Notes from an Arbitration-Lessons learned in suing an indie film sales agent
a guest post by Michael D. Akers
The world of distribution is changing constantly with the decline of DVD and the fragmentation of digital platforms. The challenges are even greater when you turn to the international marketplace. Like many filmmakers, we turned to a foreign sales agent to exploit the rights for our latest film MORGAN.
While we are going to use the word “agent/agency” in this article, we believe that inter-changeable terms could include Producer’s Rep, Distributor, Aggregator, Consultant, etc. Because, as we see it, these are the middlemen who can completely destroy you by failing at their intended purpose: to make you a profit. Many of these companies operate under the “more is better” practice where they will take on hundreds or thousands of titles so that the law of averages puts money in their pockets. While that may make sense for them, it makes no sense for the indie filmmaker. After all, we’ve taken all the risk.
A few thousand dollars one way or the other can determine when (or IF) we get to make our next films. We count on the expertise and diligence of these agents to get the best possible deals. We need them to be sharks. Our particular agent promised us high returns across more territories than we were capable of getting for ourselves. All the agent wanted was a commission. Sound too good to be true? It was.
So what happens when you have signed with an agent who is not marketing your film effectively, who is not selling your film for amounts that you feel comfortable with, and/or may not be trying to exploit your rights at all? Obviously you call them and try to work it out because, after all, you are supposed to be working together to make money for each other. But let’s suppose your agent is a total [expletive] who doesn’t even know what a deliverable is, and you want to terminate your relationship. You turn to your contract to see what recourse you have. If you feel really convinced you are right, you attempt to terminate it. That is what we did. And this is what we learned from suing our foreign sales agent to terminate our agency agreement.
1) ARBITRATION CLAUSE. Chances are that you have some kind of clause that may spell out how both parties are to resolve a dispute over the contract. You probably have never given it much thought. I know we didn’t. We had blindly accepted the language as standard, figuring the mere threat of arbitration was a deterrent from the proceeding itself. But, as our dispute rose to epic levels and arbitration became necessary, this paragraph became our master. Also worth noting, we found out that generally you cannot go to court if you have an arbitration clause (possibly if both parties agree, maybe) because a judge will send the case back to arbitration, ruling that the courts have no jurisdiction. This goes for appeals as well. Generally, courts will not hear appeals of arbitration cases. Nor will the:
2) ARBITRAL BODY: Look at the arbitration clause: Does it specify who the arbitral body is or under which state’s laws the contract will be interpreted? Does the prevailing party have the right to collect attorney’s fees? You may find, like we did, that we should have really spent time on this paragraph. We knew nothing of the arbitration company. Did they like indie filmmakers? Were they studio oriented? How much do they charge? What are their rules of process? You will be BOUND by these rules if you go to arbitration. Take the time to look up the company in your contract. Ask around. Had we looked into any of those questions, we would have NEVER agreed to use our arbitral body because of:
3) THE ARBITRATOR. The arbitrator is an attorney working somewhere in the entertainment industry (hopefully). You and the opposing party receive a list of attorneys to select from, along with their resumes. It’s not really possible to see what other cases they worked on or how they ruled in those cases. Your attorney may be able to find out more information about them, but it’s pretty tough. In our case, both parties agreed quickly to one arbitrator. This is great because we wanted the case wrapped up as soon as possible so we could get on with exploiting our film. No such luck. Upon meeting an arbitrator, you will immediately ask yourself, WHY would an attorney sign up to do this? Answer one: to bill you. Constantly. The arbitrator charges you for everything he does in the arbitration. He has no checks or balances in this regard. So if your arbitrator is trying to send his kid to college, you might as well sign over your car right now because he can make up any number of hours he wants and send you a bill. You have to pay it or you will default. Answer two: because he’s not qualified to be a REAL judge. So he’s going to take it out on you. Whatever his interpretation of the laws, whatever his opinion is of your film, your budget, your hair color, he can rule however he wants to. (As a matter of record, our arbitrator actually told us that nobody cares about our movie or this case.) And again, there are NO checks and balances on this because the arbitral body hides behind its motto:
4) AN INFORMAL, EXPEDIENT AND COST EFFECTIVE PROCESS. We elected not to have full time representation because of the cost. Our agent however did hire a full time lawyer. Even though we had the promise of an informal process, the arbitrator NEVER looked out for our best interest. He let the opposing attorney antagonize and threaten us. He let the opposing attorney cause repeated and unnecessary delays. He scheduled paperwork to be due while we were traveling on the film festival circuit. But he gave time extensions to the other side. He gave the opposing attorney such wide latitude in discovery that we turned in over 1000 pages of evidence! Meanwhile, he only required the opposing attorney to turn in about 10. So this impartial, expedient, cheap process was not our experience. Our arbitration took SIX months and cost a lot of money. The entire process from breach to verdict was a year because:
5) THE BEST OFFENSE IS A GOOD DEFENSE. From our experience, being the CLAIMANT (the party bringing the action, namely, us) puts in you a much tougher spot that being the RESPONDENT (the party being sued, the agent). We had to prove all of our claims, which meant that we had to turn over clear and compelling evidence. We thought we had plenty. But the arbitrator’s rulings slowly whittled away what we thought was our best evidence. The respondent does not really have to do anything. Our agent literally just sat on our film’s foreign distribution rights stalling all the energy we had been creating for a year. Now we might be in trouble on this one, but we really would consider just breaching the contract and exploiting the film ourselves (next time). It would then be up to our agent to prove the breach, the damages, etc. Definitely DO NOT consider this legal advice. It’s just our opinion.
