Interchangable Terms: When negotiating a profit provision in a contract, the definition of profits must be well worded, clearly defined and negotiated very carefully. Net profits, gross profits, gross revenue, gross points, adjusted gross profits, adjusted net profits, producer net profits—these terms can necessitate extremely different calculations or very similar accountings, depending how they’re worded, when they are calculated (i.e., before or after certain other profit participants) and what deductions are or are not acceptable.
Percentages: Many indie films will offer their actors a percentage of the producer’s net profits, and usually that is defined as 50% of 100% of the total profits. This isn’t always stated clearly, and it obviously makes a big difference if you’re getting 2% of 50% or 2% of 100%. These nuances become significant when and if the film earns a profit, and that is why a considerable amount of time is spent negotiating these definitions.
MFN in Profit Definition: If there isn’t time to come to an agreement on the definition before a client agrees to take the role and signs a deal memo, I will push to have the deal memo add a phrase that obligates the producers to give Most Favored Nations (MFN, further discussed in a previous posting) on the definition, i.e., “2% of Producer’s Net Profits, to be defined no less favorably than any other profit participant, including all cast members and producers.” This way, no matter how they define ‘Producer’s Net Profits,’ as in this example, I know that the actor will be participating in the same pool as all the participants, including the producers. There is no doubt the producer’s will negotiate the most favorable definition they can draft for themselves.
Please note: The information contained herein does not constitute legal advice and is intended for educational and information purposes only.