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Demystifying net profits

In order to establish the meaning of “net profits,” a clear definition of gross receipts must be established.

Gross is frequently defined as the revenue earned by a film during its theatrical run, sales to network and syndi-cated TV, other ancillary sales and the real moneymaker: homevideo.

However, deductible costs can vary from agreement to agreement. Before gross-position participants are given their share, the studio is allowed to recoup costs incurred during a film’s production and theatrical release, such as for prints and advertising. The studio also takes a distribution fee.

Typically, net-profit pacts call for the studio to deduct interest, prints and advertising costs and distribution fees before it divvies up a film’s revenues. Distributions from the remaining share of the pie are then made to those with gross participation agreements — which, in the case of “White Men Can’t Jump,” was just Ron Shelton. Those with net-profit participation are last in line to collect.

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