Above The Line Costs
The top sheet of a film budget is divided into various sections. The first of these sections summarises what are known as above the line costs. These are the creative elements – story rights and screenplay, executive producer and producer, direction, principal cast as well as the tax deductions, travelling and living costs of the individuals referred to in the detailed schedules which support the analysis set out in the top sheet. See also below the line costs.
A letter under which a laboratory undertakes to honour orders placed by a distributor, even though the laboratory may be owed money by the producer or, in relation to the film, by other persons. See also laboratory letter and pledge holder agreement.
Adjusted Gross Deal
A distribution agreement where the distributor deducts from gross receipts the costs of co-operative advertising and divides the balance ¡ the adjusted gross ¡ with the producer. The advantage for the producer is that he does not have to vet the distribution expenses. The disadvantage is that the distributor may cut back on distribution expenses, to the detriment of the commercial success of the film, if he does not think his share of adjusted gross receipts will cover his expenses.
see minimum guarantee
Rights which may be capable of commercial exploitation that accrue or are acquired as a result of or in the course of production of a film, as distinct from the exploitation of the film itself. They include merchandising rights, television spin-off rights, sequel, prequel and remake, book publishing rights, computer game rights, soundtrack album rights, and the music publishing rights in the score. These rights are sometimes referred to as secondary rights
See private investor
The composition print that emerges from the laboratory after the combination of the sound with the graded picture, optical effects and soundtrack. When the print is approved a computer tape is made which tells the printer what to duplicate and ensures that all subsequent copies are the same. Also known as the first trial print.
American Society of Composers, Authors and Publishers ¡ one of a small number of American collecting societies, which act on behalf of composers and music publishers in the licensing and collection of license fees from public performances and broadcast of musical works. See also BMI and SESAC. A.S.C.A.P. One Lincoln Plaza New York, New York 10023 USA 7920 Sunset Blvd Suite 300, Los Angeles CA 90046 tel 213 883 1000 / fax 213 883 1047 / 001 212 595 3276 www.ascap.com
Assignment By Way Of Security
The method by which a financier takes a security interest in a film. The copyright in the film and the underlying rights (and the revenues) are assigned to the financier by way of security – effectively they are mortgaged to the financier to secure the repayment of the financier’s investment. The mortgage is registered at Companies House to establish it’s priority and appears on the production companies register of charges, which is open to public inspection. See also priority agreement and security agreement. What is left of the revenue generated by a film after deduction of distribution fees and expenses, advances and minimum guarantees, recoupment of the financier’s investments, repayment of any sums advanced by the completion guarantor fees. Also known as net profit. See deferment and producer’s share of net profits.
One hundredth of one percent ¡ typically used in the context of interest rates, for example, three basis points would be 0.03%.
The British Board of Film Classification is the body charged with viewing films and certifying their suitability for cinema audiences and for sale and rental of video grams by reference to age groups. It is cheaper to certify a 16mm print than a 35mm print. 3 Soho Square, London W1V 6HD tel: 020 7440 1570 fax: 0171 287 0141
Below The Line Costs
The top sheet of a budget is divided into four sections. The first section deals with above the line costs. The following three sections ¡ production, editing period and other (for example production fee, insurance and general expenses) ¡ are below the line costs. To arrive at the total budget, you add together the above the line costs, the below the line costs, the completion guarantee fee,the contingency and the fringes.
Broadcast Music Inc -an American collecting society acting on behalf of composers and music publishers. See also ASCAP and SESAC.
Break Costs, or Funding Breakage Costs
The costs incurred by a bank as a result of receiving a prepayment during the currency of an interest period or, in the case of a loan for a fixed term, prior to the term date or as a result of withholding a drawdown under the loan, having already funded it. The costs are calculated on the premise that, in order to fund a loan to its customer, the bank has taken deposits in the interbank market which it needs to liquidate or redeploy if its own borrower repays early or fails to draw down. Typically, on a prepayment, the bank’s break costs will represent the difference between the return which the bank would have earned on the prepaid amount for the rest of the interest period if there had been no prepayment and the return which the bank will derive in the interbank market on the prepaid amount for the residue of the interest period.
British Actors Equity
Upper St Martins Lane
tel 020 7379 6000
fax 020 7379 7001
See talent unions
An arrangement (unusually entered into separately from the underlying loan) between a bank and the borrower where, for a premium, an upper limit is set on the interest rate payable by the borrower on a floating rate loan. If the underlying interest rate rises above the upper limit, the provider of the cap reimburses the borrower for the excess above that limit.
