FILM DISTRIBUTOR AND DISTRIBUTION (Some Fundamentals, Facts and Tips)

FILM DISTRIBUTOR AND DISTRIBUTION (Some Fundamentals, Facts and Tips)

Bruce Bisbey… please follow my Film and TV blog at https://dumbdogproductionsllc.blogspot.com

A film distributor is responsible for the marketing of a film. The distribution company is usually different from the production company. Distribution deals are an important part of financing a film.

A distributor is an intermediary entity between the producer of a product and another entity in the distribution channel or supply chain, such as a retailer, a value-added re-seller (VAR) or a system integrator (SI).

The distributor may set the release date of a film and the method by which a film is to be exhibited or made available for viewing; for example, directly to the public either theatrically or for home viewing (DVD, video-on-demand, download, television programs through broadcast syndication etc.). A distributor may do this directly, if the distributor owns the theaters or film distribution networks, or through theatrical exhibitors and other sub-distributors. A limited distributor may deal only with particular products, such as DVDs or Blu-ray, or may act in a particular country or market. The primary distributor will often receive credit in the film's credits, one sheet or other marketing material.

Film distribution is the process of making a movie available for viewing by an audience. This is normally the task of a professional film distributor, who would determine the marketing strategy for the film, the media by which a film is to be exhibited or made available for viewing, and who may set the release date and other matters. The film may be exhibited directly to the public either through a movie theater or television, or personal home viewing (including VHS, video-on-demand, download, television programs through broadcast syndication etc.). For commercial projects, film distribution is usually accompanied by film promotion.

When a film is initially produced, a feature film is often shown to audiences in a movie theater. Typically, one film is the featured presentation (or feature film). Before the 1970s, there were "double features"; typically, a high quality "A picture" rented by an independent theater for a lump sum, and a "B picture" of lower quality rented for a percentage of the gross receipts. Today, the bulk of the material shown before the feature film consists of previews for upcoming movies (also known as trailers) and paid advertisements.

HISTORY

The identity of the first theater designed specifically for cinema is a matter of debate; candidates include Tally's Electric Theatre, established 1902 in Los Angeles, and Pittsburgh's Nickelodeon, established 1905. Thousands of such theaters were built or converted from existing facilities within a few years. In the United States, these theaters came to be known as nickelodeons, because admission typically cost a nickel (five cents).

Historically, all mass-marketed feature films were made to be shown in movie theaters. The development of television has allowed films to be broadcast to larger audiences, usually after the film is no longer being shown in theaters.[citation needed] In 1971 U-Matic became the first magnetic format in which movies could be enjoyed in institutions outside the theatre. Later that year, the first cartrivision videocassettes of movies became available to consumers to watch in their own homes. 

Recording technology has since enabled consumers to rent or buy copies of films on VHS or DVD (and the older formats of laserdisc, VCD and SelectaVision – see also videodisc), and Internet downloads may be available and are revenue sources for film production companies. Some films may be made specifically for non-theatrical formats, being released as a "television movie" or "direct-to-video" movie. The production values on these films are often considered to be of inferior quality compared to theatrical releases in similar genres; some films that are rejected by their own movie studios upon completion may be distributed through these markets.

The movie theater pays an average of about 50-55% of its ticket sales to the movie studio, as film rental fees. The actual percentage starts with a number higher than that, and decreases as the duration of a film's showing continues, as an incentive to theaters to keep movies in the theater longer. However, today's barrage of highly marketed movies ensures that most movies are shown in first-run theaters for less than 8 weeks. There are a few movies every year that defy this rule, often limited-release movies that start in only a few theaters and actually grow their theater count through good word-of-mouth and reviews. According to a 2000 study by ABN AMRO, about 26% of Hollywood movie studios' worldwide income came from box office ticket sales; 46% came from VHS and DVD sales to consumers; and 28% came from television (broadcast, cable, and pay-per-view).

PRE-STUDIO ERA

Prior to the decline of the Motion Picture Patents Company (Edison Trust) in 1915, there were two main forms of film distribution: State's Rights and Road Show.

Under the state's rights system, films were sold on a local, territorial basis. The local salesperson would then play the film as often as they desired in an attempt to make as much profit as possible. 

