SOME POINTS ON HOW MOVIE DISTRIBUTION WORKS. (In the Entertainment industry.)

SOME POINTS ON HOW MOVIE DISTRIBUTION WORKS. (In the Entertainment industry.) 

Bruce Bisbey…please follow me at: https://dumbdogproductionsllc.blogspot.com or https://www.facebook.com/DumbDogProductionsLLC/ thank you.

SOME POINTS ON HOW MOVIE DISTRIBUTION WORKS.     

A studio or independent investor decides to purchase rights to the film. People are brought together to make the film (screenwriter, producer, director, cast, crew). The film is completed and sent to the studio. The distribution company shows the movie (screening) to prospective buyers representing the theaters.

Elliot Grove is the founder of Raindance Film Festival and the British Independent Film Awards.

1. Forget the global deal. Split rights is where deals are at.

Gone are the days when a major distributor would swoop down on your movie post Sundance, Toronto or Cannes and offer you a universal all-media buyout.

Sure there are exceptions like Fox Searchlight’s acquiring Another Earth at Sundance 2011, but it would be a foolish person to make a film on the hope that a global deal will happen.

Commonplace are split rights deals, where distributors cherry pick territories and then decide which national rights they want. It could be they are interested only in TV, or DVD for example, leaving the other pieces of the distribution window to the producer to try to max out money-wise.

2. Getting your film into cinemas costs a fortune.

Booking ad space in newspapers and magazines has become very costly. Add to that the cost of PR and social media assets the cost of a theatrical release starts to look like the budget of a small nation. Remember that the exhibitor (theatre owner) takes a fair whack, and the distribution company will take a third off the top, and the amount left in the pot from all those cinema admissions starts to shrivel. From the ‘profit’, the distributor then deducts the costs associated with the release.

Distributors aren’t in business to make a loss, so they commonly write in a cross-collateralization clause meaning they can offset theatrical losses against profits from other windows.

Why do a theatrical release for your film? The biggest asset is that a theatrical release guarantees critical notices in all the main newspapers in the country it has been released. This brings the film to the public’s attention, and creates an increased perceived value for the film when it is available in other formats, such as DVD or online streaming through a portal like Netflix, Love film, or the excellent British service, Blinkbox.com.

3. Service deals can work.

In a service deal, the filmmaker hires a specialist who takes over the distribution process for a fee. Preview screenings are set up for cinema booking agents and then specialists are booked. Advertising and publicity campaigns are designed and launched, and the money is returned to the filmmaker less the money spent. 

Service deals can offer a greater amount of flexibility and control to the filmmaker. Essentially, the distributor is working for you. Generally, the more engaged and involved the filmmaker is in the campaign, the greater the rewards. 

Remember that regardless of the film distribution deal you do, you will need to provide film Distribution Deliverable Essentials. 

4. The Bigger the deal the less control you have.

Dah. Of course. The bigger the company, the bigger the stakes.

If fortune places your darling, cute, sweetheart film into the arms of a big distribution company you will have to learn quickly how to dance to their tune. And if you don’t like how they are playing, you can pretty much forget about your voice, and very likely you will be totally ignored while the big boys decide how to best maximize the return on their investment. And if they don’t get it right by your books, and screw it all up, you can pretty much kiss your movie goodbye. They can re-cut, re-do the artwork, and basically do whatever they want without consulting you. Make sure your contract is very clear on what the approval process is for key marketing decisions.

Then cash the cheque and move on. 

5. Cap Film Distribution Expenses.

Any marketing campaign is expensive. If your deal calls for a split of profits after expenses, make very sure you have capped the expenses, or any profit will simply melt away. 

6. The Cheque is in the post.

Money from your film can take an infuriatingly long time to arrive. For your much-lauded theatrical release, don’t forget that the distributor has to wait to get the money from the exhibitor (theatre owner). From DVD sales the wait is even longer. Delays of 12 and even 15 months are not uncommon. This is because retailers often place a holdback on cash owing to account for unsold items. 

For digital sales to the likes of Love film and Netflix – remember that reporting to filmmakers is virtually non-existent. Once you have piqued their interest to the point that they want your baby, it would be prudent to expect nothing more than the initial license fee they offer you. That often can be very small. London filmmaker Chris Jones was offered $75.00 for each of his first 2 award winning features. Read What Your Film Is Really Worth To Love film.

7. Beware the middleman.

Certain middlemen exist to represent slates of films by newcomers on the premise that they have an excellent filtering process through which they cherry pick the best of the new, raw, undiscovered talent to prospective distributors. 

This becomes much more formal in the digital world. These middlemen, or aggregators, perform two functions. They prep your film for digital distribution, encoding it into a wide variety of CODECs for everything from PlayStation to mobile phones to web viewing. Then they do the actual selling to large platforms like iTunes and Netflix. They charge additional fees for this, and the filmmaker can end up with a fraction of the total revenue once the platform and the aggregator have taken their whack.

