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A reputable distributor
should be willing to accept terms that protect a filmmaker's interests.
Many such provisions do not cost the distributor anything as long as
the distributor lives up to the terms of its contract. A provision for
interest on late payments, for example, costs the distributor nothing
as long as payments are made on time. Such provisions are important
because they encourage a distributor to live up to its commitments, and
provide the filmmaker with a viable remedy in case the distributor
defaults. Here is a list of some of the most critical ways for
filmmakers to protect their interests.
This
list should not be considered exhaustive. There are other items a
filmmaker may want to include such as clauses dealing with advances,
guarantees and reservation of rights.
- NO CHANGES: The film should not
be edited, nor the title changed, without the filmmaker's
approval. Editing for censorship purposes, television broadcast
and changes made for a foreign release, such as translating the
title, is permissible.
- MINIMUM ADVERTISING
SPECIFIED:
The contract should specify in writing the minimum amount the
distributor will spend on advertising and promotion of the film.
The distributor should make a commitment to pay for the creation
of a poster, one-sheet and trailer if these items have not been
created.
- EXPENSES LIMITED: There should be a
floor and a ceiling on expenses. Market expenses (the cost to
attend film markets) should be limited to the first year of
release and capped per market. Promotional expenses should be
limited to direct out-of-pocket costs spent to promote the film
and should specifically exclude the distributor's general overhead
and staff expenses.
- TERM: The term should be a
reasonable length, perhaps up to ten years, but not in perpetuity.
The filmmaker should be able to regain rights to the film if the
distributor gives up on it. Thus, it is best to have a short
initial term, such as two years, and a series of automatic
rollovers if the distributor returns a certain amount of revenue
to the filmmaker. If these performance milestones are not met, all
rights would automatically revert to the filmmaker.
- INDEMNITY: Filmmaker should be
indemnified (receive reimbursement) for any losses incurred by
filmmaker as a result of distributor's breach of the terms of the
agreement, violation of third party rights, and for any changes or
additions made to the film.
- POSSESSION OF NEGATIVE: Distributor should
receive a lab access letter rather than possession of the original
negative and other original elements. Distributor should not be
permitted to remove masters from the laboratory.
- ERRORS AND OMISSIONS
(E&O) POLICY:
While it is generally the filmmaker's responsibility to purchase
an E & O insurance policy, distributors are often willing to
advance the cost of this insurance and recoup the cost from gross
revenues. In such an event, the filmmaker should be added as an
additional named insured on the policy.
- TERMINATION CLAUSE: If the distributor
defaults on its contractual obligations, filmmaker should have the
right to terminate the contract, and regain rights to license the
film in unsold territories as well as obtain money damages for the
default. Filmmaker should give distributor fourteen days prior
written notice of default before exercising the right to
termination.
- RIGHT TO INSPECT BOOKS
AND RECORDS:
Distributor should maintain complete books and records with regard
to all sales and rental of the film. Filmmaker should receive
quarterly (or monthly) producer statements with any payment due filmmaker.
Filmmaker should have the right to examine the books and records
of distributor during reasonable business hours on ten days
notice.
- LATE PAYMENTS/LIEN: All monies due and
payable to filmmaker should be held in trust by distributor for
filmmaker. Filmmaker should be deemed to have a lien on
filmmaker's share of revenue. Distributor should pay filmmaker
interest on any amounts past due.
- LIMITATION ON ACTION: Filmmaker should have
at least three years from receipt of any financial statement, or
discovery of any accounting irregularity, whichever is later, to
contest accounting errors and file a Demand for Arbitration.
- ASSIGNMENT: It is best to
prohibit assignment unless Filmmaker consents. If assignment is
permitted, Distributor should not be relieved of its obligations
under the original contract.
- FILMMAKER DEFAULT: Distributor should
give Filmmaker fourteen days written notice of any alleged default
by filmmaker, and an additional ten days to cure such default,
before taking any action to enforce its rights.
- WARRANTIES: Filmmaker's
warranties in regard to infringement of third party rights should
be to the best of the filmmaker's knowledge and belief, not
absolute.
- SCHEDULE OF MINIMUMS: For distributors who
license foreign rights (known as foreign distributors or foreign
sales agents) there should be a schedule of minimum acceptable
license fees per territory. The distributor is not permitted to
license the film in each territory for less than the minimum
without the prior approval of the Filmmaker.
- ARBITRATION
CLAUSE:
Every contract should contain an arbitration clause ensuring that
all contractual disputes are subject to binding arbitration with
the prevailing party entitled to reimbursement of legal fees and
costs. The arbitration award should be final, binding and non-appealable.
IFTA will now arbitrate entertainment industry disputes involving
non-IFTA companies. The IFTA personal guarantee Rider can be used
to bar a company's chief executive from attending future American
Film Markets if the company refuses to pay an arbitration award.
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