Mark Litwak

Mark LitwakMark Litwak is an entertainment attorney based in Beverly Hills, California. His practice includes work in the areas of copyright, trademark, contract, multimedia law, intellectual property, and book publishing. As a Producer's Representative, he assists filmmakers in arranging financing, marketing and distribution of their films. His filmmaker clients have had award winning films in Cannes, Toronto, Telluride and other festivals.

Law Offices of Mark Litwak & Associates | 433 N. Camden Drive | Ste. 1010 | Beverly Hills | CA | 90210

Mark's Insights to Distribution

Orchestrating the Distribution of Your Movie

Filmmakers expend so much effort to produce their film that they often don't give much thought to distribution until the movie is complete. Many filmmakers believe that if they just make a good film, distribution will take care of itself. However, securing distribution is often more challenging than raising financing and producing the movie. Ironically, the growth of independent film has glutted the marketplace with films, which combined with rapidly increasing marketing costs, and the conglomeration of the movie industry, has created an environment in which surviving the Distributors have become very selective in acquiring pictures. The increasing numbers of digital movies only adds to the flood of pictures desperately seeking distribution.

One's leverage in negotiating a distribution deal depends on whether distributors perceive the film as desirable. Of course, films cannot be appraised like real estate, as every picture is unique and there are no sure-fire criteria to determine a film's commercial worth. I don't know of a single industry executive who could have predicted the success of the March of the Penguins or The Passion of the Christ. The major studios, despite all their market research and expertise, frequently release big budget flops. But even if no one can accurately predict the commercial worth of a film, there are techniques and strategies that can be employed to improve one's prospects. Even filmmakers who have produced low-budget pictures with limited commercial appeal can usually improve upon the initial offer if they are savvy. An experienced negotiator can obtain many concessions just by knowing what to ask for. While you cannot blame a distributor for sending you their dream contract, there is no reason to accept it as is. Many terms are negotiable.

It is rare for an independent filmmaker to sell the film's copyright to a distributor. Usually the filmmaker licenses specified distribution rights for a term of years. Once the term expires, the rights revert to the filmmaker. In a typical deal, the distributor secures the right to distribute the movie in one or more media (e.g., theatrical, home video, television). The distributor pays for all distribution, advertising and marketing costs. Both parties share revenue derived from the film.

Most deals allow the distributor to retain a percentage of gross revenues as a distribution fee, and to recoup certain designated marketing expenses from film revenues, with the remaining balance, if any, paid to the filmmaker. I will call this formula a "standard" distribution deal, although there is nothing standard about it except that these deals calculate the distributor's fee as a percentage of gross revenues. Another type of deal, sometimes referred to as a " 50-50 Net Deal," allows the distributor to first recoup its expenses from gross revenues, and then share the remaining amount 50/50 with the filmmaker. A third type of deal is a so-called royalty deal, wherein the distributor pays a royalty on a per unit basis, such as 20% of the wholesale price of each DVD sold.

Which deal is best? That depends on how much revenue is generated, the extent of expenses incurred, and the amount of the distributor's fees. If one million dollars is generated in gross revenues, a standard distribution deal with a 25% distribution fee, and recoupment of $100,000 in expenses, would generate $650,000 for the filmmaker. Under a 50/50 Net deal, with the same revenue and expenses, the filmmaker would receive $450,000. With a royalty deal at 20%, the filmmaker would see $200,000. So the standard deal is best.

But wait, what if the film generated $400,000 in revenue, and the standard distribution fee was 35% with recoupable expenses of $150,000. Now the filmmaker would receive $110,000 under the standard distribution deal, $125,000 under a 50/50 Net Deal, and $80,000 under a royalty deal. So the 50/50 Net Deal is best.

However, suppose the film only generates $125,000 in revenue and has $150,000 in expenses. Under the standard deal and the 50/50 Net deal the filmmaker receives zero. Under the royalty deal, the filmmaker is paid $25,000. So there each of these deals might be best under certain circumstances, and the worse choice under other circumstances.

Keep in mind that most deals are more complex than this illustration because they cover multiple media with differing fees and formulas for each (i.e. 35% of gross receipts for theatrical, 25% of license fees for broadcast television, and 20% of wholesale price for home video), and often require cross-collateralization of expenses. Thus, it behooves the filmmaker to take pencil to paper and figure precisely how much he will receive under different revenue and expense scenarios.

A distributor may agree to give the producer an advance toward his share of revenue. The producer can use this money to pay production debts, recoup expenses or repay investors. Obviously, producers prefer large advances because they may never receive any subsequent revenue. On the other hand, the distributor will want to pay as modest an advance as possible, and may strongly resist giving an advance greater than the cost of production. That is why filmmakers should not disclose their paltry budgets before concluding their distribution deals.

Distribution can be negotiated before, during or after production. Sometimes distributors become interested in a film after viewing it at a film festival and observing audience reaction. Many distributors send one or more acquisition executives to major festivals to scout for films.

It is easy to alert acquisition executives to the existence of your film. Once a start date has been announced, do not be surprised if they begin calling you. They will track the progress of your film so that they can see it as soon as it is finished--and before their competitors can view it. To ensure that acquisition executives are aware of your film, send a press release announcing your project to the trade papers and industry magazines. These publications will include your project in their listings of films in development, pre-production and production. You can also list your project for free with Film Finders (www.filmfinders.com) which many distributors and festivals rely on to learn about new films.

