SUBSCRIPTION VIDEO-ON-DEMAND LICENSE AGREEMENT
SUBSCRIPTION VIDEO-ON-DEMAND LICENSE AGREEMENT
THIS SUBSCRIPTION VIDEO-ON-DEMAND LICENSE AGREEMENT (this “Agreement”), dated as of August __, 2011 (“Effective Date”), is entered into by and between CPT Holdings, Inc., a Delaware corporation (“Licensor”), and Netflix, Inc., a Delaware corporation (“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.
“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 and other users, as applicable, to, for example, access Licensee’s website; add or remove a movie from a Registered User’s “queue;” or receive and watch, via Approved Delivery, a trailer, Promotional Preview or Included Program. For the avoidance of doubt, the playback of Included Programs 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 Included Program will be playable.
“Approved Delivery” shall mean the streaming delivery of an encrypted (except with respect to files which are not Included Programs, such as promotional materials) digital electronic file over the public, global network of interconnected networks known as the Internet or “Worldwide Web”, 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 purposes of clarification, “Approved Delivery” shall include without limitation streaming delivery over the public Internet accessed (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; (ii) through any private, closed or walled-garden IP networks (but in no event through any closed and proprietary cellular audio-visual content service or through any closed and proprietary satellite, cable or fiber optic audio-visual content service); and (iii) through the use of Applications.
“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 B attached hereto or such other specifications reasonably agreed to by the parties and (b) the usage rules set forth on Schedule D attached hereto.
“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 B attached hereto or (b) such other format as Licensor may approve in Licensor’s sole discretion.
“Approved Protection System” shall have the meaning set forth in Section 1.2 of Schedule B.
“Avail Term” shall have the meaning assigned in Article 3 hereof.
“Availability Date” with respect to an Included Program shall mean the date on which such program is first made available for exhibition hereunder.
“Availability List” shall mean a list of Feature Films and/or Television Episodes that are available for licensing hereunder.
“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.
“Cantinflas Features” shall mean feature films which Licensor makes available for license hereunder featuring Fortino Mario Alfonso Moreno Reyes (aka Cantinflas).
“Clips” shall mean up to two (2) trailers or excerpts at any one time from each Included Program made available to Licensee by Licensor.
“Current Television Series” shall mean a Television Series which Licensor makes available for license hereunder (other than a Spanish/Portuguese Series, a Spanish/Portuguese Teleseries and a Spanish/Portuguese Telenovela) that has new episodes broadcast on television in the Territory or the U.S. for the first time during the Avail Term.
“Current Television Episode” shall mean a Television Episode from a Current Television Series.
“DTV” shall mean feature-length motion pictures which Licensor makes available for license hereunder (other than Library Features, Spanish Language Features and Portuguese Language Features) that are not theatrically released in the U.S. and have been released direct to video in the U.S., with an Availability Date during the Avail Term and for which Licensor controls without restriction the rights necessary to grant the license granted under this Agreement. DTVs shall be designated by Licensor as “Premium DTVs” or “Non-Premium DTVs”.
“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.
“Excluded Features” shall mean no more than five (5) Second Window Features to be selected by Licensor for Avail Year 3.
“Feature Film(s)” shall mean those feature-length films which Licensor makes available for license hereunder, including Post Second Window Features, Second Window Features, Foreign Features, Spanish Language Features, Portuguese Language Features, Renewal Features, DTVs, MOWs and Library Features. Feature Films made available by Licensor and licensed by Licensee shall be Included Programs for all purposes of this Agreement.
“Foreign Features” shall mean Feature Films which Licensor makes available for license hereunder (other than DTVs, MOWs, Spanish Language Features and Portuguese Language Features) that were theatrically released outside the U.S. and were not theatrically released in the U.S.
“Hardware Device” shall mean an individually addressed and addressable IP-enabled hardware device used by a Registered User, excluding tablets, desktop or laptop personal computers and mobile phones, that 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.
“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.
“Home Video Street Date” means the day on which an Included Program is first made available for sale on DVD or Blu-ray disc in the Territory.
“Included Program” shall mean those Feature Films and Television Episodes made available by Licensor and licensed by Licensee hereunder in accordance with the terms of this Agreement.
“Launch Date” shall mean the date on which the SVOD Service is commercially available offering full-length major studio feature film and/or television programming to the general public in the Territory.
“Library Features” shall mean a Feature Film which Licensor makes available for license hereunder with an Availability Date that is more than five (5) years from such film’s Home Video Street Date, which shall be designated Tier A, Tier B or Tier C.
“Library Series” shall mean a single series of Television Episodes which Licensor makes available for license hereunder (other than a Spanish/Portuguese Series, a Spanish/Portuguese Teleseries and a Spanish/Portuguese Telenovela), including all broadcast seasons thereof, with an Avail Date that is at least 3 years following the last season of production, which series may be designated Tier A, Tier B or Tier C.
“Licensed Language” shall mean for each Included Program (i) its original language, (ii) neutral or Mexican Spanish in subtitled and dubbed form if the original language is other than Spanish, and (iii) Brazilian Portuguese in subtitled form and dubbed form if the original language is other than Brazilian Portuguese.
“License Period” with respect to each Included Program shall mean the period during which Licensee may exhibit such Included Program as specified in Section 4.2.
“MOW” shall mean feature-length motion pictures which Licensor makes available for license hereunder (other than Library Features, Spanish Language Features and Portuguese Language Features) that are not theatrically released in the U.S. and are initially exhibited on television in the U.S. with an Availability Date during the Avail Term and for which Licensor controls without restriction the rights necessary to grant the license granted under this Agreement. MOWs shall be designated as “Premium MOWs” or “Non-Premium MOWs.”
“Major Studio” shall mean Paramount Pictures, Twentieth Century Fox Film Corporation, The Walt Disney Company, Universal Studios, Sony Pictures Entertainment Inc., Warner Bros., and Metro-Goldwyn-Mayer Inc.
“Mobile Device” shall mean an individually addressed and addressable IP-enabled mobile hardware device of a user, excluding a tablet, desktop or laptop or personal computer, supporting an Approved Format and generally receiving transmission of a program over a transmission system designed for mobile devices such as GSM, UMTS, LTE and IEEE 802.11 (“wifi”).
“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 Included Programs, to Registered Users only and (ii) can be uniquely identified by Licensee and 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 Included Programs, 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 Included Programs via such Netflix-Branded Playback Application. Licensee shall have no obligation to so disable such Netflix-Branded Playback Application (or the playback of Included Programs 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 Included Programs shall be made available by Licensee on the SVOD Service 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 Included Programs for which the License Period has not begun or has not expired, such pro rata amount to be calculated based upon the percentage of the applicable License Period for each such Included Program that remains as of the effective date of such termination.
