Waterfall
From ForcaWiki, the simple encyclopedia
| In one sentence | The agreed order and amount that everyone gets paid out of the money a movie earns, from the first person in line to the last. |
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| Category | Film and Television |
| Related | Collection Account Manager (CAM), Equity, Participation, Debt |
Picture an actual waterfall made of several pools stacked on top of each other. Water pours into the very top pool first. Only once that top pool is completely full does the extra water spill over the edge and fill the next pool down, and so on, all the way to the bottom.
A movie's waterfall works the same way, except with money instead of water. It is a financial statement that lays out the exact order, and the exact amount, that every person and company owed money from a movie's earnings gets paid. Whoever is highest in the waterfall gets filled up first, and only once their share is completely paid does money spill down to the next person in line.
Who is usually near the top
Lenders who provided straightforward Debt are typically paid back first, since they were promised a fixed amount and did not agree to share any of the risk. After that often comes Equity investors, recouping their investment, sometimes with a premium. Only after those earlier pools are full does money usually reach people with a Participation deal, sharing in whatever profit is left over at the very bottom of the waterfall.
An independent collection account manager is often the one actually keeping track of the waterfall and paying everyone out correctly, in the exact order the contracts agreed to.
Fun facts
- Arguing over exactly where someone lands in the waterfall, meaning how soon they get paid compared to everyone else, is one of the most fought over parts of negotiating a movie's financing.
- A movie can earn a large amount of money and still leave the people at the very bottom of the waterfall with nothing, if everyone above them in line takes their full share first.
- Waterfalls can have many levels, sometimes a dozen or more, each representing a different lender, investor, or participant with their own specific place in line.