Profit sharing

[Adam Bray]

If you were to approach someone to shoot an DVD instructional video, what do you think would be a fair offer based only on % of sales?

For example if you wanted to shoot an instructional video on how to juggle. And you knew someone who was an expert at juggling, and you wanted them to be the instructor in the video. What do you think would be a fair offer for them to do the video?

I have approached two people with my DVD idea. I offered them a few hundred bucks upfront. Both refused and accused me of "trying to get rich off them". I approached again and offered 50% of gross sales. My argument was, "If I get rich, you do too". You can't argue with that. Both then accepted.

Do you think 50% of gross sales is too high? What's your thoughts?

[Jon Fairhurst]

Unless they have "star power", I think 50% is too high. Sure, they bring talent by juggling for a few hours. But you spend the same hours filming them, bringing your talent and equipment. And then you spend hours editing, adding titles and voiceover. Then you spend hours packaging, marketing and distributing the video, making phone calls and connections.

Also, you should work off the net, not the gross. The gross would be the income before subtracting expenses, such as the phone calls, shipping costs, etc.

On the other hand, if it's a skateboard video, and the talent is Tony Hawk. He gets the 50% (or whatever - but lots), since his name alone will sell the video.

I don't think there's any fixed guideline here. It's whatever you can negotiate and still make everybody, including yourself, happy. If that's 50% of gross, then there it is.

[Adam Bray]

Sorry, I meant net.... :).

[Steve House]

Originally Posted by Adam Bray

...
I have approached two people with my DVD idea. I offered them a few hundred bucks upfront. Both refused and accused me of "trying to get rich off them". I approached again and offered 50% of gross sales. My argument was, "If I get rich, you do too". You can't argue with that. Both then accepted.

Do you think 50% of gross sales is too high? What's your thoughts?

Duuhhh ... didn't you just give away 100% of your profits? Sign two different contracts with two different people offering each of them 50% of the gross and you've just given away the store.

There's a huge difference between gross and net profit, BTW. Make sure you're clear on which you're offering the royalty on.

Sounds like you got two people who have tremendously inflated egos. While it may be interesting to a few people and you might be able to recoup your costs and make a few bucks, no one is going to get rich selling videos on how to juggle.

[Bill Davis]

Special interest videos sink or swim (dogpaddle really) based on whether you can economically MARKET the video to likely purchasers.

To use your example, if you can get affordable ads in a magazine that appeals to jugglers, perhaps you can sell enough to make a buck.

If there are NO easily definable and affordable ways to separate juggler enthusiasts out of the mass market - then you'll NEVER be able to efficiently market to them and make money.

Making special interest tapes is EASY. Anyone with a camcorder and NLE can do it. SELLING special interest tapes is very, very, very, very, VERY hard.

As to the profit split, think of it this way...

The "juggler" is going to spend a day or two juggling on camera.

You are going to pay for everything from tapes to craft services (food) on the set, You'll shoot and edit everyting. You'll put up the money for promotion and marketing and then fulfill the orders, do all the accounting and pay the taxes. He will spend hours. YOU will spend weeks or months, or if you get insanely lucky, years of effort.

NOW how much of the profits do you think the juggler deserves?

If the juggler is famous and his name will instantly sell 10,000 - 50,000 units - than 50/50 might be perfectly fair - not really based on his expertise in juggling as much as his ability to deliver SALES off the blocks.

But if not, you're going to be doing 80-90% of the work in this, trust me.

You see, you're not ever going to "get rich" off his juggling ability at all.

If you do make significant money, it's because YOU work your butt off selling the tapes.

End of story.

[Bill Davis]

One more thought that my business attorney mentioned the last time I was considering a joint venture...

If in any partnership the "royalty" rate is so high that you divert money you should be spending on marketing into royalties, you seriously weaken your chances of success.

Something to think about.

[Adam Bray]

Good points. Thanks for the tips Bill.