From the filmmaker's point of view, competition improves terms. Giving one distributor an early peek at your film is usually a bad idea. If the distributor passes on the film, word gets around and other acquisition executives may not bother to view your film. On the other hand, if the distributor likes the film, a pre-emptive bid is likely, and you may only have a day or two to decide whether to accept the offer. If you decline, you may be rejecting the best deal you will ever receive. If you accept, you foreclose the possibility of a better deal tomorrow. Thus, you will be forced to make a decision without knowing where you stand in the marketplace and what other companies might offer. That is why it is important to orchestrate the release of your film to potential buyers so as to create maximum competition and enhance your leverage. Here are some guidelines:

1) NO SNEAK PREVIEWS: It is best not to screen your film for distributors until it is complete. Executives may beg to see a rough cut. They may assure you, "Don't worry. We are professionals. We can imagine what the film will look like with sound and titles." Don't believe them. Most people cannot extrapolate. They will view your unfinished film and perceive it as amateurish. First impressions last.

The only reason to show your film before it is complete is if you are desperate to raise finishing funds. The terms you can secure under these circumstances will be less favorable than what you could obtain with a polished film. If you must show a work-in-progress, exhibit it on a Moviola or flatbed editing table. People have different expectations watching a film on an editing console compared to viewing it in a theater. If you must send out DVDs or cassettes of an unfinished film, label them so that your viewers are reminded that they are viewing a work-in-progress. Your label might say: "AVID output, not color corrected, temp sound." Always include the name of a contact person and phone number on all materials.

2) SCREEN IT BEFORE A CROWD: It is usually better to invite executives to a screening than to send them DVD. If you send a DVD to a busy executive, he will pop it in his machine and hit the pause button as soon as the phone rings. Then he will watch another few minutes until his secretary interrupts. After numerous distractions, he passes on your film because it is "too choppy."

You want an executive to view your film in a dark room, away from distractions, surrounded by a live audience--hopefully one that loves your film. So rent a screening room at a convenient location, invite all the acquisition executives you think appropriate, and pack the rest of the theater with your friends and relatives, especially Uncle Bob with his infectious laugh. Perhaps the best venue for exhibiting a picture is at a film festival. If the film is warmly received, your bargaining position will be strengthened. If an executive views your film surrounded by an appreciative audience, it may affect his perception of the film.

Moreover, festivals can generate favorable publicity. Most publications only review films about to be released theatrically in their community. Thus films seeking distribution are not reviewed. But entertainment trade papers and selected publications will review pictures exhibited at major festivals. A strong review can induce distributors to make an offer, although a poor one can chill your prospects.

Screen your film in a theater that is convenient and well-known to industry insiders. If the venue is out of the way, or if your invitees get lost searching for it, you have picked the wrong place. When you prepare an invitation list, include only those distributors that are appropriate for the film. If foreign rights are taken, there is no reason to invite international distributors. Don't be inconsiderate and waste their time. Likewise, do not invite an art house distributor to view a beach blanket bingo movie. As soon as the acquisition executive realizes that your film is not right for his company, he will stand up and depart. Do you think a stream of people leaving the screening might affect the perceptions of those remaining?

When arranging a screening, book a theater large enough to hold everyone expected to attend but not so spacious that your viewers are sitting in a sea of empty seats. Filling out the audience with cast, crew and friends may be a good idea as these people are likely to respond positively. That is why you may want to hold off on your cast and crew screening until you screen the film for distributors. Acquisitions executives, however, usually quickly spot when they are at a cast and crew screening - it is pretty obvious when an audience applauds names in the opening credits.

You should mail out invitations so they arrive on the desks of executives 7-10 days before your screening. If you mail too early, your invitation may get lost on a cluttered desk; send it too late, and your executive has made other plans. If you are represented by a producer's rep, agent or attorney, it may be best to have that person send out the invites. Always mention any name actors, and the identity of the director. If the writer, director or any other key member of your team has impressive credits or background, include this information. If an executive respects any of the people associated with the film, he/she is more likely to attend. If you have a professionally designed one-sheet, send it with the invitation. If you have a good trailer, you could include a videocassette of the trailer with the invite.

In my opinion, asking for an RSVP is a waste of time. Half the people that RSVP do not show up; others who do not reply attend. You are not going to bar anyone anyway, so why bother with an RSVP? Better to spend your time elsewhere. As a general rule of thumb, if you invite 75 busy executives to a screening of a low-budget, no-name film, you will be lucky to have a dozen show up. At the screening, have someone at the door collecting business cards or taking names of those attending. That way you can determine which companies have seen the film and which have not.

3) DO NOT GIVE AWAY YOUR FESTIVAL PREMIERE LIGHTLY: Carefully plan a festival strategy. I have seen filmmakers give their premiere to minor festivals and thereby disqualify themselves from participating in more significant ones. You can participate in lesser festivals later. If you are turned down by an important festival, the worse that happens is that you incur a small delay in seeking distribution. No one knows which festivals passed on your film unless you tell them.

4) TIMING IS EVERYTHING: You should sell your film when buyers are hungry for product. Distributors that acquire films for international distribution plan their activities around a market calendar. The major film markets are 1) AFM in the fall in Santa Monica, California, 2) Berlin in February in Germany, 3) Cannes in May in Cannes, France. There are also television markets including NATPE in the U.S.A., and MIP and MIP-COM in France.

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Release Slate 2015 -- 2017

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