What are negative costs?

• A. The actual cost to make your film, including all production costs.
• B. Costs added during distribution and marketing.
• C. The estimated revenue from production.
• D. The tax credits for production.

Answer: (B)

The concept tested is how negative costs are treated in film financing. In this context, negative costs refer to the expenses that come in during the distribution and marketing phase rather than the production phase. These are the outlays for advertising, release campaigns, distribution fees, and other post-production spend that are added on to get the film to audiences. They are considered “negative” in cash-flow terms because they offset the revenue the film can generate and are treated separately from the actual production costs.

Tax incentives and credits affect net cost but are not themselves costs; they reduce what you ultimately owe, whereas the question is focusing on the type of costs that are incurred later in the life of a release. So the option describing costs added during distribution and marketing best captures what negative costs represent.