PRIVATE RESIDENCE VIDEO-ON-DEMAND BETA TRIAL …



SUBSCRIPTION VIDEO-ON-DEMAND LICENSE AGREEMENT FOR SPA ANIMATED PICTURESTHIS SUBSCRIPTION VIDEO-ON-DEMAND LICENSE AGREEMENT (this “Agreement”), dated as of July __, 2013 (“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:DEFINITIONS. All capitalized terms used herein and not otherwise defined in this Agreement shall have the meanings set forth below.“Additional Element” with respect to a motion picture means any of the following: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.Such motion picture arises out of a script, screenplay or underlying property that was developed by any SPE Group Member.Such motion picture was produced under the control, direction or supervision of any SPE Group Member.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, post-production, and completion and delivery costs) for such motion picture.Such motion picture is based in whole or in part on an underlying property owned or controlled by any SPE Group Member.At the time of Initial Theatrical Release, substantially all of the U.S. Home Video rights to such motion picture were owned or controlled by any SPE Group Member.“Animated Picture” shall mean a theatrical motion picture that comprises a substantial amount of animation, computer graphics and/or special effects.“Applications” shall mean web applications created by developers using Application Programming Interfaces (commonly known as APIs) released by Licensee, which web applications will enable Registered Users 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 shall be available to Registered Users only and will be hosted and authenticated by the SVOD Service, subject to the terms and conditions of this Agreement (including, without limitation, the Usage Rules) and, except for Netflix-Branded Playback Applications, shall 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. [From Netflix Amendment 6]“Approved Delivery” shall mean the streaming delivery of an encrypted digital electronic file over the public, global network of interconnected networks known as the Internet or “Worldwide Web” (and not, for the avoidance of doubt, over any private, closed or walled-garden IP 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 public Internet (as described therein) (i) 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 and (ii) through any private, closed or walled-garden IP networks (but in no event through any closed and proprietary cellular audio-visual content service, e.g. Verizon’s V-cast, or through any closed and proprietary satellite, cable or fiber optic video distribution service, e.g. Verizon FiOS or Time Warner Cable). [Change made in Netflix Amendment 6] [Note to Netflix: What is an example of (ii), above?] “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 on its associated video monitor and (ii) capable of enforcing (a) the security and content protection specifications set forth on Schedule C attached hereto or such other specifications reasonably agreed to by the parties and (b) the usage rules set forth on Schedule U attached hereto. [Change made in Netflix Amendment 6]“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 attached hereto or (b) such other format as Licensor may approve in Licensor’s sole discretion. [Change made in Netflix Amendment 6] “Availability Date” shall mean the first day of each Picture’s First License Period. “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.“Digital Cinema” shall mean the exhibition in a theater intended primarily for the exhibition of motion pictures of an intangible, digital or electronic format embodying a motion picture.“DVD Service” shall mean the DVD subscription service.“Domestic Box Office” or “DBO” shall mean U.S. theatrical box office receipts for a Picture for the period commencing on a Picture’s Initial Theatrical Release and continuing through a Picture’s Availability Date hereunder, as reported by Licensor (which number may be audited by License in accordance with the audit provisions of this Agreement). [Note: looking into whether Rentrak works for us.]“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. “Hardware Device” shall mean an individually addressed and addressable IP-enabled hardware device used by a Registered User, excluding 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. [From Netflix Amendment 6]“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. [From Netflix Amendment 6]“Home Theater” shall mean the transmission of a single motion picture transmitted by Television by either VOD or PPV (in either case, which may be bundled with the right to receive a Home Video version of such motion picture), 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 conclusion of the 9th week after Initial Theatrical Release 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).“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, manufacture-on-demand (a motion picture Physical Medium manufactured to order), and in-store digital download (download for a per-picture transaction charge to a fixed (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 and subject to the following conditions: (i) the digital entitlements are made available to the consumer as part of the same transaction by which such consumer purchased the Physical Medium, (ii) if Licensor controls the marketing for such entitlements, it may market such entitlements as “included” (or with similar wording) within the purchase of the Physical Medium, and not as “free” (or similar wording), and where Licensor does not control the marketing it shall use commercially reasonable efforts to cause the marketing entity to adhere to the foregoing marketing message, (iii) 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 common digital locker initiatives (e.g., iCloud). For the avoidance of doubt, the digital entitlements described in the immediately preceding sentence shall not constitute Pay-Per-View, Video-On-Demand, Home Theater, In-Store Digital Download or Sell-Through Electronic Video. “Initial Home Video Release” of a Picture shall mean the first day of its initial Home Video release to the general public within the Territory, but specifically excluding (i) any releases of a Home Video product embodying a Picture and bundled with or embedded in a hardware product only to the extent such products are bundled with hardware branded with a Licensor Affiliate brand and such hardware has a retail price of at least $100 per unit, (ii) Limited Home Video Releases, and (iii) Sell-Through Electronic Video releases of up to one (1) Picture per year that are only made available (prior to their respective general Home Video release to the general public) through services owned and/or operated by Licensor or by a Licensor Affiliate; provided, however, that if any such release of a Picture is made greater than 15 days prior to the applicable Initial Home Video Release of such Picture, then the date of such release shall count as the Initial Home Video Release with respect to such Picture notwithstanding the above exceptions.“Initial Pay-Per-View Release” of a Picture shall mean the first day of its initial residential Pay-Per-View release to the general public within the Territory.“Initial Theatrical Release” of a Picture shall mean the first day of its initial theatrical release within the Territory, but specifically excluding film festivals, test and marketing previews, so-called “sneak” previews, free and/or charitable screenings, private, limited screenings, and 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.“Initial Video-On-Demand Release” of a Picture shall mean the first day of its initial residential Video-On-Demand release to the general public within the Territory“Licensed Languages” shall mean for each Picture English and Spanish (dubs and subtitles), provided that Licensor may provide Licensee with additional language versions of a Picture in accordance with Section 8.2.“License Period” for each Picture shall mean the First License Period and Second License Period of such Picture, collectively.“Licensor Affiliate” means Sony Pictures Entertainment Inc. and each present or future parent, sister company or subsidiary thereof other than Licensor. “Limited Home Video Release” of a Picture shall mean limited releases of Home Video product (other than DVD, Blu-ray and Sell-Through Electronic Video) by Licensor on a format or formats that collectively generates for Licensor in the Territory net revenues in the Year prior to the release of no more than an amount equal to 20% of total net revenues generated for Licensor in such prior Year in the Territory for DVD, Blu-ray and Sell-Through Electronic Video distribution, where “net revenues” mean gross revenues less returns. “Netflix-Branded Playback Applications” shall mean Netflix-branded Applications that (i) are certified by Licensee to, among other things, provide integrated playback (i.e., without requiring the launch of a new browser window) of digital audio-visual content, including, without limitation, the Pictures, to Registered Users only and (ii) can be uniquely identified by Licensee through the use of token authorizations, which authorizations can be revoked by Licensee. Before a Netflix-branded Application is “certified”, it must pass Licensee’s certification process which requires a developer to submit a candidate Application for certification, represent that the Application complies with certification guidelines, and subject such Application to audit and verification by Licensee. If, at any time, a Netflix-Branded Playback Application is found to be non-compliant with Licensee’s guidelines, that application’s access to the SVOD Service shall be revoked at Licensee’s reasonable discretion. Further, if Licensor, in its sole discretion, determines that such Netflix-Branded Playback Application’s non-compliance conflicts with any of Licensor’s respective rights or obligations in connection with the Pictures, or poses a material risk to Licensor’s relationships with third parties and/or its business, Licensor shall have the right to request in writing that Licensee disable such Netflix-Branded Playback Application or the playback of Pictures via such Netflix-Branded Playback Application. Licensee shall have no obligation to so disable such Netflix-Branded Playback Application (or the playback of Pictures through same), but in the event that Licensee declines to do so within five (5) business days of Licensor’s written request, Licensor shall have the right to terminate this Agreement by sending Licensee written notice of such termination within thirty (30) calendar days therefrom. In the event that Licensor exercises the foregoing termination right, (i) this Agreement shall automatically terminate five (5) calendar days after delivery of Licensor’s written notice of its termination pursuant hereto and no Pictures shall be made available by Licensee after such termination date and (ii) Licensor shall refund to Licensee or credit against Licensee payables, at Licensor’s option and within sixty (60) calendar days of the effective date of termination, a pro rata amount of all License Fees paid to Licensor for Pictures for which the License Period has not begun or expired, such pro rata amount to be calculated based upon the percentage of the applicable License Period for each such Picture that remains as of the effective date of such termination. [From Netflix Amendment 6]“Network Window” shall mean with respect to each Picture the period of time commencing upon the end of the First License Period and continuing through the beginning of the Second License Period.