“Non-Returning Series” shall mean a single series of Television Episodes (other than a Spanish/Portuguese Series, a Spanish/Portuguese Teleseries and a Spanish/Portuguese Telenovela) that (i) has been cancelled or is no longer in production and (ii) does not qualify as a Current Series hereunder which Licensor makes available for license hereunder, including all broadcast seasons thereof, with an Avail Date that is less than 3 years following the last season of production.
“Personal Computer” shall mean an IP-enabled desktop or laptop device with persistent storage, keyboard and monitor, designed for multiple office and other applications using a silicon chip/microprocessor architecture and shall not include any Portable Devices. A Personal Computer must support one of the following operating systems: Windows XP, Windows 7, Mac OS, Chrome OS, subsequent versions of any of these, and other operating system agreed in writing with Licensor.
“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.”
“Playback Client” shall mean a device or application that can play or render Included Programs received from the SVOD Service. A Playback Client may be integrated into an Approved Device at time of manufacture or may be downloaded to an Approved Device after manufacture. A Playback Client may be implemented via an Application. A Playback Client must incorporate an Approved Protection System or be installed on an Approved Device that incorporates an Approved Protection System.
“Playback License” shall mean a secure electronic token which grants a Playback Client permission to play an Included Program.
“Portuguese Language Feature” shall mean feature films which Licensor makes available for license hereunder that were theatrically released in Brazil and were not theatrically released in the U.S. with Portuguese as its original language.
“Post Second Window Features” shall mean a Feature Film (excluding Library Features) which Licensor makes available for license hereunder with an Availability Date that is three (3) months or more from the end of such Feature Film’s license period and any contractual post-black period (such black period not to exceed one (1) month) under Licensor’s premium pay television agreement in the Territory.
“Promotional Preview” with respect to an Included Program shall mean a video clip of such Included Program commencing at the beginning of such Included Program and running no longer than two (2) consecutive minutes thereafter (“Maximum Preview Duration”), with no additions, edits or any other modifications made thereto.
“Renewal Features” shall mean each Feature Film (excluding Library Features) selected by Licensee in Avail Year 2 or Avail Year 3 from an availability list provided by Licensor that was previously selected by Licensee in any previous Avail Year within the Avail Term.
“Registered User” shall refer to each unique user of an Approved Device registered with the SVOD Service and authorized to view an exhibition of an Included Program as part of the SVOD Service.
“Second Window Feature” shall mean a Feature Film (excluding Library Features) with an Availability Date that is less than three (3) months from the end of such Feature Film’s license period and any contractual post-black period (such black period not to exceed one (1) month) under Licensor’s premium pay television agreement in the Territory.
“Security Breach” shall mean a Security Flaw that results or may reasonably result in the unauthorized availability of any Included Program 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.
“Software Device” shall mean an IP-enabled, uniquely addressable Personal Computer, Tablet or Mobile Device that is not certified by Licensee 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 Devices shall constitute Software Devices solely when receiving such audio-visual programming through the public Internet (as described in Section 1.2). For the avoidance of doubt, Mobile Devices shall not constitute Software Devices when receiving audio-visual programming through any closed and proprietary cellular audio-visual content service (e.g., an equivalent in the Territory to Verizon’s V-Cast video service), or through any closed and proprietary satellite, cable or fiber optic audio-visual content service (e.g. Cablevision or Telefonica IPTV).
“Spanish Feature” shall mean feature films which Licensor makes available for license hereunder that were theatrically released in Mexico and were not theatrically released in the U.S. with Spanish as its original language.
“Spanish/Portuguese Series” shall mean a Television Series that was produced in the Territory with Spanish or Portuguese as its original language that Licensor makes available for license hereunder, not including Spanish/Portuguese TeleSeries and Spanish/Portuguese Telenovelas.
“Spanish/Portuguese TeleSeries” shall mean a teleseries Television Series with at least 60 but less than 90 Television Episodes that was produced in the Territory with Spanish or Portuguese as its original language that Licensor makes available for license hereunder.
“Spanish/Portuguese Telenovelas” shall mean a telenovela Television Series with 90 or greater Television Episodes that was produced in the Territory with Spanish or Portuguese as its original language that Licensor makes available for license hereunder.
“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 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, other than as set forth in Section 2.6, (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 via Approved Delivery only to Registered Users in the Territory to Approved Devices; provided that non-Registered Users may access certain limited portions of the SVOD Service, such as Clips, Promotional Previews, box art and synopses, it being acknowledged and agreed that non-Registered Users may not playback Included Programs from the SVOD Service.
“Tablet” shall mean any individually addressed and addressable IP-enabled device with a built-in screen and a touch screen keyboard, for which user input is primarily via touch screen, that is designed to be highly portable, not designed primarily for making voice calls, and runs on one of the following operating systems: iOS, Android, WebOS or RIM’s QNX Neutrino (each, a “Permitted Tablet OS”) “Tablet” shall not include Zunes, Personal Computers, game consoles (including Xbox Consoles), set-top-boxes, portable media devices, PDAs, mobile phones or any device that runs an operating system other than a Permitted Tablet OS.
“Taxes” shall mean all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, value added, goods and services, ad valorem, transfer, franchise, profits, withholding, payroll, excise, stamp, real or personal property, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, but excluding any related penalties and interest, imposed by any federal, territorial, state, local, or foreign government or any agency or political subdivision of any such government. Sales, use, value added, goods and services, and similar taxes shall be referred to as “Sales Taxes.”
“Television Episode(s)” shall mean serialized broadcast television program episodes which Licensor makes available for license hereunder. Each Television Episode made available by Licensor and licensed by Licensee shall be an Included Program for all purposes of this Agreement.
“Television Series” shall mean a single series of Television Episodes including all broadcast seasons thereof.
“Term” shall have the meaning assigned in Article 3 hereof.
“Territory” shall mean Mexico and its territories, commonwealths, possessions and trusteeships and all countries, territories, commonwealths, possessions and trusteeships within: (A) Central America (including, without limitation: Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama), (B) South America, including, without limitation: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, French Guiana, Guyana, Paraguay, Peru, Suriname, Uruguay, Dominica, Dominican Republic, and Venezuela), and (C) the Caribbean Basin Islands (excluding Bermuda, Puerto Rico and the U.S. Virgin Islands, but including, without limitation: Anguilla, Antigua & Barbuda, Aruba, Barbados, Bahamas, Bonaire, the British Virgin Islands, the Cayman Islands, Curaçao, Eustatius, Grenada, Guadeloupe, Haiti, Jamaica, Martinique, Montserrat, Saba, Saint Barthélemy, St. Kitts & Nevis, St. Lucia, Sint Maarten, St. Martin, St. Vincent and the Grenadines, Trinidad, Tobago and the Turks and Caicos Islands); provided, however, that Territory shall mean only Mexico with respect to any distribution or exploitation of the Cantinflas Features.
“Territorial Breach” shall mean a Security Flaw that creates a reasonable risk that any of the Included Programs will be delivered to persons outside the Territory, where such delivery outside the Territory may result in actual or threatened harm to Licensor.
