GUIDELINES FOR THE

DOCUMENTARY WATERFALL

Created and recommended by the

Documentary Producers Alliance (DPA)
Fall 2020
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 2

TABLE OF CONTENTS

DOCUMENTARY PRODUCERS ALLIANCE MISSION 3

BACKGROUND 4
GUIDING PRINCIPLES 5
FINANCING TOOLS FOR DOCUMENTARIES 6
THE BUDGET 8
Guidelines On Compensation 8
Guidelines On Additional Budget Items 9

GUIDELINES FOR THE DOCUMENTARY WATERFALL 10

Summary Of Waterfall Positions 11
Sample Waterfall 12
OFF-THE-TOP COSTS 13

FIRST POSITION 14

SECOND POSITION (RECOUPMENT) 14

THIRD POSITION (PREMIUMS) 15

FOURTH POSITION (NET PROFITS) 15

ADDITIONAL CONSIDERATIONS 18
BEST PRACTICES 19
RESOURCES 20
GLOSSARY 21
ENDORSEMENTS 25
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 3

DOCUMENTARY PRODUCERS ALLIANCE MISSION

The Documentary Producers Alliance (DPA) was formed in 2016 to address career sustainability challenges
affecting documentary filmmakers. Today, the DPA focuses and clarifies its mission to embrace issues
pertaining to wage and labor practices, structural inequality in our field, the scarcity of development funds,
producer recognition, and the relationship between investors and filmmakers. Additionally, we launched
several emergency programs for our members in response to the COVID-19 crisis. In 2019, the DPA released
its “BEST PRACTICES IN DOCUMENTARY CREDITING,” which was designed to standardize crediting
guidelines for the industry. In the same vein, these Guidelines for the Documentary Waterfall reflect DPA’s
collective effort to introduce greater understanding and transparency around the nature of documentary
film finance, to standardize film finance structures, and to advocate for financing terms that are sustainable,
transparent, and rewarding to investors and filmmakers alike.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 4

BACKGROUND
Over the past decade, funding sources for independent documentaries have increasingly diversified. We
have appreciated the commitment of philanthropic funders and investors who have long been active in
the field. We are now also encouraged by the increased commercial interest in documentary film and
the risks assumed by investors resulting in the influx of new resources.

Despite all of this interest, through our own surveys and research conducted by others, it is also clear
that most filmmakers are not adequately compensated in documentary film, which threatens filmmaker
sustainability.1 The DPA does not support uncompensated filmmaker work at any stage and has been
encouraged to find through this research that most industry stakeholders and funders wholeheartedly agree.2

The DPA was motivated to address current financing and waterfall structures because these structures
codify unsustainable industry “norms.” To make up for shortfalls, filmmakers were encouraged to reduce
budgets unrealistically and to work unpaid, often believing they would eventually be compensated by
the ultimate sale of the film. Once investment emerged as a financing tool, filmmakers were even less
likely to be compensated from the sale of the film, with proceeds split among investors. But through
properly and thoughtfully structuring a film’s finances, from initial budget through the distribution of
a film’s profits, multiple opportunities exist to rectify the tension between maintaining “affordable”
budgets and appropriately compensating filmmakers. We believe the Guidelines will also offer greater
protection for investors, ensuring filmmakers are deploying investments and revenues responsibly
while adhering to common industry standards.

While there are many ways to address fieldwide sustainability, our all-volunteer organization opted to
focus our efforts on establishing guidelines for the waterfall within documentary financing as a first
step in a larger effort. Accordingly, the DPA Waterfall Committee developed these Guidelines after
extensive consultation with major industry stakeholders to serve filmmakers, investors, and donors alike
in financial discussions and negotiations. We are incredibly grateful for their wisdom and time. The goal
was to identify funding mechanisms and develop best practices that are understandable, reasonable,
and sustainable for all parties involved in financing; filmmakers can more easily add investor financing
to their toolkit and investors will be rewarded for the risks they take when investing in documentaries.

The recommendations in the pages that follow are crafted as best practices rather than requirements.
We recognize that some situations may warrant filmmakers and funders to deviate from these Guidelines.
In such circumstances, we encourage filmmakers and funders to use these standards and guiding
principles as a starting place, with the specifics of a project dictating where, when, and how exceptions
are applied. Ultimately, we are encouraged that establishing robust and common standards will allow
for greater long-term sustainability for our ecosystem at large.

GENERAL NOTE: Underscored terms are defined in a glossary at the end of the document.

1
“Less than a fifth of documentary directors and producers (19%) received a full expected salary from their most recent documentary film. About 36% of
filmmakers received no salary at all from their most recent film.” 2018 CMSI State of the Field.
2
The DPA is committed to expanding upon our limited knowledge of existing conditions, defining best practices, and to advocating for higher standards. The
DPA’s Research and Data Committee, Labor and Economic Sustainability Committee, and Inclusion Committee are actively working on related initiatives.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 5

GUIDING PRINCIPLES
• Participation by donors and investors is necessary for the continued production of independent
documentary films.

• Both filmmakers and funders take creative and financial risks when embarking on the creation of a
documentary film. Film finance structures should acknowledge those risks and financially reward
both investors and filmmakers in the films they create together.

• Filmmakers must craft realistic budgets that account for the full life cycle of the film and
reflect sustainable wages for all members of the crew. Funders and investors alike rely on budgets
as the bedrock of the financing plan to assess the professionalism of the film team, the feasibility of
the film, the financial viability of the investment, and ultimately to track responsible spending.

• Transparency and honesty should be the bedrock of the filmmaker/funder relationship. Film finance
structures should be clear and understandable and negotiated in good faith, so that an agreement
acceptable to both sides can be reached.

• Not all films will benefit from investment. The presence of outside investors may introduce additional
complexity and legal costs, as well as financial pressure for the film’s commercial performance.

• Not all funders may choose to invest; some may prefer to donate. Some funders might find the
traditional tax-deductible-donation model more advantageous and aligned with their goals and less
onerous when considering the support of a film.

• It is the collective responsibility of filmmakers and funders alike to ensure the health and welfare
of the documentary field at large by valuing filmmaker sustainability, inclusion, and diversity.

