My Hollywood System

Chapter 33:

After shaking hands with Carl and George, Will asked for George’s health. He almost seemed to have gotten a heart attack at the movie’s end, and Will was scared that he would die because of his old age.

George, however, seemed like a tough nut, laughing and reminiscing about the past as he told Will how much effort they put in the ‘Janitor of the Asylum’ movie.

“Ya’know, back in the day, when we started to film that movie, although the movie idea was very unique, it heavily affected the acting of the main leads in the movie. Mainly because of the rawness of the expression which we needed, which was the core ingredient to make movies with Found Footage technique a success.”

George paused for a second and added, “Though that movie succeeded, I do have this instinctive feeling that your movie will most likely surpass that one.”

Will smiled, “Thank you so much. I am glad that all of this worked out well for us. Everyone in the crew, from the main leads to the editors, have put hours into this and have tried to make it as realistic as possible.”

George nodded, “Can’t deny that. I must say, if this movie becomes a hit, it will most likely change the lives of everyone involved in this project.”

“Fingers crossed.” Will replied, “I have high hopes for it too.”

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George thought for a moment and then said, “Let’s continue with the distributor agreement discussion. I am really excited about this movie. It’s been a long time since I last saw a hair-standing and heart-stopping horror movie.”

…

The process of filmmaking is said to be completed only when the film is distributed to the public. A film is distributed through various methods such as through theatres, OTT platforms, DVDs and so on. A distribution agreement is negotiated between a production company and the distributor.

The distribution agreement specifies the territory in which the movie is planned to be released. Territory can be worldwide or may be limited to a particular region or country. The length of the term of distribution is added. The agreement mentions the number of theatres/screens in which the movie will be exhibited. It also lays down the duties and rights of each party. The promotional and advertising activities which the parties agree to are provided in detail.

The agreement also will have a detailed clause on the collections and remuneration of each party. For instance, if it is a theatrical release, the agreement clearly prescribes the amount or percentage of daily collection that the distributor, producer and theatre owner is entitled to receive. Such amounts can vary in accordance with the number of days the film is played in the theatre.

Usually, the distributor of the movie gets about 10-15% of the total box office earning, and the thirty percent goes to the production house. However, Will’s case was pretty special.

And to understand why Will’s case was pretty special, we will have to understand how a movie’s box office is distributed.

The way a film’s income is collected and distributed is known as the Recoupment Waterfall. Income comes in from a variety of sources and the money is then handed back to the filmmakers via a number of third parties. Along the way, these third parties can recoup the money they spent upfront promoting the film and also charge a pre-agreed fee for their work. What’s left after a party has repaid costs and kept their fees will be passed down the chain to the next party.

It can be easily understood using the following waterfall:

[Total Earning: From the theatrical, non-theatrical, VOD, home ent., television, extra.)

In this part, about 40-70% of the income is kept by the exhibitors, for e.g, the theatres.

↓

[Income received to distributors.]

Let’s say, 60% comes to the distributors, from which, about 25%-35% is taken by the distributors for publicising and advertisements.

↓

[Sales Agent]

Sales agents, or sales companies, act on behalf of the producer to sell the rights to an independent film or TV drama to distributors, who then release films on different platforms (cinema, TV, DVD, Blu-ray, streaming platforms). Sales agents negotiate with the distributors based on the sales estimates and detailed assessment of the production’s commercial value.

↓

[Director, Crew, Actors, Producers and Investors]

After the sales agent’s cut and payment of the crew, about 10-25% of the total box office income is left in the pocket of investors and producers.

…

The above explanation is the most basic explanation of the complicated structure of the film industry, and what made Will’s case special was that he was the Producer, Director, and most importantly, he was also the Sales Agent since he himself came to negotiate the contract.

And because of the advantage of the genre, the share he was going to get would be a big one.

Right now, 40% of whatever the box office the movie reached was going to be in Will’s pocket.

But that didn’t mean Will would be satisfied with this. He wanted to have the biggest portion of the pie on his plate.

And his other advantage was, although the CEO of Wheel Works Studio, George Carter, was very enthusiastic about the movie, but that was mainly because of his love for the horror genre.

From a business point of view, this movie was a big risk.

And this was why he wasn’t planning to put his toes too deep into this.

“30%. That’s my last offer.” George said, “My company will handle all the advertisements and publications.”

“30% is too high for this movie,” Will shook his head, “The movie doesn’t need much advertisement. It’s the horror genre, and we will create curiosity among the audience, and that will work as a spark to fuel the movie.”

George pursed his lips, “What is your counteroffer?”

“8%.”

“8?!” Both George and Carl were taken aback. “That’s too low. I estimate that the movie will reach one to three million in the box office, and considering its budget, it will be considered a big hit. However, eight percent of that… is too low.”

Carl added, “It’s not even a half a million as per the estimate. And don’t forget that we’re considering the highest possible numbers of the box office.”

Will shook his head, “8% is my last offer.”

“What if…” George thought for a moment and asked, “What if the movie is a flop? Won’t I face a big loss? Don’t forget I have other shareholders too.”

“How about this…” Will thought for a moment and added, “Since you think the movie will fetch you 100-300k with 8% cut… how about I give you 200k as an upfront payment?”

“Hm?” George squinted his eyes, “You’re giving this instead of the 12%?”

“No.” Will shook his head, “You will now have an 8% share of the box office. But I also have a condition if you accept this deal.”

“8%…” George asked, “What is the condition?”

…

//DreamNote//

Read next 12 chapters on pat reon 🙂

The chapter was a but filler-ish, but it was important for us to understand the basic distribution of movie box office share.