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SUBSCRIPTION VIDEO-ON-DEMAND LICENSE AGREEMENT FOR
ANIMATED PICTURES
THIS SUBSCRIPTION VIDEO-ON-DEMAND LICENSE AGREEMENT (this
“Agreement”), dated as of May __, 2014 (“Effective Date”), is entered into by and between Sony
Pictures Television Inc. (“Licensor”) and Netflix, Inc. (“Licensee”). For good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. All capitalized terms used herein and not otherwise defined in this
Agreement shall have the meanings set forth below.
1.1
“Ad-Supported” means the delivery and/or exhibition of a motion picture or other
entertainment product in a manner where the consumer is required to view, or is otherwise
exposed to, commercial, sponsorship and/or promotional messages or interruptions (whether
display, interstitial or otherwise).
1.2
following:
“Additional Element” with respect to an Animated Picture means any of the
1.2.1 50% or more of the total P&A Expenses for such motion picture was
incurred by, or the payment of which is otherwise the responsibility of, any SPE Group
Member(s), either directly or via third party financiers or investors;
1.2.2 Such motion picture arises out of a script or screenplay that was developed
by any SPE Group Member(s);
1.2.3 Such motion picture was produced under the control, direction or
supervision of any SPE Group Member(s);
1.2.4 An SPE Group Member(s) was responsible for, or guaranteed a sum equal
to, at least 25% or more of the negative costs (e.g., development, preparation, production, postproduction, completion and delivery costs of an Animated Picture, including any fees payable to
any other SPE Group Members or other Licensor Affiliates) on an arms-length basis for such
motion picture; and/or
1.2.5 Such motion picture is based in whole or in part on an underlying property
owned or controlled by any SPE Group Member(s).
1.3
“Animated Picture” shall mean a theatrical motion picture that (a) comprises a
substantial amount of animation, computer graphics and/or special effects and (b) has an MPAA
(or industry-successor equivalent) rating of R or below.
1.4
“Applications” shall mean software applications created using Application
Programming Interfaces (commonly known as APIs) released by Licensee, which software
applications will enable Registered Users and other users in the Territory (as applicable) to, for
example, access Licensee’s website; add or remove a movie from a Registered User’s “queue”;
or receive and watch, via Approved Delivery, a trailer, Promotional Preview or Picture. For the
avoidance of doubt, the playback of Pictures through the use of Applications and Playback
Clients (a) will be available to Registered Users only, (b) will be hosted and authenticated by the
SVOD Service, (c) shall be subject to the terms and conditions of this Agreement (including,
without limitation, the Usage Rules and Content Protection Requirements and Obligations as set
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out in Schedule C and Schedule C-1, as applicable), (d) may require the launch of a separate
web-browser window or similar user experience (i.e., the launch of a new playback window or
web page) in which the Picture will be playable, (e) shall be Netflix (or successor)-branded, and
(f) shall be via an Approved Device.
1.5
“Approved Delivery” shall mean the streaming delivery of an encrypted digital
electronic file over the global network of interconnected networks known as the Internet (which,
for clarity, is accessible through public and/or private networks) using technology which is
currently known as Internet Protocol, solely to an IP-addressable device. In no event shall
“Approved Delivery” include downloading; provided, that the limited buffering or caching of a
temporary file that is inaccessible after initial viewing shall not be deemed downloading in
violation of the requirements for “Approved Delivery.” For the avoidance of doubt, “Approved
Delivery” shall include without limitation streaming delivery over the Internet (as described
above) through the use of Blu-ray discs or other optical media that contain certain client software
(excluding any Blu-ray discs or other optical media that contain pre-recorded long-form
audiovisual content) that will initiate and authenticate (by utilizing the disc or optical media in an
Approved Device) the transmission of data via IP (e.g., “BD-Live” technology) from the SVOD
Service.
1.6
“Approved Device” shall mean a Software Device or Hardware Device (i)
designed to directly receive audio visual programming and a decryption key via Approved
Delivery and output such programming for exhibition via a video monitor, and (ii) capable of
enforcing (a) the security and content protection specifications set forth on Schedule C and
Schedule C-1 attached hereto, as applicable (or such other specifications reasonably agreed to by
the parties) and (b) the usage rules set forth on Schedule U attached hereto.
1.7
“Approved Format” shall mean a digital electronic media file compressed and
encoded for secure transmission (a) in a Content Protection System and resolution in accordance
with the specifications set forth in Schedule C or Schedule C-1 attached hereto, as applicable, or
(b) such other format as Licensor may approve in Licensor’s sole discretion.
1.8
“Approved Content Protection System” with respect to Pictures in High
Definition resolution (or lower) shall have the meaning set forth in Section 1.2 of Schedule C,
and with respect to Pictures in UHD resolution shall have the meaning set forth in Section 3 of
Schedule C-1.
1.9
“Availability Date” shall mean the first day of each Picture’s First License Period,
determined in accordance with Section 3.1 below.
1.10
“Business Day” shall mean any day other than (i) a Saturday or Sunday or
(ii) any day on which banks in Los Angeles, California are closed or are authorized to be closed.
1.11
“DVD Service” shall mean the Netflix.com DVD subscription service.
1.12 “Domestic Box Office” or “DBO” shall mean the actual U.S. Theatrical box
office receipts for a Picture (which shall exclude, for the avoidance of doubt, any amounts
attributable to other items that may be sold to a consumer in conjunction with a Theatrical ticket
for such Picture (e.g., a pre-order of the Home Video version of such Picture)) for the period
commencing on such Picture’s Initial Theatrical Release and continuing up to and including such
Picture’s Availability Date hereunder, as reported by Rentrak (or such mutually agreed upon
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industry-accepted successor thereto) to Licensor (subject to adjustment by Licensor based on
actual U.S. Theatrical box office receipts), which number shall be consistent with the number
provided to third parties or used for Licensor’s internal reporting purposes and may be audited
by Licensee in accordance with the audit provisions of this Agreement.
1.13 “Event of Force Majeure” in respect of a party shall mean any reasonably
unforeseeable act, cause, contingency or circumstance beyond the reasonable control of such
party, including, without limitation, any governmental action, nationalization, expropriation,
confiscation, seizure, allocation, embargo, prohibition of import or export of goods or products,
regulation, order or restriction (whether foreign, federal or state), war (whether or not declared),
civil commotion, disobedience or unrest, insurrection, public strike, riot or revolution, fire, flood,
drought, other natural calamity, damage or destruction to plant and/or equipment, or any other
accident, condition, cause, contingency or circumstance (including without limitation, acts of
God within or without the United States), but shall not include an inability to pay for whatever
reason.
1.14
“Hardware Device” shall mean an individually addressed and addressable IPenabled hardware device used by a Registered User, excluding tablets, desktop or laptop
personal computers and mobile phones, that has been certified by Netflix as a hardware device
and contains an integrated Licensee-branded Playback Client, including, without limitation, a
set-top box (including without limitation a box with an integrated personal digital recorder
(DVR) and/or web browser), an Internet-enabled television, a media extender, a home theater, a
game console (including without limitation the PlayStation 3, Xbox 360 and Nintendo Wii, and
any successor platforms thereto), a network-connected Blu-ray and/or DVD player, and a
portable device.
1.15 “High Definition” shall mean resolutions higher than 345,600 viewable pixels, in
the case of NTSC, or 414,720 viewable pixels, in the case of PAL, but no greater than 2,073,600
viewable pixels, in the case of either NTSC or PAL.
1.16 “Home Theater” shall mean the transmission of a single motion picture
transmitted on either a VOD or PPV basis (which PPV or VOD transmission occurs from as
early as 1 week prior to the Initial Theatrical Release for such motion picture until as late as the
date that is the earlier of (a) the conclusion of the 9th week after Initial Theatrical Release and
(b) the conclusion of the initial Theatrical run for such motion picture) for a retail price equal to
the following (as applicable): (x) for a Home Theater exhibition commencing prior to a Picture’s
Initial Theatrical Release, at least 350% of the U.S. national average box office ticket price for
the immediately prior Year, as reported on the MPAA website (or, if not reported on the
MPAA’s website, as reported by NATO); or (y) for a Home Theater exhibition commencing on
or after a Picture’s Initial Theatrical Release, at least 200% of the U.S. national average box
office ticket price for the immediately prior Year, as reported on the MPAA website (or, if not
reported on the MPAA’s website, as reported by NATO).
1.17 “Home Video” shall mean the exploitation of a motion picture embodied in a
Physical Medium that is rented or sold for the sole purpose of private viewing where no
admission fee is charged with respect to such viewing. In addition, for the purposes of this
Agreement, Home Video shall expressly include Sell-Through Electronic Video, manufactureon-demand (a motion picture Physical Medium manufactured to order), and in-store digital
download (download for a per-picture transaction charge at a fixed location separate from the
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consumer’s residence (e.g., kiosk in retail store) to a Storage Device). Home Video shall also
include any digital entitlements (including digital or electronic copies) to a motion picture that
are granted to or otherwise offered to any purchaser of a Physical Medium embodying such
motion picture (e.g., Ultraviolet, digital copy, “virtual locker”/“sky locker” or similar rights) and
such digital entitlements shall be treated, for purposes of this Agreement, the same as the
Physical Medium for such motion picture, subject to the following conditions: (a) the digital
entitlements are made available to the consumer as part of the same transaction by which such
consumer purchased the Physical Medium; (b) if Licensor or a Licensor Affiliate controls the
marketing for such entitlements, such entitlements shall be marketed as “included” (or with
similar wording) within the purchase of the Physical Medium, and not as “free” (or similar
wording), and where neither Licensor nor a Licensor Affiliate controls the marketing, it shall use
commercially reasonable efforts to cause the marketing entity to adhere to the foregoing
marketing message; and (c) the usage rules applicable to a consumer’s usage of such digital
entitlements comply with the then-current usage rules applicable to UltraViolet (as implemented
by all members of the Digital Entertainment Content Ecosystem) or other digital locker systems
(e.g., iCloud). For the avoidance of doubt, the digital entitlements as described in the
immediately preceding sentence shall not constitute Pay-Per-View, Video-On-Demand, Home
Theater, or Sell-Through Electronic Video.
1.18
“Initial Home Video Release” of a Picture shall mean the first day of its initial
Home Video release to the public within the Territory, which shall specifically exclude the
distribution of promotional “screeners” of a Picture.
1.19 “Initial Pay Per View Release” of a Picture shall mean the first day of its initial
Pay Per View release to the public within the Territory, but excluding any Pay Per View
exhibitions that occur as part of a Home Theater exhibition of such Picture.
1.20 “Initial Theatrical Release” of a Picture shall mean the first day of its initial
Theatrical release within the Territory, but specifically excluding a Picture’s exhibition at the
following: (i) film festivals, (ii) test and marketing previews, (iii) so-called “sneak” previews,
(iv) limited free and/or charitable screenings, (v) private, limited screenings, and (vi) releases
made on no more screens and for no longer than required in order to comply with Academy
Award qualification rules, regardless of whether an admission fee is charged.
1.21 “Initial Video On Demand Release” of a Picture shall mean the first day of its
initial Video On Demand release to the public within the Territory, but excluding any Video On
Demand exhibitions that occur as part of a Home Theater exhibition of such Picture.
1.22 “Licensed Languages” shall mean, for each Picture, all languages made available
by Licensor to Licensee in accordance with Section 8.2.
1.23 “License Period” for each Picture shall mean the First License Period and Second
License Period of such Picture, collectively.
1.24 “Licensor Affiliate” means Sony Pictures Entertainment Inc. and each present or
future parent, sister company or subsidiary thereof other than Licensor.
1.25 “Minimum Source Material” for each Picture shall mean, collectively, the
following subset of Source Material, in each case to be delivered in accordance with the
specifications set forth in Schedule B: (a) one (1) Copy in the highest resolution available in
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accordance with Section 8.1; (b) subtitles and dubs in English and Spanish languages (if not
originally produced in the applicable language); (c) display art and story art for each Picture (as
specified in Schedule B); (d) closed captioning in English and, if the original language of
production is in Spanish, in Spanish and (e) the metadata required by Schedule B.
1.26 “MVPD” shall mean a cable, satellite, telecommunications or other multi-channel
video programming distributor in its capacity of distributing multiple channels of linear
television programming services (either alone or together with enhancement on-demand
programming services) to its video subscribers.
1.27 “Network Window” shall mean with respect to each Picture the period of time
commencing the beginning of the first day after the conclusion of the First License Period and
continuing through the end of the day before the Second License Period.
1.28 “Non-Qualifying Picture” shall mean any SPA Picture that is Theatrically
Released By an SPE Group Member, the SVOD rights for which are controlled by Licensor (or
an SPE Group Member), and which would qualify as a “SPA Picture” pursuant to the definition
set forth in Section 1.47 below but for the fact that Licensor (or the applicable SPE Group
Member) does not own and/or control the other minimum (non-SVOD) distribution rights set
forth in clauses (b) and (c) of Section 1.47. For clarity, in the event a motion picture does not
have a Theatrical Exhibition (e.g., direct-to-video or DVD premiere), such motion picture shall
not qualify as a Non-Qualifying Picture pursuant to this definition.
1.29 “Non-Theatrical” and “Non-Theatrical Exhibition” shall mean the exhibition of a
motion picture, television show or other entertainment product to viewers solely while they are
in any of the following venues or facilities: (i) airplanes, trains, buses/coaches, ships and other
forms of common carrier transportation, (ii) schools, colleges and other educational institutions
(including dormitories), government agencies, libraries, museums, parks, beaches, campgrounds,
film societies, religious and civic groups, holiday camps, clubs and services organizations, (iii)
non-public areas of hotels, motels and other lodging; (iv) permanent or temporary military
installations, shut-in institutions, prisons, hospitals, retirement centers, nursing homes, offshore
drilling rigs, logging camps and construction camps; (v) industrial and corporate establishments,
and for which an admission fee may be charged, and (vi) other non-theatrical venues or facilities
similar in nature to the foregoing as mutually approved by the parties, in each case by a service
provided by the foregoing venues or facilities.
1.30
“Other Animated Picture” means an Animated Picture that, notwithstanding
clause (a) of Section 1.3, is comprised substantially of animation (whether hand-drawn, celluloid,
computer or stop-motion, but not including computer animation that is intended to replicate live
action), that is Theatrically Released By an SPE Group Member under one or more SPE Group
Member production or releasing labels (but not the label currently known as Sony Pictures
Animation or any replacement or successor production label to Sony Pictures Animation), that
meets the following criteria: (a) it has Initial Theatrical Release during the Term; (b) with respect
to such Picture, an SPE Group Member controls all SVOD, Theatrical and Pay Television rights,
and has the contractual right to impose the holdbacks specified in Section 2.5 of this Agreement;
(c) either (i) an SPE Group Member controls the Home Video rights for such picture in the
Territory or (ii) if an SPE Group Member does not control such Home Video rights in the
Territory, such Animated Picture satisfies at least one (1) Additional Element; (d) no public
commercial exhibition of such Animated Picture (other than Home Theater exhibition) has
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occurred in the Territory prior to its Initial Theatrical Release; and (e) for which Licensor has
reached a written agreement with Starz Entertainment (or successor thereto pursuant to
Licensor’s film output agreement) (“Starz”) that such Animated Picture may be excluded from
Licensor’s output commitment to Starz.
1.31 “P&A Expenses” means, with respect to a motion picture, all out-of-pocket third
party costs and expenses (and/or affiliated party costs and expenses that are negotiated at arm’slength) paid or incurred by any person in connection with the Theatrical release of such motion
picture in the Territory, including, without limitation, the costs of creating and implementing a
marketing campaign for such motion picture, costs of advertising such motion picture in various
media, costs of printing and distributing promotional materials, costs of manufacturing,
packaging, shipping, insuring, delivering and storing release prints and other film and sound
materials, and shall specifically exclude executive salaries, executive travel and/or executive
living expenses for Vice President or above executives, bond fees, financing costs, interest and
overhead.
1.32 “Pay-Per-View” or “PPV ” shall mean the transmission of a single motion picture
transmitted from a distance on a linear pre-scheduled basis where the start time of playback is
scheduled or pre-determined by the distributor and not at the consumer’s discretion (and, for
clarity, a distributor may offer such motion picture on a multiple channel basis with varying
scheduling patterns and may offer multiple exhibitions of a single motion picture), and which
meets the following criteria: (i) a one-time, monetary transactional fee is charged to the
consumer for the privilege of viewing the particular motion picture for Personal Use (subject to
Section 2.5.4 of this Agreement); (ii) such motion picture is provided on a non-Ad-Supported
basis (but allowing for non-targeted banner advertisements or other similar run-of-site or run-ofservice advertising that does not interrupt or immediately precede or follow the PPV exhibition
of the SPA Picture (so long as neither Licensor nor any SPE Group Member(s) receives any
consideration from such advertising); and (iii) transmission is permitted over a period of time not
to exceed 72 hours per transaction (but for purposes of clarification, if the consumer is able to
make a copy of the applicable PPV transmission of the motion picture and does so by taking
independent action in addition to ordering the applicable PPV transmission, that is in all cases
not authorized by Licensor nor authorized and/or intentionally facilitated by the applicable
distributor, the fact that such recipient may be able to view such copy beyond the expiration of
the aforesaid 72 hour period shall not cause such mode of exhibition to fall outside this
definition). For purposes of clarification, the 72 hour period shall commence at the time the
motion picture is exhibited for more than the first five (5) continuous minutes. PPV does not
include transmissions on a Non-Theatrical, Sell-Through Electronic Video or SVOD basis, and
shall not include transmissions through any service for which the consumer is charged a “club”
or similar “access” fee (which fee shall, for purposes of this definition, be deemed not to include
any basic cable, digital/data plan, equipment rental or purchase fee or Internet access fee) for the
privilege of being able to view motion pictures via PPV unless such “club” or similar access fee
is non-creditable against, and/or does not subsidize or otherwise affect the retail price for, any
per-exhibition/per-title consumer transaction fees and provided that in all events is a charge that
is more than merely a fee to gain access to the PPV programs alone. However, PPV may include
a service where a consumer is required to pay an equipment rental fee or to purchase equipment
in order to obtain such service; provided, that no part of such equipment rental fee or purchase
price, as applicable, shall be credited or paid directly or indirectly to Licensor (and, for purposes
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of clarification, if such equipment rental fee or purchase price is received by a Licensor Affiliate
that is not an SPE Group Member, including without limitation Sony Corporation of America
and Sony Electronics, the receipt of such fee shall not, in and of itself, be deemed to be
“indirectly” received by Licensor for purposes of this definition).
1.33 “Pay Television” shall mean transmissions or exhibition of a motion picture to a
subscriber of a programming service, where the consumer is charged a recurring subscription fee
and/or periodic access charge (but allowing for promotional previews and the like) for the right
to receive a specified level of programming for an additional charge (for a single channel or
service or group of channels or services) over and above the subscription fees charged to such
subscriber for the basic “tier(s)” of programming. Examples of Pay Television services include
Starz, HBO and Showtime as such services are offered as of the Effective Date. For the
avoidance of doubt, the term “Pay Television” shall include both the applicable linear
programming network, as well as any on-demand component of the consumer’s subscription to
such linear programming network.
1.34 “Personal Computer” shall mean an IP-enabled desktop or laptop device with
persistent storage, keyboard and monitor, designed for multiple office and other applications
using a silicon chip/microprocessor architecture and shall not include any Portable Devices. A
Personal Computer must support one of the following operating systems: Windows XP,
Windows 7, Windows 8, Mac OS, Chrome OS, subsequent versions of any of these, and any
other operating system agreed in writing by Licensor.
1.35 “Personal Use” shall mean the private viewing by one or more persons on a
device in non-public locations and, provided the consumer’s use of such device in a public
location is personal, in public locations; provided, however, that any such viewing for which a
premises access fee or other admission charge is imposed (other than any fee related only to
access such non-residential venue for other general purposes) or any such viewing that is on a
monitor provided by such non-residential venue (or by a third party under any agreement or
arrangement with such non-residential venue) shall not constitute a “Personal Use.”
1.36 “Physical Medium” means a tangible recording or storage medium now known or
hereafter devised, including videotape, video disks, video cassette, laser video disc, Blu-ray,
DVD, hard drive, portable media devices, flash drives, memory sticks, floppy disks, zip drives
and portable storage devices.
1.37 “Picture” means (a) each SPA Picture and (b) any ROFR Picture that Licensor
licenses to Licensee pursuant to this Agreement.
1.38 “Playback Client” shall mean a device or application that can play or render
Pictures received from the SVOD Service. A Playback Client may be integrated into an
Approved Device at time of manufacture or may be downloaded to an Approved Device after
manufacture. A Playback Client may be implemented via an Application. A Playback Client
must incorporate an Approved Content Protection System. “Playback License” shall mean a
secure electronic token which grants a Playback Client permission to play a Picture. Playback
Clients which provide link layer playback do not require a Playback License in order to play a
Picture.
1.39 “Promotional Preview” with respect to a Picture, shall mean (i) a single video clip
that is identified or provided by Licensor and consisting of a continuous segment from the
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Picture that is a continuous sequence with a running time that is at least 10% of the Picture’s
total running time (such clip, “SPE Promotional Preview”) and (ii) a single video clip that is
created by Licensee and commences at the beginning of such Picture and runs no longer than
five (5) consecutive minutes thereafter (“Maximum Preview Duration”), with no additions, edits
or any other modifications made thereto (such clip, “Netflix Promotional Preview”).
1.40 “Registered User” shall refer to each unique user of an Approved Device
registered with the SVOD Service and authorized to view an exhibition of a Picture as part of the
SVOD Service.
1.41 “Security Breach” shall mean a Security Flaw that results from a failure by
Licensee to meet the content protection requirements and/or procedures as set forth in this
Agreement that may (in Licensor’s reasonable, good faith belief) result in harm to Licensor. For
clarity, a Security Breach does not include a Territorial Breach or a geofiltering Security Flaw.
1.42 “Security Flaw” shall mean a circumvention or failure of the Licensee’s secure
distribution system, geofiltering technology or physical facilities.