6) AGENCY COUPLED WITH AN INTEREST. Scour your contract right now for this phrase. It is crucial when it comes to terminating your agreement. Now what we are about to say is only a general rule that (true to the law) comes with a million exceptions. Nonetheless, in an agency contract, you (as the principal) ALWAYS have the POWER to terminate a contract with your agent AT WILL.) It is imperative that you understand that you can still be liable for the damages that this causes your agent (i.e., the MG or license fee they already paid you, marketing expenses they can prove they spent, etc.). Our agent did countersue us for damages. But they also sued us saying that we did not have the RIGHT to terminate the agreement. As we are now painfully aware, the RIGHT to terminate is not the same as the POWER to terminate. As a rule, you CANNOT terminate your contract with an agent if it is “coupled with an interest.” That is to say, that the agent has some kind of interest “in the thing the contract is about.” What is this “interest”? What is the “thing”? Who the hell knows! It isn’t defined by the law. What the interest ISN’T has sort of been sketched out over the last hundred years. Generally, simple monetary considerations are NOT considered interest (i.e. commissions, payments, etc.). We thought we were well within our POWER to terminate because the agent did not pay any money upfront. And since the agent did not generate any deals other than those we brought to them, it would seem TWICE as obvious that our distributor had NO interest in our film. But, referring to #2 above, our arbitrator was grossly unqualified to interpret this kind of law (our research shows these agency coupled with an interest cases frequently end up in appeals court because of their complexity). Our arbitrator ruled that our contract was coupled with an interest because of some postcards that the agent had printed out in Berlin (have we mentioned that you can’t (technically) appeal?). I’m sure that now every distributor is now calling their attorney to add this paragraph, but if you, the filmmaker, can, keep it out. The agent is covered anyway, because in the event you terminate unfairly, you are on the hook for any damages that the agent suffers (and probably their attorney’s fees).
7) DEFINE DEFINE DEFINE. Boilerplate. Fear that word. Just because everyone thinks they know what marketing, customary efforts, good faith or even all-rights is, WRITE IT DOWN. This is your business and your money we are talking about. Define every single term. We did not do this. So when we claimed that our distributor did not use “reasonable and customary efforts” to license, market and sell our film; that they did not “consult with us” on this marketing and licensing of our film; that they did not generate offers that we could have gotten ourselves, we were on the hook to prove it. We thought it was obvious that our agent should have a Facebook page, and maybe post our movie on it, or on their website, maybe even the trailer (shocking!). At least they should have spelled our names right on their listing! To our 500 pages of print-outs, the arbitrator balked, saying that is was “unpersuasive.” Outline what you think reasonable and customary efforts are. We really recommend setting a minimum amount acceptable for the contract to remain in force. Define marketing. What efforts do you expect the distributor to make? Be as specific as you can. (I am now hearing horror stories of friends’ films sitting on their distributors’ shelves in limbo. They won’t be getting the rights back for years and the film won’t be generating any more revenue because the distributor finds it financially unviable to exert further effort.) Go through your contract as though you can be shot by a firing squad. Because that’s how it feels when you go into an arbitration hearing and every sentence is scrutinized by both sides, each interpreting it to favor their position. If the arbitrator can’t see clear convincing evidence that your definition is correct, you cannot prove a breach of contract.
8) CONSULT WITH AN ATTORNEY. A GREAT ONE. Unfortunately no lawyer could have reasoned with our agent in order to avoid arbitration. The lawsuit in and of itself was ridiculous. Though we only had an attorney on retainer for consultation, the way the arbitrator pushed us around made us wish we could have afforded complete representation (or an assassin). It is worth noting here that we changed our law firm part way through the proceedings. Just like the discussion of the arbitrator above, make sure your own attorney is qualified to handle your particular dispute. The law is complex and the process is a game. You need a fighter. You want to feel really great about who is representing you. Don’t be afraid to fire people. Keep looking until you find the right lawyer. How will you know? Trust me, you will.
9) KEEP RIDICULOUSLY COMPLETE RECORDS OF EVERYTHING THAT HAPPENS…EVER. So after all of this you may be surprised to find out that we prevailed. (Can you imagine what we’d say if we LOST?) How? Every single email, letter, check, even the envelope that the check came in. Yep, we keep all of that stuff and more. Why? Look through your contract and see if you find a paragraph that discusses how to amend/addend the contract. Usually it stipulates that it has to be done in writing. It turns out that most states consider email “written communication.” While we were not necessarily saving all of that paperwork to prevail in a court hearing, that’s what ended up happening. The agent not only lost their frivolous countersuit because of those emails, they were also held to a strange law in California under which two parties can “agree to agree” just by agreeing to the major terms of an agreement. (Confused? It would take a book to explain THIS law.) Specifically, in those emails, we had offered the agent a sum of money to settle the case. Though they originally agreed to accept it, they later reneged. The arbitrator ruled that the first agreement was permanent. Though it was on a technicality, a win is a win.
