DEALS
FILMMAKING /
Don’t sign a distribution deal without reading this first
Navigating a film distribution deal can be hairy. It’s both the most exciting time in a filmmaker’s life and the most anxious, as they await the future of the film and potentially their career.
Every agreement is different, and there is no one-size-fits-all when he comes to film distribution. But let me clue you in on the five key things you should argue for in your distribution deal and two things that you should just let go.
The Most Important Deal Points
Minimum Guarantee
The minimum guarantee, or advance, is how much a distributor pays you to buy the rights to your film for the territory and the term. In some cases, the minimum guarantee will be the only money that you receive from your movie. You need to make sure that this is as high as you can get, but remember to be realistic.
A majority of the independent distributors nowadays are paying much lower minimum guarantees and giving a higher percentage of the revenue. Having a higher share of the income is great, but what happens if your film doesn’t find an audience? Or the distributor fails to market it correctly?
Independent films can get anywhere from $10,000 to $200,000 depending on the star power and quality of the film. More notable films that screen at the Sundance Film Festival can earn anywhere from $3 million to $20 million in minimum guarantees. But that is a long shot.
Remember, the higher minimum guarantee you have, the more the distributor must recoup before you see any revenue share.
Expense Cap
This term puts a cap on the amount of recoupable money a distributor can spend on your film without the filmmaker’s approval.
An acceptable expense cap is $25,000 for a non-theatrical release or up to $75,000 for a theatrical release. This number is not how much a distributor WILL spend, but how much they COULD spend before you get a say.
The lower this number, the less your film has to make before you start to see real revenue.
Distributor Fee
A distribution company makes most of its money by charging a fee to distribute your film. This fee is paid out of the gross revenue from the film before any deductions or revenue split.
If your film earns $500,000 in revenue, and the distribution fee is 30%, the distributor would receive $150,000 first. They would then recoup their minimum guarantee as well as any expenses. After all that, they split with the filmmaker.
The lower the distribution fee, the less gross revenue a film has to make before the filmmaker sees a share. I’ve seen distribution fees anywhere from 15% to 35%.
Distributor Split
The distributor split comes after the distributor has recouped all of their investments, taking their fee, and recouped any expenses.
The split is their share of the producer’s revenue. But wait, the distributor already takes a fee off the top, recoups their investments and expenses. Why should they get a larger share of the remaining revenue?
They shouldn’t.
Distributor splits are a term that you should try to negotiate for removal entirely. You may have to give up other conditions such as a lower minimum guarantee, or higher distributor fees. But it will be worth it in the long run.
Distributor splits can range from 90/10 to 70/30 in favor of the filmmaker.
Rights & Territory
Never, ever, ever sell international and domestic rights together to the same company unless they are remarkably well-known or are paying you a substantial minimum guarantee.
There are over 70 territories that pay anywhere from $2,000 to $10,000 or more depending on the quality of the film. Your film will earn much more internationally than domestically via minimum guarantees.
Most North American distributors may have an international sales team, but they don’t specialize in that. You want to release in Germany with a German distributor that understands how to get the film in front of their audience.
Just like the audience is going to be different in California, than it is in Alabama, each country has its unique quirks.
Unless you‘re planning a four-walled theatrical release, or you need to hold back home entertainment or educational rights, it’s encouraged to give one distributor all rights.
Just Let These Go
The Term
There is no difference in your film after you receive the rights back whether you get them back in five years or 50 years.
Once a film has released into the market, the salability to other companies is almost nothing. This is a huge reason why you should never self distribute on iTunes or Amazon only before exhausting all your options with distributors first. I’ve seen filmmakers blow a deal by having it available for free on YouTube temporarily.
Once you sell your first window SVOD (Subscription Video on Demand) rights to a company like Netflix, you might get one additional window with another company. But beyond that, you’re looking at a tiny revenue share deal that’s not worth your time.
Residual Assumption
The Screen Actors Guild (SAG) requires a distributor to assume residuals so that their actors receive their share out of the gross revenue. But if the distributor won’t assume residuals, and most won’t, the responsibility falls on the film producer to pay it.
If your film makes $100,000, SAG wants 4.5%, or $4,500, to be paid to their actors, regardless of if the producer’s net revenue is a negative amount. The way they protect their actors is by requiring film producers to create a residual reserve account that acts as a deposit.
This residual reserve amount can range from 3–6% of your budget, depending on the total cost of the film. As your movie generates revenue, SAG takes its share out of this reserve until it’s emptied.
As much as I’d like to see independent distributors assume residuals, it would take a massive shift in the market, and it’s not likely to change any time soon.
It’s best to prepare to work with SAG on this and not risk blowing your distribution deal for something that every filmmaker has had to except.
Remember, the film industry is a business, and your film is a product. Everything is a negotiation, and you can improve your position on other deal points by giving up ones that don’t truly matter. Pick a few points that are deal breakers for you and let your sales representative know about them ahead of time.