Suggestions on Percentage of Sale

Dach wrote on 2/9/2006, 11:09 AM
VV Users,

This forum kis very active and it has been one to cover all subject matter. I am here again to seek peoples advice and experience on a "co-production" opportunity that I have.

I am currently in a verbal agreement to create a "how to" or "instructional " video if you will. There two parties... myself and the talent. We have agreed that we will make this video at no charge... I provide the production service and he will provide the script and talent. We will then co-market the video together.

Revenue / Profit will be made by sellign this video to the general public. Our intent is to allow each of us to have a percentage of sell, with a percentage also going to marketing and replication overhead.

Does anyone have a suggestion as to what a fair distribution of the sell of a video be. I am just typing out loud here... does it make sense to keep the production in house and pay him a royalty of "x" %.

Let me know... the making of the video will be easy... the marketing and distribution is the headach and most expensive.

Thanks

Comments

Coursedesign wrote on 2/9/2006, 1:09 PM
Based on your description, I would offer the talent something like 7% for the first $5,000 in revenues to you (from retail customers or wholesalers), then 8% for the next $5,000, then 10% for anything after $10K.

Now, if you present this like "I'll take 93% and you get 7%" you may find yourself in an empty room very quickly.

So learn from those who have successfully done this many times before and create a model that shows where the revenues go.

Show that your ASP (Average Selling Price) is 100% (whatever the dollar amount may be. Shipping & handling is completely excluded from this discussion.

X% goes to manufacturing cost (DVD blanks, ducplication, printing on DVD, Amaray box (because it has a higher perceived value), shrinkwrapping, additional promotional materials in the package, etc., etc.).

Y% goes to marketing (online ads, print ads, press releases, phone calls to editors and reviewers, faxes, etc., etc.)

Z% goes towards paying back your cost of production (your time at $XX per hour, write-off on equipment, venue rental, consumables, video editing, sound finishing, etc.)

ZZ% goes to pay for your back office (general administration, bookkeeping, local business taxes on revenue, etc.)

Adjust X, Y, Z, and ZZ so that they are conservatively realistic (beyond the first week even!) and you end up with say 14-20% of which the talent gets half and you get half for putting up all the money and bothering to make a living with his income source.

So not a 93/7 split, now it's a 50/50 split, and a lot of people like that.

Of the $14 left after expenses, you take $7 each. Easy peasy and fair. Get the idea here?