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Wary the World Wide Web

Today, every agreement presented to a producer by a foreign sales agent or domestic distributor has the word 'Internet' innocently buried among all the other rights producers are being asked to give up. Without careful editorial refinements, that single word grants the distributor the right to send a film out over the Internet for any purpose whatsoever, to whomever they choose. Do not blithely sign away those rights without giving thought to several key issues.
February 1, 2004

Today, every agreement presented to a producer by a foreign sales agent or domestic distributor has the word ‘Internet’ innocently buried among all the other rights producers are being asked to give up. Without careful editorial refinements, that single word grants the distributor the right to send a film out over the Internet for any purpose whatsoever, to whomever they choose. Do not blithely sign away those rights without giving thought to several key issues.

Let’s start by dividing the Internet rights into those a distributor absolutely needs – even at this nascent stage – and everything else, which should be up for discussion.

The Internet is becoming increasingly common as a convenient delivery system, and many think it will soon replace shipping. As a result, distributors need the right to send a film (or pieces of it) over the Internet for specific purposes, such as advertising and promotion or to provide a screener to a potential sub-distributor, exhibitor or broadcaster. They might also deliver a doc by means of a secure Internet path to a sub-distributor or broadcaster that has purchased rights to the film.

The distributor would love to have much broader rights, such as the right to sell your film to the public by sending it to the consumer over the Internet, but no one currently knows the value of this distribution channel. What we do know is most technological innovations in the film business have produced larger revenues than expected and, typically, larger revenues than their predecessors. Thus, ‘grab those rights while you can’ is the battle cry. Producers would be well served to hold on to these emerging distribution rights or at least arrange some limitations.

Below is a cluster of negotiating points that will help protect a producer’s wallet and film from under-compensated exploitation over the Internet.

1. Make sure no Internet rights can be exploited until you are satisfied that proper security exists. Be sure that approval on the security measures is in writing. Of course, approval is ‘not to be unreasonably withheld.’

2. Make sure not to grant more than one entity the right to distribute your film over the Internet into the same territory. The viability of territorial integrity has been highly vaunted, but be sure that you are satisfied with the geographic definition, the system to restrict access to that territory and the security measures.

3. The commission earned by distributors might be different for the Internet than in other media, although all of the contracts floating around today allow for the same commission for Internet sales as any other sales. There are significantly lower costs and, therefore, lower risks associated with Internet sales – a different compensation structure seems only fair. The problem, however, is nobody knows what this opportunity is really worth.

So, what is a filmmaker to do? Hold on to the broader Internet rights until you are ready to part with them. In fairness to distributors and agents, consider giving them the right of first negotiation and/or the right of last refusal with regard to the broad Internet rights they all ask for, assuming they are performing on the other aspects of their sales efforts. A right of first negotiation means producers can’t sell those rights to anyone else until they have negotiated in good faith with their distributor. A right of last refusal means that if producers have a bona fide offer for one or more of the various Internet rights, they’ll give their existing distributor the opportunity to match the offer and thus obtain those rights on the same terms and conditions. Such an approach creates a balance between the hard-working distributor/agent and the filmmaker struggling to realize a return on a substantial investment of time, money and energy.

This article is adapted from Michael Donaldson’s book Clearance and Copyright – Everything the Independent Filmmaker Needs to Know (Silman-James Press).

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