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Distribution Advances and Broadcast License Fees |
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Every distribution and sales agency agreement is different. Many of these agreements provide for an advance or minimum guarantee (often known as an MG), in which the distributor or sales agent pays a guaranteed amount upfront to the producer in exchange for the rights. The advance or MG may be payable in instalments or in one lump sum on the signing of the distribution or sales agency agreement. It is normally recoupable by the payor out of the revenues the production generates before any further “net receipts” are payable to the producer. The producer may also be entitled to a portion of the “net receipts” earned by the distributor or sales agent. Below are examples of key financial terms in a distribution agreement, including a “net receipts” definition.
Distribution Advance
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$100,000 recoupable advance against producer’s share of future gross receipts in the amount payable as follows:
(a) 50% within 10 business days following execution of the distribution agreement, and
(b) 50% within 30 days following complete delivery of the production to the distributor.
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Fees
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The distributor is entitled to the following fees out of “Gross Receipts”:
(a) For theatrical distribution: 35%
(b) For home video distribution: 30%
(c) For all other media: 25%
“Gross Receipts” means all monies actually received by the distributor or by any third party for the benefit of distributor derived from the exploitation of the distribution rights
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Allocation of Gross Receipts between Distributor and Producer
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Gross Receipts are allocated as follows:
(a) First, to the payment to distributor of its Distribution Fees;
(b) Second, to the payment to distributor of its distribution expenses;
(c) Third, to the recoupment by distributor of its Distribution Advance; and
(e) The balance, if any, (“Net Receipts”), to be split 50/50 between Distributor and Producer.
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