“Usage Rules” shall mean those usage rules set forth on Schedule D attached hereto.
“VCR Functionality” shall mean the capability of a subscriber to perform any or all of the following functions with respect to the delivery of an Included Program: stop, start, pause, play, rewind and fast forward.
LICENSE.
Grant of License. Subject to Licensee’s full and timely compliance with its obligations hereunder, Licensor hereby grants to Licensee a limited non-exclusive license to transmit each Included Program for exhibition during its License Period solely in the Licensed Language 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, each such transmission of an Included Program 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 Included Program be sub-distributed in any way; (b) no Included Program may be delivered, transmitted or exhibited other than as set forth in Section 2.1; (c) except as otherwise provided for in Sections 2.7 and 2.8 of Schedule B, each Included Program must remain in its approved level of resolution and not down- or up-converted; and (d) no person or entity shall be authorized or permitted by Licensee to do any of the acts forbidden herein. Licensor reserves the right to conduct an initial inspection of and approve the picture quality and user experience of the SVOD Service within sixty (60) days of the Launch Date. Thereafter, 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 Included Program of which it becomes aware. Notwithstanding anything to the contrary in this Agreement, including without limitation this Section 2.2, Licensee shall be permitted to offer the SVOD Service, including the Included Programs licensed hereunder, on Approved Devices via Approved Delivery 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 to a service provider in order to access the bundled service that provides the ability to subscribe 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 and provided, further, that such Third Party Fees are not charged on a transactional video-on-demand or per-view basis. 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 Included Programs, 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 Included Programs or the images or sound embodied therein, other than the right to exhibit the Included Programs in strict accordance with the terms and conditions set forth in this Agreement; (b) that this Agreement shall not grant to Licensee or any other person or entity any right, title or interest in or to the copyright or any other right in the Included Programs, nor any ownership or other proprietary interests in the Included Programs; and (c) that Licensor retains the right to fully exploit the Included Programs and Licensor’s rights in the Included Program’s without limitation or holdback of any kind, whether or not competitive with Licensee.
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.
Notice of New Netflix-Branded Playback Applications and Hardware Devices:
Licensee shall notify Licensor no later than ten (10) Business Days prior to the launch in the Territory of a Netflix-Branded Playback Application certified by Licensee; provided, that such notification may be sent by email to any Licensor employee with a title of “Vice President” or above. Following expiration of the ten (10) Business Day period, playback of all then-current Included Programs (i.e., Included Programs 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 Included Programs 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 Included Programs, 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 Included Programs 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 Included Programs 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 Included Programs for which the License Period has not begun or has not expired, such pro rata amount to be calculated based upon the percentage of the applicable License Period for each such Included Program that remains as of the effective date of such termination. 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 the Territory; provided, that such notification may be by email sent to any Licensor employee with a title of “Vice President” or above, and only persistent failure to provide such notification shall constitute breach of this Agreement.
ISP SVOD Offering. Notwithstanding anything to the contrary in this Agreement, including without limitation Section 2.2, Licensee may offer the SVOD Service, including the Included Programs licensed hereunder, as part of an ISP SVOD Offering, subject to all of the following conditions (it being understood that such conditions apply solely to Included Programs):
Definitions.
“ISP” means a broadband Internet service provider on a country-by- country basis. By way of example, if one ISP operates in three countries of the Territory and Licensee has an ISP SVOD Offering agreement that only covers 2 of such countries, such ISP shall count as 2 ISPs.
(b) “ISP SVOD Offering” means an offering in the Territory of the SVOD Service by an ISP directly to its Broadband Subscribers or potential Broadband Subscribers on behalf of Licensee, which offering of the SVOD Service shall be bundled together with that ISP’s broadband data service plan and, if applicable, other services which are (as of the date of this Agreement) customarily bundled with such data service plans (e.g., voice services) only; provided, however, that an ISP SVOD Offering may not be bundled with any linear multi-channel or adult content offerings.
(c) “Broadband Subscriber” means each unique registered user that is authorized to receive broadband Internet service, regardless of access tier, by an ISP with an ISP SVOD Offering agreement with Licensee, as publicly reported or, if not available via public record, then as estimated in SNL Kagan reports or if not available, IHS Screen Digest, or if not available, then as estimated in a recognized industry publication to be mutually agreed upon by the parties. In the event such information is not available via public record or any of the foregoing publications, then Licensee shall obtain such information from each ISP with an ISP SVOD Offering agreement with Licensee.
Timing Restrictions and Termination. Licensee shall not permit the SVOD Service to be part of an ISP SVOD Offering during the first six (6) months of the Avail Term. At anytime after the first three (3) months of the Avail Term, Licensee may deliver written notice (the “First Bundling Notice”), at least three months in advance, of Licensee’s intent to permit the SVOD Service to be offered as part of any ISP SVOD Offering after the first six (6) months of the Avail Term. Licensor shall have the right to terminate this Agreement within sixty (60) days of receipt of such First Bundling Notice and such termination would be effective as of the ninetieth (90th) day following the delivery of the First Bundling Notice (such date, the “First Bundle Effective Date”). In the event that Licensor has not terminated this Agreement in accordance with the foregoing sentence and no ISP SVOD Offering is effectuated within ninety (90) days following the First Bundle Effective Date (such circumstances being referred to herein as a “False Start”), then Licensee’s First Bundling Notice shall be void and subject to the provisions of Section 2.6.8(d) below. At any time after such False Start, Licensee may deliver written notice (”Second Attempt Notice”), at least forty-five (45) days in advance, of Licensee’s intent to permit the SVOD Service to be offered as part of an ISP SVOD Offering. Licensor shall have a right to terminate this Agreement within thirty (30) days of receipt of such Second Attempt Notice and such termination would be effective as of the forty-fifth (45th) day following the delivery of the Second Attempt Notice. After the end of such forty-five (45) day notice period, Licensee shall have a forty-five day grace period in which to effectuate an ISP SVOD Offering. The earlier of such ISP SVOD Offering’s initial effective date, if any, and the last day of such grace period shall thereafter be the “Second Attempt Effective Date”.
If Licensor does not terminate this Agreement pursuant to the foregoing Section 2.6.2, Licensee shall notify Licensor at least thirty (30) days in advance in writing (such writing, a “Subsequent Bundling Notice”) of each additional time Licensee desires to permit the SVOD Service to be offered as part of any ISP SVOD Offering. The date that is thirty (30) days following the Subsequent Bundling Notice shall be referred to as the “Subsequent Bundle Effective Date.”
The First Bundling Notice and the Subsequent Bundling Notice shall each contain the identity of the ISP(s) with which Licensee desires to enter into an agreement, the number of Broadband Subscribers of each such ISP as of the date of such notice, and the countries covered by such agreement.
