Following up on our previous article about the Status Quo of the Film Industry as it relates to distribution, we thought it was a good idea to share with filmmakers the various standard models of the film distribution deal.
Theatrical Distribution Deals
The share of Box Office paid over to distributors varies between territories. The typical exhibitor’s share in the US is 45% to 55% and in the Rest of the World 55% to 65%. The UK has some of the highest retentions by the exhibitor, averaging around 65% to 70%. The balance remitted to the distributor is termed the “Net Theatrical Rentals”.
With regard to how much might actually flow back for the purposes of producers or financiers or agents below the distributor, there are three main types of theatrical distribution deals:
i. “Costs off the Top Deal”: the distributor recoups their prints and advertising (P & A) spend from the net theatrical rentals. From the balance, the distributor retains a distribution fee of up to 50% and from the remaining balance recoups any advance plus interest before paying the final balance into the pot;
ii. “Net Deal”: the distributor retains a distribution fee of up to 50% of the net theatrical rentals. From the balance, the distributor recoups P & A expenditure and any advances plus interest. The net receipts after these have been recouped are put into the pot;
iii. “Gross Deal”: the producer / financier / agent receives an agreed percentage from the net theatrical rentals before any P & A spend or advances have been recouped by the distributor. Out of the balance, the distributor retains their distribution fee and recoups P & A spend, advances and interest. After recoupment, any remaining receipts are paid into the pot.
Of these three models, the net deal is the one most commonly used. Under any of these structures, however, and because of the high cost of P&A coupled with distributor fees and other costs, it is unusual for independent producers to receive any back-end profits from the theatrical release since the other parties further up the chain will still be unrecouped. The independent producers will have to look towards the other revenue streams to see if they can get some “profits” back from their project.
Video/DVD Distribution Deals
Film distributors take an average of 75% of consumer spend from retail video/DVD activity compared to about 25% – 33% from rental activity (hence their keenness to get titles into the sell-through market as quickly as possible). There are various kinds of video/DVD distribution deals for the independent producer to be aware of:
- royalty deal: distributor pays royalty to producer / financier / agent of 35% – 45%.
- Off the Top deal: distributor takes fee of between 25% and 35%, deducts their costs (typically up to 25%) and remits the balance to the producer/financier/agent.
- royalty deal: distributor pays royalty to the producer / financier of 12.5% to 20%.
- Off the Top deal: distributor takes fee of between 25% and 35%, deducts their costs (typically up to 50%) and remits the balance to the producer/financier/agent.
Royalty deals, under which the distributor usually keeps more of the revenues, tend to be more common.
Pay per View: the Pay TV service retains about 40% to 50% of the viewer’s fee, recoups the distributor’s advance and pays any balance to the distributor. The distributor usually retains around 25% to 35% in commission and remits the balance to the producer / financier / agent.
Subscription TV: The TV operator pays a fixed fee to the distributor (of $50k to $1.2m) which usually depends on the film’s performance at the Box Office. Deals may be structured so that the fee increases in line with the number of subscribers to the film. The distributor takes between 25% and 35% commission with the balance to the producer / financier / agent.
Free TV: the license fee paid by the broadcaster usually depends on the film’s Box Office performance. The distributor takes percentage fees of between 25% and 50% in the US and 20% – 40% in the Rest of the World, with the balance to the producer / financier / agent .
We hope this article helps you navigate the various types of distribution deals to discern which type of deal will best align with your individual goals.
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