As the large platforms only deal with a small number of aggregators, you are pretty much stuffed. Do watch out for this: some aggregators and platforms try to get exclusive contracts. Signing anything BUT a non-exclusive contract would be, in my opinion, pretty dumb.

Also, be wary of aggregators who do not have direct links with distributors – but rather submit to another larger aggregator meaning another layer of fees.

8. Nothing can be guaranteed.

All relationships in life grow and develop (or disintegrate). A wise filmmaker will often sign a distribution deal in which the filmmaker can leave the distributor if a certain minimal revenue stream has not been reached. It is also common to draft into your distribution agreement a void clause should your film not be released within a certain time frame. 

9. R.O.I. and all that.

All films have a revenue potential. The trick is to understand what the revenue potential for your film is, and then make your film for less than the amount you expect to earn. Get good at this, and potential investors will start to trust your acumen and start investing in your next project.

10. Network like mad.

It’s a small industry, and it’s a people industry. The more you network with fellow filmmakers, the more you will learn about the industry and the good ‘uns and the bad ‘uns.

Jeff Tyson "How Movie Distribution Works" 18 September 2000.

You have probably seen advertisements in your local paper for movies playing at a theater near you. Sometimes, the ad will say "Held over" or "Special engagement." What exactly does that mean? And just how do those movies get from the motion picture studio to the theater?

In this article, you'll see the path of a film from an idea in someone's head to a movie screen at your local multiplex. You'll learn what the "nut" is, find out the difference between negotiating and bidding, and finally understand why movie popcorn is so expensive!

Here's the path a film usually takes to get to your local theater:

• Someone has an idea for a movie…
• They create an outline and use it to promote interest in the idea…
• A studio or independent investor decides to purchase rights to the film…
• People are brought together to make the film (screenwriter, producer, director, cast, crew)…
• The film is completed and sent to the studio…
• The studio makes a licensing agreement with a distribution company…
• The distribution company determines how many copies (prints) of the film to make…
• The distribution company shows the movie (screening) to prospective buyers representing the theaters…
• The buyers negotiate with the distribution company on which movies they wish to lease and the terms of the lease agreement…
• The prints are sent to the theaters a few days before the opening day…
• The theater shows the movie for a specified number of weeks (engagement)…
• You buy a ticket and watch the movie…
• At the end of the engagement, the theater sends the print back to the distribution company and makes payment on the lease agreement… 

Some of these steps may be combined and, particularly in the case of small independent films, additional steps may be necessary. As you can see, there is a lot that goes on before a movie is ever shown to a paying audience!

The Art of the Deal 

It has been said that making a movie is not nearly as difficult as getting it distributed. Because of the enormous amount of cost in money and time involved in distributing a movie, a distributor must feel confident that they can make a sufficient return on their investment. Having the backing of a major studio or a well-known director or star can greatly improve the chances of securing a good distribution deal. Independent filmmakers often use film festivals as an opportunity to get the attention of distributors. Once a distributor is interested in a film, the two parties arrive at a distribution agreement based on one of two financial models:

• Leasing
• Profit sharing

In the leasing model, the distributor agrees to pay a fixed amount for the rights to distribute the film. If the distributor and the studio have a profit-sharing relationship, on the other hand, the distributor gets a percentage (typically anywhere from 10 to 50 percent) of the net profits made from the movie. Both models can be good or bad, depending on how well a movie does at the box office. The goal of both the studio and the distribution company is to predict which model will benefit them the most.

Most of the major studios have their own distribution companies. For example, Disney owns Buena Vista, a major distributor. The obvious advantages of this are that it is very simple to set up a distribution deal and the parent company doesn't have to share the profits with another company. The big problem is when an expensive movie is a flop -- there's no one else to share the costs. That's the main reason several studios have partnered on major movies in recent years. For example, "Star Wars: Episode One" was produced entirely by Lucasfilm but distributed by Fox.

The next big step occurs once the distribution company has rights to the film. Most distributors not only provide the movie to theaters, but obtain ancillary rights to distribute the movie on VHS, DVD, cable and network TV. Other rights can include soundtrack CDs, posters, games, toys and other merchandising.

When a distributor has leased a movie, they will try to determine the best strategy for opening the movie. Opening refers to the official debut of a movie. There are several factors to consider:

• Studio…
• Target Audience…
• Star power…
• Buzz…
• Season….

Obviously, a movie that has everything -- major studio backing, big stars and a great story -- is probably going to open big and do very well. If it has big stars but doesn't appear to have legs (meaning that it will not stay popular for long), the distributor may opt to put the movie in as many theaters as possible during its first engagement. Fewer theaters will be interested in a movie with an unknown cast or poor buzz (unofficial information about the movie). Sometimes a movie has gotten good buzz, but isn't likely to have mass appeal because of the audience it is directed at. It might also be the wrong time of year for a particular type of movie. For example, a heartwarming Christmas story is not likely to do well opening on Memorial Day weekend. 

