The Fundamentals of Screen Content Distribution
Michael T George
Updated 6 June 2018
Are you looking for distribution for a completed production?
Both the production and distribution of screen content take a lifetime to master. Unfortunately, the two areas have very little in common. So, most producers are ill equipped to negotiate their agreements–but this too rarely stops them from doing so.
1) Get help. You have several options. An entertainment lawyer may know the contracts, but doesn’t necessarily have good contacts with the distributors appropriate for your production. An experienced content distributor turned producer consultant probably has the necessary experience to deal with contacts and contracts.
You should decide at the outset whether you want a producer rep or a distributor to handle the distribution.
2) Producer Reps vs Distributors. Both should be skilled at placing screen content with buyers. But, there are three fundamental differences between the two
A Producer Rep is a hired contractor. The producer is the Licensor on the agreements. All revenues accrue to the account designated by the producer. The Rep works for a fee or fee plus a percentage of the revenues.
A Distributor is a third party. The distributor is the Licensor on all agreements. All revenues accrue to the account of the distributor. The distributor is compensated exclusively from the sales that it makes.
3) Fundamentals of the Producer/Distributor Agreement.
a) Length of the Term. Distributors usually want an agreement that will extend for at least three years, plus the ten years that the longest license agreements will comprise–so that they can continue to service and collect royalties from said licenses.
Consider this instead. Make the agreement for one year, with an automatic extension if a specified amount of money has been paid to the producer before the end of the term. (Or, alternately, an automatic extension if executed agreements worth a certain dollar value have been effected before the end of the term.)
b) Advances. Good luck. These are rare, but can be a bargaining chip.
c) Schedule of Minimums protect the producer from having the screen content licensed for significantly less than its worth. The schedule contains a list of the major territories and the minimum amount that the screen content can be licensed for in that territory. Doesn’t have to include all territories, as the top 17 territories represent 95% of the likely revenue for the film.
The distributor would not be authorized to make any agreement unless the up front paid by the Licensee met or exceeded this figure. (I will demonstrate the difference between “license fees” and “minimum guarantees” in the Distributor/Licensee segment that follows.)
d) Distribution Fees. Most distributors want an agreement where they receive a distribution fee (25% to 40%) from the total revenues received; are then allowed to reimburse themselves for expenses related to the content; and, they pay the balance–if there is any–to the producer.
Consider this instead. A distribution fee of 40% of the gross, inclusive of expenses is preferable. Is important that the term gross means the total revenues received. There is no such thing as a gross that allows deductions. Any such allowance make it a net deal. Not gross.
It has become the fashion for distributors to want to reimburse certain general marketing expenses from the first revenues received. Don’t fall for it.
e) Delivery materials. The Producer/Distributor agreement will require that the producer provide the distributor both with access to videomasters (containing music & effects tracks) and to copies of the artwork, dialog lists, etc. If these are not in proper order, it is only right that the distributor should be able to fix or create new materials at the producer’s expense.
Fundamentals of the Distributor/Licensee Agreement.
a) There are two types of Agreement: flat licenses and royalty agreements.
Flat licenses are utilized when a set fee is paid by the licensee, as in the case of most television agreements. The amount paid up front is all that the Licensor will receive (except in the case of some licenses with major program services, which are paid in installments over the term of the agreement.)
Royalty agreements apply whenever the Licensor participates in the actual revenues received by the Licensee, such as theatrical, DVD and VOD licenses. Generally, the Licensee pays a Minimum Guarantee, which is a non-refundable advance against the royalty. This way, the Licensor is guaranteed a certain amount no matter how the screen content performs in the marketplace.
While advances are standard for theatrical and DVD licenses, they are relatively rare for VOD only licenses. Times are changing. But, most VOD licenses are bundled with DVD rights.
Under both arrangements, the entirety of the license fee or minimum guarantee is paid in advance of the delivery of the necessary mastering materials. Generally, 20% is paid at the time of contract signature; 80% is paid upon the Licensor’s notification to the Licensee that the materials are ready for delivery.
b) The Term of the License varies according to media, but generally range from five to seven years.
c) Delivery Materials generally include the following:
Permission to create copies of the videomaster of the content.
Permission to create copies of the music & effects tracks
English language dialog list (regardless of the original language of the content)
High resolution jpgs of the poster artwork (in both text and non-text versions)
High resolution jpgs taken from the content
Thanks for reading.