This is a Glossary of Key Terms
Above The Line
Budgets for films usually begin with a section that covers creative talent such as: actors, directors, producers, and writers. This section is followed by the rest of the budget, or Below the line. This term also refers to the part of the budget which includes costs and fees associated with this division of talent.
Whenever an ad or expense for a film is incurred, the account is charged, and if interest is being charged, all of the expenses collect interest charges as of the day they are incurred, even though cash payment for the expenses is made at a later date.
Distributors buy or acquire films with cash, or deal parameters that portend cash. The act of buying the film is the acquisition, and the distribution executives that commit the buy are known as Acquisition execs. They often travel to film festivals (such as Sundance, Cannes and Toronto) to find films to buy.
- a) Production Advances
Distribution companies will often advance money for, or guarantee loans for the production of a film by an independent producer. In most cases, the independent producer does not have any general liability for such an advance or loan. The loan is usually only repayable from the revenues from the film. The motion picture company bears substantially all the risks of ownership, though the producer may sometimes retain the copyright.
- b) P&A Advances
Distribution companies also generally expend funds to release a film, including P&A costs, and other costs associated with distribution. These costs are treated by the distributor as an advance, or a loan to the film. The loan is usually only repayable from the revenues from the film, while the distributor bears substantially all of the risks of loss.
- c) Distribution Advances
Distribution companies may provide the independent producer with a cash payment as an “advance” against revenues from the film. These advances can be treated by the distributor as a loan. These loans are usually only repayable from the revenues from the film.
Against(In Step Deals)
When a script is referred to going for a “low six-figure offer against mix-six figures.” Meaning the screenplay’s actual purchase price was a low six-figure offer (ex. $200,000), but the writer will receive additional funds (let’s say another $450,000), bringing the total to $650,000 or mid-six figures if the movie is produced.
A handler who represents above- or below-the-line talent. Their primary function is to secure work for their clients.
(see Domestic All Other Rights under Distributor Revenue)
The movement of a story line from beginning to end.
The crew member responsible for delegating the director’s instructions and making sure the cast and crew are in their required positions at the right time.
Associate Producers carry out significant functions which might otherwise be performed by the Producer, Executive Producer or Co-Producer. These responsibilities may range from helping to raise production finance at the beginning of the production process, to supervising the final stages of post-production. At times Associate Producer titles are agreed upon before filming, and at others are bestowed upon those who have performed above the call of their conventional task.
Often a producer seeks to make a “package” (to package) their film, to pack or to illustrate the value and validity of the film they want to make. In this “package” are more than the script, it may contain one or all of the following list of “elements”: name stars, director, writer or producer, along with other items, including budget and schedule, and so on. This packaging may include compensation for some of the elements, and may or may not include legal commitments of any of the elements.
If an artist is free to work. In Letters of Intent (LOIs) there may be references to an agreement being according to an Artist’s Availability.
Back End (Backend Rights)
Also Participations. Usually expressed as some percentage of a film’s profit. The Back End is the share of profits (usually expressed as a percentage) that a person (or even an entity) holds the rights to. This may be expressed as gross participations or net participations (and both must be defined). In FilmProfit, producer’s gross profit is considered before any deductions for backend rights of the net participants, but after backend rights of gross participants. There is a Paul Simon song which says that one man’s ceiling is another man’s floor, and in that respect, too, one man’s gross may be another man’s net. Backend is also a term used on its own, or in conjunction with other terms to describe any postponed action, such as speculative income from profits, delayed payments, delayed rights sales, etc. (see also Net Profit Participants)
Barter (or Trade)
A method whereby a syndicated television program supplier retains a portion of the advertising time, say in the case of a movie, 10 or 12 minutes across the movie’s air time, and then sells that advertising time as the way in which they make money off the movie. In these barter/syndication deals, the film may be provided to the station for free (all barter), or for some barter and some cash, or barter in the first window, and then all cash in a second, or “backend” window.
