A Tool for Independent Film Financing
A deferment, or ‘deferred payment,’ is a crucial financing strategy, especially in the world of independent filmmaking where up-front cash is limited. It’s an agreement where a key member of the cast or crew (such as the director, a lead actor, or the screenwriter) agrees to forgo a portion, or sometimes all, of their salary during production. In exchange, they are promised that this deferred payment will be made at a later date, but only if and when the film earns enough money to cover its costs.
This is, in essence, a form of high-risk investment by the individual. They are betting on the film’s future success and investing their own salary to help get it made. By reducing the initial cash budget, deferments can make an otherwise unfundable project financially viable.
How the Payout Works
The specifics of when a deferment is paid are outlined in the contract and are part of the film’s ‘recoupment schedule’ or ‘payment waterfall.’ This is the order in which revenue from the film is distributed. A typical, simplified waterfall looks like this:
- First, Pay the Sales Agent & Distributor Fees: The costs of selling and marketing the film are paid back first.
- Second, Repay the Equity Investors: The people who put up the actual cash for the budget get their initial investment back.
- Third, Pay the Deferments: Once the investors are whole, the deferred salaries are paid out.
- Finally, Distribute Profits: Any money left after all costs and deferments are covered is considered profit and is distributed to those with ‘points’ (profit participation).
Because so many independent films fail to become profitable, there is a significant risk that individuals who accept a deferment may never receive that portion of their payment. However, for passion projects or for artists looking to get a film made against the odds, it’s often a risk worth taking.