Movie studios fund the making of movies; they pay the salaries for the actors and crew, fund the creation of sets and in most cases pay to publicize the movie. Before the movie even comes to a theater near you, most of these expenses have been recouped by selling the distribution rights to show the movie. A license is simply legal permission to show a movie and charge admission. In many cases, a studio owns a distribution company or actually is the distribution company, which makes it difficult for independent distributors to get the hottest movies. Distribution companies also sell the rights to make toys, apparel and other accessories based on a film's characters and story.
Attend a studio sneak preview. Movies are usually put first in theatrical release, then sold as DVDs, then sold on pay-per-view channels and lastly shown on free television. Although the big companies can obtain distribution rights before the film is even finished, most small distributors attend a studio's sneak preview, which is used as a marketing tool to increased licensing bids.
Bid on the movie. The more "buzz" surrounding a movie, the higher the price of licensing. In fact, licensing agreements for the most popular movies may be sold before the film is finished. The better prices will be found from small production companies and lesser-known movies, but you run the risk that fewer people will want to see those films. As with any purchase, have the funds on hand before placing a bid; not being able to pay for a license could ruin your chances of future licensing.
Have a theater in place to show the movie. Most of the profit from ticket sales goes toward paying for the license. Movie theaters make their profit mainly on the concession stand items like popcorn, candy and soda. Having these kinds of extras available ensures that you can make a profit from the licensing purchase.
Consider second-run movies for independent theaters. Think about the dollar theaters in your area that show movies that have already had general release. The ticket price is lower, but so is the licensing cost for second-run movies. You may be able to charge the same prices for concession items and make a profit similar to first-run movies.
Consider the online revolution in your plans. The movie industry concedes that online distribution is the wave of the future, but no one knows yet how that will work. Add a portion of online sales to your business plan to be ready for the online movie revolution. It could be that soon movies will be released directly to home computers and theaters simultaneously.
Get a license for nonprofit only. If you want to distribute a movie and not charge admission, you can get an umbrella license offered by the Motion Picture Licensing Corporation. The license is good for 1 year but does not cover charging admission for the showing or publicly advertising the movie.
Picking a movie that becomes popular after being released is a great way to capitalize on licensing opportunities. Picking these movies is a combination of luck and intuition, so go with your gut when you can.
Based in southern California, Morgan is a full-time financial analyst. She has been writing since 1995, including articles for "Wet Set Gazette" and "The American Encyclopedia of Novels". She has been writing for eHow since 2008. She holds a Bachelor of Arts from the University of Southern California and a Master of Business Arts from Cal State Dominguez Hills.