How Does Film Distribution Work?
First things first — let’s make sure you understand what a film distributor actually is and what they do.
The film distributor’s job is to make movies available for an audience. This can be through theatrical exhibition, cable VOD (Comcast Xfinity, etc), video on demand streaming (Netflix, Hulu, iTunes, etc), DVD sales or even the internet.
You can distribute your movie using all of the above methods or which ever you want.
They will control the bulk of your marketing on the movie you agree to work with them on and in most cases they will handle the global rights and/or territorial rights.
Your distribution contract will have a certain term length and this will determine how long the distributor will control the rights to your film. Normally this is 10-15 years.
How Do Film Distributors Make Money?
Most distributors ask for a percentage of your movie. For this reason, the assumption is that they will then have a vested interest in your movie being a big hit.
So what’s their percentage versus what you take home in revenue when it’s all said and done? Like most things in any business — it’s negotiable based on who has the most leverage. Typically that’s not the average filmmaker.
When it comes to Hollywood movies that are released in theaters anywhere from the $10 million to $100 million and up, there’s several ways studios are able to make a return on their profit.
Hollywood producers, advertisers, and marketing teams are experts at squeezing every penny out of a movie. They use all sorts of gimmicks to make audiences pay for the movie multiple times. You’d be surprised at how much you contribute to Hollywood as an audience. Let’s dive into all the ways audiences help movies make their money back.
Movie Tickets During Theatrical Releases
When a movie gets released in theaters, the profit it makes from ticket sales are known as gross income. After the studios pay taxes on that sum it is considered net income.
They then split the net income profit with the theaters or sub-distributors of that movie. This split could be anywhere from 50/50 to a 25/75 split depending on their arrangement.
In the past, it used to be a rule that each week the ticket sales split agreement between the studios and theaters work on a sliding scale. So on week 1 it would start as high as 90/10 in the studio’s favor, week 2 it would drop 60/40 and week 3 it could be an even lower split.
As of the early 2000’s though, theater chains just get a basic cut of the whole revenue and it doesn’t matter which weekend it is.
Now you can understand why there is so much effort to get audiences to go see a movie in theaters the very first week it is released.
If a studio made a movie that costed them $100 million to make and by the end of its theatrical run it made $300 million, then that is a good sign the movie is doing well and by the time it hits the remaining window releases (streaming, dvd releases, television networks, etc) things should be uphill for the most part.
However, you can also see how if a studio spent $100 million on a movie and it either broke even or made less than that during its theatrical run — it’s most likely considered a flop and will have a harder time making a return on the investment (if it can at all).
Marketing on Airlines
Marketing the movie on airlines is a great way of additional income. The movie will appear on all international airlines and Pay Per View (PPV) services are used by hotels and lounges too.
These services generate income for Hollywood studios and movie producers even after the release of the movie.
DVD and Blu-Ray Sales
Studios and producers used to enjoy the fruits and labor of the DVD market once a movie left the theaters, until it began declining gradually after 2005. Before streaming services like Netlfix and Amazon came on the scene, DVD sales used to account for close to $16 billion and were somewhere around 64% of the U.S. home video market.
In today’s climate, the DVD market is less than 10% of the total market share and total sales landed somewhere around $2,2 billion in 2018.
Blu-Ray sales were close to $2.37 billion at its peak and landed somewhere around $1.8 billion as of 2018.
Television and Online Streaming Revenue
We all have been couch potatoes streaming our favorite movies late night on Amazon or Netflix binging on that bag of popcorn.
Generally, after the theatrical run, a Blu-ray is created of the movie and sold (to those of us who still buy DVDs). This used to be a very big source of income for studios and producers, but not these days.
Once that is out of the way, the movies are offered to run on premium paid channels. Once this is done a movie licensing deal is signed with services like Netflix and Amazon. These avenues bring good money to the producers if the movie has steam.
Producers can make big money by selling the domestic rights (or international rights) for television and streaming purposes. They will get paid a licensing fee from Amazon or Netflix in exchange for rights.. These movies can be streamed unlimited times or a standard period of time until the license is renewed.
Merchandising
Consumer Products and merchandising for each film earn the movie a huge deal of money.
Studios licensing the rights for characters and items of the movie. Product Placement where the movie gets payments to place products and brands in the movie.
You would be surprised to know that sometimes big Hollywood blockbusters can get half their budget back just from creative and marketable merchandising gimmicks.
Multiplex Food Stands
Multiplex theaters have a lot of overhead and a movie ticket itself would not be able to cover all the incurring costs of the film. Although this one isn’t how a studio or producer makes money from their movie, it is how the theaters themselves make a bulk of their money by showing movies.
Just selling films and tickets in a multiplex would not generate big business and would end up in a loss-making fiasco for the theaters.
So, what is the answer to this problem? Food and Concession Stands.
Yes, you heard it right!
These overcrowded stands become incredibly important for generating the additional required income for the movie. Most of the food items are overpriced. From the popcorn to the sodas, the stale bags of delicious nacho chips, and stacked up juices and coffee.
All this junk is sold at high prices and helps the cinema in a money-making enterprise.
