Film Accounting Glossary
Waterfall
What is a waterfall?
Also called recoupment waterfall, or revenue waterfall.
A waterfall is the contractual order in which a title's revenue is applied: typically collection account fees, sales agent commission and expenses, senior debt, gap and bridge lenders, equity plus its premium, deferments, then profit participants.
Each tier is paid in full before the next receives anything, which is why position matters more than percentage. The waterfall is set in the interparty agreement and executed literally by the collection account manager.
Example
$9M of revenue applied in order: collection fees, then $1.4M of agent commission and expenses, $5M senior debt, $1.4M gap, $2.16M equity plus premium. The equity tier is $960,000 short, so deferments and every profit participant below receive nothing.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
Fixed in the interparty agreement and executed literally by the collection account manager. Position matters more than percentage.
Common mistake
Negotiating a percentage without negotiating position. A small share high in the waterfall beats a large share below a hurdle that is never reached.
Related questions
- What is the order of a film revenue waterfall?
- Typically collection fees, sales agent commission and expenses, senior debt, gap and bridge lenders, equity plus premium, deferments, then profit participants.
- Who enforces the waterfall?
- The collection account manager, executing the order set out in the interparty agreement rather than relying on any single party's own accounting.