10) BE A SORE WINNER. But the award by the arbitrator was lackluster. He is a studio attorney who clearly thought that our case was frivolous and meaningless. He just couldn’t understand that to us, it meant everything. In the end, the arbitration cost us almost as much as our film and stole a year of our lives. We are now out to prove the arbitrator wrong. Filmmakers DO care about their movies and filmmakers WILL care about this verdict. He could have single-handedly moved independent filmmaking into a new era of mutual responsibility. But instead his final opinion read more like a warning to the distributor on how to fix their contract so that they can more assuredly screw over the next filmmaker.
11) TELL YOUR STORY. Since we’ve started going public, we are hearing many stories of frustration and anger about these agency relationships. Filmmakers worry that if they speak up, the agencies may retaliate. Well, here are two things you should know. One, they probably WILL retaliate. Ours did. They told film festivals, foreign sales agents, distributors and other people we do business with that our film was “unavailable.” They tied up our film’s distribution for almost an entire year. We were distraught. But then we realized number two: we are the content creators. Festivals, distributors, aggregators and (most importantly your fans) want your content. These agencies don’t have jobs unless someone makes them something to sell. Thankfully, we have been able to pick up where we left off, though the film’s value has certainly suffered from sitting on the shelf for a year.
As we sat in the hearing, reading aloud the angry emails that had flown back and forth between us and our agent, we were struck by a sad realization: this whole process was just a big waste of time and money. WE were paying the arbitrator to decide if WE had the right to terminate a contract with an agent who was supposed to be making US money by exploiting a movie WE paid for. Who were these people and why were they being granted ANY validity whatsoever? We are sharing our story in the hopes that it will help save some other filmmaker from falling into the same traps we did. And if you do find yourself having to take that big leap, remember: arbitration is war and you have to win by any means necessary.
None of this article should be construed as legal advice. This is our opinion base on our experience.
About the author:
Michael D. Akers is an American film director, producer, screenwriter and editor. In 2000, he founded United Gay Network (UGN) with his longtime partner, Sandon Berg. Morgan is Akers’ fourth in a line of genre defining films. His first film, Gone, But Not Forgotten, altered the queer indie landscape with an adept story made universal through common human drama and incidental sexuality and went on to win numerous audience awards after playing in more than 30 festivals world-wide. Gone, But Not Forgotten ultimately became one of the most successful independent LGBT films of all time.
Sheri Candler April 11th, 2013
Posted In: Distribution, International Sales
Tags: agency coupled with an interest, arbitral body, arbitration, arbitration clause, arbitrator, claimant, foreign sales agent, independent film, lawsuit, Michael D. Akers, MORGAN, Producer's rep, respondent, sales agent, United Gay Network
The harsh realities of becoming a *responsible* filmmaker
by Orly Ravid
It is difficult to definitively explain what The Film Collaborative (TFC) does in a few sentences. Often, when asked for a company bio for a speaking engagement, we are asked to sum up in a few words, but here is the thing…we do different things for different films and that is what makes this non profit company devoted to independent film distribution different. We are a membership organization and we offer a menu of services that are separately available. For our members, we are largely an educational and informational organization. We will work with any film/filmmaker to provide consultation and educational resources which are included in our membership fees.
We can provide services such as: worldwide festival distribution, worldwide sales, domestic sales, worldwide direct digital, domestic theatrical, limited domestic educational distribution, grassroots / social network marketing services, and contract negotiation services. These are all subject to additional fees so the filmmaker must have significant budget to allow for the labor and expenses incurred and our acceptance depends on the workload currently undertaken by the company.
We also serve in a sales agent capacity with SOME films. Due to this dual nature (educational and service oriented), we are very discerning about the films we take on in this capacity. We can work on any aspect of distribution, but with a strong emphasis on direct distribution being part of your overall distribution strategy. We can connect you with service providers/buyers we think are right for your film, and ones we trust and recommend, but WE NEVER OWN YOUR RIGHTS and filmmakers can cancel the service at any time. This clearly sets us apart from other sales agents and can be confusing to those who are accustomed to typical sales agent arrangements. The deals we make are almost always between the buyer and the filmmaker. The only exception to this are bulk deals whereby doing the deals individually is just tortuous for all involved. We are very boutique in our sales agent offerings, not wanting to disappoint or take on more than we can handle. If we don’t think a title is suited to our strengths and our mission to offer quality films of artistic merit with strong distribution potential, then we don’t take them on for sales representation. Which brings us to merit…
Not all films will have distribution potential, not all films are good, not all films have an audience, or not a significant one. There, we said it! Time and again we see filmmakers willingly, enthusiastically going into debt, either raising money from investors or credit cards and coming to us for help in getting their creations out into the world. Sometimes those creations just won’t have a life out there and no matter what is spent in time or money, a significant audience won’t be found. We drill down into every member’s film in order to give the best assessment, but there are times when the prognosis is not favorable to the kind of success they are seeking.
For members’ films, we remove our personal tastes from the equation and try our best to determine WHO in the world would be enthusiastic for the film and how many such folks are out there? And where are they? And can they be reached given the resources available? When you made the film, were you thinking of an audience? When you came to us expecting the film to: get TV sales, international sales, a nice Netflix fee, a theatrical release, a theatrical even after you did a DIY DVD and iTunes release, were you basing that on another film that is similar? Do you understand the decision making process involved in the buying of films for release? Was any research at all conducted BEFORE the production started? With the amount of information on our site and thousands of others online, there is no longer an excuse for not knowing the answers to these questions well before a production starts.