Below the line
Those below the line are all the workers on a film crew that are not part of the theoretically “bankable” creative talent of actors, writers, producers and director, for example. This includes all the technical categories and ancillary activities (legal, marketing, etc.) Also includes the part of the budget that includes costs and fees associated with all of this work and these workers, such as cars and drivers, hotels, care and feeding, and so on.
The industry-adopted High Definition DVD (optical disk) format. It beat out the DVD-HD format to become the standard. It was developed by the Blu-ray Disc Association (BDA), a group of the world’s top consumer electronics, personal computer and media manufacturers. The Blu-Ray format offers more than five times the storage capacity of traditional DVDs and can hold up to 25GB on a single-layer disc and 50GB on a dual-layer disc, offering consumers an unprecedented HD experience.
Box Office, Box Office Gross
Box office gross represents the total revenues taken in at movie theater box offices (ticket sales). (also see Domestic Box Office Gross)
The actual money spent to produce a film. It does not include prints and advertising. (also see Negative Cost)
Vernacular for Cable Television, or television delivered to homes via a direct wired connection. Cable TV has been a staple of revenue for motion pictures, including those made for theaters, made directly for television consumption, or even Direct to Video. Cable revenue includes all “Pay Cable” services and “Pay-per-View” services that deliver over this wired system. It is often determined contractually as a percentage of Theatrical Box Office revenue.
Cable Distribution Fee
The fee a distributor charges to distribute a producer’s motion picture to any or all of the cable carriers in the Domestic Territory. The fee could range from 15% to 30%, but is often about 25% of the revenue generated from Cable sales.
The case when an exhibitor sends a check from the box office for a film’s receipts, the distributor waits until the end of the quarter to credit the account for the revenue, and no interest is paid on the revenue balance for the period it was actually in the account. Not all distributors use cash accounting for a film’s revenues. Some credit when actually received.
- In FilmProfit all expenses paid are charged and all revenues are credited as of the mid-point of each quarter.
A distributor and exhibitor may share the cost of an advertising campaign that also features the exhibitor’s theater or theaters. In this way they are co-operating. These co-ops are arrived at through individual negotiations, and are usually short-term, on a week-by-week basis.
- In FilmProfit, co-op advertising costs incurred by the distributor are included in the amount input for P&A.
Delay in Payments by Distributor
Playing the “float” is common in the Film industry. Although distributors can put pressure on exhibitors to make payments on a timely basis, producers generally do not have much leverage to force a distributor to make timely payments. A typical cycle for a distributor is to make payments to a producer initially on a quarterly basis but thereafter on a semiannual basis.
- A distributor usually accounts for revenues and P&A expenses on a quarterly basis. After the end of the quarter, the distributor summarizes the revenue and expense data. The Distributor then submits the processed numbers to his accounts payable department for payment. The accounts payable department issues checks one to two months thereafter.
- Accordingly, the producer’s portion of revenues (Producer’s Net Rentals) collected at the box office in July may not be summarized until near the end of the next quarter (November/December) with payment by the accounts payable department to the producer in the subsequent quarter (January/February). When the cycle moves to a semiannual basis, this delay can be even longer.
- In FilmProfit, this payment delay process is referred to as the Delay In Payments by Distributor. (see also Float and Float Penalty – For a more full discussion see the chapter of the FilmProfit Guide to Distribution Deals chapter, INTEREST-BEARING ADVANCES/LOANS)
A film which is released into the video market before being made available to consumers through any other medium. It may be because the film was created precisely for the video market, or because it was unable to find distribution in other markets first.
The entity or person who takes on the responsibility of selling, licensing or renting a film to its various markets, including but not limited to theatrical, home video, pay/cable and other television markets domestically and overseas. Some distributors specialize in individual markets, while others distribute in all of the available markets.
- The independent producer may contract with one distributor for all markets, or several distributors in the individual markets.
Distribution Expenses (see P&A)
Distributors charge fees which are usually based on a fixed percentage of their revenue from exhibitors and others.
Distributor Payment to Producer
Final payment of net rentals to the producer after deductions by the distributor for Interest-Bearing Advances/Loans and for interest. (see also Delay in Payment by Distributor)
FilmProfit specifically uses this term to describe the proceeds of the film paid to the distributor before any deductions by the distributor.