1.43 “Sell-Through Electronic Video” means, solely for purposes of this Agreement
and on a non-precedential basis, the electronic transmission of a digital file embodying a motion
picture on a non-Ad-Supported basis (but allowing for non-targeted banner advertisements or
other similar run-of-site or run-of-service advertising that does not interrupt or immediately
precede or follow the Sell-Through Electronic Video exhibition of the SPA Picture (so long as
neither Licensor nor any SPE Group Member(s) receives any consideration from such
advertising) for which a one-time monetary transactional fee is charged to the consumer for
access to such digital file (subject to Section 2.5.4 of this Agreement), and that is authorized for
retention by the recipient by means of a Storage Device for a period of more than 72 hours
commencing at the time the motion picture is first exhibited (and not at the time the file is
received by the recipient) and is intended to permit playback by such recipient an unlimited
number of times, subject to the usage rules permitted by the applicable end user license
agreement. For the avoidance of doubt, Sell-Through Electronic Video shall not include VOD or
SVOD.
1.44 “Software Device” shall mean an IP-enabled, uniquely addressable Personal
Computer, Tablet or other device that is not certified by Netflix as a Hardware Device and is
capable of playing back content from the SVOD Service solely through the utilization of a
software-based Playback Client.
1.45 “Source Material” shall mean the source files for the Copies of the Pictures and
associated Advertising Materials, trailers, artwork, promotional materials (including SPE
Promotional Previews) and metadata (including without limitation audio files,
captioning/subtitling files for the deaf or hard of hearing, all Licensed Language assets, and all
relevant ratings, content descriptors and content classifications information), the delivery
specifications for which are detailed in Schedule B attached hereto.
1.46 “SPE Group Member” means Licensor and/or Sony Pictures Entertainment Inc.
and any entity Licensor and/or Sony Pictures Entertainment, either directly or indirectly controls.
1.47 “SPA Picture” means each of the following: (1) the Animated Picture known as
“Cloudy with a Chance of Meatballs 2” (“Cloudy 2”); (2) the Animated Picture known as
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“Smurfs 2” (“Smurfs 2”); and (3) any Animated Picture that is Theatrically Released By an SPE
Group Member under the production label currently known as Sony Pictures Animation (or any
replacement or successor production label) either alone or in combination with another SPE
Group Member production or releasing label other than Sony Pictures Classics, that meets the
following criteria: (a) it has Initial Theatrical Release during the Term; (b) with respect to such
Picture, an SPE Group Member controls all SVOD, Theatrical and Pay Television rights, and has
the contractual right to impose the holdbacks specified in Section 2.5 of this Agreement; (c)
either (i) an SPE Group Member controls the Home Video rights for such Animated Picture in
the Territory or (ii) if an SPE Group Member does not control such Home Video rights in the
Territory, such Animated Picture satisfies at least one (1) Additional Element; and (d) no public
commercial exhibition of such Animated Picture (other than Home Theater exhibition) has
occurred in the Territory prior to its Initial Theatrical Release.
1.48 “Storage Device” means any storage technology as may be in use from time-totime from and after the Effective Date, including without limitation Physical Medium and
intangible storage technologies such as remote DVRs and “virtual lockers”/“sky lockers.”
1.49 “Subscription Video-On-Demand” or “SVOD” shall mean the delivery of
multiple programs to a subscriber in response to the request of such subscriber (a) for which the
subscriber is charged a recurring fee and/or periodic (e.g., monthly) fee (subject to limited nonpaid access, including in instances of trial or similar promotional offerings) for the right to
receive such programming, and is not charged a per-program(s) or per-exhibition(s) fee, (b) the
exhibition start time of which is at a time specified by the subscriber in its discretion and (c)
which may or may not be Ad-Supported. For the avoidance of doubt, exploitation on an SVOD
basis shall not, simply by virtue of the inclusion of other products, services, and/or business
models, cease constituting exploitation on an SVOD basis.
1.50 “SVOD Service” shall mean the Subscription Video-On-Demand programming
service (a) currently branded “Netflix” (or successor replacement brand thereto) at all times
during the term, (b) 100% owned and/or operated by Licensee (subject to Section 20), and (c)
made available via Approved Delivery only to Registered Users in the Territory to Approved
Devices; provided, that non-Registered Users may access certain limited portions of the SVOD
Service, such as clips, Promotional Previews, box art and synopses, but that non-Registered
Users may not playback programs from the SVOD Service. Solely for purposes of this
Agreement and on a non-precedential basis, the recurring and/or periodic fee for the SVOD
Service shall be charged no more frequently than once every two (2) weeks; provided, that
Licensee may charge such recurring and/or periodic fee at such frequency only if Licensee also
charges a recurring and/or periodic fee at the same (or greater) frequency for all motion pictures
licensed from at least one (1) Major Studio under a direct agreement with such Major Studio for
distribution in their first pay television window via the SVOD Service in the Territory (but only
to the extent Licensee is then licensing any motion picture(s) in its first pay television window
under a direct agreement with a Major Studio in the Territory). For clarity, nothing herein shall
prohibit Licensee from offering the Pictures or any other motion pictures for a recurring fee
and/or periodic fee that is charged less frequently than on a monthly basis. For the avoidance of
doubt, the SVOD Service may include any combination of the following distribution models: (i)
distribution of content both in packaged media format (e.g., DVD, Blu-ray) through the DVD
Service and via Approved Delivery, including via Applications, to Approved Devices and (ii)
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distribution solely via Approved Delivery, including via Applications, to Approved Devices; but,
in each case, with the understanding that the rights granted herein are for distribution solely via
Approved Delivery.
1.51
“Tablet” shall mean any individually addressed and addressable IP-enabled
device with a built-in screen, for which user input is primarily via touch screen, that is designed
to be highly portable, not designed primarily for making voice calls, and runs on one of the
following operating systems: Windows 8, iOS, Android, WebOS or RIM’s QNX Neutrino,
subsequent versions of any of these, and other operating systems agreed in writing with Licensor
(each, a “Permitted Tablet OS”). Tablet shall not include Zunes, Personal Computers, game
consoles (including XBox consoles), set-top-boxes, portable media devices, PDAs, mobile
phones or any device that runs an operating system other than a Permitted Tablet OS.
1.52
“Term” shall have the meaning assigned in Section 5 hereof.
1.53 “Territory” shall mean the fifty states of the United States of America and all U.S.
territories and possessions, including without limitation, the District of Columbia and Puerto
Rico.
1.54
“Territorial Breach” shall mean a Security Flaw that results in any of the Pictures
being delivered to persons outside the Territory, where such delivery outside the Territory (a)
results in actual or threatened harm to Licensor and (b) is a result of Licensee’s failure to comply
with its obligations in Section 3 of Schedule C.
1.55 “Theatrical Exhibition” shall mean the exhibition of a motion picture or
programming (regardless of the format (e.g., print or digital format), means of delivery, or mode
of exhibition) in theatres open to the general public for which a fee is charged for admission.
“Theatrical” has a correlative meaning.
1.56 “Theatrically Released By an SPE Group Member” with respect to a motion
picture, means that such motion picture was Theatrically released in the Territory under any
theatrical releasing label of any SPE Group Member (other than Sony Pictures Classics).
1.57 “Ultra High Definition” or “UHD” or “4K” shall mean resolutions greater than
1920x1080 but no more than 4096x2160.
1.58
“Usage Rules” shall mean those usage rules set forth on Schedule U attached
hereto.
1.59 “VCR Functionality” shall mean the capability to perform any or all of the
following functions with respect to the delivery of a Picture: stop, start, pause, play, rewind, fast
forward and other industry-standard trick-play functionality.
1.60 “Video-on-Demand” or “VOD” shall mean the transmission of a single motion
picture from a distance where the start time of playback is not scheduled or pre-determined by
the distributor, but rather at the consumer’s discretion, and which meets the following criteria: (i)
a one-time monetary transactional fee is charged to the consumer for the privilege of viewing the
particular motion picture for Personal Use (subject to Section 2.5.4 of this Agreement); (ii) such
motion picture is provided on a non-Ad-Supported basis (but allowing for non-targeted banner
advertisements or other similar run-of-site or run-of-service advertising that does not interrupt or
immediately precede or follow the PPV or VOD exhibition of the SPA Pictures (so long as
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neither Licensor nor any SPE Group Member(s) receives any consideration from such
advertising); and (iii) transmission is permitted over a period of time not to exceed 72 hours per
transaction (but for purposes of clarification, if the consumer is able to make a copy of the
applicable VOD transmission of the motion picture and does so by taking independent action in
addition to ordering the applicable VOD transmission, that is in all cases not authorized by
Licensor nor facilitated and/or encouraged by the applicable distributor, the fact that such
recipient may be able to view such copy beyond the expiration of the aforesaid 72 hour period
shall not cause such mode of exhibition to fall outside this definition). For purposes of
clarification, the 72 hour period shall commence at the time the motion picture is exhibited for
more than the first five (5) continuous minutes. VOD does not include transmissions on a NonTheatrical, Sell-Through Electronic Video or SVOD basis, and shall not include transmissions
through any service for which the consumer is charged a “club” or similar “access” fee (which
fee shall, for purposes of this definition, be deemed not to include any basic cable, digital/data
plan, equipment rental or purchase fee or Internet access fee) for the privilege of being able to
view motion pictures via VOD unless such “club” or similar access fee is non-creditable against,
and/or does not subsidize or otherwise affect the retail price for, any per-exhibition/per-title
consumer transaction fees and provided that in all events is a charge that is more than merely a
fee to gain access to the VOD programs alone.
1.61
“Year” shall mean calendar year unless otherwise specified.
2. LICENSE.
2.1
Grant of License. Subject to the terms and conditions of this Agreement, Licensor
hereby grants to Licensee a limited exclusive license to transmit each Picture, for exhibition
during its License Period, solely in the Licensed Languages and on a Subscription Video-OnDemand basis via the SVOD Service to Registered Users located in the Territory and subject at
all times to and in accordance with the Usage Rules. Without limiting the foregoing, to be
authorized hereunder, each such transmission of a Picture shall be solely by Approved Delivery
in an Approved Format to a Registered User’s Approved Device (via Applications and/or
Playback Clients on same); provided, that, the parties acknowledge and agree that nonRegistered Users may access portions of the SVOD Service, such as clips, Promotional
Previews, box art and synopses, it being acknowledged and agreed that non-Registered Users
may not otherwise playback Pictures from the SVOD Service. In addition, for the avoidance of
doubt, the foregoing license shall be limited to authorized exhibition for Personal Use. Licensee
shall have the right to permit its Registered Users to exploit the Subscription Video-On-Demand
rights using VCR Functionality. For the avoidance of doubt, the license grant in this Section 2.1
includes the limited right of Licensee to copy, install, encode, encrypt, display, use, cache,
transmit, distribute and store the Pictures (and associated Source Material) to the extent
necessary in order to effectuate the rights granted herein.
2.2
Restrictions on License. Licensee agrees that it is of the essence of this
Agreement that, without the specific written consent of Licensor, or except as otherwise set forth
herein: (a) the license granted hereunder may not be assigned, licensed or sublicensed in whole
or in part, nor may any Picture be sub-distributed in any way, separate and apart from the SVOD
Service (other than the technical distribution of the SVOD Service by third party contractors
(namely technical hosting, billing, signup and streaming partners which provide technical
delivery services on behalf of Licensee to subscribers) in accordance with Section 27); (b) no
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Picture may be delivered, transmitted or exhibited other than as set forth in this Agreement; (c)
except as otherwise provided for in Section 2.6 and Section 2.7 of Schedule C, each Picture must
remain in its approved level of resolution and may not be up-converted; and (d) no person or
entity shall be authorized or knowingly permitted by Licensee to do any of the acts forbidden
herein. Notwithstanding anything to the contrary in the Agreement, including without limitation
Section 2.2, Licensee shall be permitted to offer the SVOD Service, including the Pictures
licensed hereunder, on Approved Devices where a Registered User must use a third party
software or service (including without limitation an Application) and/or make payment to a third
party to access the SVOD Service (whether such payment is for an additional charge or
subscription fee paid to a service provider in order to access the SVOD Service or a tier of or
bundled service that provides the ability to subscribe to the SVOD Service) (“Third Party Fees”).
Such third parties may also offer interactive features, such as chat functionality or other
communication features that overlay the SVOD Service but are not initiated by Licensee. By
way of example only, the SVOD Service may be offered through a game console such as the
Sony PlayStation 3 or Microsoft Xbox, wherein access to the SVOD Service by Registered Users
through such Approved Device requires the payment of a Third Party Fee to Sony Corporation of
America or Microsoft Corporation (in addition to the SVOD Service subscription fees billed by
Licensee or a third party on behalf of Licensee) for access to the SVOD Service or a tier of or
bundled service that includes the SVOD Service.
2.3
Reservation of Rights. All licenses, rights and interest in, to and with respect to
the Pictures, the elements and parts thereof, and the media of exhibition and exploitation thereof,
not specifically granted herein to Licensee, shall be and are specifically and entirely reserved by
and for Licensor; provided, that Licensor’s exercise of certain such rights may be limited or held
back as expressly set forth elsewhere in this Agreement. Without limiting the generality of the
foregoing, Licensee acknowledges and agrees (a) that Licensee has no right in the Pictures or the
images or sound embodied therein, other than the right to exhibit the Pictures (and to create
and/or use materials related to the Pictures in accordance with Section 10 and Section 11 of this
Agreement) in strict accordance with the terms and conditions set forth in this Agreement; and
(b) that, aside from the limited rights granted by Licensor to Licensee pursuant to this
Agreement, this Agreement shall not grant to Licensee or any other person or entity any right,
title or interest in or to the copyright or any other right in the Pictures, nor any ownership or
other proprietary interests in the Pictures.
2.4
Without the prior written approval of Licensor, the fee charged for the SVOD
Service may be affected by the purchase of other programs, products or services, subject to the
following: (i) the SVOD Service shall remain solely Licensee-branded (the parties acknowledge,
however, that the SVOD Service may be marketed by or otherwise promoted in connection with
third parties and therein also contain branding or other marks of any such third party),
(ii) Licensee shall at all times market, promote and otherwise offer the SVOD Service directly as
a standalone service to Registered Users (and potential Registered Users) in the Territory, (iii) in
respect of Registered Users billed by a third party for the applicable fee, Licensee (or its
authorized third party contractors) shall be responsible for all other subscriber relationship and
fulfillment matters (i.e., other than billing) in respect of such Registered Users, (iv) the content in
the SVOD Service accessible in such offering shall be substantially identical to that of the standalone SVOD Service otherwise offered in the Territory; and (v) Licensee shall not refer to the
SVOD Service, and shall not authorize third party promotional partners (including those who
purchase promotional subscriptions) from referring to the SVOD Service, as being any form of
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“free,” in any marketing, advertising, or promotion except as a part of a permitted Free Trial
(e.g., without limitation, the SVOD Service may be marketed, advertised and/or promoted as
“included with”, “for one low price”, “added value” and equivalents); provided that Section
2.4(v) shall not apply to free trials (as described in Section 11.4); provided, if Licensee becomes
aware of any such third marketing, advertising, or promotion in violation of the foregoing
subsection (v), Licensee shall not be in breach of this Agreement so long as Licensee uses
commercially reasonable means to address such violation. Notwithstanding anything to the
contrary in the Agreement, third parties may purchase from Netflix promotional subscriptions,
for a fee, for limited durations consistent with Netflix’s past and current practices and/or industry
standards, provided, that, such promotional subscriptions shall be subject to the restrictions in
this Section 2.4.
2.5
Holdbacks. Prior to and during the First License Period, and during the Second
License Period of any Picture, Licensor and Licensor Affiliates shall not license, authorize or
permit any exhibition (other than the SVOD exhibition via Approved Delivery by Licensee
pursuant to this Agreement) of such Picture (including any versions, formats, resolutions, and/or
languages), or the promotion of any exhibition (other than promotion of exhibition on the SVOD
Service) of such Picture to any party in the Territory; provided, however, that any promotion
during the First License Period and/or Second License Period of any linear or on-demand
exhibition described in Section 2.5.1 (i.e., exhibition during the immediately-following Network
Window) shall be limited to the pre-promotion during the final 30 calendar days of each of the
First License Period and Second License Period. Notwithstanding the foregoing, prior to and
during the First License Period and during the Second License Period, Licensor may exploit,
promote and may authorize third parties to exploit and promote, the Pictures solely by the
following means of exhibition and promotion in the Territory: Theatrical Exhibition, NonTheatrical Exhibition, Home Video, Sell-Through Electronic Video, Pay-Per-View and VideoOn-Demand.
2.5.1 During the Network Window for a Picture, in addition to the means of
exhibition and promotion listed in Section 2.5 above, Licensor may also exploit, promote, and
may authorize any third party to exploit and promote, each Picture on any Ad-Supported
programming networks or services (which, solely for purposes of this Section 2.5.1, shall mean
programming network(s) or service(s) that are generally supported by third-party commercial
advertisements), whether linear or on-demand, delivered by any and all means (including,
without limitation, free broadcast or “basic” cable networks (which may include programming in
a basic tier or expanded basic “tier(s)”, but not, for clarity, on an SVOD and/or Pay Television
basis)); provided, that with respect to any such linear or on-demand exhibition of a Picture
during the Network Window, Licensor shall require that such exhibition include at least four (4)
commercial or promotional interruptions of not less than fifteen seconds (0:00:15) in duration
per interruption that, in each case, contain advertisement(s) (i.e., a spot or message primarily
featuring or describing a third-party product or service for which a service generally receives
payment or other consideration) or other promotional content (i.e., tune-in messaging or
promotion of the network and/or its affiliate(s) and their respective programs and/or services)
that are “full screen” (“Minimum Commercial Interruption Requirement”). Notwithstanding the
foregoing sentence, Licensor may exhibit, promote and/or authorize the exhibition and
promotion of Pictures at any time during the Network Window by linear television programming
services (including on-demand enhancements thereto that are made available on an authenticated
basis to subscribers who subscribe to the applicable linear programming service via an MVPD)
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that are not then Ad-Supported (e.g., SONY Movie Channel and HD Net Movies) but that are
otherwise generally distributed as part of a programming tier or package of channels that does
not include Pay Television channels (e.g., HBO, EPIX, Showtime and Starz); provided, that each
such linear and on-demand exhibition complies with the Minimum Commercial Interruption
Requirement. Neither Licensor nor any Licensor Affiliate shall, for the avoidance of doubt,
exhibit or authorize the exhibition of any Picture during its Network Window on an SVOD
and/or Pay Television basis.
2.5.2 Listing Pictures in “Free” Sections of MVPD On-Demand Offerings. If
Licensor or any Licensor Affiliate enters into a license agreement or other arrangement with a
third party for the non-transactional on-demand exhibition during the Network Window of any
Picture in the Territory, or itself exhibits a Picture on a non-transactional on-demand basis during
the Network Window, the following restriction shall apply: where such on-demand rights are
licensed by Licensor (or with respect to Licensor or a Licensor Affiliate, exploited) without also
licensing (or, with respect to Licensor or a Licensor Affiliate, without also exploiting) the rights
to distribute such Picture on a linear basis (i.e., as part of the scheduled programming of a linear
television network), Licensor and/or Licensor Affiliates shall not make, and shall not authorize
or permit the applicable licensee to make, the applicable Picture available within any MVPD’s
“Free Movies” (or equivalent)-labeled on-demand offering within the Territory. For the
avoidance of doubt, the foregoing restriction shall not apply to any license arrangements or other
arrangements with a third party for the Ad-Supported on-demand exhibition of any Picture in the
Territory by means of a non-MVPD Internet-delivered service and/or a purely open Internetdelivered (i.e., non-authenticated) service owned by an MVPD.
2.5.3 Restrictions on New Electronic Transactional Models. With respect to
any solely electronic new transactional (rental, sell-through) distribution models that come into
existence during the Term (and through the expiration of the last First License Period for all
Pictures licensed hereunder), including any new hybrid versions of PPV, VOD and Sell-Through
Electronic Video (each, a “New Transactional Model”), if Licensor intends to authorize any such
New Transactional Model with respect to any Picture in the Territory prior to or during its First
License Period, Licensor shall first notify Licensee and, prior to any distribution of the Picture(s)
pursuant to such New Transactional Model, the parties shall engage in good faith discussions
with respect to the restrictions that shall apply to such New Transactional Model under this
Agreement (including pursuant to Section 2.5 above); provided, that the parties agree to apply
bundling restrictions that are consistent with the bundling restrictions set forth in Section 2.5.4
most analogous to the applicable New Transactional Model.
