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Archive for March, 2010|Monthly archive page

Emerging Online Distribution Issues for Independent Films

In Uncategorized on March 19, 2010 at 6:54 pm

This is something independent musicians should keep in mind along with filmmakers. The book The Independent Film Producer’s Survival Guide deals with today’s fast-paced media marketplace and new delivery systems.

Direct digital distribution is beginning to surface as a major way of providing movies to audiences online. Films that cannot attract a theatrical release can certainly have a presence online. The film industry is following the music industry by using the Internet as a way to expose their content.

Independents are typically readily adaptable to market conditions and are ideally positioned to take advantage of new and existing online distribution opportunities, just as they were able to take advantage of opportunities during the early years of home video. Once you have determined that the digital route is right for your product, here are some key issues to consider:

The Grant of Rights

It is no secret that newer online digital distribution entities are trying to build product libraries as assets by taking expansive rights for long periods of time. Do not be surprised if a newer, less well known online digital distributor hands you an agreement that grants it all rights in all media worldwide, not just digital, online or view-on-demand rights. Do not be quick to give away more rights than you should. Get yourself informed and know the costs and procedures involved in new digital delivery methods and you will be able to negotiate knowledgeably from a position of strength.

Exclusivity

As the online distribution process matures, fewer distributors will ask for exclusive online exploitation, but some may try. Because the online programming market is still developing, and iTunes and Amazon certainly have had a head start, few true leaders with large market shares have yet to emerge, so it is risky to grant exclusivity. A safe philosophy is to grant a nonexclusive online license for a limited term. This will allow the market to continue to mature and you will be able to reassess your position after a relatively short window.

Territory

Online distributors may ask for worldwide rights. Since you may prefer to license international rights or specific territorial rights in a completely different manner, try to get the online distributor to limit the territory to the United States or the specific territory in which it is primarily doing business.

Licensing Period

Your license term for online exploitation will first depend on what other rights, if any, you have previously licensed. If you have no previous exploitation, at least try to limit the license period to 6 to 18 months so that you can reassess the online marketplace in short order. Keep your license periods as short as possible.

License Fee/Payment Terms/Audit

Many online startups will claim poverty because the market is still developing so obtaining an advance against royalties for an online license may be difficult, but not impossible. If an advance is not possible, ask for a large share of the gross revenues for downloads, streaming or other licenses (50-70% is obtainable), and try for a share of advertising revenues associated with viewing your product. In addition to an advance and royalties, consider asking for stock options, and the right to purchase stock at lower than market rates. Specify the minimum rates to be charged for downloads and viewings.

Cross-Links

Make sure you include a provision that requires cross-linking of the online distributor’s site with your official website for your company or product. Try to retain the right to exhibit the product on your official site as well as the right to sell merchandise, videos and DVDs of your product from your own site.

And there’s a lot more! As the computer-using and wireless hand-held segment of the entertainment consuming population continues to increase, as digital cable lines, DSL, wireless, satellite, and other systems continue to converge, and as delivery technology continues to improve, one can expect that delivery of motion pictures online or wirelessly will rapidly expand over the next few years. As the market matures, digital pricing, territorial limitations, development of an appropriate digital exploitation window, the issue of exclusivity and the appropriate license period will begin to stabilize and a set of even more specialized standard terms for online and wireless exploitation will emerge.