The two most common options for paying for Use are Prepayment and the Advance.
If a producer has not paid a Prepayment or Advance at the time of production and then uses the Production in other media, they owe Residuals.
At the time of production, Producers choose a “Declared Use” which is indicated on the contract. In exchange for payment of the daily fee, producers can use the production in the Declared Use without additional payment.
Look to the IPA for media, term and territory included in each Declared Use (e.g. Theatrical includes worldwide use in theatres for the life of copyright of a Production; Free TV includes one run on free tv in Canada only; Pay TV includes one year on pay tv in Canada only).
If the Producer wants to use the production outside the Declared Use, meaning in another media, territory, or for a longer period of time than the Declared Use allows, they are obligated to pay Additional Use Fees. Producers choose the Additional Use Fees at the bottom of the contract. All performers on a production must receive the same method of
Use Fees, e.g. all receive a 105% Prepayment, or a 50% Advance. Producers can’t mix the different Prepayments or Advances on a production.
If the Producer hasn’t selected the Prepayment or Advance at the time of production, and then uses the production outside the Declared Use (for example the Declared Use was Free TV which allows for one run in Canada, and they continue to use it in Fee TV, or Pay TV, or Cable they owe Residual payments. As set out in B403, a percentage of performers’ Net Fees are owed for each individual Use (for example, 30% of Net Fees for one domestic run in Canada + 25% of Net Fees for 12 months’ Use on Pay TV in Canada + 30% for 12 months’ Use in the U.S., etc..). As residuals are paid “a la carte”, they can add up quickly and are not generally used.
Both the Prepayment and the Advance are a % of Net Fees paid to performers at the time of production for Use, but they are structured differently. Producers have different ongoing obligations to ACTRA and to performers under each.
The Prepayment is a payment made at the time of production for use of the production for a fixed period of time (for example if the Declared Use is Free TV, a 110% “Prepayment” of Net Fees allows use in all media including new media but excluding theatrical, worldwide, for a 4 year term).
The clock on the prepayment term starts at the first residual use of the Production, meaning the first use outside the Declared Use. For example, you might have been in a movie produced in 2006, released Theatrically in 2007 and then went to Pay TV, but not until Jan 1, 2008. The 4‐year term starts Jan 1 2008, on that first use.
Following the expiry of the term, Performers receive a percentage of Distributor’s Gross Revenue (DGR) for additional sales. These are sales or Use of the production that happen following the expiry, it usually takes 6 months to a year, for these additional sales to happen, for Producer to receive the money and send the funds to ACTRA PRS. Simple, clean, easy structure.
When a Producer chooses an Advance payment, they are choosing to compensate Performers for Use with a share in revenue. To mitigate our risk of a rev share model, they need to pay some of it upfront, at the time of Production. In other words, they need to “Advance” performers money that they may not have earned yet in backend revenue.
The amount of Advance paid to each Performer is calculated using the percentage that corresponds to the share of DGR that Performers will receive (as noted on this slide and in B501(c) of the IPA). The lower the share in revenue, the higher the Advance paid at the time of production. The percentage of Advance is the same for all performers on the Production.
“Net Fees” is defined in the IPA as fees earned on days in front of camera or behind the microphone, and specifically excludes prop shots, meal penalties, travel time, late payment penalties, etc. See the A427 of the IPA for the complete definition.
Before producer pay additional amounts to performers, they can recoup the “Aggregate Advance”. We add up the amount of Advance paid to all performers on a Production to calculate the “Aggregate Advance”. The Aggregate Advance is the amount Producers recoup before paying additional Use fees to Performers. They recoup at the percentage rate of DGR that the performers are sharing in. For example, on a production with a 50% Advance and 5.6% share in DGR for performers, the producer recoups the Aggregate Advance from 5.6% of all revenue received. Once the producer recoups, Performers start to receive additional payments for Use, sharing in DGR at the same percentage on an ongoing basis.
Unlike the Prepayment which pays for Use up front for a defined period of time, with the Advance performers share in additional revenue after the Aggregate Advance is recouped by the Producer – which could be 6 months, several years, or sometimes not at all because there aren’t enough sales outside the Declared Use.
For example, if the Declared Use was Theatrical, the total Net Fees to performers on a Production was $225k and the Producer chooses a 75% Advance, they pay an additional $168k in Advances ($225k x 75% = $168k) to performers at the time of a production. This entitles Performers to share in 4.6% of DGR for sales outside of Theatrical. In this example,
the Producer needs to make $3.6M in sales in media outside Theatrical (e.g. Pay TV, Download to Rent, Cable TV, or Free TV) before they recoup the Advance and performers start sharing in ongoing DGR.
Remember, there is no defined term to Use of the production with the Advance.
In calculating the share of DGR for Use payments or for the recoupment of the Advance, sales made in the Declared Use are not relevant. For example, if the Declared Use is Theatrical, then revenue from Theatrical is not applied to recoupment of the Advance, and performers don’t share in Theatrical revenue following recoupment of the Advance (or the
expiry of the Prepayment), because the producer received the right to exploit the production worldwide in Theatrical in exchange for the minimum daily fees. This Producer needs to make $3.6M in sales in media outside Theatrical (e.g. Pay TV, Download to Rent, Cable TV, or Free TV) before they recoup the Advance and performers start sharing in ongoing DGR.
When is payment triggered to performers?
For the Advance: once the producer has recouped the Aggregate Advance from a percentage of DGR derived from sales the Production outside the Declared Use.
For the Prepayment: payment to performers is owed following the Prepayment, for any use outside the Declared Use.
The amount of revenue owed is sent to ACTRA PRS, where we calculate how many units each performer has, and divide the payment accordingly among the performers on a production.
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