Miami - July 13, 2020

Introduction: Definition of OTT and AVOD Concepts

Over-The-Top (OTT) means, in relation to video streaming, that streamed videos are provided to end-users via the Internet without any subscription with a satellite or cable TV provider. OTT video streaming providers typically have their own website or mobile app platform in order to provide access to their OTT video content. Advertising(-Sponsored) Video-On-Demand (AVOD) is a type of video streaming service where users must watch ads in order to view the video content they want to watch free of charge (Freemium Revenue Sharing Model).

Many Clients ask us how they can structure a waterproof agreement between them (OTT AVOD streaming platforms) and film makers/producers; here are the six main structuring items which must be covered in such an agreement:

1) Purpose of Agreement & Exclusive License

An OTT AVOD streaming platform and a film/series content owner (film maker or producer) enter into a service agreement for the purposes of such platform hosting, listing, transmitting, promoting and video streaming such owner’s video content on the OTT AVOD platform. In order to be contractually authorized by the owner of any such video content, the Film Owner must grant the platform a limited exclusive license to host, list, transmit, video stream, sub-license and promote the video content on the OTT AVOD platform (i) in all versions, languages and digital formats in all media now known or in future devised; (ii) in a certain given territory; (iii) for a certain fixed-term and renewable duration; and (iv) to end-users (under a free sub-license) which are authorized to use the OTT AVOD platform for the sole purpose of privately viewing the film content.

The rights licensed by the film owner to the platform typically includes the limited right to distribute, stream and display (i) the film content to the platform’s employees, consultants and business partners at no charge and solely for the platform’s internal purposes; and (ii) a certain limited amount of seconds (e.g. ninety (90) seconds) of each film or episode of a series for the purposes of promoting the availability of such content on the OTT AVOD platform, at no charge to the platform, within the agreed territory.

The film owner also grants the platform an exclusive license to distribute and display (i) film owner’s logos, trade names, trademarks, and service marks in relation to the film content; and (ii) clips, thumbnail images, art and any other promotional material associated with such film content and any metadata, associated with the licensed film content.

In the specific case of film production companies (as opposed to independent filmmakers), such companies typically reserve all rights not expressly granted to the OTT AVOD platform, including but not limited to, electronic publishing, print publication, music publishing, live-television, radio and dramatic rights in relation to the film content listed on the OTT AVOD platform.

2) Submission Fees, Membership Fees, Advertising & Ad Revenue Sharing

Upon approval of any film content by the platform’s team of film critics, the film owner (independent filmmaker or film production company) typically pay the platform a certain fixed amount per submission of film content on the OTT AVOD platform.

Film production companies (as opposed to independent filmmakers) may also typically be required to pay the platform a monthly recurring membership fee.

The film content’s owner typically authorizes the platform to sell and insert (either itself or through an authorized third party agent) ads on the OTT AVOD platform in any manner as the platform determines suitable in relation to owner’s film content.

The platform must ensure that all ads displayed by the Platform and directly related to any film content listed on the OTT AVOD Platform shall be compliant with all advertising standards commonly recognized and applied by other OTT AVOD platforms in terms of the frequency, type and placement of the ads.

The platform shall not authorize or encourage any third party to, directly or indirectly, generate queries, impressions of any ads or clicks on any ads, including, without limitation, (i) by automated, deceptive, fraudulent or other invalid means, (ii) by repeated manual clicks or use of robots, or (iii) by any other automated query tools or computer-generated search requests.

In consideration of the license granted by the film owner to the platform, the film owner shall receive a certain percentage of the revenue generated by the platform from the display of ads on the OTT AVOD platform in relation to owner’s film content. On the other hand, in exchange for the services provided by the platform to the film owner, the platform retains a certain percentage of the same revenue generated by the platform from the display of ads on the OTT AVOD platform in relation to owner’s film content.

The ad revenue share is paid by the platform to the film owner based on certain criteria including: (i) the number of views an ad receives on the OTT AVOD platform; (ii) the number of ad interactions (i.e. the number of clicks an ad receives from customers wishing to watch the ad while watching a film content); (iii) the quality of the ad; and (iv) the length of time of the film content which shall determine the number of ads to be displayed during any customer’s viewing of film content listed on the OTT AVOD platform.

