Negative Pick-Up Agreement
The negative pick-up deal is similar to a PFD agreement except that the distribution company, usually a studio or VOD brand, agrees to pay a fixed price upon delivery of the film. Because the distribution company does not advance the cost of production, the production company must obtain a loan to finance production, and the lender will almost always require a completion guarantee to guarantee completion and delivery of the film to the distribution company in order to trigger payment. Because of the introduction of the lender and the completion guarantor, these transactions are more complex than a PFD agreement.
If a filmmaker had a budget of $1 million for a film project, she would “sell” the film by promising to deliver a completed motion picture substantially the same as that described in the screenplay in exchange for a payment of $1 million. Once the negative was delivered, the film studio would then have the obligation to finish the prints for the film, pay for its marketing and distribution, and split profits, if any, with the filmmaker on the agreed-upon percentage basis. The negative pick-up is the filmmaker’s “field of dreams”—if she shoots it, the money will come.
The negative pick-up arrangement often operates very similarly to studio financing. Each major decision may be subject to review by the distributor. The distributor will require that the script be followed, the agreed-upon casting not be changed, the length of the film be acceptable, and the film be eligible for a particular MPAA rating, typically a PG-13 or R. Any major deviations must be approved by the financier or the filmmaker risks the company stopping payments or claiming that she has breached the agreement.
The amount paid for a negative pick-up need not be the same as the production cost of the film, although the distributor will often seek to cap the payment at this amount. If so, the filmmaker must be sure to include budget items for herself and others who have invested sweat equity as the basis for negotiations with the studio. To add these items later in the negotiations will result in little or no personal payments.