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The ‘Obsession’ Windfall and How Indie Hits Pay Out — Transcript

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0:05This episode of The Town is presented by
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0:28It is Thursday, June 11th. Hollywood
0:30movies are a fascinating mix of commerce
0:33and art. Sometimes those two things are
0:35at odds, sometimes they enhance each
0:37other. I've always found that even
0:39people who have worked in Hollywood for
0:40years often don't understand how the
0:43commerce part actually works. How the
0:45money is collected, who gets it, when
0:47they get it, and why.
0:49That's especially true in the world of
0:51independently produced movies. When a
0:53big studio or streamer makes a movie,
0:55they put up the money and hire people to
0:56make the movie. Then they collect about
0:58half the box office gross from the
1:00theaters and exploit the film in various
1:02windows from premium video on demand all
1:04the way through to free TV and even
1:06YouTube. The talent involved is either
1:08paid up front or a mix of up front and a
1:10portion of the proceeds from various
1:12windows depending on what they've
1:14negotiated. It's more complicated than
1:16that, but not as complicated as the
1:18indie film world where there can be
1:20dozens of financial backers on one film
1:22all with a stake in the outcome. Plus
1:24the distributor that pays to acquire a
1:26film and release it, sometimes globally,
1:29sometimes just in a specific territory
1:31or a handful of them, or for a specific
1:33term. The talent who makes the film
1:35often works for little money up front
1:37and a share of the proceeds in success
1:39if they can negotiate that. Often not.
1:42At the center of it all is the so-called
1:44waterfall. The money that flows in from
1:47each window throughout the lifetime of
1:49the film. That revenue waterfall is
1:51especially relevant when a small budget
1:53indie movie becomes a big hit. Something
1:56like the current horror thriller
1:58Obsession, which was made by filmmaker
2:00Curry Barker for only about $750,000,
2:04and it sold to Focus Features, a
2:05division of Universal Pictures, last
2:07fall at a festival for about $15 million
2:11up front. It's now grossed more than 240
2:14million in worldwide theaters on its way
2:16to what could be a $300 million
2:19gross.
2:21That's just in theaters, too. So, who
2:22profits from that? And how does that
2:24waterfall flow? There's been a lot of
2:26speculation about this topic online, a
2:28lot of garbage out there. Then an art
2:30director on the film has voiced her
2:31displeasure at being paid less than 10
2:34grand total for her work. So, that's our
2:36topic today, and to discuss it, we've
2:38got Minette Louie on the show. Minette
2:39is a professor in the graduate film
2:41program at Columbia University and a
2:43veteran indie film producer. She's taken
2:45projects to Sundance, Toronto, all the
2:47big festivals, and she's worked on
2:49countless deals. She's not involved in
2:51this movie at all, but last week, amid
2:53all the chatter about who got paid what
2:55on Obsession, she posted her own
2:57estimates based on her experience in the
2:59industry. Today, we're going to go
3:01through those estimates. It's the
3:02Obsession windfall and who makes what on
3:05a big indie hit. From The Ringer and
3:07Puck, I'm Matt Belloni, and this is The
3:08Town.
3:10>> [music]
3:14>> Okay, we are here with Minette Louie,
3:15who is a veteran independent film
3:18producer as well as an assistant
3:20professor of professional practice and
3:22co-head of creative producing in the
3:24graduate film program at Columbia
3:27University. I love that title. Welcome.
3:29>> Thank you. It's a mouthful.
3:31>> All right. So, I wanted to have you on
3:33because, you know, we have a lot of very
3:36sophisticated listeners of The Town who
3:38know everything we're about to talk
3:40about today. And we also have a lot of
3:42people who are not and don't. And we
3:44also have a lot of people who think they
3:46are sophisticated and really don't
3:49understand the minutia of this stuff.
3:51So, when the financials of Obsession
3:55started to go around the internet and I
3:57started to do a bunch of face palms at
4:00some of the misinformation that was out
4:02there. And then you posted a response to
4:05the face palms
4:06>> Yeah.
4:06>> and said, "Listen, we we got to get
4:08some, you know, basic facts right here."
4:11I said, "Let's have Manette on the show
4:14to just go through and do an explainer
4:16episode of how the financials of an
4:19independently financed and distributed
4:22movie through a studio specialty
4:25division makes money."
4:27>> Yeah.
4:27>> So, can we do that? Well, first of all,
4:29explain briefly just how the waterfall
4:33of revenue works on an indie movie.
4:35>> Yeah, I mean, it it varies obviously
4:38from film to film, but there are some
4:40basic things and I just want to, you
4:41know, explain that there's two different
4:43types of water There's two different
4:44waterfalls. There's the distributor's
4:45waterfall, so that's the, you know, the
4:47all the accounting statements that Focus
4:49put put out for
4:50uh Obsession, there's the distributor's
4:52waterfall. And then after that, below
4:54that is the licenser's waterfall or some
4:56people call it the producer's waterfall.
4:57>> Well, I guess there would be a third,
4:59which would be the exhibitor, the the
5:00theaters. But, we're not going into that
5:02today. They take half the revenue from
5:04the box office and then they take all
5:06the concessions. So, they make their
5:08money that way.
5:09>> Exactly. And that's the one thing that
5:11the main thing that people misunderstand
5:12is that Focus gets half the money from
5:15the theaters, you know, um just right
5:17off the top.
5:18Um so, then once the money comes into
5:19Focus, Focus would take a distribution
5:21fee. Uh you It's usually like, you know,
5:2430%, 35%, 40% of uh all the gross
5:27receipts they collect and that's their
5:29fee for paying themselves to do the work
5:31do the hard work of releasing the movie.
5:33>> And that's why they paid a $15 million
5:36minimum guarantee to acquire the film at
5:40a film festival like Toronto. They
5:42That's when you see these headlines
5:43like, "Obsession sells for $15 million."
