International sales agents (“sales agent(s)”) are your pipeline to foreign distribution whether they are pre-selling or licensing the completed picture. Sales agents develop a marketing plan for the pictures they represent, design poster artwork, and undertake to cut an appropriate trailer if they believe that your sales materials are not up to par. Sales agents introduce the world market to the pictures they are representing, pitching them to the foreign distributors/buyers attending the foreign markets, e.g., the Marche du Film, the American Film Market, the European Film Market, MIPCOM, etc.
Sales Agent Agreements are exclusive and long-term, so vet the sales agent prior to making a commitment. You need a sales agent with a reputable track record and the financial means to attend foreign markets and advertise your picture. You need to know about the markets the sales agent attended the previous year and the ones he intends to attend within the next 12 months. Make it clear that you are only interested in retaining a sales agent who will attend the markets. The sales agent needs to be passionate about your picture and willing to do what it takes to make it a success. You are literally putting your picture in the sales agent’s hands, so be sure that you feel confident about the relationship. It is better that you walk away than tie up your picture with a sales agent who cannot produce results.
It is imperative that you seek legal counsel prior to entering into this agreement. Let the attorney negotiate and review/revise the Sales Agent Agreement. Below is a brief discussion about some of the sales agent agreement’s more important terms.
Term
The length of the Sales Agent Agreement is most often five to ten years. The reason the term is for a period of years is because the sales agent needs time to exploit all the windows for your picture and because the distributors enter into license agreements that are five to ten years in duration. Regardless, I always attempt to have the Sales Agent Agreement terminated earlier if the sales agent has not been successful in attaining a minimum sales goal within the first 18-24 months.
Expenses
The sales agent’s expenses need to have a floor and a cap. You want the sales agent to spend what is required in order to maximize your picture’s sales—not more. Since the sales agent will likely only sell your picture at film markets during the first year, it’s important that the market expenses be limited to that one year. Promotion and advertising expenses need to be direct out-of-pocket expenses, such as trade ads, screening rooms, posters, one-sheets, booth expenses, travel and accommodations, etc. Expenses come off the top, so they will be deducted from the revenues earned prior to you being paid any monies.
Commissions
The sales agent’s commission is negotiable and will be within 15% – 25%. The sales agent may charge closer to the 25% for a documentary and closer to the 15% if he is selling an action film with a very bankable cast. The commission is paid on the gross license fees, which means that, as with the expenses, the sales agent’s commission is deducted off the top.
Estimates
The sales agent has to provide you with estimates for each territory (the “schedule of minimums”). The sales agent cannot license your picture for less than the sum in the schedule of minimums without your prior permission. You can decide whether you want to license the picture for a lesser sum when the sales agent informs you of the offer and explains why the foreign distributor offered less the sum in the schedule of minimums. The sales agent and you will decide whether you should accept the offer or wait for a higher one.
Dubs/Subtitles
Included in the sales agent agreement is a clause whereby you give foreign distributors the ability to dub, subtitle and make changes to your picture for censorship and television airing purposes. All other changes are excluded since you do not want anyone to edit your picture.
Accounting
As with all agreements where money is concerned, you need to have the right to inspect and audit the sales agent’s books. You need to receive quarterly statements for the first two years and then semi-annual statements thereafter. I always include an interest penalty for late payments, along with an audit penalty so the sales agent has to pay interest and audit costs if the discrepancy is sizeable. I advise you to set up a CAM account to receive the revenues generated by the foreign marketplace.
Deliverables
You need the sales agent to provide a list of the deliverables. “Deliverables” are all of the components of your picture that will be required by the foreign distributors. Be sure that you have budgeted the monies required to create the deliverables required. You will be in breach of contract if you do not deliver all of the deliverables. The foreign distributor will withhold monies due to you if you do not deliver all the deliverables and may terminate the license agreement.
