About 25 years ago, I signed my first film distribution deal. My partners and I were very excited that our hard work had finally paid off. We had searched for months for a company that would believe in our product. At last, we thought we had found a distribution partner for life. Little did we know, we had just signed a horrible deal that would make the next 10 years a living nightmare.
Without the experience or proper legal support, we locked ourselves into a long-term contract with tons of expenses. The contract made it nearly impossible to recoup our costs. Even worse, our film was buried in the distributor’s catalog only after a few months, and sales became nonexistent. Six months after we signed the contract, the once-friendly distributor stopped taking our calls.
This early experience almost spooked me from the business. However, like most failures comes an opportunity to learn and grow, and that is exactly what I did. The negative experience motivated me to learn as much as I could about how movies were financed and sold. After 20-plus years of studying film distribution, I have learned some valuable tips that have helped me strengthen my own business model.
Here are a few particulars you should know:
Before signing any film distribution contract, you should always have an experienced entertainment attorney review your agreement. You should also be realistic about your film’s potential. It takes several films before most successful filmmakers get to call the shots with their contracts. It’s important to be patient and never too anxious to sign any junk deal that comes your way.
The Different Types of Deals
There are typically two types of traditional film distribution contracts. One is called an expense cap. This means, in addition to taking a percentage of your overall earnings, the distributor will take out a marketing or expense fee. This was the first deal we signed, and, in my experience, it is a common trap for most first-time filmmakers. Expense caps can be upward of $30,000 to $50,000. Typically, filmmakers won’t see any earnings until their distributor’s expense cap has been met. Most distribution companies love this type of deal because it gives them maximum profitability when the movie is fresh and more likely to sell. Unfortunately, by the time it’s your turn to make money, your film is old and sales dwindle. Plus, by that time, most distributors have dozens of fresh new films to focus on.
The other type of contract is called a gross deal, meaning no expenses are deducted from your earnings. You and your distributor split all of the earnings according to your deal. These days I do a 50-50 split with my distributor. The good thing about doing gross deals is that the second your film earns money, you’re entitled to part of those earnings. This also forces the company to be more engaged. They don’t make money unless you do. Some filmmakers are concerned about giving away higher percentages to their distributors, but I’d rather take 40 percent of gross revenues than 80 percent of a net deal any day.
Know Your Audience
Before I make a movie, I spend a great deal of time thinking about the type of movie I plan to make. I also do research to find what the market potential is for my genre. From there, I can design a story for the film that can help us sell the film better.
For example, if I’m making a thriller, I’ll study the thriller market. I will evaluate the movies that are successful and pinpoint what aspects they have in them. Is it star power? Is it production value? Is it the scare factor? What is it? I take notes and give my story a serious evaluation. Once I have this information, I can build a better plan for my development phase.
At the end of the day, movie making is not rocket science. It is, however, understanding the market and building products accordingly. I encourage every first-time filmmaker to learn as much as they can about marketing, development and distribution. Armed with just some basic knowledge can help you avoid the same mistake I made with my first film distribution deal.
I hope this helps. Keep making movies!