On May 17, 2008, I attended a terrific Film Distribution Workshop at the Fashion Institute of Technology in Manhattan with Allen Chou, President of Passion River Films (www.passionriver.com) and Josh Levin, President of Gallant Films, LLC. Although the day-long event hosted by Film Synergy Magic, LLC was scheduled to run from 9am to 5pm, Allen and Josh stayed until after 7pm, work-shopping distribution strategies for attendees’ film projects.
The nature of film distribution is that the eight or so major and mini-major companies (e.g., Sony, Paramount, Warner Brothers, Fox, Universal, MGM, Disney, Lion’s Gate, United Artists) control over 90% of the U.S. film market (theatrical and DVD). In 2007, the top ten grossing distributors had revenues of over $9.6 billion.
The traditional “windows of distribution” have been changing. For example, in 1990 theatrical exhibition would precede non-theatrical and home video release by about 6 months, with pay-per-view release about 11 months later, pay TV a year after theatrical, and free TV two years after theatrical.
Currently, home video release may follow theatrical in about 3 months, and the advent of “day and date” releases has further compressed various windows of distribution. Each separate “window” represents a distinct “right” that can be either bundled or separated in a distribution deal. The emergence of the HD format has led the majors to bank on HD as a separate window and format distinct from standard definition DVD.
Despite the prestige of getting one’s film into Sundance, one should consider that this past year 201 films were accepted out of 8000 submitted. Of the 120 feature length films screened, 21 had distribution deals going into the Festival, and only 17 left with deals made at Sundance.
For the vast majority of films, theatrical distribution itself is generally a loss-leader proposition, as the high cost of P&A to advertise a film properly, and the fact that the exhibitor generally receives about half the ticket revenue, means that very few films actually make a profit from theatrical exhibition. Even though a filmmaker will typically lose money on theatrical exhibition, having the film play in theaters can be extremely valuable.
First, if a film has a theatrical run (however short), one may get a press review. A New York Times review is particularly desirable, though it requires at least a week of exhibition in a sufficiently significant Manhattan theater. Perhaps more importantly, a theatrical run has the effect of increasing the value of the film in each of the other windows of distribution. Major DVD retailers/renters such as Netflix, Blockbuster and WalMart are far more likely to place orders for a film that has been theatrically exhibited. To be eligible to be considered for an Academy Award, a film must be theatrically exhibited at least one week in NY and LA.
If one is unable to obtain a theatrical distribution deal, it is still possible to arrange limited theatrical exhibition through the practice known as “four walling,” in which the filmmaker essentially rents a theater for one or more screenings. However, this can be very expensive, as a prestigious independent venue such as the Angelica Theater in NYC can run $20k for one week, and other venues such as the Quad Theater in NYC can run $11-15k per week. Obviously, NYC rates tend to be the highest, and it may be possible to negotiate lower rates in other cities.
Even with a theatrical distribution deal, theater owners decide each Monday which films will be dropped from screens by Friday, to make room for other films that hopefully will attract ticket buyers. A “platform release” strategy involves release of a film initially in a city such as NY, followed by serial release in other cities such as Chicago, Los Angeles, etc. A “limited release” differs from a “wide release” in that only a few markets show the film. A “limited engagement” refers to a limited period of time a film shows in a particular venue.
In making a distribution deal, beware of attempts to include “overhead” costs under recoupable expenses, as such an inclusion will seriously affect the chances that there will be any net profits left to pay percentages to the filmmaker. Also, be aware of “who’s flying to Cannes?” on your dime. While it is important that a distributor or sales agent seeking foreign buyers attend the Marche du Film at Cannes, such costs should be spread out
If your film is greatly in demand, you may be offered a “minimum guarantee” (MG) as part of your distribution deal. The MG is a payment, or set of payments, that the distributor will guarantee to pay to acquire rights to distribute the film. On a straight DVD deal, an MG (assuming one is even offered) for a non-genre film may range from about $5k up to (rarely) $50-70k. For genre films (such as horror), the MG may range as high as $500k for a DVD deal. However, it is not uncommon for a DVD distributor not to offer any MG, in which case a filmmaker must carefully research the distributor’s reputation at paying back end fees.
Stay tuned for Part Two!