Question for FilmTVLaw.com:
I am putting together an indie film that I will seek distribution and place in festivals. The film in question will be based around one leading actor. What kind of contract or agreement should I create with the leading actor if the film gets distribution and it sells in the six-figures?
Answer by Brandon Blake, Entertainment Lawyer:
Some good questions today about independent film production, specifically involving actor agreements and distribution. The complete article is posted on my website.
Let’s talk about the actor contract first, and then we can address your questions about distribution of independent films and what types of deals to expect.
So, first off everyone should know that the Screen Actors Guild (SAG) makes available free contracts to independent filmmakers, which they hope that independent filmmakers will use to hire actors. I know that as soon as I write this, half the readers will quit reading and go look up the free SAG contracts.
But for the fifty-percent of those still reading this article, I want to point out how truly wrong it is to use contracts that are written by the union that is representing actors. Don’t get me wrong, the Screen Actors Guild is an incredible organization and has done a lot to protect performers’ rights and to generally elevate the workplace standards and safety of film and television productions.
However, using the contracts that they draft to protect and advocate for their members is very similar to using someone else’s attorney to look out for your own interests. It is a basic conflict of interest, and no matter how easy and quick it might seem, the filmmaker and the producer are going to get burned.
When it comes to the question at hand, the SAG actor agreements do not have any provisions for equity sharing, or for the kind of profit participation you are discussing. Moreover, you need to be careful about how you formulate your profit participation, because there is the potential for increasing your residual and Pension Health and Welfare obligations depending on how you draft these provisions, including offering deferred salary or compensation.
Stepping beyond the boilerplate SAG actor agreements, the most customary way of defining the profit participation of an actor is going to be adjusted gross receipts. This term alone creates a lot of questions in the minds of filmmakers, because it does have the word “gross” in it, and so then that invariably draws the reaction from many independent filmmakers that they will not share “gross” with actors if they can help it.
But not all gross profits are the same, and “adjusted gross receipts” or AGR are defined by the production company to take into account the costs of production, as well as being defined on the production side, meaning that distribution and sales fees are taken out.
With regard to the correct “percentage”, a percentage of AGR could range from the low side at 2.5% to the high side of 15% for a well-known celebrity that is working for scale or substantially below his quote. Of course, the question is always, percentage of what, and you want to make sure that your production company has properly defined its revenue sharing definitions. A note here, revenue sharing definitions do not come with a LegalZoom template LLC. I know it is tempting to simply not read the boilerplate pro-forma that comes with filing service company materials, but there is literally nothing of value in those pages of useless filling except for citations to 20 or 30 year old (often outdated) code provisions.
So that is a long way of saying that don’t assume because you have an LLC that you therefore have a definition of AGR somewhere.
I also wanted to address the inherent question that was posted about distribution and what types of deals to expect for an independent feature film project.
It is my opinion that one of the most surprising things that many independent film producers do is to wait until the movie is completed to begin thinking about distribution. Given that distribution is the ultimate goal of every independent filmmaker, why is it that distribution does not become part of the pre-production planning?
Our firm has been very successful in helping filmmakers to line-up distribution interest in projects before production starts. Whether that means a distribution deal, or an offer to consider the film on completion, you will be exponentially increasing your odds of successful distribution by beginning to engage distributors before you start production.
However, lets assume that you have progressed to post-production and are now shopping for a distribution deal. Again, the right time to get entertainment legal counsel like myself involved is as soon as you begin submitting to festivals. Our firm can help to tailor the approach to distributors, preventing missteps in presenting the film, and keeping the film from going stale before you even start getting market offers.
When it comes to the types of deals, basically you need to divide distribution into domestic and international. Domestic deals can involve a minimum guarantee or even an acquisition for very hot films with a lot festival interest or commercial elements.
However, don’t overlook a percentage deal with a larger distributor, because a 20% deal with Sony Pictures or Lionsgate might come to a lot more money than an offer with a minimum guarantee from a company with less distribution channels and where perhaps the minimum guarantee is a lot trickier to collect on than the initial deal letter makes it seem.
Foreign sales are a whole other question, and generally involves negotiating a good sales agreement with a reliable foreign sales agent. I would say that for an entertainment lawyer, one of the biggest challenges is to negotiate a sales deal with a foreign sales agent, because of the complexity of the terms and the revenue structure. There is no question, if a filmmaker tries to negotiate a sales deal without counsel, nothing will end up getting paid at all by the sales agent. That’s not an overstatement, it is just reality.
I have been representing film, television and music clients for 19 years with the law firm of BLAKE & WANG P.A. Please feel free to contact us for a quote to assist with production legal, distribution contracts, and representation to distributors and sales agents. Please do not decide about complex entertainment legal matters without consulting an experienced entertainment lawyer first.
- By Brandon Blake, Entertainment Attorney