I am starting to want to be the tough love nursemaid and say we don’t want your babies to be orphans. Filmmakers now have to educate themselves a bit before conception and well before giving birth so they will be able to cover all the rearing their film baby is going to need to claw its way through the mobs of other film babies, their TV siblings, Webcontent cousins, and the rest of their multimedia distraction family. As with conceiving real babies, it is all fun and games until the reality of raising a child sets in. You need to be fully prepared for the long haul.
We have information, we keep up with the current shifting sands of distribution, we receive opportunities because we represent quality films, we have contacts, years of expertise, we’re friendly, we’re not gonna f*ck you over, but we cannot save every film from oblivion nor can we convert every film into a success however you define it. So much of that has to start with you, being clear and honest with yourself, before you say “action”.
photo credit: Adam Foster | Codefor
Orly Ravid August 8th, 2012
Posted In: Digital Distribution, Distribution, International Sales, Marketing
Tags: artistic merit, consultation, Digital Distribution, direct distribution, educational resources, festival distribution, film distribution, film sales, independent film, non profit, sales agent, TFC
Lead up to Cannes: Digital Distribution Beyond the Old World
This post was originally published on the Sundance Artists Services blog on April 23, 2012. This is an interview between Rights Stuff’s Wendy Bernfeld and The Film Collaborative’s Orly Ravid on the state of digital in Europe
In the past, many new media and VOD platforms – whether based on pay-per-transaction (TVOD), subscription (SVOD), free to user/ad supported (ADVOD) or download to own (DTO) — came and went, to the disillusionment of those brave souls trying to explore and develop the new sector and audiences.
Some filmmakers, sales agents, distributors who dared to license were wonderfully pleased with surprisingly good results for particular films (and not always the same ones that were mainstream successes in traditional media), but on balance, let’s face it, most were underwhelmed with the lackluster performance or transience of the various sites, and eventually became jaded about the whole sector. But it’s no longer a viable option just to sit back.
Over the past 18 months particularly the digital/VOD sector (including internationally) has finally begun paying off well for filmmakers, producers, distributors, and sales agents… at least for those who are willing to take the time to navigate (alone or partnered with others) the complexities of the sector, play with creative ”windowing’’ while balancing opportunities from traditional media, and accept initially more modest revenues from multiple smaller deals across various platforms and regions (yielding cumulative revenues in a largely non exclusive sector).
In addition to traditional media deals and VOD deal potential with IPTV, telecom, and cable offerings, and larger American sites (e.g. Hulu, YouTube, Netflix, iTunes), your film may well find interested audiences and homes on EU/international platforms…even if not picked up in the USA.
HOW IS INTERNATIONAL DIGITAL DIFFERENT FROM THAT IN THE USA?
The EU (beyond UK) deals with multiple languages, different tastes and appetites, different windows (vs consistent release patterns/dates per country), different platforms to navigate and balance against multiple different traditional media buyers, and, to be honest in general more work for smaller potential revenues from each deal/window.
But on the plus side, films can find homes overseas in many markets and windows, even if not ending up in the mainstream or major US/UK platforms.
The UK is at the moment probably the more stable and lucrative for English (the VOD market is already very competitive, with large platforms like Netflix, Lovefilm, BSkyB, FilmFlex, iTunes, and Blinkbox) but as soon as you ripple out to EU, digital distribution will take more work and art and generate relatively less money, especially if your film is only in original English language, and not already exposed in terms of promo/PR (theatrical, DVD release in the region etc.). However, there is indeed a growing appetite by now for art house, festival, docs, quality indie films, and foreign language films, if well curated, e.g. around festivals/brands/themes rather than as one-offs.
WHO’S OUT THERE in EU and what are some of the key territories where digital is meaningful?
Digital is immediately more meaningful in the UK, France, the Nordic region, and in Benelux, where there are already pc/mobile and tech-savvy customers and a willingness to view films in English with subtitles (vs. the dubbed regions of Germany, Spain, Italy etc., where one has to invest more to get the languages to cross over).
Although publications often refer to figures noting several hundreds of VOD platforms in Europe, in my view there are only probably 100 or so that are worth talking about when discussing licensing—half of which the main revenue generators, and another half of which are still potentially significant buyers(depending on the film of course)
In Europe, as in America, transactional VOD (pay per view) platforms are more established – some regional (per country), and others multi region (e.g. Acetrax, UPC/Chello, Headweb, iTunes, Playstation Network Live, Voddler, Xbox Live). Outside of the UK, one obviously enhances possibilities if addressing customers in their own languages and tailoring content to local preferences such film classification, advertising, and general consumer and cultural tastes.
iTunes has only recently (in autumn 2011) begun to expand its footprint into Europe, including in the following EU countries: Austria, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, Greece, Hungary, Latvia, Lithuania, Malta, Netherlands, Norway, Poland, Republic of Ireland, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. Non-English stores include: Spain, France, Germany, Italy, Luxembourg, Belgium, Switzerland, and Portugal. They also just recently launched in Brazil / Latin America as well.
