What’s involved in most distribution agreements? What should producers look for?
Normally it’s a fairly straight-forward agreement [in the case where it's a finished project]. The important thing is to have transparencies. So that everybody knows what’s going on, and there are no agreements made without the producer knowing about it.
The key point is the distribution commission, which is open to negotiation. It ranges from 15% to 35%. It’s a function of how much you’re asking for. So, that’s quite a significant discussion that needs to go on.
Then there’s accounting for the agreed costs, which are always a bone of contention between producers and distributors. Producers sometimes feel there are no costs in distribution – that you send out a postal note or a few e-mails to people and buyers come running. I think that’s pretty unrealistic. Distribution is an expensive business, but there’s a lot of tension between producers and distributors when they get lots of unexpected costs on the bottom line.
The bottom line on the distribution report is always the most contentious issue. Where and what are the costs that are being claimed above the agreed distribution commission? We, by and large, try and ensure that we have a fixed cap on costs in the contract, so that there aren’t these problems later.
So, we always look for a very good definition of what the costs will be. We’re always looking, of course, for a good definition of what the net receipts are because that’s what comes back to the producer. We want to know what’s being taken off the gross, if you like, to get us to the net. We look for contracts that are quite transparent in that respect and we look for companies that are prepared to give us a good estimate of what are those going to be in advance, and so we don’t get any nasty surprises later.
The point is that the minute you put your hand out to a distributor, it is expensive. They are, of course, entitled to make a living. Whether it makes sense [to go to them] depends on how big a gap you’re trying to finance. You might be better off going to a bank to get that money. It could very well be cheaper. But it’s very hard in the doc business to come up with the right sort of securities for a bank to make them feel happy about it. If something goes wrong, they’re just going to come and seize your doc. Well, what the hell are they going to do with a doc? It’s not exactly the best security for them. So, the bigger the gap, the more you pay. That’s the unspoken rule and pretty well hard to avoid, I’d have to say.
But then apart from pure financial issues, you want to know what your distributor is actually going to do, so it’s a good idea to ask for a proper distribution plan. Also, you need to be very careful about such things as when distributors are selling more than one product, more than one film. How are they unloading your film in collective agreements when they sell? This is really an issue much more for the large distributors, who sell lots and lots of programming in bunches to new cable channels in Latin America or something. How do you get value for your film within those group deals? What’s selling it, your film or somebody else’s? It’s quite complicated. These are all sorts of things that need to be looked at and thought about.
What about rights?
My general feeling, with some exceptions, is that the fewer people selling the better in many ways. If it’s the right person to go with, then by and large they’ll be wanting rights in every form of income, so I don’t… Often in the real world there’s lots of arguments about splitting up various rights within media. There are always issues of territories, but once again it’s best to have as few people as possible selling your product, otherwise it gets confusing in the marketplace.
What’s the advantage of going with a distributor?
You can’t be in the business as a producer unless you’ve got a specialist, someone who’s good at distribution. I’m not interested in spending the time or energy in selling to Djibouti or the Falkland Islands, but that’s what distributor’s are meant to be doing for you. Otherwise, if it was easy, we’d do it ourselves. It just isn’t quite that way.
Experienced producers will always do the key pre-sales themselves, I would think. Otherwise they wouldn’t have the money to make a film. The question is; when does the pre-selling stop and the selling begin? Now that’s also another issue that you want to look for in a contract.
Our argument with the distributors is: `well, there’s nothing to distribute until there’s a budget in place.’ So, we all put our noses to the grindstone to do the pre-selling to arrange enough budget to make a film. And there you might find that the commission for pre-sale will be quite different, much lower in other words, than the commission on a finished film. So, we look for distributors that will be partnering us in the financing of our projects and then they win the right to distribution.
Now, I think that what’s happening more and more is that the companies are having to buy distribution, that is the distributors are going to some key suppliers or some well-known names or some people that have a track record of successful programming and saying: `we want to get the rights to your production in advance.’ I remember years and years and years ago distributors saying to me, ‘well, Simon, we don’t have to buy distribution. We have people lining up to come in here to get their products done.’ Well, the world has changed since then and now it’s much more competitive amongst the distributors trying to get the properties they believe will sell well in the marketplace.
That doesn’t mean their percentages are coming down. Well, they are in fact. Channel 4′s international distribution agency here, run by Bernard McLeod. He set the cat amongst the pigeons when he came into the job and said, `well, I’m lowering the distribution commission I charge to 25% from 30% and I’m handing back all of these works that the broadcasters just sort of hung onto and not doing much with,’ handing them back to the producers. And so that raised a few eyebrows. And Bernard, I know, is being very aggressive in buying up of talent.
For more on distribution, see Let’s Make a Deal: Negiotiating Distribution Contracts