• Paying filmmakers for their work at all stages of filmmaking ensures that a diverse range of
experiences and perspectives are reflected in the films we create together. Diverse perspectives and
experiences enhance the landscape of documentary film.

• The Guidelines were developed to encompass a range of funding scenarios and may not all be
implemented or relevant for every project. Rather, the Guidelines offer an array of solutions and
guiding principles to filmmakers and investors to consider as they negotiate each deal and relationship.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 6

FINANCING TOOLS FOR DOCUMENTARIES

These Guidelines use the term “funder” to refer to the providers of any source of money that is used to
make a film. Funders will be further divided into two subcategories: “Donors,” who do not expect to receive
a financial reward as a result of their contribution to the film; and “investors,” who do. Of course, investors
may expect to additionally receive non-financial rewards, such as promoting social awareness of a particular
issue, exposure to new audiences, and support for under-represented artists, similar to donors. This is
particularly the case for double- and triple-bottom line films.

There are a number of financial tools currently being deployed as important pieces of the financing equation
for documentary films: Investments, loans, recoupable grants or no-premium investments or no-back end
investments (investors), cash advance by filmmaker, and grants or donations (donors). Each has its own
benefits and drawbacks for both filmmakers and funders depending on the specifics of the film and the
needs of its funders. Often a special legal entity is specifically created for the film (aka a “special purpose
entity” or “SPE”) such as an LLC or corporation (see addenda) to handle all funding and legal responsibility.
Investment documentation (whether promissory notes, LLC agreements, or investment agreements) may
also address other issues, such as the credit the funder is expected to receive and the film’s production
schedule and budget.

For clarity, and in an effort to introduce common industry language, the DPA defines the most widely used
financial tools as follows:
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 7

CASH ADVANCES BY FILMMAKERS: Filmmakers sometimes advance funds, also called producer’s cash, to
cover the hard expenses of filmmaking while in development (incl. travel, crew expenses, meals, etc.). These
expenses are expected to be repaid once financing flows into the project. Preferably, they are included in
the production budget. Alternatively, the recoupment of these expenses needs to be accounted for through
the Waterfall structure.

DONATION: A tax-deductible gift typically made by individuals through a fiscal sponsor and re-granted to a
film, that does not require recoupment, premiums, or net profit participation to be paid to the funding party.

GRANT: Funding provided for philanthropic reasons typically made by granting organizations adhering to
IRS non-profit guidelines, that does not require recoupment, premiums, or net profit participation to be
paid to the funding party.

INVESTMENT: Financing that includes recoupment, a premium, and net profit participation. An investment
carries the right to receive “upside” in a project, however an investor will only receive a financial reward if
the film exceeds certain income thresholds.

LOANS: Debt-based financial tools typically governed by a promissory note or loan agreement. Loans
typically outline specific terms requiring recoupment due date(s) as well as additional interest payments
on top of the principal loan amount. Some loans may require security or collateral, though that is not a
defining feature of a loan. Whether a film succeeds or fails commercially, a loan will be repaid or result in
default. However, loans do not participate in net profits.

NO-BACK END INVESTMENT: A financial tool that, similar to a standard investment as described above,
carries the right to recoup the investment, and in some cases receive a premium, if the film exceeds certain
income thresholds; however the investor does not require any net profit participation or back end on his/
her/their investment.

NO-PREMIUM INVESTMENTS: A financial tool that, similar to a standard investment as described above,
carries the right to recoup the investment, and in some cases participate in net profits if the film exceeds
certain income thresholds; however the investor does not require any premium on his/her/their investment.

RECOUPABLE GRANT: This refers to interest-free giving, recoupable by the granting organization only if
the film exceeds certain income thresholds and, in some cases, participates in premium and/or net profits.
Recoupable grants are utilized by organizations with a charitable purpose.

It is worth noting, many funders are exploring various models that work to bring more flexibility into
recoupment and net profit participation including no recoupment of principal, recoupment with no premium,
recoupment with no net profit participation, and rolling some or all of recoupment, premium or net profits
back to the filmmaker or into outreach and impact for the film. We want to acknowledge and applaud these
creative solutions to drive financing — and sustainability — back into supported projects and filmmakers.

A note about pre-sales and co-productions: These can be significant pieces of a project’s financing and
can include licensing agreements that grant distribution rights to the Licensor. The specific nature of each
deal, the terms, territories, and laws (including international) will potentially influence profitability, all rights
distribution, and recoupment. These terms may need to be factored into financing agreements and the
Waterfall for the film.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 8

THE BUDGET
While detailed film budgeting guidance is outside the scope of these Guidelines, the importance of
responsible budgeting cannot be overstated. Film budgets and trust are the bedrock of all financier/
filmmaker relationships. Funders rely on the professional expertise of filmmakers to determine the real costs
of bringing a film idea to fruition. Minimizing costs or deflating budgets to attract financiers inevitably causes
friction in the filmmaker/funder relationship and may jeopardize a project’s ability to reach completion.
Accurate budgeting and responsible spending breeds trust even when projects experience the unexpected.

As funders and filmmakers evaluate proposed budgets, it is incumbent on both parties to ensure that those
regularly working on the film are earning a reasonable living wage and that film budgets reflect that
reality. Often the challenges of budget shortfalls or budget increases lead filmmakers to cut their own fees
even when those budgets are agreed upon by both funders and filmmakers. The DPA urges filmmakers and
funders to reconsider this practice as it sets harmful precedents that threaten filmmaker sustainability and
the field at large.

Clear communication between filmmakers and funders on the “true costs” of a film and the ability to reach
clarity on an approved budget is a critical component in both the health of the film’s finances and the
relationship between filmmakers and funders.

Guidelines On Compensation
• RESEARCH AND DEVELOPMENT (R&D) WORK: The DPA recommends that filmmaker fees in the R&D
phase be included in the production budget. It is the filmmaker’s responsibility to track time and expenses
related to R&D and present these numbers in writing at the time the investor documentation is being
negotiated to find an equitable way for this work to be compensated.

