Net profits — the calculation basis

"Net profits" is the contractual concept used to calculate participation-based residuals owed to writers, directors, composers and performers on a screen production. The mechanics differ by deal but the basic shape is:

Gross revenue (per mode / per territory)
  − Distribution commissions + expenses
  − Sales agent commissions + expenses
  − Collection agent fees
  − Recoupment to financiers (per the waterfall)
  − Producer overhead allowance
  − Bond fees + interest
= Net profits available for participation

Producer's share vs net producer's share

Two adjacent concepts that get confused:

• Producer's share — what the producer receives from the waterfall, before paying out residual obligations
• Net producer's share — what the producer keeps after paying residual obligations

Participation-based residuals are typically calculated against the producer's share, not the net producer's share.

Waterfall

The recoupment waterfall is the order in which different financiers + participants get paid out of incoming revenues. Typical shape on an indie:

1. Off-the-top: distribution + sales + collection costs
2. Senior debt + bond fees
3. Equity recoupment (often pro-rata with financiers)
4. Soft money + grant repayments (some)
5. Net profits — to be split between producer + participation pool

Soft money is typically non-recoupable so doesn't appear in the waterfall (or sits at the very bottom).

Why it matters

• Drives the calculation reported in Transparency reports — Article 19 / S.I. 567/2021
• Establishes the basis on which Residual obligations are paid
• Underpins the CAMA — Contract Adjustment Mechanism / Article 20 fairness assessment

In Togra

/net-profits.php per project tracks the participation pool, named participants + their participation rates, the waterfall configuration, and the running calculation across reporting periods.