5:46That is Focus paying the minimum
5:48guarantee of $15 million to acquire and
5:51distribute the film. In this case,
5:53worldwide?
5:54>> No, it was US plus a couple of
5:56international rights because Capstone,
5:58who is the financier, also I believe
6:00sold the international rights. So, Focus
6:03took some territories. But, but the
6:05but the distribution fee is a little is
6:07a separate from the MG. The The MG or
6:09minimum guarantee is basically it's a
6:11minimum guarantee or an advance against
6:14future sales.
6:15>> Right. So, it's recoupable.
6:16>> It's recoupable and they recoup that
6:18plus interest. Okay? So, like on top of
6:20the 15 million, they're recouping
6:22interest plus 2% usually, prime plus 2%
6:25on the interest. Plus, they have to
6:27recoup all the money they spend on
6:29marketing and distributing the movie.
6:30So, or the P&A as we call it.
6:33Which I don't know what that number is,
6:35but you know
6:35>> And is the P&A typically recoupable?
6:38>> Yeah, they pay themselves back to create
6:39the DCPs, to create the posters, to
6:41design them, to cut the trailer, all
6:42that stuff, to fly Curry Barker here,
6:45there, and everywhere to promote the
6:46film. So, yes, all that is recoupable.
6:48>> To pay for his shadow Twitter accounts
6:50to start promoting the movie by posting
6:52positive things and then retweeting it.
6:54>> Yes, [laughter] yes, exactly. Viral is
6:56not not a real viral is a a creation.
6:59>> Believe nothing you see on the internet.
7:01>> Exactly, exactly. Um and then also the
7:03box office bonuses that they pay out to
7:06folks like, you know, Jason Blum and,
7:08you know, whoever else is able to
7:10negotiate box office bonuses when the
7:12box office receipts hit a certain
7:13target.
7:14>> Well, let's get we'll get to that. But,
7:15but let's go through the distributor's
7:16waterfall here. So, money comes in the
7:18door and where are all the different
7:21sources of money?
7:23>> Well, so there's, you know, theatrical,
7:25there's um transactional VOD. So, you
7:28know, when you rent a movie or buy a
7:29movie on on iTunes or Amazon or
7:32whatever. That revenue is shrinking. Um
7:35there's still physical media, you know,
7:37a little bit, DVD.
7:38>> Oh, yeah, Sean Fantasy. He's going to
7:40hold out to the very end.
7:42>> And then there's SVoD streaming and
7:45television licenses. That's kind of the
7:47biggest chunk right now. And then
7:49there's non-theatrical like airlines and
7:51film festivals and various things like
7:53that.
7:53>> But that revenue comes in later. That's
7:56why it's called the waterfall because it
7:58it, you know, sort of pours over the
8:00entirety of the film. And how is that
8:03accounted for? You hear that that
8:05opening weekend or the theatrical
8:08distribution will dictate the value put
8:11on the movie for other windows. Explain
8:14how that works in the indie context.
8:16>> Yeah, sure. Well, there if basically
8:19like with these streaming deals, if
8:22the box office hits certain milestones,
8:25then the license fee goes up. So, it's
8:28sort of a tiered system. So, it's like
8:29if you hit 100 million, we're going to
8:30pay you, you know, 5 million more or
8:32something like that for the license fee.
8:34>> That's why it's so important because it
8:37dictates the value of the film in all of
8:40the windows.
8:41You can say, "Oh, this movie didn't do
8:43well in theaters, but it'll probably be
8:44a big hit on streaming." The big thing
8:46is if it gets to 2 300 million dollars
8:48at the box office, it's treated
8:50differently throughout the other windows
8:53than a movie that doesn't.
8:54>> Absolutely. And even if they don't hit
8:55those I mean like the milestones is one
8:57thing, but just the sheer, you know, if
8:59you're doing big numbers at the box
9:01office, then a lot of people have seen
9:02your movie, a lot of people are aware of
9:04it. And so, they'll come seek it out on
9:06Hulu or Netflix or whatever.
9:08>> Okay, so that's all the incoming money
9:11for the distributor. Let's talk about
9:12the deductions. You mentioned the
9:14distribution fee, which they take
9:16themselves. And let's say, you know,
9:18let's assume that
9:20this movie Obsession gets to 300 million
9:23dollars. So, a typical distribution fee
9:26would be 30% you're saying on an indie
9:28like this?
9:28>> 30 to 40% and it's different for every
9:31type of money. Theatrical is different
9:33than SVoD is different than TVoD. So,
9:35those numbers can vary.
9:36>> So, a distribution fee on a $300 million
9:39grossing movie, and I know this is not
9:42apples to oranges because that's the
9:43global number, and Focus doesn't have
9:46all the territories, but just for the
9:48purposes of argument, let's just say
9:50that it was global,
9:5230% of 300, that would be
9:56uh
9:57>> 90 million.
9:58>> Yeah.
9:59So, 30% let's just take the domestic
10:01number. If it gets to 150, I think it's
10:03a little above that, but let's use 150.
10:05That would be $45 million as a
10:06distribution fee in theaters for Focus.
10:10That's not bad. That's triple the price
10:13that they paid to acquire the film.
10:15>> Yeah, it's not bad. Um but it could have
10:17gone the other way. I mean, they they
10:19they've put in tons of millions of
10:21dollars into this film, and if it didn't
10:22do well, then they would be at a loss.
