Backend points: Meaning in Film Production

Backend points

Definition

Backend points are percentage shares of a film's profits, one point equaling 1%, granted to producers, cast, directors, or crew, often in exchange for lower upfront pay. What a point is worth depends on the contract's definition: a point of 100% of net profits, a point of the producer's share, or a point of adjusted gross can be very different amounts.

How the definition changes the payout

Here's a small film after all revenue has come in:

Step	Amount
Revenue received by the collection account	$1,500,000
Less sales agent fees and expenses	($225,000)
Less investor recoupment of $800,000 at 120%	($960,000)
Less deferments	($75,000)
Net profits	$240,000
Investors' 50% share	$120,000
Producer's 50% share	$120,000

Now compare two actors, each with "2 points":

Actor A: 2 points of 100% of net profits = $240,000 x 0.02 = $4,800
Actor B: 2 points of the producer's share = $120,000 x 0.02 = $2,400

Both actors hold 2 points, and Actor B gets half as much, even before any argument over which expenses were deducted.

Where points come from

On independent films, investors usually give up part of their profit through a split with the producers, and the producers hand out points from their own half to people who took less cash: a lead actor, the director, a key department head. On studio pictures, participations are often defined off gross receipts with complex adjustments, and "net profits" definitions include distribution fees, prints and advertising, interest, and overhead on the negative cost, which is why studio net points rarely pay.

What to write down

A points clause should name:

The pool: 100% of net profits, producer's share, adjusted gross, or something else.
The definition of net profits, or a reference to the financing agreement's definition.
When profits are calculated and how often statements go out.
Whether the points are subject to favored nations with other participants.
Audit rights.

How it connects to budgeting

Points don't appear on the top sheet, but they're often traded against real line items. If a DP's rate drops from $5,000 to $3,500 a week for 6 weeks in exchange for a point, the budget saves 6 x $1,500 = $9,000, plus the fringes on it. The film P&L for investors shows how points change investor returns, and the recoupment and waterfall entries explain the order money is paid. Deferred pay is the other common trade for cash.

Frequently asked questions

How much is one backend point worth?

1% of whatever pool the contract names. On an indie, 1 point of the producer's 50% share of net profits is worth half as much as 1 point of 100% of net profits.

Do backend points cost anything in the budget?

Not in the production budget, because they're paid only out of profits. They do reduce what investors and producers receive later, so they belong in the financing plan and the P&L projection.

What is the producer's share of net profits?

On many independent films, net profits after investors recoup are split between investors and the producers, commonly 50/50. Points given to talent often come out of the producer's half.