Sales agents: your window to the world
Entertainment lawyer and agent Gene Goodsell looks at the legal points that should be considered when signing up with one of a producer’s most important allies: the international sales agent.
Sales agents are essential for producers– why? Because they marry buyers and sellers, packagers of talent, and financiers.
A sales agent is essentially responsible for selling a producer’s copyright to a buyer, on the undertaking that they’ll deliver money in the future. Obviously this is a high-risk venture so you’d better trust your sales agent!
The following are relevant legal points that should be considered when negotiating with sales agents:
- Get your lawyer to do significant due diligence on proposed sales agents prior to engaging the services of one;
- Make sure that good-faith negotiations have an agreed time period;
- Aim for a representation contract of six months – be assertive;
- Don’t transfer any legal rights until money from the film is recouped;
- Agree on territories being sold and realistic revenue targets;
- Make sure that you receive your money on time;
- It’s OK for a sales agent to have exclusivity as long as such exclusivity is within prescribed territories;
- As with all contracts, ensure they are signed! Many distributors require signed contracts.
- Talk to your lawyer if you are in doubt; and
- If possible, engage the services of an assertive lawyer who has strong negotiation skills, not just someone who is good at drafting documents.
The main function of international sales agents is to locate foreign distributors for a film and then negotiate and document the terms of the distribution agreements.
The ‘sale’ is effectively a license of copyright and agreement allowing the distributor to handle the film exclusively in its territory for a certain period of time.
There are numerous international sales agents who specialise in licensing film projects and completed films on a territory-by-territory basis worldwide.
They are entrepreneurial in nature and scour the globe looking for profitable ways to sell, license and finance motion pictures. Leading sales agents are usually members of the Independent Film and Television Alliance (IFTA) which is located located in Los Angeles and produces, amongst other documents, pro forma foreign sales deal memos.
Foreign sales agents are very similar to foreign distributors. The main difference lies in whether distribution rights which are part of the copyright in a film, are transferred.
When foreign sales agents pay cash to the producer in the form of an advance or completion funding, they retain a contractual right to make the deals themselves, rather than in the name of the producer.
Sales commissions are the most contentious part of a foreign sales agency agreement. Usually fees on uncompleted pictures are higher than on completed ones, especially where the foreign sales agent provides financing. International sales agency fees range from five to 35 percent of the gross receipts from each territory, as well as recouping marketing and distribution expenses incurred in the licensing of the product.
International tax laws can also impact the commission extracted by a foreign sales agent.
The producer will have to be sure that the commission is taken on the net amount remitted by the foreign distributor, not the gross amount. If this is not done, withholding tax of up to 25 percent of gross revenues may be imposed. Some foreign sales agents used sophisticated tax structures in order for money to be initially remitted to another country.
A major issue in any sales agency agreement is whether the producer has the right to approve the sale in each market. It is not practically possible for each foreign sales agent to have every agreement approved by the producer. Some foreign sales agents agree to put sales money in escrow at the bank. Even though the escrow costs money in terms of fees and legal transactional costs, a producer is more likely to get paid from an escrow than as a general creditor.
Usually a producer will pay for there to be a theatrical release, and as a result, specific clauses in the distribution agreements may be negotiated with regards to how much money the distributor will contribute to the preparation and marketing for the film’s theatrical release and the minimum number of screens it will guarantee the film will be shown on.
For further information or advice, please contact Gene Goodsell.