2.5.4 Licensor Promotional Offerings and Bundling (for PPV, VOD and SellThrough Electronic Video). Notwithstanding anything to the contrary herein, the requirement in
this Agreement that PPV, VOD and Sell-Through Electronic Video each includes a discrete,
monetary transactional fee to the consumer shall not prohibit Licensor from engaging in the
following: (a) customary, limited (in duration and scope) and industry-standard promotional
offerings with respect to PPV, VOD and Sell-Through Electronic Video distribution of the
Pictures (it being understood that (i) coupon offers and two-for-one offers offered by any
distributor, as well as “credits” offered by the applicable MVPD (in its capacity as a provider of
multichannel video programming services) that can be applied toward any title on the applicable
PPV, VOD and/or Sell-Through Electronic Video service (and not for the Picture specifically),
shall each be accepted as promotional offers throughout the Term, and (ii) any other types of
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promotional offers shall be considered “industry standard” for purposes of this Section 2.5.4 to
the extent such offers are utilized by at least three Major Studios (excluding Licensor or a
Licensor Affiliate) with respect to their applicable motion pictures); and/or (b) solely with
respect to the Sell-Through Electronic Video distribution of the Pictures where the recipient of
the Picture is authorized to retain such Pictures for an unlimited period of time, the bundling of
(i)(I) a Picture with a package or bundle of motion pictures (also distributed on a Sell-Through
Electronic Video basis where the recipient of the motion picture(s) is authorized to retain such
motion picture(s) for an unlimited period of time) that are prequels, sequels and/or remakes of
such Picture (up to any number of motion pictures per package or bundle) and/or (II) one or
more Pictures with a package or bundle of motion pictures (also distributed on a Sell-Through
Electronic Video basis) comprised of motion pictures that are by, with or about the same
director, producer, principal actors and/or principal subject matter (e.g., “The Abyss” and
“Titanic,” but not simply identical genres or themes), up to a maximum of five (5) motion
pictures per bundle or package, and/or (ii) no more than one (1) Picture per Year, selected by
Licensor in its discretion, with a line of Sony-branded hardware devices (other than PlayStationbranded hardware devices) through a single bundling initiative involving the Picture selected by
Licensor for that Year (e.g., “Smurfs 3” bundled with the latest line of Bravia televisions or the
latest line of Xperia smart phones would each be a separate bundling initiative); provided, that
each of the devices with which the Picture is bundled in connection with such initiative must
have a retail price of at least $200 or require a commitment from the consumer to pay at least
$200 over a period of time in connection with the customer’s acquisition of such device(s) (e.g.,
a smart phone with a manufacturer’s suggested retail price of $200 or more can be discounted to
a consumer price that is less than $200 so long as the consumer is required to sign up to a cell
phone service plan that would have the consumer to spend more than $200 for a wireless plan
over time); and provided further, that, with respect to the types of offers described in the clause
(b)(ii) of this sentence, the marketing and product packaging materials (to the extent controlled
by Licensor or a Licensor Affiliate) relating to such promotion and/or bundle must assign
monetary value to the Picture separate and apart from the aggregate value of the package and/or
bundle. Notwithstanding the foregoing, for so long as the SVOD Service is available via the
PlayStation 3 or PlayStation 4 game console (or successor devices), Licensor may not bundle or
authorize a Licensor Affiliate to bundle a Picture available on a Sell-Through Electronic Video
basis with the purchase of PlayStation-branded hardware devices pursuant to the terms of clause
(b)(ii) of this Section 2.5.4. Neither Licensor (nor any Licensor Affiliate) will use clause (b)(ii)
of this section to frustrate the intent of this Agreement, or of any other strategic relationship
between Netflix and any Licensor Affiliate. For the avoidance of doubt, neither a PPV nor a
VOD viewing of a Picture may be bundled with a PPV, VOD or Sell-Through Electronic Video
viewing of other motion pictures.
2.5.5 PPV/VOD/Sell-Through Electronic Video Wholesale Pricing. Licensor
remains free at all times to unilaterally determine and set the license fee that Licensor (or any
SPE Group Member) receives for PPV, VOD or Sell-Through Electronic Video rights for the
Pictures from third parties outside of this Agreement. Licensor and Licensee, however,
acknowledge the potential effects on the negotiated economics of this Agreement of allowing
Licensor to retain these rights without limitation during Licensee’s First License Period and
Second License Period. As such, Licensor and Licensee agree that Licensor’s PPV, VOD and
Sell-Through Electronic Video rights to the Pictures prior to and during the First License Period,
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during the Network Window and during the entirety of the Second License Period for each
Picture will be subject to the additional terms set forth in Schedule D.
2.6
Fraud Detection. Licensee shall consistently track information indicating
fraudulent viewing and distribution activity on the SVOD Service, including, without limitation,
license issuances by Registered User and IP address, device registration and de-authorization,
customer ID’s, play data and number of current streams by Registered User and review its
procedures with Licensor from time to time.
2.7
Exhibition Limitations on Major Studio-Named Channels. Licensee shall not be
permitted to exhibit any of the Pictures on any separate video service, channel or within any
dedicated area within the SVOD Service that (a) contains in its name any name of another Major
Studio (or variation of such names) and (b) is dedicated primarily to the distribution of such
Major Studio’s content. For purposes of this Agreement, a “Major Studio” shall be defined as
the following: Paramount Pictures Corporation, Twentieth Century Fox Film Corporation,
Universal Studios, Inc., The Walt Disney Company and Warner Bros. Entertainment Inc.
3. EXHIBITION RIGHTS.
3.1
First License Period. As used herein, the “First License Period” means: (a) with
respect to each Picture other than Smurfs 2, an 18 consecutive month period commencing on
such Picture’s Availability Date, and (b) with respect to Smurfs 2, a 15 consecutive month period
commencing on its Availability Date.
3.1.1 SPA Pictures. The Availability Date for each Picture, other than with
respect to (1) Cloudy 2 and Smurfs 2 (which shall have the Availability Dates set forth in Section
3.1.3 below) and (2) certain Holiday Themed Picture(s) (as set forth, and as defined, in Section
3.1.2 below), shall be determined by Licensor in its sole discretion (subject to the notice
requirements set forth in Section 4.2. below), but shall be no later than the earliest to occur of (i)
10 months after such Picture’s Initial Theatrical Release, (ii) 3 ½ months after its Initial Pay Per
View Release or Initial Video On Demand Release (whichever is earlier), and (iii) (A) prior to
January 1, 2017, 4 ½ months after such Picture’s Initial Home Video Release and (B) from and
after January 1, 2017, 4 months after such Picture’s Initial Home Video Release (or, in the case
of both (A) and (B), any shorter period of time following initial Home Video release
contractually agreed to with any other Pay Television or SVOD distributor of motion pictures
Theatrically Released By an SPE Group Member).
3.1.2 Holiday Themed Pictures. Notwithstanding Section 3.1.1, for up to one
(1) Holiday Themed Picture per Year, (i) Licensor may delay the Initial Home Video Release of
such Holiday Themed Picture and (ii) Licensee shall have the option of selecting an Availability
Date for such delayed Holiday Themed Picture calculated in accordance with one of the
following options (which option shall be elected by Licensee in its sole discretion): (a) an
Availability Date determined by Licensor that is no later than 4 ½ months after such Picture’s
delayed Initial Home Video Release, or (b) an Availability Date determined by Licensor that
would be a date that is no earlier than would permit Licensee to exhibit such Picture over two
consecutive relevant holidays (e.g., two Thanksgivings if a Thanksgiving-themed picture, and
two Christmases if a Christmas-themed picture). Licensor shall notify Licensee in writing if the
proposed Initial Home Video Date for a Holiday Themed Picture will be so delayed, at least six
(6) months prior to the date that would have otherwise been the start of the First License Period
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pursuant to the formula set forth in Section 3.1.1, and Licensee shall notify Licensor which of the
foregoing Availability Date calculations (as between (a) and (b) of this Section 3.1.2) it has
selected within 30 days of receiving such notice form Licensor. A “Holiday Themed Picture”
shall mean any Picture with an Initial Theatrical Release occurring in November or December
with specific references to Thanksgiving, Christmas or Hanukkah.
3.1.3 Cloudy 2 and Smurfs 2. Notwithstanding anything to the contrary herein,
(i) the Availability Date for Cloudy 2 shall be the Effective Date, and (ii) the Availability Date
for Smurfs 2 shall be June 15, 2014.
3.2
Second License Period. As used herein, the “Second License Period” means, with
respect to each Picture, a 15 consecutive month period which shall commence on the date that is
sixty (60) months after the end of the First License Period of such Picture.
4. PICTURE QUALIFICATIONS.
4.1
Commitment. Licensor shall license to Licensee, and Licensee shall license from
Licensor hereunder, all SPA Pictures, subject to a cap of not more than 3 such films released per
Year (and the parties acknowledge and agree that Cloudy 2 and Smurfs 2 shall apply against
such cap for the first Year of the Term). Notwithstanding the foregoing, (a) if Licensor does not
Theatrically release any SPA Pictures in three successive Years of the Term, then, commencing
with the fourth successive Year, the foregoing cap shall be reduced from 3 SPA Pictures per
Year to 1 SPA Picture per Year for the remainder of the Term and (b) if Licensor Theatrically
releases more than 3 SPA Pictures in any Year, the SPA Pictures that shall apply towards the cap
of 3 shall be determined by the process set forth in Section 4.2 below.
4.2
Designation. Licensor shall notify Licensee by June 1 of each Year of the Term,
of all Animated Pictures that Licensor anticipates will qualify as SPA Pictures hereunder that
Licensor expects to Theatrically release during the immediately following Year of the Term,
which notice shall include a list of all such Animated Pictures, as well as a ranking of such
Animated Pictures in descending order of anticipated DBO. If Licensor anticipates Theatrically
releasing more than three SPA Pictures during such immediately following Year of the Term,
then Licensor shall designate as Pictures to be licensed by Licensee hereunder the three SPA
Pictures that Licensor projects will have (or that Licensor, in its good faith estimation, anticipates
will have) the highest DBO, and any additional Animated Pictures beyond such three designated
Pictures that Licensor Theatrically releases in the applicable Year that would otherwise qualify
as a SPA Picture hereunder shall be deemed Excess SPA Pictures (defined below). In addition,
Licensor shall provide Licensee with a final designation notice in writing for each Picture to be
licensed by Licensee hereunder no later than 120 calendar days prior to such Picture’s
Availability Date, which notice shall include the Availability Date for such Picture, an estimated
Domestic Box Office figure for such Picture (which shall be deemed to be the final Domestic
Box Office figure for such Picture unless Licensor provides Licensee with written notice of the
actual Domestic Box Office figure in sufficient enough time for Licensee to process the initial
Licensee Fee payment for such Picture (but in all cases within 2 Business Days following such
Picture’s Availability Date)) and the corresponding License Fee calculation for such Picture as
set forth in Schedule A hereto. Any SPA Pictures in excess of the yearly caps (after Licensor has
designated which SPA Pictures it is licensing to Licensee up to the cap pursuant to designation
process set forth in this Section 4.2) shall be referred to as “Excess SPA Pictures” and any
Animated Pictures that otherwise meet the definition of a SPA Picture except for the fact that
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they are co-released under both the Sony Pictures Animation and Sony Pictures Classics labels
shall be referred to as “SPA/SPC Pictures”. The parties acknowledge that failure of the SPA
Pictures to meet Licensor’s projected rankings shall not be a breach of this Agreement; provided,
that (a) Licensor’s projections are made in good faith and consistent with Licensor’s forecasting
practices as of the Effective Date and (b) such forecasting is used by Licensor for purposes other
than just determining which motion pictures would be licensed as SPA Pictures under this
Agreement.
4.3
Right of First Refusal. Licensee shall have a Right of First Refusal to license any
Excess SPA Pictures, any SPA/SPC Pictures, any Non-Qualifying Pictures, any Other Animated
Pictures (including as set forth in Section 4.4. below) and any SPA Pictures for which Licensor is
unable to make available the Minimum Source Material pursuant to Section 8.4 (collectively
with the Excess SPA Pictures, the SPA/SPC Pictures, the Non-Qualifying Pictures and the Other
Animated Pictures, the “ROFR Pictures”) at the per-Picture License Fee specified in Schedule A.
“Right of First Refusal” with regard to any ROFR Pictures means that prior to soliciting any
offers from third parties for the licensing of such ROFR Pictures for linear and/or on-demand
(including, without limitation, SVOD) exhibition during its first pay television “window,”
Licensor shall first provide Licensee with written notice of the availability of such picture (and,
if such picture is a Non-Qualifying Picture, of any applicable rights limitations with respect to
such picture, as further described in the last sentence of this Section 4.3). With respect to a
picture that Licensor anticipates may qualify as an Other Animated Picture hereunder, Licensor
shall notify Licensee in writing of the possible availability of such picture as an Other Animated
Picture hereunder as far in advance of such Other Animated Picture’s anticipated Availability
Date hereunder as reasonably practicable, which written notice shall include the name of such
picture, synopsis, key cast, rating and estimated Theatrical release date. Licensee shall have until
30 calendar days from receiving any such notices from Licensor to elect whether to license such
picture (and, if Licensee elects to license such picture, Licensor shall thereafter confirm to
Licensee in writing such Picture’s actual availability no later than 120 calendar days prior to
such Picture’s Availability Date). If Licensee elects not to license such picture or fails to make
an election by written notice to Licensor within the requisite time period, Licensor shall be free
thereafter to solicit and/or accept offers from any other party. If Licensee elects to license any
ROFR Picture pursuant to the Right of First Refusal, then such Picture shall be included in this
Agreement and the License Fee for such Picture shall be calculated in accordance with the rate
card in Schedule A. For the avoidance of doubt, any SPA/SPC Pictures licensed by Licensee
shall not count toward the yearly cap specified in Section 4.1. With respect to Non-Qualifying
Pictures, Licensee agrees and acknowledges that Licensor may not have the contractual right to
impose some or all of the holdbacks set forth in Section 2.5 and/or may not control the Home
Video rights, and as a result, notwithstanding anything to the contrary set forth in this
Agreement, Licensee’s license of any Non-Qualifying Picture pursuant to the Right of First
Refusal in this Section 4.3 shall be subject to such rights limitations.
4.4
“Angry Birds,” “Sausage Party”. With respect to the Animated Pictures with the
current working titles “Angry Birds” and “Sausage Party,” including all prequels, sequels and/or
remakes of “Angry Birds” and “Sausage Party” that meet the qualification criteria in subsections
(a) through (d) of the definition of “Other Animated Picture” in Section 1.30 of this Agreement,
Licensor shall license to Licensee, and Licensee shall license from Licensor hereunder, such
Animated Pictures, and in each case such Animated Pictures shall be deemed to be “ROFR
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Pictures” that Licensee has licensed as Pictures for purposes of this Agreement (and shall not, for
the avoidance of doubt, count towards the yearly cap specified in Section 4.1).
4.5
Pre-Existing Commitment. Notwithstanding anything to the contrary herein, if, at
the time that a particular theatrical motion picture is (or any relevant distribution rights thereto
are) first offered to an SPE Group Member for acquisition, and such motion picture would
otherwise qualify as a SPA Picture hereunder but for the fact that the SVOD rights for the
Territory are then-subject to a bona fide pre-existing contractual commitment (e.g., the person or
entity from whom the SPE Group Member is acquiring its rights (either in connection with the
acquisition of particular pictures or acquisition of an entity) is unable to license the SVOD rights
for such motion picture in the Territory to such SPE Group Member), then such motion picture
shall not be required by Licensor to be included hereunder (unless an SPE Group Member
subsequently obtains such SVOD rights, an SPE Group Member thereafter Theatrically releases
such motion picture in the U.S., and such film otherwise satisfies the terms of this Agreement);
provided, that (a) the SPE Group Member shall use good faith efforts to obtain such SVOD
rights; and (b) neither Licensor (nor any SPE Group Member) will use this Section 4.5 to
frustrate the intent of this Agreement.
4.6
Home Theater Release. Notwithstanding anything to the contrary herein, a
motion picture which would otherwise qualify as a Picture hereunder but which is exhibited via
Home Theater (but not any other form of exhibition) by Licensor during the Term in the
Territory up to 7 days prior to or concurrently with its Initial Theatrical Release shall be included
as a Picture hereunder.
5. TERM. As used in this Agreement, “Term” shall mean the period commencing on January
1, 2014 and expiring on (but including) December 31, 2021; provided, that the foregoing
expiration date shall not affect the parties’ respective continuing rights and obligations from and
after December 31, 2021 (including, by way of example, Licensee’s exhibition rights with
respect to the Pictures through the end of the applicable License Periods and Licensee’s payment
obligations under Schedule A).
6. WITHDRAWAL OF PROGRAMS.
6.1
Withdrawal by Licensor. Licensor shall have the right to withdraw any Picture (a
“Withdrawn Picture”) or its related materials from the SVOD Service because of pending
litigation or actual claim received in writing from a third party, judicial proceeding or regulatory
proceeding, in all cases in order to minimize the risk of material liability in connection with
Licensee’s continued distribution of such program. Notwithstanding the foregoing, Licensor and
Licensor Affiliates shall not enter into any agreement to license any Picture or its related
materials to a third party in a manner that would prevent Licensor from being able to license the
rights hereunder to Licensee. Licensor shall, in such event, give Licensee written notice of such
withdrawal and set forth in reasonable detail the withdrawal cause. For any Withdrawn Picture,
Licensor shall either, at Licensee’s option, refund to Licensee or credit against Licensee payables
within sixty (60) calendar days of the effective date of such withdrawal, a pro rata amount of all
License Fees paid to Licensor for such Withdrawn Picture for which the License Period(s) has
not begun or has not expired, such pro rata amount to be calculated based upon the percentage of
the applicable License Period for each such Withdrawn Picture that remains as of the effective
date of such withdrawal. Further, Licensor acknowledges and agrees that Licensor and Licensor
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Affiliates may not exhibit, or license or otherwise provide to another party, a Withdrawn Picture
for distribution on an SVOD or Pay Television basis during the remainder of what would have
been the relevant License Period(s) hereunder without first offering the Withdrawn Picture to
Licensee in accordance with the terms and conditions set forth herein for the full duration of the
remaining License Period(s).
6.2
Withdrawal by Licensee. Notwithstanding anything to the contrary in this
Agreement, Licensee shall have the right to temporarily suspend or permanently withdraw any
Picture or related materials from the SVOD Service at any time for any reason. Such suspension
or withdrawal pursuant to this Section 6.2 shall not relieve Licensee of its payment obligations
hereunder. Notwithstanding the foregoing, in the event Licensee reasonably believes that it
should temporarily suspend or permanently withdraw any Picture or its related materials from
the SVOD Service in order to minimize the risk of material liability in connection with
Licensee’s continued distribution of such Picture, Licensee may notify Licensor in writing and
request that Licensor exercise its withdrawal and/or suspension rights pursuant to Section 6.1,
and the parties shall promptly consult in good faith. Licensor may decline to exercise its
withdrawal and/or suspension rights, provided, that Licensor shall not be relieved of its
indemnification obligations to Licensee under this Agreement with respect to such Picture.
6.3
Effect of Withdrawal on Yearly Cap. For the avoidance of doubt, neither a
withdrawal by Licensor pursuant to Section 6.1, nor a withdrawal by Licensee pursuant to
Section 6.2, shall alter the slots then-available under the per Year cap set forth in Section 4.1
(i.e., no such withdrawal shall open up an additional slot).
7. LICENSE FEE; PAYMENT.
7.1
Consideration. Subject in each instance to Section 8, for each Picture licensed
hereunder, Licensee shall pay to Licensor the License Fee set forth in Schedule A.
7.2
Payment Terms. Subject in each instance to Section 8, Licensee shall pay the
License Fee for each Picture in eight (8) equal successive quarterly payments following the start
date of such Picture’s First License Period (with the first payment due (i) with respect to all
Pictures other than Cloudy 2, by the 15th day of the calendar month in which the First License
Period commences and (ii) with respect to Cloudy 2, by May 31, 2014 (with the second payment
for Cloudy 2 due by August 15, 2014, and each successive quarterly payment due on the 15th
thereafter) by wire transfer delivered to the account set forth in Section 7.3 below.
7.3
Payment Details; Taxes. The amounts to be paid by either party under this
Agreement shall not include Taxes, and all Taxes shall be the financial responsibility of the party
obligated to pay such taxes as determined by applicable law. The parties acknowledge and agree
that to the extent that Pictures may be considered to be purchased by Licensee from Licensor,
such purchase is solely for the purpose of resale to Registered Users, and no Tax shall be
collected by Licensor from Licensee. Upon Licensor’s written request, Licensee shall provide
Licensor with a resale certificate or other similar evidence of such exemption. Licensee may
withhold from its payments to Licensor any Taxes required by law unless Licensor provides
Licensee with documentation sufficient to verify that Licensor is exempt and withholding is not
required. If Licensor claims such an exemption and provides Licensee the required
documentation and Licensee does not collect the Taxes in reliance thereon, Licensor shall hold
Licensee harmless from and against any and all subsequent assessments, if any, for such Taxes
levied on Licensee by a proper Taxing authority, including all interest, penalties and late charges
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upon any such Taxes and the cost of professional consulting fees incurred by Licensee to settle
the applicable Tax matter with the relevant Tax authorities. On the other hand, if Licensor does
not claim an exemption and Licensee withholds the legally required amount from payment to
Licensor, Licensee shall (i) remit such amount to the applicable taxing authority, and (ii) within
30 days of filing the applicable form(s) with the applicable taxing authority, deliver to Licensor
original documentation or a certified copy evidencing such remittance to permit Licensor to
obtain a credit or withholding in respect of such amounts withheld (a “Withholding Tax
Receipt”). In the event Licensee does not provide a Withholding Tax Receipt in accordance with
the preceding sentence, the Licensee shall be liable to and shall reimburse Licensor for the
withholding Taxes deducted from payments due Licensor. If Licensee’s assignment of this
agreement pursuant to Section 20 causes an increased rate of tax withholding or deduction to
apply to the payments to Licensor, then the gross amount payable by Licensee to Licensor shall
be increased so that after such deduction or withholding, the net amount received by Licensor
will not be less than Licensor would have received had Licensee not made the assignment.
Except as expressly set out herein, each party shall indemnify the other, pursuant to the
procedures set forth in Section 15.3, for failure to pay any Taxes payable by such party pursuant
to this Section and/or applicable law. Unless and until Licensee is otherwise notified by
Licensor, all payments due to Licensor pursuant to this Agreement shall be made in United
States Dollars by wire or ACH transfer to Licensor as follows: Mellon Client Service Center,
Pittsburgh, PA 15262; ABA Routing #: 043000261; Account #: 093-9923; Credit: Sony Pictures
Television Inc.
