean, every day the TV talks about who won the lottery, but I don't know anyone who plans on getting rich by playing the lottery...

... all I'm saying is: don't go planning on being the exception to the rule. There's a reason that the rule is "the rule" after all... :thumbsup:
 
Believe Barry, I'll go even further 50/50 Net is a scam. Remember my first film "The 4th Beast". I've made more off of "Wages of Sin" when I sold my first download for $2.99 than I did from my "The 4th Beast" film which I believe is being sold on Netflix still. I'm doing better on my own.

-Nate
 
I've seen 50/50 work in video sales but there was an agreed to limit on spend and usually an expect spend that went farther than what the distributor could deduct. This was always in a situation where the producers had worked with the same distributor before. It's a crappy deal but almost all filmmaker deals (given the kinds of films guys on here are making, small budget, no names, niche market) suck. Even if you get film festival exposure, you're still dealing with the same b.s.

Barry's a good guy to have on your side based on his advice above. Keep your film cheap and lean and mean and get some names (not faces) in it and do whatever is legally possible to get into festivals and in front of folks. You'll always be a little fish in a big pond because distributor own the pond. You can make money through video deals and some broadcast but it's not a thing where you'll be quitting your job.

Following was not a money maker and Memento had a ton of marketing and darling factor behind it (everyone decides to love 1 indie film every year, I call it the darling factor). Memento made money but how much is between god, irs, and the people cashing the checks.

My advice, if I can give some, find out who you know (and get to know people who's work has been distributed and who sell often, and keep them close. An asshole is less likely to default to his nature in the presence of someone that he wants to impress or continue doing business with (your new friend) and this will help you. If you're close to selling (film's done and ready soon) make as many friends as you can at AFM and find out who you are dealing with before you sign. Ask around, people will tell you who's financially worst than others. Everyone's corrupt in distributor but the worst are companies that are in trouble money wise.

Oh, and never cross collateralize your title. Better you save up the money and pay them to release your film on your terms (a service deal) then do that. You can always sell it off to them after 18 months if they want to distribute territories which hopefully you've sold the f**k out of.

50/50 isn't bad in my book. It's actually pretty amazing considering most folks sign a 20% video deal these days, after expenses. Usually TV is 40% after they take a 30% brokering fee. Pull out the high school algebra for this one and get ready to be sick in the stomach.
 
You must log in or register to reply here.
Back
Top