Posted in: Movies | Tagged: contracts, entertainment, film, filmmaking, indy films, selling films

Film Schooling – Insider Insights On Indy Filmmaking: Selling Your Film And The Contract

Published Fri, 10 Oct 2014 18:30:58 -0500

By Chris Hood

(This is Part Twenty Seven of an ongoing series to help educate aspiring filmmakers on the process of making their first film. Previous articles in this series can be found at BleedingCool.com and MovieIndustry.com)

Parts: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26

The most heartbreaking element of filmmaking is the lies. Lots of lies. You'll find they are prevalent. They're self serving (as are most lies). And they're big. Actors lie about their experience, schooling and work ethic. Writers lie about previous work and accomplishments. Directors and producers lie about big projects in the works and fabricated involvement in past shows. And distributors are the biggest liars of them all.

The "Big Lie" originated as a propaganda technique usually credited to Hitler, the idea being if a lie was too big and considered too audacious to fabricate and/or too easy to disprove, people will believe it must be true. Hitler's minister of propaganda, Joseph Goebbels, was later credited with a more succinct version of this theory with "The bigger the lie, the more it will be believed."

A notable factor in this type of psychology is that when the lie is something a person wants to hear, the ability to apply the filter of logic or common sense is severely retarded. This applies to virtually all people in all circumstances. No matter who we are, or who tells us that we're beautiful or handsome, we want to believe it. If someone tells us they love us, we want to believe it. Call us "smart," or "funny," or "talented," and virtually all of us will believe it because it's desirous to do so…even when staggering evidence to the contrary exists. That truth, the other side, the undesirable, is more pleasant to simply dismiss in favor of the more appealing falsehood.

Rather than write a long article on the psychology of manipulation, simply realize that that is the motivation for the kinds of lies a distributor will tell you. They want to handle your movie. They want to profit off of your hard work and considerable investment of time and money. And they know that they are a "buyer" in a competitive endeavor and want to be the one making the most appealing offer. Unfortunately, this almost never comes down to cash on the barrel head, so you'll have to make your decision based on speculation and idle promises…usually with nothing at all to back up those claims except your fervent desire for them to be true.

I've lost several films I've tried to acquire because I don't play this game. Perhaps it's bad business that I don't, but having been lied to as a filmmaker, I can't bring myself to do it to others now that I'm on the other side. When I'm in talks to handle a film, often times I lose out to a competitor because the other party is promising more. The fact that none of what they're promising is real is often discovered far too late. This is obviously different than when there is a tangible, real, quantifiable difference; like when I'm unable to offer a minimum guarantee and the next company is. That's real. A contracted amount of money to be guaranteed and paid is almost always preferable to the hopes that I'll be able to delivery something comparable. But these are usually not the films I lose or how I lose them.

Talk is cheap and never more so than when a distributor is trying to land your project. And some of the promises are so big, it amazes me that anyone falls for it, yet they do every day. "We'll be able to get your film to open on 800 screens!", "I can get Miramax to pick this up!", "We want to put the money up for your next film!", or "We should be able to make a million in sales on this easy." These are huge lies. This isn't wishful thinking on the part of the distributors; they know it's complete and total bullshit as it's tripping off their tongues, but they know that you, the producer, are actually shockingly naive and pathetically hopeful enough to believe it. And they know you probably won't do your due diligence because, God forbid, the actual evidence may contradict what they're telling you which is far more appealing. The Big Lie.

So here's what it comes down to: If it's not in the contract, it means nothing. And it's never in the contract! All these promises, all these lies, disappear like a fart in the wind or a virgin on prom night…or a farting virgin on a windy prom night, if you will. The contract is all that matters.

When you ask for something verbally promised to be actually included in a contract, you'll get all kinds of reasons for why they can't include it. Again, you'll want to believe them, so you may swallow these flimsy excuses if you even have the good sense to ask for it in writing in the first place. You, the filmmaker, are the fish in a barrel…except people just shoot those fish, they don't ass rape them, so maybe that's not the best analogy, either.