Film copyright holders would sell rights of a movie directly to the theater or franchise salesperson, typically on a foot-by-foot basis for 10 cents a foot. Absent major studios or national theater franchises, this system was generally the best way to ensure national release of a film, particularly for shorter films. However, in terms of profitability, the state's rights system wasn't the most effective way to screen feature-length films since the film's producers only made money on the initial sale of each film copy.

This method also made it possible to screen films of various genre which may be illegal in one state but legal in another.

With the road show system, the producer would enter into an agreement with each theater, with priority given to large-seating and famous theaters. Money would be made via ticket sales. A movie's showing would be limited to drive up demand and to help create a sense of prestige. Although this method helped increase film earnings for the producer, given its nature, a movie's release would only be at the regional level. Some of the first road show films were the Italian film Cabiria (1914) and the American the Birth of a Nation (1915).

STANDARD RELEASE

The standard release routine for a movie is regulated by a business model called "release windows". The release windows system was first conceived in the early 1980s, on the brink of the VHS home entertainment market, as a strategy to keep different instances of a movie from competing with each other, allowing the movie to take advantage of different markets (cinema, home video, TV, etc.) at different times.

In the standard process, a movie is first released through movie theaters (theatrical window), then, after approximately 16 and one-half weeks, it is released to VHS and VOD services (entering its video window). After an additional number of months, it is usually released to Pay TV, and approximately two years after its theatrical release date, it is made available for free-to-air TV.

SIMULTANEOUS RELEASE

A simultaneous release takes place when a movie is made available on many media (cinema, DVD, internet...) at the same time or with very little difference in timing.

Simultaneous releases offer great advantages to both consumers, who can choose the medium that most suits their needs, and production studios that only have to run one marketing campaign for all releases. The flip side, though, is that such distribution efforts are often regarded as experimental and thus do not receive substantial investment or promotion.

In the course of the years simultaneous release approaches have gained both praise, with Mark Cuban claiming movies should simultaneously be made available on all media allowing viewers to choose whether to see it at home or at the theater, and disapproval, with director M. Night Shyamalan claiming it could potentially destroy the "magic" of movie going.

Cinema owners can be affected seriously in case they have to share their opportunity window, especially at the beginning of the movie life-cycle, since, according to Disney, about 95% of all box office tickets for a film are sold within the first six weeks after initial distribution.

STRAIGHT-TO-VIDEO RELEASE

For more details on this topic, see Direct-to-video.

A straight to video (or straight-to-DVD or straight-to-Blu-ray depending on the media upon which the movie is made available) release occurs when a movie is released on home video formats (such as VHS, DVD, etc.) without being released in theaters first, thereby not taking into consideration the "theatrical window".

As a result of strong DVD sales, Direct-to-video releases also achieved higher success and have become a profitable market lately, especially for independent movie-makers and companies.

INTERNET RELEASE

Internet research is still new when it comes to the film distribution platform. The volume of downloaded movies is difficult to find but none compares to the even more problematical discovery of their origin.

TELEVISION DISTRIBUTION

Television distribution is a growing industry. On the back of the Communications Act developments, more distributors are setting up to take advantage of the expected growth in available product. Distributors range from broadcaster-owned companies through larger independent companies to smaller niche players.

Securing a distribution deal prior to production of a feature film in advance is a major plus point when raising finance: it demonstrates that there is a route to market for the film. Feature film distribution differs from television in that often the best route to distributors is by appointing a sales agent, who then handles the distribution of the film in territories and liaises with the distributors in those territories. The sales agent will attend festivals and markets and sell the film in return for a commission based on a percentage of the money earned from the deal with distributors.

Choosing the correct distributor for your product is about weighing up the financial deal that is on the table with the likelihood that the distributor can deliver on making product available to meet demand, has good industry contacts (including, if appropriate international contacts) and generally has expertise. It is always worth asking to see the distributor's catalogue of programs and "dropping in" on them at film and television markets to get a feel for the type of work that they deal with and how much of a presence they are. Remember that a smaller niche player may have just the contacts that you need for your particular programme, even if they do not have the general brand name.

COMMON PROVISIONS IN DISTRIBUTION AGREEMENTS

Often the distributor will produce a standard form contract. The main issues to consider when reviewing it are the commission to be charged, the media covered, the territories that it is to cover and the duration of the license.

