Hello everyone,

I went to the Sundance Film Festival and Santa Barbara Film Festival 2025, where I had the opportunity to meet and speak with many talented filmmakers. As always, I enjoy sharing insights based on the most common questions I receive, and following my good tradition of writing posts to address these topics, I decided to create this post about film financing—one of the biggest challenges filmmakers face.

Securing funding for a film is one of the most critical steps in production, and a well-structured Investor Agreement ensures transparency, protects both parties, and sets clear financial expectations. Whether you’re a filmmaker seeking funding or an investor looking for a solid return, understanding how these agreements work is key.

1. Investment Structure – How Investors Fund a Film

Investors can contribute to a film’s budget in different ways, and the agreement should clearly define the structure:

• Equity Investment: The investor provides capital in exchange for ownership in the film and shares in its long-term profits.
• Debt Investment: The investor lends money with a fixed repayment schedule, often with interest, regardless of the film’s financial success.
• Profit Participation: The investor receives a percentage of the revenue without owning any stake in the film itself.
• Hybrid Models: Some investors negotiate a combination of equity and revenue-sharing to balance risk and reward.

Understanding the structure protects both the filmmaker’s creative vision and the investor’s financial interests.

2. Return on Investment (ROI) & Profit Distribution

How and when investors get paid is one of the most critical components of any film financing deal. Investors want a clear understanding of how their money will be returned, the timeline for recoupment, and how profits will be distributed. A well-defined financial structure reassures investors that their risk is managed while also ensuring that filmmakers and other stakeholders receive their fair share of the revenue. Without a solid repayment framework in place, securing investment can be challenging, as financial uncertainty often deters serious backers.

Recoupment First

Investors typically recover their initial investment before any profits are distributed. This means that before filmmakers, producers, or other stakeholders see any returns, the capital invested in the project must be fully reimbursed. This structure protects investors from significant losses and incentivizes them to participate in film financing.

Preferred Return

Some investors negotiate a preferred return, which guarantees them a fixed percentage above their initial investment before profit-sharing begins. For example, an investor who puts in $100,000 might negotiate a 150% return, meaning they are entitled to receive $150,000 before any additional profits are distributed. This provides investors with additional security and makes the investment more attractive.

Revenue Waterfall

Profits are typically distributed in a structured sequence known as the revenue waterfall, ensuring that financial obligations are met in the proper order. The standard waterfall process includes:

1. Recoupment of Investor Capital – Investors are reimbursed for their initial investment.
2. Repayment of Other Debts (if applicable) – Any loans or additional financing are paid off.
3. Profit-Sharing – Once obligations are settled, profits are distributed among investors, filmmakers, and producers according to pre-negotiated agreements.

Profit Splits Based on Ownership

Ownership of key elements within the project—such as the screenplay, director, or production team—grants filmmakers significant negotiating power over the division of profits.

• Screenplay Ownership – If you own the screenplay rights, you can negotiate up to 50% of the profits after investors recoup their initial capital, even if you did not contribute substantial financial investment.
• Project Packaging – Filmmakers who assemble the core package (including the script, director, cast, and production team) often retain 50% of the revenue, despite making limited financial contributions. This is because the strength of the package is a major factor in securing funding and distribution.

3. What is a Package in Filmmaking and Why is it So Valuable?

A film package refers to the key creative and financial elements assembled before production to attract funding and secure distribution. Having a well-structured package significantly increases a project’s value and allows filmmakers to leverage their position in profit negotiations, even if they invest little of their own money.

Key Components of a Film Package:

A. Screenplay (IP Ownership) – The Foundation of the Deal

If you own the screenplay rights, you hold the intellectual property (IP), which is the most valuable asset in the filmmaking process. In the entertainment industry, ownership of IP is what gives creators leverage, allowing them to control how their work is developed, produced, and monetized. Investors may provide the funding, but the screenplay is the foundation of the entire project—without it, there is no film.

Owning the script not only secures creative control but also strengthens your financial position in negotiations. When you control the intellectual property, you have the ability to set terms for how the project is structured, who participates in its production, and how revenue is distributed. Instead of being a hired participant, you become a stakeholder in the project’s long-term success. This gives you the power to demand a larger percentage of the profits while protecting your vision for the film.

