This article will cover the key provisions of an agreement to distribute filmed entertainment, usually made between a producer or licensor (”Producer”) of a motion picture and a distributor (”Distributor”). These agreements are critical to the process of filmmaking; without them, films would not be viewed by the public.
1) Picture
This provision covers the specifications of the film to be delivered by the producer to the distributor. Will it be a color picture or black and white? What type of film will be used? (35 mm vs. 16 mm) How long or short must the film be? For feature films, it is typical for the distributor to require that the film be no shorter than 90 minutes and no longer than either 105 or 120 minutes. Producers with a bigger name, and hence more leverage, however, may be able to negotiate for more freedom when it comes to the acceptable length of the film. Lastly, the distributor will often require that the film be capable of receiving an MPAA rating of no more restrictive than an “R”, or “PG-13″, depending on the type and intended audience of the picture.
2) Territory
It is important for the parties to agree on what territory or territories the distribution agreement covers. Some distribution agreements are for worldwide rights to distribute the film; others cover just domestic or foreign rights. This provision can also cover whether or not the producer is obliged to deliver a subtitled version of the film so it can be shown in foreign markets.
3) Term
The parties must agree as to how long the distributor’s exclusive rights will last. This term is measured from the date of delivery. The distributor may also want to negotiate for a right to match any offer as to extending or renewal of the term.
4) Rights Granted
Here is where the agreement will lay out that whether or not the distributor is receiving the exclusive right under copyright and otherwise to exhibit, distribute, advertise, promote, publicize, market, sell, manufacture, license and otherwise exploit the picture in the territory during the term, in all forms of theatrical, free television, pay cable, subscription cable, and any other medium agreed upon by the parties. The scope of rights given to the distributor will vary from agreement to agreement. However, usually the right to advertise the film through commercials and billboards accompanies the right to distribute it.
5) Definition and Disposition of Gross Receipts
“Gross receipts” is a term used in the film industry to measure the success of a film. While there is a generally accepted definition of gross receipts, the agreement should nonetheless define the term. Usually gross receipts means “any and all gross sums actually received by the distributor, arising out of or in connection with the exercise of any of the rights herein contained.” Minimum guarantee payments, advances, and/or security deposits are usually included in gross receipts. By contrast, “net receipts” should be defined as well. Generally speaking, the term “net receipts” is defined as gross receipts minus all distribution expenses.
After providing these definitions, the agreement must spell out what percentage of the gross or net receipts the producer is entitled to and what percentage the distributor will keep. For instance, a common arrangement is for the producer to be entitled to 80% of the net receipts, and distributor entitled to 20%. This split is obviously negotiated by the parties.
These are the most important provisions of a film distribution agreement. Other provisions covering distribution expenses, credits, representations and warranties, and termination rights should also be covered. But it is most important for the producers and distributors to first agree on the territory, the term, the specification of the picture, the rights granted, and the disposition of gross or net receipts between the two parties.
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