NETFLIX, Amazon (via Lovefilm), and Hulu are expanding their international footprint too. Netflix, for example, recently launched in UK/Eire, and is anticipated to roll into other regions such as Spain thereafter, and has already extended its occasionally original production commissioning activities to EU (e.g. Denmark – Lillyhammer deal, and more recently France (Gaumont etc) – Hemlock Grove series funding ). Lovefilm already has a presence beyond the UK (in Germany and Nordic), and is anticipated to expand regions. Hulu has not yet launched in EU but did launch already in Japan. As part of its competition rampup (in the US against Netflix in the SVOD market, it has also began commissioning original programming, (Day in the Life – Morgan Spurlock, for example, which was just picked up by Fremantle for distribution thereafter)….and also continues seeking special films or shows to do stunts around. We understand that they are trying to acquire more Spanish rights for the US…an important strategic move for other US players trying to expand their footprint in EU as well. Meanwhile in early 2012 the UK became a hotbed of activity for SVOD, with deals that would formerly have been nonexclusive (with e.g. Netflix, Lovefilm) being now struck on a lucrative exclusive basis, following the example of the competitive SVOD vs. Pay TV market in the US.
So what are the other key EU platforms? Trends?
Various international platforms are now becoming increasingly interested in licensing more art house, niche and festival films–not just mainstream titles. It is expected that some of the larger brand sites this year (e.g. those in UK like Netflix, Lovefilm, etc.) will expand the indie/art house and festival category further, and also be open to foreign language films (dubbed or subtitled as applicable per country audience as above). Most deals for art house/fest films, where not locally versioned or released in theatres or DVD, are on a non exclusive rev share basis, and in some cases where there is particular acclaim or cast, it can be coupled with a modest upfront, while if on an SVOD basis, flat fee deals apply (similar to non-exclusive Pay TV licensing deal parameters).
But in countries where the Pay TV incumbent is competing against a new web player, such as a traditional Pay TV player “vs.” SVOD (like Netflix “vs.” HBO in the US, or Lovefilm/Amazon “vs.” BSkyB in UK), as above, the fees can be more lucrative, in the form of true flat license fees in the Pay TV range. – whether on exclusive or non exclusive basis, and thus matching or exceeding the normal price ranges before the competition. As well, when competition heats up over one category of title, it’s also not unusual to have the competitors round out, extend, or diversify their consumer offer and move into other genres, to try to distinguish themselves from the competition. This is happening in more and more countries– for example the Netherlands, where HBO /Ziggo just launched in February and the local incumbent, Film1, responded by adding a branded art house/indie thematic channel (Sundance Channel).
Key note: Deals are generally non-exclusive and thus if carefully staggered, one can license the film sequentially through various windows (TVOD, SVOD, AVOD, and if applicable, DTO) and in multiple regions.
An example: one can first license a current film for transactional VOD (TVOD) on a rev share basis to cable and telecom VOD platforms (like France Telecom/Orange, UPC, etc) as well as (simultaneously) web based players (e.g. iTunes), then to subscription -based windows (premium Pay TV (e.g. HBO, Viasat) and their corresponding “TV Everywhere” offerings, thematic Pay TV, and/or standalone SVOD services . Thereafter, the film can move to other ad-supported services (free to consumer, web based, e.g. YouTube AVOD). This pattern can apply in multiple countries.
As mentioned above, there are hundreds of local European platforms —both standalone web-based services and mainstream and/or local telecom and Cable VOD platforms that have online offerings of their own. VIASAT, for example, was historically a premium pay service, but now offers not only conventional Pay TV and ”TV Everywhere” but also standalone thematic offerings to non-subscribers (SVOD to PC). Similarly, BSkyB just announced the upcoming launch of NOW TV – also aimed at non- subscribers (“Cord Nevers, and/or Cord Cutters”) – a thematic SVOD/low pay offering of films.
Opportunities will only increase in 2012 and 2013 as more from USA players, sites, and OTT box offerings beyond Netflix, Hulu, and Amazon gradually cross over to EU/international markets particularly if the new services don’t limit themselves to mainstream offerings and tastes.
Getting to the platform: As in the United States, some of the larger platforms (such as LOVEFILM, BlinkBox, Netflix, itunes) only take larger packages of films with a minimum volume, and are unwilling to deal direct with producers and distributors for “one off” deals. Until recently, most of the larger sites also focused mainly on mainstream films. In general, these services steer filmmakers towards conventional distributors, or aggregators/digital distributors like Movie Partnership (UK); but sometimes will accept dealings direct for certain films, or will go via an agent working on a flat fee basis (like Rights Stuff / Film Collaborative). In the latter scenario, the film IP remains in the filmmaker’s/distributor’s name, the money from deals flows to them directly and they get access and paid advice through third party consultants/agents/advisors.
Up until now, having had a DVD and/or local theatrical release was quite important for enhancing deals. But increasingly now online sites are willing to handle more innovative windows, e.g. premiering films online, or Day & Date with other windows (or shortly thereafter). Lesser-known or library (catalog) films can usually find a home on a non- exclusive and on ad-supported (AVOD) basis, but more current films usually start with transactional (TVOD) basis and/or subscription platforms (SVOD)… If filmmakers have titles already encoded to the expensive iTunes spec, this can be helpful in wider distribution, but it’s not essential; many digital platforms are now willing to take delivery of indie or art house films even via DVD or a hard drive/ digital master.
