Film Accounting Glossary
Net profits
What are net profits?
Also called net profit definition.
Net profits are what remains of a title's gross receipts after every contractual deduction, and the definition runs for pages precisely because each clause moves the finish line.
Typical deductions include distribution fees, distribution expenses, prints and advertising, negative cost, interest on negative cost, studio overhead charged as a percentage, residuals, and senior participations. Two participants with identical percentages and different definitions can receive wildly different amounts.
Example
Two participants each hold 5% of net profits on the same picture. One deal permits a 25% distribution fee and 12.5% overhead; the other caps the fee at 20% and excludes overhead entirely. Same revenue, same percentage, wildly different payments.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
A definition that can run for pages in the participation agreement. The clauses, not the percentage, decide the outcome.
Common mistake
Comparing two net profit deals by percentage. The definition decides the outcome, and a 5% position under a tight definition can beat a larger one under a loose definition.
Related questions
- What is deducted before net profits?
- Typically the distribution fee, distribution expenses, prints and advertising, negative cost, interest on that cost, studio overhead, residuals, and senior participations.
- Why is the net profit definition so long?
- Because every clause moves the finish line. Each deduction, and how each is calculated on the others, is negotiated separately in the participation agreement.