8. PHYSICAL MATERIALS.
8.1
Delivery. Licensor shall deliver to Licensee, at Licensor’s sole cost, no earlier
than 90 calendar days prior to and no later than 30 calendar days prior to the Availability Date
for each Picture, an encoded digital file (each digital file, a “Copy”), together with all
Advertising Materials (defined below), music cue sheets and other Source Materials in
accordance with the specifications set forth in Schedule B (as may be updated from time to time
by mutual agreement of the parties). The thirty (30) calendar day deadline referred to in the
immediately preceding sentence is hereinafter referred to as the “Source Material Delivery Date”
for each Picture. Solely with respect to Cloudy 2 and Smurfs 2 (and notwithstanding the
immediately preceding two (2) sentences), the parties acknowledge that (i) the Source Material
Delivery Date for such Pictures shall be deemed to be the Effective Date, and (ii) Licensor shall
be deemed to have delivered to Licensee the Minimum Source Material for such Picture as of the
Effective Date. Without limiting the foregoing, Licensor shall provide Licensee with (a) all
versions, formats (e.g., 3D), and resolutions (e.g., 4K) Theatrically released in the Territory and
(b) all other versions, formats and resolutions (whether or not released in other media in the
Territory) for which Licensor controls (or acquires control of during the Term) the SVOD
distribution rights, including letterbox versions, “director’s cuts” and “special editions”, but
excluding versions distributed solely on a Non-Theatrical Exhibition basis (e.g., airlines).
Notwithstanding anything contained herein to the contrary, the exhibition of any Picture pursuant
to this Agreement in any video resolution higher than 4K shall be subject to all additional content
protection requirements and obligations (if any) that must be mutually agreed to by the parties
prior to Licensee’s exhibition of a Picture in such higher resolution. The occasional and
inadvertent operational failures to deliver any Minimum Source Materials to Licensee by the
Source Material Delivery Date shall not constitute a breach, provided that Licensor acts in good
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faith to promptly remedy any such failure; however, in such event, unless otherwise agreed to by
the parties: (i) Licensee may delay the First License Period and Second License Period start dates
and end dates for the applicable Picture by the same number of days as the applicable delivery
delay, solely to the extent that, in the case of a delay of the First License Period, any such delay
does not cause the First License Period to overlap with any other permitted Network Window
distributor’s start date for such Picture (in which case, Licensee shall not delay the Availability
Date, but shall instead reduce the length of the First License Period in accordance with the
process set forth in clause (ii) below); provided that any Availability Date change of more than
thirty (30) calendar days would be subject to the mutual written agreement of the parties; and (ii)
if the applicable delivery is delayed by more than thirty (30) calendar days, then Licensee may
elect not to delay the applicable Picture’s License Periods, and, instead, to reduce the length of
the First License Period by a number of days equal to the number of days that delivery was
delayed (and if a First License Period is reduced pursuant to clause (ii), the License Fee for such
Picture shall be reduced on a pro-rata, straight-line basis based on the number of days that are
removed from the First License Period for such Picture as against the overall number of days in
both License Periods for such Picture prior to such reduction). Neither Licensor nor any SPE
Group Member shall use the terms of this Section 8.1 (including the immediately preceding
sentence) to frustrate the intent of this Agreement. Licensor shall deliver to Licensee each of the
versions, formats and resolutions set forth in subsections (a) and (b) promptly upon such
version’s, format’s or resolution’s release in the medium for which it was created. Licensor will
deliver to Licensee a closed caption file for each Picture in a mutually agreed upon version of the
SMPTE-TT format in accordance with the specifications attached as Schedule B hereto.
Licensee shall exhibit such closed captions in connection with each Picture exhibited on the
SVOD Service in accordance with the CVAA and applicable law.
8.2
Additional Language Versions. Licensor shall provide all Pictures to Licensee in
both English and Spanish (including both subtitles and dubs for each such Licensed Language);
provided, that if a Picture’s original language of production is not English or Spanish, such
Picture shall be delivered dubbed and/or subtitled in the English and/or Spanish languages, as
applicable. Upon Licensee’s request, Licensor shall provide to Licensee subtitles and dubs for
each Picture for Licensed Languages other than English and Spanish (or any English and/or
Spanish subtitles and/or dubs that were not delivered by Licensor pursuant to the proviso in the
first sentence of this Section 8.2), subject to the following: (a) if such applicable Source
Materials are available to Licensor, such additional language materials shall be provided at
Licensor’s cost, and (b) if such applicable Source Materials are not available to Licensor (i.e.,
have not yet been created), then Licensor shall create and deliver such additional language
materials to Licensee (subject to any guild requirements or third-party contractual restrictions, in
each case as communicated to Licensee by Licensor in writing), and (i) for the first three (3)
language materials requested by Licensee that have not yet been created, Licensor shall create
and provide such additional Source Materials to Licensee at Licensor’s cost and (ii) for any
request by Licensee of language materials beyond the initial three (3) language materials
referenced in subclause (i), Licensee shall reimburse Licensor for its out of pocket costs (to the
extent such costs are pre-approved by Licensee, such approval not to be unreasonably withheld
or delayed) for the creation of such Source Materials.
8.3
Acceptance. Upon Licensee’s receipt of all Source Material for a Picture,
Licensee shall have thirty (30) calendar days in which to send Licensor written notice of its
acceptance (“Notice of Acceptance”) or rejection (“Notice of Rejection”) of the Source Material
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for that Picture in the Territory, such acceptance or rejection to be determined by Licensee in
good faith and based solely upon whether such Source Material complies with Schedule B. In
the event that Licensee displays or distributes a Picture, other than as permitted pursuant to the
marketing and promotional rights described in Section 11 (i.e., enables playback of the full
length Picture), on or from the SVOD Service in the Territory prior to issuing a Notice of
Acceptance or a Notice of Rejection, then such Source Material shall automatically be deemed
accepted by Licensee.
8.4
Rejection. Upon Licensor’s receipt of a Notice of Rejection, if any, Licensor
shall, without delay and at its sole expense, replace the defective Source Material. Until such
time as Licensor is able to provide an acceptable replacement for all Minimum Source Material
(at Licensor’s cost), Licensee shall not be obligated to pay any License Fee with respect to the
relevant Picture. Notwithstanding anything to the contrary in this Agreement, in the event that
Licensor is unable to provide acceptable copies of all Minimum Source Material for any SPA
Picture, Licensee shall not be obligated to license the relevant SPA Picture hereunder, and such
SPA Picture shall be deemed to be subject to the Right of First Refusal set forth in Section 4.3
above. The parties agree that neither party shall use Section 8.3 or this Section 8.4 nor the fifth
sentence of Section 8.1 to frustrate the purpose or effect of this Agreement (including Section 7)
or the rights granted herein.
8.5
Destruction. Within 90 calendar days following the later of (a) the termination or
expiration of this Agreement and (b) the last day of the Second License Period with respect to
each Picture, Licensee shall destroy, degauss or overwrite all such Copies and Advertising
Materials (and, upon Licensor’s request, supply Licensor with a certification of erasure or
degaussing of such Copies and Advertising Materials).
8.6
Loss, Theft, Destruction. Upon the loss, theft or destruction (other than as
required hereunder) of any Copy of a Picture, Licensee shall promptly furnish Licensor with
proof of such a loss, theft or destruction by affidavit setting forth the facts thereof.
8.7
Licensor’s Property. As between the parties, each Copy of the Pictures and all
Advertising Materials are the property of Licensor, subject only to the limited right of use
expressly permitted herein, and Licensee shall not charge, pledge, mortgage, encumber or grant a
lien on any Pictures hereunder.
9. CONTENT PROTECTION & SECURITY.
9.1
General. Licensee shall, throughout the Term, maintain the security systems,
procedures and technologies (including, without limitation, Content Protection Systems) that are
no less stringent or robust than those which Licensee employs with respect to licensed films from
other licensors, but in no event less than industry standard. Licensee represents and warrants that
it implements, as of the Effective Date, and will continue to implement throughout the remainder
of the Term, the systems, procedures and technologies set forth on Schedule C and Schedule C-1,
as applicable, and Schedule U. Subject to the foregoing, Licensee shall maintain and upgrade
such security systems, procedures and technologies (including, without limitation, encryption
methods) as necessary and commercially reasonable in a manner that is designed to prevent theft,
pirating, unauthorized exhibition (including, without limitation, exhibition to non-Registered
Users and exhibition outside the Territory), unauthorized copying or duplication of any video
reproduction or compressed digitized copy of any Picture available on the SVOD Service. In the
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event Licensor embeds, encodes or otherwise inserts, or if applicable, associates copy control
information in or with the Pictures prior to delivery to Licensee in accordance with the
requirements of Schedule B and Section 9 of Schedule C, Licensee shall “pass through” such
copy control information without intentional alteration, modification or degradation in any
manner. Licensee shall not authorize any use of any video reproduction or compressed digitized
copy of any Picture for any purpose other than as is expressly permitted herein. When Licensee
makes any material and negative modification to its security systems, procedures and
technologies, Licensee shall so notify Licensor, and Licensor shall have the right, at a time and
date to be mutually agreed upon, to inspect and review such modified security systems,
procedures and technologies at Licensee’s affected places of business (including off-site
facilities, if any, used by Licensee).
9.2 Suspension Notice. Licensee shall notify Licensor immediately upon learning of the
occurrence of any Security Breach or Territorial Breach, and shall provide Licensor with specific
information describing the nature and extent of such occurrence. Licensor shall have the right to
suspend the availability of the Pictures on the SVOD Service (“Suspension”) at any time during
the Term and/or the affected Pictures’ License Periods in the event of a Security Breach or
Territorial Breach by delivering a notice to Licensee of such suspension (“Suspension Notice”).
Upon receipt of a Suspension Notice, Licensee shall take steps immediately to remove the
Pictures or make the Pictures inaccessible from the SVOD Service on affected Security Model
Groups (defined below) as soon as commercially feasible (but in no event more than three
calendar days after receipt of such notice). The parties acknowledge that a Suspension pursuant
to this Section 9.2 may be occasioned in the absence of a Licensee Event of Default (e.g., in the
event the DRM is hacked through no fault of Licensee), and that in such event, Licensor shall
likewise suspend all distributors and licensees of Licensor which employ such technology. A
“Security Model Group” shall mean a constrained set of devices that share a common hardware
and security design. For the avoidance of doubt, a Security Model Group is not a single device
category such as “all Blu-ray players”, but instead is generally constrained to a group of a
particular device category produced by a single manufacturer for a specific model year (e.g., all
the models of connected televisions from a single manufacturer which share a common hardware
and software platform and have the same security design, and which were produced in the 2010
model year). For clarity, a device within a Security Model Group does not have to have been
actually compromised itself in order to be covered by the terms of this Section 9.2; provided,
however, that a device within a Security Model Group shall be deemed not to be subject to the
Suspension once the Security Breach or Territorial Breach that caused the Suspension and
compromised such device is remedied or otherwise addressed in the reasonable good faith
judgment of Licensor with respect to such device (e.g., necessary software or hardware updates
have occurred).
9.3
Reinstatement/Termination. Licensee shall have sixty (60) calendar days from the
date of Suspension to cure or address the Security Flaw that resulted in a Security Breach or
Territorial Breach. If the Security Flaw that resulted in the Security Breach or Territorial Breach
that gave rise to a Suspension is corrected, repaired, solved or otherwise addressed in the
reasonable good faith judgment of Licensor, the Suspension shall terminate upon Licensor’s
delivery to Licensee of a notice thereof (“Reinstatement Notice”) and Licensor’s obligation to
make the Pictures available to Licensee for distribution on the SVOD Service on affected
Security Model Group(s) shall resume. For clarity, no period of Suspension shall extend the
Term or any Picture’s License Period(s) in time, and upon a notice that a Suspension has ended,
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the Term and each Picture’s License Period(s) shall end as otherwise provided herein. As soon
as practicable after the delivery of a Reinstatement Notice to Licensee, Licensee may include the
Pictures on the SVOD Service on such previously affected Security Model Group(s). If any
single Suspension lasts for a period of sixty (60) consecutive calendar days, Licensor shall either
terminate this Agreement or terminate the Suspension by providing written notice of such
election to the Licensee upon the conclusion of the sixty (60) calendar days. In the event of
termination, Licensor shall refund or credit to Licensee, at Licensee’s option and within thirty
(30) calendar days of the effective date of such termination, a prorated amount of the aggregate
License Fees paid to Licensor, calculated as of the effective date of such termination and based
upon the amount of time remaining in the relevant License Periods. In the event of termination
under this Section 9.3, Licensor acknowledges and agrees that neither it nor an Affiliate of
Licensor may license the Picture(s) to a third party(ies) for distribution on an SVOD and/or Pay
Television basis in the Territory during the remainder of what would have been the applicable
License Period(s) hereunder for each Picture, to the extent distribution of the Picture(s) by such
third party(ies) would be equally subject to the Security Breach and/or Territorial Breach as that
which formed the basis of Licensor having terminated this Agreement.
9.4
Obligation to Monitor. Licensee shall have the obligation to notify Licensor
promptly of any Security Breaches or Territorial Breaches of which it becomes aware.
9.5
Content Protection Requirements and Obligations. Licensee shall at all times
strictly comply with the Content Protection Requirements and Obligations attached hereto as
Schedule C and Schedule C-1, as applicable, and incorporated herein by this reference. In the
event Licensee reasonably believes that another distributor (including Licensor and/or Licensor
Affiliates), which distributes any motion pictures Theatrically Released By an SPE Group
Member in a similar or earlier window to the applicable SPA Pictures hereunder, are distributing
such motion pictures using digital rights management and/or security systems that are less robust
or effective than those imposed upon Licensee under this Agreement (such less robust or
effective digital rights management and/or security systems, the “Alternative Security Terms”),
then Licensee may notify Licensor in writing of such belief, and Licensor shall either confirm or
deny, in writing, the applicable Alternative Security Terms within thirty (30) calendar days
thereafter. If and to the extent that Licensor (or a Licensor Affiliate) has itself implemented or
authorized such other distributor to implement such Alternative Security Terms, then the parties
shall engage in good faith discussions regarding the adoption of such Alternative Security Terms
with respect to the distribution of the Pictures by Licensee hereunder.
10. CUTTING, EDITING AND INTERRUPTION. Subject to Section 11.2, Licensee shall
not make, or authorize any others to make, any modifications, deletions, cuts, alterations or
additions in or to any Picture without the prior written consent of Licensor. For the avoidance of
doubt, no panning and scanning, time compression or so-called “up-conversion” (except as stated
in Section 2.6 of Schedule B) and similar modifications shall be permitted. Without limiting the
foregoing, Licensee shall not delete the copyright notice or credits from the main or end title of
any Picture or from any other materials supplied by Licensor hereunder. Licensee shall not
interrupt, or permit the interruption of, the exhibition of any Picture hereunder for intermission,
commercials or any other similar commercial announcements of any kind (namely no
pre/mid/post roll advertising nor any advertising displayed on the same page/window of the
SVOD Service from which the Picture is viewed). Notwithstanding anything to the contrary
herein, Licensee shall not be responsible for any third party modifications to Pictures or overlays
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that obscure or otherwise interact with Pictures and result from Registered User’s use of his or
her Approved Device and/or from the operation of any third party hardware and/or software and
are not initiated by Licensee (collectively, “Program Overlays”); provided, that (a) Licensee shall
include in its terms of service with third parties who develop Applications a requirement that any
Program Overlays conform to industry standard, (b) no Program Overlay may alter or modify the
Usage Rules and (c) if Licensee becomes aware of any third party implementing a Program
Overlay in a Picture in violation of the applicable terms of service with such third party, or if
Licensee becomes aware that any third party who is subject to terms of service with Licensee is
implementing Program Overlays that either (i) include advertising within the SVOD Service
Application or (ii) include advertising in a manner directly associated with the Pictures, Licensee
shall use reasonable means to address such violation and/or, in its reasonable discretion, revoke
such third party access to the Pictures and/or SVOD Service. For the purpose of this Agreement,
“industry standard” with respect to Program Overlays shall constitute those modifications or
overlays implemented by (i) Comcast, TiVo, Xbox or PlayStation (but solely with respect to
overlays implemented within each such entity’s subscription or Ad-Supported video
programming service), or (ii) Hulu, Crackle or any other Ad-Supported or subscription video
programming service delivered over the Internet with respect to similarly situated content. For
clarity, the services listed in the immediately preceding sentence do not represent the exclusive
list of what may constitute “industry standard” for purposes of this Section 10. For the
avoidance of doubt, this Section 10 shall not affect or limit Licensor’s withdrawal rights pursuant
to Section 6 of the Agreement.
11. PROMOTIONS.
11.1
Licensee shall have the right to use or authorize the use of written summaries,
extracts, synopses, photographs and trailers (including (i) at least one (1) promotional trailer per
Picture (in each case, with a runtime of approximately thirty (30) seconds) and (ii) all other
promotional trailers prepared by or on behalf of Licensor on a non-exclusive basis for other third
party distributors of the Pictures (e.g., trailers prepared for any MVPD’s on-demand “barker”
channel), which trailers Licensor shall make available to Licensee upon Licensee’s request)
prepared and provided or made available by Licensor or, if altered by Licensee, approved in
writing in advance by Licensor (provided such approval is not required for text-based materials
altered by Licensee (e.g., synopses)) (collectively, “Advertising Materials”) and, subject to
Section 11.2 below, Promotional Previews, solely for the purpose of advertising, promoting and
publicizing the exhibition of the Pictures to the general public and on the SVOD Service and the
right to advertise, publicize and promote, or authorize the advertising, publicity and promotion of
the exhibition of any Picture during the time periods and other restrictions specified below:
11.1.1 Licensee shall have the right to promote the upcoming exhibition of each
Picture to the general public and on the SVOD Service during the period starting 45 days before
its Availability Date (with respect to the First License Period) and 30 days before its Second
License Period, and to continue promoting such availability through the last day of each License
Period with respect to such Picture.
11.1.2 Except as expressly permitted in Section 11.1.1, Licensee shall not
promote the availability of any Picture on the SVOD Service after the expiration of each License
Period for such Picture.
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11.2 Promotional Previews. Licensor (a) hereby grants to Licensee a limited, nonexclusive license to exhibit Promotional Previews on the SVOD Service via Approved Delivery
in accordance with Section 11.1 of the Agreement, subject to any contractual restrictions of
which Licensor notifies Licensee in writing and (b) shall deliver to Licensee at least one (1) SPE
Promotional Preview for each Picture (in accordance with the requirements set forth in Schedule
B). Notwithstanding anything to the contrary herein, in the event that any guild, union, or
collective bargaining agreements or other third party agreements to which Licensor or its
affiliates is or becomes a party requires a maximum duration for video clips that is shorter than
the Maximum Preview Duration in order to avoid a residual, reuse or other fee in connection
therewith, Licensor shall so notify Licensee in writing and Licensee shall either (i) shorten the
duration of each affected Netflix Promotional Preview(s) on the SVOD Service in accordance
with the terms of the notice (“Revised Preview Duration”) as soon as reasonably possible, but in
no event longer than two (2) business days after receipt of such notice, or (ii) cease using the
affected Netflix Promotional Preview(s). In addition to and without limiting any other remedy
available to Licensor hereunder, in the event that Licensee exceeds the Maximum Preview
Duration or any Revised Preview Duration (in the case of a Revised Preview Duration, after
Licensee shortens the duration of such preview in accordance with the preceding sentence) for
any Netflix Promotional Preview, Licensee shall indemnify Licensor for the costs of any
residual, reuse or other similar fee payable by Licensor or its affiliates under the applicable guild,
union or collective bargaining agreement(s) as a result thereof. Without limiting the foregoing,
Licensor shall have the right to terminate Licensee’s right to use a Netflix Promotional Preview
for a particular Picture on a case-by-case basis if Licensor reasonably believes that such Netflix
Promotional Preview is not appropriate for all audiences or may violate the terms of any of
Licensor’s agreements with, or may adversely affect Licensor’s material relations with, any third
party. Licensor shall give Licensee written notice of any such termination, in which event
Licensee shall cease using the applicable Netflix Promotional Preview(s) within two (2) business
days after receipt of such notice. For the avoidance of doubt, Licensee need not encrypt
Promotional Previews or trailers.
11.3 “Free” Marketing; Restrictions. From and after the Effective Date, Licensee shall
not refer to the SVOD Service as being any form of “free” in any marketing, advertising,
promotion or other written public communication, except as a part of a permitted Free Trial.
11.4 Free Trials. Licensee shall be permitted to make the SVOD Service (including
the Pictures available on the SVOD Service) available for promotional purposes to subscribers in
the Territory at no charge for a limited trial period (“Free Trial”) for up to one (1) month at a
time; provided, that Licensee may not enable a trial period for a Free Trial for any nonsubscriber who was previously authorized by Licensee using the same account credentials to
participate in a Free Trial within the last twelve (12) months. Prior to enabling a trial period for
a Free Trial for a non-Registered User, Licensee will require such non-Registered User to input
account credentials which may include, among other things, user name, password, email address
and/or information necessary, such as credit card information or bank account numbers, to allow
Licensee to obtain payment from the non-Registered User after the Free Trial. In addition to the
Pictures, all other programs available as part of the same tier of the SVOD Service must be made
available for exhibition to subscribers receiving the Free Trial. By way of clarity, the Free Trials
must at all times comply with all of the copy protection requirements and Usage Rules set forth
in this Agreement.
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11.5 The rights granted in this Section 11 above shall be subject to, and Licensee shall
comply with, any and all restrictions or regulations of any applicable guild or union and any third
party contractual provisions with respect to the advertising and billing of the Picture in
accordance with such instructions as Licensor advises Licensee in writing. In no event shall
Licensee be permitted to use any excerpts from a Picture other than as created by Licensee as a
Netflix Promotional Preview hereunder and/or otherwise provided by Licensor and in no case in
excess of the Maximum Preview Duration.
11.6
Notwithstanding the foregoing, Licensee shall not, without the prior written
consent of Licensor, (a) modify, edit or make any changes to the Advertising Materials (except
in accordance with Licensee’s standard promotional practices), or (b) promote the exhibition of
any Picture on the SVOD Service by means of contest or giveaway. Licensee shall include
appropriate copyright notices with all Advertising Materials displayed on the SVOD Service
and/or any promotions and/or advertising created by or on behalf of Licensee if and to the extent
Licensee does the same with respect to all films licensed from other licensors and distributed in
the same SVOD Service plan as the Pictures. For the avoidance of doubt, Licensee shall not be
responsible for any overlays on Advertising Materials (“Advertising Overlays”); provided, that
(i) Licensee shall include in its terms of service with third parties who develop Applications a
requirement that any Advertising Overlays conform to industry standard and (ii) if Licensee
becomes aware of any third party implementing an Advertising Overlay in violation of the
applicable terms of service, Licensee shall use reasonable means to address such violation
and/or, in its reasonable discretion, revoke such third party access to the Pictures and/or SVOD
Service.