10:23>> Yeah, and they eat all the marketing
10:25costs, but those are recoupable. So,
10:27what are the other deductions? You know,
10:29distribution and marketing
10:30>> So, yeah, distribution fee, the
10:32marketing expenses, any kind of bonuses
10:34they paid for the box office or VOD, um
10:37and the minimum guarantee, the 15
10:38million they paid to the licenser, um
10:40that that that gets recouped plus the
10:42interest on the minimum guarantee, which
10:44is like prime plus 2%. So, after all
10:46those things are deducted, that's when
10:48you get into the net receipts or the net
10:50profits, um and that gets split between
10:53the distributor and the licenser. So, it
10:55could be 50/50, [clears throat]
10:57it could be like 75% in favor of the
10:59licenser. I've gotten a deal once where
11:01I got to keep 100% of that back end.
11:03>> And what caused you to get 100%? Was
11:05that just the leverage you had? Like in
11:07demand, all-night bidding war?
11:09>> It was an all-night bidding war, so
11:10yeah. And I heard this was, too. So, I
11:12do think that the producers did have
11:15some leverage here to, you know, get
11:16some good deal terms.
11:17>> Right. And so, in that kind of context,
11:20you think that the
11:21the share of revenue for the producers
11:25is going to be very favorable.
11:26>> I think so. I mean, it may not be as
11:28high as the 75% I put in my waterfall,
11:30but it could be like, you know, 60%,
11:3270%. I do think they probably got a
11:33majority.
11:34>> Okay. Well, so let's use your number.
11:36Let's use 75% that you put in there. So,
11:38let's let's continue the analysis here.
11:40I feel like we're doing SAT prep course.
11:44>> [laughter]
11:44>> So, first first let's like finish out
11:47the distributor. So,
11:50let's get to all of the revenue that
11:52they are going to make.
11:53>> Yes.
11:54So, they're making their distribution
11:55fee, which we already talked about.
11:57They're making the interest on the 15
11:58million MG they paid. And then they're
12:01getting this, you know, 25% share of
12:03net. So, those are the three different
12:04sources that they're getting money from.
12:06>> Okay. Also, Focus has sequel rights. So,
12:09if there is Obsession 2 through 10, they
12:12will participate in those movies.
12:14That's, you know, they're going to get
12:15to do a Halloween Horror Nights maze at
12:18Universal Studios. Like, there will be
12:20other ways for them to profit off this.
12:22This kind of a movie could be an anchor
12:25in a package of movies that gets
12:27licensed to foreign television or
12:29others. And there are ways where these,
12:31you know, it will forever be in the
12:33Focus library, which is the Universal
12:35library, which brings value there. So,
12:37there's a lot of ways that these studios
12:39get value out of these movies. We are
12:40just going through the specific P&L on
12:44this particular
12:46on this particular title.
12:47>> Yep.
12:48>> Okay. So, you have total there as being,
12:53you know, a windfall of, let's say,
12:57for the purposes of this argument, this
13:00movie gets to 200 million domestic and
13:03the territories that Focus controls. On
13:06a 200 million grossing movie for a
13:08distributor like this in the indie
13:10context where they paid 15 million up
13:12front, what do you estimate the take
13:15home from the theatrical window is for
13:19Focus?
13:19>> I mean, here, let me plug it into my
13:21spreadsheet cuz I'm not going to
13:22estimate that off of um so, basically,
13:25if they're getting they're getting a
13:26hundred million dollars, right? From
13:28that 200.
13:29>> And we don't know what their marketing
13:30spend was exactly. And we There's a lot
13:32of variables here.
13:33>> Yeah, we don't know.
13:35Um okay.
13:37They'd be getting
13:3943 million.
13:41>> Okay.
13:42Just from the theatrical distribution.
13:44>> Yeah, just you know, assuming all my
13:45assumptions are
13:46>> Yeah.
13:46>> correct.
13:47>> Not bad.
13:48Um and that's just the beginning. So
13:51but let's flip this because this is what
13:52I think most people want to know about.
13:55Let's flip this to the people who made
13:56the movie.
13:57>> Yes.
13:57>> Because that's where we saw this art
14:00director complain that, you know, she
14:02was paid $3,000, sorry, $300 a day ended
14:06up making less than $10,000 on the
14:07movie. She wanted to get uh additional
14:11payments. That typically doesn't happen.
14:13Um have you ever seen
14:15in the indie context bonuses across the
14:17board to everybody who worked on the
14:19movie?
14:20>> Yeah, Sing Sing did it.
14:21>> Um Oh yeah, that's right.
14:23>> Yeah, and you there's a great uh on
14:25YouTube they did a very detailed case
14:26study with Dolby. So if you Google Sing
14:28Sing and Dolby, you'll hear the
14:30filmmakers talk about how they did that.
14:32And you know, they had 75 people in
14:33their cast and crew.
14:34>> Yeah.
14:34>> And they were able to do that and they
14:35basically, you know, just very quickly
14:38um they treated everybody equally. They
14:40gave everyone the same pay. The only
14:42variable is time, like how much time
14:43each of them worked on the film. Um but
14:46everybody participated.
14:47>> But wasn't that negotiated up front?
14:49>> It was negotiated up front, yeah.
14:50>> And that's what Ben and Matt Ben Af- Ben
14:53Affleck and Matt Damon they do that with
14:54Artist Equity where they give everyone a
14:56piece of the bonus if they get to the
14:58streaming bonus, but that's all
14:59negotiated up front. I mean, when you
15:01have a contract and you agree to terms,
15:03it's really tough to go in after the
15:04fact.
15:05>> It is tough to go in after the fact, but
15:06I I
15:07I've been given back in after the fact.
15:09I didn't negotiate it. You know, my very
15:11first film Mutual Appreciation uh the
15:13director Andrew Bujalski, he made some
15:15money from that movie, a little bit of
15:16money, not even that much, but as soon
15:18as he made some money since none of us
15:19were paid, he gave us money. We didn't
15:21ask for it. He gave it to us, you know?
