13. Production-Financing-Distribution Agreement (PFD): An agreement between a studio and a production company that documents the studio's intent to finance a production. Typically, the studio acquires distribution rights and substantial equity in exchange for financing.
14. Production Service Agreement (PSA): An agreement between the producer/financier and the production service company (PSC) that will be hiring and paying for all things on the ground in the jurisdiction where the production activity will take place. Under the PSA, the PSC will own none of the assets nor the rights with the exception of a One Picture License.
15. One Picture License (OPL): A short form agreement between the commissioning producer/financier and the PSC which gives the PSC a license to make and deliver the film back up to the commissioning producer/financier. No other rights are conveyed in this license.
16. Exit Strategy: A contingency plan executed by an investor or business owner to liquidate a position in a financial asset once predetermined criteria are met or exceeded. In the case of a production LLC, an exit strategy comes into play after a project earns enough net profits to meet an investor's recoupment requirement (e.g., 130%). Once met, rights can be assigned from the investor to managing members of the LLC (typically producers), and the LLC can be dissolved.
17. Ask and Take: Columns on a sales estimate used during pre-sale negotiations with distributors that provide guidelines on what deals a sales agent can approve based on their producer’s ideal “ask” price and their bottom line “take” price. If a distributor offers a figure within the range, the sales agent has the authority to approve the deal. If an offer falls outside the range, the sales agent must get approval from the producer.
18. Minimum Guarantee (MG): A flat fee that a distributor agrees to pay a producer for the exclusive rights to distribute a completed film for a set term in a defined territory.
19. Overages: Amount of revenue received by a producer above and beyond the MG that has already been paid.
20. Compliance Expenses: All production costs incurred related to adhering to industry and governmental regulations. These include compliance worker salaries, COVID risk mitigation costs, OSHA safety compliance-related expenses, taxes, and so on.
21. Copyrights: Rights producers buy to utilize and legally produce any existing intellectual property as new content. These apply to scripts, books, treatments, magazine articles, short stories, music, and other forms of intellectual property.
22. Co-production: A type of collaborative joint venture that brings two or more production companies together for the purpose of producing a project. Co-productions can be very beneficial because they allow a project to take advantage of more diverse resources, funding and incentive opportunities, marketing avenues, and so on.
23. Fiscal Sponsor: A nonprofit that agrees to act on behalf of a production as a gateway for receiving funding. Utilizing a fiscal sponsor allows productions to reach a broader donor base because contributions to the project can be written off as tax-deductible donations.
24. Loan Out Corporation: A personal service company that “loans” out the services of actors and crew members - typically utilized by highly compensated individuals.
25. Minimum Spend: Amount of money a production must spend in a particular jurisdiction to qualify for a film incentive. Varies by state, region, territory, and country.
26. Gap Financing: The difference between a film’s total budget and the amount of money that has already been raised. To give context, a producer typically receives 10% of the agreed-upon funds from a distributor upon signature and the remaining 90% upon delivery. Since the 90% won’t be received until the film is completed, and providing the distributor is “bankable”, a lender would consider lending against the receivable (the “gap”) providing the lender’s requirements were met. This type of loan is considered senior debt (i.e., in first position to be paid back from receivables).