Tax relief which may be claimed on the capital cost of acquiring a qualifying asset. It may be offset against a taxpayer’s income liable to corporation tax or income tax. There are various forms of capital allowance and detailed rules governing the rates of capital allowances and how they are applied. They may be subject to clawback as a result of a balancing adjustment when the taxpayer disposes (or is deemed to dispose) of the relevant asset.
The cash flow is usually setout in a schedule to the budget and comprises the sums from time to time required for the timely production of the film. The cash flow will also show the source of funds. A hurdle to independent producers is that cash is normally drip fed once the film is formally in production, meaning that even prosperous companies have to tighten their belts until the elusive first day of production actually happens. Perhaps this is one of the reasons that movies are shot before the scripts are fully developed: cash strapped productions companies are always eager to bring forward the date of production at the expense of time-consuming and expensive script development. Certified the cost of production of a film, as certified by an independent firm of accountants.
Chain Of Title
The route by which the producer’s right to use copyright material may be traced from the author to the producer through a `chain’ of assignments and transfers.
Advertising, the cost of which is shared between the distributor and exhibitors.
An agreement between states which may permit films made in or with resources from both states to benefit from subsidies available from both states.
An organisation which acts on behalf of it’s members, who may for example be composers, music publishers, visual artists or record companies, to administer, collect and distribute sums to which the members are entitled on the commercial use of their works.
See collection agreement below
An agreement entered into by the producer and financiers of a film with a collection agent, for example, National Film Trustee Company Limited. The collection agent is appointed to collect the proceeds of the exploitation of the film and distribute them to the financiers, the producer and other beneficiaries,such as deferees and profit participants, in accordance with directions set out in the agreement. The collection agent would expect to receive a fee for this work, perhaps negotiated as a percentage of all sums collected by it.
A collection agent is appointed because, whilst a production entity may have a continuing legal existence, it may not have a continuing physical existence in the sense of numbers of individuals who attend to its business on a daily basis. The collection agent offers physical continuity and is responsible for ensuring that distributors account for and pay the producer’s share of the distribution revenues. The collection agent will hold revenues on trust and they are therefore intended to be secure from the collection agent’s own creditors. The collection agent may also offer a degree of security, not only in the legal sense, because of its reputation and perceived permanence.
An agreement under which a completion guarantor guarantees to the financiers of a film, or a distributor who has advanced money prior to delivery, that the film will be completed and delivered by a given date to its principal distributors in accordance with the relevant distribution agreements.
The completion guarantor will not be under any liability to complete and deliver the film once a specified level of financing known as the strike price has been advanced by the financiers. Once the strike price has been paid the completion guarantor will have the option of abandoning the film (and repaying the financiers) or of completing and delivering the film. Also the completion guarantor will not accept any responsibility for the artistic quality of the film. If the film is not delivered by the given date,the completion guarantor will repay to the financiers the sums they have advanced towards the cost of the film. The completion guarantee may be supported by a loss payee endorsement.There will also be an agreement between the completion guarantor and the production company, under which the production company (a) agrees to produce the film in accordance with the financing and distribution agreements and to permit the completion guarantor to take over the production in certain specified circumstances and (b) grants to the completion guarantor a charge or security interest over the film.
A company which is in the business of providing completion guarantees for financiers, the principal UK guarantor being Film Finances.
A final sum added to the budget for a film to cover unforeseen circumstances, usually 10% of the budgeted cost excluding the completion guarantee fee.
A search in the US Copyright Office to see if any interest in the relevant work or film has been registered. No equivalent registry in the UK exists and accordingly no certain means of verifying the ownership of copyright interests.
Cost of Funds
A bank’s cost of lending money. This will depend on the nature of the loan – for example a bank’s cost of funds on a sterling LIBOR loan will usually be LIBOR plus its MLA cost.
Costs Off The Top Deal (referred to as C.O.T)
A distribution agreement where distribution expenses are deducted from gross receipts and the balance is then divided between the distributor and the producer in agreed shares. Distributors’ fees are usually calculated on gross receipts but in this case the distributor’s share is effectively it’s fee, calculated on a lower base.
The application of revenues derived from one source, whether a territory or a means of exploitation, towards the recoupment of an advance irresrespective of revenues arising from another territory or means of exploitation all falling within the same grant to a distributor or agent. This device is generally discouraged by the lawyers of independent filmmakers, but is widely encouraged by sales agents as a means of facilitating sales. Know what you are getting into on this one.