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Predatory Film Distributors: The Bankrupt Reboot Scam

I’ve spoken about predatory film distributors before on the show (The Dark Underbelly of Predatory Film Distributors – BEWARE!) but I just discovered how some of these scumbags have figured out how to absolutely screw over filmmakers using a legal loophole. It’s called the Bankrupt Reboot Distribution Scam.

Here’s how they do it. A predatory film distributor will prey on desperate indie filmmakers and will try to obtain the rights to as many low budget indie films as they can, usually for no money upfront in a short period of time. Let’s say 1-2 years, if not faster. During that time they sell-off the rights in one big transaction to a bunch of different platforms, outlets, streaming, foreign agents, etc.

Now here’s the rub, rather than actually paying filmmakers what they are owed, the distributor files for bankruptcy protection, which is extremely easy to do in the United States. So you must be asking

“If the distributor goes bankrupt, what happened to the rights of all those films?”

Glad you asked. These bottom dwellers go to the bankruptcy court hearing and then buy back all the rights to the catalog of films from their own bankrupt company. The court has no other choice because that is how the bankruptcy law is written and there’s no one else there to buy these assets.

These bastards then form a new company and assign the newly purchased film catalog to themselves through that company. Now they are no longer legally obligated to pay the filmmakers (or anyone else they owe money to). So they own the film you killed yourself to make for pennies on the dollars and they never have to pay you a thing.

This is made possible because of the original contract the filmmaker signed, which has a clause absolving the distributor in the event of bankruptcy. Then to add insult to injury when the rights they originally sold off expire, they re-sell them again.

These predators run this scam over and over and over with new companies formed each time. This is an extremely profitable business model. It’s not ethical but it is legal.

In this episode, I breakdown a case study of how one of these predatory film distributors pulled this off and I also go over how you can protect yourself. Make sure you take some notes because this episode is a doozy!

