Producers face many challenges during the creation and exploitation of an audiovisual project. Complying with contractual obligations towards multiple parties is one of such challenges. One of the contractual obligations is payment of a share of the revenues. This includes payment to investors, co-producers, talent, and others.

In this article, we will focus on management of the revenues and how Collection Account Management can be beneficial to producers.

What is Collection Account Management?

A Collection Account is an account set up in the name of a neutral third-party Collection Account Manager (or CAM), who receives from the local distributors the revenues generated by the international exploitation of the project.

The revenues include royalties payable under straight distribution agreements, minimum guarantees and overages. Subsequently, the CAM disburses such revenues to the multiple beneficiaries of the project.

What Types of Projects use Collection Account Management?

A Collection Account can be set up for feature films, documentaries, television series, animation, video games, and even for non-audiovisual projects.

Who may look for Collection Account Management?

Anyone that is entitled to receive a share of the revenues of a project is called a beneficiary. Any beneficiary with a major financial interest in the project, may look to establish a Collection Account.

Generally, such beneficiaries may include producers, sales agents, financiers (lenders, equity investors, or tax credit financiers), actors, directors, writers, guilds, talent agencies, or law firms.

In practice, it is often the main producer, the sales agent, a financier or a law firm that sets up the Collection Account.

When does a Production need Collection Account Management?

A production may need a Collection Account if it meets one or more of the following characteristics:

• The project is financed independently, with financing coming from several different sources;
• The Project is distributed independently, whereby multiple exploitation channels are used;
• The project is a(n) (official or non-official) co-production between two or more production companies, from either the same country or from different countries;
• There is an international sales agent or worldwide distributor engaged to distribute the project;
• Guild residuals are payable out of the project’s revenues;
• There are deferred commitments to talent (actors, director, writer and / or individual producers) and the deferred entitlements (fees, box office bonuses and profit participations) are payable out of revenues.

Reasons to look for Collection Account Management

There may be several reasons for parties to engage a CAM:

• Protection of revenues: None of the parties with a financial interest in the project controls the receipt, allocation and distribution of revenues, other than the CAM;

• Avoidance of conflicts: Only one agreement rules and therefore, the risk of disagreement and conflict is substantially reduced or even eliminated;

• Creation of transparency: The CAM reports all payments and how revenues are allocated, and that information is 24 / 7 digitally available;

• Outsourcing of administrative work and reporting: The CAM does the administrative work in connection with the revenues and provides reporting to the parties of interest.

How Does Collection Account Management work?

The producer and the parties with a major financial interest in the project, together with the CAM enter into a Collection Account Management Agreement (or CAMA). At the same time, the Collection Account is opened.

The parties that sign the CAMA may include production companies, the domestic and international sales agents, financiers like lenders, equity investors and tax credit financiers, the guilds (SAG-AFTRA, DGA, WGA) if residuals are payable and talent like actors, directors, writers or individual producers.

The CAMA includes the Recoupment Schedule of the project.

The producer, the sales agent, and / or the worldwide distributor instruct(s) the local distributors to pay the royalties due under the Distribution Agreements, into the Collection Account.

The CAM allocates and disburses the revenues from the Collection Account to the beneficiaries in accordance with the Recoupment Schedule in the CAMA. At the same time, it supplies the parties with all the relevant information related to the revenues and makes such information digitally available.

Why is Collection Account Management Essential for Producers?

The producer has a particular role in independent production. He or she can be seen as the project leader who enters into agreements with all individual parties of interest. The producer therewith incurs multiple liabilities and obligations vis-à-vis financiers, talent and guilds.

Collection Account Management may be of use to the producer during production, for financing purposes, for sales and distribution and in connection with the producer’s contractual obligations and liabilities.

Below we will point a couple of specific benefits of Collection Account Management for producers.

Collection Account Management during Production

• In the case of a co-production, production partners may include a Collection Account as a requirement to enter a project. Co-production agreements can include language committing to the establishment of a Collection Account;

• A Collection Account can be essential if revenues are collected prior to principal photography and used for production. This situation can occur in the case of pre-sales.

Collection Account Management during Financing

• Governmental institutions that provide financing may require a Collection Account. Examples are the British Film Institute (BFI), Screen Australia and Eurimages;

• A Collection Account can be essential during bank financing, if revenues are collected prior to financial closing. This situation can occur in the case of pre-sales;

• Producers can safeguard the rights and position of their equity investors with a Collection Account, shaping comfort and confidence;

• At development stage, including the concept of a Collection Account in financial models and decks, may help pitching the project to financiers.

Collection Account Management and Sales & Distribution

• The CAMA in its most basic form, arranges for protection of the producer’s position under the Sales Agency Agreement;

• The Sales Agency Agreement may include language committing producer and sales agent to establish a Collection Account.

Producer’s Contractual Obligations and Liabilities

• The CAMA supersedes all other agreements with respect to the revenues, and therefore, centralizes the Producer’s liabilities and obligations with respect to the revenues in one single document;

• Allocation and disbursement of revenues, reporting obligations, and supply of information is outsourced by the producer to the CAM;

• Payment of guild residuals can be included in the CAMA, covering the producer’s relationship vis-à-vis the guilds;

• The more detailed the Recoupment Schedule, the more of producer’s liabilities and obligations are covered under the CAMA.

Conclusions

Collection Account Management is essential for independent productions, with multiple financial sources and distribution channels.

Execution of the CAMA with included the Recoupment Schedule, safeguards the entitlements of the beneficiaries, including producers, sales agents, financiers, talent and guilds.

The rights, obligations and liabilities of the producer are centralized in the CAMA.

The producer can benefit from establishing a Collection Account for production, financing, sales and distribution purposes, and to deal with multiple contractual obligations and liabilities.