In terms of deal models, some aggregators (middlemen) take larger %s but then take care of all encoding and delivery fulfillment, while others who are more in an advisory or agent role take a lower share for deal making and platform access but leave you to arrange the encoding separately. In some countries (e.g. Brazil), platforms may not take English versions unless local subtitles or dubs are available, and work with distributors who create versions where necessary. These distributors co-curate packages with filmmakers based on experience of what “moves” best in the region so as not to invest in encoding or language versioning for films that may not generate enough revenue to justify it…
A side note regarding subtitling, by the way: Film Collaborative is looking into software that helps facilitate dubbing in the same voice as the actor/speaker, but meanwhile in any case, subtitling for digital is getting less and less expensive and can be done via relatively inexpensive software or labs. If one has shown a film at a film festival in another country and plans to then distribute the film there, we’d recommend you ask the fest for access to the subtitles (if cleared for other distribution). Traditionally, Nordic, Benelux, and some other regions are fine with and prefer subtitles, while others (such as Germany, Spain, and Italy) require dubbing. However, in the higher-educated arthouse/filmfest world, one can often get away with just subtitled versions even in the dubbing countries.
As indicated above, for better platform access, one may want to pick or join with new media /digital distribution specialists – particularly if your traditional sales agent or distributor, strong in conventional media (theatrical, video etc.) is however not active or savvy in the VOD landscape above (platforms, deal terms, contacts etc). Otherwise it can be a self-fulfilling prophecy that you then ”don’t make money in digital’’. It’s a balancing act of cost vs. services, and a lot of work in international!
And filmmakers, whatever you choose to do with respect to your digital distribution, do not forget that one can also reach the whole wide world via one’s own website(s) and social networking pages by utilizing DIY digital distribution services (for more on this topic please refer to numerous past blog posts about digital distribution and DIY platforms and services at www.TheFilmCollaborative.org/blog and/or the Resource Place at www.TheFilmCollaborative.org/ResourcePlace).
As for piracy: in various cases filmmakers can tap into or derive indirect benefit from these online communities. See for e.g. Sheri Candler’s case studies in www.SellingYourFilm.com, Some filmmakers partner with Bit Torrent, Pirate Bay etc to launch their films online, tapping into the audiences already there (e.g. Nasty Old People, The Tunnel, Yes Men Fix the World).
LET’S TALK ABOUT POTENTIAL FUTURE TRENDS:
Diversification, Cross Platform/Transmedia: We believe 2012 will see continued consolidation of platforms and fuller diversification within the genres offered. Also as above, some key platforms (such as Hulu, Netflix, Yahoo, Endemol/AOL, Nokia, Canal+, Orange, ARTE, Channel4, ) are now also selectively commissioning transmedia and/or branded film opportunities (YouTube has not begun funding outside US yet). New funds and educational bodies (including MEDIA, Power to the Pixel) are increasing the emphasis on digital as a 360 proposition from inception of the film production process.
Multi-Layered Business Models: Platforms’ business models are also starting to become more multi-layered to handle different genres, consumer price points, and windows. For example, AVOD platforms such as YOUTUBE and SVOD platforms such as Lovefilm are now adding premium transactional VOD (TVOD) in order to handle current films. And as above, SVOD players are expanding their offerings beyond just library titles, beginning to buy newer and newer films in order to compete against premium PAY TV. This trend is continuing in the newer launching countries, e.g. Holland and Brazil where new PAY TV and localized SVOD and AVOD entrants have launched (e.g. YouTube regional sites). YouTube is also commissioning Made for Web content (MFW), although first in English language countries.
Festivals: Some European festivals have also recently started offering select titles on a TVOD basis. Rights Stuff recently worked with IDFA.tv to put around 100 films online—some on an AVOD basis and some on a TVOD basis—and in future more will follow. Certain other festivals (such as IFFR) have also begun to follow the US festival path of offering limited TVOD around or during the festival. This can open many doors for filmmakers, but also requires careful juggling and balancing when figuring out distribution patterns for conventional vs. online and new media….the balancing act is always key.
Traditional Players add VOD as well: As to the more traditional PAY TV players, last year after EPIX began licensing international festival documentaries it then turned its focus more to co-productions instead of acquisitions. And over 2011/12,As in the US, many traditional PAY TV platforms are going cross-platform and on multiple devices (a la “TV EVERYWHERE”, and similarly the nonlinear online channels are often seeking multiple device rights and/or at least have an App). Thus balancing traditional PAY TV sale vs. digital media requires more attention in rights grants and windows, but offers more opportunity correspondingly. In terms of trends, it still seems like the bigger funds and platforms are still more focused on more mainstream content, however as above this is starting to expand in EU to a wider net of content and genres.
REGIONAL EXAMPLES: VOD LICENSING PLAYERS AND WINDOWS in EU:
For bigger indie titles and mainstream ones, there are usually about 5-8 or so VOD outlets that one can target per country. Most of these will buy TVOD rights and sometimes also SVOD and/or AVOD. Platforms include television-related services (IPTV, Telecom/Cable companies, etc), as well as online and/or mobile sites, OTT box offerings, and consumer electronic (e.g. connected TV) portals.
