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LEGALLY SPEAKING, IT DEPENDS: Movie Industry Vocabulary Reference Guide - I

When striking a deal, it's important to understand movie industry vocabulary for the terms of sale or option. Entertainment Attorney Christopher Schiller explains.

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In the social sciences one of the ways you distinguish a profession from the rest of the occupations is the unique language used by its practitioners. Doctors talk with a shorthand only fellow doctors and associates can easily understand, lawyers talk legalese, police use shorthand and codes to convey a lot in a short amount of time. As writers, you should all be familiar with language of the professionals. In fact, we have a term for it in scripts, techno-babble.

The reasons for using a created, commonly understood language are manifold. Short hand references make conversations that much easier. It doesn't take long before shortening references for speed leads to a completely separate communications medium, understood only by those who are exposed to the new uses. From there co-opting words with particular meaning or inventing new words to encapsulate whole ideas is a natural progression.

From the outside, it is quickly evident that “they” are communicating and you aren't “in the club.”

This column is the first in a likely series of occasional posts to address that gap. What follows is the first entry in my Movie Industry Reference Vocabulary where I attempt to provide quick definitions for those industry insider terms that aren't directly evident to a writer but that they may come across in a business meeting or conversation. Being in the know just might help you give you more confidence that you are part of this industry after all. Remember this is just a reference. For true clarity always consult a lawyer knowledgable about the specifics.

Movie Industry Vocabulary

Money terms:

Typically studios, producers or anyone else funding movies don't work with piles of bills lying around in a vault, ready to fund movies. There are numerous schemes that are used to shift funds when needed into the right places to keep the checks from bouncing. There are terms that mean a filmmaker's money is “somewhere” and is essentially available when needed.

Line-of-Credit – is when a studio or production entity is able to secure what is in essence a pre-approved loan limit prior to asking for any funds. The funds are “available” but not really theirs. There's usually a pre-arranged percentage rate for the loan, but no interest is accrued until the money is actually borrowed. It is not uncommon for a studio to have a $300 million plus line of credit at their disposal for a period of time.

What the writer needs to know – Even when working with a studio, the difference between a green light and just keen interest in a project is that going ahead will incur a financial risk and prevent the studio from moving forward with other projects. So if a studio says, “Can you make it for less?” there's likely a financial reason behind the request.

Negative Pickup - is an older term meaning that you get bupkiss right now for production funds to make the film, but, if you manage to deliver a completed film (an old school, actual negative) ready for distribution then you get the promised funds. A filmmaker can take that promise to another entity and borrow against it (for a percentage) in order to have actual cash to make the film to be delivered.

What the writer/director needs to know – typically the borrowing against the negative pickup will be at a severe discount. You'll need to make up the difference somewhere in order to pay the costs of getting that distribution ready product. But, if you deliver, you'll be able to pay everything back.

Payout Schedule – most financial deals include this in their terms so the filmmaker only has available the amounts you need for that week, say according to the approved budget. In order to make sure you aren't short in your obligations while shooting it is imperative to have an accurate budget and schedule.

What the writer needs to know – Often a writer's final compensation for a script is tied to the “first day of principle photography.” If that payment is somehow neglected to be included in the payout schedule for that film, your paycheck could be delayed quite some time.

Pay or Play Deals – usually involve tying actors or directors to a project in order to secure the “package” (see below). The deal is that the person gets a guaranteed payment of their salary when they commit to performing in the piece. The payment will be made regardless of whether the person ends up doing the gig. If the part gets recast or another director is brought on board, the original still gets paid their agreed fee. But if they aren't replaced they are committed to being there and can't take another gig.

These are used when a particularly high profile person is thought to be able to secure the rest of the funding needed for the project. It is a risk for the production since, whether they get money or not, they still have to pay the Pay or Play person.

What the writer needs to know – An actor or director with a Pay or Play deal is considered a heavily valued asset to the production and so accommodating changes to the script they might want will seem like a high pressure request. But it is still a possibility that another actor or director will fill that role in the end and the budget hit encountered in that scenario will mean a script revision that needs to be cheaper to film and still accommodates the new player. (And will be needed on short notice.) Plan accordingly and be prepared.

