What to Do When a Distributor Goes Bankrupt
Read this if you:
- have been using Distribber
- need to know what to do if your distributor collapses
- want to reduce the chance this will happen to you
When Distribber was launched in 2007, it provided a new way for filmmakers to get their films on iTunes and other digital platforms. Instead of having to find a traditional distributor and split the revenues from digital platforms, filmmakers paid Distribber a one-time fee and received 100% of the revenues from digital platforms. For many years Distribber provided this service to independents, guaranteeing they would get on iTunes, and passing on all of the revenues from TVOD platforms.
It was shocking to hear that Distribber and its parent company GODIGITAL have collapsed financially. While much is still unclear, here’s a breakdown of what I’ve learned so far.
NOTE: The following is not legal advice. I recommend you speak to an attorney for legal guidance.
1. Distribber is in dire financial straits. It has not paid many filmmakers for many months the money it owes them from the revenues received from platforms. Some other filmmakers have paid Distribber to place their films on platforms but Distribber has not done so.
2. Rather than entering into a bankruptcy process, Distribber is utilizing an ABC (Assignment for the Benefit of Creditors) process.
3. Distribber is using GlassRatner to manage the ABC process. Senior Managing Directors Seth Freeman (San Francisco Office: 425 California Street Suite 900 San Francisco, CA 94104 – 415.839-.9280 x 700) and George Demos (Orange County Office: 19800 MacArthur Blvd Suite 820, Irvine, CA 92612 – 949.429.4288) will be leading the process. (see #8 below)
4. The best way to contact Distribber is to email: [email protected]
When filmmakers contact Distribber, they can:
- terminate their agreement with them (see termination language below)
- request that Distribber take down their film from each platform
- request that Distribber release all rights back to them
- request that Distribber pay all monies owed to them and provide a full accounting of all revenues Distribber received on their behalf
- request that Distribber ask the platforms to pay all future revenues directly to the filmmakers
- request that Distribber refund any fees paid to them for services not provided
5. Here is the termination language in many Distribber agreements:
Either Party may terminate this Agreement by written notice to the other:
1 in the event of a material uncured breach or default by the other Party of any of its obligations under this Agreement, such to a thirty (30) day cure period (if the breach is curable); and/or
2 in the event that the other Party (i) institutes or otherwise becomes a party, voluntarily or involuntarily, to a proceeding alleging or pertaining to the insolvency or bankruptcy of that Party; (ii) is dissolved or liquidated; (iii) makes an assignment of its material assets for the benefit of creditors; and/or (iv) initiates or is subject to the reorganization proceedings.
Upon any such termination, GoDigital shall be relieved of all obligations to Licensor hereunder, provided Licensor shall remain obligated to pay the Delivery Fee.
Under this language, filmmakers can terminate their agreement immediately. They do not have to allow a 30-day cure period since Distribber has already made “an assignment of its material assets for the benefit of creditors.”
6. Filmmakers can also contact the platforms where their films are available:
- alerting them to the fact that they have terminated their relationship with Distribber
- requesting that all future payments be paid directly to them (rather than Distribber)
Platforms never want to interact directly with filmmakers and make it very difficult for filmmakers to contact them. However, this is a critical situation affecting many filmmakers that the platforms are well aware of. Netflix is already transferring titles from Distribber to individual filmmakers, enabling them to receive payments directly.
Filmmakers should request that all other platforms do the same. Hulu, Amazon, iTunes, and other platforms should follow Netflix’s example and help filmmakers through this crisis.
While it is possible for platforms to simply change the payee as Netflix has done, some may require that each title be first taken down (by Distribber or the platform itself) before the film can be put back on that platform via another aggregator. This will require the filmmaker to find and pay another aggregator. I don’t know how much this will cost or how long it will take.
