By Julia Dillard
PATTERNS AND AMORTS
The series Pattern Budget is the standardized cost of each episode. Just like the pattern of a dress, a Pattern budget is a template that the show can then tailor for the needs of each episode. The pattern budget is the estimated cost to produce a typical episode. It does not include costs that aren’t directly attributable to the show’s production, such as network publicity spend for marketing the show.
Costs that are not attributable to a single episode are in a separate budget, referred to as the Amort. The Amort might include the cost of underlying rights, the season prep period, construction of standing sets, opening titles, and more. The total Amort is divided by the number of episodes in that season and then included as an account item in the Pattern. Therefore, each episode carries an equalized share of the amortized costs.
There are many types of Amorts. Amorts are separated out into different categories as an organizational tool to make it easier for production to make changes to the budget. For example, if the production schedule shifts and another holiday needs to be added, only the holiday Amort will be adjusted, instead of the entirety of the Amort.
Types of Amorts:
Amort Amort (Main Amort) - This is the main amort, which includes costs that will be shared and USED in every episode. For example, the cost to rent a sound stage for 5 months while filming a series would be in the “main'' amort or the cost of filming the opening titles that are used on each episode.
Enhancement Amort - Used to enhance certain episodes with on-screen spends, such as a car chase, expensive stunt, stunt casting, etc. An enhancement amort is often used in straight-to-series orders and is usually intended to be used on the first episode.
Construction Amort - Cost associated with constructing large sets that are used in more than one episode.
Holiday Amort - Cost associated with shutting down production, paying PTO, and extending rentals for holiday breaks, such as for Thanksgiving or the 4th of July.
Prep Amort - Cost associated with prepping a season, such as the labor costs of gathering and preparing equipment.
Wrap Amort - Cost associated with wrapping a season, such as the labor costs of returning equipment and storing or striking sets.
Location Amort - Sometimes referred to as a “distant location amort” costs associated with filming anywhere outside the studio zone or the area surrounding your production base.
Additional Days Amort - Cost associated with adding a day to an episode's shooting schedule or splitting an additional day across two or more episodes.
Once an episodic target budget number is agreed to (usually in a licensing agreement), the line producer, executive producers, and studio production executives will work in tandem to get the pattern budget as close to that number as possible. Once they’ve achieved this, studio executives, network executives, the line producer, and executive producer(s) sign off on the budget. The sign-off process is to ensure that all information is correct, such as the episodic fees of actors, and that everyone is in agreement on how the funds will be allocated. This version is referred to as the Locked Budget. Pattern and amort budgets are often locked in the final days before production of the season begins.
As a showrunner, think of the Locked Budget as a promise you are making to the studio and network executives. You should be intimately involved in the budget revision process leading up to locking the budget. Ultimately, it's your reputation and series on the line if the show goes over budget, and you want all the information possible before you agree to anything. The showrunner should have access to the budget throughout the process.
If a show has a pilot step in the development process, there will be a separate Pilot Budget. Pilots usually cost more than the pattern of a show’s first season. Pilot budgets are usually built first or in tandem with pattern budgets. One reason pilots typically cost more is there is no way to amortize costs across multiple episodes for a pilot step. Longer prep time is needed to start a show from scratch, and longer wrap time is needed to shut down production completely. Another reason for the higher cost is that pilot schedules almost always have additional days to allow time for the show to find its tone and style that will be replicated in later episodes. Pilots also tend to have larger on-screen spends for the inciting incident of the series. The classic example of this is the plane crash for LOST.
Once a show has been ordered to series and an episode is in prep, the line producer, UPM, and accountant start work on the Episodic Budget. An Episodic Budget is a customized version of the pattern budget that meets the needs of that specific episode. For example, if an episode requires an unusually large crowd, the costume department would be allocated additional money. This might come from the enhancement amort, or another part of the episode will be scaled back to make up for that cost, such as using only one location. However, there are some things that never change in an episodic budget and are fixed costs. Series regulars are paid for “all episodes produced”, so even if they don’t appear in the episode for creative reasons, they will be paid as if they did. John refers to this difference as fixed and discretionary costs, which you can read about in depth here. Again, a signature is usually required from studio executives, network executives, and executive producer(s) before the episodic budget can be locked. Episodic budgets are often locked on the last day of prep for that episode.
TAX INCENTIVES
A Tax Incentive cancels a portion of the tax owed to the government (country, state, province, county, or city) by the production company. They often save anywhere from 5-10% of the total cost of the pattern. Governments put these programs in place to attract films and TV shows to their jurisdiction, as these productions often create an economic windfall for the communities where filming takes place.
Most tax incentives apply only to expenses related to the physical production done within the jurisdiction and don’t apply to goods or services not purchased within the jurisdiction. Additionally, if a crew member or actor is not a resident of the jurisdiction of the tax incentive, then their labor might not qualify. This varies greatly depending on the jurisdiction.
While most tax incentives apply only to physical production costs, there are some tax incentives for post-production. One of the most notable is DAVE, a Canadian (British Columbia) tax credit for VFX and Animation.
There are a number of things to consider when discussing tax incentives and whether a location will actually work for your show. Tax incentives can be impactful on the budget, but in the end, if a location really isn’t right for the show, the tax incentive is not going to make it worth it. If you decide the location of a tax incentive is also creatively right for your show, there are several questions to ask your production team and studio executives.
What’s the equipment like in the area? If there are only a few equipment houses with a small selection, that will have a direct impact on your budget, as the crew may need to source some of the equipment from a nearby production hub. If that production hub is outside the jurisdiction of the tax incentive, those costs might not count towards the tax incentives.
