The following terms are commonly used in the independent movie business and in the financing of indie films:
Above-the-Line: The portion of a project’s budget which covers major creative elements and personnel, i.e., those which are creatively unique and individually identifiable. These are primarily story acquisition, script rights, script development, writer, executive producer, producer, director and principal members of the cast.
Advertising: The creation and dissemination of promotional materials and the conduct of promotional activities including, without limitation, cooperative advertising, institutional advertising, national advertising and trade advertising in whatever form or media.
Below-the-Line: Project budget items relating to the technical expenses and labor (other than above-the-line) involved in producing a film, i.e., relating to mechanical, crew, extras, art, sets, camera, electrical, wardrobe, transportation, raw-film stock, printing and post-production.
Blue Sky: Relating to state securities law compliance matters as opposed to federal securities law.
Creative Talent: Screenwriter, Producer, Director, Actors, Actresses and others who participate in the creative process.
Deferments or Deferrals: Arrangements for the deferral (postponement) of some or all of the costs of goods and/or services provided by the suppliers of such goods and/or services so that the payments are not a production cost but rather are paid out of specified production entity receipts before or after Recoupment.
Depreciation: Income Tax deductions allowed by the Internal Revenue Code in recovering the cost of a tangible asset over time.
Director: The person responsible for the direction of the resources (especially the film crew and cast during production and the editor during post production) brought to bear by the producer in making a film.
Distributable Cash: All cash reserve and funds received by the production entity from its activities. For example, if the production entity is a limited partnership, the definition would be “Gross Partnership Revenues” minus (a) all operating expenses of the Partnership, including, if any, all remaining unreimbursed Offering expenses and expenses incurred by the Partnership in connection with the distribution and exploitation of the movie and the ancillary rights thereto; (b) such reserves as the General Partner deems necessary in accord with good business practice to cover future Partnership expenses; (c) all costs of production of the film which have not been supplied by the Partnership or by any pre-sales or other similar agreements (such as, for example production funds obtained through loans); and (d) any Deferments.
Distributor: The person(s) or entities arranging for the exhibition of the film or providing other means of commercial exploitation.
Distributions (for example, of a Partnership): Any cash or other property distributed to Partners. The term “Distributions” shall not include any payments to the General Partner in the form of management fees, organization fees, production fees, selling fees or reimbursement for goods or services provided to the Partnership.
Executive Producer: The individual or individuals who are designated by the Producer to receive the Executive Producer credit for the film for services rendered in the organization and funding of the entity producing the film.
Executive Producer Fee: A payment or payments to be paid to the Executive Producers for services rendered in the organization and funding of the movie project.
Feature Film: A motion picture at least 80 minutes in length.
Financial Projections: Good faith estimates (based on reasonable assumptions) of the future financial results of the producing entity and its activities relating to the production, distribution and exploitation of the film.
General Partner: The manager of a limited partnership. The general partner may be one or more individuals or a managing entity, such as a corporation.
Gross Proceeds of the Offering: The aggregate total of the Original Invested Capital of investors in a production entity.
Gross Partnership Revenues or Gross Revenues to the Partnership:The total amount of revenue received by a Partnership from all sources for Partnership activities, including the distribution, exhibition and exploitation of the film but not including any monies due to be paid to any co-financing entity (same as “Partnership Gross Revenues”).
Independent Films: Movies produced by independent producers; in another words, producers who are not directly affiliated with one of the major motion picture studios such as Fox, Disney, Paramount, MGM, etc.
Indie: Short for “independent.”
IRS: The Internal Revenue Service.
Issuer: The entity which is issuing the securities in the production entity (i.e. the limited partnership, limited liability company, or corporation). The person or entity offering the securities for sale is the “offeror.”
Limited Partners: Non managing investors in a limited partnership.
Net Proceeds of the Offering: Gross Proceeds of an investor offering for a production entity less expenses incurred and to be paid by the production entity in connection with organizing the entity and in offering Units of ownership (the “securities”) to Prospective Purchasers.
Offering: The offer and sale of securities in a production entity made in reliance on Regulation D, promulgated by the Securities and Exchange Commission and various state exemptions from registration, or some other authorizing law or regulation.
Offering Memorandum: The disclosure document which is required to be furnished to Prospective Purchasers of securities in a production entity pursuant to the federal and sometimes state securities laws and regulations.
Option: An agreement between a producer, or production entity, and the author of a screenplay wherein the producer pays an upfront fee and then has a specified period of time (a year, for example) to raise or arrange production funding for the project. If the funding is raised in a timely fashion, then the producer can buy the screenplay and begin pre-production on the project. A producer can also option rights to a story that would become the basis or inspiration for a screenplay.
Pre-Production: The earliest phase of production, encompassing writing, polishing and breaking down the script, hiring or obtaining letters of intent from creative personnel, including the director and principal cast establishing shooting locations and shooting schedules, preparing the budget and such other steps as are necessary to prepare for the actual commencement of photography.
Pre-Sale Financing: Funds obtained in addition to the proceeds of an investor offering in the form of cash advances or guarantees paid by domestic or foreign distributors, pay or cable television systems, video cassette producers, television syndicators, and/or bank loans obtained by using such cash advances or guarantees as collateral.
Producer: Those individuals or entities that manage the business of making the motion picture and who are to receive the Producer credit for their work in connection with the production of the film.
Producer’s Rep: Someone hired to represent the producer of a motion picture in an attempt to secure distribution for the film.
Production Cost Deferments: Arrangements for the deferral of some or all of the costs of goods and/or services provided by the suppliers of such goods and/or services so that the payments are not a production cost but rather are paid out of specified production entity receipts before and/or after Recoupment.
Production Entity: It is usually advisable for a producer to form a company to own and produce a proposed film project. The company so formed is the “production entity.”
Post Production: The final stage of production, after the close of photography or filming of the movie. This is when the film is edited, color corrections are made, sound is added (foley), the musical score is added, dialog may be fixed or corrected, credits are included, etc.
Recoupment: The designated point at which investors in a production entity are paid a specified percentage of their invested capital (usually 100% of invested capital).
Securities Act: The federal Securities Act of 1933, as amended.
Securities and Exchange Commissio”: The federal agency responsible for regulating the sales of securities including limited partnership interests. This agency is often known as the “SEC.”
Thanks to my friend John Cones for providing much of the foregoing material.
