Legal Definitions - formula deal

A formula deal is a specific type of contract in the film industry where a movie distributor enters into an agreement with a cinema chain to exhibit a particular feature film across all or a significant number of its theaters. Under this arrangement, the distributor's payment is calculated as a predetermined percentage of the total ticket sales generated by all the participating theaters nationwide.

• Example 1: Major Studio Blockbuster Release

  Imagine "Galactic Films," a major movie distributor, has produced a highly anticipated science fiction epic, "Starfall Chronicles." They enter into a formula deal with "CinePlex United," a national cinema chain operating 400 theaters across the country. The agreement dictates that "CinePlex United" will screen "Starfall Chronicles" in all its locations, and "Galactic Films" will receive 65% of the total gross ticket sales collected from all 400 theaters during the film's entire theatrical run. This ensures a wide release and a standardized revenue split based on the film's overall performance across the entire chain.

  This illustrates a formula deal because it involves a distributor ("Galactic Films") and a cinema circuit ("CinePlex United") agreeing to show a feature film ("Starfall Chronicles") in all their theaters, with the distributor's compensation being a fixed percentage (65%) of the combined national gross receipts from those theaters.

• Example 2: Independent Film Distribution

  "IndieLens Distribution," a smaller company specializing in independent cinema, acquires the rights to a critically acclaimed documentary titled "The Silent Forest." To give the film a broad reach, they secure a formula deal with "ArtHouse Collective," a circuit of 50 independent cinemas spread across various major cities. The terms specify that "ArtHouse Collective" will exhibit "The Silent Forest" in all its venues, and "IndieLens Distribution" will receive 50% of the cumulative box office revenue generated by all 50 theaters. This allows the independent film to reach a wider audience through a single, comprehensive agreement.

  This scenario demonstrates a formula deal as an independent distributor ("IndieLens Distribution") and a cinema circuit ("ArtHouse Collective") agree to screen a film ("The Silent Forest") across all their locations, with the distributor's payment being a set percentage (50%) of the total ticket sales from all those participating theaters.