15:22>> That's very nice of him. I don't know if
15:24they a big corporate studio is going to
15:27do that.
15:28>> They probably won't. They probably
15:30won't. But I myself have had like
15:31allocated points on my like unallocated
15:34points on some of my films. And I'm
15:35like, "Hey, you know, this person did
15:37such a great job. I'm going to give them
15:38some points, you know, even though their
15:39deal is already closed." But I will say,
15:41you know, Sally, I'm really glad that
15:42Sally Choy brought it up because this
15:44conversation needs to be had. I think
15:46it's important. And I think she was
15:48brave to do it, you know, especially as
15:49a woman of color in this industry like
15:51or unicorns, you know, we don't get
15:52second chances and we have to work 10
15:54times as hard. So, you know, and it's
15:56it's kind of crazy that these so-called
15:57liberal filmmakers are they're arguing
16:00against sharing of wealth.
16:02Um it's a little crazy to me. Their
16:03minds have been like thoroughly
16:04colonized by you know, traditional film
16:07capitalism or something.
16:08>> I Well, it would be nice if they did
16:10share. Uh I know they probably don't
16:12have any obligation to and there's
16:14companies like Blumhouse that came in
16:16after the fact and they could share as
16:18well. So, we'll see if any of that ends
16:19up happening.
16:20>> Yeah, I mean, you know, on the other
16:22side there's a lot of crew who you know,
16:24are saying that producers and directors
16:26are selfish for not sharing and you
16:28know, they're not acknowledging or maybe
16:29they don't know that very often we on
16:32tiny films like this, we don't even pay
16:33ourselves. Like we get zero up front and
16:36for years of work, for years of
16:37development developing and packaging.
16:39>> Well, and you do 10 of these and nine
16:41don't work.
16:42>> Yeah, exactly. [laughter]
16:43>> Yeah, I know. It's a very complicated
16:45issue, but I am glad we're talking about
16:47it. So, let's get to the licenser's
16:49waterfall, all the producers waterfall.
16:52So, take us through who put up the money
16:54for this movie and how they get paid.
16:57>> Yeah, so they they get the minimum
16:59guarantee of the 15 million that Focus
17:01paid in the first place.
17:03Um and that and sometimes that's most of
17:05the time that's all the money you'll
17:06ever see from a movie, you
17:08>> That's why it's so important to get that
17:09up front.
17:10>> Exactly. Exactly. And it's an indication
17:12of how hard the distributor is going to
17:13work to distribute your film. If they
17:15pay you zero, they don't have to work
17:17very hard to make that back, right? So,
17:19um so they're getting a $15 million
17:20minimum guarantee in in my example,
17:23they're getting a share of net, the 75%
17:25that we talked about earlier. Um and
17:28then they probably negotiated some box
17:29office and VOD bonuses as well.
17:32>> That's on top of the share of net.
17:34>> That's on top of the share of net and
17:36you know, I didn't I didn't put in
17:37estimates for those cuz those can range
17:39really widely. Like they can be all over
17:41the place, so I didn't want to guess
17:42there.
17:42>> Well, there was a report out there this
17:44week that said that Blumhouse had
17:46negotiated box office bonuses. So, if
17:48Blumhouse had them, you got to assume
17:50the producers had them as well.
17:52>> You would think so, but you know, Jason
17:54Blum is a is a brand and you know, he
17:56has the leverage to negotiate that kind
17:58of stuff, so.
17:59>> And he brings a lot of value if you you
18:01know, it's marketed via Blumhouse. They
18:03have expertise in how to get these
18:04movies to the right audiences, so
18:06>> Exactly.
18:07>> we shouldn't assume. You're right.
18:09>> Right. But but it was a you know, a um a
18:12bidding war at TIFF, right? So, when you
18:14have a bidding war situation, then you
18:15do have leverage.
18:17>> Right.
18:17>> Yeah.
18:17>> So, let's go through the rest of the
18:20waterfall. That's the revenue coming in
18:23to the producer. What are the deductions
18:25that are charged against it?
18:27>> Yes, there's a lot of those. There's um
18:29all the middle people that we have to
18:31work with to sell the movie, right? So,
18:33that includes a sales agent, you know,
18:35um who's selling the movie. In this
18:37case, I believe it was CAA, I think who
18:40did that. Um Capstone, I think was their
18:42international sales agent. CAA only did
18:44the domestic. So, sales agents typically
18:47charge between 5 and 10% right off the
18:49top of whatever the producers make. Um
18:51so, they're you know, at TIFF, they took
18:5310% of 15 million.
18:55>> So, and that's off the sale price.
18:57That's not off of the box office.
18:59>> It's off of the sale price and it what
19:00it's off of whatever the producer makes.
19:02It's off of whatever comes into the
19:03producer's waterfall.
19:04>> Oh, so it it it travels beyond just the
19:07sale at the festival.
19:09It goes to the net profits as well.
19:10>> Yes. Yes, it does.
19:12>> Oh, interesting.
19:13>> Mhm.
19:13>> It's so funny because you see the
19:15agencies pulling back these days on
19:18these independent film divisions. WME,
19:20you know, they let their people go and
19:22you know, I I keep hearing that that
19:25business is just so challenged for these
19:28agencies. If you are not, you know,
19:30Brooke Sutherland at CAA, it's really
19:33tough to make that a real business
19:35because so many of these films just
19:37don't sell at all.
19:37>> Yeah, yeah, it's true. It is tough.
19:40>> So, when you have a movie like this that
19:42is a 100% unequivocal success, I guess
19:45you you want to capitalize as much as
19:47you can on it.
19:48>> Yeah, no, absolutely. Um, it is it is a
19:51tough business.
19:52>> But, it does take away from the
19:52producers.
