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Litwak on Investing in Film and Defaulting Distributors

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Mark Litwak is a treasure: a resource for both entertainment lawyers and their clients.  He’s the author of numerous books on the film and television industry and how to navigate their legal pitfalls.  He’s also generous enough to make excerpts from his books available on his blog (the Entertainment Law Resources blog).  Two recent entries which I thought worth drawing attention to are Attracting Investors and When A Distributor Defaults, particularly the latter which includes a useful checklist of things to consider when assessing a distribution deal, of which here are the first five of fourteen items:

1. Media: Which media (e.g., theatrical, television, home video) does the distributor serve? Is the distributor an unnecessary middleman, or does it provide valuable resources and expertise? Any company can call itself a distributor. What services does this entity provide? To what extent does it use subdistributors? If subdistributors are used, do they take an additional commission?

2. Territory: What geographical area does the distributor serve? American independent filmmakers often use multiple distributors: a foreign sales company for international sales and a domestic distributor(s) for release in North America.
3. Reputation: Has the distributor left a trail of unhappy filmmakers in its wake? Is the distributor known for distributing films of a similar genre, budget, and stature? Does the distributor have a good reputation among its licensees or exhibitors?

4. Advance/Minimum Guarantees: What is the amount of any advance? When is it payable, and what conditions need to be satisfied? When are minimum guarantees payable? Will the distributor pay this guarantee if the film is not successful?

5. Division of Proceeds: How will revenues be shared? How much does the distributor take in fees or commission? Can the distributor recoup any of its overhead or staff expenses? Are there caps on marketing and distribution expenses?