Domestic includes the United States and Canada (North America), and represents proceeds from:
- Theatrical: distribution proceeds paid by exhibitors to the distributor for the box office
The term Rentals as defined by Variety and others is often used to describe this income, particularly from domestic box office.
- Domestic Video: proceeds paid by video retailers to the distributor for videocassettes and videodiscs
- Domestic Pay TV: proceeds paid by cable and other pay TV companies to the distributor for the rights to broadcast
- Domestic Public TV: proceeds paid by the Public Broadcasting Service, by public television stations, or by producing entities such as American Playhouse, to the distributor or producer for the rights to broadcast. (In FilmProfit this does not include outright grants from other agencies)
- Domestic Network TV: proceeds paid by network and independent television companies to the distributor for the rights to broadcast on nonpublic free TV These proceeds are derived from the first runs of the films in free television. Subsequent reissue or reuse is referred to as syndication
Domestic All Other: proceeds paid for TV syndication and all other ancillary markets, include:
- Syndication represents the license of rights by the distributor, usually in packaged collections of films, to independent television stations for broadcast on free TV
- Ancillary Rights includes sales to libraries, schools, airlines, ships at sea, hotels, clubs, prisons, military, and includes such market spin-offs as music rights, toys, posters, T-shirts, clothing, etc.
- Foreign includes all regions outside the United States and Canada, and represents proceeds paid to the distributor by subdistributors and exhibitors for all theatrical, video, pay TV, public TV, network TV, TV syndication and ancillary market rights and income
Because FilmProfit is structured to relate to the producer who will own his or her own film, as opposed to the system that favors studio or distributor ownership, we have designated the producer’s revenues as Net Rentals, and the return to the distributor from the exhibitor as Distributor Revenue.
Includes the United States and Canada (North America). All other areas are defined by industry practice as foreign, though not in any nationalistic sense.
The domestic markets are:
- Distribution of films in movie theaters
- Home Video
- Distribution of a film via videocassette or disc that may be purchased or rented for viewing through VCR’s
- A programming service for which consumers pay a separate fee, and which is primarily delivered in the United States over cables wired into the consumer’s home
- Public TV
- Free television which operates without “advertising revenue.” Financial support for public television is primarily through government funding, contributions and corporate and private grants
- Network TV
- Also called broadcast TV and free TV. Supported by advertising, it is distributed over the free airwaves by networks and independent stations
Domestic Box Office Gross
Domestic usually refers to the combined US and Canadian markets (North America). Box office gross represents the total revenues taken in at movie theater box offices (ticket sales)
An owner or operator of a theater that shows films
Exhibitor Share of Domestic Box Office Gross
In FilmProfit, the amount of box office gross receipts retained by the exhibitor to cover the exhibition expenses and profit margin.
Financial Interest and Syndication Rule
US networks have not been allowed to have a financial interest in their own programming, or been allowed to participate in the after-market syndication of their programming, in order to prevent the networks from favoring one of their program offerings (specifically those which they own) over others in time-slot placement, in promotion or in other means. The Federal Communications Commission created the financial interest and syndication rule in 1970. In 1993 this rule was eased again.
The amount of money that a distributor holds for the period between the time the distributor receives the money and when it is paid to the producer. (see also Float Penalty and Delay in Payments by Distributor).
(see also Delay in Payments by Distributor –For a more full discussion see the chapter, INTEREST-BEARING ADVANCES/LOANS in the FilmProfit(r) Guide)
All areas other than the United States and Canada.
The total of funds paid to distributors for exhibition and other rights outside of the United States and Canada.
- FilmProfit assumes that all foreign distributors have deducted for their P&A and other direct and indirect foreign distribution expenses, as well as their foreign distribution fees before remitting to the primary distributor, if any, or before remitting to the producer.
