The State of International Sales for Independent Films

November 21, 2012
posted by sheric

This piece was originally published on The Film Collaborative blog on November 20, 2012.

In our continuing look at film sales, today we are featuring an interview with an international sales agent for independent films, Ariel Veneziano of Recreation Media. He has handled international sales for many films including the highest grossing documentary of its time Michael Moore’s Bowling For Columbine, the highest grossing independent film of all time Mel Gibson’s The Passion of the Christ, and America’s most watched television show CSI: Crime Scene Investigation. The Film Collaborative works closely with Recreation Media for its international sales efforts.

SC: How are things different now than they were 5-10 years ago?

AV: In one word: worse.  Sorry to start this off on a down note!

SC: Do you mean money-wise or just sales interest at all?

AV: I think both. It is best to acknowledge what the reality is. At the same time, there are some opportunities that emerged, new ways of doing business that didn’t exist several years ago. It is important for filmmakers to have a reality check that there have been changes in the way viewers consume media and that has led to radical changes in the market. People go to movie theaters to see independent films much less than they did. Although global box office appears higher, this is only for a very small percentage of films. We’re talking Twilight, Iron Man, Dark Knight, James Bond. That share of the box office numbers is cannibalizing all of the other films out there.

Home entertainment revenues have been shrinking. DVD is progressively becoming marginal, and while broadcasters are multiplying, the license fees they are paying, especially for independent product, are getting smaller. While VOD and digital distribution are on the rise revenue wise, there is also an overabundance of product being made because of the sudden availability of low cost production methods.

Piracy is a threat to revenues. People still watch movies, but they don’t always pay for them. There is now a generation who sees this like going to the faucet and turning on the water, you don’t pay for every glass you fill. You pay a monthly fee and you can get a lot of water. Same with many internet subscriptions, one fee, unlimited choice.

The good side to digital and particularly online distribution is the ability to, in theory at least, reach a broad audience without need for a large infrastructure. Are there ways to capitalize on that trend? Yes. Are they easy? Not necessarily, it is a very fast moving situation and even the so called experts who have done this for years, they don’t know what is going on. There’s a lot of chaos here, the wild west.

SC: If we were to look at 5 years ago, what would have been a pretty normal deal scenario for an independent film with no names, but some festival pedigree?

AV: If we’re talking about one of the major festivals, like Cannes, Venice, Berlin that you could put on the poster, those are the big 3, you could have made a several hundred thousand of dollars in worldwide sales. But that’s not necessarily the case anymore.

SC: Right, I was noticing out of Toronto in September that films with more than notable names were being picked up in groups for $5 million, when their budgets must be nearer to $20 million combined. Lionsgate/Roadside Attractions bought Stuart Blumberg’s “Thanks for Sharing,”(Gwyneth Paltrow, Mark Ruffalo, Tim Robbins),  Shari Springer Berman and Robert Pulcini’s “Imogene” (Kristin Wiig, Annette Benning, Matt Dillon) and Joss Whedon’s “Much Ado About Nothing” all for a reported total of $5 million. So those films are not making their money back in advances. It used to be you could be made whole or close to it, but now that is not nearly the case.

AV: Right, it means you have to be smarter with the budgets, keep them low. Smarter with the finance plans and use soft money, something that isn’t going to be high risk for investors.

What happened in the music industry is now happening to film. When is the last time you bought a CD? With technology progressing so fast, storage capacity growing, speed of transmission of data, availability of mobile devices. Few people are going to want a DVD collection, why? I can access a gazillion movies in my cloud storage. So if people aren’t really spending money on music, the revenues for albums have gone way down. Why would they continue to spend for films? If you want to know what the future holds for the film industry, look at the music industry.

And because there is so much uncertainty, buyers are trying to safeguard themselves. They are being much more particular about titles they take on and for what prices because they don’t know how well it will sell.

SC: So when you go to a market, what attracts their interest to buy anything?

AV: Bigger theatrical pictures. For foreign buyers, they want to know the film will have a wide domestic theatrical release. Some domestic distributors can promise that like Weinstein, Summit, or if you are an international sales agent who struck a deal with a studio early on to release the film with a minimum 1000 screens, buyers are receptive to that.

Cast of course makes a difference. Certain genres like action do very well. Everything related to action travels well. So, adventure, sci fi, thriller, fantasy are all cousins of the action genre and those typically do well.

SC: One genre I see a lot in indie film is the “coming of age” drama story. How well does that kind of story do?

