In this opinion piece Torsten Hoffmann warns 3D filmmakers about common pitfalls and gives advice about how to best position your film for global distribution. This is the first of a two-part article:
At the Korean I3DS event in December, I showed a slide entitled ‘Be Careful 3D Filmmakers’ and many producers approached me afterwards about the bulletpoint list and asked me specifics. So let me replicate/expand the 13 point list and explain in a bit more detail. Feel free to add your comments and stories in the comment section.
1. Good and not-so-good Filmfestivals and Competitions
Filmfestivals have always been the first place for filmmakers to present and promote their new films. There are many specialized 3D festivals, some of which we have sponsored, interviewed the organizers, and/or won awards. And I still firmly believe that awards makes the 3D distribution work easier. Not only can we achieve more deals but also higher license fees for awarded films in our catalog. In general I think it is a good idea to participate in as many festivals, both 3D and 2D as long as submission fees or material requirements don’t take too much of a toll on your team. However, I always urge filmmakers to read the terms and conditions very carefully. For example, one blogger uncovered some not-so-funny legalise in a recent 3D competition. Full story and original link here.
2. Fishy Contracts
Speaking of smallprint, let’s also discuss distribution contracts. Both our agent agreements and our licensing termsheets are 1.5 – 2 pages long. Anyone can understand it without hiring a lawyer. This makes life easy and both parties can spend more time on what they are supposed to do instead of revising contract drafts and cursing the MS Word functions for version tracking. We add a clause to our contracts that may be helpful to some readers here: “A more formal agreement may be prepared. Unless and until such an agreement is signed, this Deal Memo together with the latest available version of the IFTA Standard Terms and Conditions will be a binding contract between the parties.” The IFTA is a respected association and their terms and conditions are generally accepted as being fair (if anything, then slightly leaning towards the benefit of content owners). Now, obviously there will be cases where a strong negotiation partner forces you to sign their paperwork and you have no choice but to deal with their legal department. Yes, this happens and unless you are James Cameron or own a large 3D library you are probably in a weaker negotiation position. But concessions should be made only for the larger deals that are worth the extra time (or even hiring a lawyer). There are many more components in contracts than can be tricky but common sense usually helps. Don’t sign off rights for too many years (1-2 in most cases, 5-10 for Home Video). Don’t agree to jurisdiction in the country of Wadiya. Make sure that both acts of Gods and Satan are covered in the indemnification section. Things like that. It’s not rocket science. Really.
3. Distributors and their Credentials
3D is here to stay and therefore many people try to enter this space. As filmmakers you will be contacted by sales agents and distributors right, left and center. It is in their interest to have a large library, this is the nature of the distribution business. However, I would urge filmmakers to be careful. Do not sign off too many territories. Do not commit to too long terms or exclusivities. In fact, I encourage many filmmakers that approach us to ‘try out’ more than one distributor. But be smart about it. Ask for three references and do check them out. Find out how many 3D deals they have done in the past. We have come across distributors with stolen artwork and promoclips on their websites and we just want everyone to be extra careful before signing exclusive deals.
4. Distributors and their 3D Expertise
Most sales agents/distributors that you will meet at conferences, markets, and festivals come from the flat (2D) world. This is great, because, as I have argued many times, 2D is still the much larger market, that’s where, ideally, most of your license fees should come from. However, rarely a week passes without filmmakers approaching us after being disappointed about their 3D income. The reason is simple: 2D distributors know 2D customers, and there are very few media buyers that do both 2D and 3D. Even if they do (like BSkyB for example), their 3D activities would be a separate project groups with different managers. Moreover, most 3D buyers have NO 2D activities, hence, are completely unknown to 2D distributors. Look at the 3D buyers you know: 3net, LG, Yabazam, ….(add to the list)… most of them are 3D-only businesses. And why would a 2D sales agent spend time looking for the few and small 3D buyers while they already have existing relationships with larger buyers from the larger 2D industry. This is a version of the classical innovator’s dilemma. Hence, in our experience, films with a smart mix of 2D and 3D distributors generate the highest total license fees.
5. Complete Buyout Deals NOW?
We are seeing a phenomenon from the 2D media industry slowly appearing in 3D. Global Buyout deals by larger media corporations are offered to independent producers, who may be tempted to accept one large payout now instead of waiting for unknown payments over the next years. While this may be an attractive proposition to both parties I would caution producers to agree because the risk-return ratio is clearly out of balance. Let me explain: Filmmakers would have spent many months working on a project which they have funded by themselves or with third party investors. This is a high-risk ‘enterprise’ with an uncertain outcome, so in a way this is comparable to the start-up business world where entrepreneurs build a ‘product’ for an unknown or potentially growing market. Now, after the work is done, the film/product is ready and there even comes a first customer knocking. Why would an Entrepreneur sell their company at the launch date to the first customer? Wasn’t the whole point to invest time, money, sweat into creating something potentially much bigger. Shouldn’t there be more upside after they have taken so much downside risk all alone?
So, if you already have found a buyer for your film, I can assure you there will be more. Why would you sell all the rights to the very first interested party? This proposed deal may earn you a decent ‘producer fee’/reasonable profit but that’s usually the case if you have a co-production in place, so where a producer carries little or no risk. If you produce at your own risk, I would think, you should aim higher and try to keep the rights and exploit yourself, or at least shop around for a better deal. This is especially true because you surely must believe that 3D has a future. This means you also believe that the market will grow and there are many statistics that seem to confirm this. So giving all rights away in a global buyout deal at the time when the market is still small is most likely both bad judgement and bad timing. Instead it may be wiser to slowly build your 3D expertise as well as a library of 3D assets now, which probably will only increase in value when the market matures. Even though I don’t have data, I would imagine that this strategy paid of for the first films in color and the first batch of HD content.
6. Exclusive Territories
This point is important. Co-Producers or investors or customers may demand exclusive rights for a specific country, say Turkey. This is a common business practice from the 2D world and completely understandable for broadcast TV rights. However, it gets tricky with the VOD rights and, again, 3D is a different and a new business. In fact, there are many 3D buyers, hardware manufacturers for example, that acquire rights only on a global basis. So if the filmmaker/distributor doesn’t play his/her cards right they may have a TV deal in Turkey but can’t do a over-the-top deal with a TV maker. I have seen this several times and am sad to report that this does indeed sometimes kill deals. So be smart about how you license your rights. Particularly OTT (over-the-top) VOD rights, footage rights, and exclusivities in certain countries are tricky.
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Tips 7-13 of this article are here.
The views expressed above are the authors own personal opinion. Torsten Hoffmann is the CEO of 3D Content Hub. Feel free to re-post, re-blog and re-publish with credit and link to original source. Feel free to comment below or Contact Brinda – at – 3DContentHub.com, the editor of this blog for any questions.