“Non-Theatrical Exhibition” shall mean the exhibition of a motion picture initiated in educational and institutional facilities, airlines in flight, oil rigs, public transportation, corporate locations, ships-at-sea, U.S. military bases, nursing homes, hospitals, hotels, motels, prisons and other similar locations or forms of transportation, regardless of the technology used for, and the origin of, such delivery, in public, common areas of such locations and forms of transportation and in non-public, non-common areas of such locations and forms of transportation. “P&A Expenses” means, with respect to a motion picture, all costs and expenses 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 costs related to Digital Cinema (e.g., virtual print fees and electronic transmission costs), and shall specifically exclude bond fees, financing costs, interest and overhead.“Pay-Per-View” or “PPV” shall mean the transmission of a single motion picture transmitted by means of Television, on a linear pre-scheduled basis where the start time is scheduled by the distributor and not by the consumer and for which a transactional charge (in cash/legal tender, unless Licensor and Licensee mutually agree in writing that other forms of payment are acceptable) is made to the consumer for the privilege of viewing the particular motion picture, alone or together with any goods or services that may be bundled therewith, on a per-exhibition basis. PPV may be offered on a multiple channel basis with varying scheduling patterns and may offer multiple exhibitions of a single motion picture over a period of time not to exceed 72 hours, but not on a Negative Option Basis. A PPV viewing of a SPA Picture cannot be bundled with a PPV, VOD or Sell-Through Electronic Video viewing of other motion pictures. PPV promotional offers shall be permitted and shall be part of customary, limited (in duration and scope) and industry-standard promotional offerings (e.g., coupon offers, two-for-one offers, credits offered by the PPV provider that can be applied toward any title on the PPV service (and not for the SPA Picture specifically)). [Thanda sent Pauline a representative list of current common promo practices] For this purpose, PPV does not include operating on a subscription basis and, therefore, shall not include any service for which a consumer is charged a “club” or other similar “access” fee (which shall not, for the purposes of this definition, be deemed to include any basic cable, digital/data plan or Internet access fee) solely for the privilege of being able to view motion pictures via PPV, unless such “club” or similar access fee is a nominal sum (i.e., an annual fee not to exceed $10) that is non-creditable against any per exhibition consumer transaction fees and in all events is a charge that is more than merely a fee to gain access to the PPV motion pictures 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, is credited or paid directly or indirectly to Licensor, and provided further that Licensor, when acting as a retailer and not a wholesaler, may receive an equipment rental fee or purchase price, as applicable, and such equipment rental fee or purchase price shall not count as a “club” or similar access fee. For purposes of clarification, Licensor shall not be deemed to have “indirectly” received an equipment rental fee or purchase price 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. PPV shall not include transmissions on a Sell-Through Electronic Video basis or exhibitions via Digital Cinema. Home Theater will be considered a form of PPV (or VOD) if (but only if) exploited in a manner inconsistent with the pricing and timing restrictions thereon contained in this Agreement. For purposes of clarification, (i) the 72 hour period shall commence at the time the motion picture is exhibited for more than five continuous minutes and (ii) if the recipient 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, 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 of “PPV.” “Pay Television” shall mean transmissions or exhibitions by any form of linear Television to a subscriber of a programming service (i) upon payment by such subscriber of a periodic subscription fee charged on a not less than monthly except with respect to promotional previews and the like, (ii) on a commercial-free, non-advertiser supported basis, and (iii) offered to such subscriber for an additional charge (for a single channel or service or group of channels or services) over and above the charge to such subscriber for the obligatory basic tier of programming. “Personal Use” shall mean the private viewing by one or more persons on an Approved Device in non-public locations and, provided that the consumer’s use of Approved Devices in such locations 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.”“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.“Promotional Preview” with respect to a Picture shall mean a video clip commencing at the beginning of such Picture and running no longer than two (2) consecutive minutes thereafter (“Maximum Preview Duration”), with no additions, edits or any other modifications made thereto. [From Netflix Amendment 6]“Qualifying Films” means all theatrical motion pictures that are SPA Pictures that have their Initial Theatrical Release during the Term and for which Licensor (or its affiliates) control theatrical rights and Television (including SVOD), or have the contractual right to impose relevant holdbacks specified in this Agreement, provided that, to qualify, the Picture must satisfy at least one (1) Additional Element, provided, further, that, other than any Home Theater exhibitions, no general public commercial exhibition of such motion pictures has occurred in the Territory prior to such motion pictures’ respective Initial Theatrical Releases. “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. [Change made in Netflix Amendment 6]“Security Breach” shall mean a Security Flaw that results or may reasonably result in the unauthorized availability of any Picture or any other motion picture that originated in its compressed form from files obtained from the SVOD Service, which unauthorized availability may result in actual or threatened harm to Licensor.“Security Flaw” shall mean a circumvention or failure of the Licensee’s secure distribution system, geofiltering technology or physical facilities.“Sell-Through Electronic Video” means the electronic transmission of a digital file embodying a motion picture for which a per-transaction charge (in cash/legal tender, unless Licensor and Licensee mutually agree in writing that other forms of payment are acceptable) is made to the consumer for the purchase or rental of such digital file, alone or together with any goods or services that may be bundled therewith, 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 exhibited for more than five continuous minutes (and not at the time the file is received by the recipient), and which shall be deemed to be included within the definition of Home Video for the purposes hereof. For the avoidance of doubt, a Sell-Through Electronic Video entitlement of a SPA Picture may be bundled with other motion pictures. Sell-Through Electronic Video promotional offers shall be permitted and shall be part of customary, limited (in duration and scope) and industry-standard promotional offerings (e.g., coupon offers, two-for-one offers, credits offered by the Sell-Through Electronic Video provider that can be applied toward any title on the Sell-Through Electronic Video service (and not for the SPA Picture specifically)). Additionally, Licensor and/or Licensor Affiliates may bundle no more than one (1) SPA Picture per Year, selected by Licensor in its discretion, with Sony-branded hardware devices (through one or more bundling initiatives involving the SPA Picture selected by Licensor for that Year) in accordance with Licensor’s practices as of the Effective Date. With respect to the types of offers described in the immediately preceding sentence, the primary 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 SPA Picture separate and apart from the aggregate value of the package and/or bundle). The parties acknowledge that Sell-Through Electronic Video may be used by consumers for the purpose of “library-building,” in that a consumer may permanently store a motion picture received by means of Sell-Through Electronic Video on Storage Devices. For the avoidance of doubt, Sell-Through Electronic Video shall not include operating on a subscription basis for which a periodic fee is charged, it being agreed that two-for-one discounts, bundled or installment sales shall not constitute operating on a subscription basis, but shall otherwise be subject to the terms specified above with respect to promotional offers.“Software Device” shall mean an IP-enabled, uniquely addressable desktop or laptop personal computer, portable device or mobile phone 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; provided, however that mobile phones shall constitute Software Devices solely when receiving such audio-visual programming through the public Internet (as described in Section 1.4). For the avoidance of doubt, mobile phones shall not constitute Software Devices when receiving audio-visual programming through any closed and proprietary network (e.g. Verizon’s V-cast, or through any closed and proprietary satellite, cable or fiber optic video distribution service, e.g. Verizon FiOS or Time Warner Cable). [From Netflix Amendment 6]“SPA Pictures” or “Pictures” means those Animated Pictures that are 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 label (other than Sony Pictures Classics). “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.“Storage Device” means any storage technology as may be in use from time-to-time from and after the Effective Date, including without limitation Physical Medium and intangible storage technologies such as remote DVRs and “virtual lockers”/“sky lockers.”