Production contracts (pacts) have an extensive impact on the film making industry. A pact is an arrangement made between players, studios, and production companies. These pacts can force players to give studios a chance to purchase a script before other studios can see it, set up a profit scenario where individual players, studios, and company backers all share the profits made from the film, and a set up a distribution system where the studios distribution and marketing branches are used exclusively.
In the current market, these pacts have led to extremely successful business operations due to the preferential deals acquired by both sides. This can be seen by the overwhelming amount of movies in box office created by large studies, a good amount of which were engaging in pacts. These pacts help make the filmmaking process much more efficient. Two reasons that pacts have increased the efficiency of filmmaking is that they narrow down the selection of scripts studios have to go through and it helps ensure funding and loans. In the film making industries, there are millions of scripts being sent to studios and a ton more being pitched verbally. Studios don’t have time to read and listen to these opportunities, so having pacts with good writers and studios limits there options on scripts because they will be brought scripts by proven writers directly and they can purchase these scripts immediately. Second, it is easier to get funding. Banks often require a completion guarantee before supplying a loan. If banks know that the studio has an interest in the movie being finished, due to the sharing of profits, and that a large studio is producing the movie they are more likely to complete the movie. This is especially important with the rising cost to create films.
Unfortunately, pacts have a negative impact on the film industry and can also on the quality of texts. Pacts, to an extent, have made the film industry a closed market. With first look deals, scripts are sold without competition. Other studios never have an opportunity to bid on them and they never enter the market. Further, with distribution and production deals, studios limit who they interact with during the whole process. The quality of texts can go down because the writers involved in pacts may be producing worse scripts than other writers, but they will often receive the funding instead because of the pact. Further, there script is more likely to be produced and finished because the studio has a stake in the profits. This could be lower quality movies on the market, and leave great ones out.