Thursday, January 30, 2020

Pre-sale Financing

Before or during production, a producer may go to various distributors for commitments to distribute the film after it is made. To work effectively, such commitments must include advances or minimum guarantees which may cover all or some of the film’s production and post-production costs.

This is known as “pre-sale financing.” The distributor either (1) pays a cash advance upon signing of the agreement or in multiple installments over the course of production, (2) guarantees to pay that advance upon completion and delivery of the film (and the minimum guarantee is used as collateral for a production loan), (3) pays a share of the distribution revenues, or (4) in limited cases, pays a flat buy-out fee.

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