Distribution and exploitation of film and TV
rights
This guide is based on UK law. It was last updated in March
2008.
Overview
Having put so much effort into creating a feature film or
television programme, the next big task is to exploit that effort
and make some money. Distribution deals are not always easy to
secure, but with an increasing number of players in the marketplace
it is essential that producers understand how these deals work.
The Communications Act changed the landscape for television
producers by "unbundling" the rights in programmes. Now
broadcasters get a licence to show programmes, but must pay
separately for other rights such as international broadcast,
merchandising, internet etc. This has created a huge opportunity
for television producers to make more money from the programmes
they create.
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Television distribution
Television distribution is a growing industry. On the back of
the Communications Act developments, more distributors are setting
up to take advantage of the expected growth in available product.
Distributors range from broadcaster-owned companies through larger
independent companies to smaller niche players.
Securing a distribution deal prior to production of a feature
film in advance is a major plus point when raising finance: it
demonstrates that there is a route to market for the film. Feature
film distribution differs from television in that often the best
route to distributors is by appointing a sales agent, who then
handles the distribution of the film in territories and liaises
with the distributors in those territories. The sales agent will
attend festivals and markets and sell the film in return for a
commission based on a percentage of the money earned from the deal
with distributors.
Choosing the correct distributor for your product is about
weighing up the financial deal that is on the table with the
likelihood that the distributor can deliver on making product
available to meet demand, has good industry contacts (including, if
appropriate international contacts) and generally has expertise. It
is always worth asking to see the distributor's catalogue of
programmes and "dropping in" on them at film and television markets
to get a feel for the type of work that they deal with and how much
of a presence they are. Remember that a smaller niche player may
have just the contacts that you need for your particular programme,
even if they do not have the general brand name.
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Common provisions in distribution agreements
Often the distributor will produce a standard form contract. The
main issues to consider when reviewing it are the commission to be
charged, the media covered, the territories that it is to cover and
the duration of the licence.
Commission
Distributors tend to charge a commission on revenue generated
from exploitation of the product. This is usually based on "gross
revenues," which is the amount actually received by the distributor
from the purchaser of the film or programme. However, the
distributor will also want to deduct its costs before sending you
any money. It is important to check carefully the deductions that
the distributor can make to ensure that these are legitimate and
that the distributor is not adding in matters such as general staff
overhead, which it should be covering from its commission.
Usual deductible costs would include the cost of shipping the
product to broadcasters or cinemas, advertising and marketing the
product and creating additional prints/tapes.
With feature films, first time producers are often shocked by
the tiny percentage of revenue they actually see from distribution.
The exhibitors (cinemas) will deduct almost half of the revenue off
the top and then from the balance comes off the distributor's
commission and costs before any of the investors in the film start
to recoup their investment. Only after the investors recoup does
the producer see any profit. Most low-budget feature films in the
UK never reach the stage of generating a profit.
Ensure that the distribution agreement contains obligations on
the distributor to account to you for revenue earned, deductions
made etc. on a regular basis (no less than six monthly). You should
also insert provisions to allow you to have an independent person
audit the figures you are given if you are doubtful as to
whether they are accurate.
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Territories
Most distributors would rather get a worldwide licence of a
programme: it gives them more scope to earn revenue. However, if
the distributor is only really known in the UK then their ability
to make you money in international territories will be limited.
Therefore you should weigh up the simplicity of dealing with only
one distributor against the chance of making money from these
territories. The main territories are Europe, North America, Asia,
South America, Africa and Middle East.
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Duration
The licence term is always negotiable. It is important to strike
a balance between giving the distributor enough time to exploit the
rights and not tying the rights up indefinitely with someone who is
not performing. A compromise can be to extend the term, but
negotiate in a "get out" clause if revenue fails to reach a certain
target. It is also important that the licence contains explicit
termination provisions if the distributor becomes insolvent or
defaults on any of its obligations, such as the very important
obligation to pay you.
Media
To maximise revenue the distributor is likely to want the right
to sell the full range of media. This will include standard TV, pay
TV, interactive TV, online transmission and video/DVD. The
distributor may also look for secondary rights in the programme or
film, such as merchandising, soundtrack etc.
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Other issues
It is always worth questioning the distributor closely about the
marketing planned for your programme or film and, if you can,
enshrine this in the contract as a commitment. That way you can
ensure that you and the distributor agree up-front about the
direction that the marketing campaign is to take. Sometimes a
distributor may look for an option to distribute any sequel to the
work. For television programmes in particular it often makes sense
to give them this since the distributor will then have the
advantage in the marketplace of being able to negotiate with a
package of programmes, which can get you better deals. However,
always try to negotiate an additional financial benefit from the
distributor in return for granting these additional tie-in rights
and/or a "get out" if they have not performed against targets in
the original deal.
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Secondary rights
Making a programme or a feature film is not the end of the story
regarding rights exploitation: it is possible to make decent
revenue from exploiting secondary rights, such as soundtracks,
merchandising and tie-ins with complementary businesses. Good
examples of this in television are Bob the Builder, Teletubbies and
Who Wants to be a Millionaire. In films, Harry Potter, Star Wars
and any of the recent Disney/Pixar releases are great examples of
the power of secondary rights. Deciding how best to exploit these
opportunities depends on how capable you feel and how much time you
have. If either of these areas score low then it is better to
employ a merchandising agent to negotiate deals on your behalf.
It is important that exploitation of secondary rights fits in
with the primary programme or film: it makes sense to ensure that
the programme or film establishes the name in the minds of the
public to give the merchandise a better chance of selling. However
it is also important to ensure that the merchandising material is
available to meet demand when it is high.
You should also ensure that you have the right to exploit
secondary rights. For example, when you acquired permission to use
a song in your film, did you also get permission to include it in a
soundtrack?
Common provisions in a secondary rights agreement will include
approval rights over the material (it is important that this does
not risk the primary product), territorial restrictions on where
products can be sold and provisions obliging any agent to account
for commissions earned.
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Conclusion
Opportunities have never been greater for generating revenue
from the exploitation of film and television rights. Producers have
more media than ever over which to deliver content to consumers. It
is important to get distribution deals right so that exploitation
generates rewards for the producer as well as the "middle men."
If you are an
individual in need of advice: please note that our law
firm does not tend to act for individuals, only for organisations.
You can contact the Law Society if you need help finding
a solicitor.
Contact: Yvonne Dunn (yvonne.dunn@pinsentmasons.com
/ 0141 248 4858) or see Yvonne's
biography.
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