• LONG-TERM PRODUCING WORK: Producing, directing, and other above-the-line fees must be agreed
upon both in terms of scope and amount in financing agreements. If increases are needed when the
scope of the work changes, they need to be addressed in writing. These increases, like all other fees,
should be fair, clear, and reflect livable wages for the time spent working on the film3.

• PRODUCING TERM: It is essential that all documents are clear as to when the budget starts and ends
and how much post-premiere work—if any—is already accounted for in the original budget. These deal
terms should be made explicit to investors to the extent they impact the waterfall. In certain cases, if
the scope of work is expanded (such as cutting down or re-editing a film for a sale), a new budget should
be agreed upon for the additional producing work.

3
The DPA is committed to expanding upon our limited knowledge of existing conditions, defining best practices, and to advocating for higher standards. The
DPA’s Research and Data Committee, Labor and Economic Sustainability Committee, and Inclusion Committee are actively working on related initiatives.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 9

Guidelines On Additional Budget Items

• Cash advances by filmmakers: Filmmakers often advance funds, sometimes known as “Producer’s
Cash”, to the production in early stages to cover the hard expenses of filmmaking while in development
(incl. travel, crew expenses, meals, etc.). The funds allow filmmakers to capture early or time-sensitive
footage before outside financing is secured which is often used to attract financing. In the interest of
transparency, it is preferable to include these expenses in the production budget.

• All budgets should include a contingency to account for unforeseen expenses reasonably expected
in the production process (commonly up to 10%). At the outset of funder negotiations, given the
unpredictable trajectory of many documentaries, it is helpful to formulate a plan that prepares for
the possibility of budget overages or unanticipated expenses even beyond the contingency. At times,
filmmakers will seek new sources of funding to close the budget gap. At times, the existing funders might
opt to cover the overage. The filmmaking team should consult investors if unforeseen circumstances
require additional financing, loans, or other sources of funding beyond the approved budget that could
impact the waterfall as amendments to the original investor agreements may be necessary.

• In addition to filmmaker fees, budgets typically include line items for necessary overhead fees or a
“Production Company Fee” (reflecting customary or pro-rated rent for offices housing the production
staff, accounting, utilities, etc.) associated with producing films, generally 10% of the film’s overall
budget.

• The DPA strongly recommends including reasonable distribution, deliverable and festival premiere costs
in the production budget.
• Common deliverable costs should encompass:
• Delivery for a festival premiere.
• Delivery to a domestic distributor.
• Delivery to a foreign sales company.
• Common premiere costs should include:
• One US and one international festival premiere (or more if critical to the sale of the film).
• Travel and lodging for two film-team members to the festival premieres.
• Traveling of subjects, talent, or additional crew to be mutually agreed.
• Festival publicity and promotion expenses (i.e.: publicist, social media, trailer, poster, and postcards,
if needed; this generally excludes awards campaigns or publicity provided by a distributor).
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 10

GUIDELINES FOR THE DOCUMENTARY WATERFALL

The film’s financial “waterfall” describes the flow of gross revenues that a project receives and how these
gross revenues, or the “pie,” are distributed amongst those with a financial interest in the project.

Gross revenue sources may include but are not limited to all-rights deals, broadcast deals, theatrical
rentals, streaming platform licenses, educational and non-theatrical distribution, home entertainment and
VOD, TV, international sales, merchandising, soundtrack, derivative-rights payments, remake rights, etc.
Note that the revenues that a project generates are often far removed from the ultimate gross revenues
received. For example, a film that generates $5 million in domestic box office (DBO) does not receive $5
million in revenues as there are significant distribution expenses and fees incurred by the distributor.

Determining how much investment financing to take on and the structuring of investment deals—specifically
the waterfall itself—impacts the potential for investor recoupment and can make an investment more or
less appealing. The amount of funding required will be impacted not only by the film’s budget, but by pre-
sales, general market conditions, and the filmmaker’s overall distribution and impact strategy. Some deals
include investment caps, which limit the amount of investment that a film can take on. Creating too many
tiers and/or deductions in the waterfall may limit a film’s ability to attract financiers who may not want to sit
in lower positions. Creating too few tiers and/or deductions can result in structures that are too financially
onerous for filmmakers. In crafting these Guidelines for the Documentary Waterfall, we worked to weigh
various competing financial interests so that everyone is fairly positioned in the original budget, on the
“front end” and on the “back end” to benefit from the profitability of the films they work together to create.

The DPA’s Documentary Waterfall Guidelines call for fair recoupment and profits for all parties in
the distribution of revenues in the waterfall.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 11

Summary Of Waterfall Positions

• Off-the-top costs (prior to recoupment):
• Customary deductions may include sales agent fees, actual costs in connection with licensing
and exploiting the film, residuals to guilds, legal fees for distribution agreements, CAMA fees,
and additional accounting fees.
• Distribution and festival expenses not included in the production budget.

• First position:
• Budgeted fees unpaid because of cash flow, also known as deferred fees.
• Preferential loans and cash advances by filmmakers sometimes called “producer’s cash”.
• Second position pro rata pari passu:
• Investor principal recoupment.
• Some recoupable grants.
• Non-preferential loans.
• Unpaid / deferred fees/ cash advances by filmmakers, if not recouped in first position, converted
to “sweat equity” investment.

• Third position pro rata pari passu:

• Premiums on investment.

• Recoupable grants that participate in premiums

• Fourth position pro rata pari passu:

• Net profits, shared between the Funder Pool and the Filmmaker Pool.
• Recoupable grants that participate in net profits.
• There is no set industry standard for how to allocate the distribution of the Filmmaker Pool.
To the extent the filmmaker seeks to retain discretion to grant additional distributions at the
end of the project, careful attention must be given to contractual promises to crew and story
participants, when appropriate, regarding any back-end participation.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 12

Sample Waterfall

Note: the waterfall graphic illustrates the flow of funds — but not
necessarily the timing. Different revenue streams commonly continue
over the course of multiple years after the film’s premiere/sale. The
waterfall serves as the structure to guide payouts as they accrue.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 13

OFF-THE-TOP COSTS

• Off-the-top costs may include sales agent fees, actual costs in connection with licensing and
exploiting the film, residuals to guilds, legal fees for distribution agreements, CAMA fees, and
additional accounting fees.