For e.g. in Holland, a film or TV show can have various TVOD deals, not only with MSO like KPN, Tele2, Ziggo, and UPC, but also with web based services like Cinemalink.nl (for art house), iTunes, and the newly launched service from theatrical distributor Pathé (a Rights Stuff client), pathethuis.nl a bold move by a traditional theatrical exhibitor to also launch and embrace TVOD for a fuller offer to its film-loving audience base.
That would then be then followed by Premium PAY TV and/or SVOD sales (e.g. Film1, Ziggo/HBO, Ximon, Mubi.com), then AVOD (YouTube, IDFA.tv) with various competing players per region. The same film can also attract interest of foreign platforms not yet launched in the region but scaling up behind scenes, poised to launch there (e.g. those seeking to next move after UK into, say, Spain or other Benelux regions/Nordic). And this is on top of the broadcaster based proprietary VOD services (e.g. RTLXL and Veamer (from SBS and public TV catchup sites.
There are also various local equivalents of genre sits like Fandor or IndieFlix in certain EU regions. MUBI (www.Mubi.com) (co-owned by the rights holder to one of the most expansive libraries of art house cinema, Celluloid Dreams) is technically available everywhere, and is sometimes syndicated as an SVOD channel to telecom platforms (as in the case with Belgacom in Belgium). It is also on Sony Playstation. Last we checked, 60% of its audience was the US and most of the rest in Europe. Revenues from it for our films (TFC) have been small to-date, low 3-figures but it’s a good pedigree platform and perhaps revenues will increase.
A few others in EU include e.g. Orange, Canal Plus, (France and, multi region), Telenet, Belgacom, (in Belgium), SF Anytime, Voddler Film2home, Headweb , Viasat etc in Nordic /other regions), Telefonica, … Maxdome (Germany), Sony-related Qriocity, Daily Motion (many countries in EU), Movieeurope, Zattoo. Sales agent Wild Bunch has also recently launched a platform service called FilmoTV.
And as an aside, in Brazil/Latin America, the market has been heating up intensely in late 2011/12, with various TVOD and IPTV platform launches players, as well as competitive new PAY TV and SVOD services (eg Netflix, Netmovies, Terra) springing up or extending VOD. NewPAY TV laws (from fall 2011) are resulting in more potential competition, which is good news for filmmakers seeking new audiences over there. Our recommended approach to filmmakers seeking deals in this region is to partner locally, e.g. with ELO Distribution, with whom we work traditional and non-traditional (new media) players.
These are just a few categorical examples…there are plenty more buyers and platforms emerging internationally, including consumer electronics manufacturers (such as Samsung and tablet and connected TV manufacturers in EU and internationally who are getting into the game either on the licensing front or occasionally even funding/commissioning Transmedia or mfw (Made for Web). However, these usually license fuller sites (like a Lovefilm or Snagfilms) and not individual one –off titles.
Overall, there are a lot of small markets and platforms, and all this takes a lot of work, but if one has built community around a film and awareness then the effort may pay off and add up to a nice revenue stream. Once the first deals are in place with platforms (deal structures, relationships, contacts, contracts) it’s easier to build on that and add new films to the deals with just short amendments or riders, so the effort at the front end makes years of future dealings run smoother.
TRENDS RE: OTHER GENRES:
Aside from art house, festival indie films, and docs, one area that we expect to see more SVOD licensing around is kids’ films. Various smaller sites also have a strong appetite for gay/lesbian, martial arts, and horror programming, graphic novels, and made for web/cross platform/Transmedia original productions…but one has to be selective. As to documentaries, the combination of a large number of doc sites in the EU with the heavy exposure of docs on public and conventional TV in EU means docs can be relatively harder to monetize here, unless well curated and packaged, for e.g. under a larger brand/festival, like IDFA.
WINDOWING:
Typically films follow the sequential windowing described above when moving through the Transactional, Sell Through, Subscription, and ADVOD windows. But for certain films it it can be clever and compelling to have windows intentionally reversed or out of sequence. For example, premiering a film ONLINE or day-and-date with another cross-promoted window ahead of theatrical, and heavily emphasizing social media marketing can allow producers to build (and engage with) the audience before the film is even out. The key is to know your audience and try to tailor the marketing and distribution patterns accordingly…producers can be more active these days to heighten the chances of film success.
More and more platforms are open to this REVERSE WINDOWING (which began successfully in the US, e.g. with Lars von Trier’s Melancholia), . For example, in Holland, the film Claustrophobia launched online first and its success via social networking ultimately brought it a theatrical deal. In another case, Submarine NL’s film ‘’Molotov Alva’’ (a second life documentary released online virally first) later secured a HBO sale on premium pay tv, and in another film we worked with (the documentary Surfing and Sharks), intensive social network/audience engagement before and during the film’s festival exhibitions helped not only to enhance the potential audience for the film ahead of commercial released, but also to attract wider sponsor support. Ultimately, the visible online appetite for the film (including the number of Twitter and Facebook followers amassed in a very short time) helped result in a stronger all-rights distribution deal as well.