(see Network TV)
Any funds given outright to the producer, which carry no interest charges, and are not expected to be paid back. Some grants, however, do carry stipulations as to certain market windows, etc. For example, a National Endowment for the Humanities grant could stipulate that the film would receive one airing on Public Television, or some other like stipulation. (see also Presales and Noninterest-Bearing Presales/Grants)
NOTE: It is important that the producer who is receiving, or anticipating receiving grant funds, particularly those with public television stipulations attached, NOT enter those funds on the Public television data entry line and also enter them on the Noninterest-Bearing Presales/Grants data entry line. This will result in DOUBLE ENTERING, and will accordingly affect the accuracy of your FilmProfit results.
Gross is a reduced form of the term Gross Box Office.
Also a term used generically to denote any revenue before being reduced by expenses. (see also Domestic Gross Box Office)
A type of deal between the producer and the distributor in which advances (if any), with interest charges, are deducted by the distributor. Then the producer’s portion of the revenue is remitted before the distributor recoups his expenses and calculates his profit.
Gross Profit Participants
Those individuals (often actors, though male actors more than female actors) and companies which are entitled to a percentage of the gross distributor revenue, unreduced, or only marginally reduced by expenses or fees. Usually a deal made with the distributor taking part.
The sum a distributor agrees to pay a producer for his film, no matter what the market performance may be. Sometimes these guarantee payments are made in lump sums in the production phase, or in a lump sum after production and upon the delivery of the negative, or they are spread out in progress payments, a portion during production, a portion during distribution. In FilmProfit, such guarantees received before release are treated as Noninterest-Bearing Presales/Grants if they bear no interest, or if they do bear interest are treated as Interest-Bearing Advances/Loans. After production, or after release, such guarantees are treated as Negative Pick-Up Guarantees. (see also Interest-Bearing Advances/Loans, Noninterest-Bearing Presales/Grants, and Negative Pick-Up Guarantee).
The Exhibitor’s calculation of what it takes to lease his theater, to staff and to run it. In use, this figure may really include some hidden profit for the exhibitor.
Banks and others charge borrowers a percentage rate on the money they loan as a fee for the loans.
The interest rate banks charge to high quality borrowers for low risk loans is known as the prime interest rate (prime rate). (see also Risk Factor).
A distributor may advance a lump sum to the producer, to be used for production.
- If this advance is treated by the distributor as a loan, and accordingly bears interest, FilmProfit calls these advances Interest-Bearing Advances/Loans. These advances will usually be recovered by the distributor, usually along with interest charges on the advances, by deducting them from the distributor revenue before remitting to the producer.
- Distributors view such advances as high risk investments, and accordingly generally charge interest rates in excess of the prime rates. FilmProfit calls the additional percentage points above prime the Risk Factor. (see also Noninterest-Bearing Presales/Grants and Negative Pick-Up Guarantees).
One of the most significant considerations in the long-term health of a motion picture distributor is the value of the programs which they own, their “library,” so to speak. If a program is perceived to have this long-term value by a pay/cable distributor, they will most likely be more willing to invest a larger sum in the production of the film, and want to hold all or most of the rights.
A contract between two parties, giving one the rights to distribute, or exhibit a program in a certain market, or in all markets. Licenses generally operate within certain time periods, with the rights reverting to the owner (licensor) at the end of the time period.
Describes television shows generally of 90 minutes to 2 hours or more in length, as opposed to television series segments. Applied particularly to television movies and mini-series.
Movies made for television.
A distributor may advance a lump sum to the producer after production and upon delivery of the film negative.
- If this advance is treated by the distributor as a loan, FilmProfit calls these advances Negative Pick-Up Guarantees, as this sum is assurance that the producer will reap a minimum of return on their film from the markets included in the deal. These advances will usually be recovered by the distributor, usually along with interest charges on the advances, by deducting them from the distributor revenue before remitting to the producer.
- Distributors view such advances as high risk investments, and accordingly generally charge interest rates in excess of the prime rates. FilmProfit calls the additional percentage points above prime the Risk Factor. (see also Interest-Bearing Advances/Loans)
A distribution deal wherein distribution fees, P&A (including overhead on the advertising portion), advances (both production and distribution), and interest on advances, are subtracted from distributor revenue before arriving at the producer’s net rentals.