Points, Participation, Shares, etc. - various names are used to refer to the sharing of the financial outcomes of good times. It is passé to call them “Profit Share” for various reasons, not the least of which is the negative connotation that “Profit” has garnered. But all these terms revolve around a calculation of some form of Profit (see below). The key to understand is that the more specifics that are stipulated in the definition associated with the sharing, the less wiggle room the accountants have in underserving the participant. Here's where having a great negotiating lawyer on your side can serve you for years to come.

What the writer needs to know – Negotiation is key to your level of participation, if any. Often the writer isn't powerful enough at the bargaining table to get points. But there are other ways of getting money after the script is turned over, incentives tied to performance, bonus for particular award nominations, etc. Keep these in mind while negotiating.

Profit (what it really means) – Gross Profit, Net Profit and the like are all defined terms. The key to remember is that there is no standard definition that is required to be followed for these ubiquitous terms. Gross Profit is supposed to be all income prior to any expenditure. But often, certain incomes are not included even in the Gross (see First Dollar below for an example). Net Profit is supposed to be the residual monies after all debts and prior committed payments are allotted. Accountants are notorious for being able to reduce the Net Profit figure down to negative numbers. They are not (usually) cheating, especially with a business that is created to be a constantly functioning engine. Knowing the specifics of what goes into the calculations is key. Realize that you can have your own definition of profit that applies only within your contract, different from all the rest. That way you can experience an old fashioned net profit share even if other net participants in the same project are still seeing red.

What the writer needs to know – In theory, having your own definition of profit in your contract can be beneficial, but, you'll need bargaining power to get it, since each profit definition causes more complexity on the business end for the producers and their accounting departments. And even if you get your own definition, you'll need resources to make sure it is being followed. Good negotiators are key. Still, there can be wild variation between points participants in the same project. (See below.)

First Dollar – A very powerful figure can negotiate a First Dollar Gross deal, which means that prior even to the Gross Profit calculation above, they get their participation monies taken out of the first dollars through the door. With a couple of big stars attached to a movie, it is easy to see how a mega-hit never reaches net profit though the first dollar participants make out handsomely. It's good to be the king.

What the writer needs to know – A few writers have reached the level of first dollar gross participants. It's rare, but, if it is available in the negotiations go for it. If there are others who are first dollar gross participants, the writer would be best to keep their script needs of paramount importance if you intend to keep working on the project. Clout gets rewrites.

Favored Nations – is a negotiating tactic, that if available levels the playing field by essentially saying, “whatever the best deal is, I get the same.” It allows that if another party gets a better deal you get an equivalent level up in your deal. This is usually limited in scope to things like participation points, but, can also be trailer size or just about anything else, as long as it is specified and both parties have the same item as part of their contract terms.

What the writer needs to know – Because a writer is on the project the longest, favored nations deals work to your favor if the project becomes a bigger deal as time goes on. If suddenly the budget blooms and bigger stars are attracted to the piece, you at least can be treated better as the new players come on board and get their perks that weren't available when you negotiated your deal.

Against – is the term used when referring to the partial initial payment made for the full script, the rest to come at a specified later date or event. For example, an article might read, “Writer A got $100,000 against high six figures for her latest spec.” Which means the writer got paid $100,000 cash upon delivery of the complete spec draft and will receive the rest of the money most likely upon first day of principal photography. This is outside of any other money for future drafts of the script.

What the writer needs to know – The initial payment is a downpayment and taken from the total figure stated for the remainder. So if it's $120,000 against $750,000 on first day of principal photography, on that day a check for $630,000 is what the writer can expect.

Packaging – is the accumulation of above the line talent (actors, directors, writers, producers) that will look like a financially attractive group to investors. It is a way of making it seem like the movie is all ready to be made and is already a hit, so put your money in now. It is a pure marketing ploy that works surprisingly well.

What the writer needs to know – Whether you are included in the package or not is indicative of your status as a financial draw. If you are in the project but not touted as central part of the package, hitch your wagon to those who are. If you are touted as part of the sales package, remember to use that in negotiating your own deals, now and in the future.

I'll stop with the vocabulary here for now. Remember, these are just hints of what these terms mean and all the subtleties and variations are missing. What do they really mean in context? As always, it depends.

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