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EPISODE TRANSCRIPT

Alex Ferrari 2:55
So guys, today, I have a interesting episode, I kind of started this new series that I'm going to be doing on the podcast every once in a while. And it's going to be entitled predatory film distributors, and the different scams and things that they do to screw over filmmakers. And I'm going to be bringing these little ways out into the into the light out of the corners in the darkness in the back alleys of film distribution. And before I get started, I wanted to give you a quick update on the tug situation. If you have not listened to Episode 373, definitely check that out. And it breaks down everything that we know to date about the closing of tug, and how it's affecting hundreds, if not 1000s of filmmakers. And I know just from the few filmmakers that I've spoken to that we're easily into the hundreds of 1000s if not millions of dollars that are owed to filmmakers and also two customers that bought tickets through a tug screening. So if you want to get the latest updates on all of that, you can join my facebook group, which was the protect yourself from distributor Facebook group. But now we're transitioning that in to protect yourself from predatory film distributors slash aggregators. And you can get to it by going to indie film hustle.com Ford slash protect yourself. That's where all the latest information on tugg other filmmakers experience and what's going on with other predatory film distributors, and or aggregators, or, you know, just shenanigans in general in the distribution world. That's where filmmakers are going to, to inform and educate each other. And that little group that I started for, basically to help distributor victims has turned into a wonderful community of filmmakers there to help and assist and answer questions about distribution. And that's why it's evolving into this app. tugg I felt that it's time to, to evolve that group. So just go to indie film hustle.com forward slash protect yourself and sign up. Now, before I get into this scam that predatory film distributors use, I want to make it really clear that I am not bashing all film distributors. It is I want to make that very crystal clear. There are good film distributors out there. I do believe that there are many more bad distributors, I think it's harder to find a good distributor than it is to find a bad or predatory film distributor without question. So please, anytime I hear me talk about predatory film distributors, there's a reason why I'm saying predatory. It's not all film distributors. I myself am with a film distributor for this is Meg. And for parts of this is Meg. And for on the corner of ego and desire. I've partnered with this distribution company, which is indie REITs. And I love them, they're, they're great. And there are they are a unicorn in the distribution world. And there are other good ones as well please do your own homework, please do your own research and due diligence on any film distributor that you work on. But what I'm talking about in these, these episodes that I'm going to be doing over the course of the year, exposing these kind of slimy, ridiculous, you know, immoral techniques that these guys are using to screw over filmmakers. Just be aware that you have to be looking out for this with any and all distribution contracts that you might sign. So let's get into it, guys. So today's episode is about the bankrupt reboot scam. Now, I been in this business a long time. And as you guys know, I'm in this I'm in deep, especially now getting into the distribution side of the business. I had never heard of this scam before. And it's been going on for years. And the scam is done. Not only in our industry, but many industries around the world. And this is how it goes guys. A predatory film distributor will prey on desperate independent filmmakers. And we'll try to obtain the rights to as many low budget indie films as they can in for no money upfront. Of course, no MGS, no minimum guarantees in a short period of time, let's say a year or two, if not faster. During this time, they will package large groups, if not all of their films into kind of clusters into packages into transactions that they can sell them off to. So if they have 50 movies, they'll sell all 50 movies off as a package to foreign agents, streaming services, other distribution outlets, wherever, wherever they think they can get some money. And they'll do that a bunch of times, of course, because you've signed a horrible deal in the first place with these guys. They will take forever, if anything to pay any money out and they'll probably won't even pay anything out at all. Now this is the rub guys, rather than actually paying the filmmakers that are owed money. And they've already screwed you over by packaging them out. And I talked a lot about that in my book, this predatory film distributor will then file for bankruptcy protection, because they're going to crank up a ton of money ton of debt, doing what they do. And filing for bankruptcy is fairly easy here in the United States. So then you must be asking yourself, but if distributor goes bankrupt, what happens to the rights to all those films? Well, I'm glad you asked guys, these bottom dwellers go to the bankruptcy court hearing and then buy back all the rights to the catalog of films from their own bank robbed company. The court has no other choice because there's nobody else there to buy it. So basically, someone they raise their they anybody here willing, willing to bid for this. And they go in and they buy it. So since nobody else is there to bid against them, they buy back the rights to your films, pennies on the dollar. But it even gets worse from there. These bastards then form a brand new company and assign all these newly purchased films to themselves through that company. Now because they did this, they are no longer legally obligated to pay any of the filmmakers any of the money that is owed to them. So they own the film that you killed yourself to make. And they buy it for pennies on the dollar. And they never pay you a thing. This is made possible because of the original contract that you signed as a filmmaker and the clause is absolving them in the event of a bankruptcy. And to add insult to injury, when the rights they originally sold off expire, they get to resell them again and Again, and again, these predators run this same grift, on filmmakers, again, and again and again. And each time they form new companies and new companies, this is an extremely profitable business model, not ethical in the least. But it is legal. Now you as a filmmaker can sue for this, and sometimes you'll win. But now you're looking at a lot of court costs to try to get the rights back to your film. And it might make sense if you have a large movie, and you feel that you can make money with it. But they are banking, that most of the filmmakers are either embarrassed or not able to, to do it, they're not savvy enough to do it, they're afraid to take them to court, all these different things. And, and they just bank on filmmakers just rolling over. And nine out of 10 will there'll be that one that squeaky wheel that makes a lot of noise. And they might just give that movie back just to shut them up. And that happens all the time. As I did more and more research about this, I was shocked at how prevalent it is in the industry, I can't believe I hadn't heard about it. This is one of those dirty secrets. Because there's predatory film distributors, there's there's people that will create a contract, that is obviously just misleading and completely in favor of that distribution company and worded in a way that you will never see a dime, there's that predatory guy. But then you've got this completely new level of scumbag that is literally coming after your film in a fraudulent way, knowing what they're going to do is going to screw you when you sign that that paper. It's it's