Profit Participation

Profit participation is a very complex topic that is the subject of a great many accounting disputes, legal claims, and general ill-will between companies and the people to whom they’re supposed to be paying participations.

This post is an attempt to give as simple a picture as possible. Even so, this is your fair warning that this is going to be a very long post, and I will be generalizing or simplifying a lot of really complex concepts for the sake of providing a clearer, broader overview.

Also, please keep my disclaimer in mind. I am by no means an undisputed authority on this topic and in trying to distill a complex process down, there will likely be some details that you’ll want to consult an attorney and/or accountant about before diving into profit participation on your own deals.

For everyone else, I hope this overview helps to demystify this complicated concept a bit.

Separated Rights

In my most recent post about writing credit, I mentioned that one of the perks of receiving screen credit on an original project that’s signatory to the Writer’s Guild of America is the screenwriter is entitled to something called separated rights. This post will take a look at what separated rights are and why they’re so important.

Sterile Scripts

I’ve already talked about options and script sales, and those of you who have read those posts might have noticed several mentions of the fact that production companies don’t always end up buying the scripts they option or work on. It’s actually a common occurrence for a company to option a script, pay to have some writing done, and then ultimately decide not to buy it for any of a variety of reasons. That situation naturally raises the following question:

What happens to those drafts written while the work was under option?

Script Sale Breakdown

In my last blog post about quotes, I talked about how a writer’s compensation typically increases over time, in the same way most other professionals slowly build a salary history  over the length of their careers through increasing levels of expertise and proven results.

Today, let’s break down how a writer actually gets paid out when they sell a script.

Conditions Precedent

At the very beginning of most entertainment contracts, there’s an important section called the conditions precedent. It tends to get overlooked because there are way more interesting sections like the compensation, credit, and perks like premiere tickets, but the conditions precedent is a critical area that shouldn’t be ignored.

Basic Definitions

In order to make sure everyone’s on the same page for these blog posts, I think it’s important to outline some definitions that will be used frequently in my posts. A lot of these are taken from the Writers Guild of America‘s (WGA’s) Minimum Basic Agreement (MBA), with some other thrown in. Please keep in mind these are just general definitions and many will be elaborated upon in later blog posts.