By Hammad Zaidi | January 8, 2013

Hi everyone. I hope the first week of 2013 has been magical for you. Since I want to do my part in making sure your year starts off well, today we’re going to begin a short series called “Almost Criminal Contract Clauses. The reason I say “almost,” is because the “criminals” (distributors) usually aren’t convicted for their fiercely unethical practices, since the victims (filmmakers) agree to the provisions. However, these are clauses you, the filmmaker, should never agree to, because they put your film in a seriously disadvantageous situation.

What I’m presenting to you today is excerpts from very recent distribution contracts from distributors, along with my explanation of the clauses. The distribution company names have been omitted to protect the guilty (and to protect me from retaliation from them). Should you be wondering how I got these contracts, they come from filmmakers who signed them, and suffered their consequences. The filmmakers email their contracts to me and ask me how they can get out them (they usually can’t, unless a severe breach of contract occurs from the distributor). So, let’s dive into our first four contract clauses to raise an eyebrow on!

Licensor reserves the right to self-distribute DVD’s of the feature on one (1) feature-exclusive website. Licensor reserves the right to theatrically “four-wall” and exhibit in festivals.
First of all, the “licensor” is you, the filmmaker. This clause allows you to sell your film on your own website for one-year. It also gives you the right to do the festival circuit as well as four-wall your film. The problem here is, the distributor is restricting your in-house sales to one year? That’s crazy. Most places allow filmmakers to sell their own film for an unlimited amount of time. In fact, it’s standard practice. Anything less is a world-class screw job. The other thing that bothers me about this clause is it’s not clear whether the festival run and four-walling is limited to one-year, or not. Since grey-areas always favor the distributor, you’d be wise to strike down, or change and clarify this clause.

Distributor will have the exclusive representative right to offer the above mentioned feature in all territories for an initial period of five (5) years commencing on the first day of the month following the date this agreement is signed, or for the term of the agreement with the distributor or exhibitor, whichever is longer.
Are you kidding me?  This clause is reprehensible. The length of time you sign with your distributor/sales representative and the time they sign your film away for when they sell it, are never the same – nor should they be. While a two to five year distribution/sales representation contract is common, when your distributor/sales representative sells your film internationally, they usually do so for eight to twelve years. Thus, unless you strike this clause from your contract, you could be caught in a situation where you think you signed with your distributor/sales representative for two years, but if they sell the rights to your film to China for 12 years, then you’ll be stuck being represented by your distributor/sales rep until 2025!

Licensor will advance five hundred ($500.00) dollars against expenses. Licensor agrees to pay the first one thousand seven hundred fifty ($1,750.00) dollars U.S. of Licensor’s portion of gross revenue as reimbursement for legal and marketing expenses; and thereafter twenty-five (25%) percent on Licensor’s share of its gross revenue from licenses made by. If a sub-agent is used, Licensor agrees to pay no more than an additional five (5%) percent on Licensor’s share of its gross revenue from licenses made by the distributor.
You should never pay any distributor/sales representative up front. If they need $500 from you to cover their “expenses,” then they aren’t that successful, and shouldn’t be representing your film. Furthermore, there’s nothing wrong with distributors charging fees. However, a smart move on your part would be to negotiate a total fee amount, and then tell your distributor/sales representative to take their fees as an off-the-top expense on sales they create for your film. The 30% sales fee seems a bit high, (my company charges 20%) but 30% isn’t criminally outrageous if, and only if, your distributor/sales representative is blanketing the earth (in person) trying to sell your film.

Licensor will supply with an adequate and reasonable number of printed screeners in order that will be able to solicit offers for the feature. Licensor will supply with “Hollywood Studio” quality artwork and a reasonable number of one-sheets in order that will be able to solicit offers for the feature. Distributor will, if requested by the Licensor and at an agreed upon cost, fulfill either or both of these requirements.
This is comical, if not criminal. Let’s think about this: In the clause before this one, the distributor wants you to pay them up front, pay legal and marketing fees, plus up to 30% of gross sales. Now, in this clause, they want you to provide them with “Hollywood Studio” quality artwork, one sheets, etc… and if you don’t… they’ll happily charge you more money to do so?  So, exactly what are you paying them to do, if you’re doing their job for them? Shouldn’t they be the ones to provide you with “Hollywood Studio” quality one-sheets? Doesn’t it concern you that this distributor is charging filmmakers for every finger they lift for their films? It should, because if a distributor has to change for everything, then it means that they either, a) don’t believe in your film’s sales potential, b) are broke, or c) both a and b. Either way, the ABC’s of bad contract clauses aren’t an alphabet that you want to learn!

On that note, I’d like to thank each and every one of you for lending me your eyes, and I’d be honored to borrow them again next Tuesday! Have a great week.

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  1. Gerald says:

    GREAT article! I once worked for a distribution company who asked for a 35% Distribution Fee from gross receipts..a $45,000 Marketing Fee (which, I know, they DID NOT have a sound marketing team) I knew from the get-go that this would be bad news for Producers. I was fairly sure my boss would take an up-front fee from producers, but am not 100%. It was also low, cause most of the films were very low-budget and weren’t making much anyway. So, any trivial amount of my money that went into the green, my boss took. Sad.

  2. Ryan says:

    Great start. These are the issues that I find many filmmakers don’t know enough about. The most important part of the game here – even if it will cost you some money is to HIRE A LAWYER to negotiate these deals. The $500- $1000 that you may spend will be worth much more in the long run.
    The moral of the story though is that there are good companies and bad companies out there. Make sure to vet the company you are working with by talking to other filmmakers BEFORE signing or agreeing to anything.
    Some thoughts –

    #1 is a bit heavy handed but in actuality could make sense in closing a deal with a third party as that third party does not want to compete with someone in the same territory making an alternate version of the film available. This can go either way.

    #2. Yes, you are right. The term should always be defined. In addition, this should be amended to say that the agent does not have the right (without written approval) to license the film to third parties for a term longer than (for example) 15 years.

    #3. You should never ever ever pay a sales agent for their work up front. If they don’t believe in the film enough to front the costs, they shouldn’t take the film.

    #4. I don’t necessarily agree with you on this one. Many companies have in house marketing teams that can put these materials together but if they do, a filmmaker runs the risk of getting materials that they are not happy with. Additionally, by hiring a third party designer or editor, the costs can get quite high for this service. By delivering your own materials, you guarantee that you like the artwork or trailer AND you know the costs associated with the production. Remember that all expenses an agent utilizes will be recouped from your future revenue so you do have an incentive to have them keep these down.

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