Finder's fee vs back-end profits
June 21, 2010 7:23 AM Subscribe
Should someone who approaches investors and makes deals happen be treated the same as an investor?
I am producing my first feature film, and have been in contact with someone who is good at approaching brands/investors and selling the film.
At first we (my business partner and I) simply offered him a finder's fee of 10% of all monies he brought in. Since this initial premise, things have become more complicated.
He is now insisting that he receive back end points, the same as us. In other words, after the pie has been cut up and divided between investors, deferred compensation, deals with post-production houses, etc., there remains 27% of net profits. He is insisting that he receive the same as us, ie, 9%.
Perhaps there's a lot more to this I should explain, and it's also possible that I'm simply not capable of understanding what's going on, so to simplify the question: is this fair?
My partner and I will be doing all the work to make the film. He will not. He is also not bringing the money in on a silver platter - he makes the introductions, sells the film as best he can, then we have to present ourselves and make the actual deal. I cannot see how that work should be equated with everything that we've done and still need to do to make this film, especially as he's not actually investing any money himself, and is already getting a 10% finder's fee.
Any help here? Anonymous because, quite obviously, I don't want him to know what I'm thinking, even if I'm pretty certain he doesn't read mefi and doesn't know my user id.
I am producing my first feature film, and have been in contact with someone who is good at approaching brands/investors and selling the film.
At first we (my business partner and I) simply offered him a finder's fee of 10% of all monies he brought in. Since this initial premise, things have become more complicated.
He is now insisting that he receive back end points, the same as us. In other words, after the pie has been cut up and divided between investors, deferred compensation, deals with post-production houses, etc., there remains 27% of net profits. He is insisting that he receive the same as us, ie, 9%.
Perhaps there's a lot more to this I should explain, and it's also possible that I'm simply not capable of understanding what's going on, so to simplify the question: is this fair?
My partner and I will be doing all the work to make the film. He will not. He is also not bringing the money in on a silver platter - he makes the introductions, sells the film as best he can, then we have to present ourselves and make the actual deal. I cannot see how that work should be equated with everything that we've done and still need to do to make this film, especially as he's not actually investing any money himself, and is already getting a 10% finder's fee.
Any help here? Anonymous because, quite obviously, I don't want him to know what I'm thinking, even if I'm pretty certain he doesn't read mefi and doesn't know my user id.
*commission
posted by Inspector.Gadget at 7:27 AM on June 21, 2010
posted by Inspector.Gadget at 7:27 AM on June 21, 2010
Short answer: no.
Longer answer: is this normal in the film business? I don't know anything about filmmaking, but I do know that in basically any industry where there's a set of people who are dying to make some longshot happen that could produce great financial rewards, there's a whole class of people who essentially prey on the creative ones. They'll call themselves 'placement agents' and say that anyone they talk to who invests with you is someone they introduced you to, so you need to pay them. Then they'll email blast/voicemail every single conceivable investor (or maybe skip that part) so if _anyone_ invests with you, you have to pay them.
If this person is so good at racking up investments in films, why is he not a film producer? Isn't that what producers do? Couldn't he conceivably make _way_ more money by using his investment-raising chops to get a bunch of money together, buying a book, hiring a writer, etc.?
Again, I don't know anything about movies, but this smells bogus. Even without the lame crap he's trying to tack on above his finders' fee.
posted by jeb at 7:29 AM on June 21, 2010 [1 favorite]
Longer answer: is this normal in the film business? I don't know anything about filmmaking, but I do know that in basically any industry where there's a set of people who are dying to make some longshot happen that could produce great financial rewards, there's a whole class of people who essentially prey on the creative ones. They'll call themselves 'placement agents' and say that anyone they talk to who invests with you is someone they introduced you to, so you need to pay them. Then they'll email blast/voicemail every single conceivable investor (or maybe skip that part) so if _anyone_ invests with you, you have to pay them.
If this person is so good at racking up investments in films, why is he not a film producer? Isn't that what producers do? Couldn't he conceivably make _way_ more money by using his investment-raising chops to get a bunch of money together, buying a book, hiring a writer, etc.?
Again, I don't know anything about movies, but this smells bogus. Even without the lame crap he's trying to tack on above his finders' fee.
posted by jeb at 7:29 AM on June 21, 2010 [1 favorite]
By playing a critical role in raising money for the film, this guy is essentially acting as one of the film's producers. It seems fine to me that he'd want some ownership in return for that. You can debate how many points, but the basic fact of points does not seem outrageous at all to me.
You'll note that the "Best Picture" Oscar doesn't go to the director, who is the leading creative talent behind the film. The "Best Picture" Oscar goes to the producers, and there are often several of them.
posted by alms at 7:38 AM on June 21, 2010
You'll note that the "Best Picture" Oscar doesn't go to the director, who is the leading creative talent behind the film. The "Best Picture" Oscar goes to the producers, and there are often several of them.
posted by alms at 7:38 AM on June 21, 2010
It sounds like this guy is negotiating with you for the terms of the agreement. This all sounds rather normal. If you accept his terms, then great. If you don't, then try to negotiate terms that are more favorable to you and your partner.
I don't think there is any standard here for finders; each agreement is going to be negotiated individually. As long as the agreement would stand up in a court of law then all should be good.
I assume, of course, that you and your partner have retained competent counsel to review any agreement you have with this finder, and that any agreement you reach with him will be in writing, and not an oral one?
posted by dfriedman at 7:39 AM on June 21, 2010
I don't think there is any standard here for finders; each agreement is going to be negotiated individually. As long as the agreement would stand up in a court of law then all should be good.
