As part of our educational series of blog posts at FilmChain, the industry’s first digital CAM, we’d like to approach one of the pillars of film financing, which is the recoupment schedule.
A recoupment schedule (or revenue waterfall) is how revenue from foreign sales and domestic distribution deals for a film or TV project will be paid out, and the order (and rate) in which investors and beneficiaries will be paid. There are a variety of different types of payment including:
- Gross Percentage — allocates a percentage of all gross receipts flowing through the CAMA territory containing the stakeholder on a continuing basis.
- Net Percentage — allocates a percentage of gross receipts available in one position (a portion or slice of the recoupment schedule) containing the stakeholder on a continuing basis.
- Fixed Amount — allocates gross receipts available in the position containing the stakeholder up to the specified amount
And a variety of different stakeholder types can be included in the recoupment schedule:
- Lead Producer
- Investors (Public and/or private)
- Sales agent
- Talent (actors, directors, writers)
- Crew (if they are offered any deferrals or profit points)
- Post Production Houses
Sales agents work closely with the project’s producers, and act as an intermediary between the producer and distributors, negotiating with the distributors based on the sales estimates and detailed assessment of the production’s commercial value.
If any of the talent involved in the project is a member of one of the guilds (SAG-AFTRA — Screen Actors Guild, DGA — Director’s Guild of America, WGA — Writer’s Guild of America, Equity in the UK or ACTRA in Canada are a few examples), then Residuals are payable by the production company out of the revenues.
You will see in certain positions that the payment for that part of the schedule will be made on a pari passu basis. Pari Passu means ‘equal footing’ and states that each beneficiary in a position shall rank equally without discrimination, preference or priority with all other beneficiaries.
The manner and order of payment of entitlements under the recoupment schedule entirely depend on what the producers and the other parties of interest negotiate amongst each other. The producer needs to pay attention to the financing agreements, sales agent agreement, and the co-production agreements, which often include preferential terms of their recoupment. Some agreements’ terms may come into conflict, and that’s where a production lawyer would be best to advise.
We’ve found that the sweet spot to begin CAMA discussions is once a project is 70–80% financed. This ensures that the recoupment schedule is mostly complete yet also allows our team to support you as necessary with the drafting of the CAMA and through any final changes to the recoupment schedule. Some public and private funds may request for a CAMA to be executed before they transfer the first installment of their investment, so if these terms come up in the financing agreements, don’t postpone the drafting for too long.
To receive a free copy of our recoupment schedule template, email firstname.lastname@example.org. Our commitment is to help all projects of all budgets and producers at any point in their careers. If you have any more questions, we’re an email away.