IFH 374: 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 them of that 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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