ADVANCE WARNING

So you’ve just come back from your skirmishes in the bunker at MIPCOM with that distribution advance. When you’ve told all your disbelieving colleagues how tough it is partying with the rest of the TV industry in Cannes in October, you can relax. All you need to do is sign the distribution agreement and you can get on with the production, right?

Wrong – this is where you need to raise your game and make sure that 10 years down the line that distribution agreement doesn’t cause you an even bigger headache than that one last drink at the final night party.

Here are my top ten tips for negotiating your distribution agreement:

1. Territory. Make sure the territory is clearly defined. Avoid accepting generic definitions like “the US, its territories and possessions”. Ask for a list of the territories included within the definition to append to the agreement. Otherwise, you could unknowingly licence rights in the same territory to someone else. Do you need to do a “throughout the world” deal or can you keep some territories back?

2. Rights. Media and languages should be clearly specified and defined. If you cannot be clear from the agreement exactly what rights you are licensing there is something wrong with the drafting.

3. Term. Negotiate the shortest term you can. Ensure that for agreements for a longer term there are clearly defined performance targets and a mechanism for early termination in the event that targets are not met. Remember that vaguely worded obligations to use reasonable endeavours to maximise receipts are difficult to enforce.

4. Conflicts. Make sure that the above 3 don’t conflict with the rights you have already agreed to grant to other financiers and that any holdbacks in favour of broadcasters are reflected in the distribution agreement. The cross-territorial nature of new media can easily give rise to conflicts of rights.

5. Licence v Assignment. Rights should be licensed (i.e. permitted to be used for a specified period) rather than assigned (where ownership is transferred). Be cautious about language which refers to assignment or executing assignments. If you are required to execute a document to be filed with the US copyright registry be clear as to the effect of this and any mechanism for modifying/removing any entry or, if rights have been assigned, obtaining a re-assignment of rights, on expiry or termination of the distribution agreement.

6. Termination Provisions. There should be some! Make sure that you have the right to terminate for breach of any of the distributor’s obligations and warranties (again, there should be some apart from paying the advance!), for any event of insolvency in any jurisdiction (particularly important in the current climate) and failure to meet those performance targets you included earlier.

7. Receipts, Commission and Distribution Expenses. You will want to make sure that you are happy with the commission rates and that they include all commissions payable to sub-distributors, agents etc. (no double-dipping). Run through that Distribution Expenses definition with a fine tooth-comb and cap them overall at 5% of Gross Receipts.

8. Payment of Distribution Advance. Make sure there is sufficient certainty regarding payment dates and that the delivery requirements don’t allow a distributor to reject the programme/film on arbitrary grounds (increasingly important in the uncertain economic climate).

9. Accounting provisions. These often come near the end of the agreement. Don’t flag now! You need to work out exactly when you will receive your monies following their receipt by the distributor. Go for accounting within 30 days of each 3 month period if you can. Make sure the agreement provides for regular accounting statements setting out all the information you will need to make sure you get what’s due to you. There should be provision for interest on late payments and the right to inspect and audit the books (at the distributor’s expense if the inspection reveals an underpayment.)

10. Finally. If you can afford it, get yourself a lawyer who will review your distribution agreement for you. Many lawyers will be able to quote you a fixed fee for reviewing/amending a distribution agreement. When the distribution advance is a distant memory and your cherished programme is sharing the fate of the ark of the covenant at the end of the first Indiana Jones film you might even think it was value for money!

(c) Forte Law 2008

The above article was first published on broadcastnow.co.uk in October 2008. The above tips are general guidelines and should not be regarded as a substitute for legal advice on any particular agreement.