Ask the Experts: What questions do you have about the film financing waterfall?
Film Financing Expert John Hadity will be hosting a webinar this fall about the film financing waterfall - what questions do you have about the waterfall? Post them here and John will address them during the webinar!
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What is traditional and can I promise a "first money out" position to an investor? What language do I use to protect myself, their investment, and other investors?
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Hi Corey. We'll address this in the waterfall session, but to give you a quick response, investors in a project typically buy shares in the corporate entity that owns and controls the distribution rights which are then licensed or sold to distributors worldwide. As revenue from those distributors comes in, the distributors will take their fees as well as get reimbursed for their out-of-pocket expenses, including residuals, and if there's anything left over the distributor should share it with the LLC in which the members have an ownership stake. Typically, the Managing Member (Producer) will allow the investors a gross corridor of this revenue until they are made whole (or sometimes have received 110% of their investment back) after which time there is a split of the revenue with the producer. In this way, the investors are "first money out" behind the producer & other profit participants (e.g., ATL commitments).
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