• Festival premiere travel expenses are often necessary to offer the film for sale in the marketplace.
Similarly, delivery expenses are required to complete the contractual sale and delivery of the film.
As such, if they are not already included in the budget, the associated additional expenses should
be treated as off-the-top costs deducted from gross revenues. Expenses may include but not be
limited to:
• Foreign language reversioning for an international sale.
• Re-edit for a broadcast cutdown including fees to the editor(s), the cost of the edit room, re-
mastering, music, graphics, sound mix, subtitles, or dubbing, etc.
• Filmmaker compensation should be included at a reasonable and agreed-upon rate for delivering
additional versions beyond those stipulated in the original budget and deal terms.
• It is worth noting that the rise of global distribution often requires a wide range of deliverables
with multiple languages and formats that may well exceed common delivery budgets but should
also be paid “off-the-top” to complete contractual sale and delivery.

• Filmmakers and funders may determine that certain additional distribution and promotional expenses
not included in the budget (or not being covered by distributors) would prove valuable to the future
life of the film. These may include but are not limited to: outreach & impact campaigns, promotion,
and self-distribution (in the event that a film is not picked up by a distributor). It is worth noting,
not all films benefit from these additional phases of work. If the parties agree these phases will be
beneficial, the filmmakers should approach funding parties impacted by the additional costs and
potential changes in the waterfall with a plan and budget, inclusive of expenses and filmmaker fees
to compensate for this new phase of work. At times this will trigger a new fundraising effort. At other
times, funders may want to contribute an additional donation/investment or treat it as an off-the-
top expense. All fees, terms, and payment should be agreed upon prior to commencing the work.

• All parties should agree on an adequate reserve on funds paid out from gross receipts after sales
sunset to cover future allowable expenses such as legal, accounting, masters storage, and additional
administrative fees.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 14

FIRST POSITION
It is the DPA’s position that all crew supporting the creation of the film be paid in full before
recoupment begins and this should become a standard part of investment agreements.

• Budgeted deferred fees: Current industry standards often provide for recoupment of unpaid budgeted
fees—also known as deferred fees—after recoupment of investment and premium. Deferment is
detrimental to filmmaker sustainability but has become normalized. It is the DPA’s position that if fully
budgeted fees have not been paid, all crew should be paid their full budgeted fees from gross revenues,
ideally in first position, after customary off-the-top expenses and before any recoupment begins.

• Filmmakers often provide cash advances (sometimes called producer’s cash), or their own funds, to pay
hard costs in the development and production of projects. Filmmakers should seek to memorialize the
loan of cash in the form of a promissory note for the repayment of principal (but no payment of interest)
so that it is treated like other debt investments. Repayment of that note should be included in the budget,
if possible. However, if excluded by distributors or co-production partners, cash advances should be
recouped in first position with no premium or net profit participation on those funds. The amount of the
cash advance should be agreed upon at the time of contract or before additional filmmaker advances
are invested in the course of production.

We recognize paying budgeted unpaid fees and cash advances in first position is a new and bold
proposal that differs from traditional models and may be a high bar to achieve in some cases. As an
alternative, if filmmakers are asked to wait to be paid their fees or reimbursed their financial outlays, then
we recommend that deferred fees and cash advances by filmmakers be converted to investment and
that filmmakers should inure the same benefit as investors with pari passu recoupment, most favored
nation premium, and net profit participation.

• Preferential loans with terms requiring recoupment in first position. It is worth noting that not all loans
require preferential first-position treatment.

SECOND POSITION (RECOUPMENT)

In the spirit of a fair recoupment for all parties, the DPA advocates second position recoupment on a
pro rata pari passu basis including:

• Principal of investments.

• Recoupable grants.
NB: Some recoupable grantors have opted to place themselves in fourth position, recouping only once
the film reaches net profits. Positioning recoupable grants later in the waterfall may assist filmmakers
in attracting other financing. This also allows filmmakers to secure their deferred fees in a more timely
fashion, supporting filmmaker sustainability.

• Non-preferential loans.
 GUIDELINES FOR THE
DOCUMENTARY WATERFALL 15

• Budgeted unpaid fees also known as deferred fees converted to “sweat equity” investment: If mutually
agreed by the filmmaker, the individual labor provider (if different from the filmmaker), and investors,
budgeted unpaid deferred fees (including R&D and any other budgeted labor fees) may be converted
to sweat equity investment (and thus the deferred fees waived by the labor provider). Such sweat
equity investments should be made on a most-favored-nations basis with other outside investors, with
premium and net profit participation and subject to the same terms as all other investors.

THIRD POSITION (PREMIUMS)

• Recoupment of the premiums on investments to the investors and some recoupable grantors.
Traditionally, premiums for film projects have been subject to most-favored-nations status so that all
investors—regardless of the nature of their investment and timing of their commitment — would be
entitled to the same premium on their investment.

Earlier investment in a project—which is both critical to a project and also inherently carries a
greater risk— should be rewarded with preferential premiums.

Specifically, the DPA suggests the following premium structure to be paid pro rata, pari passu:
• 15-20%—premium on investment made during R&D.
• 10-20%—premium on investment made during production and post production.
• 10-20%*—premium on investment made after a film has been accepted to a festival premiere.

* We appreciate that investors can bring a range of benefits to projects including additional fundraising, sales,
editorial, promotional support, or completion of the lion’s share of the production budget. We suggest a
range of premiums to allow filmmakers and investors to honor the full value of an investment on a case by
case basis.

FOURTH POSITION (NET PROFITS)

Net profits remaining after investors recoup their initial investment and secure their premium have
traditionally been split 50/50 between the “Funder Pool” and the “Filmmaker Pool” (sometimes referred
to as the “Creative Pool” or “Producer Pool”). This is the current industry model for both narrative films as
well as documentary films.

Unlike fiction films which generally require all financing be secured before beginning the hard work of
production, documentaries are often in production while funds are raised. Uniquely, documentary filmmakers
are responsible not only for the creative process, but also raise critically needed “soft money”—securing
funds from grantors, crowdfunding proceeds, philanthropic foundations, government entities offering
grants and tax credits, and other donors. “Soft money” improves the potential for investor recoupment and
furthers represents the mission of most grantors and donors to support filmmaker sustainability.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 16

Therefore the DPA is advocating for a new standardization of the documentary profit participation
model, whereby the filmmaker participates in the Funder Pool in proportion to the share of soft
money he/she/they have raised.

