PROCESS—Multiple Players Often Involved in Hollywood Deals

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We all know that success has many parents and failure is an orphan. But in Hollywood, every deal win or lose has an extended family.

Perhaps it’s the glory of seeing a name on the screen, but more likely it’s the potential for big money. Few dealmakers ever see their names scroll by when the lights go out.

It’s likely there are more fingers in the dealmaking side of a major motion picture than, say, a real estate deal, because the creative types who shape the vision of the final product are focused on just that the vision.

Getting the script or pitch ready to go to the market through the agent starts with the manager.

While agents are licensed and bonded by the state and serve as employment agencies for their clients, the manager can’t legally solicit work on behalf of the client and can, unlike the agent, take a producer’s role in the project.

It’s a murky distinction, since both managers and agents are out in the market, talking up clients to producers and studio executives. It’s a situation that riles the agents, in particular, who see the blurred roles and watch the increased participation in the final product by managers through a glass wall.

While managers can charge “what the market will bear,” said Patrick Faulstich, a former agent and now principal of Accurate Representation, a management company, the range is generally between 10 percent and 15 percent of the gross value of the client’s deal.

“Where a client is repped by one of the five major agencies,” he said, “it can seem the manager’s real job is to manage the agency’s representation of the client. It’s generally true that managers work from client out to market, where agencies often work from the market back to the client.”


Studios

Once a producer has committed and has the green light to make a deal from the studio, which will finance the script’s purchase and production, its business affairs department gets on the phone with the agent and they work out terms.

Since the creative trades are governed by union contracts the Screen Actors Guild, Writers Guild, Directors Guild baseline deals are already in place and, along with deals made as precedent on earlier films, serve as a starting point for the negotiations.

The agent works the basic terms with the business affairs, often in consultation with the manager, and takes a 10 percent commission on the gross value of the deal.


Lawyers

Talent’s involvement with legal counsel can be as removed as no contact at all or as intimate as frequent conversations when deals become more complicated. In entertainment, lawyers almost always charge a 5 percent fee instead of a retainer or hourly. They might lose money on clients just starting out, but they can clean up as a client’s stature and price increases.

(Not all talent use the manager, agent and lawyer combination some use all three, some a pairing of two and others may only use one of these dealmakers.)


Financing

Financing the picture can take many forms. In a conventional, single-picture deal, a banker will look at the talent attached, the distribution and rights deals that could be lined up and will lend based on their assessment of the likelihood of the film’s success. Generally those deals are made on the basis of an agreed interest rate and fees associated with the loan, which is generally short-term.

On the finance side Andy Sale, a partner in the entertainment practice at Ernst & Young, straight hourly rates are charged the studios – the primary clients – to assure proper accounting of licensing deals.

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