Rent-a-System Agreement

In a rent-a-system agreement, a producer licenses certain film rights to a distribution company, typically a studio, for a limited term, but the distribution company is not required to pay an advance to the producer to either finance production or take delivery of the film.

In fact, in some cases the producer pays all distribution expenses relating to the film.

In exchange for the absence of fixed payments by the distribution company, the distribution company agrees to a very low distribution fee, and the remaining revenues are remitted to the producer. In essence, the distribution company avoids any risk of loss relating to the film, particularly if the distribution company does not pay distribution expenses, and the producer bears the full risk and reward of the success or failure of the film.

Because of the absence of financial commitment by the distribution company, and the limited upside from the low fee, distribution companies have little incentive to adequately market and push a rent-a-system film, so such films often flop.

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