Distribution: What’s the Deal?

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When it comes time to sign a distribution agreement, you’re going to want to take a close look at the fine print and get some knowledgeable advice about what’s in there. Chances are, you’ll be signing more than one for any given project, giving different rights to different distributors for various markets, platforms, and geographic territories.

This is the agreement that’s going to determine whether your project turns a profit and you want to make sure that if it does, the money won’t all end up in the distributor’s pocket. Be sure you understand each and every term in the agreement before signing anything, and pay as much attention to what’s missing as what’s included.

Here’s what you can expect to find.

Territory

These are the physical boundaries within which the distributor has obtained the rights to market your film. Domestic means the U.S. and Canada (or sometimes just English-speaking Canada), and foreign rights means everywhere else.

Media

This defines how your film will reach its audience. It can include any or all types of media like theatrical release, non-theatrical screenings, video-on- demand, DVD, network television and syndicates. It can also include things like merchandising, soundtracks and books (hard-copy or digital). Be sure to specifically retain the rights for media that a distributor won’t be using in order to sell them to someone else.

Term

As a rule of thumb, distributors want long term contracts to maximize the time available to recoup their expenses, while filmmakers want them to be shorter in case the distributor doesn’t do a great job. A good compromise is a shorter contract that rolls over if the distributor meets defined sales targets. Make sure you also restrict the length of third-party contracts, which are deals the distributor can make with sub-contractors in other territories or markets.
When you eventually get your rights back, you want them all back.

Fees

This is where the distributor makes their money, and can be the most complex part of the agreement. Distributors usually take a percentage of gross revenues, and if the expenses eat up the rest, there might be nothing left for the filmmaker. That’s the bog you’re trying to avoid. Variations include earning filmmaker royalties rather than percentages, which may end up allowing you to keep more of the net profits.

Expenses

Failing to clearly define or limit the expenses that a distributor can recoup may result in a filmmaker earning absolutely nothing for a film that actually did very well. Without caps, the distributor can spend a fortune on travel, promotion, airfare, tape production and a host of other legitimate or dubious expenses. If the distributor is taking in a percentage of the gross, they may not care how much of the profits they spend once their share is in the bank. As with
the document’s fee clause, the terms and conditions governing expenses have to be unambiguous and drafted to protect your piece of the rapidly shrinking pie.

Advances

Wherever possible, you want to try and get a healthy advance on your take of the revenues. Generating returns can take a long time and you probably still have outstanding bills to pay. Depending on how well your film does in the market, this could be all the money you ever see. Luckily, if the distributor goes bankrupt or your film bombs, you don’t have to pay it back. Your financial backers may also insist on finding a distributor who agrees to an advance in order for
them to start receiving a return on their investment.

All distribution agreements will also include clauses about auditing, warranties, insurance, deliverables, and a host of other important rights and responsibilities attaching to the parties. They all matter, and each needs to be thoroughly vetted for accuracy and completeness. Most importantly, you need a solid dispute resolution clause to protect your interests if things start to go very wrong.

Landing a distribution deal is an occasion for celebration, but just make sure you understand the fine print before popping the cork.

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