The only way to keep from getting screwed is to make sure you're protected against it in writing. The distributor always provides the agreement and there are always several elements that exist solely to screw you…though they are camouflaged to some extent. You need to know exactly what you're getting in to, precisely what that contract is obligating you to, so you better have a lawyer help you with this. Unless you've decided to give the film away, not caring or expecting any money and not really concerned about what happens when you pass it off to someone else, the contract is monumental. Now, there are cases where a filmmaker has resigned himself to not seeing any money and will pretty much sign whatever a distributor puts in front of them. I actually can respect this grasp on reality. I've heard filmmakers say, "Yeah, I know I'm never going to see any money out of this, but I just want to get it out there." If that's the best you can do, and often times it is, it's certainly better to realize that fact and go into things with your eyes open.

If you don't have a lawyer reviewing and revising your contract, make sure you have someone very experienced with contracts. These documents can be dozens of pages long and quite daunting. There are going to be things that are utterly confusing to a layperson, even an intelligent one. There are things that are even confusing to contract lawyers that have never dealt with film deals before, but they at least know enough to ask the right questions and do the proper research.

Let me give you some examples of distribution elements to watch out for:

Commission vs. Sales Agent/Distribution Fee: Naturally, your distributor/sales agent expects to be paid for the services he's rendering. This is almost always in the form of a commission. This can be 20%-60% or even more, I won't argue the merits of a lower commission over a higher one because in many cases a higher commission with none of the bullshit fees and deductions will yield far more money to the filmmakers. There are contracts out there with the distributor taking 10% or less but they have padded the contract with enough bullshit to ensure the filmmakers will never see a dime. This commission is only relevant compared to how it is handled and how it relates to all the other elements that affect gross revenues of your film.

The most egregious angle I see in this area is the distributor that will ask for a commission and a distribution fee. These are usually kept in different areas of the agreement. They might list a 30% commission in this article and a 5-10% distribution fee elsewhere. It's bullshit, but if you don't read the contract, don't know enough to ask, or are too much of a pussy to stand up for yourself, it will slip right though to the final agreement and they end up double dipping.

Marketing/Promotional Expenses: This/these are part of every film contact. The fact is that the distributor will have to spend money to sell your film. This may include creating a new poster and box cover, cutting a new trailer, printables, getting an MPAA rating, securing Errors and Omissions insurance, and many, many other possible things. The distributor will want to recoup this money and they'll want to get it back first. But this can be a slippery slope…and that's exactly how they want it.

A relatively new advent in the distribution game is to forgo a traditional recoupment scenario (which can still be easily manipulated to fuck over the filmmaker) for an easier "expense cap" structure. How this works is that there will be a set amount for expenses that the distributor gets to claim off the top from dollar one to cover all these expenses. Yes, that's a set amount, regardless of how much the distributor actually spends on these things. In fact, it's usually put together in such a way that they don't even have to tell you how much they spend or show you a single receipt.

Now, there's a minimum spend that comes with any film. Realistically, it's in the $5k-$10k. It could be even lower than that, but it's hard to get a film even ready to present without spending a little. Yet, distributors will ask for $40k, $50k or more as the "expense cap." I've seen expense caps in excess of $100,000! I shouldn't need to tell you that these companies don't spend anywhere near this amount, but they take that massive chunk of money right off the top because you agreed to it in the contract.

Office Expenses: This is another ridiculously audacious ask that often slips through. A distributor will request another generous chunk of money to cover their office expenses. After they hit your $50k for their marketing expense cap, they'll tack on another $25k for "office expenses". Again, they don't have to show you any documentation to verify where this money is going, it's just another way to skim off the top.