Following this principle, net profits should be determined as follows:

• Funder Pool profit participation:

• The Funder Pool shall consist of investment funding AND soft money funding raised by filmmakers.
• The Funder Pool shall be allocated a standard percentage of 50% profit participation.
• An investor or filmmaker’s profit participation in the Funder Pool should be calculated by taking
the amount invested by said funder or the amount of soft money raised by the filmmaker; dividing
that amount by the film’s total budget; then dividing that amount by two: (funding amount ÷ total
budget) ÷ 2 = amount of profit participation

• Filmmaker Pool profit participation:

• The Filmmaker Pool consists of producers, directors, and any other crew member (DP, editor, etc.),
and/or other non-financing entities who are allocated profit participation by the filmmakers for their
work. The DPA believes that filmmakers should be transparent with regards to how this Filmmaker
Pool is split and these allocations should be specified in crew deal memos or other relevant legal
agreements.
• To recognize the creative contribution of the filmmakers, the Filmmaker Pool should be allocated
a floor of 50% of the profit participation (i.e., back end).
• Any profit participation that is allocated for soft money raised allows the filmmaker to participate
in the Funder Pool. In this scenario, the total back end-profit participation related to the Filmmaker
Pool is calculated as follows:
[(soft money funding amount ÷ total budget) ÷ 2] from the Funder Pool + 50% of the profit
participation (from the creative allocation) = Total filmmaker’s profit participation
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 17

Another way of understanding the same idea illustrated in the flow chart above in which the budget of a
film is $1 million—comprising $500,000 from investments and $500,000 from soft money raised by the
filmmakers—is through the following calculations:

• The investors who invested private funds in the film should receive 25% of net profits.
($500,000 ÷ $1,000,000) ÷ 2 = 25%

• The filmmakers who raised the soft money—in this case $500,000—should also receive 25% of the net
profits.
($500,000 (soft money) ÷ $1,000,000) ÷ 2 = 25%

The investors and filmmakers therefore split the net profits of the Funder Pool in recognition of
their respective financing of the project.

• The Filmmaker Pool would receive its standard 50% of net profits for its creative contribution.
As a result, in this specific example, the Filmmaker Pool would receive:
25% Investment Funder Pool net profits allocation
+ 50% Baseline Filmmaker Pool net profits allocation
= 75% Total filmmaker net profit allocation

Note that the 50% allocation of net profits to the filmmaking pool is the DPA-preferred standard US model.
The European model (and other international models) may differ. Adjustments may need to be made if
international co-producers are involved.

Some funding contributions that advance income to close budget gaps such as pre-sales, tax credit loans,
or early tax credits may be excluded from a calculation of “total budget” when determining net profit
allocations. For instance, a film with $100,000 in tax credits would deduct $100,000 from the total budget
before running the formulas noted above.

Finally, for some mission-driven or charitable organizations, it might be beneficial and, in some cases, legally
required for the granting organization to have the right to designate where any Net Profits attributable
to their contributions are directed. The organizations may choose to allocate Net Profits to filmmakers,
impact campaigns, or other designees depending on their mission and/or priorities. As such, filmmakers
should engage funders on the designation of Net Profits, if any, during contract negotiations.

RESOURCES NOTE:

The DPA has created a DPA Summary Term Sheet that offers a summary format to relay the project’s key
financing and crediting terms to potential investors and funders.

In addition, we have created a DPA Accounting Worksheet that reflects the financial structures outlined in
the flow chart above with working calculations.

You can find these worksheets (along with others) in the Resources section at the end of the document.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 18

ADDITIONAL CONSIDERATIONS
• It is worth noting that the term “equity investment” has become common in describing investment
financing overall. We would like to distinguish that term from investment financing, as the term
“equity” may suggest ownership of the property or intellectual property (IP), or of the special
purpose entity (SPE) that owns and controls the film, though that is not the standard in documentary
investment. The DPA is eager to reimagine a term—“equitable equity” in which investment financing
is equitable to all parties.

• Some mission-driven investors also choose to forego their participation in principal, premiums, and
net profit participation in the waterfall.

• The DPA recognizes that different deals may include revenue corridors for recoupment that benefit
filmmakers, talent, impact campaigns, or investors depending on the deal. As we cannot weigh
in on every model, we encourage filmmakers to try and finance their films in a way that mutually
benefits all parties.

• It may be agreed in certain cases that some profit participants (e.g. celebrity participants) will be
deducted off-the-top, in which case the Funder Pool and the Filmmaker Pool need to mutually agree
to share this financial burden equally.

• In some cases when funders, investors, or a third party help raise financing for the film, it may be
appropriate to allocate net profits accordingly. We encourage net profit participants to have these
discussions early in the process.

• While there are no common standards for how to share profit participation within the creative team,
it can be offered to both reward crew and/or remediate below-standard fees, or to recognize other
important creative contributions to the film including, when appropriate, story participants.

• Filmmakers are sometimes able to obtain in-kind services. These services may be in the form of
outright contributions with no expectation of repayment. Alternatively, these services may be
treated like deferred fees payable prior to recoupment. Finally, these services—calculated as the
value of goods and/or services—may be treated as investments. When in-kind services are treated
as an investment the filmmaker and investors should mutually agree and detail in writing the value
of the services in advance or agree to a rate card.

• To minimize administrative burden and tax reporting on both filmmakers and investors, the DPA
recommends sunsetting distribution requirements (and in the case of a film-specific LLC, winding
down the LLC) once most sales have been exploited, typically after five years or less. Even in
these cases, it is important to have a system in place to manage assets long term. This should be
negotiated contractually with the input of attorneys and partners to ensure robust legal, tax and
business practices, may not be appropriate for all films with longer life cycles, nor does it remove
contractual profit-sharing obligations.