In the event that Licensor exercises such right of termination during Avail Year 1, (regardless of when terminated) the total aggregate License Fees for Avail Year 1 shall, for the avoidance of doubt, remain due and payable notwithstanding such termination. In the event that Licensor exercises such right of termination during Avail Years 2 or 3, then the License Fees that have accrued prior to such termination effective date shall remain due and payable notwithstanding such termination.
Bundling Restrictions and Obligations.
In the event that Licensor does not exercise its right of termination set forth in Section 2.6.2, Licensee may permit the SVOD Service containing any Included Programs to be offered as part of an ISP SVOD Offering through up to an aggregate of five (5) ISPs throughout the term without Licensor’s prior written consent. Any ISP SVOD Offerings by more than an aggregate of five (5) ISPs during the term shall require Licensor’s written consent, which consent shall be given or withheld in Licensor’s sole discretion. If goods and services other than (i) the ISP’s broadband data service plans and (ii) such services as are currently customarily bundled with data service plans (e.g., voice services) as of the date of this Agreement are included in a bundle, then such bundle shall not qualify as an ISP SVOD Offering and the SVOD Service may not be included in such bundle.
Notwithstanding anything to the contrary herein, the SVOD Service shall be offered on a standalone basis in each country in which an ISP SVOD Offering is offered (if at all). ISPs that are making available an ISP SVOD Offering may be permitted to make the SVOD Service available as an a la carte option to Broadband Subscribers. The SVOD Service that is offered as part of any ISP SVOD Offering in any country of the Territory shall be the same version of the SVOD Service (with identical content) that is being made available on a standalone or a la carte option in such country by such ISP or Licensee.
Marketing Restrictions and Obligations.
Licensee shall not, and shall not permit any ISP to, refer to the SVOD Service as being offered for “free,” at “no additional cost” or the like in any marketing, advertising, promotion or other public communication. The SVOD Service offered through an ISP SVOD Offering shall be clearly and prominently branded “Netflix”, e.g., the “Netflix” logo and branding shall appear on all places where Included Programs are offered, listed or otherwise appear. Neither Licensee nor the ISP shall “white label” the SVOD Service which for avoidance of doubt includes that there shall be no “shared” branding such as “[X-SVOD]” Service powered by Netflix.
Avail Year Term Extension and License Fee Premiums. As a material inducement to Licensor to grant Licensee the right to offer the SVOD Service through an ISP SVOD Offering as set forth in this Section 2.6:
If Licensee does not exercise its right to terminate this Agreement set forth in Section 2.6.2, all License Fees set forth at Schedule C shall be immediately increased by Twenty-Five Percent (25%) (such increase, the “Initial ISP Increase”) for the rest of the Avail Term (subject to Section 2.6.8(d) below) as of the date of the First Bundle Effective Date and, if applicable, as of the date of the Second Attempt Effective Date. For the avoidance of doubt, such increase shall apply to all Included Programs that have an Availability Date on or after the First Bundle Effective Date and/or Second Attempt Effective Date, as applicable, and, on a pro-rata basis, to all Included Programs for which the date of the First Bundle Effective Date and/or Second Attempt Effective Date, as applicable, falls within its License Period.
In addition to such 25% increasethe Initial ISP Increase, the then applicable License Fees shall be increased in further increments (such increases in License Fees, the “Incremental Increases”) based on the aggregate number of Broadband Subscribers serviced by ISPs offering an ISP SVOD Offering, as follows:
|Number of Broadband Subscribers |Incremental License Fee |
| |Increase |
|7,500,000 to 14,999,999 |7.5% |
|15,000,000 to 24,999,999 |10% |
|25,000,000 or more |10% |
For the avoidance of doubt, all increases in License Fees shall be compounded against the Initial ISP Increase and against each other Incremental Increase, even when Incremental Increases are triggered simultaneously.
Subject to Section 2.6.8(d) below, the Incremental Increases shall be effective on the First Bundle Effective Date and/or Second Attempt Effective Date, as applicable, and shall be further triggered on any date when Broadband Subscribers exceed the thresholds set forth above. The Incremental Increases shall be calculated whenever reports are available; provided, however that Incremental Increases will be effective retroactively to the extent that the requisite number of Broadband Subscribers is reached or exceeded since the last report was available. Any growth in Broadband Subscribers since such last report shall be prorated evenly on a monthly basis across the relevant reporting period for calculation purposes. For example, if data is available only on an annual basis and the growth in subscribers from year 1 to year 2 was 2 million and such growth caused the aggregate number of Broadband Subscribers to trigger an Incremental Increase, then when the reporting is made available in year 2, such 2 million Broadband Subscribers shall be considered to have been acquired evenly on a monthly basis such that at the end of each month following year 1, Licensee will be considered to have acquired 166,667 Broadband Subscribers per month. As such, if the aggregate number of Broadband Subscribers exceeds 7.5 million in the 5th month following year 1, then the effective date of the Incremental Increase will be on the last day of such 5th month and all such increased License Fees shall be due and payable immediately upon reporting such Broadband Subscriber data at the beginning of year 2. Each time that the aggregate number of Broadband Subscribers increases such that a new tier is triggered, as set forth in the chart above, the License Fees shall be recalculated for the remainder of the Avail Term. The increased License Fees apply to any Included Programs with an Availability Date on or after the effective date of the Incremental Increase or, on a pro-rata basis, to any Included Programs with a License Period which includes such effective date of the Incremental Increase. For the avoidance of doubt, the 10% increase for all License Fees for each Avail Year after Avail Year 1 pursuant to the final paragraph of Schedule C will continue to apply for all Included Programs made available in each such Avail Year on top of and in addition to the Initial ISP Increase and any Incremental Increases which may also apply. The Initial ISP Increase and any Incremental Increases, once triggered, shall be irreversible and non-refundable. Without limiting the foregoing, a numerical example of how to calculate the Initial ISP Increase and the Incremental Increases is set forth below:
1) Example 1: During Avail Year 1, Licensee has agreements in place with ISPs that in the aggregate serve 26 million Broadband Subscribers. License Fees in Schedule C are multiplied by 1.25, 1.075, 1.1 and 1.1. In other words, an aggregate multiplier of 1.626 is applied to the License Fees in Schedule C to calculate the new License Fees for Avail Year 1, which new License Fees shall serve as the basis for calculating License Fees for subsequent Avail Years.
2) Example 2: During Avail Year 1, Licensee has agreements in place with ISPs that in the aggregate serve 132, Licensee closes an agreement with its first ISP partner, which ISP serves 15 million Broadband Subscribers. License Fees in Schedule C would be multiplied by 1.25 and then again by 1.075. If in Avail Year 2, Licensee has struck no new deals with ISPs, but the same ISPs in the aggregate serve 15 million Broadband Subscribers, a further multiplier of 1.1 would be applicable to the already adjusted License Fees in Schedule C. 1.25, 1.075 and 1.1. Furthermore, if in Avail Year 3 Licensee enters into a new deal with an ISP, and the ISPs, in the aggregate, serve 25 million Broadband Subscribers, a further multiplier of 1.1 would be applicable to the already adjusted License Fees in Schedule C. A numerical examplecalculation is attached as Schedule E hereto.