Festival/Market expenses: More of the same here, though this one is even harder for them to justify when you put their feet to the fire. Distributors go to festivals and film markets. It's where they meet with their buyers, connect with new clients and sometimes pick up new films. Yet, for some reason, they seem to think it's reasonable to ask you, the filmmaker, to cover this cost as well. Don't consider that these costs fall squarely into the "marketing expense" category where you're already getting fucked.

The most disgusting part of this is the blatant, in-your-face dishonestly. Your contract may allow the distributor to ding $3000-$10,000 against your film for each festival or market that's attended. Wow! Great deal for the distributor! They have 40 films and get to debit each filmmaker $7k per market, that's $280,000 for an event that probably costs them thirty grand!

Film Prep Fees: This element has become more commonplace since the transition to digital media and VOD. Now, there is some truth that every digital platform has specifications that need to be met if you're submitting to that platform…but what's reasonable? I've made sub-licensing deals where a VOD aggregator can get a film on 20, 30 or 40 platforms…but they charge to prep files for every one…sometimes as much as $500. And some of these will ask for the filmmaker (or the sales agent) to pay this money up front! Great deal for the sub-licensee. We can come out of pocket $10,000 to get these films on all the big VOD platforms and our little titles can easily get lost in the ocean of thousands of other films. It's great if your film is on Comcast, Time Warner and AT&T VOD, but not if you spent $500 each to get it there and you're generating $14 a quarter (and that can actually happen). You know the provider is pocketing some of that $500 and getting a piece of that $14 besides. Great deal for them even if the film is a total flop on the other end since they know they're "in the black" from the moment they prep the title even if they don't make a single VOD sales.

Hold Backs: This is another area I find particularly annoying. Although it's becoming less and less relevant and realistic, it still seems to find it's way into most agreements. Hold backs come from the days of the record business where stores had the ability to return unsold product. Since the distributor never knew exactly when those returns might happen, they would earmark a chunk of money for if/when that would transpire. Obviously they don't want to pay the filmmaker on everything sold only to find that some of it was returned at a later date and have to get that chunk of return money back from the filmmaker. Good luck with that. So, the origin of hold backs was logical…in theory.

Big retailers do generally have return policies, so this is still somewhat relevant, but only very minutely so. I'll see contracts where the distributor is asking to hold back 25% of all gross revenues for 2 or even 3 years. That means they get to sit on 25% of the money for a very long time while it earns interest in their account. Interest of which you'll never see a penny even thought, technically, you should be seeing 50%-75% of that interest depending on your deal.

Others: After all of this, there are still other ways your distributor or sales agent will try to legally steal even more money out of your pockets. They constantly come up with new and interesting ways to stick it to you. So every line of your contact needs to be clearly understood.

When you look at all these things, you see why so few filmmakers ever see a dime on their film. And, sadly, most of the fault lies with the producer for signing an agreement they don't fully understand. You know (or should know) that most distributors are going to try to take advantage of you. So it's either ignorance or laziness that explains why your distribution deal is so unfavorable.

Just reading this one article puts you ahead of most other filmmakers. That's shocking. It's disturbing. If filmmakers were smart, educated and handled this part of the process properly, far more films and film investors would actually see a return and in some cases (gasp!) an actual profit.

Every bad contract an inexperienced, delusional, stupid or lazy filmmaker signs reflects badly on the entire indy filmmaking business. They're making it harder to raise money for films and contribute to the reality that indy film investing is a terribly risky endeavor. Yes, the shady distributor shares some of the blame, but if you throw chum in the water, you can't blame the sharks for putting in an appearance.

Don't be chum.

Chris Hood is a writer, producer and director of such films as "Counterpunch" starring Danny Trejo (a Lionsgate release) and "Dirty Dealing 3D" with Michael Madsen and C. Thomas Howell. He and Jon Schultz own Robin Hood Films, a Las Vegas-based distribution company representing English language films around the world and Chris operates a film blog at MovieIndustry.com. He's also dead sexy. (Mr. Hood denies any involvement in the creation of this mini-bio.)

Enjoyed this? Please share on social media!