• Awards, grants, and individual fellowships/honoraria given directly to filmmakers for their work on a
film, as well as speaking fees paid to filmmakers when they present a screening, are not considered
revenue streams in the waterfall and should be expressly excluded from royalties and revenue
definitions in the investor and financing agreements.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 19

BEST PRACTICES
• CONSULT ENTERTAINMENT ATTORNEYS AND ACCOUNTANTS: Investments are complex legal
deals that carry broad and far-reaching responsibilities and risks, that may include founding new
entities, and that carry fiduciary and legal responsibilities. Every deal is different and should always
be negotiated. Do not copy or re-use old agreements without the counsel of an attorney who has
supervised investment financing deals in the past.
• Filmmakers and investors should separately have their own attorneys.
• Attorneys should include provisions in agreements for how to deal with issues including a legal
disagreement, governing law, arbitration, liens, damages, and a framework for the inherent
uncertainty of some aspects of investment financing.

• SEEK AN ADVISOR WITH FILM INVESTMENT FINANCING EXPERIENCE: Both filmmaker and
investor should find peers or mentors with direct experience working with investment financing from
a previous project. Ask them to advise the team as you build relationships and negotiate terms. In
addition, we recommend using a CAMA when possible in the revenue distribution process to increase
financial transparency.

• COMMUNICATE WITH INVESTORS: Fundraising is challenging, and many documentary filmmakers

feel desperate for funding and so may be hesitant to ask questions that might jeopardize an
interested party. Talking about money, legal protections, and risk can be uncomfortable and these
important conversations are often avoided as a result. The reluctance to have difficult conversations
can lead filmmakers and funders to enter into deals that become problematic for one or both parties
in the long term. It is absolutely critical to align expectations up front. No matter how difficult the
question or concern may be, both filmmakers and investors should listen to their gut and raise issues
or concerns early on. Use the nature of the negotiation process as a litmus test to evaluate what it
will feel like to enter into a relationship with an investor or filmmaker and to make sure the priorities,
goals, and personalities of each are compatible. For investors, try to make it easy for filmmakers to
ask questions so they fully understand the expectations that come with funding. For filmmakers,
try to help investors understand the unknowns inherent in the project that can affect the schedule,
the budget, and the final film.

• CONSIDER ALL POTENTIAL SCENARIOS: Carefully drafted investment documentation and strong
partnerships (sometimes but not always within legal agreements) create a framework to deal with a
range of possible scenarios (good and bad) during the full life cycle of the film’s production. Carefully
drafted budgets with contingencies and thoughtful financing plans are also critical to a strong
framework. However, given documentary is prone to the unexpected, these conversations should
also include how to handle budget caps, budget overages, budget shortfalls, investment caps, and
the need to raise more financing than previously expected, to name a few.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 20

RESOURCES FOR FINANCING AGREEMENTS

FINANCING RESOURCES: ARTICLES ON INVESTOR ARTICLES ON FILMMAKER
RELATIONSHIPS AND DEAL SUSTAINABILITY:
DPA Accounting Worksheet MAKING:
Caty Borum Chattoo and
DPA Summary Deal Terms Daniel Lawrence Abrahams. William Harder. “The State
Worksheet of the Documentary Field:
“Deal Making Done Right: A
Risk Factors for Investors to Back-to-Basics Approach to the 2018 Study of Documentary
Consider (Courtesy of Nicole Byzantine World of Waterfalls, Professionals” Center for Social
Page, Esq.) Hurdle Rates and Preferred Media and & Social Impact
Returns” producersguild.com. American University School of
SEC definition of an accredited August 10, 2015 Communication. September,
investor 2018
Dan Cogan. “How to Manage
“Exempt Offerings” U.S. The Relationship Between Tom Grater. “Film4, BBC, BFI &
Securities and Exchange Film Producer and Investor” Pact Back UK Producers Survey
Commission website Indiewire. Sept 11, 2013 That Reveals Stark Challenges Of
Indie Biz” Deadline. February 5,
“Film Finance Recoupment 2020
for Private Equity Investors”
RodriguezLaw.com. May 16, Lance Kramer. “The Messy
2018 Truth Behind a Day Job as a
Documentarian” Documentary
Magazine. April 26, 2017
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 21

GLOSSARY
ABOVE-THE-LINE PERSONNEL (ATL and pay out revenue to the financiers and profit
PERSONNEL): Derived from the top-sheet of a participants pursuant to the terms of the agreed
budget, this term refers to the line of individuals who waterfall in the CAMA.
directly lead the production and creative direction
of a film. In a documentary film, ATL roles include DEFERRED FEES: Generally due to cash flow
but are not limited to the producers and directors constraints, crew members may defer or allow
as well as writers and voiceover artists or other budgeted fees to go unpaid. Any member of
performers (if applicable). Above-the-line costs may the crew can offer to defer their fees including
also include development costs. ATL personnel are but not limited to directors, producers, editors,
typically credited in the main credits. cinematographers, and composers.

ANNUAL PERCENTAGE RATE (APR): This is the DOMESTIC BOX OFFICE (DBO): A measure of
annual percentage rate charged on loans or earned ticket sales in the North American theatrical market
through an investment. that is often used to gauge the financial success of
a theatrically released film.
BACK END: Also known as net profit participation,
this term refers to the expectation of income based DONATION: A tax-deductible gift typically made by
on distributions of net profits made as the last step individuals through a fiscal sponsor and re-granted
of the waterfall. These profits can also sometimes be to a film.
referred to as “points.”
DOUBLE BOTTOM LINE: The “bottom line”
BELOW-THE-LINE PERSONNEL (BTL traditionally refers to the last line of a balance
PERSONNEL): Derived from the top sheet of a sheet or other financial document, showing overall
budget, this term refers to the line that separates financial results. A “double bottom line” film focuses
the director(s), producer(s), and writer(s) from the not only on financial results, but also on non-
other crew, such as cinematographers, sound financial benefits, such as mission investing, social
recordists, and post production crew. BTL personnel impact, exposure to new audiences, or support
are all personnel who participated in the film other for under-represented artists, just to name a few.
than the ATL personnel, and are typically credited in “Enhanced bottom line” or “triple bottom line” values
the end credits. the abilities of artists who are creating the work to
thrive, in addition to the financial return and non-
CASH ADVANCES BY FILMMAKERS OR financial benefits.
PRODUCER’S CASH: Expenses incurred by the
filmmaker before other sources of financing become EQUITY: In financial terms, equity means the value
available. of shares issued by a company. In legal terms, equity
implies ownership over the company or intellectual
COLLECTION ACCOUNT MANAGEMENT property (such as a film). In social justice terms,
AGREEMENT (CAMA): This agreement is with a equity means the quality of being fair.
collection agent that will manage revenue for the
film. All revenue derived from exploitation of the film FILMMAKER: As used in these Guidelines, the core
(from distributors, sales agents and other licensees) creative decision makers with legal and fiduciary
will be directed to the collection agent, and the responsibility for the film, typically including
collection agent will issue accounting statements directors and/or producers.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 22