In the specific case of film production companies (as opposed to independent filmmakers), such companies may sometimes be allowed to promote multiple third party sponsors on their film content and are solely responsible for all sponsorship agreements executed by such film production companies in relation to their film content. However, film production companies are usually not allowed to have their own ad sponsors/partners in relation to their film content listed on the OTT AVOD platform. The platform usually keeps full, complete and exclusive control over all ad partnerships and ad revenue generated in relation to any film content listed on the OTT AVOD platform.

3) Withdrawal of Film Content from the OTT AVOD Platform

The film owner should have the right to temporarily suspend or permanently withdraw his/her/its film content from the OTT AVOD platform, for example if the film owner becomes aware (a) of the fact that any third party has a bona fide right in such film content, and/or (b) of the existence of any third party legal action in relation to such film content.

In case of any such withdrawal, the platform’s payment obligations with respect to the withdrawn film content cease as of the date of withdrawal and resume only when there is no longer any (i) third party’s bona fide right associated with the film content, or (ii) third party legal action in relation to the film content.

The OTT AVOD platform owner, on the other hand, should have the right to withdraw from the OTT AVOD platform any film content at any time in order to minimize the liability risk to which the OTT AVOD platform may be exposed due to any actual or potential third party claim relating to ownership rights, licensing rights or rights of use of any kind over such film content.

4) Other Specific Platform’s Rights & Obligations to include in the Contract

The OTT AVOD platform should not be allowed to cut, edit, modify, or authorize third parties to cut, edit or modify any film content without the film owner’s prior written consent.

However, the platform should have the right to determine, when, within which specific territory, under which genre classification and at what resolution, all or any of the film content will be displayed, streamed, or distributed on the OTT AVOD platform. However, if the film owner, in its/his/her reasonable discretion, determines that the genre classification (including but not limited to drama, comedy, horror, suspense, and romance) made by the platform with regard to any of its/his/her film content listed on the OTT AVOD platform creates a bona fide brand concern (including any risk of commercial damage) for the film owner, then the platform and the film owner should work together in good faith to modify such genres. Therefore, the agreement should provide that the platform shall use good faith efforts to classify the film content within one or more of the available genres in an appropriate manner. The film owner shall have the right to: (i) object to a classification of the film content that is, in the sole and good faith judgment of the film owner, derogatory or inappropriate, and (ii) require the platform to promptly reclassify such film content in the genres as indicated by the film owner.

The OTT AVOD platform should be able to choose not to display/distribute any film content, upon reasonable determination by the platform that the film content (i) may be the subject of a third party claim, or (ii) is otherwise inconsistent with the platform’s brand, standards, or practices. If the platform becomes aware of the fact that all or any part of film content is the subject of a third party claim, the platform may remove such film content from the OTT AVOD platform and reduce the ad revenue share associated with such removed film content accordingly.

5) Film Content Protection and Security

The platform must represent and warrant, in the agreement, that: (i) it has put in place effective, stringent and robust security systems and technologies to prevent theft, pirating, unauthorized exhibition (including, without limitation, unauthorized exhibition to non-customers and any exhibition outside the agreed territory), unauthorized copying or duplication of any video reproduction or compressed digitized copy of any film content listed on the OTT AVOD platform, and (ii) such security systems, procedures and technologies are no less stringent or robust than (a) those that the platform employs with respect to content licensed from other independent/indie film owners or film production companies, or (b) industry standards. The platform should not be allowed to authorize any use of any video reproduction or compressed digitized copy of any film content listed on the OTT AVOD platform for any purpose other than as expressly permitted by the film owner under the agreement.

6) Film Owner’s Representations and Warranties

The film owner should be required to represent and warrant to the platform that:

(i) all necessary synchronization, public performance and other licenses for the use of any musical compositions contained in the film content have been obtained by the film owner from the applicable intellectual property rights’ owners. It follows that the film owner should represent and warrant to the platform that all monies payable under such licenses have been or will be paid by the film owner;

(ii) the submitted film content (including all elements thereof) is not in the public domain and has been validly registered for copyright. The film content should contain all proper copyright notices required or permitted for protection of the film content under the United States Copyright Act (if relevant) and under the Universal Copyright Convention;

(iii) the credit lists, materials, and any documentation, delivered by the film owner to the platform in respect of the film content, are complete and accurate; and

(iv) the film owner has complied and will comply with United States Code title 18 §§ 2257 and 2257A (if relevant) regarding minors and the depiction of sexually explicit conduct, if any, in all film content, including, without limitation, the collection and maintenance of individually identifiable information regarding all performers as required.

Dr. Ariel Humphrey