Incidentally, if you want to bring in your own, more realistically priced food from the outside, it’s unlikely your cinema will even try to stop you these days.
Four-walling
So, what exactly is the concept of Four Walling a movie?
Sometimes, the distributors refuse to share the ticket price with the movie exhibitors, or sometimes cinemas are not interested in taking a standard booking for a particular film.
In such cases, the distributors buy out the screens and pay the cinema producers a flat fee for the running of the movie. The movie gets a flat lump sum and the distributor keeps 100% of the profit generated from the film
This method works when the movie never expected to make good money but with the four-walled arrangement, a good profit can be generated for the distributors and cinema both.
Adaptations from Novels and Books
Adapting movies from novels and books and also making video games of popular films is really becoming a brand-new trend. This increases a lot of popularity of the movie among the young generation
When a movie director really nails any movie adaptation from a comic or book the same can-do brilliant business as a game as well sold on any mobile platform, windows platform, or Mac store.
Star Wars, DC, Marvel, Lord of the Rings, Harry Potter are some of the brilliant Comic and novel adaptations that we have seen on a big screen. Most of them have graphic games out which are also selling as merchandise. These movies become a brand by themselves and can drive a lot of sales in different fields.
Tourism
Movie adaptation sets and rides have always been immensely popular sites for luring tourists and getting them excited.
Both Disney and Universal have amazing theme parks and loads of movie sets spawned rides and celebrity attractions everywhere.
The movie production teams earn a good deal of money from these fancy sets and movie-inspired rides. Jurassic Park, Transformers, Puss in Boots, and many more are some amazing rides we all have been a part of.
Movies for the Education Sector
The education sector generates a great deal of money for movies. To get a License for playing films in the classroom can cost a good amount of over $50 per title. This is a good money-generating business for all old and new films.
What are the Most Common Distribution Deals?
There’s three types of distribution deals that happen most often:
1) A percentage of the gross revenues deal – You don’t pay expenses. 20% is normal from what I have heard.
2) 50/50 Split Deal – This is most common and all costs are taken off the top then both parties split the profits equally. The distributor will normally say you get your half after they recoup the marketing expenses they spent to get your film out there (which rarely gets recouped ever).
3) Distributor fee deal – it’s where the distributor takes a percentage off the top (average is 25%) then covers his “expenses” and the rest goes to the filmmaker (allegedly) lol…
What Is A First-Look Deal in Film Distribution?
If you listen to entertainment news or read the trades like Variety or Hollywood Reporter, chances are you’ve heard about a filmmaker or someone getting a First-Look Deal.
So let’s cut to the chase — a first-look deal is basically a contract where a party (typically a distributor, studio, network, etc) retains the right to have first right of refusal on your next venture. For example, if you wrote a screenplay and wanted to have it made — the studio or network would have first dibs on what you have. In the event they aren’t interested, then you can go off and shop it around town to whoever you want.
How Do I Get a First-Look Deal with a Studio?
The answer here is pretty obvious — do or make something great. Have a box office smash, work in the industry long enough where folks want to partner with you, pitch and create successful shows or even these days just having an incredibly large following (ie. Kim Kardashian, etc).
The takeaway here is that you need to have some type of talent or offering where a studio or network feels they can make money with you.
Just to be clear, first-look deals aren’t reserved for just filmmakers. Other content creators and personality types can get one depending on how big of an audience they’re able to attract.
Here’s some examples of recent first-look deals:
- Regina Hall and Showtime
- Eva Longoria with 20th TV
- Gabrielle Union and Sony
- Wilmer Valderrama and CBS TV Studios
What’s an Overall Deal?
Now this deal is different from the first-look deal in the fact that the creators have agreed to work exclusively with the network or studio. Generally speaking, these deals are usually more lucrative than a first-look deal because the creator can not shop their material anywhere else if the network or studio doesn’t like it.
Not only that, but the content the creator came up with remains under the intellectual property of the network or studio regardless if they use it or not even after the deal terms are up.
Some of the overall deals that went down this year in 2020 that Netflix signed were:
- John Boyeha and his production company (Star Wars, Attack the Block)
- Guillermo del Toro (Pan’s Labyrinth, The Shape of Water)
- Steve Blackman (The Umbrella Academy)
- The Duffer Brothers (Stranger Things)
You can see the entire list here.
What’s the Best Distribution Deal?
Like all things in life — it depends. Your situation, expectations, budget and if you have investors or partners involved who have a financial steak in the game will determine what’s best for you.
No deal is set in stone and like any business venture the more leverage you have the better. If you have a strong fan base, social media following, star attached, festival buzz — then you have something to bargain with. If not, then you’re going to end up taking the best thing you are offered.
Do You Even Need a Film Distributor for Your Movie?
If you’re trying to release a movie the traditional way and want a theatrical release?
Probably.
Here’s why — the distributor will have money for prints and advertisements aka P&A. This is what will help your film be perceived as a movie.
The distributor will also have the ability to collect from theater owners across the country. You probably don’t — unless you plan on four-walling from state to state, and even that can be exhaustive and tricky in some respects.
So unless you have the time and energy to sit in small claims court for all the times you get screwed it’s probably more convenient to just use a distributor.
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