Originally producers who made films handled distribution pretty much the way they handled production and post production of a film. They made some kind of deal with a theater and split the revenues.
Over many years “distributors” came into being. These companies purchased the right to distribute a film in theaters, on television, on cruise ships, on cable channels, on tape, etc. They would pay filmmakers an up front fee for these rights and a percentage of the revenues the film earned.
Over the last couple of decades, the deal has changed such that many filmmakers give their rights to the distributor with no upfront fee, or for a small minimum guarantee, and get paid a percentage of the revenue the film earns in distribution only after the distributor recoups all their costs for marketing the film to buyers. The filmmaker has no control over these costs or the terms under which the content is distributed.
In a service deal distribution, the producer retains ownership and control of their content and makes agreements directly with buyers for the performance, broadcast, and release of their content. A service deal distributor works on a fee-for-service basis just like a UPM, DP, or gaffer.
Why Would a Producer Choose a Service Deal Distribution?
For producers and investors, theatrical releases are almost always expensive “loss leaders”. Producers usually have to cover all the costs the distributor pays to promote the film to film brokers and theaters as well as to the public. This is called P&A. It can run into the hundreds of thousands or hundreds of thousands of dollars and producers have no control over when, how, or how much of their money is spent.
The distributor will subtract all their expenses from revenues they receive from the theatrical release of a film, and then take 25%-45% of the remaining “profit” as their fee.
This often leaves little or nothing left for the producers and investors who paid to produce the project even when the project earns tens of millions of dollars in theatrical release.
For example, a film that earns $200M in theatrical release worldwide might only pay the filmmaker and their investors $50M which they subsequently have to split. Meanwhile, theaters running the film for audiences are also struggling to survive. Only the distributors are winning in this equation. They have no risk and receive the by far the most financial reward.
It Gets Worse
When distributors acquire theatrical release rights for a film, they usually take other rights as well, including overseas sales, cable, TV, and video-on-demand deals, etc. Once again distributors will recoup all their costs for promoting the film across these channels and will and take their percentage of all revenue that comes in from those sources. The producer and their equity investors will once again get paid what’s left which is usually very little.
It is important to understand that distributors sometimes elect to do almost nothing to market or promote a movie they’ve acquired the rights to. Since they own the right to distribute the film, their decision not to actively sell those rights can effectively ensure that the film generates no revenue.
Regaining control of a film from a distributor who has acquired the rights often requires producers/investors to buy the film back or engage in a hard-to-win law suit.
Producers who don’t like the terms of standard distribution deals can elect to engage in a service deal distribution instead.
Films like Passion of the Christ, Big Fat Greek Wedding, Donnie Darko, Metallica: Some Kind of Monster, are just a few of the films who have benefitted from service deal distribution deals.
Filmmakers have been doing service deals successfully for many years. It’s not talked about because its not the kind of thing most media and most people care about when they discuss films.
- All the paying audience cares about is that a film is in a theater and that people like it. They don’t care how it got there.
- All post-service-deal distributors buying rights care about is that the film got a good release, had good marketing, has good buzz, and that there’s demonstrably enough of an audience to purchase the film in other territories.
In short, filmmakers frequently do a service deal theatrical release because they want to ensure their film makes money.
They have gone to the trouble of producing a film, paying every one along the way, and they are unwilling to hand the finished project off to a distributor offering a bad contract with the “hope” things will go well.
Is Service Deal Distribution Risky?
The most risky thing you can do is give your film to a distributor without the confidence that they’ll work very hard to ensure you earn revenue from it. It is effectively giving your film away.
If you can’t find a distributor you have full faith and confidence in, then a service deal distribution makes sense because it’s better than no distribution or a poor distribution that ties up your rights forever.
Sometimes filmmakers start out with a service deal distribution for theatrical release then move on to working with an established distributor to sell other rights after the value of their project has increased.
What Are the Risks?
If there’s no audience for your film, or one cannot be found, you’ll spend money to show the work to empty theaters. You’ll make it available through other channels and no one will watch it or buy it. That means it will produce no revenue, which is likely what will happen if it gets a bad release from an unmotivated distributor.
If the audience doesn’t like your film, you’ll get bad reviews. This will make it hard for you to produce your next film. One of the reasons non-theatrical distributors want to see a film go through a theatrical release is that that they know it will reveal these problems before they’ve purchased the rights.
Some distributors will be unwilling to purchase the rights to your film after a service deal release of any kind. They want a “virgin” project.
That said, if a film does very well in service deal theatrical release and/or in other windows, it’s usually attractive enough that producers will be able to find distributors and/or other buyers willing to pay money to release it.
Success in Service Deal Distribution Comes Down to The Film and Your Determination to See it Succeed
If you’ve made the right script, cast, production, and post production decisions, your film should have a market that is easy to identify and reach. We can help you test screen the film, collect and interpret audience feed back, and suggest potential changes that will likely make the film do better in wide release.
We can also help you determine how to earn more from the film with merchandising and other monetization options. Your film might be great promotion for books, shirts, and other products. Even the “highest-minded” and most philanthropic films may want to make merchandise available because it spreads the message that inspired the film and it lets people show support for that message.
A well executed service deal distribution can be the best thing that ever happened to a good film because it allows the producer and the team that worked so hard to create it to ensure it gets to the paying audience who will love it as much as they do.