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Rent a Distributor: When a Producer Rises to Studio-like Clout

The rent-a-distributor model is rarely used and limited to producers with enough of a checkbook and a track record they can pay for production costs and bargain for reduced distribution fees. The most famous example of this model is Lucasfilm’s deal with 20th Century Fox for the three Star Wars prequels, Episodes I, II, and III in the Star Wars saga. Due to the success of the original Star Wars trilogy, George Lucas had the financing and leverage to pay for the three prequels himself.

Fox was reputedly investing no direct production costs, receiving a negotiated fee for distributing the Star Wars films.23 This arrangement of only earning fees without taking any risk, while the producer in essence utilizes the studio’s distribution Financing Production: Studios and Networks as Venture Capitalists 99 operations (e.g., theatrical, video) and maintains the upside for having financed production, is often unfairly characterized as riskfree to the studio.

By unfairly characterized, I mean that this premise tends to ignore the opportunity costs; Fox took on the responsibility and management of releasing these films, which was significant because they were destined to become the event titles of their respective years and require appropriate associated management and overhead time.

Presumably, the only reason a studio would agree to take on this level of time commitment is if (1) it was important to have a relationship with the talent and/or property and (2) if it believed even with no or minimal upside ownership stake it could earn significant distribution fees. This latter point underscores that the films in question need to be of mega box office stature, which leads to the corollary benefit of the studio leveraging one of the most desired films in its portfolio.

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While packaging is theoretically illegal under anti-trust laws prohibiting tying arrangements, if studio X comes to a client with a slate of pictures and one of those pictures is a must have picture, the wheels are greased for the other releases. All of these elements were satisfied:

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Fox had been the home/distributor of the original Star Wars films, clearly wanted to maintain a relationship with George Lucas, believed each film had the potential to generate hundreds of millions of dollars from which it could generate significant fees, and was ensured of multiple tent pole releases anchoring its summer slate over a number of years (from which it could directly or indirectly leverage other films).

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