Licensing Contracts and Pre-Sales

Licensing Contracts and Pre-Sales

1. Licensing and Pre-Sales A. They are done all year but typically started and/or concluded at important film markets and festivals throughout the year. i. Festivals and markets are the same and different. A Festival: is a celebration of the quality of your film. Film is chosen as worth of being celebrated by an expert panel viewing thousands of submissions. ii. Market: is a gathering of buyers and sellers to view, buy, sell, and talk about pre-buying new films that are going to be made. a) some festivals have markets while others do not

1. Licensing and Pre-Sales (cont.) -iii. Principle Film Markets associated with festivals are: - A. Sundance January - B. Berlin February - C. Hong Kong- Spring - D. Cannes May - E. Venice/Toronto August/September - F. AFM is really truly a market, but they have tried to associate with the AFI Film Festival which occurs at the same time. But, it just does not seem to work because AFI is in Hollywood and AFM is in Santa Monica. It s just too far. - F. Other mini. markets associated with festivals include: - Guadalajara April-one of the principal South American markets

1. Licensing and Pre-Sales (cont.) - G. Also, these are 3 major TV markets where film buyers/sellers gather: 1) NATPE January/February 2) MIPTV April 3) MIPCOM -- October

2. What Happens at Markets A. Companies spend many weeks prepping for each market i. Contacting buyers for meetings ii. Lining up their slates, purchasing or acquiring products for sale iii. Advertising, marketing, and promoting their product in trade publications

2. What Happens at Markets (cont.) iv. Films are screened or scripts with project descriptions are sent out to various buyers v. Companies come prepared to do business at each market with meetings every ½ hour/ 1 hour; drinks, dinner, socializing and talking films

2. What Happens at Markets (cont.) B. Types of Licensing Agreements Completed Films Co-Productions-Future Films

2. What Happens at Markets (cont.) C. Completed Picture Territorial Licensing Agreement Many use a Standardized International Territorial Licensing Agreement a MILA (Multiple Rights International Licensing Agreement) developed by IFTA ( An international legal committee drafts these agreements-i am on that committee)

2. What Happens at Markets (cont.) BASIC TERMS OF A MILA 1. Picture Specifications 2. Credits 3. Advance Payment / MINIMUM GUARANTEE A. 20% on signing B. 60% on Initial Delivery C. 20% on Final Delivery *Variations in all of these

3. Allocation of Minimum Guarantee/Advance ( MG ) A) Allocation of MG is Negotiated, but a reasonable ALLOCATION OF THE MG MIGHT BE: 30% for Theatrical Rights 10% for Ancillary Rights 25% for Video /VOD Rights 15% for Pay TV Rights 20% for Free TV Rights

4. Bonuses on top of the MG might be negotiated for: Oscars Nominations Golden Globes Box Office Results

5. Rights Granted Specify what rights: Theatrical DVD, VOD TV (pay, fee, satellite) Ancillary (hotels, airlines, non-theatrical)

6. Reserved Rights Usually Remake, Sequel, Prequel, TV series rights, live stage, book publishing, soundtrack album, music publishing, merchandising are reserved to the Producer and/or underlying rights holder Holdbacks are negotiated for 5-7 years from First Release on Remakes, Sequels, Prequels- before they can be exploited by the Producer

7. Security Interest If there is a significant advance a territorial distributor may ask for a security interest

8. Term A. With Advance/MG 15-25 years B. With No Advance 3-7 years

9. Territory Needs to be specifically defined. Areas that sometimes require negotiation: A. German-speaking territories B. French-speaking territories C. Latin America D. US Puerto Rico Bahamas Virgin Islands Guam Bermuda

10. Prints and Advertising ( P&A ) If you can obtain a P & A commitment, it is important to negotiate specifically: Minimum Number of Prints Minimum Number of Theatres Minimum Number of Cities Minimum Amount of $ Spent Minimum Number of Weeks in Theatrical Release

11. Holdback and Outside Release Date A. U.S. Distribution may require no release outside the U.S. prior to U.S. release B. Also there should be an OUTSIDE Release date negotiated as well i.e. not later than Dec. 31, 2014 (subject of course to the Holdback)..so that the Picture ultimately gets out into the marketplace

12. Delivery A key issue A fairly long delivery list is usually established which includes not only physical film and sound elements, marketing and promotional materials, but also many paperwork items showing/proving the producers actually own the Picture A. UPON NOTICE OF DELIVERY Initial Money is wired B. CERTAIN ITEMS DISTRIBUTOR PAYS FOR Certain masters Dubbing and subtitling

13. Assumption of Producer s Obligations 1. Gross Participations 2. Box Office Bonuses 3. Guild Residuals

14. Gross Participation for Producer and Creative Elements 1. Gross Receipts definition usually excludes certain off the top costs Collection costs, Checking costs, Residuals, Dues, Trade association fees, Taxes

15. MINIMUM GUARANTEE ( MG ) Typically minimum guarantee is negotiated A. It is usually cross collateralized against all media licensed (Theatrical, TV, DVD,VOD)

16. TYPES OF REVENUE SPLITS A. Costs off the Top Deal Structure 1. Distribution costs taken off TOP 2. Balance split 50/50 or 75/25 (in producer or distributor s favor), depends on film and negotiation 3. If there is a MINIMUM GUARANTEE (MG) the MG would apply against Producer s Share B. Distribution Deal Structure: 1. Distribution fee (25-35%) 2. Distribution expenses 3. MG 4. Negotiated Split 50/50 or 75/25 thereafter

16. TYPES OF REVENUE SPLITS (cont.) C. Video Royalty Deal: 1. 25-35% of Video Gross to Producer MG is recouped against Producer s 25-35% share 2. Balance to distributor

17. OTHER STANDARD TERMS (A 15-20 page document) is attached to the Short Form License Agreement. Representations and Warranties Indemnities Definition of Rights Arbitration Accountings Gross Receipts Definition Suspension and Withdrawal Assignment and Sublicensing