COMMISSION

Distributors tend to charge a commission on revenue generated from exploitation of the product. This is usually based on "gross revenues," which is the amount actually received by the distributor from the purchaser of the film or programme. However, the distributor will also want to deduct its costs before sending you any money. It is important to check carefully the deductions that the distributor can make to ensure that these are legitimate and that the distributor is not adding in matters such as general staff overhead, which it should be covering from its commission.

Usual deductible costs would include the cost of shipping the product to broadcasters or cinemas, advertising and marketing the product and creating additional prints/tapes.

With feature films, first time producers are often shocked by the tiny percentage of revenue they actually see from distribution. The exhibitors (cinemas) will deduct almost half of the revenue off the top and then from the balance comes off the distributor's commission and costs before any of the investors in the film start to recoup their investment. Only after the investors recoup does the producer see any profit.

Ensure that the distribution agreement contains obligations on the distributor to account to you for revenue earned, deductions made etc. on a regular basis (no less than six monthly). You should also insert provisions to allow you to have an independent person audit the figures you are given if you are doubtful as to whether they are accurate.

TERRITORIES

Most distributors would rather get a worldwide license of a programme: it gives them more scope to earn revenue. However, if the distributor is only really known in their country then their ability to make you money in international territories will be limited. Therefore you should weigh up the simplicity of dealing with only one distributor against the chance of making money from these territories. The main territories are Europe, North America, Asia, South America, Africa and Middle East.

DURATION

The license term is always negotiable. It is important to strike a balance between giving the distributor enough time to exploit the rights and not tying the rights up indefinitely with someone who is not performing. A compromise can be to extend the term, but negotiate in a "get out" clause if revenue fails to reach a certain target. It is also important that the license contains explicit termination provisions if the distributor becomes insolvent or defaults on any of its obligations, such as the very important obligation to pay you.

MEDIA

To maximize revenue the distributor is likely to want the right to sell the full range of media. This will include standard TV, pay TV, interactive TV, online transmission and video/DVD. The distributor may also look for secondary rights in the programme or film, such as merchandising, soundtrack etc.

OTHER ISSUES

It is always worth questioning the distributor closely about the marketing planned for your programme or film and, if you can, enshrine this in the contract as a commitment. That way you can ensure that you and the distributor agree up-front about the direction that the marketing campaign is to take. Sometimes a distributor may look for an option to distribute any sequel to the work. For television programs in particular it often makes sense to give them this since the distributor will then have the advantage in the marketplace of being able to negotiate with a package of programs, which can get you better deals. However, always try to negotiate an additional financial benefit from the distributor in return for granting these additional tie-in rights and/or a "get out" if they have not performed against targets in the original deal.

SECONDARY RIGHTS

Making a programme or a feature film is not the end of the story regarding rights exploitation: it is possible to make decent revenue from exploiting secondary rights, such as soundtracks, merchandising and tie-ins with complementary businesses. Good examples of this in television are Bob the Builder, Teletubbies and Who Wants to be a Millionaire. In films, Harry Potter, Star Wars and any of the recent Disney/Pixar releases are great examples of the power of secondary rights. 

Deciding how best to exploit these opportunities depends on how capable you feel and how much time you have. If either of these areas score low then it is better to employ a merchandising agent to negotiate deals on your behalf.

It is important that exploitation of secondary rights fits in with the primary programme or film: it makes sense to ensure that the programme or film establishes the name in the minds of the public to give the merchandise a better chance of selling. However it is also important to ensure that the merchandising material is available to meet demand when it is high.

You should also ensure that you have the right to exploit secondary rights. For example, when you acquired permission to use a song in your film, did you also get permission to include it in a soundtrack?

Common provisions in a secondary rights agreement will include approval rights over the material (it is important that this does not risk the primary product), territorial restrictions on where products can be sold and provisions obliging any agent to account for commissions earned.

CONCLUSION

Opportunities have never been greater for generating revenue from the exploitation of film and television rights. Producers have more media than ever over which to deliver content to consumers. It is important to get distribution deals right so that exploitation generates rewards for the producer as well as the "middle men."

Sources: Google, Wikipedia, Out-Law.com, indiewire.com, entertainment.howstuffworks.com, distribution.la, IMDB, Pinterest, Quora, Stone Circle, Wall Street Journal, Variety, Slate Magazine, Los Angeles Times, J.A. Aberdeen, Tech Target