All of these factors help the distributor determine the number of prints to make. Each print typically costs about $1,500 to $2,000 to make, so the distributor must consider the number of theaters a movie can successfully open in. Many of the 37,000 screens in the United States are concentrated in urban areas. A popular movie might fill the seats in several theaters in the same city while another movie would have a much smaller audience. Since opening a movie on 3,000 screens could cost $6 million for the prints alone, the distributor must be sure that the movie can draw enough people to make the costs worthwhile. 

Most theaters use buyers to represent them in negotiating with the distribution companies. Large chains such as AMC Theatres or United Artists employ buyers while small chains and independent theaters contract with a buyer. The negotiating process is very political. The buyers often will accept a movie that the theater is not very interested in to make sure they get a film they really want. Distributors try to balance the movies they lease to theaters in the same local area to make sure all of the theaters will continue to work with them. Sometimes a theater will get an exclusive or special engagement to premiere a movie in its area. Once a buyer is interested in a movie, the lease terms are discussed. 

There are two ways for a theater to lease a movie:

• Bidding
• Percentage

Bidding requires that the theater agree to pay a fixed amount for the right to show the movie. For example, a theater might bid $100,000 for a four-week engagement of a new movie. During that time, it could make $125,000 for a profit of $25,000. Or it might take in only $75,000, which means the theater has a loss of $25,000. Few distribution companies use bidding anymore. Most agreements are for a percentage of the box office (ticket sales). 

In this sort of deal, the distributor and the theater agree to several terms:

• The theater negotiates the amount of the house allowance, or nut, with the distributor. This is a set figure to cover basic expenses each week…
• The percentage split for the net box office is set. This is the amount of box office left after the deduction of the house allowance…
• The percentage split for the gross box office is set…
• The length of engagement is set (typically four weeks)…
• The distributor will get the vast majority of the money made by the movie. The agreement gives the distributor the agreed-upon percentage of the net box office or gross box office, whichever is greater…

The way this works is amazing!

Consider this example. Theater A is negotiating with Distributor B over a new movie. The theater has figured that expenses, the nut, are about $4,500 per week. The net percentage to go to the distributor is set at 95 percent for the first two weeks, 90 percent for week three and 85 percent for the final week. The gross percentage to go to the distributor is set at 70 percent for the first two weeks, 60 percent for week three and 50 percent for the final week.

You can see that during weeks one, two and three, the gross percentage is higher. The net percentage is higher for week four. So the distributor would take gross percentage on one through three then net for week four. The theater breaks even the first week, loses money the second and makes a profit on weeks three and four.

The movie itself is considered a loss leader by the theater owner: It is meant to get people into the theater. The theater makes its money selling refreshments to the movie audience. That's why concessions are so expensive -- without the profits generated by things like popcorn and soda, most theaters could not afford to stay in business.

At the end of the negotiated engagement, the theater pays the distributor its share of the box office earnings and returns the print. If a movie is very popular and can continue to draw a steady crowd, the theater may renegotiate to extend the lease agreement. Any time you see the phrase "Held over," you know that the theater has extended the movie lease.

While first run movies that have just been released are loss leaders, movies that have been out for a while can be profitable for the theaters that show them. Second run theaters often get very attractive leasing terms from the distributor. These theaters are facing increasing competition though, as first run theaters continue to show more movies past the traditional four to six week time frame.

Elliot Grove founder of Raindance Film Festival

Jeff Tyson "How Movie Distribution Works" 18 September 2000. HowStuffWorks.com. <https://entertainment.howstuffworks.com/movie-distribution.htm> 10 February 2019

Sources, References & Credits: Bruce Bisbey, Google, Wikipedia, Wikihow, WikiBooks, Pinterest, IMDB, Linked In, Indie Wire, Film Making Stuff, Hiive, Film Daily, New York Film Academy, The Balance, Careers Hub, The Numbers, Film Maker, TV Guide Magazine, Blurb, Media Match, Future Learn, Quora, Creative Skill Set, Chron, Investopedia, Variety, No Film School, How Stuff Works, WGA, BBC, Daily Variety, The Film Agency, Best Sample Resume, How Stuff Works, Bright Hub, Career Trend, Producer's Code of Credits, Truity, Production Hub, Producers Guild of America, Film Connection, Variety, Wolf Crow, Get In Media, Production Beast, Sony Pictures, Warner Bros, UCAS, Frankenbite, Realty 101, Liberty Me, Careers Hub, Sokanu, Raindance, Film Connection, Cast & Crew, Entertainment Partners, My Job Search, Prospects, David Mullich, Gear Shift, Video University, Oxford Dictionaries’, Boredom Therapy, The Bold Italic, Meets the Eye Studio, The Guardian, Jones on art, Creative Plant, Studio Binder, Film Tool Kit, Still Motion, Film Under Ground, Steves Digicams,

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