The Sales Agent Deal Explained (Before You Sign One)
In today’s Newsletter I’m going to do a deep dive into a sales agent deal so that you can engage this type of company with confidence.
Knowing what this type of deal looks like, what to expect when negotiating it, and how to get the best deal is vital for ensuring your film has the best chance of recouping its investment.
But it’s not just about the deal. It’s also about ensuring you have attached the right sales agent to begin with. So I’ll give you some red flags and green lights to look out for along the way.
Once you understand how to navigate this deal, you will be ready to approach and attach a sales agent to your film.
Unfortunately, most filmmakers only learn about this when they are already pitching their film, or even after they’ve done their first deal.
By then, the die has been cast and your film is likely locked away for 12–15 years, sometimes more.
So it goes without saying that getting this right the first time is the aim.
Let’s begin.
The main deal points
The terms you want to be focused on in the early stages of negotiation are:
Minimum Guarantee (MG)
Definition: The amount the sales agent will pay as an advance against future sales.
Range: $0 – $200k for a debut feature film
Term
Definition: How long the agreement will last.
Range: 12 – 25 years
Sales Commission
Definition: What percentage will the sales agent charge for providing their service.
Range: 15 – 25%
Marketing expense cap
Definition: What amount of marketing expenses will the sales agent charge against your film to support its promotional efforts.
Range: $15 – 50k
Territory
Definition: The countries the sales agent has the exclusive right to sell your film.
Range: Single territory to worldwide.
Importantly, if a sales agent (or distributor for that matter) makes an offer that only contains the MG, ask them to provide the main deal terms.
Let’s talk about why.
The negotiation
In any sales negotiation, it’s rarely only about the amount being paid. As the phrase goes, the devil is in the details.
This is why it’s so important to ask for the main deal terms, then negotiate on these points before you enter into a long-form agreement.
The way to negotiate these deal points is to imagine them like levers or pulleys. If you pull down on one to get a better position, the other one may increase.
For example, let’s say you don’t need a certain level of MG to finance the film. Maybe you already have a bunch of equity. That puts you in a strong negotiating position, because now you can negotiate a lower MG in return for a lower commission. And if the film sells well, this will allow you to recoup more from each sale.
On the flip side, if you need a bigger MG to finance the film, you can expect the sales agent to negotiate hard for a higher commission and cost cap.
The fine print
Once you’ve agreed on the main deal points, you want to look out for some additional clauses:
Distribution Territory
Is the sales agent also taking rights to distribute the film in a local territory?
This happens where the sales agent also has a distribution arm in their local country. But this means that you will miss out on a deal in that territory, as the sales agent is wrapping it up in the sales agreement.
This isn’t necessarily a bad thing, just ensure that the MG reflects the addition of this territory.
Sales approval thresholds
Certain contracts allow the sales agent to close deals without producer approval above a specific price point, but require approval if the sale is below a minimum level. If this threshold is too low, your film could be sold cheaply without your input.
Audit rights
Many agreements allow producers to audit the sales agent’s books, but often only for a limited number of years and usually at the producer’s expense. It’s important to ensure you have a meaningful right to verify revenue reporting. Engaging a collection agency is a great way to ensure reporting is done correctly and honestly.
Delivery obligations
Sales agents normally require extensive delivery materials before paying an advance, including contracts, chain of title, music licenses, stills, and technical masters. If these aren’t delivered correctly, or if a film fails to pass a Quality Control check, the advance can be delayed or withheld.
Red flags
Now we know how to structure the deal, let’s discuss some potential red flags to look out for:
Reputation
The best thing you can do when deciding whether to work with a sales agent is to speak with other producers. Ideally, producers who have worked with them, otherwise active producers who know the inside scoop on the industry.
This is as simple as looking at the sales agent’s catalogue and finding the producers of those films, then reaching out to them.
If a sales agent has a bad reputation, don’t work with them. No sales agent is perfect and so you might hear one or two bad stories, but if the general message is “stay away” you should heed that advice. I learnt this the hard way.
Inactivity
Another red flag is if the sales agent doesn’t look very active. Maybe their website hasn’t been updated with new films, or they aren’t attending markets.
You want to avoid working with a sales agent who isn’t all in on the business, or has cut down on activity due to financial issues.
No similar films
Finally, prioritise sales agents who have actually sold films similar to your own. It means they have buyers in their network looking for those types of films.
On the flip side, if they haven’t sold films like yours you need to question whether buyers exist in their network, or if they are using your film as a guinea pig to test the waters in a new genre.
Green lights
Reputation
Just as reputation is a red flag, it’s also a green light. If you start hearing positive things about a sales agent from numerous people, it’s a solid sign that the company is reputable and their word is meaningful.
Recent big wins / sales
A recent big win or sale by the sales agency demonstrates two things:
The sales agent’s coffers are likely full after the win, making them more likely to reinvest that money into new product and their business.
Their confidence will be riding high, and sales is a skill that feeds off confidence.
Track record
Finally, we’re looking for tenure.
Has the company been around for several years, or if it’s a new company have the owners been around for several years in sales roles at a different company?
You want to ensure that the company has the skillset and experience to deliver. But tenure alone is not enough, it must be coupled with reputation.
Well, that's it for this week's issue.
See you next time.
Alexi
