Mo Money, No Problems: A Grower’s Guide to Residues

EDITOR’S NOTE: The following article originally appeared on our blog in 2018. We are reposting it here with minor edits. Special thanks to author Su Fang Tham.

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The information below is courtesy of November 14, 2018 Members Event held at Film Independent’s Wilshire Blvd HQ to help inform filmmakers of the basics of residual payments—Including the benefits of establishing CAMAs (Collective Account Management Agreements) and how, as a producer, you can best protect yourself financially on any project.

Presented in partnership with the PGA Independent Producers Committee, the panel featured Oscar nominated producer Chris Moore (se.se.sssssssssssssssssssss.sssManchester by the sea, promised land) and independent cinema Spirit Award winning producer Clark Peterson (Monster, Bulwark) in a one-hour discussion followed by a question-and-answer session. Here are some of the main takeaways:

(Not necessarily the type of waterfall we’re talking about here)

What is the “stunt” of a movie? Basically it refers to: “Who gets paid what when? Peterson explained, “It’s basically where the money goes when it comes back and the order in which the different parties receive that money.” If a bank is one of the inventors, it is reimbursed first. Next are guilds (SAG / AFTRA, WGA, DGA, etc.) and IATSE residues (paid directly into union health and pension plans), followed by salary deferments, profit participants and ‘other inventors. Different levels of inventors and producers recoup their investments at different ratios before investors’ equity is paid in full.

Get it right away. Peterson stressed the importance of having a pre-arranged payback schedule – again, the “waterfall” – in place when you first develop your project. Cascading arrangements can usually be found in funding agreements or fundraising agreements that all investors must sign during pre-production.

What is a CAMA and what is it used for? CAMA stands for “Collective Account Management Contract” – a contract whereby a fund is opened in a bank and managed by third party rights management and royalty collection companies such as House Fintage or Highway Entertainment. The worldwide revenues of a film or television project will be paid into this account and the company will administer, distribute and distribute the profits to all parties with a financial interest in the project (i.e. financier, producer, other participants profits, etc.) according to the stunt schedule. Moore compares it to an escrow account when buying and financing a home.

Small change. Make sure you have enough for everyone!

Why should I spend money on a CAMA? The installation fee for a CAMA can be $ 8,000 on a low budget film, with the collecting company taking a percentage of the film’s revenue as a fee. Despite this, Peterson thinks the CAMAs are worth it. “If you’re producing the movie, you don’t want to be the person who takes the money and makes sure everyone gets paid. It is money well spent. And a selling point for potential investors is the ability to assure them that the money is being managed by a trusted third party. It’s also possible to negotiate to have the setup fee removed from your earnings once the revenue starts coming in, in which case you wouldn’t have to pay up front.

What is a residual link? Before principal photography can begin, unions like SAG-AFTRA will require a bond for the residue as a guarantee that funds are set aside to pay for the residue in the future. This money comes out of the budget up front before any profit is made. In some cases where a CAMA has been established, this requirement may be waived.

Surprise! You still owe residue even if the film has lost money. Moore explains that even if a movie is a “financial disaster,” it still has to pay trade union / guild talent residue every time it airs on cable, SVOD or other platforms. Residue is one of the downstream production expenses that has nothing to do with profit. That is why unions demand residual obligations first, so that even if your production unit is completely exhausted, its members can still be paid.

Everyone wants it.

Is it never too late to sign a CAMA? Moore and Peterson agree that it’s never too late to set up a CAMA. In fact, Moore was involved in a project where part of CAMA finally signed the deal more than two years after the film was made and a year after its theatrical release.

Once the residues have been paid, is the residual deposit refunded? In theory, yes. However, Peterson has seen instances where other contractual requirements had to be met before the bond was refunded, even though the residue was no longer due.

What are the criteria for selecting a good entertainment lawyer? Funding agreements are generally fairly standard. Moore advises going with someone who has demonstrated extensive experience, such as viewing a lawyer’s credits on IMDb.

Can you put the cost of CAMA into the production budget? Yes! Add it as an item in the budget and spread the risk if you can.

Best advice when considering an option deal? “Take the long-term view,” Moore recommended to the crowd, given the writer’s perspective. It might be worth accepting a low option price for your script. now. But state in the contract that you get X number of dollars (a full and fair amount) when your material is made into the first movie – and a healthier amount if there’s a sequel.

Whether you’ve just graduated from film school or are an industry veteran looking to streamline the financial side of your next project, it pays (literally) to arm yourself with a full understanding of how film works. residue process and what you can do to protect yourself and your film.

Now count those beans!

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