If you want to thrive in the independent film world, this is a term you need to become familiar with. It’s an agreement made between a distributor (usually foreign and specific to only one country) and the production company before the film is completed and often times even before production of a film has even commenced. This is a strategy that producers use to get their film financed. You may here that a producer financed a film via foreign presales alone. This means that a distributor will pay for the distribution rights in their country before they even see the finish product. In return, they will get to pay a significantly reduced cost for these rights as opposed to if they waited to buy the rights to the film in the open market upon completion. They are banking on the film doing well in the box office based on the script, director, producer and actors that are attached to the film. Some presale agreements involve the distributor and producer agreeing – prior to production – on a fixed amount to be paid upon delivery of the film. This is called an advance or a minimum guarantee.
Obviously a budget is important in order for you as a producer to know much money you are going to need to make your film. The cheaper your film, the better chance of you being able to get financing, and the larger your profit margin will be; that’s a given. But the importance of a budget goes far beyond that. Your budget is the key factor in determining how much your film will sell for in the open market. Most distributors will determine the value of a film based on a pre-determined percentage of the budget. If there were two films that looked and sounded exactly the same, and film A costs ten times more than film B, film A will sell for ten times more. I know this doesn’t seem sensible but that’s the way it works in the open film market. So on one hand, you want to reduce the budget of your film in order secure financing and increase profit margin. On the other hand, you want your budget to be as high as you can so that you can sell it to distributors for the maximum price. You as a producer must decide what is best for your film.
This is the term used to describe the percentage of a films budget that is used by distributors to determine the price of a film. In other words, one of the main factors that distributors use to figure out how much they are going to pay for a certain film is the film’s negative cost. This is usually a percentage, and every distributor has a different percentage that they apply to particular films. Therefore, the higher the film budget, the higher that it will likely sell for.
A distributor is the owner and licensee of motion picture rights. They are responsible for getting the movie into theaters, and licensing the rights to desired third parties.
This term can be confusing as it has nothing to do with renting movies. This is portion of the box office revenue paid by the theatres to the distributor. This percentage will vary depending on the deal that is made for a particular film. Most of the time the box office revenue is split 50/50 between the theatres and studios, however there cases where the studio will receive a higher percentage on the opening weekend, or the first week of release.