What to Look For in a Distribution Contract

Should you sign?
Should you sign?

What follows should not be construed as legal advice, and you should ALWAYS get legal advice before signing a contract. However, if you’ve been offered your first distribution deal and money is tight, these basic tips might help you reach a rough understanding of what exactly is on the table before you splash out on a solicitor.

rAs an example I’m going to use one of the contracts I was offered for my feature Soul Searcher, but not the one I signed.

Download the contract (PDF, 143KB) – I cannot be held responsible for any losses arising from the use of this contract or the following blog post.

Grant of Rights

Producer hereby grants to Distributor, with respect to the Term and the Territory set out below, the exclusive distribution and exhibition rights in all media now known or devised later including, but not limited to Theatrical, and Non Theatrical rights, Video/DVD rights, rights pertaining to all forms of Television syndicated or non syndicated, ancillary rights, and all kinds of internet rights pertaining to the feature film entitled “SOUL SEARCHER” (the “Picture”) a film by Neil Oseman, shot in Mini DV.

Territory: The World excluding U.K.

Term: Commencing immediately and expiring 25 years from the Date of Complete Delivery.

First of all check out the TERRITORY and MEDIA, i.e. what countries are you allowing the sales agent to distribute the film in and in what form (theatrical, DVD, TV, VOD…), but be aware that just because the contract grants them the right to release your film in cinemas, for example, it doesn’t mean they are under any obligation to do that. Also check out the TERM – how long will they get these rights for? The 25 year term in this contract is unusually long; five would be more typical.

Minimum Guarantee (“ Advance”)

Distributor agrees to pay Producer Fifteen thousand dollars ($15,000.00 USD) as a Minimum Guarantee of Producer’s share of Gross Receipts payable 20% on signing of this agreement and approval of Chain of title. The remaining 80% balance will be on complete delivery and acceptance, in terms of technical specifications, of all the items noted under Schedule “ A”. 

This contract offers an ADVANCE – meaning that they pay you upfront, later recouping this advance out of the profits. But if your film doesn’t make any profits you’ve still got the advance. This is a great deal for a low budget filmmaker.

Distribution Fees, Expenses and Reporting

Distributor shall be entitled to a distribution fee of 25% of gross receipts net of withholding tax from exploitation of the Rights. 

The crux of the contract is the PERCENTAGE of any earnings that the sales agent will pass on to you the producer, the higher the better. Here they are proposing to take 25%. That leaves 75% for me –  pretty good, huh? But wait….

Distributor shall also be entitled to distribution expenses to a maximum cap of U.S. $ 75,000.00 excluding deliverables, unless additional expenses are approved in writing by Producer, which approval will not be unreasonably withheld (“Distribution Expenses”). Distribution Expenses mean out-of-pocket costs incurred by the Distributor, directly or indirectly, in specific connection with distribution, promotion, and marketing of the Picture including any costs which can reasonably and proportionately be allocated to the Picture in accordance with normal accounting practices of the motion picture industry.

Gross receipts shall be disbursed in the following order: (1) Distributor’s fee (2) To recoup Distributor’s costs for creating or correcting any deficient materials as set forth above (3) Distribution Expenses (4) Balance to Producer

Check out that last paragraph. When the money comes in, the sales agent creams off their 25%, then they recoup any costs in correcting the delivery materials (more on that later), then they recoup their EXPENSES, and only then does the producer get what’s left of the pie. So they can swan off to Cannes, Berlin, the American Film Market and so on, to promote their catalogue of films, and take the cost of all their lunches and air fares and slap-up dinners out of the profits before the producers of those films get to see a penny.

You should look for an EXPENSES CAP in the contract, limiting the amount the sales agent can claim out of the profits before they’re passed to you. Here it’s $75,000. The chances of a microbudget film ever making more than that are extremely slim. Result? You never see any money (except the advance, if you’re lucky enough to have been offered one).

Representations and Warranties

Producer warrants, represents and agrees that it is the holder of the copyright, and has the right to convey all of the rights, licenses and privileges granted herein; that it has not entered and will not enter into any agreement, commitment, arrangement or other grant of rights competing with, interfering with, affecting or diminishing any of the rights and licenses granted herein, and that the Picture, insofar as the Rights granted herein are concerned, are free and clear of any encumbrance and do not infringe upon the rights of any party or parties whomsoever. 

If you sign this contract, what you’re saying via the paragraph above is that you haven’t already sold the rights to anyone else and that your film doesn’t infringe anyone else’s copyright. You’re WARRANTING that you’ve cleared all the music and branding that appears in your film. You got Apple’s permission to show that logo on the iPhone your lead character’s always using, right? And you got WHSmith’s permission to have their shopfront in the background of that highstreet scene?

Now we come to the reason I didn’t sign this contract: the DELIVERY MATERIALS, the list of which occupies five full pages of this contract, so check out the PDF download above to see them.

When you sell a film, you can’t just hand over one master copy of it. The sales agent wants all kinds of different versions – eleven different submasters in this contract, plus all the film elements (those would have been expensive – I didn’t shoot on film!), sound elements, press kits…. And then the documents. Some of the things listed on pages eight and nine (especially the E&O insurance) are serious legal documents that could have cost thousands of pounds to have drawn up. The delivery materials could easily have eaten up the whole $15,000 advance and might even have cost more than the whole production budget of the film. I recommend getting quotes for all delivery materials before signing any distribution deal.

I hope this has given you some idea of what to look for, but let me say again, GET PROFESSIONAL LEGAL ADVICE BEFORE YOU SIGN ANYTHING!

What to Look For in a Distribution Contract

One thought on “What to Look For in a Distribution Contract

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