Question on Royalty Pools after Recoupment

[Feldzieg]

Posted: 11/18/14 at 6:06am

This goes out to the handful of budgetary nerds around here.

Can you help me fully understand the royalty pool?

I know that it helps the investors to recoup faster. Instead of simply giving the creatives a fixed percentage of the Gross Weekly Box Office Receipts (which can in the worst case lead to the investors losing money while the creatives make lots of it - even though the show returns a small profit) the pool (i.e. most of the creatives, underlying rights owner, producer) gets a percentage (35 -40 %) of the net weekly operating profits, leaving the investors a guaranteed 60 - 65 % in order to reach recoupment.

Understood.

But what happens after recoupment? Has the royalty pool served ist purpose and reverts to % GWBOR for the creatives on the one hand and investors and producers sharing the net profits 50/50 on the other? Typically a show that has recouped will earn enough not to lose money with this calculation.

Or does the pool stay in place? If yes, is it adjusted? And what happens to the producer? Does he/she participate twice? Once through the pool and once through their 50 % share of the investors share of net operating profits? Or does he/she switch sides from the pool to the investors?

Or does that simply differ from show to show?

Thanks for your answers!

[temms]

Posted: 11/18/14 at 9:06am

The pool remains in place post-recoupment. Usually it bumps up from 35% to 40%, or something similar.

It doesn't totally protect the producers against loss - there is still a weekly minimum for all the pool participants whether there is Net Profit or not.

The Producers are usually only a small part of the royalty pool, but they get a weekly Office Charge paid to them that accounts for some of their payment. Post-recoupment, they indeed keep their royalty share in addition to their 50% of the investor share.

The details are different show to show, but the Dramatists Guild and SDC have minimum percentages that the writers and directors have to get, relative to the total net profits. So however the pool is allocated, there is a minimum percentage of the net profits that must go to the writers and director, with everyone else sharing in the remainder to the extent that their agent is powerful enough to negotiate.

[Yero my Hero]

Posted: 11/18/14 at 4:34pm

From the agreements that I have seen, the pool pre-recoupment is anywhere from 70-30 to 60-40 (with the investors getting the larger amount), but post-recoupment it almost always reverts to a 50-50 split.

There could be exceptions, of course, but this is just what I have seen happen.

[Feldzieg]

Posted: 11/19/14 at 6:21am

Thank you so much, guys!

That really helped me out!