AV: AWFUL  in terms of revenue. I am talking as a businessman. As a viewer, I love coming of age dramas, but I can’t sell them. Nobody wants to buy them unless: 1) it is directed by a world class filmmaker. If it is a Woody Allen or Terrence Malick film, you’ll sell it 2) big names in the cast and when it comes to getting buyer excited about the cast level, the bar has gotten a lot higher as far as this  3) based on a best-selling novel 4) selection in a MAJOR festival. For international revenue that would be Cannes, Berlin, Venice. Sundance has an impact domestically, but internationally people don’t care. Toronto the same, it is fine for a repeat screening, but if that is your only claim to fame, not going to help you that much.

Coming of age drama is one of the worst for travel; that and comedy. Buyers just flee unless it comes with any or lots of those 4 criteria. So Terrence Malick’s Tree of Life, fits 3 of those criteria. World class director, A level cast, major festival selection. That is desirable to buyers.

SC: So you are really saying that a microbudget indie film with all of those things absent really has no chance for a buy at a foreign market?

AV: None.  Absolutely zero.

SC: This is good to know, we’re tempering expectations here. This doesn’t mean there is no audience for the film. It simply means that it has no value to a buyer.

AV: It is going to bring in too little money for them that it isn’t worth investing in. But you’re right, does it mean you can’t put it on iTunes or some other online outlets on your own and get people in foreign countries to pay to see it? No, you can absolutely do that. But since it is such a wild-west scenario at the moment, the revenue could still be zero for you.

SC: Are you saying that there are no prospects even in broadcast for this kind of film?

AV: No prospects, but as with anything there are a few exceptions.

A Lifetime movie, like a women in peril kind of film. If it was bought by Lifetime in the US, then there could be some broadcast value elsewhere. But that is a very specific kind of film, very formulaic.

SC: What about a low budget documentary? What if it was picked up by HBO in the States?

AV: Now we’re mixing types of films. Docs are a little bit different, but it depends on what they are about.  If it strikes the right chord with something timely, you find the right broadcaster who is filling their schedule with a thematic type of programming and your doc fits that profile, then boom you have a deal. A small deal probably, but still a deal.  A theatrical doc is the exception, docs are mostly for TV. Having it on HBO? No, it doesn’t make a difference. Not PBS either. It is more about the right subject matter, being topical.

The brands broadcast buyers respond to for narratives are Syfy Channel, Lifetime, Disney, Nickelodeon,  maybe Hallmark. Again, those films are very specific and formulaic. No fancy effects, no flashbacks and weird montage, just very straightforward stories.

SC: A foreign sales agent does what? You go to markets, but what is done in between? Should I get a specialist foreign sales agent or a worldwide sales agent?  

AV: Typically domestic and foreign markets are two different animals. There are some sales companies that can act as a good one stop shop, handling both within the same company and that can simplify administration. But the option to hire a dedicated domestic sales agent – also known as a producer’s rep – is a common way to go as well.

What we do as a sales agent is that we help you maximize revenue on the film from all available sources around the world. So that entails marketing, highlighting an existing campaign or creating a new one; working the press, getting a film into the right festival. Then leveraging the relationships we already have with buyers around the world. Negotiating and papering the deals. Delivering the movies. Invoicing and collecting the revenue. Monitoring how a film does in a territory and requesting (or demanding!) the revenue reports. Structuring the deal correctly so you can have some money up front and then see more money later down the road – if the film does well. It is a “technical” job and is very relationship driven.  Probably the most important aspect for a filmmaker in electing a sales agent, is working with someone you can establish a relationship of trust with. Trust can be an elusive thing sometimes. You keep hearing stories about filmmakers being ripped off by sales agents.

Some films are probably not meant to be handled by a sales agent because it is just too many layers of middlemen for too little available revenue, and the filmmaker would have been better off handling it themselves for the amount of sales revenue that can be gained from it. It will be a lot of work though for the filmmakers and some people are very naïve about that, thinking ‘oh who needs a sales agent?’ and they take their film to markets or put it up for sale themselves online and at the end of the day, a lot less revenue comes in than they thought. It is a lot harder to make money than it seems…

SC: Sometimes filmmakers try to call buyers and they find their calls aren’t returned. Buyers don’t know who they are.

AV: Trust me, sometimes we have trouble getting them to return our calls too! And they do know who we are.

SC: What is the typical length of time for a sales agent agreement?

AV: There are two types of agreements. One is a straight distribution agreement where the sales agent comes on just to sell the film into territories. Another is when a sales agent comes in with a minimum guarantee, some money upfront. If they put in some money, they will be more demanding on the terms. If it is just straight distribution, the filmmaker has more leverage to negotiate it.  So a typical term is 10-15 years.

