Understanding the difference between an LOI and a Pre-Sale

A few weeks back I did a post on how to get a Letter of Intent from a Sales Agent.  You can read that post here.  However, I realized it might not be a bad idea to step back and examine the differences between a Letter of intent and a Pre-Sale.  While I touch on it in the Rules for getting a Letter of intent blog, It seemed like the topic was worth a little bit more explanation.

The very basics of the difference between the two is that a pre-sale is a document that has a proven value.  It’s a document that says once you deliver the completed film to the sales agent/distributor you will receive a check for an agreed upon amount.  Generally they’ll come coupled with a completion bond.  If you get a presale from the right sales agent/distributor, then this document is serious enough you could take it to an entertainment bank and take out a loan against it. 

A letter of intent is a much less serious document.  It essentially guarantees that a sales agent will review a film once it’s completed and if it passes quality concerns, they’ll make an offer to represent the film at that point in time.  This document has no monetary value, but prove to investors that you have access to distribution.

RELATED: 5 RULES FOR AN LOI FROM A SALES AGENT

The reality is that while pre-sales still happen, the likelyhood of getting one isn’t very high for the vast majority of filmmakers. 

In an ideal world, every filmmaker would be able to get presales and fund most if not all of their movie on them.  Unfortunately, we do not live in an ideal world.  With the glut of content currently being produced, most filmmakers should consider themselves lucky to get a Letter of Intent. 

The reason a Sales Agent or a Distributor would pre-buy a movie is so they know they’ll be able to fill the programming slots when the time comes.  It used to be that if they pre-bought content, they could get it at a lower cost than when they bought it after it was completed. 

Unfortunately, due to a glut of equity financing in the market that is no longer the case.  With how many films are being made every year, the likelihood of them being unable to find suitable content is slim.  That’s why the only people still buying content require reputable directors and recognizable name talent. 

Now as then, the only reason to pre-buy is so you can get the films you need when you need them.  Given the glut of content filling the market place at the lower levels, the only films worth pre-buying have to be very high quality, with very high quality assets.

​In order to get a presale, you need 3 things:

• The director must have a proven track record of 3+ films in a similar genre to the movie you’re producing now
• some level of recognize name talent,
• The film must not be execution dependent.

All of this really boils down to distributors want to know that the movie they’re buying before it’s made will meet the needs of the outlets the distributor intends to release the film on.

That’s why the director’s track record is so important, and the notoriety of the cast is also a huge selling point.  It’s also where the idea of execution dependence comes in.  By Execution dependent, I mean that the film must not rely on intricacies of good execution to be profitable.  Something like Moonlight is very execution dependent, whereas the Expendibles 4 is not.

Pre-selling your film is also if the film is based on well-known existing source material.  This could be a long running series of books that might have flown under the radar of other movie producers, a recognizable web series, or even a video game.  Uwe Boll made his career by pre-selling terrible movies based on video games.  Of course, he also had the help of some very lenient German Tax incentives.

Letters of intent are much easier to get, as they’re a much less severe document.  If you have a strong relationship with a filmmaker, it’s very possible you could get a letter of intent. It’s also possible that if you or your producer’s rep know what they’re doing, they can work with the right sales agents to escalate the document into a pre-sale once the package comes together.

Thank you very much for reading.  I do a lot of work in helping to procure letters of intent for filmmakers if you’d like to learn more, submit your project or book a call on clarity.  I also offer a program that teaches you how to get them yourself.  If you'd like to find out more about that program, as well as what the next steps you should take in building your film career are, then you should book a FREE Executive Producer Expressway Strategy Session, powered by clarity.   In it I'll help you figure out where you are as an executive Producer, and what the next steps in your filmmaking career are.  

https://clarity.fm/benyennie/StrategySession

Also, if you appreciate the content I write for this blog, please consider supporting me on patreon.  If you can’t afford my rates on Clarity, I do a monthly livestream where I might just answer your questions.

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