Licensing Contracts and Pre-Sales
1. Licensing and Pre-Sales
• A. They are done all year but typically started
and/or concluded at important film markets
and festivals throughout the year.
– i. Festivals and markets are the same and different.
– A Festival: is a celebration of the quality of your film. Film
is chosen as worth of being celebrated by an expert panel
viewing thousands of submissions.
– ii. Market: is a gathering of buyers and sellers to view, buy,
sell, and talk about pre-buying new films that are going to
be made.
– a) some festivals have markets while others do not
1. Licensing and Pre-Sales (cont.)
-iii. Principle Film Markets associated with festivals are:
- A. Sundance – January
- B. Berlin – February
- C. Hong Kong- Spring
- D. Cannes – May
- E. Venice/Toronto – August/September
- F. AFM – is really truly a market, but they have tried to associate
with the AFI Film Festival which occurs at the same time. But, it just
does not seem to work because AFI is in Hollywood and AFM is in
Santa Monica. It’s just too far.
- F. Other mini. markets associated with festivals include:
- Guadalajara – April-one of the principal South American
markets
1. Licensing and Pre-Sales (cont.)
- G. Also, these are 3 major TV markets where film buyers/sellers
gather:
1) NATPE – January/February
2) MIPTV – April
3) MIPCOM -- October
2. What Happens at Markets
• A. Companies spend many weeks prepping for
each market
– i. Contacting buyers for meetings
– ii. Lining up their slates, purchasing or acquiring
products for sale
– iii. Advertising, marketing, and promoting their
product in trade publications
2. What Happens at Markets (cont.)
– iv. Films are screened or scripts with project
descriptions are sent out to various buyers
– v. Companies come prepared to do business at
each market with meetings every ½ hour/ 1
hour; drinks, dinner, socializing and talking
films
2. What Happens at Markets (cont.)
• B. Types of Licensing Agreements
– Completed Films
– Co-Productions-Future Films
2. What Happens at Markets (cont.)
• C. Completed Picture Territorial Licensing
Agreement –
• Many use a Standardized International
Territorial Licensing Agreement
• – a ‘MILA’ (Multiple Rights International
Licensing Agreement) developed by IFTA ( An
international legal committee drafts these
agreements-I am on that committee)
2. What Happens at Markets (cont.)
• BASIC TERMS OF A MILA
– 1. Picture Specifications
– 2. Credits
– 3. Advance Payment / MINIMUM GUARANTEE
•
•
•
•
A. 20% on signing
B. 60% on Initial Delivery
C. 20% on Final Delivery
*Variations in all of these
3. Allocation of Minimum
Guarantee/Advance (“MG”)
• A) Allocation of MG is Negotiated, but a
reasonable ALLOCATION OF THE “MG” MIGHT
BE:
– 30% for Theatrical Rights
– 10% for Ancillary Rights
– 25% for Video /VOD Rights
– 15% for Pay TV Rights
– 20% for Free TV Rights
4. Bonuses on top of the MG might be
negotiated for:
•
•
•
•
Oscars
Nominations
Golden Globes
Box Office Results
5. Rights Granted
• Specify what rights:
– Theatrical
– DVD, VOD
– TV (pay, fee, satellite)
– Ancillary (hotels, airlines, non-theatrical)
6. Reserved Rights
• Usually Remake, Sequel, Prequel, TV series
rights, live stage, book publishing, soundtrack
album, music publishing, merchandising are
reserved to the Producer and/or underlying
rights holder
– Holdbacks – are negotiated for 5-7 years from First
Release on Remakes, Sequels, Prequels- before
they can be exploited by the Producer
7. Security Interest
• If there is a significant advance a territorial
distributor may ask for a security interest
8. Term
• A. With Advance/MG – 15-25 years
• B. With No Advance – 3-7 years
9. Territory
• Needs to be specifically defined. Areas that
sometimes require negotiation:
–
–
–
–
A. German-speaking territories
B. French-speaking territories
C. Latin America
D. US
•
•
•
•
•
Puerto Rico
Bahamas
Virgin Islands
Guam
Bermuda
10. Prints and Advertising (“P&A”)
If you can obtain a P & A commitment, it is important to
negotiate specifically:
Minimum Number of Prints
Minimum Number of Theatres
Minimum Number of Cities
Minimum Amount of $ Spent
Minimum Number of Weeks in Theatrical Release
11. Holdback and Outside Release
Date
• A. U.S. Distribution may require no release
outside the U.S. prior to U.S. release
• B. Also – there should be an OUTSIDE Release
date negotiated as well… i.e. not later than
Dec. 31, 2014 (subject of course to the
Holdback)..so that the Picture ultimately gets
out into the marketplace
12. Delivery
• A key issue
• A fairly long delivery list is usually established
which includes not only physical film and sound
elements, marketing and promotional materials,
but also many paperwork items showing/proving
the producers actually own the Picture
– A. UPON NOTICE OF DELIVERY – Initial Money is wired
– B. CERTAIN ITEMS DISTRIBUTOR PAYS FOR
• Certain masters
• Dubbing and subtitling
13. Assumption of Producer’s
Obligations
• 1. Gross Participations
• 2. Box Office Bonuses
• 3. Guild Residuals
14. Gross Participation for Producer
and Creative Elements
• 1. Gross Receipts definition usually excludes
certain “off the top” costs
– Collection costs,
– Checking costs,
– Residuals,
– Dues,
– Trade association fees,
– Taxes
15. MINIMUM GUARANTEE (“MG”)
• Typically minimum guarantee is negotiated
– A. It is usually cross – collateralized against all
media licensed (Theatrical, TV, DVD,VOD)
16. TYPES OF REVENUE SPLITS
• A. Costs off the Top Deal Structure
– 1. Distribution costs taken off TOP
– 2. Balance split – 50/50 or 75/25 (in producer or
distributor’s favor), depends on film and negotiation
– 3. If there is a MINIMUM GUARANTEE (MG) the MG
would apply against Producer’s Share
• B. Distribution Deal Structure:
–
–
–
–
1. Distribution fee (25-35%)
2. Distribution expenses
3. MG
4. Negotiated Split – 50/50 or 75/25 thereafter
16. TYPES OF REVENUE SPLITS (cont.)
• C. Video Royalty Deal:
– 1. 25-35% of Video Gross to Producer
• MG is recouped against Producer’s 25-35% share
– 2. Balance to distributor
17. OTHER STANDARD TERMS
• (A 15-20 page document) is attached to the Short
Form License Agreement.
–
–
–
–
–
–
–
–
Representations and Warranties
Indemnities
Definition of Rights
Arbitration
Accountings
Gross Receipts Definition
Suspension and Withdrawal
Assignment and Sublicensing