“Subscription Video-On-Demand” or “SVOD” shall mean the delivery of multiple programs to a subscriber in response to the request of such subscriber (i) for which the subscriber is charged a monthly fee (in cash/legal tender, unless Licensor and Licensee mutually agree in writing that other forms of payment are acceptable) for the right to receive such programming, and is not charged a per-program(s) or per-exhibition(s) fee, which fee is unaffected in any way by the purchase of other programs, products or services, (ii) the exhibition start time of which is at a time specified by the subscriber in its discretion and (iii) which is displayed on a video monitor associated with the Approved Device that received delivery of such program from the service provider. ? “SVOD Service” shall mean the Subscription Video-On-Demand programming service branded “Netflix” at all times during the Term, 100% owned and operated by Licensee, and made available on the Internet only to Registered Users; provided that non-Registered Users may access limited portions of the SVOD Service, such as box art and synopses, it being acknowledged and agreed that non-Registered Users may not playback programs from the SVOD Service. 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) distribution solely via Approved Delivery, including via Applications, to Approved Devices (the “Streaming Subscription Plan(s)”); but, in each case, with the understanding that the rights granted herein are for distribution solely via Approved Delivery. [Change made in Netflix Amendment 6]“Television” shall mean all forms of transmission of video signals from a distance by any means now known or hereafter devised, including without limitation the Internet, to a consumer in a home or other non-public venue, or to a consumer’s personal portable device or Storage Device in the ordinary course of viewing, for personal use. Television shall not include any form of Home Video (including, without limitation, Sell-Through Electronic Video), Digital Cinema or Non-Theatrical Exhibition hereunder. “Term” shall have the meaning assigned in Article 5 hereof.“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. “Territorial Breach” shall mean a Security Flaw that creates a reasonable risk that any of the Pictures will be delivered to persons outside the Territory, where such delivery outside the Territory may result in actual or threatened harm to Licensor.“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).“Usage Rules” shall mean those usage rules set forth on Schedule U attached hereto. [Change made in Amendment 4]“VCR Functionality” shall mean the capability of a subscriber to perform any or all of the following functions with respect to the delivery of a Picture: stop, start, pause, play, rewind and fast forward.“Video-On-Demand” or “VOD” shall mean the transmission of a single motion picture transmitted via any form of Television where the start time is scheduled by the consumer and not the distributor, where the consumer can view the motion picture over a period of time not to exceed 72 hours and for which a transactional charge (in cash/legal tender, unless Licensor and Licensee mutually agree in writing that other forms of payment are acceptable) is made to the consumer for the privilege of viewing the particular motion picture, alone or together with any goods or services that may be bundled therewith, on a per-exhibition basis, but not on a Negative Option Basis. A VOD viewing of a SPA Picture cannot be bundled with a PPV, VOD or Sell-Through Electronic Video viewing of other motion pictures. VOD promotional offers shall be permitted and shall be part of customary, limited (in duration and scope) and industry-standard promotional offerings (e.g., coupon offers, two-for-one offers, credits offered by the VOD provider that can be applied toward any title on the VOD service (and not for the SPA Picture specifically)). For this purpose, VOD does not include operating on a subscription basis and, therefore, shall not include any service for which a consumer is charged a “club” or other similar “access” fee (which shall not, for the purposes of this definition, be deemed to include any basic cable, digital/data plan or Internet access fee) solely for the privilege of being able to view motion pictures via VOD, unless such “club” or similar access fee is a nominal sum (i.e., an annual fee not to exceed $10) that is non-creditable against any per exhibition consumer transaction fees and in all events is a charge that is more than merely a fee to gain access to VOD motion pictures alone. However, VOD 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, is credited or paid directly or indirectly to Licensor, and provided further that Licensor, when acting as a retailer and not a wholesaler, may receive an equipment rental fee or purchase price, as applicable, and such equipment rental fee or purchase price shall not count as a “club” or similar access fee. For purposes of clarification, Licensor shall not be deemed to have “indirectly” received an equipment rental fee 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. VOD shall not include transmissions on a Sell-Through Electronic Video basis. Home Theater will be considered a form of VOD (or PPV) if (but only if) exploited in a manner inconsistent with the pricing and timing restrictions thereon contained in this Agreement. For purposes of clarification, (i) the 72 hour period shall commence at the time the motion picture is exhibited for more than five continuous minutes (and not at the time the motion picture is received by the recipient) and (ii) if the recipient 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, 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 of “VOD”.“Year” shall mean calendar year unless otherwise specified.LICENSE. Grant of License. Subject to Licensee’s full and timely compliance with its obligations hereunder, 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 in the medium of Subscription Video-On-Demand on the SVOD Service to Registered Users in the Territory and subject at all times to 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 located in the Territory for exhibition on each such Approved Device’s associated video monitor in a format designed for viewing on such video monitor. 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 exploit the Subscription Video-On-Demand rights using VCR Functionality. 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; (b)?no Picture may be delivered, transmitted or exhibited other than as set forth in Section 2.1; (c) except as otherwise provided for in Section 2.7 and Section 2.8 of Schedule C, each Picture must remain in its approved level of resolution and not down- or up-converted [subclause (c) changed in Amendment 4]; and (d) no person or entity shall be authorized or permitted by Licensee to do any of the acts forbidden herein. When Licensee makes any modification that results in a material adverse change to the picture quality and user experience of the SVOD Service, Licensee shall so notify Licensor, and Licensor shall have the right to inspect and approve such modified picture quality and user experience. Licensee shall immediately notify Licensor of any unauthorized transmissions or exhibitions of any Picture of which it becomes aware. [The following was added via Amendment 6:] 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 (e.g., pay 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 access to the SVOD Service) (“Third Party Fees”); provided that Licensee represents and warrants that it shall not receive any portion of such Third Party Fees at any time during the Term. 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 subscription fees billed by Licensee) for access to the SVOD Service or a tier of or bundled service that includes the SVOD Service.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. 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 in strict accordance with the terms and conditions set forth in this Agreement; and (b) that this Agreement shall 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. The license granted herein also does not grant Licensee any right to sublicense the Pictures.Holdbacks. Prior to and during the First License Period, and during the Second License Period of any Picture, Licensor shall not license or authorize any Television exhibition (other than the Internet SVOD exhibition by Licensee pursuant to this Agreement) of such Picture or the promotion of any Television exhibition (other than promotion of exhibition on the SVOD Service) of such Picture to any party in the Territory; provided, however, that pre-promotion of an immediately following exhibition window may be allowed during the final 30 days of the First License Period and Second License Period. In addition to the foregoing, Licensor agrees that prior to and during the First License Period and during the Second License Period, it shall only exploit and authorize third parties to exploit the Pictures by the following means of exhibition in the Territory: theatrical, Non-Theatrical Exhibition, Home Video, Sell-Through Electronic Video, Pay-Per-View and Video-On-Demand. During the Network Window for a Picture, in addition to the means of exhibition listed in the immediately preceding sentence, Licensor may exploit and authorize any third party to exploit each Picture by any means of ad-supported Television (e.g., free broadcast, basic cable, on-demand or otherwise). [Notwithstanding the immediately preceding sentence, Licensor may exhibit and/or authorize the exhibition of Pictures at any time during the Network Window by Television programming services that are not ad supported (e.g., Sundance Channel, 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 premium Pay Television channels (e.g., HBO, EPIX, Showtime and Starz); provided, that, the exhibition of the Pictures on such Television programming service must 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 only full-screen advertisement(s) or other promotional content.] [Under discussion by the parties.] For the avoidance of doubt, Licensor’s rights in the immediately preceding sentence shall include the right to exploit and authorize third parties to exploit the Pictures on an on-demand basis on any on-demand enhancement of such linear programming service so long as such programming service complies with the restrictions and conditions set forth in the immediately preceding sentence.Listing Pictures in “Free” Sections of MVPD Systems. If Licensor or any Licensor Affiliate enters into a license agreement or other arrangement with a third party for the non-transactional on-demand Television exhibition of a Picture in the Territory during the Network Window, or itself exhibits a Picture on a non-transactional on-demand Television basis during the Network Window, the following restriction shall apply: where such on-demand rights are licensed (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’s affiliates shall not make, and shall not authorize or permit the applicable licensee to make, the applicable Picture available within