11.7 The names and likenesses of the characters, persons and other entities appearing
in or connected with the production of Pictures shall not be used by or on behalf of Licensee
separate and apart from the Advertising Materials which will be used solely for the purpose of
advertising the exhibition of such Pictures, and no such name or likeness shall be used so as to
constitute an endorsement or testimonial, express or implied, of any party, product or service, by
“commercial tie-in” or otherwise, other than whatever indirect endorsement of Licensee or the
SVOD Service is implied by its exhibition of the Advertising Materials and Pictures. Licensee
shall not use Licensor’s name or logo or any Picture or any part of any Picture as an endorsement
or testimonial, express or implied, by Licensor, for any party, product or service, including
Licensee or any program service or other service provided by Licensee; provided, however, that
Licensee may use (a) Licensor’s name and logo for promotional purposes on the SVOD Service,
and in connection with marketing and promotional activities, with Licensor’s prior written
consent and (b) Animated characters from any Picture within its “Just For Kids” or successor
feature.
12. RATINGS AND ANTI-PIRACY WARNING. Licensor shall provide Licensee with
MPAA (or industry successor) rating information (“Rating Information”) for each Picture, and
Licensee shall display such Rating Information for each Picture in a manner that is consistent
with Licensee’s display of rating information for other similar content distributed via the SVOD
Service, including, as applicable, the applicable Rating Information icon(s), as well as the
description of the reasons behind the rating, if applicable (e.g., “Rated PG-13 for some
violence”). In addition, the SVOD Service must implement parental controls that allow a
subscriber with password-protected access to the SVOD Service to restrict Registered Users of
that account from exhibiting Pictures that do not carry a specific rating (e.g., restrict access to
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Pictures that carry any rating above “G” or its equivalent in the Territory). If, at any time during
the Term, any governmental body with authority over the implementation of the so-called “AntiPiracy Warning” requires as a matter of law that such warning be implemented as a condition of
the distribution of licensed content via the SVOD Service, then Licensee shall comply with those
requirements to the extent Licensee is legally required.
13. LICENSOR’S REPRESENTATIONS AND WARRANTIES. Without limiting any other
representation, warranty or covenant of Licensor herein, Licensor hereby represents and warrants
to Licensee that:
13.1 It is a company duly organized under the laws of the state of its organization and
has all requisite corporate power and authority to enter into this Agreement and perform its
obligations hereunder.
13.2 The execution and delivery of this Agreement by Licensor has been duly
authorized by all necessary corporate action.
13.3 This Agreement has been duly executed and delivered by, and constitutes a valid
and binding obligation of, Licensor, enforceable in accordance with the terms and conditions set
forth in this Agreement, except as such enforcement is limited by bankruptcy, insolvency and
other similar laws affecting the enforcement of creditors’ rights generally, and by general
equitable or comparable principles.
13.4 The performing rights to any musical compositions contained in each of the
Pictures, are either (a) controlled by ASCAP, BMI or SESAC or any other future or successor
collecting society with requisite authority and jurisdiction in the Territory with respect to the
public performance rights in musical compositions (each and collectively, the “PRO”)
(b) controlled by Licensor to the extent required for the licensing of the exhibition in accordance
herewith, or (c) in the public domain. Licensor does not represent or warrant that Licensee may
exercise the performing rights in the musical compositions without obtaining a valid
performance license and without payment of a performing rights royalty or license fee, and if a
performing rights royalty or license fee is required to be paid to a PRO in connection with the
exhibition of the Picture with respect to the musical compositions contained in the Picture,
Licensee shall be responsible for the payment thereof and shall hold Licensor free and harmless
therefrom.
14. LICENSEE’S REPRESENTATIONS AND WARRANTIES. Without limiting any other
representation, warranty or covenant of Licensee herein, Licensee hereby represents, warrants
and covenants to Licensor that:
14.1 It is a company duly organized under the laws of the state of its organization and
has all requisite corporate power and authority to enter into this Agreement and perform its
obligations hereunder.
14.2 The execution and delivery of this Agreement has been duly authorized by all
necessary corporate action.
14.3 This Agreement has been duly executed and delivered by, and constitutes a valid
and binding obligation of Licensee, enforceable against such party in accordance with the terms
and conditions set forth in this Agreement, except as such enforcement is limited by bankruptcy,
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insolvency and other similar laws affecting the enforcement of creditors’ rights generally, and by
general equitable or comparable principles.
14.4 No Picture shall be transmitted or exhibited except in accordance with the terms
and conditions of this Agreement. Without limiting the generality of the foregoing, no Picture
shall be exhibited to any person other than a Registered User within the Territory as part of the
SVOD Service in the medium of Subscription Video-On-Demand, or transmitted other than by
Approved Delivery in an Approved Format to Approved Devices for Personal Use.
Notwithstanding the foregoing, Licensor acknowledges that Licensee cannot guarantee that
current geofiltering technology as of the date of this Agreement shall be effective in every
instance.
15. INDEMNIFICATION.
15.1 Licensor shall indemnify and hold harmless Licensee and its representatives (with
respect to a party, its officers, directors, equity owners, employees and other representatives and
its parents, subsidiaries and affiliates (and their officers, directors, equity owners, employees and
other representatives (collectively, the “Representatives”)) from and against any and all claims,
damages, liabilities, costs and expenses, including reasonable outside counsel fees, incurred by
the foregoing in any action or proceeding brought by a third party arising from or in connection
with (a) the breach or alleged breach by Licensor of any of its representations or warranties or
any material provisions of this Agreement and claims that any of the Pictures (or portions
thereof), Advertising Materials and/or Source Materials, under U.S. law, infringe upon the trade
name, trademark, copyright, music synchronization, literary or dramatic right or right of privacy
of any claimant, or constitutes a libel or slander of such claimant or (b) the violation or alleged
violation by Licensor of any applicable federal, state or local laws, ordinances, rules or
regulations; provided, however, that Licensee shall promptly notify Licensor of any such claim
or litigation. Notwithstanding the foregoing, the failure to provide such prompt notice shall
diminish Licensor’s indemnification obligations only to the extent Licensor is actually
prejudiced by such failure. In addition, Licensor shall not be required to indemnify Licensee or
its Representatives for any claims resulting from Licensee exhibiting Pictures using Advertising
Materials in a form other than as delivered or approved by Licensor or due to Licensee’s editing
or modification of any Pictures or Advertising Materials or Licensee’s authorization of a third
party to do any of the foregoing without Licensor’s approval.
15.2
Licensee shall indemnify and hold harmless Licensor and its Representatives
from and against any and all claims, damages, liabilities, costs and expenses, including
reasonable outside counsel fees, incurred by the foregoing in any action or proceeding brought
by a third party arising from or in connection with (a) the breach or alleged breach of any
representation, warranty or other material provision of this Agreement by Licensee, (b) from the
exhibition of any material (other than Advertising Materials, clips, Promotional Previews and
other Source Materials exhibited in strict accordance with this Agreement and Licensor’s
instructions therefor provided in writing in accordance with the terms of this Agreement), in
connection with or relating, directly or indirectly, to such Pictures, (c) the infringement or
alleged infringement upon or violation or alleged violation of any right of a third party other than
as a result of the exhibition of the Pictures in strict accordance with the terms of this Agreement
or (d) the violation or alleged violation by Licensee of any applicable federal, state or local laws,
ordinances, rules or regulations; provided, however, that Licensor shall promptly notify Licensee
of any such claim or litigation. Notwithstanding the foregoing, the failure to provide such
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prompt notice shall diminish Licensee’s indemnification obligations only to the extent Licensee
is actually prejudiced by such failure.
15.3
In any case in which indemnification is sought hereunder:
(a) At the indemnifying party’s option, the indemnifying party may
assume the handling, settlement or defense of any such claim or litigation. If the indemnifying
party assumes the handling, settlement or defense of any such claim or litigation, the party to be
indemnified shall cooperate in the defense of such claim or litigation, and the indemnifying
party’s obligation with respect to such claim or litigation shall be limited to holding the
indemnified party harmless from any final judgment rendered on account of such claim or
settlement made or approved by the indemnifying party in connection therewith, and expenses
and reasonable attorneys fees of the indemnified party incurred in connection with the defense of
such claim or litigation prior to the assumption thereof by the indemnifying party and any
reasonable out-of-pocket expenses for performing such acts as the indemnifying party shall
request. If the indemnifying party does not assume the handling, settlement or defense of any
such claim or litigation, the indemnifying party shall, in addition to holding the indemnified
party harmless from the amount of any damages awarded in any final judgment entered on
account of such claim, reimburse the indemnified party for reasonable costs and expenses and
reasonable outside attorneys fees of the indemnified party incurred in connection with the
defense of any such claim or litigation; and
(b) The party seeking indemnification shall fully cooperate with the
reasonable requests of the other party in its participation in, and control of, any compromise,
settlement, litigation or other resolution or disposition of any such claim. The indemnifying
party shall not consent to the entry of any final judgment in any action without the indemnified
party’s prior written approval except, in the case where Licensor is the indemnifying party,
where such consent involves the agreement not to further exploit a Picture.
16. REPORTING OBLIGATIONS. Licensee shall report electronically to Licensor the
following information: on a monthly basis, within thirty (30) calendar days after the end of each
calendar month, a written report detailing the aggregate number of unique Registered User
viewers for each Picture and the aggregate number of Registered User stream starts, in each
instance with respect to the Territory; provided, however, that Registered Users attributable to a
“free trial” of or other promotion for the SVOD Service shall not be included.
17. PRESS RELEASE. Licensor and Licensee shall mutually agree as to the form, content and
release date of any press release related to this Agreement (and the parties acknowledge that it is
their intent to issue a press release announcing this Agreement within the sooner to occur of: (i) a
reasonable period of time after the later of full execution hereof by both parties or the Effective
Date, and (ii) within any applicable time frame proscribed by applicable law or regulation).
18. SEVERABILITY. If any provision of this Agreement is, for any reason, held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein. If, moreover, any
restriction or provision of this Agreement is, for any reason, held to be too broad as to duration,
scope, activity or subject, it shall be construed by limiting and reducing such provision or
restriction so as to be enforceable to the extent compatible with applicable law, although
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Licensor and Licensee hereby agree that said restrictions and other provisions of this Agreement
are fair and reasonable as of the Effective Date. In any such event, Licensor and Licensee shall
endeavor in good faith to replace any invalid, illegal or unenforceable provisions with valid
provisions, the economic effect of which comes as close as possible to that of the invalid, illegal
or unenforceable provisions. By way of clarification, a provision shall not be considered
“illegal”, “unenforceable” or “invalid” for purposes of (or for purposes of giving rise to the
application of) this Section 18 if such provision is held to be “illegal”, “unenforceable” or
“invalid” against a party hereto by reason of such party’s bankruptcy, insolvency, receivership,
dissolution, liquidation, winding up or termination or cessation of existence or otherwise by
reason of something that is personal to such party (i.e., such provision is held to be “illegal”,
“unenforceable” or “invalid” based upon circumstances that are applicable only to such party).
19. TERMINATION.
19.1 Without limiting any other provision of this Agreement and subject to Section
19.3, upon the occurrence of a Licensee Termination Event (as defined below), Licensor may, in
addition to any and all other rights which it may have against Licensee, immediately terminate
this Agreement, or any license hereunder with respect to a Picture if the Licensee Termination
Event is specific to that particular Picture, by giving written notice to Licensee. In addition to
any and all other remedies in respect of a Licensee Event of Default which Licensor may have
under applicable law, Licensor shall be entitled to recover from Licensee all payments past due
from Licensee to Licensor hereunder, together with interest, compounded monthly, at the lesser
of 2% above the prime rate of interest announced by Bank of America at such time or the
maximum rate permitted by law, plus reasonable outside attorney fees, and all costs and
expenses, including collection agency fees, incurred by Licensor to enforce the provisions
thereof. Furthermore, upon a Licensee Event of Default that is not cured within 30 days after
Licensee’s receipt of written notice from Licensor, Licensor shall have the right to immediately
suspend delivery of all Pictures and Marketing Materials with respect thereto and/or suspend
Licensee’s right to exploit any Pictures, licensed hereunder, without prejudice to any of its other
rights hereunder; provided, (i) Licensee shall not be required to pay any License Fees with
respect to any Pictures for which Licensor does not deliver the requisite materials in accordance
with the Agreement and (ii) any such suspension of Licensee’s exploitation rights shall be for no
longer than a total of 90 calendar days (i.e., after such 90 days, Licensor must either lift such
suspension or terminate the Agreement in accordance with this Section 19.1). As used herein, a
“Licensee Event of Default” shall mean the occurrence of any of the following: (A) Licensee (x)
fails to timely perform or breaches any of its material obligations hereunder or otherwise
materially breaches this Agreement, (y) fails to make timely payment of fees under this
Agreement or (z) assigns or otherwise transfers this Agreement in violation of this Agreement; or
(B) upon (i) Licensee becoming unable to pay its debts; (ii) a petition being presented or a
meeting being convened for the purpose of considering a resolution for the making of an
administration order, the winding-up, bankruptcy or dissolution of Licensee; (iii) Licensee
becoming insolvent; (iv) a petition under any bankruptcy or analogous act being filed by or
against Licensee (which petition, if filed against Licensee, shall not have been dismissed by the
relevant authority within 60 days thereafter); (v) Licensee executing an assignment for the
benefit of creditors; (vi) a receiver being appointed for the assets of Licensee; (vii) Licensee
taking advantage of any applicable bankruptcy, insolvency or reorganization or any other like
statute; or (viii) the occurrence of any event analogous to the foregoing. As used herein a
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“Licensee Termination Event” shall mean: (I) the occurrence of a curable Licensee Event of
Default described in sub clause (A) above that Licensee has failed to cure within 30 days written
notice from Licensor of the occurrence of such default; (II) the occurrence of a non-curable
Licensee Event of Default described in sub clause (A)(z) above; (III) the occurrence of a
Licensee Event of Default described in sub clause (B) above; and (IV) the occurrence of breach
by Licensee of its confidentiality obligations under Section 26.
19.2 Subject to Section 19.3, in the event Licensor fails to timely perform or breaches
any of its material obligations hereunder, otherwise materially breaches this Agreement, or
Licensor becomes insolvent, or a petition under any bankruptcy act shall be filed by or against
Licensor (which petition, if filed against Licensor, shall not have been dismissed within 60 days
thereafter), or Licensor executes an assignment for the benefit of creditors, or a receiver is
appointed for the assets of Licensor, or Licensor takes advantage of any applicable insolvency or
reorganization or any other like statute (each of the above acts is hereinafter referred to as a
“Licensor Event of Default”), and Licensor fails to cure such Licensor Event of Default within
30 days after delivery by Licensee to Licensor of written notice of such Licensor Event of
Default, then Licensee may, in addition to any and all other rights which it may have against
Licensor, immediately terminate this Agreement by giving written notice to Licensor.
19.3
Notwithstanding anything to the contrary in this Agreement, no termination of
this Agreement for any reason shall relieve or discharge, or be deemed or construed as relieving
or discharging, any party hereto from any duty, obligation or liability hereunder which has
accrued as of the date of such termination (including, without limitation, the obligation to pay
any amounts payable hereunder accrued as of such date of termination) and, for clarity and
without waiving any rights or remedies of either party, no further rights or obligations shall
accrue on the part of either party after termination of the Agreement.
19.4 Survival. Those rights and obligations which by their very nature are intended to
survive termination or expiration of this Agreement shall survive, including without limitation
Section 1, Section 7.3, the fourth sentence of Section 10, the third sentence of Section 11.2,
Section 15 and Sections 18-33.
20. ASSIGNMENT. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the non-assigning party, such
approval not to be unreasonably delayed, withheld or conditioned. Notwithstanding the
foregoing, (a) Licensor may, without such prior approval, assign this Agreement in whole or in
part to (i) any entity controlling, controlled by or under common control with Licensor (ii) by
reason of merger, consolidation, reorganization or similar transaction, or in connection with the
acquisition of a majority of Licensor’s voting capital stock; or (iii) to any acquirer of all or of
substantially all of Licensor’s assets or equity securities; provided, that in the event of each of (i),
(ii) and (iii) Licensor provides Licensee with written notice of such transaction and causes such
entity to assume Licensor’s obligations hereunder, and (b) Licensee may, without such approval,
assign this Agreement in whole or in part (i) to any entity controlling, controlled by or under
common control with Licensee, (ii) by reason of merger, consolidation, reorganization or similar
transaction, or in connection with the acquisition of a majority of Licensee’s voting capital stock;
or (iii) to any acquirer of all or of substantially all of Licensee’s assets or equity securities;
provided, that in the event of each of (i), (ii) and (iii) Licensee provides Licensor with written
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notice of such transaction and causes such entity to assume Licensee’s obligations hereunder. In
the event of any assignment of this Agreement pursuant to sub-clauses (a)(i) or (b)(i) of this
Section 20 above, the assigning party shall remain secondarily liable for all of its obligations
hereunder, and in the event of any assignment of this Agreement pursuant to sub-clauses (a)(ii),
(b)(ii), (a)(iii) or (b)(iii) of this Section 20 above, the assigning party shall remain secondarily
liable for all of its obligations hereunder if the assigning party survives such applicable assigning
event. Subject to the foregoing, this Agreement will benefit and bind the parties’ successors and
assigns.
21. HEADINGS. The titles of the paragraphs of this Agreement are for convenience only and
shall not in any way affect the interpretation of this Agreement.
22. NON-WAIVER OF BREACH; REMEDIES CUMULATIVE. A waiver by either party
of any of the terms or conditions of this Agreement shall not, in any instance, be deemed or
construed to be a waiver of such terms or conditions for the future or of any subsequent breach
thereof. No payment or acceptance thereof pursuant to this Agreement shall operate as a waiver
of any provision hereof. All remedies, rights, undertakings, obligations and agreements
contained in this Agreement shall be cumulative and none of them shall be in limitation of any
other remedy, right, undertaking, obligation, or agreement of either party.
23. NOTICES. All notices hereunder shall be in writing and shall be sent by certified (return
receipt requested) or registered mail, by air courier service, by personal delivery, or by facsimile
to the address or fax number of the party for whom it is intended as follows, or to such other
address or fax number as any party may hereafter specify in writing:
If to Licensor:
Sony Pictures Television Inc.
10202 West Washington Boulevard
Culver City, California 90232
Attention: Executive Vice President,
Distribution Business Operations and Strategy
Facsimile: 1-310-388-0251
with a copy to:
Sony Pictures Entertainment Inc.
10202 West Washington Boulevard
Culver City, California 90232
Attention: General Counsel
Facsimile: 310-244-0510
If to Licensee:
Netflix, Inc.
Maple Plaza
335 North Maple Drive
Suite 353
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Beverly Hills, CA 90210
Attention: Chief Content Officer
Facsimile: 310-734-2999
With a copy to:
Netflix, Inc.
100 Winchester Circle
Los Gatos, California 95032
Attention: General Counsel
Facsimile: 408-540-3642
Notice given by personal delivery or facsimile shall be deemed given upon delivery and notice
given by overnight delivery or courier service shall be deemed given the first Business Day
following the Business Day of delivery to the overnight delivery service.
24. GOVERNING LAW/ARBITRATION. This Agreement shall be construed and enforced in
accordance with the laws of the State of California without regard to the choice of law principles
thereof. Any controversy or claim arising out of or relating to this Agreement, including but not
limited to its enforcement, arbitrability or interpretation shall be submitted to final and binding
arbitration, to be held in Los Angeles County, California, before a single arbitrator, in accordance
with California Code of Civil Procedure §§ 1280 et seq. The arbitrator shall be selected by
mutual agreement of the parties or, if the parties cannot agree, then the arbitrator shall be
appointed by JAMS/Endispute. The arbitration shall be a confidential proceeding, closed to the
general public. The arbitrator shall issue a written opinion stating the essential findings and
conclusions upon which the arbitrator’s award is based. The parties will share equally in
payment of the arbitrator’s fees and arbitration expenses and any other costs unique to the
arbitration hearing (recognizing that each side bears its own deposition, witness, expert and
attorney’s fees and other expenses to the same extent as if the matter were being heard in court).
Nothing in this Section 24 shall affect either party’s ability to seek from a court injunctive or
equitable relief at any time.
25. FORCE MAJEURE. Neither party shall in any manner whatsoever be liable or otherwise
responsible for any delay or default in, or failure of performance resulting from or arising out of
or in connection with any Event of Force Majeure, and no such delay, default in, or failure of
performance shall constitute a breach by either party hereunder.
26. CONFIDENTIALITY. Other than as may be required by law, or governmental authority,
or to enforce its rights hereunder, and subject to the following sentence, neither party shall,
without the express written consent of the other, publicly divulge or announce, or in any manner
disclose to any third party, other than its attorneys, advisors, directors, employees, agents,
shareholders, accountants, parent entities or auditors, profit participants, or pursuant to
applicable guild obligations (each of whom shall be subject to the confidentiality provision
hereof) on a need-to-know basis, any of the specific terms and conditions of this Agreement,
including, without limitation, the License Fees payable hereunder (“Confidential Information”).
