Finding A Sales Agent to Trust is A Tough Call

If you've ever spent time at the American Film Market, chances are you noticed the large number of sales agents that are out there selling films. There is also a huge range in the quality of films being handled by agents and the quality of individuals selling those films. There are always new agencies springing up (often from the ashes of old ones) and just as many who disappear.

This is a little scary if you're using a sales agent to sell your film because it is difficult to figure out who you can trust and who is going to be in business six months from now, let alone the seven or more years that are typical terms for agreements with sales agents. One form of protection is to build in a right to terminate your agreement if the sales agent goes bankrupt or ceases doing business - although this won't help if the sales agent assigns its rights in your film before dropping out of sight. Another prophylactic used by producers is to insist that all of the sale proceeds from their film are paid into a collection account.

There are only a small number of companies world-wide that provide this service. For a fee of approximately 1% of the proceeds collected plus expenses (which are generally minimal) these companies will act as a trustee to collect and pay out money from distributors and broadcasters who have purchased rights in a film. This money is used firstly to pay the fees and expenses of the collection agent, then generally the fees and expenses of the sales agent, with the balance being remitted to the producer or investors in the film. This so-called waterfall is set out in a collection account agreement that is signed by those who have an interest in the proceeds.

The use of a collection agent avoids temptation on the part of the sales agent to keep all of the proceeds of a film, especially when times are tough. And the proceeds will not be lost if the agent goes belly-up. It also means that money is paid out when it is due rather than when the sales agent feels like disbursing it. At the same time, it deals with the common complaint about sales agents that they do not report on a regular basis, as the collection agent reports to all parties on a regular basis.

Another advantage of collection agents is that arrangements can be made to have royalties (such as SAG residuals) paid from the collection account. Sales agents are generally not willing to sign guild assumption agreements and producers are at risk of having to pay residuals on sales before they've received any revenue. Using the collection account to pay these royalties means that the producer will not receive threatening phone calls from the guilds years after the film has been completed Some sales agents are reluctant to use a collection agent because they want to control the funds that are received on a film and because they don't want to pay a fee to a collection agent. They also argue that despite the name, collection houses are not effective at collecting accounts from delinquent purchasers. However, reputable sales companies are generally willing to use a collection agent and collection agents are at least as effective as sales agents in getting buyers to pay up. The small fee they charge is well worth the comfort to producers that proceeds from their film will not end up in the wrong hands.
- Kim Roberts.