any multichannel video programming distributor’s “Free Movies” (or equivalent)-labeled on-demand offering within the Territory. Restrictions on New Electronic Transactional Models. With respect to any solely electronic transactional (rental, sell-through) distribution models other than 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 notify Licensee and the parties shall engage in good faith discussions with respect to authorizing such New Transactional Model. Any New Transactional Model with respect to a Picture during the period specified above shall be subject to Licensee’s prior approval, not to be unreasonably withheld. For purposes of this Section 2.4.2, New Transactional Model shall include, without limitation, exhibition of Pictures in the Territory on an ad-supported Pay-Per-View, ad-supported Video-On-Demand, ad-supported Sell-Through Electronic Video (or other electronic ad-supported transactional) basis, provided, however, that the foregoing shall not prohibit, with respect to Pictures exhibited on a PPV, VOD and/or Sell-Through Electronic Video basis, the (x) exhibition of any non-targeted banner or other types of run-of-site advertisements (including for third party products or services, provided that Licensor does not participate in any revenues generated by the third party distributor from any such third party run-of-site advertisements), and so long as such advertisements do not appear on (i) the product page for a SPA Picture, (ii) the video player (pre-roll, interstitial or post-roll) during playback of the SPA Picture, or (iii) on the playback page for the SPA Picture, (y) promotion of other titles available on a Pay-Per-View, Video-On-Demand or Sell-Through Electronic Video basis, and/or (z) promotion of other titles available from Licensor on a Pay-Per-View, Video-On-Demand, Sell-Through Electronic Video, Home Video and/or theatrical basis. 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. [The section that used to be in this spot was deleted by Netflix Amendment 6]Exhibition Limitations on Major Production/Distribution Studio-Named Channels. Licensee shall not be permitted to exhibit any of the Pictures on any channel or platform that contains in its name any name of another Major Production/Distribution Studio (or variation of such names).EXHIBITION RIGHTS.First License Period. As used herein, the “First License Period” means an 18 month period commencing on a Picture’s Availability Date. The Availability Date for each Picture, other than a Holiday Themed Picture (as defined below), shall be determined by Licensor in its sole discretion and be no later than the earliest to occur of 10 months after such Picture’s Initial Theatrical Release, 3 ? months after its Initial Pay-Per-View Release or Initial Video-On-Demand Release, and 4 ? months after such Picture’s Initial Home Video Release. Notwithstanding the foregoing, the Availability Date for up to one (1) Holiday Themed Picture per Year shall be determined by Licensor in its sole discretion and be a date no earlier than would permit Licensee to exhibit such Picture over two relevant holidays (i.e., two Thanksgivings if a Thanksgiving-themed picture, and two Christmases if a Christmas-themed picture), provided that in no event shall the First License Period start later than November 1 of the second calendar year following the Initial Theatrical Release of such Picture. Notwithstanding anything to the contrary in this Agreement, all references to a Picture’s Initial Video-On-Demand Release and Initial Pay-Per-View Release shall expressly exclude any PPV/VOD exhibitions that occur as part of a Home Theater exhibition.. A “Holiday Themed Picture” shall mean any Picture with a General Theatrical Release occurring in November or December with specific references to Thanksgiving, Christmas or Hanukkah. Licensor shall notify Licensee in writing if a Holiday Themed Picture will be delayed, at least six (6) months prior to the date that would have otherwise been the start of the First License Period pursuant to the formula set forth above.Second License Period. As used herein, the “Second License Period” means a 15-month period which shall commence sixty (60) months after the end of the First License Period of such Picture. Notwithstanding the foregoing, Licensor may shorten the foregoing 60-month interval for any Picture with Licensee’s prior approval, not to be unreasonably withheld or delayed. PICTURE QUALIFICATIONS. “Picture” or “Pictures” shall mean, individually or collectively as the context requires, all Qualifying Films licensed in accordance with Section 4.mitment. Licensee shall license from Licensor hereunder all SPA Pictures, subject to a cap of not more than 3 such films released per Year. Notwithstanding the foregoing, if Licensor does not theatrically release and make available to Licensee pursuant to this Agreement any SPA Pictures in three successive Years, then commencing on 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.Designation. Licensor shall notify Licensee of the Pictures to be licensed by Licensee up to the caps set forth in Section 4.1, above, no later than 30 days following the Initial Theatrical Release for each such Picture. 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 a final Domestic Box Office figure for such Picture. Any Pictures in excess of the yearly caps (after Licensor has designated, in its discretion, 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 co-released under both the Sony Pictures Animation and Sony Pictures Classics labels shall be referred to as “SPA/SPC Pictures.”Right of First Refusal. Licensee shall have a Right of First Refusal to license any Excess SPA Pictures and any SPA/SPC Pictures at the per-Picture License Fee specified in Exhibit A. “Right of First Refusal” with regard to any Excess SPA Picture or SPA/SPC Picture means that prior to soliciting any offers from third parties for the licensing of such Excess SPA Picture or SPA/SPC Picture for Television (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. Licensee shall have until 7 business days from receiving a notice from Licensor to elect whether to license such picture. 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 Excess SPA Picture or SPA/SPC 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 Exhibit A. Any SPA/SPC Pictures licensed by Licensee shall not count toward the yearly cap specified in Section 4.1.Unavailability of Rights. Notwithstanding anything to the contrary herein, if, at the time that a particular theatrical motion picture that could qualify as a Picture hereunder is (or any relevant distribution rights thereto are) first offered to an SPE Group Member, the SVOD rights (and or any other rights or holdbacks Licensor must control hereunder) of which are subject to a bona fide pre-existing commitment, and/or 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 unwilling or unable to license the U.S. Pay Television and/or SVOD rights 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 Pay Television/SVOD rights and an SPE Group Member theatrically releases such motion picture in the U.S.), provided that the SPE Group Member shall use good faith efforts to obtain the same.PPV/VOD Release. Notwithstanding anything to the contrary herein, a motion picture which would otherwise qualify as a Picture hereunder but which is exhibited by PPV or VOD (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.“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 and Licensee’s payment obligations under Exhibit A).WITHDRAWAL OF PROGRAMS. Without limiting any other provision herein, Licensor shall have the right to withdraw any Picture because of loss or impairment of rights, unavailability of necessary materials, potential infringement of the rights of third parties, any pending or threatened claim, judicial proceeding or regulatory proceeding, or because Licensor in its reasonable good faith business judgment deems it necessary in order to prevent potential litigation or arbitration in order to minimize or avoid a liability to Licensor (all of the foregoing being collectively “Withdrawal Causes”). Licensor shall, in such event, give Licensee written notice of such withdrawal and set forth in reasonable detail the Withdrawal Cause. If the applicable Picture has been exhibited on the Licensee Services one or more times prior to such withdrawal, the parties will negotiate in good faith regarding an appropriate adjustment to the License Fee. If the parties are unable to reach agreement as to the amount of such adjustment within a thirty day negotiation period, the issue of such adjustment shall be presented to arbitration before a single neutral arbitrator experienced in the entertainment industry. Such arbitration shall be conducted in accordance with Section 23.LICENSE FEE; PAYMENT.Consideration. For Pictures licensed hereunder, Licensee shall pay to Licensor the License Fees set forth in Exhibit A.Payment Terms: No disputed License Fee for any Picture licensed hereunder shall cause a delay to the timely payment of the License Fee. 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 on the last day of the calendar quarter in which the First License Period commences) by wire transfer delivered to the account set forth in subsection 7.3 below. Payment Direction. 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 subscribers, 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 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. Except as expressly set out herein, each party shall indemnify the other, pursuant to the procedures set forth in Section 14.3, for failure to pay any Taxes payable by such party pursuant to this Section and/or applicable law.