19:53>> Yeah, I mean, what just keep in mind
19:55like this is a one in like
19:5810 million, you know,
20:00example. Like most indie films don't
20:02make money. So, um, yeah, so 10% to CAA
20:06>> Five between five and 10. I don't want
20:07to say it's always 10.
20:08>> Between five and 10. Between five and
20:0910. Uh, the international sales agent
20:11usually makes between like 15 to 25%
20:15of the international receipts receipts.
20:19>> Why is it more there?
20:20>> Because they do sort of do more legwork
20:22because they have to go, um, a lot of
20:24them go like territory by territory. So,
20:26they're selling films to like, you know,
20:27the Spanish distributor and the, you
20:30know, Middle Eastern distributor and
20:32like the Australian distributors. They
20:33have kind of have to go knock on these
20:34doors and it's a lot more legwork having
20:36to travel to markets.
20:37>> They have to go yacht to yacht at
20:38Cannes. I mean, God, you know, who's
20:40going to do that work?
20:42>> Exactly, exactly.
20:43So, um, and then they had the those
20:45sales agents, same international sales
20:47agents, they have a lot of expenses
20:48going yacht to yacht. Um, so they
20:50usually charge a bunch of expenses and
20:52you it's usually like 25,000 or 40,000.
20:54So, they take that off the top. Um, and
20:57then you need
20:57>> That's the rosé bill at whatever Cannes
20:59restaurant they do the dinner at.
21:01>> Yes, exactly. Um, and then, you know,
21:03you need lawyers to negotiate these
21:05deals, right? And so, you're usually
21:07paying either by the hour or like, you
21:08know, sometimes you'll do like 2 to 2.5%
21:11of whatever's coming in to the producer
21:13with a floor and a ceiling.
21:15And then, of course, there's the
21:16collection agent if you engage one,
21:18which you should if you're, you know,
21:20making all this money and having to pay
21:21all these parties. So, collection agent
21:23charges like 1% and they basically bring
21:26collect the money and make sure it's
21:28paid out properly to the right people.
21:30>> Okay, so that's a lot of deductions.
21:32>> There's more. There's more. There's
21:34more. There's
21:34>> Okay, keep going.
21:35>> There's the guild residuals, okay? So,
21:37like usually so, you know, this I think
21:39this movie only was SAG. It didn't use
21:41IATSE crew.
21:42And so, usually Focus a company like
21:45Focus as big as Focus, they'll assume
21:47the residuals. So, they'll pay the all
21:49the SAG residuals. But then, these
21:51smaller distributors that Capstone is
21:52selling to, you know, like the Spanish
21:54distributor or whatever, they're not
21:55going to deal with paying residuals. So,
21:56the producer has to do that. So, we have
21:58to skim off the top in order to pay SAG
22:01so that SAG can then, you know, pay out
22:03those residuals to the actors. Residuals
22:05are a form of back end, by the way. And
22:06so, that's why this was a non-union
22:07crew. If it were a union crew, they'd be
22:10getting residuals on the back end in a
22:12big pot.
22:13>> way you get to a $750,000
22:16budget is if you use a non-union crew.
22:19>> Basically, yes.
22:20>> There's no way to do a movie like that
22:21with a union crew at that price.
22:23>> Right. That's right. Um, did I miss
22:26anything? I think that's basically it.
22:28And then, you want to keep a reserve
22:29from the money you collect cuz, you
22:31know, the producer is saddled with
22:33dealing with the film for the rest of
22:34their lives. So, you have to deal with
22:35the tax accounting every year and the
22:36maintaining it and all that. So, we keep
22:38a reserve to deal with that.
22:39>> That's a lot of deductions. We're
22:40looking at like between 20, 30, 40% off
22:44the top.
22:45>> Yep. Yep. It's a lot. It's a lot.
22:47>> And and that's not even accounting for
22:49deferrals, right?
22:50>> No, it's not. Where that comes later.
22:52So, next in line is the investor
22:54recoupment, okay? So, like Capstone put
22:56in $750,000 I believe for the film and
23:00they get paid back that $750,000 plus a
23:02premium, which is usually like 15 to
23:0525%. So, let's use 20%. So, on top of
23:08that 750, they're getting another 150
23:11as their little reward. And then you go
23:13into cast and crew deferrals.
23:15>> Oh man.
23:16>> Which I put at 100,000, you know? So,
23:18it's like, you know,
23:19maybe Curry waived his entire fee, you
23:21know? So, he's getting kind of paid from
23:22this residual of this a deferral pool.
23:26Um and you know, a a lot of crew I I
23:28I've paid uh like the DP and department
23:30heads
23:31uh from this deferral pool if I'm not
23:33able to pay them their usual rate
23:35upfront, okay?
23:36>> Mhm.
23:36>> So, they take a risk and say I'll work
23:37for much less or free and you pay me if
23:40we make money.
23:41>> Exactly. They're investing their labor.
23:42>> But the the fact of the matter is it's
23:44got to make a lot of money to end up in
23:46profits like this.
23:47>> Yes, exactly because of all these
23:49deductions we've been talking about,
23:50right? Um and then okay, then after the
23:53deferrals are paid out, then you Here we
23:56get into the points, the back end that
23:57everybody is talking about.
23:59>> Right. And that's what we end up talking
24:00about on successful movies is what are
24:03you getting of the upside here? And
24:06we've already explained how, you know,
24:08there's a lot of things that have to
24:09happen and a lot of deductions that have
24:11to be made, but then if after all of
24:14these payouts, you get to profits, net
24:17receipts, then there is a mechanism to
24:20share.
24:20>> Yes, and those mechani- basically it's
24:22the contracts that the crew and the cast
24:24have negotiated with the producer. You
24:26know, you you negotiate your upfront
24:28pay, any deferred pay, and then whatever
24:30points you get on the back end. And so,
24:32if you hit it big like in a movie like
24:33this,
24:34those points will actually materialize
24:36and you'll get money.