Even if you do not own the screenplay outright, securing an option agreement with the screenwriter gives you the right to purchase the script in the future. An option agreement allows you to control the screenplay for a set period, preventing other producers or studios from acquiring the rights while you develop financing and production plans. This means that even before full ownership is transferred, you still have the exclusive right to produce the film based on the script, effectively giving you leverage in negotiations with investors, distributors, and talent.

By owning—or securing an option on—the screenplay, you maintain control over the film’s core asset, ensuring that you reap the long-term financial and creative benefits.

Example of Profit Potential:

A filmmaker who owns the screenplay and secures an investor to fund production can negotiate a 50/50 revenue split after recoupment—even if they did not contribute significant financial resources themselves. This means that once the investor has recovered their initial investment, the remaining profits are divided equally between the filmmaker and the investor.

B. Director & Cast – Adding Credibility and Market Value

Attaching a well-known director and lead actors before seeking investors can significantly enhance the credibility and marketability of a film. Investors and distributors are far more likely to back a project that features recognizable talent, as this reduces financial risk and increases the film’s potential for commercial success. Having an established director also reassures investors that the project will be handled professionally and delivered on time and within budget.

One of the most effective ways to strengthen a film’s investment potential is by securing a Letter of Intent (LOI) from a star actor. An LOI is a non-binding commitment indicating that a well-known actor is interested in participating in the film, subject to financing and scheduling. This document serves as a powerful tool in negotiations, as it shows investors and distributors that the film has the potential to attract audiences and generate strong box office or streaming revenues.

A strong cast not only makes a film more appealing to audiences but also increases its pre-sale value. In many cases, distributors will buy the rights to a film before it is even made if it features bankable actors. These pre-sales can serve as collateral for securing additional financing, making it easier to fund production without giving up excessive ownership.

By assembling a compelling package with renowned talent, an experienced director, and a well-structured investment deal, filmmakers can position their projects as low-risk, high-reward opportunities, attracting serious investors and distribution partners early in the process.

D. Producer(s) & Production Team – Experienced Leadership

Attaching experienced producers, executive producers, cinematographers, and editors is essential to establishing credibility and legitimacy for the project. Investors are more inclined to support a film when they see a team with a proven track record of success. Seasoned producers and executive producers, in particular, bring industry connections, financial oversight, and strategic planning that reassure investors and increase the project’s chances of success.

E. Financing Plan – Reducing Investor Risk

• • A clear budget breakdown and financing plan shows where the money will go.
  • If partial funding is already secured (grants, tax incentives, pre-sales), it reduces the investor’s risk.
  • Investors prefer projects where other financial commitments have already been made.

F. Distribution Plan – Path to Revenue

Having pre-negotiated distribution agreements with streaming platforms, theatrical distributors, or international buyers significantly enhances investor confidence. When a film already has a confirmed pathway to audiences, it demonstrates commercial viability and reduces financial uncertainty. Investors are more likely to commit funding when they know there is a guaranteed outlet for the film’s release, ensuring a return on investment.

If the project has a secured theatrical, streaming, or television distribution deal in place, it becomes a lower-risk investment. A pre-established distribution plan provides assurance that the film will reach its intended market, making it a more attractive and financially sound opportunity for investors. Additionally, such agreements can lead to more favorable financing terms, as lenders and equity partners recognize the reduced risk associated with a project that has already secured distribution commitments.

How a Package Increases Filmmaker Profitability

I often see filmmakers with a strong package leverage 50% or more of the net revenue in a well-structured deal. A filmmaker or project owner who controls the package has the ability to negotiate the best possible terms for themselves, ensuring they retain a significant share of the profits, even when investors provide the majority of the funding.

Ownership of the screenplay or the overall film package allows filmmakers to demand at least 50% of net profits after investors have recouped their initial investment. While investors typically receive their money back first, the profit-sharing structure then determines how remaining revenues are split. By maintaining control over key elements of the project, filmmakers can position themselves to benefit from long-term earnings beyond just the initial release.

Beyond direct profits from the film, filmmakers who control the rights can also monetize additional revenue streams such as merchandising, streaming rights, and sequel rights. These ancillary markets can provide long-term financial benefits, turning a single film project into a sustainable business venture. Having a well-packaged film not only attracts investors but also gives filmmakers greater leverage in maximizing their financial return.