[New tax language from Netflix Amendment 8] 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. [New payment direction language from Netflix Amendment 19]PHYSICAL MATERIALS AND TAXES.Delivery. Licensor shall deliver to Licensee at least 30 days prior to the Availability Date for each Picture, at Licensor’s election, either a videotape (containing a file in an uncompressed format) or an encoded digital file (each videotape or digital file, a “Copy”), together with available Advertising Materials (defined below) and music cue sheets. All costs (including, without limitation, duplication/encoding, shipping and forwarding charges, and insurance) of creating and delivering Copies and Advertising Materials to Licensee shall be borne solely by Licensee at Licensor’s standard rates on a pass-through basis. In the event Licensor elects to deliver to Licensee a videotape of a Picture, Licensee shall create master encoded digital files of such Picture (each, a “Created Master”) and shall deliver to Licensor any and all Created Masters created for such Picture solely for purposes of storage and quality assurance testing. Additionally, Licensee shall have access to (a) all versions theatrically released in the Territory and, (b) subject to any contractual restrictions, any other versions released in other media in the Territory for which Licensor has the requisite rights, including letterbox versions, “director’s cuts” and “special editions” but excluding airline and other Non-Theatrical Exhibition versions. Licensee shall have the right to access each of the versions set forth in subsections (a) and (b) promptly upon such version’s release in the medium for which such version is created (subject to, only with respect to versions listed in subsection (b), any contractual restrictions. The occasional and inadvertent failure to timely deliver any materials or other elements required to be delivered hereunder to Licensee shall not constitute a breach of contract provided that Licensor acts in good faith to promptly remedy any such failure.Additional Language Versions. [Under discussion by the parties.] Licensee shall have the right to access up to three (3) additional language versions (other than English and Spanish) for which Licensor has materials available and on hand. If Licensor does not have an additional language version requested by Licensee, then Licensee may request that Licensor create such version and Licensor shall create the additional language version at Licensee’s cost and subject to any contractual or guild requirements or restrictions. Each additional language version of a Picture supplied by Licensor shall not trigger an incremental license fee, provided that if Licensee agrees to pay an incremental license fee to any other licensor for an additional language version of a motion picture licensed pursuant to an output license agreement, then Licensee shall notify Licensor and shall pay Licensor an incremental licensee fee for such additional language version(s) based on the same license fee increment paid by Licensee to its other licensor, provided, further, that if Licensor makes additional language versions of motion pictures (other than English and Spanish) available to Starz pursuant to a motion picture output licensing arrangement at no additional charge, then Licensor shall also furnish to Licensee the SPA Pictures in such additional language(s) at no charge.Return. Within 30 days following the later of (a) the termination or expiration of this Agreement and (ii) the last day of the Second License Period with respect to each Picture, Licensee shall at Licensor’s election either return all Copies and Created Masters to Licensor or erase or degauss all such Copies and Created Masters and supply Licensor with a certification of erasure or degaussing of such Copies and Created Masters. [The section that used to be in this spot was deleted by Netflix Amendment 6]Loss, Theft, Destruction. Upon the loss, theft or destruction (other than as required hereunder) of any Copy or Created Master of a Picture, Licensee shall promptly furnish Licensor with proof of such a loss, theft or destruction by affidavit setting forth the facts thereof.Licensor’s Property. 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 permit any lien, charge, pledge, mortgage or encumbrance to attach thereto. CONTENT PROTECTION & SECURITY. 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. As of the Effective Date, Licensee represents and warrants that it implements, and will continue to implement throughout the remainder of the Term, the systems, procedures and technologies set forth on Schedule C 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 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. In the event Licensor embeds, encodes or otherwise inserts, or if applicable, associates copy control information in or with the Pictures prior to delivery to Licensee, 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). [From Netflix Amendment 8]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 (“Suspension”) of the Pictures on the SVOD Service at any time during the Term and/or 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 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, no further rights or obligations shall accrue on the part of either party after such a Suspension. Reinstatement/Termination. If the cause of the Security Flaw that gave rise to a Suspension is corrected, repaired, solved or otherwise addressed in the sole 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 on the SVOD Service shall resume. For clarity, no period of Suspension shall extend the Term or any Picture’s License Periodin time, and upon a notice that a Suspension has ended, the Term and each Picture’s License Period shall end as otherwise provided herein. As soon as practicable after the delivery of a Reinstatement Notice to Licensee, Licensee shall include the Pictures on the SVOD Service. If more than two Suspensions occur during the Term for any reason under any provision of this Agreement, or any single Suspension lasts for a period of three months or more, Licensor shall have the right, but not the obligation, to terminate this Agreement by providing written notice of such election to the Licensee. Obligation to Monitor. Licensee shall have the obligation to notify Licensor promptly of any Security Breaches or Territorial Breaches of which it becomes aware.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 incorporated herein by this reference.CUTTING, EDITING AND INTERRUPTION. 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” or “down-conversion” 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. No exhibition of any Picture hereunder shall be interrupted for intermission, commercials or any other similar commercial announcements of any kind. Notwithstanding anything to the contrary herein, Licensee shall not be responsible for any third party modifications to Pictures or overlays 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 (i) Licensee shall include in its terms of service with third parties who develop Applications a requirement that any Program Overlays conform to industry standard, (ii) no Program Overlay may alter or modify the Usage Rules, and (iii) if Licensee becomes aware of any third party implementing a Program Overlay in a Picture 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. 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 ad-supported services are listed as examples of the types of technology or features that constitute permitted Program Overlays, but in no event may Program Overlays include any type of advertising.] For the avoidance of doubt, this Section 10 shall not affect or limit Licensor’s withdrawal rights pursuant to Section 6 of the Agreement. [Added by Netflix Amendment 6, except for bracketed language which is a clarification added by SPT] PROMOTIONS. Licensee shall have the right to use or authorize the use of written summaries, extracts, synopses, photographs and trailers prepared and provided or made available by Licensor or, if altered by Licensee or used other than on the SVOD Service (e.g., in television advertisements or Internet banner ads), approved in writing in advance by Licensor (provided such approval is not required for text-based materials altered by Licensee (e.g., synopses)) (“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 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 on the SVOD Service during the time periods and other restrictions specified below: [Added by Netflix Amendment 6]Licensee may promote the upcoming exhibition of a Picture on the SVOD Service in printed materials distributed directly and solely to Registered Users not earlier than 45 days prior to the Availability Date of such Picture and continue promoting such availability through the last day of such Picture’s License Period.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 30 days before its Availability Date and to continue promoting such availability through the last day of eachLicense Period with respect to such Picture. Marketing, promotional and advertising materials shall conform to the following:If an announcement, promotion or advertisement is more than 10 days in advance of such program’s Availability Date, Licensee shall only announce and/or promote and/or advertise (in any and all media) its future availability on the SVOD Service by referring to its specific Availability Date. By way of example, in such case “Coming to ______ on September 10” would be acceptable, but “Coming soon on _______” would not be acceptable.If an announcement, promotion or advertisement is 10 or fewer days in advance of such program’s Availability Date, Licensee shall have the right to announce and/or promote and/or advertise (in any and all media) its future availability by referring generally to its upcoming availability or referring to its specific Availability Date. By way of example, in such case both “Coming to ______ on September 10” and “Coming soon on _______” would be acceptable.Licensee shall not promote the availability of any Picture on the SVOD Service after the expiration of each License Period for such Picture.Promotional Previews. Licensor hereby grants to Licensee a limited, non-exclusive license to exhibit Promotional Previews on the SVOD Service via Approved Delivery to Registered Users in accordance with Section 11.1 of the Agreement, subject to any contractual restrictions of which Licensor notifies Licensee in writing. 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 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 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), Licensee shall indemnify Licensor for the costs of any residual, reuse or other 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 (a) Licensee’s right to use a Promotional Preview for a particular Picture on a case-by-case basis if Licensor reasonably believes that such 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 and (b) Licensee’s general right to use Promotional Previews under this Agreement if Licensor withdraws such general right from all other Internet distributors of Licensor’s content in the Territory (i.e., distributors who are authorized to delivery Licensor’s content for exhibition via the public Internet). Licensor shall give Licensee written notice of any such termination, in which event Licensee shall cease using the applicable 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. [Added in Netflix Amendment 6]Internet 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 public communication except as a part of a permitted Free Trial.Free Trials. [Note: This is consistent with market practice and with what Netflix appears to be currently doing in the U.S.] Licensee shall be permitted to make the SVOD Service (including the SPA Pictures available on the SVOD Service) available for promotional purposes to new subscribers in the Territory at no charge for a limited trial period (“Free Trial”) for up to thirty (30) consecutive days no more than once during any twelve (12) month period per subscriber. In addition to the SPA Pictures, all other programs available on the SVOD Service must be made available for exhibition to subscribers receiving the Free Trial. Prior to enabling the trial period for a Free Trial for a new subscriber, Licensee must require such new subscriber to input account credentials, including without limitation name, email address and credit card or other valid payment information. Once a subscriber reaches the end of the Free Trial, Licensee shall automatically begin charging such subscriber for continued access to the SVOD Service unless such subscriber affirmatively opts out of continuing access to the SVOD Service prior to the end of the Free Trial period. 