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Need advice regarding a potential deal with a client

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Need advice regarding a potential deal with a client

I am the owner of a small animation studio, and I have recently been speaking with the creators of a popular online series, who are interested in creating a feature length animated film. They have offered a deal which I would like some advice on.

The series that they produce is very profitable, and it seems that they think creating this film will also be profitable. They say that they will take care of all of the distribution. They will also provide the script and all audio components. The part that seems strange to me is that they do not want to invest any money into producing this film. Instead, they are offering a 50% share of the profits. That means that the responsibility of finding funds to produce the film would fall entirely on my studio. They have said they will provide me with a contract granting my studio rights to produce animated content for their series. Their plan is that I can then use this contract to approach investors and secure the necessary funding to create the film.

Does this sound right to anyone? It seems to me that normally the client should provide the funding for their production and then retain full rights to their content, or at least provide a portion of the funding and offer a small percentage of the profits. If they are confident that the film will be profitable, then would it not make more sense to want to own 100% of the profits, rather than 50%? If it were not for the popularity of their content, then I would turn down this deal right away. Are there any examples of a producer/distributor relationship such as this being successful in the past? 

I am new to animation

I am new to animation business but with strong business analytical background.

Your concern is sound and you are asking right questions. In a nutshell - key message from what you've written was that you alone will be accountable for any risk related to this project (related to production cost), especially in terms of potential losses.

This is what comes down to being an enterpreneur, you need to assess if this is risk worth taking - it might pay off. But if something goes south.... You alone will be dealing with loss.

In order to do this right you should collect data such as fixed, variable costs, revenues projected by any deals that are in place. You should look into how profits are calculated in this legal entity, just imagine that company might have 1M USD in revenue and anyone representing board will sign-off purchase of fancy cars, "business trips", moving to better offices etc. lowering profit dramatically.

If this is not ready to be provided to you by person who approached you, than business case is far from solid and you will be making decissions based on emotions instead of facts.

I think you need to seek

I think you need to seek legal advice from a entertianment lawer.