Those individuals or companies entitled to a percentage of revenue after it is fully reduced by all expenses (including production negative cost), distribution fees, overheads and interest. Since FilmProfit is primarily focused on the distribution stream, it makes no provisions for calculating net profit participations.
The “Big Three” (ABC, NBC and CBS) have now become four with the advent of the Fox Channel, and there is now a stab at a fifth channel in the Universal TV Network, which is, like the Fox Channel, an amalgam of independent stations, primarily providing Universal with a constant TV distribution stream for their movie packages. Television program distributors who supply programming to their affiliated stations across the country in turn for advertising time on the air during the programs. These four make up the bulk of what is often also called “Free TV.”
A distributor or granting agency may advance a lump sum to the producer, either to be used for production, or after production.
- If these advances do not bear interest and accordingly are not loans, FilmProfit calls these advances Noninterest-Bearing Presales/Grants.
- In FilmProfit all funds received for production which do not have to be repaid, would be properly entered as Noninterest-Bearing Presales/Grants. (see also Presales, Product Placement and the chapter DOMESTIC TELEVISION DISTRIBUTION in this Guide).
Other Funds Needed for Production
In FilmProfit, the resulting cash needed to cover the Negative Production Cost after deducting any Interest-Bearing Advances/Loans, and after deducting any Noninterest-Bearing Presales/Grants. This figure is the amount of money the producer still needs to provide in order to produce the movie. It may be provided by private investors, by deferring fees or expenses, trading profit participations for goods or work, or any number of other methods.
- As FilmProfit is for analyzing the distribution aspects of a film, it makes no provisions for analyzing any of these methods or any alternative methods of providing for these funds.
A deal usually between a producer or producing entity and a distributor (in any market), in which the distributor has exclusive access to the producer’s future products. Can be restricted to time, to types of projects, etc.
A factor, usually a percentage of costs incurred by the distributor, which is intended to cover the distributor’s indirect costs such as maintaining an office, paying regular staff, etc.
- There are two prime instances in which the producer will incur overhead charges with the distributor:
- Overhead on Production Advances: When a distributor directly advances money, material, production equipment or space for a film production, they will usually also charge a fee based on a percentage of that advance which is meant to cover the distributor’s indirect costs.
- Overhead on P&A: When a distributor who distributes films to theatrical exhibitors incurs direct costs for advertisements (the A of P&A), they will usually also charge a fee based on a percentage of the direct advertising costs to cover the distributor’s indirect costs.
- In FilmProfit, it is always assumed that the overhead account will incur interest.
The actual costs incurred by a distributor in producing the screening prints (the P) of a film, plus the actual costs incurred for advertising that film (the A), which usually also includes overhead on the advertising.
- In FilmProfit, there is a separate entry line for overhead on P&A. As well, P&A costs would also include certain other expenses distributors charge to the producer’s account, including: Taxes, Checking (auditing of box office income, etc.), Censorship (rating seal, etc.), Transportation, Guild payments and royalties, Trade association dues (MPAA, etc.), Claims (from any litigation, etc.), Bad debts.
A television system in which the consumer/subscriber pays a fee for the delivery of programming. The delivery of programs can be through direct wiring to the receiver, or through use of satellite technology.
- There are three primary types of cable channels:
- Basic cable included in a “base-price” to the subscriber.
- Premium cable which are channels not included in the “base-price” of the cable service.
- Pay-per-view, in which each program has a separate price for access.
In some instances, a producer may make a direct sale (or license) to a particular market, or markets. These sales (or licenses) would not incur any distribution fees, and would be the occasion for direct payments to the producer.
The practice of licensing all or certain rights to a film project before it is produced, or while in process of being produced. Generally used in speaking of licenses (“sales”) to overseas markets. FilmProfit treats presales that bear interest as Interest-Bearing Advances/Loans. Conversely, FilmProfit treats presales that do not bear interest, and which accordingly are outright advances, as Noninterest-Bearing Presales/Grants.
An individual or company that selects a film project, arranges financing for the film’s production budget, and causes the film to be made.