24:38>> So, if someone says I have five points
24:39on this movie, what does that mean?
24:41>> It it depends. So, the points can be
24:43confusing cuz basically there's 100%
24:45There's 100 points, the whole pool of
24:47100 points. Half of those points go to
24:49the investor and usually and half of
24:52them go to the producer or the licenser.
24:54And that that half that that 50% is what
24:57we control as producers and we can dole
24:59out to cast and crew. So if somebody
25:01says I have five points in the film,
25:02this you assume it's five producer
25:04points, you know, and not five total
25:06points. Five producer points, so that's
25:075% of that 50%.
25:09>> So two and a half of the whole.
25:11>> Two and a half of the pie of the entire
25:12pie, exactly.
25:13>> And if you say like, oh, we weren't able
25:15to get a a big actor, so we had to give
25:18five points to Chiwetel Ejiofor or
25:22Renate Reinsve to get them in backrooms
25:24or something like that.
25:25>> Yep.
25:25>> That's what we're talking about.
25:26>> Exactly. And yeah, for names like that,
25:28they usually take the biggest share of
25:30the pie.
25:30>> And interestingly, they're represented
25:33by one of the big agencies, which is
25:35often the agency that ends up selling
25:37the movie.
25:38>> Yes, there's a lot of dipping and here.
25:42>> Yes, we don't have to get into that.
25:43>> That's the other thing, too, is like,
25:44um, you know, all like directors and and
25:48writers and and, um, actors, they have
25:50to basically take 25% off the top of
25:52their own pay. 10% to their agent, 10%
25:55to their manager, and 5% to their
25:56lawyer. So, I like people to keep that
25:58in mind as well.
26:00>> This podcast is brought to you by Land
26:02Man. As oil rises from the earth, so do
26:04the secrets. Billy Bob Thornton, Demi
26:07Moore, and Sam Elliott star in the
26:08explosive second season of Land Man. One
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26:19a cultural phenomenon. For your Emmy
26:21consideration in all categories. Now
26:23streaming on Paramount Plus. So let's go
26:25through the waterfall for the the talent
26:29participants.
26:30>> Yes.
26:31>> How does that typically work? The
26:33producers get the most?
26:34>> Well, no, the the lead out the A-list
26:36actor gets the most.
26:37>> Okay. I mean, in the case of Obsession,
26:39these were not known names.
26:41>> Yeah, so I don't think they got very
26:42much. They got probably got a couple
26:44points. Um, the producers probably got
26:47the most. The director got, um, a lot, I
26:50would imagine. Um, and I don't and I
26:53usually give, you know, points to my
26:55department heads at least. I don't know
26:57what happened here. I've no idea.
26:58>> So, a line producer or a DP or a
27:01composer editor, those people can get
27:04points on an indie movie.
27:06>> Yeah, and most and many of my indie
27:08producer colleagues do give points to um
27:11these department heads cuz we're asking
27:12them to work for less than their usual
27:14rate, you know, on these little passion
27:16projects that we have, right? So,
27:18they're investing their labor and their
27:19time. So, um we're giving
27:22money because of that.
27:23>> And in the ultimate success of a movie
27:26like this,
27:27is that are we looking at a
27:29million-dollar windfall for a typical
27:32below-the-line participant? Are we
27:34looking at a couple hundred grand?
27:36>> even even in this situation, you know,
27:38my what was my example? I can't I can't
27:40even find my my own example right now,
27:42but um
27:43you know, 1% at the current box office
27:46when I did this was worth $127,000.
27:50>> So, now it's probably up to 150.
27:52>> Yeah.
27:53Yeah.
27:54>> So, if
27:55Sally Choi had gotten a point on this
27:58movie, she would have had an extra 150
28:00grand.
28:01>> She would have. She's an art director.
28:02She's not the production She worked
28:03under the production designer, so
28:05>> Right. So, she's probably not getting
28:06that in the best-case scenario, but
28:08let's say she did.
28:10>> Yeah. Yeah, she'd be getting an extra
28:11$130,000,
28:13$50,000.
28:15>> All right. So, bottom line here, give us
28:17your ranking of the people who made the
28:20most money on Obsession. Taking the
28:23theaters out of it, taking Focus out of
28:26it.
28:27Who is making the most money likely on
28:30Obsession?
28:31>> Just from Obsession?
28:32>> Mhm.
28:33>> Not from cuz Curry Barker has gotten
28:34really great deals after Obsession,
28:36right? For his subsequent films, right?
28:38>> Yeah, no. We're not talking about the
28:39heat. Everyone associated with Obsession
28:41is going to get a bump. The The stars of
28:43the movie are going to get big roles.
28:45I've already heard the lead actress is
28:47up for a ton of things. So,
28:49give us your
28:51uh ranking of people just on this movie.
28:54>> Okay, I would imagine Curry and the lead
28:56producers. Uh those British guys, I
28:58believe. Um got the most. I mean, Curry
29:01is a brand, right? That's why they
29:02reached out to him in the first place.
29:03Those producers like, you know, saw um
29:06some promise in him. They saw he had an
29:07audience and they they took the risk of,
29:10you know, making his first feature. Uh
29:12so, they should get rewarded for it and
29:15and so should Curry.
29:15>> And what about Blum? Blum's got to be on
29:17there.
29:17>> Not with that rap article that came out.
29:19I you know, it sounds like he made a
29:20nice sweet deal with um Focus and
29:23Universal for his bonuses. So, that's
29:26probably up there as well.
29:28>> But so, okay, Minette, so like this
29:29movie makes $300 million. You take half
29:31of it. So, are we saying Curry Burker
29:33who wrote and directed this like 10 20
29:35million bucks? Does that feel right?