If Licensor does not exercise its right to terminate this Agreement in Section 2.6.2 (even in the event of a False Start), Licensor shall have the option, to be exercised in Licensor’s sole discretion, to lengthen the Avail Term by twelve (12) consecutive months (such additional period shall be “Avail Year 4” hereunder). Licensor shall exercise such option, if at all, one hundred twenty (120) days prior to the expiration of Avail Year 3. For the avoidance of doubt, all terms and conditions set forth herein shall apply in Avail Year 4, including the increases in License Fees set forth in this Section 2. Without limiting the generality of the previous sentence, unless otherwise specified, all terms that are specific to Avail Year 3 (including the obligations in Schedule C) shall also apply to Avail Year 4.
Notwithstanding anything to contrary set forth in this Agreement, (i) in the event of a False Start, Licensee shall not be obligated to pay any Initial ISP Increase associated with such False Start beyond such initial ninety (90) day False Start period and all License Fees (other than with respect to the 90 day False Start period) shall be calculated as if there had been no such First Bundling Notice delivered; (ii) in the event that the Initial ISP Increase becomes payable on the Second Attempt Effective Date, such increase shall be payable for the remainder of the Avail Term regardless of whether any ISP SVOD Offering is effectuated during the Avail Term; and (iii) in no event shall any Incremental Increases be payable hereunder until such time as an ISP SVOD Offering is actually effectuated.
TERM. Subject to earlier termination pursuant to the terms of this Agreement, the period during which Licensor shall be required to make Included Programs available and Licensee shall be required to license Included Programs pursuant to this Agreement shall be the period starting on September 1, 2011 and ending September 1, 2014 (“Avail Term”). Beginning on September 1, 2011, each twelve month period is an “Avail Year.” The Avail Year beginning on September 1, 2011 is “Avail Year 1,” the Avail Year beginning on September 1, 2012 is “Avail Year 2,” the Avail Year beginning on September 1, 2013 is “Avail Year 3,” and the Avail Year beginning on September 1, 2014, if any, is “Avail Year 4.” In no event shall Licensee have the right to exploit any Included Program prior to the commencement of the Avail Term or its License Period or after the end of its License Period. Each party acknowledges that the License Period for an Included Program may expire after the end of the Avail Term. The “Term” of this Agreement shall commence on the Effective Date and expire on the last day of the last License Period to expire for an Included Program licensed hereunder. Notwithstanding the foregoing, no termination or expiration of this Agreement, howsoever occasioned, shall relieve either party hereunder of any obligations that are expressly or impliedly created before or that expressly or impliedly continue after any such termination or expiration hereof.
LICENSE PERIOD.
Availability Date. The Availability Date for each Included Program shall be as determined by Licensor in its sole discretion and shall be specified in Schedule A or an Availability List; provided that (other than the Avail Year 1 Availability List) up to the date that is sixty (60) days prior to the specified Availability Date, Licensor may, subject to Section 8.1.1, modify any such Availability Date by providing written notice to Licensee.
License Period.
The License Period for each Feature Film and Television Episode that is an
Included Program shall commence on its Availability Date and shall expire 12 months
thereafter.
LICENSING COMMITMENT.
Television Episodes. Licensee shall license from Licensor hereunder, subject to the terms of this Agreement, the following number of Television Episodes as Included Programs during the Avail Term:
1. for Avail Year 1, all Television Episodes specified on Schedule A-1 attached hereto;
2. for Avail Year 2, a minimum of 1100 hours of Television Episodes;
3. for Avail Year 3, a minimum of 1200 hours of Television Episodes;
provided, however, that at least 250 hours must be Library TV Series in each of Avail Years 1, 2 and 3.
Feature Films.
Second Window Features, Post Second Window Features and Renewal Features. For Avail Year 1, Licensee shall license from Licensor hereunder, subject to the terms of this Agreement, the Post Second Window Features specified on Schedule A-2 attached hereto. Licensor has made an availability list available to Licensee for Second Window Features for Avail Year 2 and Licensee hereby acknowledges receipt thereof. Licensor shall make available for license hereunder all Second Window Features (other than Excluded Features) and/or Renewal Features which have an Availability Date within Avail Year 3 and shall do so by providing Licensee with at least one hundred fifty (150) days written notice prior to each such Feature Film’s Availability Date. Following receipt of such notice, Licensee shall have thirty (30) days to provide Licensor with notice of the Feature Films it intends to license hereunder. For Avail Year 1, Licensee shall license from Licensor hereunder, subject to the terms of this Agreement, the Second Window Features specified on Schedule A-3 attached hereto. During each of Avail Years 2 and 3, subject to Section 5.3 below, Licensee shall be required to license the following number of Feature Films (excluding Library Features:
65 for Avail Year 2; and
70 for Avail Year 3;
provided, however, that such Feature Films to be licensed by Licensee must include the number of DTVs, MOWs and Foreign Features described in 5.2.3 below.
Cantinflas Features. For Avail Year 1, Licensee shall license from Licensor hereunder, subject to the terms of this Agreement, the Cantinflas Features specified on Schedule A-4 attached hereto. In addition to the other requirements in this Section 5.2, Licensee shall license from Licensor hereunder for each of Avail Years 2 and 3, at a minimum, the lesser of (i) all Cantinflas Features made available in each such Avail Year by Licensor and (ii) 11 Cantinflas Features in each such Avail Year.
Other Feature Films. For Avail Year 1, Licensee shall license from Licensor hereunder, subject to the terms of this Agreement, the DTVs, MOWs and Foreign Films specified on Schedule A-5 attached hereto. As a part of its obligation to license Feature Films in Section 5.2.1 above, during each of Avail Years 2 and 3, Licensee shall be required to license, at a minimum, the lesser of (i) all DTVs, MOWs and Foreign Films made available in each such Avail Year by Licensor and (ii) 7 DTVs, 8 MOWs and 2 Foreign Films in each such Avail Year. Library Features. For Avail Year 1, Licensee shall license from Licensor hereunder, subject to the terms of this Agreement, the Library Features specified on Schedule A-6 attached hereto. In addition to the other requirements in this Section 5.2, during each of Avail Years 2 and 3, Licensee shall be required to license 150 Library Features in each such Avail Year, at least 50 of which must be Tier C, at least 50 of which must be Tier B and at least 10 of which must be Tier A.