I assume, of course, that you and your partner have retained competent counsel to review any agreement you have with this finder, and that any agreement you reach with him will be in writing, and not an oral one?
posted by dfriedman at 7:39 AM on June 21, 2010
I don't know the film business, but it seems like everyone just grabs what they can get and there is no normal.
Since taking back end points has a greater risk and potential reward, he should be willing to pay for it by taking less up front. If that's something he wants, I would thing that a fair deal would be for him to take more like 1% of the front, and then get a cut of the back that's commensurate with what he brought in.
So, suppose he brings in X% of your investments. Maybe fair would be for him to get a *cut* of that X% of the back end. Maybe 20% of X%?
Whether he is a sleaze depends, I think. If he gets you meetings that you wouldn't have gotten otherwise, then he deserves something certainly. If he is playing the game jeb describes, that sounds a little shady.
So, tell him to take his 10% and be happy with it, or tell him he can have a smaller cut for a few points of the back end.
posted by gjc at 7:48 AM on June 21, 2010 [1 favorite]
Since taking back end points has a greater risk and potential reward, he should be willing to pay for it by taking less up front. If that's something he wants, I would thing that a fair deal would be for him to take more like 1% of the front, and then get a cut of the back that's commensurate with what he brought in.
So, suppose he brings in X% of your investments. Maybe fair would be for him to get a *cut* of that X% of the back end. Maybe 20% of X%?
Whether he is a sleaze depends, I think. If he gets you meetings that you wouldn't have gotten otherwise, then he deserves something certainly. If he is playing the game jeb describes, that sounds a little shady.
So, tell him to take his 10% and be happy with it, or tell him he can have a smaller cut for a few points of the back end.
posted by gjc at 7:48 AM on June 21, 2010 [1 favorite]
He is now insisting that he receive back end points, the same as us. In other words, after the pie has been cut up and divided between investors, deferred compensation, deals with post-production houses, etc., there remains 27% of net profits
There are at least a million reasons for any film not to get made, and a million more for there to be no profits. Fighting over profits that most likely will never exist is one more way not to make a film. Give him a producers credit, just not the producers credit.
Agree to his terms, with no commitment until his source has money in hand. Handle it like a real estate closing, his contract gets executed at the same meeting that the investors funds are transferred. To protect him, give him a non-circumvention agreement. He notifies you in advance who he will be approaching, you either show that you are already pursuing that person, or agree to let him handle that account. Meanwhile, pursue all other options, make your final decision based on what is actually on the table, if anything ever is.
posted by StickyCarpet at 7:52 AM on June 21, 2010
There are at least a million reasons for any film not to get made, and a million more for there to be no profits. Fighting over profits that most likely will never exist is one more way not to make a film. Give him a producers credit, just not the producers credit.
Agree to his terms, with no commitment until his source has money in hand. Handle it like a real estate closing, his contract gets executed at the same meeting that the investors funds are transferred. To protect him, give him a non-circumvention agreement. He notifies you in advance who he will be approaching, you either show that you are already pursuing that person, or agree to let him handle that account. Meanwhile, pursue all other options, make your final decision based on what is actually on the table, if anything ever is.
posted by StickyCarpet at 7:52 AM on June 21, 2010
If you don't, then try to negotiate terms that are more favorable to you and your partner.
I think what he's asking for is so unreasonable that it indicates a willingness to take advantage of the OP. This is not someone I would want to do business with if I had any other options. Yeah, having a lawyer isgood essential.
posted by grouse at 7:52 AM on June 21, 2010
I think what he's asking for is so unreasonable that it indicates a willingness to take advantage of the OP. This is not someone I would want to do business with if I had any other options. Yeah, having a lawyer is
posted by grouse at 7:52 AM on June 21, 2010
You'll have to decide whether this guy is being unethical or just being a good negotiator. If it feels like he's pulling a bait-and-switch, then maybe you don't want to be working with him. On the other hand, if it's just that he's a good negotiator and is standing up for his own interests, then he could be exactly the kind of person you want to have on your side of the table. You and your partners are the only ones who can make that call.
posted by alms at 9:30 AM on June 21, 2010
posted by alms at 9:30 AM on June 21, 2010
People who say this is not normal business practice have probably not made an independent feature. It is war. By any means necessary. Whatever it takes to get to the next square. Sign a pact giving half your territory to your old nemesis? That's preferable to dying today. Sort it out when the treaties are signed.
posted by StickyCarpet at 9:46 AM on June 21, 2010
posted by StickyCarpet at 9:46 AM on June 21, 2010
Put another way, have you or anyone else you work with raised any investments for this sort of thing, ever? If not give yourself a score of zero. If he raises anything at all his score will be infinitely more than everyone else put together. And, no, he doesn't get paid much for a phone number or an introduction, he has to pry the check out of their hand.
If you can raise money yourself, you don't need him. Bridge financing, that keeps you alive and in the game, is expensive money.
posted by StickyCarpet at 9:53 AM on June 21, 2010
If you can raise money yourself, you don't need him. Bridge financing, that keeps you alive and in the game, is expensive money.
posted by StickyCarpet at 9:53 AM on June 21, 2010
On a first feature, the odds of you having *any* back-end profits are extraordinarily low. If he really is going to be key in your ability to get the film made, heck, give him *all* of the back-end. It's really hard to get films made and distributed, and if he can be helpful, he'll have earned his share - and if he isn't, it's on him. You don't want to be in business with someone you don't trust, but if you do trust that what he's doing is valuable (and you may want to ask him to step up and be part of the deal negotiation, not just the introduction), then it is totally reasonable to give him a share of what are likely to be very small profits, if any.
posted by judith at 10:14 AM on June 21, 2010
posted by judith at 10:14 AM on June 21, 2010
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posted by Inspector.Gadget at 7:26 AM on June 21, 2010