29:37>> I mean, I don't want to say that cuz I
29:39don't know what he got in points. I
29:40really I don't want to speculate and
29:41everybody is always thinking taking this
29:43is like fact, right? So, I don't want to
29:45use hard number hard dollar numbers.
29:47>> But more just a kind of have a sense of
29:49like, okay, if if you are someone like
29:50him and you make a movie that hits big,
29:52like what could you make off this?
29:54>> Yeah, I put the numbers in and it's
29:55like, you know, it's under 10 mi- it's
29:57like 6 million bucks. It's under 10 mi-
29:58It's not It's Yeah, it's it's a lot It's
30:00a lot of money, but it's not like, you
30:01know, dot com money or whatever. It's
30:03not tech money, right?
30:04>> that surprise you, Craig? I mean, this
30:06guy did not have like the biggest
30:09leverage going into this. This was a
30:11tiny movie.
30:12>> Totally. And getting 6 or 10 million
30:13dollars is obviously great. And then, of
30:15course, like Minette said, like what
30:16this gets you is it sets you up for
30:17everything else afterwards.
30:18>> Yeah, the whole reason you do this is
30:20for the next movie and the movie after
30:22that.
30:23>> Yes. And the real winners here are are
30:25the producers.
30:27>> Yeah.
30:27>> And the distributors.
30:28>> Yeah, and the investor. The investor
30:30made a lot of money.
30:32Yeah.
30:32>> And the stars who got a huge bump off
30:33this. They'll have careers.
30:36>> I think everybody, crew, everyone, you
30:37know? Um I think when you're when you're
30:39associated with something successful
30:41like this, like your next thing is your
30:42payment.
30:43>> All right. So, this movie, obviously,
30:46is an anomaly.
30:48What percentage of indie movies that
30:52sell
30:53at film festivals, I'm not talking about
30:55the morass of movies that try to find a
30:57distributor and don't, or
30:59self-distribute or whatever.
31:02The headlines we see at film festivals,
31:03what percentage of those end up in
31:04profits?
31:06>> You know, everybody asks this question.
31:08I've been trying to look for the answer.
31:09I I think the reason why I think there's
31:11just not a lot of like reliable data out
31:13there is cuz these are
31:14Each indie film is like a private
31:15company, you know? We we form LLCs. We
31:18don't make any anything public, you
31:20know? We're we work in an industry of
31:21smoke and mirrors, so nobody wants to
31:23admit their failures.
31:24>> Well, that's why there's so much
31:24litigation, also.
31:25>> Exactly.
31:26>> people, and there's so many nuances to
31:28these deals that it just it is a
31:31breeding ground for bad behavior and
31:33ultimately litigation.
31:34>> Yeah, unfortunately. But, you know, the
31:36the number I often use is basically like
31:382% of all indie films that get that get
31:41made recoup for their investors. Not
31:43even hit it big, just like recoup
31:45period, you know?
31:46>> 2%?
31:46>> 2%.
31:47>> That's worse than Broadway.
31:49>> Yeah, it's pretty terrible. It's not a
31:51business you want to go into if you want
31:53to make a lot of money, you know? And
31:55>> And and the old days of the DVD market
31:57saving these films that that's long
32:00gone.
32:00>> Unfortunately, yes, we have to find an
32:02alternate because these stream you know,
32:03with streaming for a little while, but
32:05these streamers are not buying these
32:07films anymore.
32:08>> Unless Netflix thinks they can get an
32:09Oscar nomination out of it. Then they'll
32:11pick up some movies that can.
32:12>> Potentially, but you know, that that
32:13only benefits a handful of movies, but
32:15like there the distribution model is
32:17broken and needs to be fixed. That's the
32:18biggest problem in independent film
32:20right now.
32:20>> Well, how would you fix it? You got a
32:22platform here.
32:22>> I don't know. It's a huge problem. I'm
32:24going to teach a class on distribution
32:26in the spring, so I'm trying to figure
32:27it out and I'll let you know. You can
32:28have me on again and I'll tell you.
32:29>> I know.
32:30>> [laughter]
32:30>> We I I want you to fix the the indie
32:32distribution problem cuz I hear this all
32:34the time, people complaining about the
32:36model and the the streamers were great
32:38for a few years cuz they were buying up
32:40global rights that everyone was getting
32:41paid but then they backed away a little
32:44and now it's sort of left with this
32:45wasteland where a couple movies hit it
32:48big at these festivals and everybody
32:50else is chasing scraps.
32:52>> Yeah, I mean it's been that way for a
32:53long time like they're always there's
32:55always like a handful of films that like
32:57you know have the bidding wars
32:59but the rest of the films would find
33:01some kind of distribution would find
33:02some kind of home even if it weren't
33:04like you know making a lot of money they
33:06would find a distributor willing to take
33:08it on and putting in the the effort to
33:11put it in theaters or on VOD or whatever
33:13but we're not even finding that now.
33:14>> Well, hopefully the outside success of
33:17Obsession will lead to people taking a
33:20little more risk and being willing to
33:22take chances on some films and we'll get
33:25a little bit more heat around this
33:26market.
33:27>> I sure hope so and I do hope that what
33:29Sally said will spark others to think
33:31about different models and I do want to
33:33mention one other there was a company
33:34called Indigent back in the early 2000s
33:37that really pioneered they were the OG
33:39of like this back end sharing with crew
33:41and they were partnered with IFC Films
33:44which basically funded their slate and
33:46IFC was so generous they shared like
33:4850/50 with the company from the first
33:51dollar
33:52which is so good which is never we would
33:54never happen these days you know.
33:55>> And how long did they last?
33:57>> I think maybe
33:59not quite a not quite a decade.
34:01>> I IFC might still be around.
