6 Issues to Consider before entering a Digital Distribution Agreement

Entertainment attorney George Rush and contributor to SF360 (San Francisco Film Society's online publication) put together a helpful piece on digital distribution.  Below is a summary of the issues he recommends considering before entering into a digital distribution agreement.   

Excerpt from "Notes on Digital Distribution" - by George Rush....

"...Any filmmaker thinking about entering into a distribution agreement that grants any digital rights must think about these issues:

Conflicts: There are a lot of overlapping and conflicting rights within digital distribution, which can include a digital element for VOD, a digital element for pure website distribution, or a digital element for distribution through iTunes or Netflix. All of these can be considered distinct forms of digital distribution. But if you grant away all digital rights, even if the purpose of the deal is simply to stream your film on a website, you will not be able to enter into other deals. Make sure that your deal is strictly limited to the intended type of distribution; otherwise you may lose important distribution rights.

Purchaser: Is the purchaser a content provider or a middleman? It is always best to sell your film to a content provider instead of a middleman. Middlemen just try to sell your film to content distributors, and you get an even smaller percentage of any eventual profits.

Money: If you’re going to give someone else the right to distribute your film, make sure that the payment or advance is fair. In the world of theatrical releases, it’s easy to follow the money; with digital distribution, it’s often impossible. A distributor may make money from charging for content, but most likely it will make money from ads. Determining your share of ad revenue is difficult, and it is in the distributor’s interest not to tell you how it’s done. If your deal gives you nothing but a cut of ad revenue, you’ll probably never see a dime. Get money up front, or be prepared to get nothing at all.

Exclusivity: Almost all distributors are going to ask that you give them the exclusive right to distribute your film. If you are giving a distributor exclusive rights, it is even more important to ensure that you are granting only the digital rights that are necessary to the deal. Also, remember that many of the prominent distributors that have a wide audience will only enter into an agreement with you if they get an exclusive deal. This means that those non-exclusive deals may interfere with a better, bigger deal. Don’t assume a deal is safe just because it’s non-exclusive. If you enter a non-exclusive deal in order to get some publicity, make sure your deal has a good termination clause, just in case that better deal comes along.

Time: Always try to limit the amount of time a distributor controls your film. If you enter into a theatrical and broadcast deal with, say, IFC, it certainly makes sense for the contract to last at least a few years. However, if you enter a non-exclusive digital distribution deal just for streaming over a website for the purpose of gaining some publicity, make sure the time period is extremely short—one or two years.

Bundling: Bundling has been around for a while with regard to home video, but it is becoming more prevalent with digital distribution. A distributor may buy 50 or 100 films, package them together, and sell them off to a broadcaster or Netflix. Unless you get a good advance, the only money you’ll see will come from your percentage of the bundle’s profits. This is another situation where you must know what’s happening with your film; otherwise the money generated by your film could get watered down with all the other films in the bundle."

Full Article Here