In FilmProfit, the amount of funds in the producer’s account with the distributors after deduction for all gross participations, distribution fees and charges for P&A. (see also Producer’s Gross Profit)
A term used by FilmProfit to denote the actual cash paid out to the producer by the distributor, after all expenses, charges, and interest are deducted (Distributor Payment to Producer) and after addition of any Post-Release Direct Sales and deduction of Other Funds Needed for Production and Presales/Grants.
Quite often independent producers will get a light in their eyes when they think about product placement as a way of funding their film production costs, or even as an area for profit from their film.
- Now, the producer is actually selling advertising space in their movie, rather than what is euphemistically called “placing product,” and product placement often brings in far less than some producers anticipate, and quite often nothing at all.
- For an instructive look at product placement see “Products for Nothin’ & Your Drinks for Free: Corporate Support…or Sell-Out?” in The Off Hollywood Report (magazine of the Independent Feature Project), April/May, 1990.
- If you do receive product placement money, and would like to account for it in FilmProfit place the entire sum in the Non-interest-Bearing Presales/Grants data entry line (added to any other presales or grants, if any). Otherwise, deduct the amount of product placement money from the production negative cost before entering the production negative cost in the program.
Production Negative Cost, (Budget)
A generic term referring to the cost of producing the film (producing the actual film negative, from which screening prints will be struck), and includes the development, preproduction, production and postproduction costs.
Compensation based on sharing the revenues from a film’s performance in the market. Much compensation (or incentive compensation) in the motion picture industry is based on this method of sharing income. (see also Gross Profit Participants and Net Profit Participants)
Public TV could conceivably be called the “Fifth Network” if looked at as free TV. Public TV is free to its viewers, though they are often asked to ‘donate,’ or ‘become members.’ Public TV receives its revenue neither from advertisers nor subscribers, but rather from federal funds, from ‘donations’ and from corporate, foundation and individual sponsorship. (see also Domestic)
The process of advertising, promoting and physically distributing films to theaters or other media.
A distributor may charge interest on advances, on P&A, and effectively, on overhead. In contrast to the lending rates of banks, a distributor typically charges interest rates above the prime rate, with the added percentage their consideration for taking the “risk.” FilmProfit calls this added interest percentage above the prime rate, the “risk factor.”
Payments made to a producer’s account from proceeds of videocassettes. Usually calculated as a percentage of the wholesale price of each cassette.
A film which will be or has been distributed to “niche” markets, as opposed to being exhibited through general or “wide” release. Some films are designed to be specialty films, and some films just turn out to be specialty films.
Motion pictures receive income from independent television stations through the practice of selling the films station by station. This method of selling of movies is done by specialized Distribution companies, or by specialized arms of large Distribution firms. The films are often sold in packages, and each film is individually priced for each television station, according to the size of the station’s market and according to the film’s box office and other previous exposure. The films are not usually sold individually.
Third-Party Gross Participations
(see Gross Participations)
A term used in FilmProfit to express the relationship of market revenues to the quarter of the year (such as year 2, quarter 3) in which those revenues would be received by the distributor.
In the film industry, used to describe the situation where the producer and the distributor are one entity, but even more particularly where the distributor and the exhibitor are one entity. Particularly distressing in the business of film distribution and exhibition as it can lead to freezing-out competitive films from the marketplace. (for more information, research topic Consent Decree of 1949 – 1952).
As used in FilmProfit, the home video wholesale share is that portion of the distributor revenue which is not passed on as royalty to another distributor or to the producer.
The specific time period during which a film is allowed to be exhibited by a rights buyer, such as a television network, or pay/cable exhibitor.
- Also used to denote time periods which relate to the general sequencing of a film to its various markets.
Other glossaries may be of interest, including:
–Hastings Communications and Entertainment Law Journal Comm/Ent, published Fall of 1991, Volume 14, Number 1, published by University of California Hastings College of the Law
-Dictionary of Marketing and Related terms in the Motion Picture Industry, by Donn Delson, Bradson Press, Thousand Oaks, CA.