| Negotiating A Distribution Deal |
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Page 3 of 3 Distribution and sub-distribution feesDistributors usually charge a distribution fee based on a certain percentage of gross revenues from the sale of the film. The percentage will depend on a number of factors, including the applicable territory and media of exploitation. You should check with your legal or other advisors to determine whether a particular percentage is consistent with industry standards – typically 15% to 40% or up to 75%, if inclusive of costs.If a sub-distributor is handling international sales, you want to be careful not to end up paying double distribution fees – that is, find yourself in a situation where both the sub-distributor and the domestic distributor are entitled to deduct a fee from revenues. You prevent this by capping the total fees payable, and specifying they are inclusive of all distribution and sub-distribution fees. Some distributors might resist a cap on fees, but it is quite a common practice. Books, records and audit rightsOne way to ensure you are receiving your fair share of the film's revenues is to require the distributor to maintain books and records relating to all revenues derived from his exploitation of the film. You should be entitled to examine those books and records during reasonable business hours, after providing the distributor with a reasonable period of notice.For an example of this practice, look at Telefilm Canada. When it has money in a project, it typically requires the filmmaker to insert a provision in the distributor contract granting Telefilm the same audit rights as the filmmaker. Furthermore, Telefilm is to be allowed to examine and audit the materials as often as it wishes, and the distributors may not close their books at any time during the term of the distribution agreement. In addition to the right of examination, you should be entitled to reimbursement of your audit costs if any audit reveals that you have been underpaid by a specified amount (typically 5% to 10%). Finally, the contract should also require the distributor to provide monthly or quarterly statements setting out how much revenue has been received in each territory, and what amounts have been deducted from revenues to pay distribution fees and expenses. These statements should be accompanied by any payments owed to you. Termination / ArbitrationDistribution contracts typically provide that if the distributor defaults on his obligations under the contract, the filmmaker's remedies are limited to the right to sue for money damages only.You can, however, include two provisions in the contract that will protect you from contract breaches or defaults by your distributor:
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