Confidential Information shall include all oral, written or recorded confidential information
about or related to the disclosing party or its business. Notwithstanding the foregoing,
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Confidential Information does not include information that: (a) is or becomes publicly available
without breach of this Agreement; (b) can be shown by documentation to have been known to
the receiving party prior to its receipt from the disclosing party; (c) is rightfully received from a
third party who did not acquire or disclose such information by a wrongful or tortious act; or (d)
can be shown by documentation to have been developed by the receiving party without reference
to any Confidential Information. Each party represents and warrants to the other party that it
party shall not use the other party’s Confidential Information for any purpose, or disclose such
information to any third party (except for attorneys, accountants, auditors, third party participants
and/or the third party contractors, provided such parties have reason to know such information
and are bound to confidentiality obligations (which shall not be waived) at least as protective as
this Section 26), other than (i) as necessary to perform its obligations or enforce its rights under
this Agreement or as required by law (and subject to the next sentence in this Section), (ii) to the
extent it obtains prior written approval from the other party, and/or (iii) to the extent it is legally
compelled to disclose such Confidential Information by the valid order of a court of competent
jurisdiction, in which event it shall so notify the other party as promptly as practicable (and, if
possible, prior to making any disclosure) and shall seek confidential treatment of such
information, it being understood that the parties will cooperate in protecting against any such
disclosure and/or obtaining a protective order narrowing the scope of such disclosure and/or use
of the Confidential Information. If in the absence of a protective order the receiving party is
nonetheless compelled to disclose Confidential Information, the receiving party may disclose
only that portion of the Confidential Information which the receiving party is advised in writing
by counsel is so legally compelled, it must (if allowed by law) provide the disclosing party with
immediate notice of such disclosure and receiving party will exercise best efforts to obtain
assurances that confidential treatment will be accorded such Confidential Information. Each
party shall take all reasonable measures to protect the secrecy of and avoid disclosure of
Confidential Information, which measures shall be no less than reasonable care and shall include
all of those measures that the receiving party uses to protect its own Confidential Information.
For the avoidance of doubt, each party is responsible to the other party herein for the actions or
omissions of its employees, attorneys, accountants, auditors, third party participants and/or third
party contractors if such actions or omissions result in a breach of this Section 26. This Section
26 shall survive expiration or earlier termination of this Agreement.
27. THIRD PARTY CONTRACTORS. Notwithstanding anything to the contrary contained
herein, Licensor acknowledges and agrees that, in order for Licensee to operate and maintain the
SVOD Service in the Territory or otherwise host, serve, exhibit and distribute Pictures in the
Territory, Licensee may use the communications, hosting, data processing and/or fulfillment
services of third parties; provided, however, that Licensee will remain, in all respects, directly
and primarily liable to Licensor for all of Licensee’s obligations hereunder and for all acts and
omissions of such third parties, including any breach of this Agreement, or acts or omissions,
which if taken by Licensee, would be a breach of this Agreement.
28. AUDIT. Licensee, through its outside auditor, which shall be subject to Licensor’s approval
(with Licensor hereby pre-approving the so-called “Big 4” accounting firms and any entity not
affiliated with Licensee that is at the time of an audit permitted hereunder providing audit
services for either Licensee) shall have the right to inspect and audit Licensor’s books and
records related to Licensor’s DBO calculation and/or collection, billing reports (and any
settlements related thereto) relating to the exploitation of each Picture commencing upon
CONFIDENTIAL
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EXECUTION VERSION
Licensor’s notification to Licensee of each Picture’s Availability Date, and the terms set forth on
Schedule D hereto. The parties acknowledge that Licensor shall not be required to disclose any
documents that are subject to attorney/client privilege (or other evidentiary legal privilege) to
Licensee in the course of such audit. Licensee may conduct such audits no more than one time
during any Year; provided, however, that Licensee may conduct one (1) additional audit per
Year relating solely to the DBO calculation and/or collection. In all cases, such audits shall not
cover time periods previously audited except to review additional information not available at
the time of such prior audit. Any audit shall be conducted at Licensor’s home office and shall be
made by such person or persons Licensee shall designate in accordance with the first sentence of
this Section 28 during reasonable business hours upon reasonable prior notice and shall not last
on-site for more than 10 business days in the aggregate, provided Licensor and its affiliates have
supplied within a reasonable period of time all information necessary to conduct standard
auditing procedures. Licensee may conduct an audit which covers a time period more than two
and one-half years earlier than the date of notification of intent to audit.
29. COUNTERPARTS. This Agreement may be executed in any number of counterparts and
all of such counterparts taken together shall constitute one and the same instrument.
30. NO THIRD PARTY BENEFICIARY. This Agreement is entered into for the express
benefit of the parties hereto, their successors and permitted assigns and is not intended, and shall
not be deemed, to create in any other natural person, corporation, company, and/or any other
entity whatsoever any rights or interest whatsoever, including, without limitation, any right to
enforce the terms hereof.
31. LIMITATION OF LIABILITY. Neither party shall be liable to the other for special,
consequential or incidental losses or for lost profits.
32. PRESUMPTIONS. In interpreting the terms and conditions of this Agreement, no
presumption shall be interpreted for or against a party as a result of the role of such party or such
party’s counsel in the drafting of this Agreement. The descriptive headings in this Agreement
are inserted for reference only and are not intended to affect the meaning, construction and
interpretation of this Agreement.
33. ENTIRE UNDERSTANDING. This Agreement (which includes all Schedules and
attachments hereto) includes the entire understanding of the parties with respect to the subject
matter hereof, and all prior agreements (written or oral) with respect to such subject matter have
been merged herein. No representations or warranties have been made other than those
expressly provided for herein. This Agreement may not be modified, except by a written
instrument signed by the parties, and this provision may not be waived except by written
instrument signed by the parties.
34. FURTHER INSTRUMENTS. In the event Licensor (or, as applicable, an SPE Group
Member) executes, or agrees to execute, short-form license(s) for any other Pay Television or
SVOD distributor in the Territory of motion pictures Theatrically Released By an SPE Group
Member, Licensor shall promptly notify Licensee and Licensor shall, with respect to each
Picture, promptly following the date of delivery of the final designation notice for each such
Picture as set forth in Section 4.2 of this Agreement, deliver an executed short-form license in
the form substantially similar to the form attached hereto as Schedule E. In no event shall
CONFIDENTIAL
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EXECUTION VERSION
Licensor’s failure to execute and/or deliver a short-form license with respect to any Picture
relieve Licensee of its obligation to license such Picture hereunder or to pay the License Fee for
such Picture in accordance with the terms of this Agreement.
[Signature Page Follows]
CONFIDENTIAL
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EXECUTION VERSION
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.
SONY PICTURES TELEVISION INC.
NETFLIX, INC.
By:
By:
Its:
Its:
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SCHEDULE A
RATE CARD
The license fee (“License Fee”) for each Picture (other than Cloudy 2 and Smurfs 2, the License Fees for
which are set forth separately below) shall be based on the table below. The final License Fee is
calculated from the percentage of the incremental Domestic Box Office at each level as follows:
Domestic Box Office Tiers:
$0
$10,000,001
$15,000,001
$25,000,001
$75,000,001
$100,000,001
$125,000,001
$150,000,001
$200,000,000
to
to
to
to
to
to
to
to
to
$10,000,000
$15,000,000
$25,000,000
$75,000,000
$100,000,000
$125,000,000
$150,000,000
$199,999,999
+
Incremental Percentage
to DBO to be Paid as the
License Fee:
32.5%
28.0%
23.5%
19.0%
15.0%
10.0%
5.0%
-
Cumulative License Fee at
Top of Range:
$3,250,000
$4,650,000
$7,000,000
$16,500,000
$20,250,000
$22,750,000
$24,000,000
$24,000,000
$25,000,000
By way of example only, if the Domestic Box Office for a Picture is Twenty-Five Million United States
Dollars (US$25,000,000), then the Licensee Fee would be calculated as follows: Three Million Two
Hundred Fifty Thousand United States Dollars (US$3,250,000) for the first Ten Million United States
Dollars (US$10,000,000) of such Picture’s DBO, plus One Million Four Hundred Thousand United States
Dollars (US$1,400,000) for the next Five Million United States Dollars (US$5,000,000) of such Picture’s
DBO, plus Two Million Three Hundred Fifty Thousand United States Dollars (US$2,350,000) for the
next Ten Million United States Dollars (US$10,000,000) of such Picture’s DBO, for a total License Fee
of Seven Million United States Dollars (US$7,000,000).
With respect to Cloudy 2, the License Fee for such Picture shall be $20,729,481.74.
With respect to Smurfs 2, the License Fee for such Picture shall be $11,402,758.40.
CONFIDENTIAL
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SCHEDULE B
DELIVERY SPECIFICATIONS
Objective
The purpose of this document is to give a high-level summary of our Digital Asset Requirements.
The Netflix® streaming service offers an outstanding, high-quality viewing experience for our customers. We ask
that our content partners help us to maintain this standard by following our Material Requirements below. For
more technical detail and instructions in preparing files for Netflix, see Netflix Full Specifications and Operators
Manual. https://netflix.box.com/FullSpecifications
Primary Digital (video) Assets
File Specifications
Format
HD
1920x1080
1280x720
SD
720x480/486
720x576
Container
Video
MPEG-2 Transport Stream
QuickTime MOV
(iTunes package format)
Audio
MPEG-2 80 Mbps,
i-frame only
ProRes 422 HQ
(~220 Mbps)
MPEG-2 Transport Stream
QuickTime MOV
(iTunes package format)
MPEG-2 50 Mbps,
i-frame only
ProRes 422 HQ
(~50 Mbps)
AES3 LPCM; PCM;
MPEG Layer 1,2,
One track – multichannel
LPCM,
iTunes channel
configuration
AES3 LPCM; PCM;
MPEG Layer 1,2,
One track – multichannel
LPCM, iTunes
channel
configuration
Files MUST:







Match the original frame rate and aspect ratio of program as it was originally shot.
Contain a minimum of 1 frame and a maximum of 1 second of black at head and tail of the program.
If Source Material has commercial blacks, each commercial black segment must be trimmed down to 2
seconds or less before delivery.
Contain the non-subtitled version. Netflix defines “non-subtitled” as the presence of main titles, end
credits, narrative text, location call-outs, and other supportive/creative text, but the absence of burned-in
subtitled dialogue, regardless of the language in the primary video.
Have audio and video muxed into one file.
Have audio conform (sync) to video within the MPEG-TS or MOV container.
Have audio and video duration match within 1 second.
Files MUST NOT contain any of the following:
Bars and Tone
Production Slates
Placards
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VITC (vit-see) Time Code
Ratings Cards
Overlay Branding
-41-
Advertisements
FBI Warning Cards
Website Links
Subtitles
Subtitles MUST:



Encompass the spoken dialogue intended to be understood that differs in language from the subtitle file.
Translate any narrative burned-in text that is in a different language from the subtitle file.
Conform, within a half second, to the Primary Video Mezzanine that is delivered or to a Netflix-provided
Proxy File.
Acceptable formats:
 TTML (valid extensions are .dfxp and .xml) – PREFERRED if creating from scratch
 STL (EBU)
Forced Narrative Subtitles
Our preference is to receive a non-subtitled video source of the program (as referenced in section 2).
Forced Narrative Subtitles MUST:

Be delivered as secondary files.
Forced Narrative subtitles are required when:
 An alternate language from the primary language is spoken (and intended to be understood by viewer).
 There is inaudible dialogue that is subtitled in the original broadcast or theatrical presentation.
Example: An English-language film has 5 minutes of Japanese dialogue and is to be streamed to U.S. customers.
The desired video would not include burned-in subtitles for the Japanese sections. A Forced Narrative subtitle file
would be supplied that contains the Japanese dialogue translated into English. The Forced Narrative file would not
have the original English dialogue transcribed.
Accessibility Files
CC and SDH
CC – Closed Captions (English language only) and SDH (Subtitles for the Deaf and Hard of Hearing)
CC/SDH files MUST:


Encompass all spoken dialogue, including foreign-language dialogue, intended to be understood during
the program.
Contain descriptors, identifiying important non-dialogue sounds.
Acceptable Closed Caption Files:
 TTML (valid extensions are .dfxp and .xml)
 SCC
Acceptable SDH Files:
 TTML (valid extensions are .dfxp and .xml)
 STL (EBU)
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Descriptive Audio (if available, upon Licensee’s
request)
Descriptive audio MUST:



Consist of the full stereo mix including the descriptive dialogue.
Be delivered as a separate file, i.e., not muxed in with the primary video file.
Adhere to technical specifications of Alternate Language Audio Files.
Alternate Language Audio
Alternate language audio MUST:
 Be delivered as a separate file, i.e., not muxed in with the primary video file.

Conform (sync) with the primary A/V mezzanine.
Acceptable Alternate Language Audio Files:
Container
MP4
MPEG-TS
MOV or WAV
Codec
AAC
AES3 LPCM
Uncompressed PCM
Dub Cards
Dub Cards MUST:



If dubbed audio files are sent, distributor shall deliver such Dub Cards to Netflix formatted exactly as
they are to appear on-screen. No extraneous information can be included beyond the language of
dub, studio name, cast and other key personnel or as otherwise required by law in the territory of
exhibition.
Be delivered as flat image files (TIFF, PNG, BMP, JPG)
o Minimum resolution 640x480, with a 1:1 Pixel Aspect Ratio
If multiple dub cards are needed for one language, a ZIP archive must be delivered, containing all dub
card image files for that particular language in alpha-numeric display order. One language per ZIP.
Metadata
Metadata MUST: Technical or source metadata must be delivered via The Netflix Backlot via XML. Descriptive
title metadata must be delivered via an excel template, unless otherwise specified (i.e., XML).
Here is the full documentation of the XML specification, including the XML Schema Definition, which describes the
required and optional metadata elements need for delivery: [ http://goo.gl/sJTLQ ]
File Delivery
Netflix requires Aspera for Source Asset delivery. Netflix will provide a free Aspera account, if necessary.
Distributor shall deliver Source Material via The Netflix Backlot. The Netflix Backlot will be accessible via GUI
(graphical user interface) and, in the future, through API (application programming interface) integration with the
Distributor’s asset management system.
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Artwork
In addition to any other art requirements under this Agreement, Distributor shall deliver to Netflix the following art
for each Title in compliance with the below requirements: Vertical, Horizontal, Title Card, Stills, Story Art,
Character Art and Title Treatment (each as defined below) delivered via Backlot in the highest quality available to
Distributor or its affiliates. Images provided will be used within the Netflix service (including, without limitation, on
all Netflix Ready Devices, through the website, User Interfaces, applications, blogs, social networking sites and our
communications with members and potential members) and in marketing materials promoting the titles’
availability on Netflix.
**All art shall be provided in localized format (i.e., as it is marketed in the Territory) including Title Treatments
in each language in which the Title may be exhibited under the Agreement.**
Please refer to the Netflix Artwork Style Guide for all art requirements and requests. A Style Guide can be
requested via email at [email protected].
Display Art – Vertical, Horizontal, and Title Card
Three (3) high-resolution images are required for every Title that represents the feature film or television series. All
three Display Art images should be from the same key image.
Each Vertical, Horizontal, and Title Card display art should have:
 No extraneous text such as quotes, taglines, credits, copyrights, billing blocks
 No extraneous logos such as DVD, Blu-ray, award laurels, studio logos
 Title treatment and keyart on separate layers in PSD (If a layered file is not available, uncompressed PNG,
TIFF, EPS and JPEGS with 'maximum quality' compression are acceptable).
Artwork Asset
Display Art Vertical
Display Art Horizontal
Display Art Title Card
Image Specifications
571 (w) x 800 (h)
300 ppi
RGB (8-bits/channel)
1280 (w) x 720 (h)
300 ppi
RGB (8-bits/channel)
File Formats
Layered PSD and
High Resolution JPG
265 (w) x 149 (h)
300 ppi
RGB (8-bits/channel)
Layered PSD and
High Resolution JPG
Layered PSD and
High Resolution JPG
Requirements
For television shows, vertical artwork should not
have title treatment in the lower 1/5 of the
image area.
Should use same key image as Vertical with the
layout optimized for a landscape image.
Horizontal artwork should not have title
treatment in the lower 1/5 of the image area.
Title treatment on a themed background.
Story Art
One (1) high-resolution image is required for every feature film and every television series to represent the main
character(s) in a staged scene that depicts the theme of the Title.
Artwork
Asset
Story Art
CONFIDENTIAL
Image
Specifications
1920 (w) x 1080 (h)
300 ppi
RGB (8bits/channel)
File Format
Description
High Resolution JPG A stylized, high-gloss, eye-catching image of the main
character(s) posed to depict the theme of the feature film or
television series. No title treatments, text, logos, or copyright
lines. No weapons pointing at camera, extreme gore, or nudity.
-44-
Stills
Three (3) high-resolution images are required to represent each feature film or episode of television series. All
images must be cleared for promotional use.
Artwork Asset
Still image
Image Specifications
1920 (w) x 1080 (h) or
1440 (w) x 1080 (h)
300 ppi
RGB (8-bits/channel)
File Format
High Resolution
JPG
Description
Three (3) stills per feature film/television episode
required. For television series, stills shall be
provided per episode representing that episode
best; for feature films, a still that represents the
film as a whole. No text, logos, or copyright lines.
No weapons pointing at camera, extreme gore,
or nudity.
Character Art
One (1) high-resolution image is required for every feature film or television series (animated or live action) that is
appropriate for viewing by children and family.
Artwork
Asset
Character
Art
Image
Specifications
Variable (w) x 720
(h)
300 ppi
RGB (8bits/channel)
File Format
Description
Layered PSD, EPS
Forward-facing, full-body character shall not be
obstructed by text, objects or other characters. Art shall
not include any borders or frames. Image should have a
transparent background.
Title Treatment
One (1) high-resolution image is required for every feature film or television series. Title Treatment should be
identical to that provided within the Display Art images.
Artwork
Asset
Title
Treatment
Image
Specifications
800 (w) x 340 (h)
300 ppi
RGB (8bits/channel)
File Format
Description
High Resolution PNG The title treatment should be bottom/left aligned and
with Transparency should fill the image height or width. Image background
and Layered PSD
should be transparent. Art should not include any
borders or frames. No logos, copyright lines, taglines, or
quotes.
Change Summary
Changes from Spec and Delivery Overview-6-1-1
Changed the format of dub cards from text files to image files, requiring ZIP archives in cases where multiple
images are needed for a single language. Renamed timed text file type from DFXP to TTML. DFXP is a subset of
TTML. The spec of the timed text files did not change.
CONFIDENTIAL
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Changes from Spec and Delivery Overview-6-0
The significant changes to the Spec and Delivery Overview 6-1-1 include two new asset types; descriptive audio for
the blind and dub cards. We have also reduced our acceptable timed text file types to .scc, .stl, and .dfxp. These
files all support necessary positional data that we now utilize in our encoding pipeline. The timing requirement for
23.976 subtitles and captions has been changed to match the playback time, instead of SMPTE 24 timecode. We
have added .wav files as an acceptable asset type for dubbed audio files. The artwork section has
been thoroughly overhauled to support our new, richer, user interfaces. The length of the overview document has
been shortened from 8 pages to 6 pages.
CONFIDENTIAL
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UltraHD (3840x2160) IMF Specs
Format
Image Track File
Image Track File Type
Image Essence
Profile Level
Image Width
Image Height
Timecode Start
Color Encoding
Colorspace
Bit Depth
Display Aspect Ratio
Frame Rate
Scanning Type
UDH IMF App2 (App2-extended)
MXF
JPEG2000
BCP5
3840
2160
00:00:00:00
YCbCr / 4:2:2
xvYCC / BT.709
10bits
16:9
23.976
Progressive
Audio Track File
Audio Track File Type
Audio Essence
Sampling Rate
Bit Depth
Audio Configurations (one track file per configuration)
MXF
WAV/BWAV
48 KHz or 98 KHz
24 bits
Mono, LtRt, 5.1, 7.1
Language Codes
Please note that if the desired language code is not found in the table below please contact Netflix Operations.
CONFIDENTIAL
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Language Name
Acoli
Afrikaans
Albanian
Arabic
Aramaic
Armenian
Bambara
Bashkir
Bengali
Bosnian
Bulbovian
Bulgarian
Burmese
Catalan
Chechen
Cheyenne
Chinese Cantonese
Chinese Mandarin
Chinese Simplified
Chinese Traditional
Croatian
Czech
Danish
Dari
Dinka
Dutch
Dzongkha
Efik
Elamite
English
English (UK)
Esperanto
Estonian
Faroese
Filipino
Finnish
Flemish
French
French-Canadian
Gaelic
CONFIDENTIAL
Language Code
Ach
Af
Sq
Ar
Arc
Hy
Bm
Ba
Bn
Bs
XA
Bg
My
Ca
Ce
Chy
Yue
Zh
zh-Hans
zh-Hant
Hr
Cs
Da
fa-AF
din
nl
dz
efi
elx
en
en-GB
eo
et
fo
fil
fi
nl-BE
fr
fr-CA
ga
-48-
Georgian
German
Greek
Gujarati
Hawaiian
Hebrew
Hindi
Hokkien
Hungarian
Icelandic
Indonesian
Inuktitut
Italian
Jamaican Patois
Japanese
Javanese
Kannada
Kazakh
Khmer
Kikuyu
Kinyarwanda
Kirghiz
Korean
Kurdish
Lango
Latin
Latvian
Lebanese
Lingala
Lithuanian
Maasai
Macedonian
Malagasy
Malay
Malayalam
Maltese
Marathi
Maya
Mende
Mongolian
Nepali
CONFIDENTIAL
ka
de
el
gu
haw
he
hi
nan
hu
is
id
iu
it
jam
ja
jv
kn
kk
khm
ki
rw
ky
ko
ku
laj
la
lv
ar-LB
ln
lt
mas
mk
mg
ms
ml
mt
mr
myn
men
mn
ne
-49-
Newari
None
Norwegian (Bokmål)
Norwegian (Nynorsk)
Pashtu
Persian
Polish
Portuguese (Brazilian)
Portuguese
Punjabi
Romanian
Romansh
Romany
Russian
Sami
Sanskrit
Scottish Gaelic
Serbian
Sinhala
Slovak
Slovenian
Somali
Songhai
Spanish (Castilian)
Spanish (Neutral)
Swedish
Swiss-German
Tagalog
Tamashek
Tamil
Telugu
Thai
Tibetan
Tonga
Turkish
Tuvan
Ugaritic
Ukrainian
Urdu
Vietnamese
Welsh
CONFIDENTIAL
new
zxx
nb
nn
ps
fa
pl
pt-BR
pt
pa
ro
rm
rom
ru
smi
sa
gd
sr
si
sk
sl
so
son
es-ES
es
sv
gsw
tl
tmh
ta
te
th
bo
to
tr
tyv
uga
uk
ur
vi
cy
-50-
Wolof
Xhosa
Yiddish
Zapotec
Zulu
CONFIDENTIAL
wo
xh
yi
zap
zu
-51-
SCHEDULE C
CONTENT PROTECTION REQUIREMENTS AND OBLIGATIONS
FOR THE AVOIDANCE OF DOUBT, ALL REFERENCES IN THIS SCHEDULE C TO “HIGH DEFINITION” ARE
NOT MEANT TO INCLUDE UHD/4K.
