In the digital age there are many ways a film can be distributed, and the box office is just the first step.

Here’s a look at distribution focusing on contractual agreements and how the profits and expenses are sliced up.

On the Cinema Screen

Film DistributionOnce upon a time the box office was where a film made its money but today, the ‘branding’ of a film can be just as important or even more valuable than the short-term profits that are made by selling tickets at the box office. People may purchase the DVD, pay to see it on cable or download it because of the buzz it got while on the silver screen.

Here is how its profits and expenses are broken down.

The Gross Box Office refers to the total takings at the ticket window from theatre-goers, also known as box office receipts.

Around 60 films each year make this mark in the US make more than $50m. Most box office receipt come from bigger cities such as New York and Los Angeles. However, niche films can make most of their money in more target markets. For example The Blind Side did most of its box office takings in southern USA cities.

Direct Distribution Expenses (DDE) cover the cost of distributing the film, including advertising and prints (P&A). DDE can also include promotions, publicity and festival costs. These fees are recouped from the gross receipts after deducting distribution fees.

The Distributors Theatrical Net refers to film rental minus distributions fee and distribution expenses. In the USA this can cost around $10m, so $50m dollar films spend 20% in distribution.

Film Rentals are the distributor’s rentals to cinemas and their fee for this. The film rentalagreement sets out the terms between the exhibitor (the cinema) and the distributor (the producer). Typically the distributor negotiates a higher percentage early in the films screening when its likely to attract more people but generally the percentage averages out to around 50/50, exhibitor and distributor.

The Theatrical Distribution Fee is a percentage of the films Film Rental. It’s usually between 25%-35% though established producers with connection to powerful studios generally get a better deal than a one off independent film producer.

Keep in mind that these days distribution can be considered to have a long-tail and a surprising amount of profit is made in the middle and at the end of that tail, often more than in the cinema.

Digital & Home Entertainment

Home Entertainment Distribution- DVD and Blu-Ray Duplication and Distribution

With the onset of streaming, downloading and pay-per view, DVD and Blu-Ray distribution needs to offer more to be competitive. Considering this, the duplicator must print the DVD, print the sleeves, and manage the marketing and shipping- yet their 120 minute film will only cost around $2. Sometimes the distributors will offer special cuts of the film (the director’s cut) and extras (behind the scene interviews) on the DVD that are not available elsewhere.

The Home Entertainment Distribution Fee is negotiable but is normally are 35% for studio films, 30% for negative pick-ups and 25% for distribution only.

Distributor’s Home Entertainment Net is calculated by taking the Home Entertainment Gross Income and deducting the following; 1) distribution fee 2) duplication and 3) the distribution expenses. Normally all three categories have the same amounts allotted to them.

Streaming and downloading

Streaming and downloading have been a big winner in recent years with Internet streaming and downloading becoming cheaper and more convenient than DVD and Blu-ray, plus matching HD quality. Despite its low cost to viewers it’s now the most profitable way films make money.

On the Box- Cable Television Gross

The majority of this income is via monthly viewer subscriptions from premium cable networks, which in the US would be HBO, Showtime, the Movie Chanel and Encore. For a $50m film this is around 11%.

The Premium Cable Distribution Free is typically less than 35% of that of projections. Some producers are able to sell directly from the production company to paid television.

On the box- Network Television Gross

This is free-to-air television broadcasting. The license income for a $50m grossing film in cinemas is normally around 14%. A film that established a massive audience (brand) in the cinema is able to command such fees as it guarantees the free-to-air station and audience for its advertising.  On the other hand a film that did not become a household name while on the silver screen is unlikely to be bought by network TV.

Free Network Distribution Fees should again be less than 35% of the projections and are often sold by producers directly to networks. Free Network Television Distribution Expenses will include legal, travel and trade show costs. Distribution Free Television Network Net is calculated as the gross income minus the fees and expenses.

Other Distributions Fees

Sales Agent Fees may be applicable when there is a separate agency or in-house division that deals with negative pick-up, or some international sales in certain territories.

International Territory Gross should be set at a percentage of the budget for the base value and a minimum guarantee for each territory in mind.