Film & Alternative Investing
By Yuri Rutman, Writer/Director & Producer, The Violinist (Filmdemand). Educational content only — not investment advice.
A revenue waterfall is the order in which money collected from a film is distributed to the parties with a claim on it. It is one of the most important documents for any investor to understand.
A typical sequence (illustrative only)
Actual waterfalls vary by film and agreement. A simplified example:
1. Collection and distribution costs. A collection account manager, sales agent and distributor fees and expenses are paid first.
2. Senior financing. Any bank debt, gap loans or incentive-backed loans are repaid.
3. Investor recoupment. Equity investors are repaid their invested capital, sometimes with a negotiated premium.
4. Deferments. Payments deferred by cast and crew may be paid.
5. Profit participation. Remaining profits are divided among investors, producers, talent and others according to agreed percentages.
Why order matters
An investor who is last in line is paid only after everyone ahead. An investor first in line behind debt typically has a stronger recovery position — though that never makes a return certain. For one example of a specific structure, see The Violinist returns explained.
What to look for
Whether your position is pari passu with other equity or senior to it
Whether there is a premium on recoupment
Which fees come off the top, and whether they are capped
How cross-collateralization could affect payments
Frequently asked questions
What does recoup mean?
The return of invested capital before profits are shared.
Does recoupment mean profit?
No. Recoupment returns principal; profits come after.
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Educational information only. Not investment, legal, or tax advice, and not an offer to sell or a solicitation to buy any security. Any offering is made only to verified accredited investors through definitive offering documents. Film investing involves substantial risk, including total loss of capital. Statements about Section 168(k) reflect current law; statements about a federal 20% production credit refer to pending legislation that has not been enacted. Consult your own advisors.