ALL DEFINED TERMS USED BUT NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS
GIVEN THEM IN THE AGREEMENT.
1.
Content Protection System. All Pictures delivered by Licensee to, output from or stored on an
Approved Device must be protected by a content protection system that includes digital rights
management, conditional access systems and digital output protection (such system, the “Content
Protection System”). The Content Protection System shall (i) be fully compliant with all the
compliance and robustness rules set forth in this Schedule C, and (ii) use only those rights
settings, if applicable, set forth in this Schedule C or that are otherwise approved in writing by
Licensor. Upgrades to or new versions of the Content Protection System that would materially
and negatively affect the protection provided to Pictures shall be approved in writing by Licensor.
1.1.
1.2.
CONFIDENTIAL
Explicitly Prohibited. For the avoidance of doubt.
1.1.1.
Unencrypted streaming of Pictures is prohibited.
1.1.2.
Unencrypted downloads of Pictures is prohibited.
1.1.3.
All Pictures shall be transmitted and stored in a secure encrypted form. Pictures
shall never be transmitted to or between devices in unencrypted form.
Approved Content Protection Systems. Licensee warrants that either (a) the below
Approved Content Protection Systems have a device licensing mechanism to ensure that
the device manufacturer will keep the applicable Approved Content Protection System
licensor informed of potential or actual Security Breaches, and Licensee, where possible
and to promptly and securely update clients of the Approved Content Protection
System, where necessary and (b) the below Approved Content Protection System
licensor must retain the right to revoke any client where such update is not applied. The
following protection systems are approved, with the conditions shown, as part of the
Content Protection System, provided that Licensor shall have the right to withdraw its
approval of a subsequent release by its publisher of any such protection system, upon
reasonable advance written notice, in the event that release materially and negatively
alters such protection system such that such protection system no longer enforces the
relevant provisions of this Schedule C or the Usage Rules:
1.2.1.
Windows Media DRM 10 (and any successor and/or update thereto that, as
designed, maintains a level of robustness that is equal to or greater than the
robustness as of the Effective Date). Windows Media DRM 10 is NOT approved
for the delivery of Pictures in High Definition to Software Devices
1.2.2.
Silverlight Powered by PlayReady and/or PlayReady (Windows Media DRM
11)( and any successor and/or update thereto that ,as designed, maintains a level
of robustness that is equal to or greater than the robustness as of the Effective
Date);
-52-
1.3.
1.4.
1.2.3.
Widevine Cypher 4.2 DRM (and any successor and/or update thereto that ,as
designed, maintains a level of robustness that is equal to or greater than the
robustness as of the Effective Date);
1.2.4.
Advanced Access Content Systems (“AACS”) specification version 0.95 (and
any successor and/or update thereto that maintains a level of robustness that is
equal to or greater than the robustness as of the Effective Date). AACS is NOT
approved for the delivery of Pictures in High Definition to Software Devices
Marlin Broadband v1.2.2 DRM in compliance with the Marlin Trust
Management Organization’s robustness and compliance rules (and any successor
and/or update thereto that ,as designed, maintains a level of robustness that is
equal to or greater than the robustness as of the Effective Date);
1.2.5.
Adobe Flash Access 2.0 (and any successor and/or update thereto that maintains
a level of robustness that ,as designed, is equal to or greater than the robustness
as of the Effective Date);
1.2.6.
Apple Fairplay (including FairPlay Streaming) (and any successor and/or update
thereto that ,as designed, maintains a level of robustness that is equal to or greater
than the robustness as of the Effective Date) but solely with respect to iOS
devices (including Apple TV), OS X devices; and/or
High Definition Requirements (Both Hardware and Software Devices)
1.3.1.
Where the integrity of the firmware is integral to the security of the content
protection system, all firmware responsible for content protection must be
validated for origin using digital signature validation or some other
cryptographically secure validation mechanism (such as AES-128 encryption,
CMAC using 128 bit or higher security encryption, HMAC using 128 bit or
higher security, etc) before any firmware update is applied. Additionally,
Licensee recommends Approved Device manufacturers implement secure boot.
1.3.2.
Systems must not allow unencrypted video signals on busses accessible by users
using widely available tools. Notwithstanding anything to the contrary herein, to
the extent Licensor makes Pictures available in High Definition for exhibition on
Approved Devices that are Software Devices, this Clause 1.3.2 will apply to
Software Devices.
Requirements for HD delivery to Software Devices. The requirements below shall
apply for the delivery of HD Included Films to Software Devices.
1.4.1.
Robust Implementation
1.4.1.1. Implementation of Approved Content Protection Systems on Software
Devices shall, in all cases, use state of the art obfuscation mechanisms or
trusted execution environments for the security sensitive parts of the
software implementing the Content Protection System.
1.4.1.2. All Software Devices deployed by Licensee after end December 31st,
2013, SHALL support trusted execution environments. For the avoidance
of doubt, this requirement applies to actual, physical devices which are
deployed to Subscribers by Licensee only and does not apply to software
Playback Clients or Applications distributed by Licensee.
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1.4.2.
For avoidance of doubt, HD content may only be output in accordance with
Clause “Digital Outputs” below unless stated explicitly otherwise below.
1.4.3.
If an HDCP connection cannot be established, as required by Clause “Digital
Outputs” below, the playback of Pictures over an output on a Software Device
(either digital or analogue) must be limited to a resolution no greater than
Standard Definition (SD). Notwithstanding the foregoing, as long as Licensee
receives an affirmative response that HDCP is engaged, Licensee may deliver a
Picture in HD.
1.4.4.
With respect to playback in HD over analog outputs on Software Devices that
are registered for service in the Territory by Licensee after 31st December, 2011,
Licensee shall either (i) prohibit the playback of such HD content over all
analogue outputs on all such Software Device or (ii) ensure that the playback of
such content over analogue outputs on all such Software Device is limited to a
resolution no greater than SD. Licensor represents and warrants that it requires,
and shall continue to require during the Term of this Agreement, the foregoing
with respect to all other on-demand distributors and licensees of Licensor’s
content (including Licensor’s affiliates) in the Territory.
1.4.5.
Notwithstanding anything in this Agreement, if Licensee is not in compliance
with this Clause, then, upon Licensor’s written request, Licensee will temporarily
disable the availability of Pictures in HD via the Licensee service within thirty
(30) days following Licensee becoming aware of such non-compliance or
Licensee’s receipt of written notice of such non-compliance from Licensor until
such time as Licensee is in compliance with this Clause “Requirements for HD
delivery to Software Devices”; provided that:
1.4.5.1. if Licensee can robustly distinguish between Software Devices that are in
compliance with this Clause “Requirements for HD delivery to Software
Devices”, and Software Devices which are not in compliance, Licensee
may continue the availability of Pictures in HD for Software Devices that
it reliably and justifiably knows are in compliance but is required to
disable the availability of Pictures in HD via the Licensee service for all
other Software Devices, and
1.4.5.2. in the event that Licensee becomes aware of non-compliance with this
Clause, Licensee shall promptly notify Licensor thereof; provided that
Licensee shall not be required to provide Licensor notice of any third
party hacks to HDCP.
1.4.6.
Secure Video Paths:
The video portion of unencrypted content shall not be present on any
user-accessible bus in any analog or unencrypted, compressed form. In
the event such unencrypted, uncompressed content is transmitted over a
user-accessible bus in digital form, such content shall be either limited to
standard definition (720 X 480 or 720 X 576, considering visible pixels
only), or made reasonably secure from unauthorized interception.
1.4.7.
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Secure Content Decryption.
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1.4.7.1. Decryption of (i) content protected by the Content Protection System and
(ii) CSPs (as defined below) related to the Content Protection System
which require confidentiality shall take place in a manner such that
decrypted content and CSPs are protected at all times in the device,
including during transmission to the graphics card for rendering, from
attack from other software processes on the device. “CSPs” shall mean
keys, passwords, and any other information that are critical to the
security robustness of the Content Protection System.
2.
Outputs.
2.1.
For Approved Devices with respect to which Licensee exercises sole control over
design and manufacturing, if any, such devices shall limit analog outputs to a maximum
resolution of 1080i and shall not permit analog outputs at a resolution of 1080p or
greater.
2.1.1.
Digital Outputs. A digital signal may be output if it is protected and encrypted
by High-Bandwidth Digital Copy Protection (“HDCP”) or Digital Transmission
Copy Protection (“DTCP”). An Approved Device that outputs decrypted Pictures
provided pursuant to the Agreement using DTCP shall:
2.1.1.1. Map the copy control information associated with the program; the copy
control information shall be set to “copy never” in the corresponding
encryption mode indicator and copy control information field of the
descriptor;
2.1.1.2. At such time as DTCP supports remote access set the remote access field
of the descriptor to indicate that remote access is not permitted.
2.1A Exception Clause for Standard Definition and, for television programming
only and not feature films, High Definition, Uncompressed Digital Outputs: HDCP
must be enabled on all uncompressed digital outputs (e.g. HDMI, Display Port), unless
the customer’s system cannot support HDCP. Licensee will use HDCP for SD where
HDCP is known to be supported and will not represent HDCP as being an optional
feature for SD in its interactions with its industry partners, including device
manufacturers and software developers. In all cases Licensee shall attempt to engage
HDCP where it is known to be supported for SD and (for television programming only
and not feature films) HD content. Licensee shall only not attempt to engage HDCP
where it has justifiable reason for believing HDCP not to be supported.
2.2.
Miracast. Output via Miracast is allowed only when the Content Protection System is
set to enable protection via HDCP.
2.3.
In the event that Licensor provides to any entity to whom it licenses in the Territory,
feature films or television programming with similar or earlier windows as the Pictures
licensed to Licensee hereunder an exception or allowance to any digital output
requirement set forth herein, and such entity's content protection system, delivery
mechanism and usage model are comparable to Licensee's, as reasonably determined by
Licensee, Licensor will, upon Licensee’s request, discuss in good faith with Licensee
whether such an allowance would apply to Licensee hereunder.
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3.
2.4.
The Content Protection System shall prohibit recording, transfer or copying of protected
Pictures onto recordable or removable media except as explicitly provided for in the
Usage Rules.
2.5.
The Content Protection System shall prohibit recording, transfer or copying of Pictures
onto external devices except as explicitly provided for in the usage rules or the
definition of Approved Device.
2.6.
For Approved Devices with High Definition output capability, standard definition
Pictures will be delivered to the device at a pixel resolution no greater than 345,600
visible pixels (in the case of NTSC), or 414,720 visible pixels (in the case of PAL), but
the applicable Approved Device may up-scale such Pictures to High Definition
resolutions while maintaining all relevant output protections; provided that Licensee
shall not advertise or represent the exhibition of such standard definition Pictures as
“high definition”.
2.7.
High Definition streams (for Pictures authorized by Licensor for transmission in High
Definition) shall run up to a pixel resolution of 2,073,600 visible pixels delivered at a
variety of bit-rates.
Geofiltering.
3.1.
4.
Licensee must utilize an industry standard geolocation service to verify that a
Registered User is located in the Territory that must:
3.1.1.
provide geographic location information based on DNS registrations, WHOIS
databases and Internet subnet mapping.
3.1.2.
provide geolocation bypass detection technology designed to detect IP addresses
located in the Territory, but being used by Registered Users outside the Territory.
3.1.3.
use such geolocation bypass detection technology to detect known web proxies,
DNS based proxies, anonymizing services and VPNs which have been created
for the primary intent of bypassing geo-restrictions.
3.2.
Licensee shall use such information about Registered User IP addresses as provided by
the industry standard geolocation service to prevent access to Pictures, via the SVOD
Service, from Registered Users outside the Territory.
3.3.
Both geolocation data and geolocation bypass data must be updated no less frequently
than every two (2) weeks.
3.4.
Licensee agrees to periodically review geofiltering tactics during the Term of this
Agreement.
3.5.
Licensor acknowledges that Internet Protocol (IP) based geolocation and geofiltering
technologies may in some cases be circumvented by highly proficient and determined
individuals or organizations.
Implementation of an Approved Content Protection System on iOS and Mac OS X
4.1.
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Output of the Pictures via AirPlay Mirroring is only allowed in Standard Definition and
only for iOS6 and earlier versions of Licensee’s iOS application.
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5.
4.2.
Licensee may use Apple Airplay (sometimes called “Airplay Streaming”, where the iOS
or Mac OS X device sends a link to the Apple TV or other Apple Airplay enabled
implementation such that the receiving device may fetch Licensee content directly) but
not Apple Airplay Mirroring, with such delivery from the Licensee to the receiving
device limited to SD if protected using http live streaming (HLS) encryption, and shall in
all other cases require protection using an Approved Content Protection System.
4.3.
Licensee shall disable Airplay Mirroring on Mac OS X devices and other Airplay enabled
devices as soon as reasonably possible after mechanisms to do so are introduced except if
(i) disabling Airplay Mirroring results in a loss of video or audio picture on the display
device such Airplay-enabled device is trying to connect to and (ii) no other method of
delivery to such display devices (e.g. Airplay Streaming or Chromecast) that is more
secure and robust, from a content protection standpoint, than Airplay Mirroring is
available to Licensee on commercially reasonable terms.
Remote update and revocation. In the event of a Security Breach being found in the Content
Protection System and/or its implementations in clients and servers for which Licensee owns the
implementation, the Licensee shall ensure that relevant clients and servers of the Content
Protection System are promptly updated, and/or where necessary, revoked.
5.1.
6.
In case of Security Breach for implementations owned by the Licensee, Licensee shall
ensure that patches including System Renewability Messages received from content
protection technology providers (e.g. DRM providers) and content providers are promptly
applied to clients and/or servers, where applicable.
Network Service Protection Requirements.
6.1.
All Pictures in Licensee’s possession must be received and stored at content processing
and storage facilities in a protected format using an approved protection system. Access
to such Pictures must be limited to authorized personnel who need such access for
operational purposes and Licensee shall maintain auditable records of actual access.
6.2.
Document security policies and procedures shall be in place. Documentation of policy
enforcement and compliance shall be continuously maintained.
6.3.
Physical access to servers must be limited and controlled and must be monitored by a
logging system.
6.4.
Auditable records of access, copying, movement, transmission, backups, or
modification of Pictures not encrypted with at least AES128 or the equivalent and of
encryption keys for such Pictures in Licensee’s possession must be securely stored for a
period of at least one year.
6.5.
Content servers must be protected from general internet traffic by “state of the art”
protection systems including, without limitation, firewalls, virtual private networks, and
intrusion detection systems. All systems must be updated, per Licensee’s standard
operational procedures, to incorporate the latest security patches and upgrades. For the
avoidance of doubt, Licensee may put encoded encrypted content onto internet facing
servers for use by Approved Devices and.
6.6.
All facilities which process and store Pictures not encrypted with at least AES128 or the
equivalent and encryption keys for such Pictures must be available for Motion Picture
Association of America and Licensor audits at times and places to be mutually agreed
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upon by Licensor and Licensee; provided, however, that any such inspection is
conducted during Licensee’s normal business hours and does not materially interfere
with Licensee’s operations or confidentiality obligations to third parties.
6.7.
Any changes to Licensee’s security policies or procedures set forth in this Clause 6 that
would materially and negatively affect the protection provided to Pictures must be
submitted to Licensor for approval.
6.8.
Each Picture must be returned to Licensor or securely destroyed pursuant to the terms in
the applicable Agreement including, without limitation, all electronic and physical
copies thereof.
7.
PVR Requirements. Any device receiving playback licenses must not implement any personal
video recorder capabilities that allow recording, copying, or playback of any Picture except as
explicitly specified in the Usage Rules.
8.
Unencrypted Audio. Notwithstanding anything herein to the contrary, unencrypted streaming of
audio files associated with Pictures shall be permitted; provided that if Licensor reasonably
determines that the streaming of unencrypted audio files associated with Pictures is a source for
theft or piracy of such audio, the parties agree to discuss in good faith whether the streaming of
unencrypted audio files should continue to be permitted.
9.
Forensic Watermarking. Notwithstanding anything to the contrary in the Agreement, Licensor
and its Affiliates shall not include within any Source Material any watermarks or other similar
information that could be used to individually identify the device, device model group, or user of
a device or to signal to a device that such watermarks or other similar information be output by
the device in a manner that would individually identify the device, device model group, or user of
a device.
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SCHEDULE C-1 UHD CONTENT
CONTENT PROTECTION REQUIREMENTS AND OBLIGATIONS FOR UHD/4K CONTENT
Definitions
All defined terms used but not otherwise defined herein shall have the meanings given them in the
Agreement.
UHD (Ultra High Definition) shall mean Pictures with a resolution of greater than 1920 x 1080 but no
more than 4096 x 2160. UHD is also known as “4k”. This Schedule C-1 is only applicable to Pictures at
UHD resolutions. Content licensed at UHD resolutions shall in addition meet the requirements in the
following clauses from Schedule C:
 2.4, 2.5 (recording and copying)
 3 (Geofiltering)
 6 (Network Service Protection Requirements)
 7 (PVR Requirements)
 8 (Unencrypted audio)
 9 (Forensic watermarking)
General Content Security & Service Implementation
1.
Content Protection System. All Pictures delivered to, output from or stored on an Approved
Device must be protected by a content protection system that includes digital rights management,
encryption and digital output protection (such system, the “Content Protection System”).
2.
The Content Protection System shall (i) be fully compliant with all the compliance and robustness
rules set forth in this Schedule C-1, and (ii) use only those rights settings, if applicable, set forth
in this Schedule C-1 or that are otherwise approved in writing by Licensor. Upgrades to or new
versions of the Content Protection System that would materially and negatively affect the
protection provided to Pictures shall be approved in writing by Licensor.
3.
Approved Content Protection Systems. Licensee warrants that either (a) the below Approved
Content Protection Systems have a device licensing mechanism to ensure that the device
manufacturer will keep the applicable Approved Content Protection System licensor informed of
potential or actual Security Breaches, and Licensee, where possible will promptly and securely
update clients of the Approved Content Protection System, where necessary or (b) the below
Approved Content Protection System licensor retain the right to revoke any client where such
update is not applied.
The following protection systems are approved, with the conditions shown, as part of the Content
Protection System, provided that Licensor shall have the right to withdraw its approval of a
subsequent release by its publisher of any such protection system, upon reasonable advance
written notice, in the event (and only for so long as) that release materially and negatively alters
such protection system such that such protection system no longer enforces the relevant
provisions of this Schedule C-1 or the Usage Rules:
3.1.
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PlayReady, including Silverlight Powered by PlayReady (and any successor and/or
update thereto that maintains a level of robustness that, as designed, is equal to or greater
than the robustness as of the Effective Date);)
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4.
3.2.
Widevine Level 1 implementations of Widevine Cypher 4.6 DRM (and any successor
and/or update thereto that maintains a level of robustness that, as designed, is equal to or
greater than the robustness as of the Effective Date);
3.3.
Promptly following receipt of a written request (email sufficing) with respect thereto
from Licensee, Licensor shall approve Apple FairPlay (including Fairplay Streaming)
(and any successor and/or update thereto that, as designed, maintains a level of
robustness that is equal to or greater than the robustness of Apple FairPlay as of the
Effective Date) (collectively, “Apple FairPlay”) for Licensee if and when Licensor or a
subsidiary of Sony Pictures Entertainment Inc. (an “SPE Sub”) has first approved Apple
Fairplay for any electronic-sell-through, video-on-demand, pay-per-view or subscription
video-on-demand licensee (including for itself or any SPE Sub) (excluding Test
Licenses); provided, however, that Licensor’s approval hereunder may be conditioned
only on Licensee complying with any technical (including security-related) requirements
and limitations imposed by Licensor on such other licensee as a condition of such
approval that are directly related to the approval of Apple FairPlay and that are
reasonably related to ensuring the security of Licensee’s use of Apple FairPlay (e.g.
limiting approval to only certain devices and/or implementations performed by certain
parties); provided, further, however, that (i) nothing herein shall require Licensor or
Licensee to breach the terms of any confidentiality agreement or confidentiality
covenant; (ii) if Licensee is unable, using commercially reasonable efforts, to implement
such technical (including security-related) requirements and limitations required by
Licensor, then Apple FairPlay shall nevertheless be approved for Licensee if Licensee
complies with other technical (including-security related) requirements and limitations
that are functionally equivalent (from a security and content protection perspective) to
those met by such other licensee; and (iii) Licensee shall not be obligated to comply with
any requirements and/or limitations that are not reasonably related to ensuring the
security of Licensee’s use of Apple FairPlay and/or that are intended to frustrate the
provisions of this Section 3.3.). For purposes of this Schedule C-1, a “Test License” shall
mean a license that is limited in terms of duration, geographical region, content or in any
other material way that is being entered into for the primary purpose of testing new
technology/devices, content protection methods, usage rules or business models, in all
cases as long as the test does not have a duration greater than six (6) months.
Encryption and Decryption.
4.1.
The Content Protection System shall use AES (as specified in NIST FIPS-197) with a key
length of 128 bits or greater, DVB-CSA-3, or other algorithm of equivalent or greater
cryptographic strength to be agreed in writing with Licensor or other algorithm supported
by an approved Content Protection System. DVB-CSA Version 1 is NOT approved for
UHD Pictures.
