Monday, November 26, 2007
Whew, via Craig Mazin, someone who actually understands the residual system, here.
I'm trying to remember our last DVD deal. It was for the movie Pandora Machine. This was back when Blockbuster was still buying titles. We sold 4800 units at $7.25/piece. The distributor took $3.00 off the top (of any sale above $5/unit) and then split the rest 50/50 with us. I think we can safely assume that manufacturing and shipping cost the distributor less than $3. Jonathan Handel says that the marketing/manufacturing/distribution cost for a major release is something under $5. And apparently the studios average $12 on DVD's (but I wonder what their deal is with revenue sharing a la Blockbuster.)
Lastly, he doesn't say anything about the effect of the residuals on 1st-dollar gross participation deals by actors and directors. For my money, that's the biggest elephant in their room. And irrelevant to our needs.
I think the deal we use, where we choose an arbitrary number "DAN" (or "Drew's Arbitrary Number) and say that after that we start paying out participation from gross, makes the most sense. Right now I'm thinking that a DAN of 4x "negative cost" is fair. But if there's a theatrical release and we need to make a film print then an extra $100K should be added to DAN unless the distributor handles the cost of making the film print(s). For a big studio to use this formula (the "DAN" formula) just add three zeros and remove the film print part.
BONUS! An article on writing Letters of Intent. Read and memorize. It'll be on the test next week.