One thing I find myself explaining often is that I did not become a global sales agent because I had a passion for selling films, rather I became a sales agent out of necessity.
Early in my career I was excited to see my films being sold in various corners of the world, but it became quickly apparent that despite my films being distributed worldwide, not much if any money seemed to flow back to myself or the investors.
This was also back a few years ago when you could still make it a Blockbuster night and digital distribution was an afterthought. That was a far more lucrative time than today.
What I knew was that someone was making money on my films, even if I wasn’t seeing it.
It started to become clear that a lot of the money is lost in the distribution process and I was hellbent on learning how – if for nothing else, to maintain more control and become a smarter producer in the future.
Think Of Them As An Investor
Distributors and Sales Agents are in a very advantageous position if you think of them like an investor in your film.
Even though your film is done, a sales agent and ultimately the distributors who release your film are kind of like investors who come in last, and get out first.
That doesn’t mean it’s always a gravy train for them – after all there are manufacturing costs and packaging costs and supply chain costs and marketing costs and localization costs and P&A costs, etc.
Not to mention, a sales agent and distributor may have also paid you a minimum guarantee (or an advance) when you signed the film over to them.
All of these things mean there is an investment – skin in the game to release your film.
The difference is, however, that distributors and sales agents typically recoup their investment off the top plus profit before a single dollar filters back to you or your investor.
This can be a daunting financial hill to scale before revenues start pouring back on the other side, especially in today’s digital market where films can get lost among the noise.
Avoid The ‘Super Profit’
This is the common process, but distributors and sales agents have also worked out ways to make what I refer to as “super profit” – or profit on profit – on our films before any revenues actually flow back to us, the Producers.
There are two extremely common ways for distributors and sales agents to make super profit:
Distributors in particular typically take a percentage of the gross revenues, meaning they take a nice thick slice off the top before they even recoup expenses or an advance. It’s pretty challenging to eliminate this completely but by negotiating this as low as possible, it can expedite the threshold of seeing Overages.
Sales Agents and Distributors are notorious for exploiting “Marketing Caps”, which implies recouping expenses that may reach as high as the defined cap. But the reality is that many of them collect this money as a fee.
Often times both a Sales Agent and a Distributor will both exploit a marketing cap, and often both are recouping on the same expenses.
One way to avoid this is by adding language into your agreements that there is no double dipping on the same expenses. Bigger, more powerful distributors may refuse to cap their marketing spend all together, meaning they can recoup expenses indefinitely and never pay overages.
Most sales agents will fully exploit marketing caps on every title they represent.
If the marketing cap is $30,000 on average per title, then the sales agent is putting the first $30,000 grossed right into their pocket before the producers ever see a dollar.
For smaller films, they may not ever gross beyond $30,000, which is why little or no money finds its way back to the Producers.
These are several of the reasons why most Sales Agents and Distributors fly business class to Cannes and eat at nice restaurants while the rest of us fly coach on low cost carriers all the way to the South of France.
How To Vet A Sales Agent
I am often asked by filmmakers how to identify whether a sales agent is good or bad. The fact of the matter is that you really only get one shot at making your selection.
Once your film is presented into the marketplace by a sales agent and released by a distributor, it’s very challenging to change your mind and start over.
There are plenty of ways to vet sales agents and distributors by digging around online and talking to other filmmakers, but being cognizant of the way sales agents and distributors make super profit on films while leaving the producers in unfavorable positions will help you evaluate who is a good guy and who is not.
Rules of Thumb
Ultimately, I have found several rules of thumb to help you decipher whether a sales agent and distributor wants to be your partner and profit with you, or just flat out profit off of you.
- Willingness to Negotiate – If a sales agent and/or distributor is truly interested in working with you as a partner, they will negotiate to a point of mutual favorability. Too often I’ve found distributors with a “Take it or leave it” attitude, particularly when it’s a larger label.
- Collaborative Spirit – If a sales agent and/or distributor embraces a collaborative dynamic and is willing to work with you on key decisions such as art work, etc. then that’s a good thing. Be cautious of sales agents and distributors who insist on having total control without allowing filmmaker input.
- Win or Lose Together – Obviously sales agents and distributors need to recoup their costs and make money, but there needs to be a sense that the distribution partner is willing to win or lose with you. The best way I know how to show this to Producers I work with is by structuring the terms in a way so that they see money back from dollar one, even if I have recoupable expenses. This is often referred to as a gross corridor. The bottom line is that the sales agent and distributor should not undoubtedly win if the Producer of the film is losing.
Put Yourself In the Best Position Possible
I would never motivate indie filmmakers to become their own sales agents or distributors. It’s hardly the path of least resistance. It just happened to be my path. But if you are going to be a career filmmaker, then knowing and understanding how to navigate the realities and pitfalls of distribution are essential to put you in the best position possible to produce movies that make their money.
If you’d like to learn more about navigating Film Distribution and putting your film in the best position to get a lucrative Distribution deal, consider joining me in my free training, 6 Ways to Not Screw Up Your Distribution Deal.