Film Accounting Glossary
Profit participation
What is profit participation?
Also called participation, or points.
Profit participation is any contractual right to share in a title's revenue after defined recoveries, spanning first-dollar gross, adjusted gross, and net profits.
The percentage matters far less than the definition of what it is a percentage of and where it sits in the waterfall. Participations are tracked as contingent liabilities on the picture's books and reported through periodic participation statements.
Example
Three participants each hold 5%: one on first-dollar gross, one on adjusted gross, one on net profits. On $80M of receipts they might receive $4M, $1.3M, and $195,000 respectively. The percentage is identical; the position is everything.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
Carried as a contingent liability on the picture and reported through periodic participation statements.
Common mistake
Negotiating the percentage before the definition. Position in the waterfall and the list of deductions decide the value; the percentage only scales it.
Related questions
- What types of profit participation exist?
- First-dollar gross, gross with limited deductions, adjusted gross, and net profits, in descending order of value and ascending order of how often they pay nothing.
- How is profit participation tracked?
- As a contingent liability on the picture, reported to each participant through periodic participation statements calculated per their own definition.