Additional Library Series and Library MOWs Commitment. In addition to the other requirements in this Section 5.2 and Schedule C, Licensee shall license in every Avail Year (including Avail Year 4, if any) a number of Library Series and Library MOWs for which the aggregate Licensee Fees in such Avail Year equal or exceed One Million Five Hundred Thousand U.S. Dollars (US$1,500,000.00). Licensee shall select from an availability list for each Avail Year (other than Avail Year 1) pursuant to Section 5.4 hereof. With respect to Avail Year 1, Licensor has made an availability list available to Licensee of the Additional Library Series and Library MOWs to be licensed under this Section 5.2.4 (it being understood and agreed that Licensor may withdraw without penalty therefrom any Additional Library Series and Library MOWs for which Licensor does not have all necessary music rights) and Licensee shall make its Avail Year 1 selections from such availability list by no later than October 1, 2011. Schedule C rate card pricing shall apply; provided, however that all Library MOWs shall be categorized as Tier C.
Licensor shall provide availability lists for Television Series and Feature Films for Avail Years 2 and 3 that are comparable in number to the Television Series and Feature Films listed on the availability list provided for Avail Year 1. Licensor shall use good faith efforts to provide Television Series and Feature Films that are comparable in quality to the Television Series and Feature Films listed on the availability list provided for Avail Year 1, provided that Licensor cannot offer any assurance with respect thereto. Notwithstanding the foregoing, each such availability list for Avail Years 2 and 3 must include at least 25% of the same Library Features licensed in Avail Year 1.
Except with respect to Avail Year 1, availability lists shall be provided by Licensor at least one-hundred and fiftytwenty (150120) days prior to the start of each Avail Year. If Licensee fails to select the Included Programs required to be licensed under this Agreement within sixty (60) days after receipt of such availability list, Licensor will have the right to designate such Included Programs for Licensee.
During each of Avail Year 2 and Avail Year 3, the parties intend that Licensor shall make available and Licensee shall license on the terms and conditions herein no less than two of the Television Series (other than Library Series, Non-Returning Series and animated series), including all seasons thereof, that are licensed hereunder during the prior Avail Year and any additional subsequent seasons of such Television Series that are produced or acquired by Licensor prior to the expiration of the Avail Term, provided that Licensor makes more than two (2) Television Series available, the selection of such Television Series shall be mutually agreed upon by the parties, provided, further, that Licensor shall in Licensor’s sole discretion determine the Availability Dates (which in no event will be before the initial U.S broadcast). For the avoidance of doubt, nothing herein shall be construed to obligate Licensor to produce any additional episodes or seasons of any Included Program.
Notwithstanding anything to the contrary herein, prior to the applicable Availability Date and with sixty (60) days prior written notice in each instance, Licensor shall have the right to withdraw from licensing hereunder any of the Included Programs specified on Schedule A or an availability list provided to Licensee; provided that if Licensor withdraws an Included Program (i) no License Fee shall be due and payable by Licensee for such withdrawn Included Program; and (ii) Licensor shall use commercially reasonable efforts to make available a mutually agreed upon comparable replacement Included Program for the duration of the withdrawn Included Program’s License Period. Licensor acknowledges and agrees, however, that it shall not use the foregoing withdrawal rights in such a manner to materially frustrate the purpose and effect of this Agreement.
WITHDRAWAL OF PROGRAMS.
Licensor may withdraw any Included Program or related materials at any time because of (a) an Event of Force Majeure, loss of rights, unavailability of necessary duplicating materials or any pending or threatened litigation, judicial proceeding or regulatory proceeding or in order to minimize the risk of liability in connection with a rights problem with such program, or (b) upon ninety (90) days’ prior written notice, if Licensor elects to theatrically re-release or reissue such program or make a theatrical, direct-to-video or television remake or sequel thereof, or such program is placed on DVD moratorium in Mexico, Brazil or Argentina (except in the case of a re-release, re-issue, remake or moratorium in any other country in the Territory, in which case thirty (30) days’ prior written notice shall be sufficient). For any Included Program withdrawn pursuant to this Section 6.1, Licensor shall provide a comparable replacement, or refund to Licensee or credit against Licensee payables within sixty (60) calendar days of the effective date of such withdrawal, a pro rata amount of all License Fees paid to Licensor for withdrawn Included Programs for which the License Period has not begun or has not expired, such pro rata amount to be calculated based upon the percentage of the applicable License Period for each such Included Program that remains as of the effective date of such withdrawal.
In addition to the foregoing, Licensor may withdraw at any time and for any reason (i) any Included Program (and related materials) that is designated by Licensor as “Subject to Section 6.2 Withdrawal” in Schedule A or an Availability List and (ii) any Cantinflas Feature after the first 6 months of Avail Year 1. If Licensor exercises such right of withdrawal for an Included Program, Licensee shall remove such Included Program from the SVOD Service within thirty (30) days of receiving notice thereof from Licensor or ninety (90) days of receiving notice thereof if such Included Program is a Cantinflas Feature; provided that if the reason for withdrawal is Licensor’s reasonable belief that the inclusion of such Included Program in a Free Trial (as defined below) could materially jeopardize Licensor’s business relationship with any third party licensee of Included Programs in the Territory, Licensee shall remove such Included Program from the SVOD Service within seven (7) Business Days of receiving notice thereof from Licensor. For any Included Program withdrawn pursuant to this Section 6.2, Licensor shall provide a comparable replacement if the withdrawn Included Program is a Library Film, or refund to Licensee or credit against Licensee payables within sixty (60) calendar days of the effective date of such withdrawal, a pro rata amount of all License Fees paid to Licensor for withdrawn Included Programs for which the License Period has not begun or has not expired, such pro rata amount to be calculated based upon the percentage of the applicable License Period for each such Included Program that remains as of the effective date of such withdrawal.
LICENSE FEE; PAYMENT.
License Fee. In consideration of the rights granted hereunder and subject to Articles 4 and 5, Licensee shall pay to Licensor a license fee determined in accordance with this Article 7 for the Included Programs licensed by Licensee hereunder as set forth on Schedule C attached hereto (the “License Fee”). The License Fee specified herein is in United States dollars.
Payment Terms: Subject in each instance to Section 8.1, each License Fee shall be due and payable in equal quarterly installments, with the first such quarterly payment due on the 15th day of the calendar month immediately following such Included Program’s Availability Date and each subsequent quarterly payment due on the 15th day of the first month of each calendar quarter thereafter. By way of example only, if the License Fee for Included Program A is $15,000, the License Period is 12 months, and the Availability Date is February 1, 2011, Licensee shall pay the License Fee as follows: in four (4) equal installments of $3750 each, with the first due and payable on March 15, 2011, the second due and payable April 15, 2011, the third due and payable July 15, 2011, the fourth due and payable October 15, 2011. The parties acknowledge and agree that the provisions of this Article 7 are of the essence. Licensee covenants and agrees to make all payments to Licensor hereunder in a timely manner. Without prejudice to any other right or remedy available to Licensor, any late payment will bear interest accruing from its due date at a rate equal to the lesser of 2% above the prime rate of interest announced by Bank of America at such time per year and the maximum rate permitted by applicable law.
