I investigate any distributor with whom I am unfamiliar prior to commencing negotiations on behalf of a client: I want to ascertain their track record, acquire a list of the markets they attend, and contact their references (filmmakers, whose films they have distributed in the last five years). I do not start negotiating until I have done my due diligence. I have represented producers who were afraid of “losing the distribution deal” while I conducted my research. Any distributor who objects to you becoming familiar with how they do business, and whether they will do right by you, is a distributor from whom you should run.
Below is an explanation of the most important clauses included in the Distribution Agreement. It will give you an idea of what is expected of you, what occurs to your picture once it is out of your control, and how the monies are accounted.
The Distribution Agreement will state up front the title of the picture, its running time, MPAA rating, and the territories the distributor is acquiring. I am careful not to overlap territories. For example, if the domestic Distribution Agreement includes all of North America and its territories and possessions, I exclude French speaking Canada from the domestic Distribution Agreement if you pre-sold the French territory including French speaking Canada.
The term for Distribution Agreements varies, with terms being anywhere from 5 to 15 years. I try to limit the term as much as possible—especially when there is no advance, or a meager one. A shorter term may result in the Distribution Agreement terminating prior to the licenses issued by the distributor, which is irrelevant because the Distribution Agreement’s term will not impact those licenses. I push for the shorter term because I want my client to regain control of the picture if the distributor is ineffective. To such end, I always insist on including a “performance” clause, so that the picture reverts to producer if it does not meet a threshold sales figure. For example, I may require the picture revert to the producer if the distributor does not generate gross sales in a sum equal to at least 80% of the production budget during its first 36 months in Distribution. The distributor will have a “sell-off period” (usually 6 months) that extends beyond the Distribution Agreement’s termination date. The distributor may sell off DVDs and other materials related to the picture during the sell-off period.
You can grant the distributor the right to exercise its rights in all media whether now known or yet to be invented, which would allow the distributor to sell your picture in all formats within the territory and during the term of the Distribution Agreement; or you can limit the media by specifying that the Distribution Agreement is only for theatrical use. Most distributors require an inclusive Distribution Agreement because they are laying out large sums of capital up front and want the best opportunity possible to recoup their investment in your picture. Regardless, I have advised my clients against granting worldwide rights (domestic and foreign) to any one distributor unless the distributor is a studio. I prefer that my client diversify. You may need to grant the distributor the right to dub the picture in other languages and/or use sub-titles. Some actors insist on dubbing in any language they speak in addition to English. For example, Marion Cotillard may want to do the French dub of the pictures in which she performs. I always review the contracts of foreign language-speaking actors in case we need to carve out exceptions for them.
The distributor may want to edit the picture and/or its trailer to make it appealing to its licensees or to accommodate governmental limitations. I will agree to censoring the picture when it is includes sex scenes and is being licensed in territories that prohibit the depiction of sexual acts. How much the distributor will be able to edit beyond a censorship issue will depend on the Producer’s and Director’s Agreement with the production company and the bargaining power of the parties. Notwithstanding, I would consider what the distributor wants to undertake in case it makes the picture better and increases its likelihood of success. It is not out of the question for a distributor to want to re-edit in order to secure a “PG-13” MPAA rating for an “NC-17” rated picture, since the latter rating can limit sales.
The distributor may want the right to exercise all literary publishing rights, live television rights, merchandising rights, music publishing rights, soundtrack recording rights, radio rights, additional motion picture rights, remake rights and sequel motion picture rights. I decline all of these on behalf of my clients, since the distributor has no ownership in the picture (unless it is also the studio) and did not finance the picture’s production. The distributor should not be granted the right to piggy back onto, or to hamper, my client’s future successes.