SC: Why does it need to be that long?

AV: Well there’s two questions here. The first is the sales agent’s engagement term. How long is the agent going to be selling the film? And the second is for how long is the agent allowed to sell the rights? How long will the contract last for each deal brokered?  I might sell the film to a buyer in the first year, but the buyer might want a 20 year contract on that film especially if it is an all rights deal where they can exploit each window over a long length of time. They might spend a lot of money to release the film theatrically and make up the bulk of that money on DVD/VOD and then digital then broadcast which can then mean relicense and relicense over a long period of time. You know, when you watch TV, there are rerun movies, things that came out a long time ago. Those  have been relicensed over time.  So if you are going to all this effort and expense, you want to have a long period of revenue coming in on that.

So if a producer and a sales agent have a good relationship, they should both want that. It is not just about selling and walking away, there is the monitoring of the sales.  You may get an advance from the buyer, but then there is a revenue sharing structure that has to be enforced. A buyer might release theatrically and not make money, but then it goes into DVD and broadcast, and especially in Europe broadcast is where a lot of the money is, in TV, so when that revenue is coming in, you have to make sure reporting is being done correctly.  That can be many years after the fact.  If a film is doing really well, you may have to check the reports or audit them to make sure you are getting all that is due.  It can be complicated to do this and costly. You want your buyer to comply, but you may have to send in someone to check the records.

You need to manage the revenues coming in, the agent gets commission and expenses and then the rest flows through to the filmmakers.  So for us this lasts 15 years typically.

SC: 15 years to maintain the film, the sales contracts on the film?

AV: Yes.

SC: So then the question is if after a year or two, the agent hasn’t made deals in many territories. Why should they still hold the rights to my film for 15 years? If I know that I have an audience in Indonesia based on my website traffic, but it isn’t enough to satisfy a broadcaster or a distributor in that territory, I could service them directly from my website, but I can’t do that because legally I don’t own my film, the agent does.  An agreement for that length of time in this case doesn’t seem to serve anyone.

AV: Well in TV sales it can take a while for a sale to come through. The decision making process is slower in TV.  Also it can be about the right theme being programmed in the schedule.  A film may not be a fit for this year’s schedule, but maybe for a schedule 2 years from now.  If the agent has the rights to a film that fits, a sale can be made then.  But I think good practice for a sales agent is to yield to the filmmaker if they find after a reasonable amount of time that there is no real sales potential.  A clause should be worked into the contract that after X amount of time, if no sales are pending and interest is limited, then the rights go back to the filmmaker or the sales agent agrees to arrange for another type of distribution (iTunes aggregation or other kind of digital VOD distribution) and any revenue would be subject to whatever commission was agreed – if the sales agent helped to get the film onto a revenue generating platform, then they should get a commission out of it.

SC: Walk me through the revenue flow. If it is just a straight distribution deal, the agent has not given the filmmaker an MG to represent the film, how does the money flow from the buyers through the sales agent to the filmmaker?

AV: Everything is up for negotiation, but here’s the typical structure. The revenue comes in from the distributor, the agent takes a commission,  then the agent takes reimbursement on the expenses that have been capped and agreed, then the filmmaker gets the rest. Let’s say there is $100,000 of revenue. Commission is 20% and the agent spent $10,000 in expense. The commission is $20,000 plus the $10,000 for expenses so $70,000 goes to the filmmakers.

SC: Ok say that it isn’t $100,000 in one go. Say it is $2,000 this month and $5000 last month and all of this revenue flows through the agent.  Does that mean every time there is revenue, the agent gets 20% of it, or is this a flat 20% of all revenue?

AV: Usually reporting is on a quarterly basis in the first year or two and after that it is only twice a year.  So every time there is a statement, commission is disbursed.

SC: And how do you show me expenses? How do I know what my expense was for the trailer or the one sheet design and printing or the market booth?

AV: Again different companies have different practices, but typically expenses are amortized across all of the current titles the sales agent is handling. We have costs from the markets that we split across the slate of films. We do a fair assessment of the films we are actively selling and then there are direct costs. If we hold a screening of a film in a venue during the market, 100% of that cost is going against that particular film. But a booth at Cannes for all of the active slate of films, that cost will be amortized across the slate.