7. Filmmakers should be very careful about selecting a new aggregator. They should do due diligence to make sure that the aggregator:
- has direct deals with each platform Distribber put their film on
- can efficiently place their film on these platforms and possibly others
- has competitive rates
- has good customer service, enabling filmmakers to speak with someone when needed
- is financially stable, ideally part of a larger business that generates income from other services
8. Filmmakers can also contact GlassRatner directly to:
- request the payment of all monies owed to them and a full accounting of all revenues Distribber received on their behalf
- request the refund of all fees paid to Distribber for services not provided
- request that all platforms be instructed to pay all future revenues directly to them
9. Filmmakers whose films Distribber failed to put on platforms even though it was paid to do so, are in a special position. They don’t have to get their films removed from platforms; no revenues are owed them by Distribber.
It’s possible that they may get their initial fees refunded via their credit card companies. See the following post from Protect Yourself From Distribber:
Here is a copy of the letter that Laura sent to her credit card company:
I am writing to dispute a charge on my Credit Card on November 14, 2018, to the company GoDigital in the amount of $1,520.00. This was supposed to be for aggregator services to place my digital content on iTunes and Amazon. I had sent them all the needed materials and they never completed the work. My last day of communication with them was in March 2019 and I never heard from them again. I just discovered that the company has recently closed down and is filing for bankruptcy and is currently working with bankruptcy specialist GlassRatner. GoDigital will be owing to its clients’ hundreds of thousands of dollars and they have not been communicating with their clients. I would like this charge to be reversed. Thank you!
10. Filmmakers must be determined, persistent, and loud to maximize their chances of succeeding. When contacting Distribber, the platforms, and GlassRatner, filmmakers must be clear about what they want and unwilling to take no, or silence, for an answer. The squeakier the wheel, the better. Filmmakers can have an attorney write a letter discussing possible litigation or make it clear they will hire an attorney if they don’t get a satisfactory response. Either way, they need to let the decision-makers understand that they are serious and committed to achieving a fair outcome. They fought hard to make their film and bring it into the world and they must stay as tenacious as necessary.
WHAT TO DO IF YOUR DISTRIBUTOR GOES UNDER
The Distribber situation is a cautionary tale. Here are the key takeaways.
1) If your distributor becomes insolvent, files a petition for bankruptcy, or makes an assignment for the benefit of creditors, act immediately. Speak with an attorney and other filmmakers to learn as much as you can.
2) You may be able to easily terminate your agreement with your distributor.
3) You can request that the distributor immediately provide letters of direction to all sublicenses exploiting your film directing the payment of all future advances, fees, royalties and commissions to you.
4) You can request that your distributor pay all the monies owed to you and provide a full accounting of all revenues received.
5) You can contact digital platforms, alert them to the fact that you have terminated your relationship with the distributor, and request that all future revenues be paid directly to you.
6) If the distributor is using an assignment for the benefit of creditors process, you can contact the firm managing the ABC to request: the payment of all monies owed to you and a full accounting, the refund of any fees paid to the distributor for services not provided, and that all platforms be instructed to pay all future revenues directly to you.
7) You may be able to get a full refund from your credit card company for any services paid for but not provided by your distributor.
8) You must be determined, persistent, and loud to succeed.
HOW TO REDUCE THE CHANCE THIS WILL HAPPEN TO YOU
1) Before you sign any agreement:
- do due diligence about the company with 5 filmmakers currently working with them (in addition to any references the company provides)
- make sure the agreement includes fair bankruptcy, termination, and dispute resolution language
- have an experienced attorney or producer review your agreement before signing
- negotiate for a shorter term
- avoid automatic renewal clauses
2) After you have signed your agreement:
- make sure you receive revenue reports and payments on time and review them carefully. If they are delayed significantly, determine whether the delay is a sign of underlying financial instability. If so, take steps to protect yourself from an impending financial meltdown.
- pay attention to reports and articles in various publications and online that may give you a sense of the distributor’s financial health
Peter Broderick is President of Paradigm Consulting, which helps filmmakers and media companies develop strategies to maximize distribution, audience, and revenues.His seminal article, “Maximizing Distribution,” has been reprinted in publications around the world. His reports, “Welcome to the New World of Distribution” and “Declaration of Independence” are concise guides to the latest distribution strategies.