The Majors typically enter into three different relationships with Independent Producers: In-House Studio Production, Negative Pickup, and Distribution-Only Relationships.

In-House Production

Producer’s Relationship StatusThis type of relationship originates in the production operation of the studio. First a producer needs to present a good story, a sound business plan to complete the development, the capability deliver the picture on schedule, and the ability to operate within an approved budget. Then a studio will hire that individual to handle the project as a studio picture with the support of the in-house production and distribution capabilities.

The studio and producer benefit in many ways from this relationship and each have a specific role to play. For example, a producer may have creative freedom with the project but the studio has the final word on creative decisions.

Also, the studio will also own the negative, copyright and all the distribution rights but they also own the risk if the picture does not do well.  In this arrangement, the producer gets a lump-sum production fee delivered with the completion of the picture, is reimbursed for any development costs, and has an interest or is paid a percentage of the profits (referred to as points).

In recent years, this relationship type has become less common from the majors as many of them are reducing the amount of pictures they produce in house in order to focus on distribution of acquired movies.

Negative Pickup

Negative Pickup relationships are similar to in-house arrangements, but provide a producer more independence. Like an in-house contract, the producer provides a story, and a business plan for the development and completion of a picture on-time and on-budget.

However, in a negative pick up, the producer has more personal responsibility in securing the production financing.  The studio provides production support and a contract for all of most of the funding to be paid when the producer delivers the picture. While the producer typically has more creative freedom, the agreement may stipulate that the studio has the final cut.

The ownership of the final product is negotiable in this agreement. A common arrangement is often that the producer owns the copyright while the studio retains the distribution rights (usually the US territory). The studio typically has its distribution fees and expenses paid from the gross receipts of the picture as well as points on the profits.

The producer has more personal responsibility in the funding of the project. This requires a relationship with an entertainment bank. The collateral a producer puts up is usually the studio’s negative pickup contract and estimated receipts from distribution rights not owned by the studio (usually foreign territories).

Also, typically the producer will have a bond relationship with an insurance company. The insurance company provides the bank assurance that the picture will be delivered on the agreed upon date for the approved budget with the specified creative elements still in tact.

Distribution-Only Relationship

The distribution-only relationship gives the producer the greatest creative freedom and largest expected profits. In it, a producer delivers a finished picture to the distribution operations of a major. In some cases, the producer will also provide all or part of the direct distribution expenses.

The studio provides none of the financing, collateral or advance fees. They do provide, however, production and campaign consulting from the picture’s earliest development in addition to US Theatrical distribution and usually, US home entertainment distribution.

This sophisticated relationship offers producers the greatest overall benefits, produces better movies, and more money in his or her pocket.