GLOSSARY
FILMMAKER POOL: The net profits shared by all the IN-KIND: Services provided to the film in lieu of
non-financing parties receiving profit participation upfront monetary compensation. They can either be
in a film project– generally producers, directors, or contributions with no expectation of repayment, for
crew members. which payment can be deferred, or services that can
be considered an investment to be recouped as per
FRONT END: The expectation of income based on investor agreements once net profits are received.
payouts made pursuant to the budget, off-the-top
costs, return of capital, and premium. INVESTMENT: Financing that traditionally has
included recoupment of principal, a premium, and
FUNDER: In these Guidelines funder refers to any net profit participation.
source of money that is used to make a film. Funders
will be further divided into two subcategories: INVESTMENT CAP (ALSO KNOWN AS “EQUITY
“Donors,” who do not expect to receive a financial CAP”): A limit on maximum allowable investment
reward as a result of their contribution to the film; on a film project.
and “investors,” who do.
LOAN: A financial instrument governed by a
FUNDER (OR FINANCING) POOL: The Funder Pool contract with specific terms defining the repayment
is comprised of recoupable funders -- generally of principal according to a set schedule and,
including investors, some recoupable grantors and, typically, the payment of interest on top of the
in the DPA recommended model, filmmakers who principal amount loaned. Some loans may require
have raised “soft money” -- all of whom participate establishment of a security interest in the film
in the net profits of the film. as collateral to be recovered by the lender in the
event of the borrower’s default, though that is not a
GRANT: As used in these Guidelines, a grant is an defining feature of a loan.
outright gift of funds provided for philanthropic
reasons not requiring recoupment, payment of a MOST-FAVORED-NATIONS (MFN): A contractual
premium, or back-end participation. A grant may provision in an investor agreement whereby the
be conditioned on compliance with certain terms producer agrees to give the investor the best/most
and conditions of the grantor. Grants may be made favorable terms made available contractually to any
by non-profit 501(c)(3) foundations, government or other investor. Note this term also may be used in
quasi-governmental organizations. other contracts to ensure a party does not get lesser
terms than any other similar party. Some attorneys
GROSS RECEIPTS: The total amount of revenues recommend using “no less favorable” language
generated by a film property, generally through rather than “most-favored-nations” clause, which
exploitation of distribution and ancillary rights. can be very broadly interpreted.
Note that definitions of the term or inclusions and
exclusions from “gross receipts” may vary widely by NET CROWDFUNDING PROCEEDS: Monies raised
contract. from crowdfunding minus the cost of fulfillment
on rewards and platform costs (i.e. for any typical
GROSS REVENUES: The total amount of revenues Kickstarter campaign, Kickstarter will take 5% of the
(gross receipts) received by the film entity minus total proceeds for use of their platform; the cost of
distribution expenses (e.g. prints and advertising or fulfillment of rewards promised in the campaign can
P&A, agency fees, distribution fees, or advances, etc.). range from zero to even 40% of monies raised).
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 23

GLOSSARY
NET PROCEEDS: A defined term reflecting gross PRO RATA: Proportionately as between all relevant
revenues of a film after all of the approved budget parties (i.e. funders), in proportion to their relative
line items have been fulfilled including all labor fees interests, where distributions are made in proportion
and all contractually agreed-upon expenses (“off- to the parties’ financial contributions.
the-top costs”) have been paid.
PRO RATA PARI PASSU: The two terms are often
NET PROFITS: As used in these Guidelines, used together to mean proportionately, at the
gross revenue of a film less budgeted expenses, same time.
off-the- top costs, recoupment of principal, and
premium. Net profits are distributed to investment PRODUCER: The term “producer,” in this instance,
financiers and other back end participants (including is a contractual term used to identify the signer
filmmakers and some recoupable funders). of investor and distributor agreements. The
producer may include the credited director (if they
NET PROFIT PARTICIPATION: The right to receive are a producer and/or owner of the film) and/or
a distribution of net profits of a film, based on producer(s) and/or the legal entity controlling the
payouts made as the last step of the distribution film.
waterfall, after budgeted expenses and above-the-
line costs have been deducted from gross revenues. RECOUPABLE GRANT: This refers to interest-free
Otherwise known as “back end.” giving, recoupable by the granting organization
only if the film exceeds certain income thresholds
NO-BACK END INVESTMENT: A financial tool that, and, in some cases, participates in premium and/
similar to a standard investment as described above, or net profits. Recoupable grants are utilized by
carries the right to recoup the investment principal organizations with a charitable purpose.
and a premium; however, the investor does not
require any back end participation. REVENUE: The total amount of revenue earned and
actually received by a film, from all distribution and
NO-PREMIUM INVESTMENT: A financial tool that, exploitation of the film in all media and across all
similar to a standard investment as described above, platforms throughout the world. May also be referred
carries the right to recoup the investment principal, to as “gross revenue” or “total revenue.”
and in some cases receive a share of the net profits
of a project if the film succeeds commercially; REVENUE CORRIDOR: A portion of gross
however, the investor does not require any premium revenues (usually a percentage, up to a ceiling)
on his/her/their investment. that is excluded from the waterfall and paid to the
filmmaker or other designated corridor recipients
OFF-THE-TOP: Any costs deducted from gross ahead of or pari passu with the investors and other
receipts prior to recoupment of financing and paying waterfall participants. A revenue corridor may be
out of net profits. used, for example, where the filmmaker’s budgeted
fee was lower than the project warranted.
PARI PASSU: Equally between all relevant parties
(i.e. funders), at the same time, without preferential SALES SUNSET: The winding down of distribution
treatment to anyone. of net profits requirements (and in the case of a
film-specific LLC, winding down the LLC) once most
sales have been exploited, typically after five years
or less.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 24

GLOSSARY
SOFT MONEY: As used in the documentary film
investment landscape, soft money refers to all non-
recoupable, non-investor funds contributing to the
film’s budget, including grants, donations, subsidies,
tax credits, and crowdfunding.