How many crews deep is the area? Oftentimes locations outside of production hubs are only one or two crews deep. Between other tv shows and movies, your show might end up competing for crew, which can raise your costs. Further, inexperienced crews mean longer shoot days, which can hit your show’s budget hard.
Is there a large number of actors to pull from? On ER, there were an average of forty new speaking roles each episode. Twenty episodes a season, and now you need 880 actors - and that’s just per season. If your show needs a large number of day players/guest actors, the importance of a large pool of actors cannot be overstated. Flying in cast gets extremely expensive and quickly. If you need to do it more than a few times an episode, it will hit your budget very hard. An additional consideration is the makeup of the actor pool. If your show is largely about people of color, it’s important that there are actors of color within the acting pool in the area.
Does the jurisdiction have the type of locations that your show requires? If you are writing a show that takes place almost entirely outside in the rain forest, New Mexico most likely won’t be the right place for your show, no matter how great the tax incentive.
If a show is utilizing tax incentives, there will be two different budget totals. The first is the Gross, which is the direct cost of production. The second is the Net which is the final cost of production after applying for the tax credit. For example, a show with a locked gross pattern budget of $10 million per episode could have a net budget of $8.5 million per episode. The “Net Locked Pattern Budget” is the number most people refer to as the show's budget. In the example above, when asked what the budget of the show is, they would answer “$8.5 million an episode”.
HOW TO READ A TOP SHEET
The Top Sheet provides a snapshot of your overall estimated production budget, broken down into distinct levels which contain financial information on all the accounts.
Top Sheet Levels:
Above The Line (ATL) - Part of a film’s budget is reserved for major players in the production, such as the director, producers, writers, and recurring actors. So-called because these accounts appear above an actual line on the top sheet. Sometimes productions will be referred to as “top-heavy;” this means the above-the-line costs are out of proportion with the below-the-line costs. This often happens on long-running shows as the actors and other key creatives renegotiate their deals.
Below The Line (BTL) or Production - All physical production costs not included in the above-the-line expenses, including departmental crews, labor, equipment and materials, locations, etc.
Post-Production - Covers everything you need to assemble the footage, including editors, music, foley, VFX, etc.
Other - Amortization costs. In practice, it's the total cost of all amorts divided by the number of episodes. So if all amorts total $1,000,000 and there are 10 episodes ordered for the season, each episode would carry $100,000 in amortization costs. (On a pilot, this section contains items that would normally go in an amort, such as insurance, production-specific legal fees, and miscellaneous expenses.)
Within each section will be the Accounts totals. These accounts are subsections within the budget for individual departments or expenses, which are assigned a number, such as Set Operations (2500), Directors (1300), and Editing (5100). The account numbers are the same in every single budget for every show, across every studio.
Please see an example of a Top Sheet below.
John breaks down each account here, with an eye towards where you have discretion for your episodic budgets.
Some studios also include a Cover Sheet that summarizes the budget and any key assumptions made, such as the number of days on locations vs in-studio. This sheet also includes signature lines for sign-offs. You can see a breakdown of the different Amorts on the coversheet, typically divided by the number of episodes in that season so that the Amort total is per episode.
The shoot schedule is also included, which tells you how many days you’ll have on Stage, Backlock and Location, and your crews work hours for each subset.
Please see an example of a coversheet below.
GLOSSARY
Accounts - Subsections within the budget for individual departments or expenses, which are assigned a number, such as Set Operations (2500), Directors (1300), and Editing (5100). These numbers are the same in every single budget for every show, across every studio.
Amort - Amort is the budget for expenses that are not attributable to a typical episode. The cost of the amort is equally divided across each episode of a season.
Estimated Final Costs (EFCs) - Financial reports that the show’s production accountant sends out to actualize where the episodic budget stands after the production of an episode wraps.
Episodic Budget - Customized version of the pattern budget that meets the needs of that specific episode.
Gross - Complete cost of a production before applying the tax credit.
Hot Costs - Daily reports that the show’s production accountant sends out to actualize where the episodic budget stands.
Locked Budget - A finalized version of the budget that will no longer be changed.
Movie Magic - Computer software used to schedule and budget both TV shows and features, used by most major studios, line producers, assistant directors (ADs), and accountants. The two programs Movie Magic Budget (MMB) and Movie Magic Scheduling (MMS) can work in tandem, but typically in TV the programs are used completely separately. The ADs handle the scheduling, and the accountants handle the budget, with the line producer acting as the bridge.
Net - Cost of a production after applying the tax credit.
Pattern Budget - Sometimes referred to as the Series Budget, the Pattern is a per-episode budget estimating the consistent cost of producing each episode.
Pilot Budget - Single episode budget for a pilot. Typically, only used when the pilot is a separate step, and not for straight-to-series shows.
Scale - The minimum amount of compensation required by a union (or guild) for that position. Scale usually increases by about 3% each year unless a renegotiation takes place to increase it further.
Studio Zone - 30-mile radius in the Los Angeles area used by union film projects to determine per diem rates and driving distances for crew members.
Tax Incentives (Tax Credits) - Cancels a portion of the tax owed to the government (country, state, province, county, or city) by the production company.
Top Sheet - Provides a snapshot of your overall estimated production budget, broken down into four distinct levels which contain financial information on all the accounts.
Variance - (Two-budget comparison) is a side-by-side comparison of a previous budget draft with a new one, or of an episodic budget against the pattern budget. It can also be used to compare one seasons pattern to the next seasons pattern, or an episodic budget against another episodic budget.