Providing service and support to film and television musicians.

A Guide to Understanding Film Musicians Secondary Markets Fund Residuals

"Producer's Gross" / "Accountable Receipts"

When a Theatrical or TV motion picture moves from its "Primary" market into a "Supplemental" or "Secondary" Market (e.g., television and theatrical pictures to DVD's, Pay TV or "new media"; or television pictures to "In Flight"; or theatrical films to free television), the Producer and/or other obligated party (e.g., Distributor or other buyer) remits to the Film Musicians Secondary Markets Fund (FMSMF) a residual payment based on a percentage of the "Producer's Gross" revenues generated from the secondary markets. The FMSMF, in turn, processes and distributes the residual payments to the individual musicians who worked on the picture. For purpose of this explanation, TV "motion picture" includes MOWs, episodic series, documentaries or other TV programs produced under the TV Agreement.

How Do I calculate the "Producer's Gross" in order to calculate residuals?

If a Theatrical Motion Picture or a TV Motion Picture Is Released To DVD or Pay TV:

To determine "Producer's Gross", first you take the gross receipts received by the Distributor (not the Exhibitor).

From that amount, you then take the following allowed deductions:

  • Sums paid to any advertising agency in connection with any exhibition in secondary markets:
  • In the case of DVD revenues, any rebates, credits and/or repayments for units returned (Producer many set up a reasonable reserve for returns);
  • Sums realized or held by way of deposit as security, until and unless earned, other than non-returnable sums;
  • Frozen foreign currency until the Producer shall either have the right to freely use such foreign currency or transmit to the United States; and
  • Sums required to be paid or withheld as taxes (turnover taxes, sales taxes or similar taxes based on the actual revenues to be remitted to or by the Producer. NOTE: net income tax, franchise tax or excess profit tax or similar tax payable by Producer or Distributor on its net income or for the privilege of doing business are not excluded from "Producer's Gross").

The remainder is the subtotal of "Producer's Gross". To complete the calculation of determining "Producer's Gross":

  • For revenues derived from distribution of DVDs and similar devices:
    • If the Producer is the Distributor, or the Distributor is owned or affiliated with the Producer; "Producer's Gross" is 20% of the worldwide wholesale revenues derived by Distributor (i.e., the Producer pays 1% of 20% of the Distributor's revenues from DVD distribution).
    • If the Distributor is not the Producer, and is not owned by or affiliated with the Producer, then "Producer's Gross" is 100% of the worldwide gross revenues received by Producer from licensing the right to distribute the motion picture in the DVD market.
  • For revenue derived from distribution on Pay Television, Producer's Gross is the worldwide total gross revenue derived by distributor and/or sub-distributor for Pay TV distribution.
The final number is the "Producer's Gross", which is then multiplied by 1% (0.01) to determine the Secondary Markets residual payment to be sent to the FMSMF.

If a Theatrical Motion Picture Is Released To Free Television (i.e., Traditional TV or Basic Cable):

To determine "Producer's Gross", first you take the gross revenue received by the Distributor (or sub-distributor if the distributor does not distribute directly to Free TV, but instead employs a sub-distributor).

From that amount, you then take the following deductions:

  • Sums paid to any advertising agency in connection with any exhibition on free television;
  • Sums realized or held by way of deposit as security, until and unless earned, other than non-returnable sums;
  • Frozen foreign currency until the Producer shall either have the right to freely use such foreign currency or transmit to the United States;
  • Sums required to be paid or withheld as taxes (turnover taxes, sales taxes or similar taxes based on the actual revenues to be remitted to or by the Producer. NOTE: net income tax, franchise tax or excess profit tax or similar tax payable by Producer or Distributor on its net income or for the privilege of doing business are not excluded from Producer's Gross).

The remainder is the subtotal of "Producer's Gross". To complete the calculation of determining "Producer's Gross":

  • Deduct 40% of the remainder to cover distribution fees and expenses. NOTE: In the event of an outright sale of the film or programs, deduct 10%, rather than 40%.
The final number is the "Producer's Gross", which is then multiplied by 1.667% (0.01667) to determine the Secondary Markets residual payment to be sent to the FMSMF.

Other Useful Information Regarding Producer's Gross

Non-returnable Advances:

Non-returnable advances are included in "Producer's Gross" when a picture is "available" and "identifiable" and the amount of the advance is "ascertainable"

  1. A picture is available when it first may be exhibited or otherwise exploited, or when it first may be sold or rented by a retailer.
  2. A picture is identifiable when the Producer first knows or reasonably should have known that a given picture is covered by a particular license or distribution agreement
  3. The amount of the advance is ascertainable if the advance is for one picture, means of exhibition, and territory.
  4. If the total amount of the advance is for more than one picture, means of exhibition and/or territory, the Producer shall reasonably and fairly allocate such advance among the licensed pictures, exhibition markets and/or territorial markets (NOTE: as each of these pictures becomes identifiable and available, the allocated portion shall be included in "Producer's Gross" for that quarter)

Outright Sales:

  • In the case of an outright sale for the entire world or any territory or country, the income derived by the seller, but not the income realized by the purchaser of such rights, shall be the "Producer's Gross." (In the case of an outright sale, a Buyers' Assumption Agreement needs to be obtained from the purchaser(s) of rights).

New Media:

Free Web Streaming, Subscription Services (Netflix Model) and Permanent Downloads (iTunes Model)

When a Theatrical Motion Picture, TV Motion Picture, made for Pay TV or made for Home Video motion picture is released to "new media", Secondary Markets residuals may apply. The following chart provides a simple overview of the various platforms that generate secondary markets residuals.

Secondary New Media Platform

Original Platform Free To Consumer Streaming Subscriptions Services (e.g., Netflix) Permanent Downloads (e.g., iTunes)
Theatrical, Direct-to-Pay TV, or Direct-to-DVD 1% 1% 1% of (20% of) gross for first 50,000 units and 1.8% of (20% of) gross for units above 50,000
Television N/A 1% 1% of (20% of) gross for first 100,000 units and 1.9% of (20% of) gross for units above 100,000
New Media Program (budget of ≥ $25,000/minute) N/A 1% of receipts generated after the first 26 weeks 1%

Please call the FMSMF Contract Compliance Department (1.818.755.7777 x804) or the Executive Director (1.818.755.7777 x 850) for assistance in deriving "Producer's Gross" in New Media, the applicable formulae for films made for initial exhibition in New Media or for assistance with any questions regarding the Film Musicians Secondary Markets Fund.