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.The rights granted in this Article 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 may advise Licensee. In no event shall Licensee be permitted to use any excerpts from a Picture other than as provided by Licensor and in no case in excess of two minutes (or such shorter period as Licensor may notify Licensee from time-to-time) in the case of a single continuous sequence, or four minutes in the aggregate from any single Picture (or such shorter period as Licensor may notify Licensee from time to time). 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. Appropriate copyright notices shall at all times accompany all Advertising Materials displayed on the SVOD Service and/or any promotions and/or advertising created by or on behalf of Licensee. For the avoidance of doubt, Licensee shall not be responsible for any Program 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 Program 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. [Change made in Netflix Amendment 6] The names and likenesses of the characters, persons and other entities appearing in or connected with the production of Pictures shall not be used separate and apart from the Advertising Materials which will be used solely for the purpose of advertising of 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. 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 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.Within 30 calendar days after the last day of the License Period for each Picture, Licensee shall destroy (or at Licensor’s request, return to Licensor) all Advertising Materials for such Picturewhich have been supplied by Licensor hereunder.Promotions on the SVOD Service may position Subscription Video-On-Demand in a positive light, but in no event shall any such promotion contain negative messages about other means of film or television distribution.LICENSOR’S REPRESENTATIONS AND WARRANTIES. Without limiting any other representation, warranty or covenant of Licensor herein, Licensor hereby represents and warrants to Licensee that: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.The execution and delivery of this Agreement by Licensor has been duly authorized by all necessary corporate action.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.The performing rights to any musical compositions contained in each of the Pictures, are either (a)?controlled by ASCAP, BMI or SESAC or similar organizations having jurisdiction in the Territory, (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 music 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 in connection with the exhibition of the Picture, Licensee shall be responsible for the payment thereof and shall hold Licensor free and harmless therefrom.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: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.The execution and delivery of this Agreement has been duly authorized by all necessary corporate action.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, insolvency and other similar laws affecting the enforcement of creditors’ rights generally, and by general equitable or comparable principles.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.INDEMNIFICATION. 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 (i) the 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 Advertising 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 (ii) the 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 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. [From Netflix Amendment 8] 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 (i) the breach of any representation, warranty or other material provision of this Agreement by Licensee, (ii) from the exhibition of any material (other than Advertising Materials exhibited in strict accordance with this Agreement and Licensor’s instructions therefor), in connection with or relating, directly or indirectly, to such Pictures, (iii) the infringement upon or 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 (iv) the 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 prompt notice shall diminish Licensee’s indemnification obligations only to the extent Licensee is actually prejudiced by such failure. [From Netflix Amendment 8]In any case in which indemnification is sought hereunder: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; andThe 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.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; provided, however, that Registered Users attributable to a “free trial” of or other promotion for the SVOD Service shall not be included. Additionally, Licensee shall provide Licensor, at least once during each calendar quarter, with an informal business review, which review will include (i) data and discussion regarding the performance and relative performance of Pictures on the SVOD Service, Hardware Devices and/or Software Devices such as the performance of Pictures by content type (e.g., episodic vs. feature) and age; (ii) additional streaming data, such as the percentage of Registered Users actively streaming content on the SVOD Service; the average number of concurrent streams and registered Approved Devices used by actively streaming Registered Users; and (iii) such other information that Licensor may reasonably request from time to time (if available and not subject to confidentiality restrictions). Licensee represents and warrants that it shall not, commencing on the Effective Date and throughout the remainder of the Term, disadvantage Licensor with respect to reporting by providing to any other major studio licensor materially greater, relevant reporting information than provided to Licensor hereunder. [Change made in Netflix Amendment 6]PRESS RELEASE. Licensor and Licensee shall mutually agree as to the form, content and release date of any press release related to this Agreement; provided, that, the parties agree 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. 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 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 17 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).TERMINATION. Without limiting any other provision of this Agreement and subject to Section 18.3, 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 by giving written notice to Licensee and/or accelerate the payment of all monies payable under this Agreement such that they are payable immediately and to retain such monies, it being acknowledged that Licensee’s material obligations hereunder include full, non-refundable payment of 100% of the license fees described in this Agreement regardless of any early termination of this Agreement due to a Licensee Termination Event unless expressly provided otherwise herein. Whether or not Licensor exercises such right of termination, Licensor shall, upon the occurrence of any Licensee Event of Default (as defined below), have no further obligation to deliver Copies or Advertising Materials to Licensee and Licensor shall have the right to require Licensee to immediately return all Copies, Created Masters and Advertising Materials to Licensor. 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, Licensor shall have the right to immediately suspend delivery of all Pictures and Advertising 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. 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 “Licensee Termination Event” shall mean: (I)?the occurrence of a curable Licensee Event of Default described in subclause (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 subclause (A)(z) above; (III)?the occurrence of a Licensee Event of Default described in subclause (B) above; and (IV) the occurrence of breach by Licensee of its confidentiality obligations under Section 25. [From Netflix Amendment 8] Subject to Section 18.3, in the event Licensor materially defaults in the performance of any of its material obligations hereunder 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.Notwithstanding anything to the contrary contained in Sections 18.1 or 18.2 hereof, 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 was 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).ASSIGNMENT. Licensee shall not sell, assign, sublicense, subdistribute, transfer, mortgage, pledge or hypothecate any such rights or licenses in whole or in part, or delegate any of its duties or obligations hereunder, without obtaining the prior written consent of Licensor, nor shall any of said rights or licenses be assigned or transferred or duties delegated by Licensee to any third party by operation of law (including, without limitation, by merger, consolidation or change of control) or otherwise; provided, however, Licensee may assign this Agreement to a direct or indirect wholly-owned subsidiary of Licensee, provided further that such assignment shall not release Licensee from any of its obligations hereunder.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.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.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 BoulevardCulver City, California 90232Attention: Executive Vice President, Distribution Business Operations and StrategyFacsimile: 1-310-388-0251with a copy to:Sony Pictures Entertainment Inc.10202 West Washington BoulevardCulver City, California 90232Attention: General CounselFacsimile: 310-244-0510If to Licensee:Netflix, Inc.Maple Plaza345 North Maple DriveSuite 300Beverly Hills, CA 90210Attention: Chief Content OfficerFacsimile: [___________________]With a copy to:Netflix, Inc.100 Winchester CircleLos Gatos, California 95032Attention: General CounselFacsimile: 408-540-3642Notice 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 ERNING 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 21 shall affect either party’s ability to seek from a court injunctive or equitable relief at any time.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. 