There are various new platforms focused on these models that are launching and expanding reach in EU– e.g. EU1 (The Makers Channel), which just launched in the Netherlands and will soon expand to other EU regions. One part of the site is business-to-business (geared towards talent, directors, actors, producers, etc.) providing for online pitches and related crowd sourcing and crowd funding (like Kickstarter). The other component is business to consumer, and allows exhibition of works online, on a rev share VOD basis… which will be coupled for the first time with TVOD exhibitions on UPC/Chello/Ziggo (the Cable TV VOD platform partners) thus giving much wider audience reach than conventional web VOD to PC. In some cases films can also combine a theatrical (conventional or event theatrical local) release for the films “day and date” with or in staggered creative windows. We are working with two English film cases in NL already, and as this site expands to other regions and to wider English crossover, this will open up many more opportunities (in some ways similar to what you see already in the USA on Tribeca/Sundance with exhibitions on cable households (TVOD).
SHOW ME THE MONEY:
Even where indie features have no theatrical or DVD release, if there is some cast and acclaim from festivals, and the film is new/current, TVOD is possible . This is usually on a rev share basis (with %s ranging from 50-50 to 70-30, with various deductions to negotiate). In SVOD/PAY TV, flat fees are normally paid instead of rev share, usually, along lines of comparable non-exclusive PAY TV license fees for indies. For example, in medium sized, non-English language EU countries, we’ve seen SVOD flat fee prices range from 5K-50K per title where it’s been theatrically or DVD released, etc, while with less exposure or more niche, sometimes the flat fees can be lower and more aligned with AVOD. In AVOD, deals are usually rev-share, (50-50 to 70-30) with sometimes a small upfront fee. In a medium-sized EU region, MG’s (Minimum Guarantees), when given at all for indie film, can range from a few hundred dollars (plus rev share) to 1-2K for higher end material. The very largest platforms may get away with no upfront fees at all due to their scale and reach, but smaller EU sites may well, depending on the film, offer something modest. When you do multiple nonexclusive deals, these can add up and help defray some costs of versioning, digitization, deliveries, etc.
As to revenues generated from VOD once the license is done: again it is platform and film specific, and one cannot generalize. We’ve seen certain cases where niche foreign language art house films yielded 40K in 2 months of non-exclusive TVOD revenues across a few platforms, , while other titles from the same distributor yielded only 1-2K in the same deals/time period. Things are similar with SVOD – fees can range in one small non-English EU country from 5k to 40k for a single SVOD window license fee (non exclusive) – so the key is still in our view still to engage in a reasonable number of deals in each country across various windows, platforms and business models.
IN SUM: SOME TIPS FOR GOOD RESULTS IN DIGITAL DISTRIBUTION:
- We strongly advise building audience for the film before release, even while the film is still being made. Engage in social media marketing around the themes of your film and the cast: Twitter, Facebook, YouTube (promos) etc. This not only enhances the audience and reach of your film, when it is released, but potentially your distribution and/or digital deal making as well.
- Once a deal is done and even after the film is sold, it still helps for the producer or distributor to take an active role in social media marketing, e.g. to direct attention (via social media etc.) to scheduled exhibitions of the films on various platforms licensed. Many platforms in EU are still showing viewers EPG’s with clumsy alphabetical “listings’’(as opposed to the type of creative Netflix/Lovefilm recommendation engines and suggestions), so helping viewers find the film will in turn increase returns.
- As for digital deals: We’d also recommend that individual producers who cannot afford tailored individual advice consider combining forces via producer groups to collectively fund some serious upfront advice – help each other curate more attractive packages of their better material, so easier to sell on to platforms directly or indirectly – and grouped in many different ways (theme, genre, category, audience etc.).
- If necessary, try to have “split rights’’ deals. If the person to whom you are entrusting the film in an “all rights” deal is less strong in digital and likely to “sit on” new media rights, you can explore splitting these rights /sharing them non exclusively with the distributor and another specialized digital distributor, case by case. Rights Stuff has often done this working with sales agents and distributors and producers directly to maximize digital distribution.
- Work with festivals (both traditional and online), who can play an increasing role in EU as they cross over to the digital space and VOD offerings. But be careful about the scope and duration of rights granted vs. other traditional and digital media, to maximize potential in all areas.
- Don’t abdicate completely, ie don’t’wash your hands of the film once you put it in someone else’s hands (the conventional sales approach) – keep involved along the way, gain as much learning as possible, split revenues, resources, knowledge base, contacts … and lever the outcomes to your next and future films.
Final notes: Pricing of films on the transactional side is relatively commensurate with that in the US, however non USA SVOD and AVOD markets are smaller with lower revenue per deal. . We did not include VIEWSTER in this article but feel free to check them out. They are a consumer-facing platform that also supplies other platforms (i.e. functions like an aggregator). They seem to favor films with cast, more commercial films and those with a bigger profile. www.Viewster.com
Orly Ravid May 15th, 2012
Posted In: Digital Distribution, Distribution, Distribution Platforms, Hulu, International Sales, iTunes, Netflix
Tags: aggregators, AVOD, digital distribution in Europe, distributor, DTO, independent film, Orly Ravid, release windows, Rights Stuff, sales agent, subtitling, Sundance Artists Services, SVOD, The Film Collaborative, TVOD, Viewster, Wendy Bernfeld