Why Cash Flow is King in Distribution
By Stacey Parks
This week in my Business Plan Boot Camp we had a discussion about Cash Flow & Sales Cycles. Translation: once you have completed film and you take it to market and try to sell it and get distribution deals, you're almost never paid your license fee 100% up front. In fact, most of the time you're paid a small up-front deposit (30%-ish), and the balance is paid over several months or even a year. And that's assuming you get an advance in the first place...
What if you're making royalty-only (or 'backend') deals which are more common in the indie world? Then cash flow gets pushed out a year or more since you have to wait for the distributor or sales agent to first recoup their marketing expenses (that you darn well better be negotiating a cap on) and THEN they start paying you quarterly or whatever your agreement is with them.
This never ceases to surprise new producers since they just assume they make a film, they sell the film, they get cash. When in reality, if and when you sell the film, your actual revenue takes 6-18 months to start trickling back to you. This is important for a few reasons... mainly because you want to be able to communicate this to your investors effectively so they don't erroneously assume they'll be cash-flowing back their investment any time soon, and also you want to know this for your own peace of mind so you can manage your expectations of the distribution sales cycles.
So one of my students then proclaimed - "You mean we won't get rich FAST?" The answer is a resounding NO. And anyone with experience, who's been through this process of distributing their completed films will tell you the same thing.
I should probably devote a longer blog post to this but for now, if you have any questions on Sales Cycles and Cash Flow, or experiences you want to share, click on over our to the the Film Specific Facebook page and let me know what you think!
DVD Deals They Are A-Changin'!
It's interesting how over the last few years the standard DVD deal has evolved into something that encompasses more than just DVD rights, allows for split rights, and has become more generous on the fees and commissions front. I guess it's because things have gotten more competitive out there with all the new digital platforms that exist, and filmmakers are more in the driver seat than ever before as to whether they want to take a deal or not.
So this week I've uploaded an up-to-the-minute sample DVD contract to the sample contracts library for Film Specific members (also available for download here). Why is this important? Because you need to see what's headed your way if you're going to be seeking distribution for a completed film at some point. Pay special attention to term, rights requested, marketing expenses, and delivery items.Every week I help my clients negotiate better deals for themselves but now with this new sample, you can be totally prepared for what's coming your way.
About Stacey Parks: Stacey Parks is the Founder of Film Specific and an expert in the area of Film & TV distribution, with over 15 years experience working with independent film producers. As a Foreign Sales Agent since 2001 she has secured distribution for hundreds of independent features and programs worldwide. She has sold films and programs to NHK (Japan), RTL (Germany), Canal Plus (France), BBC, SkyTV, HBO, Showtime, Starz, PBS, A&E, History Channel, Travel Channel and countless others.