unconscionable. And I just wanted to bring this up. And I wanted to put it out there. So filmmakers can be very aware of what the hell's going on. Now, during my research, I found a bunch of these cases of companies doing this. So I'm going to give you a little bit of a case study. Now I'm not going to name names, obviously, but I will give you rounded about estimates of what they did. So this distribution company, had her company declared insolvent let's say last year, and all of her company's films, which was about 350 films were deemed not to have any value to third parties. Because it's not really NASA. It's not a it's not a microwave, a computer office supplies, it's none of that. So they had no value. In other words, this distribution companies library was worthless in the courts eyes. And the company owed about $6.5 million to creditors, including many, many, many filmmakers. And the company assets were basically around $200,000. That's it. So then they create a separate company that then purchase all of their original all the original company's assets for about $150,000 because nobody else was there to bid. So this predatory distributor bankrupted their company, and bought back all of their films for about 200k saving themselves, about $5.8 million. I mean, you I mean, it's diabolical. It really is. But it is so immoral and so just horrible to do to people. It's amazing. And this company had done it multiple times. So how do you protect yourself as an independent filmmaker? Well, before I continue, I you have to understand I am not an attorney. And this is not legal advice, you should definitely reach out to an attorney, an entertainment attorney who understands entertainment law and distribution contracts. But to my understanding after talking to some attorneys, these are things that you can do to help protect yourself. First off, do some research. Start doing your homework on the company. Find out the owners of the company, how many times they've been they filed bankruptcy. How old is this distribution company? Is it a fly by night distribution company that just launched has in all these things you need to understand call filmmakers who were with them from their old company if they had an old company. call those filmmakers see what kind of experience they have with them. Don't ask the company for referrals because you're only going to get sweet people who are probably their best friends. So do your homework, do your research. You got to be careful about these little clauses, these little bs clauses that can literally Screw you. So first thing you need to do is include a clause in The contract that states that in the event of a bankruptcy, all rights revert back to the original owners. And make sure that your lawyer checks that language and make sure there is no way they can get out of it, make sure it's ironclad. And another thing you need to do is to make sure there's an official procedure outlining the steps in the event of a bankruptcy, and what needs to be done in order to get your film back. Again, please consult with an attorney about this. But this is just one of many clauses, and many little tricks that predatory film distributors use in their contracts to screw you over. I know of a specific I know this, a specific Sundance winning film and filmmaker who signed with a distribution company who went bankrupt and their Sundance winning film was locked up in bankruptcy court for three to four years. And that and by the time the filmmaker got that movie out, it was old news, it was done. If they would adjust put in a clause stating if the company goes bankrupt, all rights revert back, please check with an attorney on this and make sure that they go over every little clause with a fine tooth comb. And like I said, in my book, Rise of the entrepreneur do not get Uncle Bob who's a real estate attorney, he's not going to understand the minute language, that in clauses that will screw you as an independent filmmaker, you've got to get a seasoned entertainment attorney who knows film distribution contracts and is extremely savvy when doing it. But at the end of the day, guys, it's your responsibility to do as much homework as humanly possible. If you want to learn more tricks of predatory film distributors, I have an entire chapter actually two chapters, detailing all the little tricks and scams that they pull on filmmakers in my book, Rise of the film intrapreneur at WWW dot film biz book.com. And check it out there. Also, thank you so much, guys, for all the amazing reviews the Amazing love that I've gotten for on the corner of ego and desire, I am humbled that you guys love the film so much I truly, truly, truly appreciate all the love from the tribe. It is now available on prime on Amazon Prime if you want to watch it on Amazon Prime. And on Tuesday, if you want to watch it for free, if you want to go iTunes is there and of course on indie film, hustle TV, where you get these six hours plus of special features on how I made a $3,000 film at the Sundance Film Festival. And you can go to ego and desire film.com. And you can get links to all of those places there. And if you did see the movie, I need you to do me a favor, I need you to go to Amazon and leave a review, we need to get to 100 reviews before 30 days if we do, Amazon's algorithm is going to really give this a lot of juice. And that's really, really important. So please, if you see it even on another platform, and you have an Amazon account, please just do me a favor and leave a review there. And also there were a bunch of haters on IMDB that came out before the movie even was released and dropped our rating on IMDB and has been growing so much. Thank you so much for everybody that's gone on and rated it all you got to do is go on to IMDb and give us a good review, hopefully eight 910 stars if you like the film, and that really helps us out a lot as well it works with the algorithm on Amazon. So that's a little trick. By the way, if anybody is going and self releasing or self distributing their film on Amazon, those are some of the metrics that you need to hit to really get some love from Amazon's algorithm. So I hope this episode was of service to you guys. I hope it's if it just saves one filmmaker, the pain and suffering that I've seen so many other filmmakers go because they did not understand that this was a clause. This was a little trick that that these bastards do. I hope it really does help at least one person. And since you have listened to this, please share this. I want this information to get out to as many filmmakers as possible. So you don't if you don't want to share that the link, just tell them just get this information out there. I want this information out to as many people as humanly possible. If you want to get a quick link to this episode, you can share it it's indiefilmhustlecom/374. And there I will have links to the Facebook group to everything else that we talked about in the episode. And if just please just get this information out there. I really appreciate it. We're in this together. And I'm just truly tired of filmmakers being taken advantage of by these predatory film distribution companies and predatory sales agents and all the other you know just scum shark snakes that are in this side of the business. It is My goal in life to expose all of these little tricks and techniques as much as possible so you guys can be educated and protect yourself from these things. Because if you make a movie and you spend $500,000, if you spend $5, and it takes you a year to make and it's your baby, and all of a sudden one of these guys comes in and steals it from you, because you were ignorant to what they could do, then I have failed. So hopefully, I want all this information to get out there to help as many filmmakers as possible. Thank you for listening. As always, keep that hustle going. Keep that dream alive. And I'll talk to you soon.


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