28 April 2017 The Irish Film & Television Network
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LEGAL SERVICES DISTRIBUTION AGREEMENTS
in association with
Distribution Agreements

'The Guard', filmed on location in Galway
Distribution Starts before Production

As will be seen from what has been set out earlier, a producer is already hard at work in connection with the distribution and marketing of his film before it even goes into production. It is vitally important in this context to distinguish between the role of the producer and the role of the distributor. The producers primary role is to achieve the production of the film having procured sufficient financiers to enable him to do this. The primary concern of the producer should be to follow one of the great principles of the film industry "Never Spend Your Own Money" but instead to secure third party finance for the total cost of production (including producers fees and production fees / overhead contributions).

Fully Financed Producer already in profit

If a producer achieves full third party funding for his feature film or drama television project, he is already in profit as a producer and any additional revenue that come in to him from the exploitation of the film or television programme are an added bonus to this. The distributor by contrast will in all probability have paid a certain sum of money for particular territories and rights in a particular feature film and will wish to achieve to obtain from that territory and those rights at least the amount he has paid back to him as well as hopefully a profit.

Producer .v. Distributor

People often ask whether a feature film did well or badly but this does not address the reality of the situation where for example a producer can produce a feature film and be paid substantial fees to do so out of the budget. The film can be critically acclaimed but do badly at the box office. From the producers point of view this is a relatively high degree of success but the unfortunate distributor who will be relying upon box office returns will do badly. It can even happen that some distributors will profit considerably from the same film that other distributors lose their shirts on. A classic example of this was the film The Field which was hugely successful at the box office in Ireland but fared less well in the United States. Thus the producers and one distributor of the film profited but the US distributor lost out.

Domestic .v. Foreign

The dominance of the American film industry has led to the development of some terminology which can be confusing. The domestic market for international purposes is North America with the rest of the world including Ireland being so called >foreign=. In North America when you are dealing with distributors, whether you are dealing with the Hollywood studios or with so called independents such as Miramax, New Line, CastleRock, Samuel Goldwyn Company, Fox Searchlight etc you are dealing with distributors who in turn are dealing directly with the cinemas. The domestic box office is published every week in the international version of Variety and it can be very interesting to see how films perform in the American market.

Rentals and Overages

On average, cinemas return approximately 40 - 50% of their box office to distributors and the term usually applied to this revenue is 'rentals'. The distributor then deducts its commission and its distribution expenses (often referred to as Prints and Advertising costs), it will then recoup its advance to the producer prior to accounting to the producer for any further revenue which are referred to as 'overages'. When dealing with Hollywood Studios, the contracts have extensive provisions dealing with how the studios account to the producers, usually based on the concept of 'adjusted gross

Theatrical and Other Media

To the extent that distributors have not recovered their distribution commission, P & A costs and advance from the cinema exploitation of the film, the ancillary markets will be available to them eg video, television etc. Distribution deals with North American distributors are often negotiated on the basis of bonuses when particular box office levels are achieved as well as royalty / bonus deals in respect of video distribution and payments in respect of television exploitation.

Distributors / Sales Agents

By contrast, AdistributionA outside North America in the 'foreign' territories is normally organised by sales agents who in turn deal with distributors in each local territory. Normally a sales agent will take an advance for all rights in respect of a particular territory eg Germany France Japan Australia etc, it will deduct its distribution commission and expenses (but not P & A costs which are a matter for the local distributor) and then after its advance, if any, is recouped will pay overages to the producer. It will then police the local distribution deals in the hope of obtaining overages in each territory.

DVD Distribution

DVD rights in a feature film / television programme can be licensed separately from other rights in the feature film or television programme. Normally a DVD distribution deal involves the granting of the DVD distribution rights to the DVD distributor for a particular territory (eg UK and Ireland) for a particular term (eg 5 - 7 years) for a particular advance against royalties normally approximately 20% of the dealer price of the DVD.

This type of arrangement applies whether it is drama or other type of film and television production and the only area of caution is where music programming is involved. There it is important to establish whether the arrangements with the copyright owner of the music contained in the music video eg the rock and roll band whose concert is being featured in the video are to receive royalties in respect of each unit sold. Normally the copyright of music on a sound recording receives royalties at the standard rate fixed between the relevant mechanical copyright protection society and the record producers in each territory and this has been extended to music videos for both sound recordings and DVD, the royalty is between 6% and 8% depending on the territory of distribution.

Television Distribution

Television distribution can also be arranged separately from the exploitation of other rights in audio visual productions. Again, the normal arrangement is a licence for a particular territory for a particular term (anything from one year to five years) for a particular number of transmissions (usually two or three). A licence fee is paid.

Withholding Tax

It is vitally important to make sure that when deals are done for advances from particular territories that no withholding tax arrangements operate within that territory in respect of the payment of advances outside the territory. This is something that has to be watched in feature film production where finance coming from a particular source may be subject to withholding tax.

The Markets

While accessing potential funding sources and distribution opportunities in Ireland is relatively straightforward, if somewhat limited in levels of finance available, seeking out the myriad sources of international financing and the distribution opportunities involves an enormous degree of commitment both in terms of travel and persistence. The major markets during the year for feature films are Sundance in Colorado (January); Berlin (February) American Film Market ("AFM") Los Angeles (March) Cannes (May) Toronto (September) Milan ("MIFED").

Television sales festivals include NAPTE (US); Cannes (MIP TV (April) and MIPCOM (October ) and MIP Asia. A producer should attend one or more of these markets each year and also keep up with trades ie magazines such as Variety, Screen International, Broadcast and Film Ireland. Financing and distribution for feature films are TV programmes is however found in the most extraordinary way and sometimes in the oddest place. A producer needs to have a total flexibility of mind in order to change the minds of others.

 






 
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