In today’s world of independent film production and financing, it is essential for a production to understand Collection Account Management. In this article, I will reveal how Collection Account Management operates and the benefits it can provide for independent filmmakers and screenwriters.
A ‘collection account’ is a bank account set up to receive the revenues generated by international distribution of a film project. The Collection Account functions as a neutral bank account outside the control of any of the parties with a financial interest in the film, like the producers, the sales agent, or the financiers.
When in the production process is a Collection Account created?
A Collection Account is set up during pre-production, and ultimately before the film starts to generate revenues. There is no minimum budget for a film to qualify for a Collection Account, but in general, the higher the budget, the more common it is to see a Collection Account on a film.
Who manages the Collection Account?
The Collection Account is set up in the name of a neutral third party, called the Collection Account Manager or simply CAM. The Collection Account Manager is the only party with access to the revenues received in the Collection Account and is the one who will allocate and distribute the revenues amongst the beneficiaries of the film. A beneficiary is a person or company that is entitled to receive a share of the revenues:
- The sales agent gets a commission on the revenues and recoups the distribution and marketing expenses it incurs
- An investor is entitled to recoup its investment
- A screenwriter receives his or her deferred writer’s fee
- A producer may receive a deferred fee from the revenues
- An actor or director may be entitled to receive a box office bonus and a profit participation.
These are all examples of sharing in the revenues of the film.
Collection Account Management: managing the revenues
The allocation of the revenues amongst the beneficiaries of the film is done based on the so-called Recoupment Schedule. This is basically a master schedule dictating the manner and order of payment of revenues received, combining all the entitlements to a share of the revenues. It reflects all the single deal terms between the production and the beneficiaries of the film.
Which are the benefits of using a Collection Account?
The benefits for the beneficiaries of having a Collection Account in place are multiple. The below are in my view the most crucial ones.
Protecting the film’s revenues
With a Collection Account in place, none of the parties with a financial interest in the film controls the receipt, allocation and distribution of revenues. The Collection Account Manager is an independent, neutral, third party whose only role is to manage the revenues and who has no interest in the film other than receiving its collection account management fee. This protects the revenues belonging to the beneficiaries of the film from the usual financial risks in the audiovisual industry like, for example, bankruptcy, of any of the parties of interest.
Avoidance of conflicts
The Recoupment Schedule is included in the so-called Collection Account Management Agreement, or CAMA. The funds received in the Collection Account are allocated and distributed by the Collection Account Manager strictly in accordance with the Collection Account Management Agreement, which is a multiparty agreement, and which is typically signed by all parties with a major financial interest in the revenues of the film. By having all the parties signing of on one single contract that supersedes all other agreements and individual deal terms (including the sales agency agreement, finance agreements and talent agreements), the risk of disagreement and conflict between the parties involved in the film is reduced to a minimum.
The Collection Account Manager issues periodic statements with an accumulative overview of the allocation of revenues. This creates transparency and keeps all beneficiaries of the film informed about payment or recoupment of their entitlements.
Outsourcing of administration
And who would do all the work of receiving and allocation revenues, and reporting to the parties of interest in the film if the production does not engage a Collection Account Manager? Some production companies and sales agents do not have the back office to administer this and by outsourcing this task to the Collection Account Manager, there is less of an administrative burden for the parties.
by David Zannoni.
David is a representative of Fintage House, one of the major providers of Collection Account Management Services and runs his own media consultancy and representation firm Zannoni Media, which provides consultancy and representation services in the audiovisual industry, with a special focus on transactions between the USA, the countries of Latin America and Spain. David has an extensive network among film producers, financiers, bankers, sales agents, law firms and agencies.
David can be contacted at email@example.com