4.2.
A single key shall not be used to encrypt more than one piece of Pictures or more data
than is considered cryptographically secure and no more than a single licensed title.
4.3.
The Content Protection System shall only decrypt Pictures into memory temporarily for
the purpose of decoding and rendering the Pictures and shall never write decrypted
Pictures (including, without limitation, portions of the decrypted Pictures) or streamed
encrypted Pictures into permanent storage. Memory locations used to temporarily hold
decrypted Pictures shall be secured from access by any code running outside of the
Trusted Execution Environment. (A "Trusted Execution Environment" or "TEE" is a
computing environment which is isolated from the application execution environment
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using a security mechanism such as ARM TrustZone, hardware enforced virtualization, a
separate security processor core or other similar security technology.)
5.
4.4.
Keys, passwords, and any other information that are critical to the cryptographic strength
of the Content Protection System (“critical security parameters”, hereafter referred to as
CSPs) may never be transmitted or stored (i.e. placed in memory other than RAM) in
unencrypted (for CSPs requiring confidentiality) and/or unauthenticated (for CSPs
requiring integrity protection) form. Memory locations used to temporarily hold CSPs
must be secured from modification by any driver or any other process other than
authorized code running inside the Trusted Execution Environment.
4.5.
Decryption of (i) Pictures protected by the Content Protection System and (ii) CSPs shall
take place in a hardware enforced trusted execution environment and where decrypted
content is carried on buses or data paths that are accessible with Widely Available Tools
or Specialised Tools, it must be encrypted, for example during transmission to the
graphics or video subsystem for rendering.
4.6.
The Content Protection System shall encrypt the video portion of Pictures, including,
without limitation, all video sequences audio tracks,, and video angles. For the avoidance
of doubt, audio need not be encrypted.
4.7.
The client side of the Content Protection System must not share the original Pictures
encryption key(s) with any other device except as allowed by an Approved Content
Protection System using an approved output protection mechanism or otherwise by
approval in writing by Licensor.
Robust Implementation
5.1.
6.
Implementations of Content Protection Systems shall use hardware-enforced security
mechanisms. All security critical software used by the Content Protection System must
be authenticated and Content Protection System cryptographic keying material must be
stored in manner that restricts access to code running inside the Trusted Execution
Environment.
Content Protection System Identification
6.1.
Each Approved Device shall be individualized and thus uniquely identifiable.
Revocation And Renewal
7.
In the event of a Security Breach being found in the Content Protection System and/or its
implementations in clients and servers of which Licensee is aware, the Licensee shall ensure that
clients and servers of the Content Protection System are promptly updated, and/or where
necessary, revoked.
7.1.
Licensee shall ensure that patches including System Renewability Messages received
from Content Protection System providers (e.g. DRM providers) are promptly applied to
clients and/or servers, where applicable.
7.2.
Where Licensee determines that Pictures have been compromised from a particular
device and Licensee is able to uniquely identify said device, Licensee shall promptly
revoke or securely and provably update said device.
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7.3.
Where Licensee determines that a particular device type requires a mandatory security
update, in order to fix or invalidate an actual Security Breach (as defined in Section 1 of
this Agreement), once such update is available, it shall be applied to all devices of the
relevant device type as soon as reasonably possible and relevant devices shall not receive
Pictures in UHD until updated if they have not been updated within 30 calendar days or
less of the security update first being made available to such devices.
7.4.
Where Licensee determines that a particular device type requires a mandatory security
update to fix a Security Flaw that is not classified as a Security Breach, once such update
is available, it shall be applied to all devices of the relevant device type as soon as
reasonably possible and relevant devices shall not receive Pictures in UHD until updated
if they have not been updated within 90 calendar days or less of the security update first
being made available to such devices.
Breach Monitoring and Prevention
8.
Licensee shall have an obligation to monitor for security breaches at all times, including
unauthorized distribution by any user of the Licensee’s service of any Pictures. Licensee shall
promptly report the details of any Security Breach or Territorial Breach to Licensor with respect
to Pictures.
Copying & Recording
9.
Copying. The Content Protection System shall not enable copying of unprotected Pictures or
recording of any Pictures. Copying the encrypted file is permitted.
Outputs
10.
Analogue Outputs. Analogue outputs are not permitted.
11.
Digital Outputs. For protected Pictures a digital signal may be output if it is protected and
encrypted by High-Bandwidth Digital Copy Protection (“HDCP”) version 2.2 or higher, or in the
case of Miracast version 2.1 or higher. The Upstream Content Control Function shall be set such
that the content stream is not transmitted to HDCP 1.x-compliant devices or HDCP 2.0-compliant
repeaters. For the avoidance of doubt, the content stream may be transmitted to repeaters that are
compliant with HDCP 2.2 or higher, or in the case of Miracast version 2.1 or higher.
Notwithstanding this requirement, an audio signal may be output without any encryption.
Restrictions & Requirements
In addition to the foregoing requirements, playback of Pictures in UHD is subject to the following set of
restrictions & requirements:
12.
Player Validation and Authentication.
Prior to the first playback of a given Picture on a given device, the device must be connected to the
SVOD service which will cryptographically authenticate the claimed identity of the device and establish
that the device is unrevoked.
13.
Forensic Watermarking
If PlayReady or Widevine add forensic watermarking so as to identify the platform that a DRM Security
Breach came from, Licensee agrees, upon Licensor’s request, to discuss with Licensor implementation of
such forensic watermarking.
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SCHEDULE D
PPV/VOD/SELL-THROUGH ELECTRONIC VIDEO
DEEMED PRICING AND FEE CALCULATION
1. PPV/VOD: With respect to the exhibition of any Picture(s) on a PPV and/or VOD basis prior to and
during the First License Period, during the Network Window, and during the Second License Period for
such Picture(s), for purposes of this Schedule D fee calculation, Licensor shall receive the deemed
wholesale and/or retail price (as applicable) per consumer transaction for each such Picture set forth
below:
1.1.1 prior to the First License Period and continuing through the last day of the First
License Period, (a) if Licensor or any SPE Group Member is the wholesaler, not less than $1.00 (for
standard definition versions), $1.50 (for High Definition versions) or $2.00 (for Ultra High Definition and
3D versions), and (b) if Licensor or any SPE Group Member is the retailer, not less than $2.00 (for
standard definition versions), $3.00 (for High Definition versions) or $4.00 (for Ultra High Definition and
3D versions) per consumer transaction;
1.1.2 during the Network Window and the Second License Period, (a) if Licensor or
any SPE Group Member is the wholesaler, not less than $0.50 (for standard definition versions) or $0.65
(for High Definition versions) or $1.00 (for Ultra High Definition and 3D versions), and (b) if Licensor or
any SPE Group Member is the retailer, not less than $1.00 (for standard definition versions) or $1.50 (for
High Definition versions) or $2.00 (for Ultra High Definition and 3D versions) per consumer transaction.
2. Notwithstanding the foregoing, Licensor may at any time in its own discretion receive a per
transaction amount with respect to any PPV or VOD transaction of a Picture prior to and during its First
License Period, during the Network Window and/or during its Second License Period which is less than
the deemed amounts set forth in subsections 1.1.1 and 1.1.2 above, as applicable, subject to Licensor
promptly providing payment to Licensee, or crediting to Licensee against future payables (at Licensee’s
sole discretion), an amount equal to the number of consumer transactions at such lower price multiplied
by either 75% (in the case of transactions during the License Period and the Network Window) or 85%
(in the case of transactions prior to the First License Period) of the difference between the relevant
deemed amount as determined pursuant to subsections 1.1.1 and 1.1.2 above and the actual amount
charged per such lower-priced consumer transaction.
By way of example only where if Licensor is acting as retailer, if there are 1,000,000 standard definition
PPV/VOD consumer transactions of Example Picture A at $1.50 per transaction during the First License
Period, then the minimum PPV/VOD deemed retail price for Example Picture A would be $2.00 per
consumer transaction during this period.
Under this example, Licensee would be entitled to a payment from Licensor of $375,000; calculated as
75% of $0.50 ($2.00, the minimum PPV/VOD price, less $1.50, the Licensor’s price per retail
transaction), multiplied by 1,000,000 consumer transactions.
3. Sell-Through Electronic Video. Without limiting the generality of Licensor’s right to exhibit (and
right to authorize the exhibition of) Pictures at any time in its own discretion on a Sell-Through Electronic
Video basis, Licensor’s Sell-Through Electronic Video rights to the Pictures during each of Licensee’s
License Periods and the Network Window will for purposes of this Schedule D fee calculation, given the
potential effects on the negotiated economics of this Agreement of allowing Licensor to retain these
rights, also be subject to Licensor receiving a deemed price not less than (a) during the period
commencing on the Effective Date and ending on December 31, 2016: (i) $5.00 (for standard definition),
$6.00 (for High Definition), $8.00 (for Ultra High Definition), and $10.00 (for 3D) for each Sell-Through
Electronic Video transaction that occurs prior to and during the First License Period, (ii) $3.50 (for
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standard definition), $5.50 (for High Definition), $7.00 (for Ultra High Definition), and $8.00 (for 3D) for
each Sell-Through Electronic Video transaction that occurs during the Network Window, and (iii) $2.50
(for standard definition), $4.50 (for High Definition), $5.50 (for Ultra High Definition) and $6.00 (for 3D)
for each Sell-Through Electronic Video transaction that occurs during the Second License Period, and (b)
during the period commencing on January 1, 2017: (i) $3.50 (for standard definition), $5.50 (for High
Definition), $7.00 (for Ultra High Definition), and $8.00 (for 3D) for each Sell-Through Electronic Video
transaction that occurs prior to and during the First License Period, (ii) $2.50 (for standard definition),
$4.50 (for High Definition), $6.00 (for Ultra High Definition), and $6.50 (for 3D), as applicable, per each
Sell-Through Electronic Video consumer transaction that occurs during the Network Window, and (iii)
$2.00 (for standard definition), $3.50 (for High Definition), $4.50 (for Ultra High Definition) and $5.00
(for 3D) for each Sell-Through Electronic Video transaction that occurs during the Second License
Period; provided, that Licensor may at any time in its own discretion receive less than the minimum
deemed amounts set forth above, as applicable, per retail Sell-Through Electronic Video consumer
transaction, subject to Licensor promptly providing payment to Licensee, or crediting to Licensee against
future payables (at Licensee’s sole discretion), an amount equal to the number of consumer transactions at
such lower price multiplied by either 75% (in the case of transactions during the License Period) or 85%
(in the case of transactions prior to the First License Period) of the difference between the relevant
deemed minimum amount set forth above and the actual amount charged by Licensor per such lowerpriced consumer transaction. For purposes of clarification, a Sell-Through Electronic Video consumer
transaction (whether wholesale or retail) may result in the delivery of multiple Pictures (on a nonsubscription , Sell-Through Electronic Video basis) in accordance with the bundling requirements set
forth in Section 2.5.3 of the Agreement, provided, that each such Picture included in the bundle is
separately subject to the requirements set forth in this Section 3.
4. The parties understand and agree that for PPV, VOD and/or Sell-Through Electronic Video
transactions pursuant to which the consumer is entitled to access a Picture in different resolution formats
(e.g., both standard definition and High Definition, or 4K as well as High Definition and standard
definition), the applicable deemed amount Licensor receives for such transaction for purposes of the
calculations in Sections 1 and 3, above, shall be based on the highest resolution available to the consumer
pursuant to such transaction. By way of example, for a Sell-Through Electronic Video transaction that
occurs in the year 2015 during the First License Period for a Picture, where the consumer is entitled to
access the Picture in both High Definition and standard definition, Licensor must receive at least $6.00 for
such transaction (i.e., the minimum deemed amount applicable to High Definition) in order to avoid a
payment to Licensee in accordance with Section 3, and Licensor need not, for the avoidance of doubt,
also receive $5.00 for the standard definition version of such Picture that was also available to the
consumer in connection with such transaction.
5. Additional Resolutions. In the event that, during the Term, Licensor intends to distribute (and/or
authorize any other party to distribute) any SPE Picture(s) on a PPV, VOD and/or Sell-Through
Electronic Video basis in a resolution other than those identified in this Schedule D (i.e., standard
definition, High Definition, 3D and Ultra High Definition), Licensor shall first notify Licensee and, prior
to any distribution of the SPE Picture(s) in such new resolution on a PPV, VOD and/or Sell-Through
Electronic Video basis, the parties shall engage in good faith discussions with respect to the deemed
wholesale and/or, if Licensor or any SPE Group Member is the retailer, deemed retail pricing terms that
shall apply to such additional resolutions for the sole purpose of the calculation of any fee under this
Schedule D.
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SCHEDULE E
SHORT FORM LICENSE
This Short Form License (this “Short Form License”) is entered into as of the date set forth below, by and
between Sony Pictures Television Inc. (“Licensor”) and Licensee, Inc. (“Licensee”), pursuant to and subject to a
Subscription Video-On-Demand License Agreement for Animated Pictures (the “Agreement”), dated as of May __,
2014, concerning the distribution of certain animated Pictures (as defined below). Capitalized terms used herein
without definition shall have the respective meanings ascribed to such terms in the Agreement.
The Agreement provides that, for good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, and in accordance with the other terms and conditions set forth therein (and as more
particularly set forth therein), and Licensor has irrevocably licensed exclusively to Licensee, its permitted successors
and assigns, during the License Period and throughout the Territory, the “Rights.”
As used herein, the following terms shall be defined as follows:
“Pictures” shall mean, collectively, the feature-length animated motion pictures set forth on Exhibit A
attached hereto.
“Territory” shall mean the fifty states of the United States of America and all U.S. territories and
possessions, including without limitation, the District of Columbia and Puerto Rico.
“Rights” means the following: the exclusive right and license (to the extent set forth in Section 2.5 of the
Agreement), to transmit each Picture, for exhibition during its License Period, solely in the Licensed Languages and
on a Subscription Video-On-Demand basis via the SVOD Service to Registered Users located in the Territory and
subject at all times to and in accordance with the Usage Rules, including the limited right of Licensee to copy,
install, encode, encrypt, display, use, cache, transmit, distribute and store the Pictures (and associated Source
Material) to the extent necessary in order to effectuate the rights granted in the Agreement. Prior to and during the
First License Period, and during the Second License Period of any Picture, Licensor and Licensor Affiliates shall not
license, authorize or permit any exhibition (other than the SVOD exhibition via Approved Delivery by Licensee
pursuant to the Agreement) of such Picture (including any versions, formats, resolutions, and/or languages), or the
promotion of any exhibition (other than promotion of exhibition on the SVOD Service) of such Picture to any party
in the Territory; provided, however, that any promotion during the First License Period and/or Second License
Period of any linear or on-demand exhibition described in Section 2.5.1 of the Agreement (i.e., exhibition during the
immediately-following Network Window) shall be limited to the pre-promotion during the final 30 calendar days of
each of the First License Period and Second License Period. Notwithstanding the foregoing, prior to and during the
First License Period and during the Second License Period, Licensor may exploit, promote, and may authorize third
parties to exploit and promote, the Pictures solely by the following means of exhibition and promotion in the
Territory: Theatrical Exhibition, Non-Theatrical Exhibition, Home Video, Sell-Through Electronic Video, Pay-PerView and Video-On-Demand. During the Network Window for a Picture, in addition to the means of exhibition and
promotion listed in the immediately preceding sentence, Licensor may also exploit, promote, and may authorize any
third party to exploit and promote, each Picture on any Ad-Supported programming networks or services (which,
solely for purposes of this Section, shall mean programming network(s) or service(s) that are generally supported by
third-party commercial advertisements), whether linear or on-demand, delivered by any and all means (including,
without limitation, free broadcast or “basic” cable networks (which may include programming in a basic tier or
expanded basic “tier(s)”) and by linear television programming services (including on-demand enhancements
thereto that are made available on an authenticated basis to subscribers who subscribe to the applicable linear
programming service via an MVPD) that are not then Ad-Supported but that are otherwise generally distributed as
part of a programming tier or package of channels that does not include Pay Television channels, subject to the
minimum commercial interruption requirements set forth in the Agreement. Licensor shall not, for the avoidance of
doubt, authorize the exhibition of any Picture during its Network Window on an SVOD and/or Pay Television basis.
This Short Form License shall be fully binding upon Licensor, and its successors and assigns, and has been
duly executed on behalf of and with the full authorization and consent of Licensor. The terms of this Short Form
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License, and Licensee’s exercise of the rights evidenced hereby, are at all times subject to the terms of the
Agreement, and in the event of a conflict between the terms of this Short Form License and the terms of the
Agreement, the Agreement shall control.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned has executed this Short Form License effective as of
_________, 20__.
SONY PICTURES TELEVISION INC.
By: ______________________________________
Name:
Title:
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State of California
County of ___________________ )
On _________________, 20__, before me, ____________________, a notary public in and for
the State of California, personally appeared ___________________________, who proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature _________________________
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Exhibit A to Short Form License
Picture(s)
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SCHEDULE U
USAGE RULES
1.
Playback Client
a. Each Playback Client must be uniquely identifiable.
b. Each Playback Client must be registered with a Registered User’s user account (each, a
“User Account”) prior to receiving Pictures or playback licenses.
2.
User Accounts
a. Registered Users must have an active User Account prior to viewing a Picture on the
SVOD Service.
b. All User Accounts must be protected via account credentials consisting of at least a userID and password.
c. A Playback License (as described below) must timeout after 24 hours.
d. All User Accounts must have full account privileges applicable to such account,
including purchasing power and the power to change account options, such that access to
the account credentials (username and password) is sufficient to (i) enable purchases to
be made and charged to the Registered User who is the account owner and (ii) change
account options and subscription tiers to the extent applicable to such account.
3.
Each User Account can have a maximum of 6 registered Playback Clients at a time. Playback
Clients may be de-registered pursuant to Licensee’s standard de-registration procedures, which
allows Playback Clients to be de-registered from either the client or the server side. After deregistration, a Registered User must re-present valid account credentials before Pictures can be
received and viewed.
4.
Rendering of Pictures on a Playback Client shall be possible only by the possession on the
Playback Client of a Playback License or via Link Layer Protection Playback (which is playback
via a secure streaming protocol which is an Approved Protection System where the issuance of a
Playback License is not required).
5.
Playback Licenses for all CPS except Link Layer Protection (which shall nonetheless meet the
standard of this Section 5 by providing for an analogous level of protection, pursuant to the Link
Layer Protection Playback Business Rules set forth at Section 5(l) below):
a. Only a single Playback License shall be issued per viewing of a Picture.
b. Each Playback License shall be restricted to only registered Playback Clients.
c. Playback Licenses shall not be transferable or copyable between Playback Clients.
d. Pictures not playable without a Playback License.
e. Only Licensee can authorize Playback Licenses for Pictures on the SVOD Service.
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f.
Playback Licenses must be acquired at the start of viewing of a Picture, and cannot be
cached or stored on the applicable Approved Device after the earlier of viewing being
stopped or 24 hours after the playback license was issued.
g. Playback Licenses are only delivered to Registered Users with User Accounts in good
standing.
h. Playback Licenses shall expire period within 24 hours of being issued. Resuming
playback (after a stop) of a previously viewed (including partially viewed) stream
requires acquisition of a new playback license.
i.
If a playback client receives a new Playback License while it already has a Playback
License or is playing a Picture authorized by another Playback License, any Picture
playing shall terminate, and the new Playback License shall replace any existing
Playback Licenses (other than in the case of “picture-in-picture” streaming as described
in sub clause j. below).
j.
Each playback client may only have a single stream at a time (other than in the case of
“picture-in-picture” streaming, in which case each such stream to the same device shall
be counted towards the concurrent stream limit set forth in Section 5(m) below).
k. Prior to issuing a Playback License, a playback client must be authenticated with its
associated User Account using the User Account credentials.
l.
Link Layer Protection Playback Business Rules:
i. Only a single stream shall be initiated per viewing of a Picture.
ii. Each stream shall be restricted to only registered Playback Clients.
iii. Streams shall not be recordable, copyable or transferable between Playback
Clients.
iv. Pictures are not playable without proper authorization by Licensee.
v. Only Licensee can provide streams for Pictures on the SVOD Service.
vi. Streams cannot be cached or stored on the applicable Approved Device after the
earlier of viewing being stopped or 24 hours after the start of playback.
vii. Streaming sessions shall expire in a period within 24 hours of being initiated.
Resuming playback (after a stop) of a previously viewed (including partially
viewed) stream requires initiation of a new stream.
viii. If a Playback Client receives a new stream while an existing stream was already
in progress, any Picture currently playing shall terminate, and the new stream
shall replace any existing streams.
ix. Only a single streaming instance shall be allowed per Approved Device at any
one time.
x. Prior to starting a streaming instance, a playback client must be authenticated
with its associated User Account using the User Account credentials.
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m. Only four (4) streaming instances (including any combination of Playback Licenses plus
Link Layer Protection) may be active at one time associated with a single User Account.
n. Streaming is only allowed to Registered Users with User Accounts in good standing.
6. Fraud Detection
a. Licensee shall require that each Registered User has agreed to be bound by and comply
with the SVOD Service’s terms and conditions, which terms shall, at a minimum, set
forth the permitted use of Pictures by a Registered User, including that such programs are
available to members for personal, non-commercial use only. Licensee will establish
commercially reasonable procedures in accordance with prevailing industry standards to
provide for appropriate action to be undertaken, in Licensee’s good faith discretion, with
respect to any Registered User who violates the Terms of Use. Licensee shall use
commercially reasonable efforts to ensure that Playback Licenses for a single account are
only delivered to the relevant account holder, which may include members of a single
household only.
b. Licensee will use appropriate anti-fraud heuristics to prevent unauthorized access of User
Accounts. As part of this effort, Licensee will monitor operational statistics from the
back end (for example, number of streams per Registered User in a given period,
diversity of stream session locations in a given period, amount and location of concurrent
sessions, etc.) to evaluate potential fraud.
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