Distributors will front P&A Money. Should You Take It?

May 2, 2016|Entertainment finance
Rodriques Law

Word of mouth alone will not sell movie tickets. These days, a film’s advertising budget can range from half to up to three times the budget for production. The advertising for a summer blockbuster can cost hundreds of millions of dollars and involve huge print and advertising (P&A) campaigns. Naturally, an indie film will not have this kind of marketing, but promoting one can still be prohibitively expensive for indie producers, which is why some distributors are willing to front P&A money.

Just because a distributor offers to front the money, though, doesn’t necessarily mean you should take them up on the offer. Every distribution deal is different, and you should always make sure that you negotiate a deal that’s right for your film.

A lot of choosing the right deal depends on your stomach for risk, and whether you want to be a profit partner. Of course, these two factors are linked. In a general sense, an independent producer has two options: a traditional distribution deal, or a service deal.

First, the traditional deal: When a distributor puts up money for P&A, they expect to recoup that money out of the profits. This means that after the exhibitors take their fee, the distributor takes its fee, the distributor takes its expenses out of that, leaving the profits (or lack thereof).

With a traditional deal, it is important to determine how and when you, as a filmmaker, will be paid.

Because of the cost structure, ‘profits’ are likely to be scant, so you should always angle for a small portion of gross rather than a large portion of profits. ‘Gross’ in this case refers to distributor’s gross (after exhibitor’s fees) rather than box office gross (before exhibitor’s fees) -- not that box office gross wouldn’t be preferable, but as an indie producer they are unlikely to be on the table. If you are interested in taking more risks, this is the deal for you.

Alternatively, you forget about taking a portion of anything, and negotiate a buyout. In the case of a buyout, you grant a distributor rights to market and sell the film, and walk away with a check. The risk-averse producer will be better off with a buyout.

A traditional deal will secure you P&A money, and considerably mitigate your risk. However, it will also mean a large surrender of control over the marketing and distribution of your film. For the producer that wants to maintain control and isn’t afraid of taking risks, there is the service deal.

In the case of a service deal, the distributor is hired only to secure theaters. As the producer, you are responsible for financing production, financing marketing, and generally shoulder the risk of your film failing. On the other hand, you and your investors will not have to split profits, or end up with no profits because of distributor’s expenses.

So there you have it. In most cases, distribution companies will front P&A money. Whether you should take it depends on what you expect to get out of your film. In any case, you should never accept a deal without first reviewing it with your attorney.