Distribution holds the key to the flow of financing in the entertainment industry.
If ever you are looking to get a script sold, optioned, financed, or produced, you will have to appeal to a number of decision-makers along the way. The distribution process will play a crucial role in every decision that they make throughout that journey.
Without distribution, there can be no financing, and without financing, no content will be made, and there will be no industry left to speak of. It is the first thing that anyone trying to make it in the world of film and television should familiarize themselves with.
So, what is it?
Distribution describes how a project - whether a film, TV show, web series, short film, or any other kind of content - gets seen by an audience. It is the bridge between the filmmaker and the viewer.
The entire entertainment industry depends on that viewer choosing to pay a certain amount of money to watch a particular piece of content.
That could be $0.99 for a download on iTunes, or $29.99 to watch "Mulan" on Disney+ next month. Most commonly (or at least before the current pandemic hit), it is someone going to a cinema and paying $15 for a ticket to go and see your movie, or someone paying $11.99 every month for an SVOD (“Subscription Video On Demand”) service like Netflix or Hulu.
These are all different forms of distribution, each with a different model but working on the same principle: distributors (via a selection of exhibitors) provide a platform, a venue, or a marketplace for audiences to consume your product, and in return they collect the audience’s payments and funnel them back to you and your investors.
This is, of course, a very simplified description of a complicated process, but at the same time, the entire multi-billion dollar entertainment industry is summarized right there.
The distribution landscape is constantly evolving. Distribution platforms come and go, and new and disruptive technology shakes up the models from time to time. Prices fluctuate and the market shifts, but the principles remain the same: filmmakers must appeal to viewers and persuade them to spend their money viewing whatever new content the filmmakers put out.
The successful financing of a project at the right budget is inextricably linked to its potential distribution and the money that it can earn when made available to the public. Whichever stage of the financing or production process you are at, you can never forget this. There needs to be a direct link between your budget and the market. You can’t get that balance right unless you pay attention to the distribution process.
For example, YouTube is a distribution platform. Even new services like TikTok and Instagram Reels are distribution platforms that enable content creators to reach an audience.
But nobody is really paying to consume your content on those platforms. Because of that, filmmakers are not spending significant sums of money to produce that content (apart from the tiny percentage at the top that can actually generate advertising and sponsorship revenues). It just wouldn’t make sense to spend $1m on a YouTube video that nobody will pay to see.
This shows the direct correlation between distribution (encompassing the amount of money that a viewer will pay to see your content) and financing (the amount of money that someone will spend to create that content).
At the other end of the scale, the producers of “Transformers: Revenge of the Fallen” were comfortable spending $200m to make that movie because, based on the successful distribution of the first installment of that film franchise, the market indicated that the budget could be justified by the expected distribution revenues. An estimated final gross of $836m proved them correct.
These are great examples of how the distribution process helps to define what your budget should be. Too many filmmakers budget their projects way too highly, at a level that is disproportionate to their sales and distribution projections.
When that happens, their projects either don’t get made in the first place, or if they do, they lose a significant amount of money, which is bad for the investor, and can be fatal for a filmmaker and their career.
And that is why understanding the distribution process is so crucial to any filmmaker trying to make it in the industry nowadays.
The market will always tell you what your project is worth. A filmmaker must be aware of the market and listen to what it is telling them.
Just as you wouldn’t spend $1m to create that YouTube video that nobody will pay to watch, you shouldn’t be looking to spend $10m on a film that is only projected to collect $2m in sales MG's and distribution receipts.
If you want to raise significant investment from external financiers for your project, you will need to understand how distribution works and where you will fit into the process. Because when you or your producers meet with those financiers, they will inevitably ask the questions: “How am I going to get my money back, and how am I going to make a profit?”
You’ll need to have an answer for them. Fortunately, if you understand the distribution process, this shouldn’t be a problem.
To learn more about the Sales & Distribution process, check out our book on the topic: HOW THE HELL… DO I Get My Film Financed: Book Two: Sales & Distribution by Ricky Margolis. For more information on other books in this series, check out all our current releases here.
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