So everything should be documented as far as expenses. If you feel like the expenses are unfair, you should have audit rights in your agreement. When you have that ongoing relationship with your sales agent and they are motivated to do repeat business with you, they will want to do things right. Ideally you want to work with someone you can 100% trust, but we hear every day how there are disputes in Hollywood studios, independent studios. Lots of creative accounting, people don’t always report accurately and things end in arbitration or litigation.

SC: A few years back someone on a panel said that especially in low budget filmmaking there are a lot of first time filmmakers, but not a lot of second time ones. So relationship building on either side, the agent or the filmmaker, there isn’t a lot of loyalty there. The filmmaker may  never work again, the agent may not even want another film from this person, the filmmaker will choose whatever agent seems to be bringing them the best deal.  So is the motivation to be loyal and honest really there?

AV: Well maybe filmmakers should have more of a career plan. Don’t think one film at a time, but have a vision for what your career will look like and plan for the relationships that will help you realize it over time. Also, films aren’t made by only one person. There is the producer, the director, the writer, the cast and sometimes cast members are also producers. There can be relationships with all of these people that benefit a trust factor being present.  And then there is the carrot and the stick principle. Yes, we want to have relationships where we believe all are being honest, but we know some people are more honest with those they know than with those they don’t. You have to trust, but verify.

You can always question what doesn’t seem like a reasonable expense.  You won’t go through every receipt and say “are you sure at that dinner you talked about my movie?” Come on, you aren’t going to do that. But if you see some weird expenses for things you don’t remember happening, like a screening at a market, then you should question it and request backup documentation. The sales agent should be able to provide it.

SC: Lastly, what kinds of things should be included in my sales agent contract. Should there be non performance clauses, bankruptcy clauses, a limit to the years my title is held by the agent?

AV: Well, I am going to be on the other side of the negotiating table and I will want less encumbrances of course. So who am I advising here?!

SC: If we are transparent and honest people who really want what is equitable, we should be honest about this. Also  what kind of things are you expecting from the filmmaker in the contract?

AV: I will want to be efficient. I want to know that they have all the deliverables ready or in a timely manner. This includes master drive or prints as physical material, but also legal documents. Chain of title, music clearances, E&O everything that is included in the delivery list. So many times attention isn’t paid to the details of this both from the physical perspective, but also the budgeting perspective.  Often these materials have to be created and that costs money and a budget needs to be available for this.

We might have an offer that will bring in a good amount of revenue, but if the producers can’t deliver the items required by the buyers, there is no deal.  Sometimes we take on that expense ourselves say a 35mm print might be needed, but one wasn’t made. We wait to see how interest goes at the first market and if 5 territories want to do a theatrical release,  then we will take on that expense because we know it will be recouped.  A 35 mm print may be optional depending on the film, but there are other things that are required. For example an M&E track so that the film can be dubbed in foreign territories.

SC: What is the worst thing people tend to forget or deliver in the wrong format?

AV: One thing that happens a lot is stalling, letting things drag and not delivering the final elements. The final music tracks are being cleared or the M&E track is being finished. Several situations where the film never really seems to be finished.  The deals were struck, the buyer is getting impatient waiting for everything to be sent over. A film isn’t like red wine, it doesn’t get better with age, it doesn’t gain value, it does the opposite.  The film got old and it never came out.

Also, one thing that is perpetually a disappointment: still photography. Good photography is super important to promote the film, to design into the campaign. Buyers really want good stills.  On low budget films, good photography is perpetually dismissed. Make everyone’s life easier, get lots of on set shots. Not behind the scenes stuff with the crew goofing off and doing set ups.  Get shots from the scenes, good shots of the cast, the atmosphere of the scene, things that we will see on screen.

SC: What would you tell someone who hasn’t yet made their film, but they are about to embark on the process. What to expect?

AV: First start with why you are motivated to do this? Making money isn’t always the prime objective for some people. They have an urge to tell a story and yeah, maybe some business person may find it genius, but it is ok if they don’t. Be very clear about that with yourself and others, that you are doing something that has only a remote chance of making money. That way, you won’t be this frustrated filmmaker who is suddenly surprised when all the odds are against you. You knew it going in. Maybe this first film is a calling card and all part of the career plan.

Ultimately, if you want to make a career in this industry, you are going to have to make film that connects with paying audiences and make some commercial sense. First films can be something very striking visually or artistically, but not make much or any money. They can have an artistic integrity that isn’t necessarily attractive to a buyer, but can find a small audience.  In order to capture industry attention, the films are going to have to be accessible to an audience.

I think Ariel Veneziano for sharing his time and information with us. Remember, The Film Collaborative does handle films sales on a limited basis and we are always open to advising our members on the best course for getting their films out to market

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