Negative Pickup Financing & Your Film Production
Few industries include such unique financing as the motion picture business. It’s no surprise that films cost a lot to produce. Which is probably why film financing takes many unique structures in the film world. In addition to equity financing, film distribution rights may also be secured through special financing. Although independent filmmakers face a number of challenges when it comes to financing a production. The negative pickup deal represents one of many distribution agreements that may help.
What is Negative Pickup Financing?
Negative pickup financing, or the negative pickup deal, is a term that describes an agreement between a film studio and the filmmaker.
When the film is finished and the negative is ready to be reproduced for distribution in theaters. The filmmaker sells the film to the studio. And receives reimbursement of production expenses. As well as profit sharing that comes with the ultimate proceeds from film distribution.
Filmmakers are rarely able to fund a film project on a cash basis. In fact, they almost always work on presale and distribution deals such as those provided by negative pickup.
How the Negative Pickup Arrangement Works
Negative pickup arrangements work in several ways. Most often, they work out similar to a studio financing agreement. The filmmaker produces the film and incurs the cost of production. Including various expenses related to the creation of the project.
The distributor reviews all major decisions that are made. Requiring specific details to be followed in relation to their agreement. Including script requirements, agreed upon casting, and other needs.
Provided the filmmaker continues to follow along with all agreements made between them and the distributor, when the film is finalized the studio takes ownership.
The studio finances the production, paying for all important aspects along the way. As long as the filmmaker continues to follow through with the agreement, the studio continues to pay for the production.
How is the Payment for Negative Pickup Structured?
Moreover, the negative pickup deal that you make with a distributor can be structured in many ways. The payments arrange, typically, in a manner in which the purchasing film studio provides funding on a weekly basis to ensure the project continues to operate smoothly.
In exchange, the film company will meet standard obligations and will demonstrate their commitment to remaining within the pre-defined, or pre-approved budget and other needs discussed in advance of the agreement.
The greatest concern is that both parties adhere to the terms of the agreement as they are set forth. If you’re unable to meet the terms of the agreement, you should discuss the situation with the distributor in advance.
And if a new agreement is disclosed all of the details should be in written form with a signed update to the contract.
In Summary
Entering into a negative pickup deal is a huge opportunity for you to get the funding you need for your production in advance of the process. While it represents a key opportunity for you, it’s important that you only enter the agreement if you’re fully comfortable with the terms set forth.
As it is a binding contract made between the filmmaker and the film studio or distributor. However, the negative pickup may also be used to obtain commercial loans and other forms of financing required to cover production expenses.
This is important for you to consider as you also consider whether or not negative pickup financing is right for you!