34:02>> IFC is still around yeah yeah yeah IFC
34:04is still around. Yeah, that company is
34:06not unfortunately.
34:08>> All right, well we will figure it out at
34:09some point and we will revolutionize the
34:11indie film business you and I. Thank you
34:13for coming on the show appreciate it.
34:15>> Thanks Matt.
34:18>> All right, today's call sheet is brought
34:19to you by FX's The Low Down from
34:21Sterling Harjo starring five-time
34:23Academy Award nominee Ethan Hawke.
34:25Craig, I'm going to place a little bet
34:28here and say that you are a fan of the
34:3121 Jump Street franchise.
34:33>> Absolutely. Yeah.
34:34>> Yeah, that that seems like right in your
34:35wheelhouse.
34:36>> Yeah, it was like 2010 to 2014 range.
34:39That was we
34:40that was the sweet spot.
34:41>> Yeah, those movies are good.
34:43>> They're great.
34:43>> 21 Jump Street, 22 Jump Street, good
34:45comedies.
34:46>> It's the rare sequel that came out right
34:48after the original and also was great.
34:51>> Yes. So, they've been trying for 10
34:53years to do a third one and it's always
34:57been difficult because according to my
34:59sources, is Jonah Hill. He didn't want
35:02to do a legacy sequel like that. He
35:05wanted to be a real filmmaker and
35:07>> Yeah, he had elevated beyond that. He
35:09was doing Wolf of Wall Street and and
35:11directing cool movies like Mid-90s and
35:14things like that.
35:14>> Totally.
35:16That's why it was so funny to see the
35:19announcement this week that 24 Jump
35:22Street, they're skipping 23 apparently,
35:24it's an inside joke, and going straight
35:26to 24 Jump Street. And yes, Jonah Hill
35:29and Channing Tatum and Ice Cube all in
35:32talks to return. And my prediction is
35:35not just that that this will happen, but
35:37it's more why this is happening. I mean,
35:40Jonah Hill right now is not in a great
35:42spot as a filmmaker. Outraged, no,
35:45outcome
35:46>> Outcome, yeah. Worst title ever.
35:48>> Outcome just came out on Apple. Have you
35:52And have you actually seen that movie?
35:54>> No, it's in my queue. I need to watch
35:55it.
35:57>> Yeah, I'm not a critic, but man, like
36:00that's a whiff. They paid a lot of money
36:02for that. They Keanu in it. They Cameron
36:04Diaz in that movie. Um, and then more
36:08importantly is he had a movie he
36:10directed called Cut Off with Kristen
36:12Wiig that was supposed to come out via
36:14Warner Brothers in July and Warner's
36:17just punted the movie. No release date.
36:20>> And Jonah was directing that.
36:22>> Yes.
36:23No release date, nothing. I heard it was
36:25a total disaster, unreleaseable. They
36:28are trying to fix it now. And I think
36:32that because of those two setbacks,
36:35Jonah has fallen into the warm embrace
36:39of a franchise that he knows will be a
36:41hit.
36:41>> Oh, I see. Okay.
36:43Got it. You think this is a reset here?
36:45Let's do something that's bankable, that
36:47everybody likes.
36:48>> Yes.
36:48>> Which is probably smart.
36:50>> Sure.
36:51>> You know?
36:51>> Yeah, and like they're not, you know, I
36:53know the premise of these movies is that
36:55these are two guys who could
36:56theoretically pretend that they're in
36:58high school or college. So, I don't know
37:00what the new bit is going to be. But,
37:01you know, these guys are Jonah Hill's
37:0342, Channing Tatum's 46.
37:04>> 46?
37:05>> But, they're a young 42 and 46. So, you
37:08know.
37:08>> Okay.
37:09>> You can get away with it. They're not
37:10too old.
37:11>> Yeah. I mean, I like the idea of them
37:13doing a kind of menial job or some kind
37:16of like fast food job or something like
37:17that. That could be funny.
37:18>> Yeah, I mean,
37:19Lord and Miller are producing.
37:21>> But, not directing.
37:22>> They're not directing. Peter Rodney
37:24Rothman is directing.
37:25>> Yeah, one of their guys.
37:26>> Um who directed the first Spider-Verse
37:28movie. So, he's in the Lord Miller
37:29family. You look at the
37:31when you make a legacy reboot comedy or
37:33or sequel comedy, I mean, it it is rare
37:35that these work. Like, Zoolander 2, the
37:37Dumb and Dumber 2. The 10 years later
37:40comedy, it's hard to pull off.
37:42>> Very hard. Remember they were going to
37:43do a Men in Black crossover at one
37:45point?
37:46>> Oh, yeah.
37:47>> That's not happening. The Men in Black
37:49not where it was. Um yeah. Sony needs
37:51franchises. Jonah Hill now needs this.
37:54And I think all the stars are aligned.
37:57This movie will happen, and it will
37:58probably be dated for summer of '27,
38:01'28.
38:02>> Hopefully this will help remind people
38:04that they like to go to the theater to
38:05laugh.
38:06>> Yeah. And hopefully it'll remind people
38:08that they like Jonah Hill. He's great. I
38:10love Jonah Hill.
38:11>> Me, too.
38:11>> I want I want him to do more movies like
38:12this. All right. Today's call sheet was
38:14brought to you by FX's The Low Down.
38:16This gloriously off-kilter noir is an
38:18AFI television program of the year, and
38:20one of 2025's most critically acclaimed
38:22shows. The Low Down is available for
38:24your Emmy consideration on Hulu and
38:26Disney Plus for bundle subscribers.
38:28Okay, that's the show for today. I want
38:29to thank my guest Minette Louie,
38:31producer Craig Horlbeck, our editors
38:33Matt Pevic and Jesse Lopez, and I want
38:35to thank you. We will see you next week.
38:37>> [music]

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