SWEAT EQUITY: A party’s contribution to a project

in the form of labor, as opposed to financial equity or
paying others to perform the task.

WATERFALL: A contractual financial structure

accounting for the flow of gross revenues that a
project receives, the payment of required expenses,
and how net revenues are distributed amongst
those with a financial interest in the project.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 25

ENDORSING ORGANIZATIONS
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 26

SUNDANCE INSTITUTE continues to support and applaud the Documentary Producers Alliance
organizing and education efforts and will continue to be a convener, provide a platform for
advancing best practices in crediting, financing and overall sustainability, and directly support
producers through our fellowship program, labs and other activities.

The INTERNATIONAL DOCUMENTARY ASSOCIATION (IDA) has agreed to be a convener and to

provide a platform for advancing the conversation around Documentary Waterfall Guidelines as
part of its advocacy and policy work.

ADVISORS
The following organizations and professionals have committed their time and expertise to
reviewing these Guidelines. They have signed in support of the ethos these Guidelines promote.

THE PERSPECTIVE FUND, Funder

SANDBOX FILMS, Funder
SUBMARINE, Sales Agent
KAREN SHATZKIN, Attorney
JONATHAN GRAY, Attorney

We thank the countless others who have advised us over the past three years.
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 27

ENDORSING PRODUCERS
Maria Agui Carter Rachel Dickson Helen Hood Scheer Mika Orr Schreiber
Olivia Ahnemann Fenell Doremus Andrew Houchens Josh Penn Meghan Shea
Daniel Alpert Andrew Douglas Julia Huffman Abbie Perrault Tahria Sheather
Eva Anisko Sandi DuBowski Carletta S. Hurt Martine Phelan- Alexander Shebanow
Jessica Anthony Sky Dylan-Robbins Melissa Jacobson Roberts Andrew Sherburne
Sara Archambault Sian Evans Susan Kaplan Rachel Pikelny Marc Smolowitz
Jameka Autry Violet Feng Christina D. King Zak Piper Martha Spanninger
Robert Bahar Ina Fichman Lance Kramer Miranda Plant Jennifer Steinman
Patricia Benabe Kerthy Fix Christine La Monte Amanda Pollak Sternin

Allison Berg Emma Francis- Gretchen Landau Katie Prentiss Rebecca Stern
Snyder Onsager Johnny Symons
Veronique Bernard Lisa Leeman
Ariana Garfinkel Diane Quon Jen Tate
Nicole Bernardi-Reis Tia Lessin
Tchavdar Georgiev Heidi Reinberg Nathan Truesdell
Rebecca Blumhagen Beth Levison
Megan Gilbride Stacey Reiss Paula Vaccaro
Maggie Bowman Justin Levy
Jocelyn Glatzer Larissa Rhodes Lisa Valencia-
Rachel Boynton Brad Lichtenstein
Megan Gilbride Ian Roberston Kibbe Svensson
Shawna Brakefield- Elizabeth Lodge
Haase Kathleen Glynn Stepp Ann H. Rose Danielle Varga

Andrew Brumme Yoni Golijov Joshua Louis Simon Louise Rosen Monique Walton

Caryn Capotosto Jamie Gonçalves Jennifer MacArthur Hannah Rosenzweig Jackie Weissman

Nina Chaudry Jonathan Goodman Susan Margolin Anya Rous Carrie Weprin

Lori Cheatle Levitt Mark Maxey Rachel Rozycki Elizabeth Westrate

Jamie Coughlin Michael Gottwald Yael Melamede Maureen A. Ryan Ray Whitehouse

Laura Coxson Jennifer Grausman Alexandra Moss Wendy Sachs Julianne Wilkinson

Nicholas Daniele Lynette Gryseels Alysa Nahmias Alicia Sams Jessica Wolfson

Carl Deal Elisabeth Haviland Rachel Nederveld Risé Sanders-Weir Daniel Wright
James Garret Savage Eden Wurmfeld
Jessie Deeter Marilyn Ness
Alice Henty Ose Schalz Jeremy Yaches
RD Delgado Sara Nodjoumi
Ines Hofmann Kanna Nancy Schwartzman Lise Zumwalt
Jessica Devaney Jeff Orlowski
Tracie Holder Camille Servan-
GUIDELINES FOR THE
DOCUMENTARY WATERFALL 28

ENDORSING PRODUCTION COMPANIES

Arch + Bow Films Means of Production Media
Ajna Films Medicine of the Wolf Productions
Beggar Kings Entertainment Meridian Hill Pictures
Big Mouth Productions Motto Pictures
Blue Lake Entertainment Multitude Films
The Brakefield Company Necessary Pictures
Delirious Pictures Nyla Pictures
The Department of Motion Pictures Northland Films
Exposure Lab Once in a Blue Films
Farthest Films Oregon Media Lab
Hazel Pictures Public Record
Hibiscus Films Inc. Salty Features
Iguana Films / Emerson College SideXSide Studios
Insignia Films Stacey Reiss Productions
Intention Media St Marks Productions
Intuitive Pictures Thornapple Films
La Monte Productions Vagabond Moving Pictures
Maylo Films
 SUPPORT THE DPA

The Documentary Producers Alliance is a 100% volunteer

organization and relies solely on donations to support its ongoing
work and advocacy on behalf of documentary producers.

Thank you in advance for making a tax-deductible donation through our

Fiscal Sponsorship provided by The Film Collaborative.

DONATE

SUPPORTERS

Founding Supporter Fiscal Sponsor

DPA | Advocating and setting best practices on behalf of documentary producers since 2016

© 2020 Documentary Producers Alliance