Sales Taxes. The amounts to be paid by either party under this Agreement shall be exclusive of and unreduced by any Sales Taxes. Licensee shall pay to Licensor any Sales Taxes that are owed by Licensee solely as a result of entering into this Agreement and which are required to be collected from Licensee by Licensor under applicable law. Where applicable law requires Licensee to self-assess or reverse-charge Sales Taxes, Licensee shall be solely responsible for complying with such law. The parties acknowledge and agree that to the extent that Included Programs may be considered to be purchased by Licensee from Licensor, such purchase is solely for the purpose of resale to subscribers. Accordingly, if Licensee provides Licensor with a valid resale certificate, then Licensor shall not collect any Sales Taxes covered by such certificate.
Withholding Taxes. Licensee may withhold from its payments to Licensor any Taxes required to be withheld by applicable law. Licensor may provide to Licensee and Licensee shall accept the documentation required by applicable law to establish Licensor’s qualification for an exemption from or a reduced rate of withholding. Licensee shall (i) remit legally required amount from payment to Licensor to the applicable taxing authority, and (ii) within the time required for filing an IRS Form 1042S with the IRS or as otherwise required by applicable law, 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.
Due to the U.S. residency of the original contracting parties, Licensor and Licensee agree that as of the effective date of the Agreement, applicable law does not require withholding on payments from Licensee to Licensor. If Licensee’s assignment causes an increased rate of tax withholding or deduction to apply to the payments to Licensor, then the gross amount payable by Licensee to Licensor shall be increased so that after such deduction or withholding, the net amount received by Licensor will not be less than Licensor would have received had Licensee not made the assignment.
Other Taxes. Except as otherwise provided in this Agreement, Licensee shall be solely responsible to determine, collect, bear, remit, and pay, and shall hold Licensor forever harmless from and against, any and all Taxes (including interest and penalties on any such amounts, but other than Licensor’s corporate income and similar taxes), payments, or fees required to be paid to any third party now or hereafter imposed or based upon the importation, licensing, rental, delivery, exhibition, possession, or use hereunder to or by Licensee of the Included Programs, Created Masters, or Advertising Materials, or any print or any Copy thereof.
Payment Direction. Unless and until Licensee is otherwise notified by Licensor, all payments due to Licensor hereunder shall be made in United States dollars by wire or ACH transfer to Licensor as follows:
Sony Pictures Television
c/o Chase Manhattan Bank – New York
4 Chase Metrotech Center
Brooklyn, NY 11245
ABA # 021-000-021
Account Number 304-192-791
Per-Turn Fees. Licensee agrees that during the Term it will not grant to any other Major Studio, whether via an executed SVOD license agreement with such Major Studio with respect to the SVOD Service in the Territory, side letter, or amendment to an existing SVOD license agreement, as consideration for the license a “per-turn fee” and/or a per-subscriber fee.
PHYSICAL MATERIALS AND TAXES.
Delivery.
Copies. For each Included Program, Licensor, at Licensor’s determination shall provide a copy or shall grant Licensee access to a Licensor-designated facility or laboratory to obtain either a high quality HDcam if available or DigiBeta (containing a file in an uncompressed format) or an encoded HD digital file if available (each HDcam or DigiBeta or digital file, a “Copy”) and if available separate neutral or Mexican Spanish and Brazilian Portuguese audio and subtitle files. Licensee shall receive materials or have such access no later than ninety (90) days prior to the Availability Date for each Included Program. The parties agree that for any Included Program for which the Availability Date is less than ninety (90) calendar days after the Effective Date, Licensee shall receive or be granted access as soon as practicable. All costs (including, without limitation, duplication/encoding, shipping and forwarding charges, and insurance) of obtaining and creating Copies shall be borne solely by Licensee at the applicable facility’s standard rates on a pass-through basis. In the event Licensee elects to obtain a DigiBeta of an Included Program, Licensee shall create master encoded digital files of such Included Program (each, a “Created Master”) and shall deliver to Licensor any and all Created Masters created for such Included Program solely for purposes of storage and quality assurance testing. For each Included Program delivered by Licensor to Licensee whose original language is not neutral or Mexican Spanish or Brazilian Portuguese, Licensor shall deliver to Licensee such original language version subtitled and/or dubbed (both if available out of stock on hand) in neutral or Mexican Spanish and in Brazilian Portuguese. If Licensor is unable to deliver dubbed and/or subtitled versions of an Included Program pursuant to the previous sentence, then Licensee shall have the right to create, at Licensee’s sole cost, subject to any third party contractual restrictions of which Licensee has received notice, a subtitled version of such Included Program in the Licensed Language. All rights, including copyrights and trademarks, in such subtitled versions of the Included Programs licensed hereunder, shall vest in Licensor upon creation thereof, subject only to any third party rights therein and the rights granted herein to Licensee hereunder during the Term hereof. Licensee acknowledges and agrees that Licensee is not granted and is not acquiring any ownership rights in or of, or interest in, any copy, Included Program or subtitled version of an Included Program by reason of Licensee’s permitted use or manufacture thereof. Upon request, Licensee’s rights in any such versions shall be assigned on a quit-claim basis to Licensor (a) free of charge following the expiration of the Term or (b) during the Term provided that Licensor reimburses Licensee for fifty percent (50%) of the cost of such subtitled version. In the event of any such assignment, Licensee shall deliver (free of any delivery charge) to Licensor copies (or access to copies) of all such requested subtitled versions created by Licensee. Notwithstanding the foregoing, Licensee’s obligations to assign, deliver (or provide access to) any subtitled files shall at all times be subject to any third party rights and restrictions with respect thereto. In connection with the creation of any subtitled version (not including the underlying Included Program) by Licensee or its agents, Licensee shall be responsible for obtaining all necessary third party rights, consents and clearances of which it has received written notice with respect thereto and Licensee shall indemnify Licensor for any claims arising from Licensee’s exploitation of such subtitled version to the extent that such claims result from Licensee’s failure to obtain such rights, consentconsents or clearances.
Advertising Materials. For each Included Program, Licensor shall deliver to Licensee at least sixty (60) days prior to the applicable Availability Date all available Advertising Materials (defined below) and music cue sheets with respect to such Included Program. The parties agree that for any Included Program for which the Availability Date is less than sixty (60) calendar days after the Effective Date, delivery hereunder shall be made as soon as practicable. All costs (including, without limitation, duplication/encoding, shipping and forwarding charges, and insurance) of creating and delivering Advertising Materials shall be borne solely by Licensee.
Copies/Asset Repurposing. Licensor grants Licensee the right, subject to Licensor securing all necessary rights and permissions from the relevant third party(ies), to re-purpose source files in its possession for any Included Program where Licensee has the right to distribute such Included Program in territories other than the Territory (e.g., if Licensee has taken delivery of source files for an Included Program for distribution in the United States pursuant to the Subscription Video-On-Demand License Agreement, effective as of December 13, 2006, between Licensee and Culver Digital Distribution Inc.). In such cases of asset repurposing, Licensor shall not be required to make Copies available to Licensee, but shall deliver Advertising Materials and, to the extent available out of stock on hand, subtitled and/or dubbed audio files in neutral or Mexican Spanish and Brazilian Portuguese for such Included Program. Subject to the rights granted to Licensee herein, all right, title, and interest in and to the Copies made available to Licensee hereunder shall at all times remain in Licensor.
