What The New Sundance Deals Look Like
Forget a massive sale. Savvy filmmakers find an audience (and money) by splitting rights.
Most of the 120 or so movies At this year’s Sundance Film Festival will arrive in Park City with no distributor. While the heyday of indie film sales might be behind us, the market for movies seems to be swinging back toward filmmakers.
But the new Sundance deals look very different than those of a couple of years ago.
Until recently, securing distribution at a festival was a straightforward process. A producer engaged a sales agent to generate awareness among the dozen or so key distributors, who were then played against one another to create an auction-style frenzy, resulting in a splashy seven- or eight-figure all-rights deal. Cut to the present: Many of the specialty buyers have disappeared and sales prices have decreased. The approach to securing domestic distribution is now a more complicated undertaking, as options have diversified in light of technology and shifts in viewing habits.
No doubt there will be films sold in all-rights deals to the likes of Fox Searchlight, Focus Features and the rest. But for most festival entries, producers will need to customize a distribution strategy. Increasingly, this involves a plan for “self-releasing” the film theatrically in the U.S. (while using a foreign sales agent overseas) and contracting directly with licensees on a “split-rights” basis, including home video, pay TV, basic cable, VOD and digital players such as Netflix, iTunes, Hulu, Vudu, Amazon and Microsoft Xbox.
With this strategy, the producer effectively becomes the distributor. He eliminates a top-line distribution fee, controls marketing and distribution costs and prevents a third-party distributor from cross-collateralizing the various revenue streams. This route should be considered in advance of any festival if a satisfactory all-rights deal does not materialize.
There are plenty of reputable do-it-yourself releasing companies: Paladin, D2, Roadside Attractions, One Way Out Media and Freestyle Releasing are just a few.
Fashioning a patchwork of split-rights deals might be a better alternative for a film than an all-rights festival sale with a small or no minimum guarantee and minimal theatrical-release commitment. Some releasing companies also have valuable relationships with DVD distributors, pay and free television licensees and digital-rights buyers, which could provide important high-level introductions and, on occasion, access to output deals that might not otherwise be available.
The amount of prints and advertising allotted to a theatrical self-release often is critical to generating interest from domestic video, television and digital licensees and foreign distributors. Titles with a recognizable cast can spark interest from the home entertainment divisions of studios if the producer can guarantee a minimum P&A commitment of high-six or low-seven figures. It is common for a DVD distributor to supplement the P&A spend to boost box office and improve its own retail deals as well as the license fees from pay cable or subscription VOD services like Netflix.
To maximize revenue streams in a split-rights environment, filmmakers need to be smart when divvying up rights (and when determining whether rights are granted on an exclusive or nonexclusive basis subject to holdbacks). These deal terms are usually negotiable, with the outcome typically riding on which media are licensed first.
When a home entertainment company is the “anchor” licensee, it will insist that its rights include all VOD, including SVOD. Producers should seek to grant SVOD on a nonexclusive basis (or reserve such rights) to allow, for example, Netflix and a pay TV licensee to exploit the film at the same time.
If a movie is to premiere on a pay TV network like HBO, the network will insist its grant of SVOD rights be exclusive and often will require all streaming VOD rights be held back until after the pay TV license period. It also will ask that digital sell-through and traditional DVD distribution be held back for 90-365 days. Basic cable licensees are more open to negotiation, but they usually insist on exclusive television rights and free VOD as well as SVOD and possibly transactional VOD rights on a nonexclusive basis, which would be exploited only on that network’s branded platforms.
Distributors including Magnolia and IFC have developed strategies that make films available on VOD previous to or day-and-date with the theatrical window. A “national” digital release is intended to drive strong word-of-mouth for a theatrical run while capitalizing on a growing revenue stream at the highest end of the digital pricing spectrum (about $10-$12 for rentals). While specialty exhibitors initially resisted this approach for fear of cannibalizing ticket sales, it is becoming an accepted norm outside of major studio fare.
Many filmmakers now realize that a direct-to-VOD release or day-and-date VOD release results in terrific exposure for their work. They should experiment with deals that allow them to maximize audience and revenue.
Andrew Hurwitz and Alan Sacks are attorneys at Schreck Rose Dapello Adams & Hurwitz, which represents artists, producers and financiers in film, TV and theater deals.