Why This Model Makes Filmmaking So Lucrative

Investors often come from business backgrounds and are experienced, strategic negotiators who prioritize maximizing their returns. Filmmakers must approach these discussions with confidence, understanding the value of their package and standing firm on key terms that protect their financial and creative interests.

A strong film package gives filmmakers leverage, but that leverage is only effective if they are willing to negotiate aggressively. Investors may push for higher ownership stakes, greater control, or disproportionate revenue shares, but filmmakers who control essential elements—such as the script, director, key talent, and distribution—can push back and demand fair terms.

Filmmakers should never accept unfavorable deals out of fear of losing funding. Instead, they must recognize that a well-structured package is a valuable asset that investors need in order to profit. The more control a filmmaker retains, the stronger their negotiating position. By being firm, strategic, and well-prepared, filmmakers can secure deals that not only fund their projects but also ensure long-term financial success and creative autonomy.

4. High-Risk Disclosure – Understanding the Risks of Film Investment

Negotiating film investments requires strategic thinking and a clear understanding of the risks involved. While deal terms can be flexible, filmmakers must ensure they do not compromise on critical elements that protect their financial and creative interests. Investors often come from business backgrounds and are skilled negotiators, seeking to maximize their returns. Filmmakers who control key aspects of their project—such as the script, director, talent, and distribution—must use this leverage wisely to secure fair and favorable agreements.

One essential component of any investment agreement is a high-risk investment disclosure to ensure transparency and legal protection. The film industry is inherently volatile, and investors must fully understand the financial uncertainties before committing funds. While it is technically possible to use personal assets—such as a house—as collateral for a film investment, this is strongly discouraged. The risks are too high, and even promising projects can result in financial loss.

A well-structured agreement should explicitly outline the following risks:

• Market Uncertainty – A film’s success depends on audience reception, marketing strategies, and distribution opportunities, all of which are unpredictable.
• Budget Overruns – Film projects frequently exceed their initial budgets, requiring additional funding or financial restructuring.
• Delays & Production Risks – Factors such as weather issues, cast and crew availability, equipment failures, or legal disputes can cause costly delays.
• Revenue Variability – A film’s earnings depend on fluctuating factors, including box office performance, streaming platform deals, and licensing agreements.
• No Guaranteed Return – Even well-produced films can fail financially, leading to partial or complete loss of investment.

Investors should conduct thorough due diligence and seek legal and financial advice before committing capital to any film project. While film investments can yield significant financial rewards, they remain speculative. By including a high-risk disclosure in agreements, filmmakers protect themselves from legal liability and ensure investors enter the deal with a full understanding of the potential risks involved.

Final Thoughts: Why a Strong Investor Contract Matters

A well-structured investor contract is a critical tool for filmmakers, as it not only attracts serious investors but also ensures that filmmakers retain creative control and maximize their financial returns. A carefully drafted agreement outlines the terms of investment, profit-sharing structures, recoupment schedules, and ownership rights, providing both parties with clarity and legal protection. Investors are far more likely to commit funds when they see a well-organized contract that safeguards their interests while maintaining the integrity of the film’s creative vision.

When filmmakers own the screenplay or package the project themselves, they gain significant leverage in negotiations. This level of control allows them to secure up to 50% or more of the net profits, even when they contribute little to no personal funding. Investors typically receive priority in recouping their investment, but after that, profit-sharing agreements kick in, enabling filmmakers to retain a substantial share of the revenue. This structure makes filmmaking an attractive business opportunity, as it allows creators to generate significant earnings while minimizing financial exposure.

Beyond direct profits from the film, ownership of the package enables filmmakers to capitalize on additional revenue streams such as international sales, merchandising, sequel rights, and streaming platform deals. These ancillary rights can provide long-term financial stability, ensuring continued earnings well beyond the film’s initial release.

Understanding the complexities of investor agreements is crucial, and we are here to help. Whether you need assistance drafting contracts, negotiating terms, or structuring investment deals, we provide the legal expertise necessary to protect your interests and secure the best possible terms. A strong investor agreement not only brings in capital but also sets the foundation for a successful and financially rewarding film production.