How to Manage Revenue Sharing on Independent Television Productions
How to Manage Revenue Sharing on Independent Television Productions
Lately there seem to be a tendency in television towards independent production.
This has also led to changing distribution and revenue models. If a television project is produced independently this typically means that revenues are shared.
There is revenue sharing on television productions when there are at least two parties involved in the production, financing and distribution of the series.
In this article we will look at how the revenue sharing model on independent television production comes together, and how revenue sharing work in practice.
The creation of a revenue sharing model for an independent television production is a process that leads us along the various stages of the life cycle of a project: development, production and distribution.
The revenue sharing model also reflects the financing of the project, as well as the agreements entered into with talent, especially any deferred compensations that will become payable.
Finally, if any of the actors, the directors and the writers involved in the television production are guild members, payment of guild residuals should be included in the revenue sharing model.
It is at the very beginning, the development stage, where what will eventually become the revenue sharing model, start to show its first characteristics.
The development of a television production, contrary to a film production, may be broken up in several smaller units.
A television production typically consists of a couple of series, and each series is split in several episodes.
Each series, and even each episode or a couple of episodes together, may be developed and produced as separate sub-projects with different production partners, financiers, talent and distributors.
Consequently, the revenue sharing model may very well change for each series or even per episode.
There are numerous ways a production can come together, and the nature of the production further shapes the revenue sharing model.
Whether the production is done completely in house, or if several production companies team up to produce the project, impacts how revenues are to be allocated.
The project can be a local or international production. It can be an informal or official co-production between two or more countries. Click here if you would like to get more detailed information on international co-productions.
If there are several producers involved – producers from the same country, are from different countries – and ownership of the project is shared, then revenues are also shared amongst those producers.
Furthermore, the revenue sharing model will reflect the financing structure of the television project.
Projects can either be financed completely in-house by one production company, or financing can be provided by several production companies.
Independent productions typically also include one or more external financiers.
Financing can consist of debt financing provided by banks or lenders, equity financing contributed by individual or institutional investors, production incentives, tax incentives, co-production sources, or a combination of two or more of these sources.
The financiers will look to recoup their loans or investments, together with interest or premium, from the revenues generated by international exploitation of the project. Therefore, the financiers require their share in the revenues.
It is customary that especially equity financiers share in the net profits of the project as well.
The revenue sharing model is likely to be also affected by the distribution model of the television production.
Sometimes a television project is distributed directly by the production company, or by one of the production companies if there are several involved. Other projects are sold by an external worldwide distributor or international sales agent.
If there is a worldwide distributor or an international sales agent involved, they will be entitled to receive a share of the revenues to pay their commission and expenses, and if they pay a minimum guarantee to obtain the distribution rights, also the minimum guarantee is recouped from revenues.
In independently produced television projects, the position of talent may affect the revenue sharing.
Producers and talent often negotiate, that certain fees and other entitlements that are payable to actors, directors and writers, will be deferred and made payable out of revenues.
Talent typically also shares in net profits, together with financiers and producers, if that stage is reached.
Actors, directors and writers who are guild members, will be entitled to receive so called residual payments from revenues.
In the United States, the Screen Actors Guild (SAG-AFTRA), the Directors Guild Of America (DGA) and the Writers Guild Of America (WGA) representing their members, see to it that the payment of residuals is included in the revenue sharing model.
In other major production countries like Canada and the United Kingdom, there are guilds and unions that, on behalf of their members, may share in the revenues.
To learn more about residual payments, you may want to check out this article. The article focuses on film production but there is a lot of overlap with television.
How can an independent television production manage the revenue sharing?
The parties involved in the television production, generally the main production company and the worldwide distributor or the sales agent, can decide to manage the revenue sharing process themselves by receiving the revenues and paying them amongst all the other beneficiaries – producers, financiers, talent and guilds.
However, a more accurate way to manage the revenue sharing process for an independent television production is to set up a Collection Account.
Collection Account Management is typically set up for independently produced and financed audiovisual projects. It has been a common tool for film productions for decades now and is also becoming a standardized tool for more and more independent television productions.
A Collection Account is a designated bank account, set up for a specific project. All revenues generated by international distribution of the project are paid by local licensees into the Collection Account.
The Collection Account Manager, a neutral third party appointed by parties involved in the television production, allocates and disburses the revenues to the beneficiaries of the project, in accordance with the Recoupment Schedule, in accordance with the Collection Account Management Agreement.
The Recoupment Schedule is the payment schedule that indicate the order and manner as to how revenues are to be disbursed – it basically formalizes the revenue sharing model in a shape agreeable by all major parties involved. To learn more about how to put together a recoupment schedule for audiovisual projects, please check out this article.
The Collection Account Management Agreement or CAMA is a stand-alone, multiparty agreement entered into by all parties with a major financial interest in the project. The CAMA formalizes the appoint of the Collection Account Manager and the establishment of the Collection Account.
It also provides for the obligation of the parties to ensure that revenues are directed to the Collection Account. The CAMA includes the Recoupment Schedule and overrules all other, underlying agreements, with respect to receipt, allocation and disbursement of the revenues.
The CAMA is an essential document for financiers, investors, and producers as it guarantees to all parties involved that each beneficiary receives his or her share of the revenues.
If you would like to learn more about Collection Account Management, please check out this previous article.
Independent production in television is on the rise. Independently produced projects typically imply revenue sharing amongst two or more partners. The revenue sharing model is shaped through all the stages of the television project: development, production, and distribution, and it also reflects the financing structure and any deal terms with talent and residual payment obligations.
Revenue sharing on television productions can be managed by the parties directly amongst themselves, or by setting up a Collection Account for the project.
If a Collection Account is established, the parties will enter into a CAMA with a Collection Account Manager. The Recoupment Schedule of the project will be included in the CAMA. This way, beneficiaries will be guaranteed proper allocation and disbursement of revenues.
About the Author
I have been working in film and TV since 2007. Through my consultancy firms XamanHaC and Zannoni Media Advisors, I have been involved as consultant and representative for amongst others Fintage House and Visualnet. For Fintage I negotiate agreements for films and television series, and am involved i...