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 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. Neither party shall issue any press release regarding the existence of or terms of this Agreement without the prior written consent of the other party.AUDIT. Licensee shall keep and maintain complete and accurate books of account and records at its principal place of business in connection with each of the Pictures and pertaining to Licensee’s compliance with the terms hereof, including, without limitation, copies of the reports referred to in Article 15 hereof for a period of two (2) years after termination or expiration of this Agreement. Licensor shall have the right, exercisable no more than once per calendar year, on no less than five (5) days written notice to Licensee, and at a time and place to be mutually agreed upon by Licensor and Licensee, to audit and check Licensee’s books and records pertaining to the accuracy of the statements and other financial information delivered to Licensor by Licensee and the amount of the License Fees paid or payable hereunder. The exercise by Licensor of any right to audit or the acceptance by Licensor of any statement or payment, whether or not the subject of an audit, shall not bar Licensor from thereafter asserting a claim for any balance due, and Licensee shall remain fully liable for any balance due under the terms of this Agreement. If the good faith undisputed results of an examination establishes an error in Licensee’s computation of License Fees due with respect to the Pictures, Licensee shall immediately pay the amount of underpayment, plus interest thereon from the date such payment was originally due at a rate equal to the lesser of 2% above the prime rate of interest announced by Bank of America at such time or the maximum rate permitted by applicable law. If such error is in excess of 10% of such License Fees due for the period covered by such audit, Licensee shall, in addition to making immediate payment of the additional License Fees due plus interest in accordance with the previous sentence, pay to Licensor (i)?the costs and expenses incurred by Licensor for any audit, and (ii)?reasonable attorney’s fees incurred by Licensor in enforcing the collection thereof. Licensor shall keep and maintain complete and accurate books of account and records at its principal place of business in connection with the DBO for each of the Pictures for a period of two (2) years after termination or expiration of this Agreement. Licensee shall have the right, exercisable no more than once per calendar year, on no less than five (5) days written notice to Licensor, and at a time and place to be mutually agreed upon by Licensee and Licensor, to audit and check Licensor’s books and records pertaining to the accuracy of the DBO statements delivered to Licensee by Licensor and the amount of the License Fees paid or payable hereunder. The exercise by Licensee of any right to audit or the acceptance by Licensor of any statement or payment, whether or not the subject of an audit, shall not bar Licensor from thereafter asserting a claim for any balance due, and Licensor shall remain fully liable for any balance due under the terms of this Agreement. If the good faith undisputed results of an examination establishes an error in Licensor’s computation of License Fees due with respect to the Pictures, Licensee shall immediately pay the amount of underpayment (or, if applicable Licensor shall refund to Licensee the amount of overpayment), plus interest thereon from the date such payment was originally due at a rate equal to the lesser of 2% above the prime rate of interest announced by Bank of America at such time or the maximum rate permitted by applicable law.SEVERABILITY. If any provision of this Agreement is determined by a court or arbitrator to be invalid or unenforceable, such determination shall not affect any other provision of this Agreement, each of which shall be construed and enforced as if such invalid or unenforceable provision were not contained herein.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. 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.LIMITATION OF LIABILITY. Neither party shall be liable to the other for special, consequential or incidental losses or for lost profits.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.ENTIRE UNDERSTANDING. This Agreement 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.[The following two paragraphs were added in Netflix Amendment 6, but without section/insertion references. Let’s discuss whether they’re still necessary.]Beginning on the Amendment Effective Date, Licensee shall notify Licensor no later than ten (10) business days prior to the launch of a Netflix-Branded Playback Application certified by Licensee. Following expiration of the ten (10) business day period, playback of all then-current Pictures (i.e., Pictures currently made available for exhibition) may be made available through such new Netflix-Branded Playback Application; provided, however, that Licensor may, at any time within thirty (30) calendar days of receiving each notice of each new Netflix-Branded Playback Application, request in writing that Licensee disable such Netflix-Branded Playback Application or the playback of Pictures via such Netflix-Branded Playback Application if Licensor, in its sole discretion, determines that such new Netflix-Branded Playback Application conflicts with any of Licensor’s respective rights or obligations in connection with the Pictures, or poses a material risk to Licensor’s relationships with third parties and/or its business. Licensee shall have no obligation to so disable such Netflix-Branded Playback Application (or the playback of Pictures through same), but in the event that Licensee declines to do so within five (5) business days of Licensor’s written request, Licensor shall have the right to terminate this Agreement by sending Licensee written notice of such termination within thirty (30) calendar days therefrom. In the event that Licensor exercises the foregoing termination right, (i) this Agreement shall automatically terminate five (5) calendar days after delivery of Licensor’s written notice of its termination pursuant hereto and no Pictures shall be made available by Licensee after such termination date and (ii) Licensor shall refund to Licensee or credit against Licensee payables, at Licensor’s option and within sixty (60) calendar days of the effective date of termination, a pro rata amount of all License Fees paid to Licensor for Pictures for which the License Period has not begun or expired, such pro rata amount to be calculated based upon the percentage of the applicable License Period for each such Picture that remains as of the effective date of such termination. Commencing on the Amendment Effective Date, Licensee shall notify Licensor at least sixty (60) calendar days in advance each time a new Hardware Device is made available to Registered Users.IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.CULVER DIGITAL DISTRIBUTION FLIX, INC.By: By: Its: Its: [Note: Schedule A deleted by Netflix Amendment 8]EXHIBIT ARate CardThe license fee (“License Fee”) for each Picture 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:US Box Office Tiers:% Lic. FeeCumulative: $0 to $10,000,000 31.5% $3,150,000 $10,000,001 to $15,000,000 27.0% $4,500,000 $15,000,001 to $25,000,000 22.5% $6,750,000 $25,000,001 to $75,000,000 18.0% $15,750,000 $75,000,001 to $100,000,000 14.0% $19,250,000 $100,000,001 to $125,000,000 9.0% $21,500,000 $125,000,001 to $150,000,000 4.0% $22,500,000 $150,000,001 to $199,999,999--? $22,500,000 $200,000,000to+$25,000,000 Schedule B[Note: Schedule B deleted by Netflix Amendment 6]Schedule C[NOTE: this is the most recent version from the Netflix U.S. agreement – taken from amendment 8. May need to update based on more recent international deals]Content Protection Requirements And ObligationsThis Schedule C is attached to and a part of that certain Subscription Video-On-Demand Agreement, dated December 13, 2006 (the “Agreement”), between Culver Digital Distribution Inc. (“Licensor”) and Netflix, Inc. (“Licensee”). All defined terms used but not otherwise defined herein shall have the meanings given them in the Agreement.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 B, and (ii) use only those rights settings, if applicable, set forth in this Schedule B 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. Explicitly Prohibited. For the avoidance of doubt.Unencrypted streaming of Pictures is prohibited.Unencrypted downloads of Pictures is prohibited.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 Protection Systems. The following protection systems are approved 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 B or the Usage Rules:Windows Media DRM 10 (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);Silverlight Powered by PlayReady and/or PlayReady (Windows Media DRM 11)( 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);Widevine Cypher 4.2 DRM (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); 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);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 maintains a level of robustness that is equal to or greater than the robustness as of the Effective Date); Adobe Flash Access 2.0 (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);Apple FairPlay (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); and/orSSL Transport Layer Content Protection. For streaming only to Approved Devices other than personal computers, Licensee will use a system with SSL providing encryption and integrity protection of content where: (a) SSL shall be either Secure Socket Layer version 3 (SSLv3) or Transport Layer Security version 1 (TLSv1) or later transport layer security protocols;(b) clients shall be uniquely identifiable; (c) mutual authentication shall be provided by X.509 certificate based authentication, token based authentication or both; and (d) content protection shall be ensured by securing content keys using hardware resources and/or industry strength tamper resistance.Hardware Requirements (Hardware Devices only)All firmware responsible for content protection must be validated for origin using digital signature validation before any firmware update is applied. Additionally, Licensee recommends Approved Device manufacturers implement secure boot. 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 Section 1.3.2 will apply to Software Devices.Outputs.