Waterfall (Film)
The priority order in which film revenues are distributed to participants and investors.
Definition
The waterfall in film financing defines the order in which revenues are distributed: typically distributor fees and expenses first, then debt repayment, investor recoupment, deferred payments, and finally profit participation. Each position (tier) receives payment only after positions above it are satisfied.
Waterfalls are documented in collection account management agreements and vary significantly between deals.
Why It Matters
Position in the waterfall determines who actually gets paid. First-position participants often recover investment while lower positions receive nothing. Understanding waterfall structure is essential to evaluating deal terms.
Sophisticated negotiation focuses on waterfall position as much as headline percentages.
Examples in Practice
A completion bond lender insists on first position in the waterfall, ahead of all other participants.
A producer negotiates for a "first dollar gross" corridor, receiving payment before investor recoupment.
An equity investor accepts lower position but higher percentage, betting on film success beyond breakeven.