In between films, and maybe forever, you will have
development and operations expenses. Some of these expenses can
be charges against the projects that ultimately get financed for
production. The cost of a script that is financed for production
is really the cost of all scripts in development divided by the
number of scripts in development, but it is unwise to over-burden
any one particular project with too much development (and/or
operation) costs, otherwise the project may not get financed.
Knowing how much you should allocate to the each major
activity of the Company is vital for long range planning.
Financial allocations, are described by the following
philosophical approach to spending money. An organization will
grow to the degree the blood (money) in its veins is flowing to
the right areas in generally the right proportions.
Operating Expenses mean corporate and administrative expenses such as office rent, supplies, phone, utilities, operating salaries, professional fees and expenses not accrued on specific projects. Often referred to as "Overhead," most of these expenses are not normally capitalized.
Development Expenses mean expenses connected with creating or acquiring literary properties, packaging talent and arranging financing for projects. These expenses may be capitalized.
Production Expenses are those delineated in individual production budgets of each movie project, broken down as Above-the-Line Expenses and Below-the-Line Expenses. Production expenses usually pick up all or part of Development Expenses and a small percentage of Overhead. These expenses are usually capitalized.
Marketing Expenses means prints and advertisements as well as allocations for shipping, film markets, sales and transportation. The Distributor's fee is a marketing expense to the Producer. All or part of these expenses are capitalized.
All after-tax net profits generated from the sale and
exploitation of the Company Major Products should be allocated
roughly as follows:
First to Company Reserves . . . . . . . . . . 5%
Dividends to Stockholders . . . . . . . . . . 10%
Of the remaining balance:
Of the 100% allocated to Admin Activities, Allocate:
Operations . . . . . . . . . . . . . . . . . . 40%
Development Activities . . . . . . . . . . . . 20%
Marketing Activities . . . . . . . . . . . . . 40%
Money spent into to each Operation, Development and
Marketing Division should be allocated roughly as follows:
First to Divisional Reserves . . . . . . . . 5%
Of The remaining Balance, allocate Div Budgets:
Total . . . . . . . . . . . . . . . . . . . . 100%
Of the 100% allocated to Production Activities, Allocate:
Allocation into Production Activities should follow these rough
guidelines:
Budgets of $50,000 - $500,000
Budgets of $500,000 - $1,000,000
Budgets of $1,000,000 - $5,000,000
Budgets of $5,000,000 - $15,000,000
Budgets of $15,000,000 - $35,000,000
Budgets above $35,000,000
Above-the-Line Breakdown Allocations:
Producer Unit Allocations:
The rational behind the Producer Unit Allocations allocations is this:
If a Line Producer has to be brought aboard to supervise the
production and get it done from a technical point of view, both
the Producer and Executive Producer should grant him about a
third of their fees - thus a third of 50% is about 16%. 16%
coming from the producer and the Exec Producer would give the
Line Producer 32%, as illustrated in the chart above. The
Producer performs or has performed the function of a Packaging
Producer the minute a Line Producer is brought aboard but usually
retains the title of Producer.
An Associate Producer, with authority derived from the
majority decisions of the other three producers, should be
brought on to help execute and supervise the duties and
responsibilities of these senior producers, especially when they
plan on developing new projects that demand their attention.
Thus an Associate Producer, performing about 10% of each senior
Producer's work, is entitled to receive about 10% of each
producer's fee; thus 10% of the Producer's 34% is 3.4%, 10% of
the Executive Producer's 34% is another 3.4% and 10% of a Line
Producer's 32% is 3.2% for a total of about 10 or 11 percent for
the Associate Producer (3.4 + 3.4 + 3.2 = 10).
If there is no Line Producer, but a Producer, Executive
Producer and Associate Producer, the Producer and Executive
Producer should still get equal fees; however, the Associate
Producer should get more of the Producer Unit allocation because
he or she would carry perhaps 15% - 25% of the Producer and the
Executive Producer's work. Thus an Associate Producer might
receive 20% of each the Producer's and Executive Producer's 50%
allocations, giving him 20% of the Producer Unit allocation.
In the event the Producer finances the project, either with
personal funds or out of the cash flow of his or her last
projects (the ideal scene), there is no need for an Executive
Producer acting as a financing agent. Thus the Producer would be
entitled to 100% of the producer unit allocation. If a Line
Producer comes aboard to share the Producer's work, the Producer
should give him about a third of his fee, as above. Thus, the
Line Producer would receive 33% and the Producer would be left
with 67% in exchange for both financing and packaging the
project. Again, an Associate Producer, performing about 15% -
25% of the work, would receive about 20% of the Producer and Line
Producer's fees. This would give the Producer about 53%, the
Line Producer 27% and the Associate producer 20%, as illustrated
above.
I think you can see the logic used here to adjust your own
allocations accordingly and fairly. At the least, the above
should give everyone a place to start negotiating from.
Producer
50%
34%
30%
40%
53%
Executive Producer
50%
34%
30%
40%
00%
Line Producer
00%
32%
29%
00%
27%
Associate Producer
00%
00%
11%
20%
20%
Total Producer Unit
100%
100%
100%
100%
100%
When "00%" appears in a column it means that there is no post
being held by that Producer.
A Producer, who packages and brings to the project the production
know-how is acting as a packaging and line producer rolled into
one. Thus he or she should be paid equally with an Executive
Producer who brings to the project its financing. This is in
line with the philosophy that the money and project construction
are equally important and deserve equal consideration.
Also see Points