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.The Content Protection System shall enable Macrovision content protection technology, when available, or, at Licensee’s election and subject to Licensor’s approval (not to be unreasonably withheld), other equivalent copy protection in accordance with industry standards on all analog outputs from end user devices. As between Licensor and Licensee, Licensee shall pay all royalties and other fees payable in connection with the implementation and/or activation of such content protection technology allocable to Included Programs provided pursuant to the Agreement. Nothing herein shall prevent Licensee from disabling analog TV outputs. [Note: this section was removed from the Netflix agreement in Amendment 25]The Content Protection System shall enable CGMS-A content protection technology, when availablewhere properly functioning video hardware and drivers are known to be available, on all analog outputs from end user devices on all Approved Devices. As between Licensor and Licensee, Licensee shall pay all royalties and other fees payable in connection with the implementation and/or activation of such content protection technology allocable to Pictures provided pursuant to the Agreement. [Changes are from Amendment 25]The Content Protection System shall prohibit digital output of unprotected, unencrypted Pictures. Notwithstanding the foregoing, the Content Protection System may allow a digital signal to be output if it is protected and encrypted by High Definition Copy Protection (“HDCP”) or Digital Transmission Copy Protection (“DTCP”). Notwithstanding the foregoing but subject to Section 2.4A, the Content Protection System may allow a digital signal to be output if it is protected and encrypted by High Definition Copy Protection (“HDCP”) or Digital Transmission Copy Protection (“DTCP”). Further, the Content Protection System may implement (i) Digital Video Interface version 1.0 (“DVI”) without HDCP and allow only standard definition or scaled standard definition output on such interface on personal computer platforms in accordance with the allowances for DVI outputs through the DVD-CCA and/or (ii) an exception for unprotected analog and digital outputs to allow only standard definition or scaled standard definition output on such interface on personal computer platforms in accordance with the allowances for analog and digital outputs through the DVD-CCA; provided, however, that in the event that the DVD-CCA authorizes an exception to current or future DVD-CCA allowances for any such output for personal computer manufacturers, Licensor acknowledges and agrees that Licensee shall be entitled to the benefit of such exception. For the avoidance of doubt and notwithstanding anything to the contrary herein, the Content Protection System may allow High Definition content to be output via a digital output only if it is protected by HDCP or DTCP. Defined terms used but not otherwise defined in this Section 2.4 shall have the meanings given them in the DTCP or HDCP license agreements, as applicable. [Changes are from Amendment 25]An Approved Device that outputs decrypted Pictures provided pursuant to the Agreement using DTCP shall:Deliver system renewability messages to the source function;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;Map the analog protection system (“APS”) bits associated with the program to the APS field of the descriptor;Set the image_constraint_token field of the descriptor as authorized by the corresponding license administrator;Set the eligible non-conditional access delivery field of the descriptor as authorized by the corresponding license administrator;Set the retention state field of the descriptor as authorized by the corresponding license administrator;Deliver system renewability messages from time to time obtained from the corresponding license administrator in a protected manner; andPerform such additional functions as may be required by Licensor to effectuate the appropriate content protection functions of these protected digital outputs.An Approved Device that outputs decrypted Pictures provided pursuant to the Agreement using HDCP shall:If requested by Licensor and if supported by a particular platform, deliver a file associated with the Pictures named “HDCP.SRM” and, if present, pass such file to the HDCP source function in the set-top box as a System Renewability Message; andVerify that the HDCP Source Function is fully engaged and able to deliver the Pictures in a protected form, which means:HDCP encryption is operational on such output,Processing of the System Renewability Message associated with the Pictures, if any, has occurred as defined in the HDCP Specification, andThere is no HDCP Display Device or Repeater on such output whose Key Selection Vector is in such System Renewability Message.2.4A. Exception Clause for Standard Definition, Uncompressed Digital Outputs on Windows-Based PCs, Macs running OS X or higher and PCs running Chrome OS with a Widevine DRM described in Section 1.2.3): HDCP must be enabled on all uncompressed digital outputs (e.g., HDMI, Display Port), unless the customer’s system cannot support HDCP. [This section was added in Amendment 25]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 Licensor, Licensor will discuss in good faith with Licensee whether such an allowance would apply to Licensee hereunder.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.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.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”.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, up to a maximum of 10Mbps.The Content Protection System may allow down-conversion of Included Programs; provided, however, that in no event shall the video stream component of Included Programs be encoded at less than 250 Kbps. [Deleted by Amendment 25]Watermarking Requirements.The Content Protection System must not remove or interfere with any embedded watermarks in any Picture; provided, however, that nominal alteration, modification or degradation of such embedded watermarks during the ordinary course of Licensee’s encoding, encryption and/or distribution of Pictures shall not be a breach of this Section 3.1.Geofiltering.The Content Protection System shall take affirmative, reasonable measures to restrict access to Pictures to within the Territory.Licensee shall periodically review the geofiltering tactics and perform upgrades to the Content Protection System to maintain “state of the art” geofiltering capabilities.Embedded Information. Licensee’s delivery systems shall “pass through” any embedded copy control information without alteration, modification or degradation in any manner; provided, however, that nominal alteration, modification or degradation of such copy control information during the ordinary course of Licensee’s encoding, encryption and/or distribution of Pictures shall not be a breach of this Section work Service Protection Requirements.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. Document security policies and procedures shall be in place. Documentation of policy enforcement and compliance shall be continuously maintained.Physical access to servers must be limited and controlled and must be monitored by a logging system.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.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.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 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.Any changes to Licensee’s security policies or procedures set forth in this Section 6 that would materially and negatively affect the protection provided to Pictures must be submitted to Licensor for approval.Each Picture must be returned to Licensor or securely destroyed pursuant to the Agreement at the end of such program’s License Period including, without limitation, all electronic and physical copies thereof.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.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.Schedule U[Note: This is the most recent version from the Netflix U.S. agreement – taken from amendment 6]Usage RulesPlayback clients are devices or applications that can play or render Pictures received from the SVOD Service.Each playback client must be uniquely identifiable. Each playback client must be registered with a Registered User’s user account (each, a “User Account”) prior to receiving Pictures or playback licenses.Each playback client may only be associated or registered with a single User Account at a time.User AccountsRegistered Users must have an active User Account prior to viewing a Picture on the SVOD Service. All User Accounts must be protected via account credentials consisting of at least a user-ID and password. A playback license (as described below) must timeout after 24 hours.All User Accounts must have purchasing power such that access to the account credentials (username and password) is sufficient to enable purchases to be made and charged to the Registered User who is the account owner.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 de-registration, a Registered User must re-present valid account credentials before Pictures can be received and viewed.Playback Licenses for all CPS except Link Layer Protection (which shall nonetheless meet the standard of this Section 3 by providing for an analogous level of protection, pursuant to the Link Layer Protection Playback Business Rules set forth at Section 3(m) below): Only a single playback license shall be issued per viewing of a Picture.Each playback license shall be restricted to only registered playback clients.Playback licenses shall not be transferable or copyable between playback clients.Pictures not playable without a “playback license.”Only Licensee can provide playback licenses for Pictures on the SVOD Service.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. Playback licenses are only delivered to Registered Users with User Accounts in good standing.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.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.Each playback client may only have a single stream at a time.Prior to issuing a playback license, a playback client must be authenticated with its associated User Account using the User Account credentials.Link Layer Protection Playback Business Rules:Only a single stream shall be initiated per viewing of a PictureEach stream shall be restricted to only registered playback clients.Streams shall not be recordable, copyable or transferable between playback clients.Pictures are not playable without proper authorization by Licensee.Only Licensee can provide streams for Pictures on the SVOD Service.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.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.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.Only a single streaming instance shall be allowed per Approved Device at any one time. Prior to starting a streaming instance, a playback client must be authenticated with its associated User Account using the User Account credentials. 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. Streaming is only allowed to Registered Users with User Accounts in good standing.Fraud DetectionLicensee 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. Netflix will establish commercially reasonable procedures in accordance with prevailing industry standards to provide for appropriate action to be undertaken, in Netflix’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. 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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