You’ve made your film, you’ve been to the festivals and wow, you’ve been picked up by a distribution company. You’re not an idiot, you don’t want this deal to slip away from you and so you sign the first contract that they shove under your nose. Distribution seems to go well, you get a theatrical and DVD release and the money starts to come rolling in. Only not quite so much of it is rolling in as you suspect there should be. You contact the distribution company and get passed around the phone system like they can smell your bad breath or something. After hitting a blank wall you sit back, swear and resolve to be more careful when you sign a contract next time and make sure that you have a full audit clause put in there.
Distribution companies are in the business to make money, and the less they have to give to you, the filmmaker, the more they can keep for themselves. When they take on a film, distribution companies have a variety of costs to cover, from duplication of the film to marketing it and brokering deals for its release. Expenses of this sort may or may not come out of the filmmaker’s share of the profit and so accounts of how much money was spent on what are supposed to be carefully kept by the distribution company. However, underreporting, mislabeling and other grey practices mean that accounts may not always be kept as carefully as they should. Since they are in the business of making money, more often than not, the distribution company will put down any errors in their favour and wait to be corrected, relying on they fact that they so seldom are.
This is where the audit clause of the contract comes in handy to the filmmaker. They can use this and exercise their right to go through the distribution companies books, make a note of any monies they might be owed and claim them back. Understandably, this is not something the distribution company wants to be subject to and so they often attempt to limit the power of the audit or remove the clause from the contract altogether.
Here are some of the restrictions they may make
- the time and place of the audit
- who can choose the auditor
- how often and audit can occur
- how long the filmmaker has to demand an audit
- choosing who pays for the audit
- which books and ledgers the auditor has access to; the general ones of the whole company or just the ones provided by the distribution company; those of parent and subsidiary companies; those of any third party distributors
As a filmmaker you should be wary of these limitations as the audit is often your only recourse if you fear something fishy is going on. One apocryphal story tells of how auditors were given a workspace in a cramped and windowless room, not allowed to eat at the company caferteria, were not allowed to photocopy documents and were not given documents in chronological order or allowed to see them twice. Another tells of audits uncovering £1000 lunches and of paying overhead costs, which included the building rent.
Make sure you know what you are looking for in a contract before one is offered to you – you might not always have time to go away and give it our full consideration. A working knowledge of the basic defensive necessities can prevent a whole lot of heartache.
James has been out of university for a year now and no-one has walked up and offered him a job - yet.
He is, at the moment seeking shelter and solace in the warm bosom of a Raindance internship and hoping that the recession will have gone away by the time he emerges from the cocoon-like cellar.
At the moment he hones his (already razor-sharp) skills by writing articles and timetables for the above mentioned festival company.
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