Making a movie at all costs could cost its distribution

“When budgeting for independent low budget movies, the salaries of the leading actors often appears to be the smallest obstacle that concerns most producers largely because they assume (correctly) that with decent work so hard to come by, most actors will work for very little if they are allowed to share in whatever future revenue the film may generate,” he says.

“This does not imply that producers negotiate such deals in order to exploit actors or other crew. Rather, they enter into such arrangements because low budgets generally do not allow for proper salaries.

“Either the film gets made on this basis, or the film does not get made at all.”

Groenewald explains that allowing cast members to share in the film's future revenue is called the ‘point system' because the individuals are allocated a number of points (basically a share percentage) that allows them a portion of the profit. This is lawful and the various guilds, including SAG (Screen Actor's Guilds) provide for a minimum point system based on the individual's length of involvement.

Profit

It appears to offer a win-win situation for producer and crew member, especially actors – many of whom have launched their careers from such a platform.

By providing crew members with a share in profit (which should to be structured to allow for gross profit, rather, if anyone is stand a chance on collecting any profit) as well as other incentives such as obliging the producer to cast an actor in a sequel, or even in a TV serial should such spin-offs be created, the producer is able to secure a decent cast and crew for a low budget film.

“Not surprisingly, it's very popular and a lot of movies are made this way. However, although a lot of these movies are produced, few are sold,” Groenewald adds.

The problem is that it's not only the producer who faces adversity in securing a profitable film. Distributors also face enormous risks in taking on a movie.

And, Groenewald points out, no distributor wants to be told that after he secured screenings with various theatres and exhibitors, embarked on a massively expensive marketing campaign and after having sold DVD or TV rights, that the grosses are to be further diminished because the producer made a taxing deal with the lead actor or director, simply to complete production.

According to Groenewald, the distributor is bound to the same point system obligations that the producer negotiated with the cast and crew. The rights that the distributor purchased from the producer are limited and the distributor is compelled to honour the profit participation deals that accompanied the sale of the production.

Downside

“So, if the producer made point deals with actors, the director or even the composer, the distributor has to calculate the value thereof as an expense before he can turn a profit for himself.

“Producers need to be aware of the downside of the points system and try to be realistic in the percentage or points granted because the very thing that allowed the producer to make the film, may be the same thing that prohibits the producer from selling it,” he concludes.