International co-production as a format is well known in the audiovisual industry.Many films are set up as audiovisual co-productions and as a concept, international co-production has been gaining popularity among producers of television series and animation projects.
Since an international audiovisual co-productions contain an independent production and financing structure, the revenues generated by exploitation of the project do not belong to just one production company. Several co-producers share the revenues amongst them.
In this article we will give a short recap of what a co-production is, and why producers of audiovisual projects opt for the co-production format. Then, we will focus on how a co-production generates revenues and finally, how these revenues are managed.
Definition of international co-production
Audiovisual co-productions are joint ventures between two or more production companies for the purpose of producing an audiovisual project, which can be a feature film, television series, animation project, documentary or video game.
When two or more production companies from different countries work together to co-producer an audiovisual project, we speak of an international co-production.
There are several classifications possible for audiovisual co-productions, like official and non-official, or treaty and non-treaty co-productions.
For more information as to how an international co-production works, you can check out my article on Stage 32 about how co-productions work.
Reasons to set up audiovisual co-productions
There may be several reasons for producers to develop and set up audiovisual co-productions.
Common reasons are:
- The ability to pool together multiple financial resources;
- Access to and possibility to combine government’s incentives and funding sources from each of the individual co-producers’ territories;
- Access to the partner’s markets and audiences, to boost the exploitation of the project;
- Access to a specific project owned by another producer from a different country;
- Access to desired locations which would otherwise be unavailable to the production.
Although each production is different and all of the above reasons or a combination can apply, often the reasons set out under 1 and 2 above are predominant.
Because of the multiple financial resources, in combination with several government incentives and funding sources, the revenues will have to be split between multiple beneficiaries.
Therefore, it is essential for the co-producers and their partners that allocation and distribution of revenues are managed accurately to ensure that all parties with a financial interest the project receive their share of the revenues in a timely and correct manner.
Audiovisual co-productions and revenues management
As for the revenues generated by audiovisual co-productions, I will make a distinction between domestic exploitation and international sales.
Domestic exploitation is the exploitation of the project in the home markets of the co-producers.
Typically, each co-producer keeps the distribution rights of the project in its own country and related territories (in case of France, for example: the French speaking territories, which includes France and its overseas territories, but also Monaco, and which may also include the French the speaking parts of Belgium,Luxembourg and Switzerland, as well as other French speaking nations worldwide).
This means that the co-producer exploits the rights of the project in its own territory, including theatrical release and television deals.
All territories not belonging to any of the co-producers individually, are together considered the rest of the world (commonly referred to as “ROW”). The international sales of the co-production are often done by an independent sales agent or worldwide distributor.
Note: the above-mentioned scenarios may not apply in case worldwide rights are acquired by a streamer, like Netflix or Amazon. Typically, a streamer buys worldwide rights including the home territories of the co-producers.
Revenues from the home territories of the co-producers
What happens with the revenues that derive fromthe home territories of the co-producers?
As a rule of thumb, the domestic revenues go directly to each of the individual co-producers.
The co-producers will use these revenues to pay off their domestic obligations with regional co-producers, public funds, investors, and talent, and pay out any profits.
Revenues received from international distribution
The revenues generated from international sales of the co-production, go to the general pot and are typically split between the co-producers.
In practice, as part (if not most of) the revenues are assigned to third parties for recoupment of loans by individual or institutional lenders, and investments by equity investors, and payment of deferred fees, bonuses and profits to talent, the co-producers together agree on a recoupment schedule to deal with allocation and disbursement of all international revenues.
To effectively execute the recoupment schedule, ensure proper allocation of revenues and timely and accurate disbursements, the co-producers may decide to engage a neutral, third party collection account manager (often referred to as the “CAM”).
The CAM sets up a so-called collection account for the project. The collection account receives all international revenues of project (but, for the avoidance of doubt, not the revenues from the home territories of the co-producers).
The CAM, the co-producers, the sales agent, and any other party with a main financial interest in the project, together enter into a multiparty collection account management agreement (“CAMA”).
The CAMA contains the recoupment schedule, and dictates the rights and obligations as between co-producers, sales agent, CAM and other parties, with respect to the international revenues.
Finally, the CAM periodically disburses the revenues to the co-producers, sales agent and others in accordance with the recoupment schedule.
Co-production is a common format for independent feature films, television series, animation projects, documentaries and even video games. One of the primary reasons to set up international audiovisual co-productions is to combine multiple financial sources, government funds and incentives from several territories.
Typically, each individual co-producer retains the rights for its home territory, including the right to receive revenues from domestic exploitation. The revenues generated by the international sales of the project are shared amongst co-producers, sales agent and third parties.
An essential element of management of the international revenues is the recoupment schedule. Execution of the recoupment schedule may be done by a collection account manager in accordance with a collection account management agreement.