Return. Within 30 days following the later of (a) the termination or expiration of this Agreement and (ii) the last day of the License Period with respect to each Included Program, Licensee shall at Licensor’s election either return all Copies and Created Masters to Licensor or to a Licensor-designated facility or laboratory 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.
Loss, Theft, Destruction. Upon the loss, theft or destruction (other than as required hereunder) of any Copy or Created Master of an Included Program, 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 Included Programs 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 B and Schedule D. 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 Included Program. In the event Licensor embeds, encodes or otherwise inserts, or if applicable, associates copy control information in or with the Included Programs 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 Included Program for any purpose other than as is expressly permitted herein. Licensor or its representative shall have the right, at a time and date to be mutually agreed upon, to conduct an initial inspection and review Licensee’s security systems, procedures and technologies at Licensee’s places of business (including off-site facilities, if any, used by Licensee) within sixty (60) calendar days of the Launch Date. Thereafter, 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).
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 Included Programs on the SVOD Service at any time during the Avail Term 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 Included Programs or make the Included Programs 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 with regard to such 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 Included Programs available on the SVOD Service shall resume. For clarity, no period of Suspension shall extend the Avail Term in time, and upon a notice that a Suspension has ended, the Avail Term shall end as otherwise provided herein. As soon as practicable after the delivery of a Reinstatement Notice to Licensee, Licensee shall include the Included Programs on the SVOD Service. If more than two Suspensions occur during the Avail 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 B and incorporated herein by this reference.
CUTTING, EDITING AND INTERRUPTION. Subject to Section 11.2, Licensee shall not make, or authorize any others to make, any modifications, deletions, cuts, alterations or additions in or to any Included Program 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” (except as stated in Section 2.10 of Schedule B) and similar modifications shall be permitted. Without limiting the foregoing, Licensee shall not delete the copyright notice or credits from the main or end title of any Included Program or from any other materials supplied by Licensor hereunder. No exhibition of any Included Program hereunder shall be interrupted for intermission, commercials or any other similar commercial announcements of any kind. Notwithstanding anything to the contrary in this Section 10, Licensee shall not be responsible for any third party modifications to Included Programs or overlays that obscure or otherwise interact with Included Programs 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 an Included Program 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 Included Programs 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 the avoidance of doubt, this Section 10 shall not affect or limit Licensor’s withdrawal rights pursuant to Section 6.
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 Included Programs on the SVOD Service and the right to advertise, publicize and promote, or authorize the advertising, publicity and promotion of the exhibition of any Included Program on the SVOD Service during the time periods and other restrictions specified below:
Licensee may promote the upcoming exhibition of an Included Program on the SVOD Service in printed materials distributed directly and solely to Registered Users not earlier than thirty (30) days prior to the Availability Date of such Included Program and continue promoting such availability through the last day of such Included Program’s License Period.
Licensee shall have the right to promote the upcoming exhibition of each Included Program to the general public and on the SVOD Service during the period starting thirty (30) days before its Availability Date and to continue promoting such availability through the last day of the License Period with respect to such Included Program. Without limiting the foregoing, Licensee shall not promote the availability of any Included Program on the SVOD Service to the general public fewer than fifteen (15) calendar days after such Included Program’s Home Video Street Date or after the expiration of its License Period; provided that the restriction on promoting the availability of Included Programs to the general public fewer than fifteen (15) calendar days after the Home Video Street Date shall not apply to any Included Programs that are direct-to-video releases or Current Television Episodes that have an Availability Date hereunder that is the same day as or prior to the Home Video Street Date for such release.
Marketing, promotional and advertising materials shall conform to the following:
a) 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.
b) 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 Included Program on the SVOD Service after the expiration of the License Period for such Included Program.
Licensor hereby grants to Licensee a limited, non-exclusive license to exhibit Promotional Previews on the SVOD Service via Approved Delivery in accordance with Section 11.1 above, 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 Included Program 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 SVOD distributors of Licensor’s content in the Territory (i.e., distributors who are authorized to deliver 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.
Notwithstanding anything to the contrary herein, Licensee acknowledges and agrees that, subject to the conditions specified in this Section 11.3, it shall be permitted to make the SVOD Service, including, without limitation, the Included Programs, Promotional Previews and Advertising Materials hereunder available for promotional purposes to non-Registered Users within the Territory, solely via Approved Delivery and solely as exhibited on such non-Registered Users’ Approved Devices, at no charge to such non-Registered Users and for a limited trial period not to exceed one (1) month in each instance (a “Free Trial”). Licensee’s right to include Included Programs in each Free Trial is subject to the following:
In addition to the Included Programs, all other programs available on the SVOD Service must be made available for exhibition to non-Registered Users as part of the Free Trial.
Prior to enabling a trial period for a Free Trial for a non-Registered User, Licensee will require such non-Registered User to input account credentials which may include, among other things, user name, password, email address and/or information necessary, such as credit card information or bank account numbers, to allow Licensee to obtain payment from the non-Registered User after the Free Trial, or some combination thereof. If permitted by applicable law, Licensee shall notify non-Registered users that it shall charge such non-Registered Users for a subscription following the expiration of the Free Trial without obtaining further consent or any further information from such Registered User other than the consent obtained at the beginning of the Free Trial.
Licensee may not enable a trial period for a Free Trial for any non-Registered User who was previously authorized by Licensee using the same account credentials to participate in a Free Trial within the last twelve (12) months.
For the avoidance of doubt, except for Licensee’s limited ability to provide non-Registered Users trial access to the SVOD Service (including without limitation Included Programs) as part of a Free Trial, all relevant provisions of the Agreement shall remain in full force and effect, including Schedule B and Schedule D.
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 Included Program in accordance with such instructions as Licensor may advise Licensee in writing. In no event shall Licensee be permitted to use any excerpts from an Included Program, other than (i) as provided by Licensor or (ii) Promotional Previews used in accordance with Section 11.2.
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 Included Program 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 Included Programs and/or SVOD Service.
The names and likenesses of the characters, persons and other entities appearing in or connected with the production of Included Programs 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 Included Programs, 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 Included Program or any part of any Included Program 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 90 calendar days after the last day of the Term, Licensee shall destroy (or at Licensor’s request, return to Licensor) all Advertising Materials for such Included Program which 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 Included Programs, are either (a) controlled by music performance rights organizations (“PROs”) in the Territory, from which licenses on commercially reasonable terms and conditions covering Licensee’s transmissions of Included Programs in the Territory are available, (b) controlled by Licensor to the extent required for the licensing of the exhibition in accordance herewith (and not available for licensing through PROs), in which event no additional clearance of, or payment with respect to, such performing rights shall be required by Licensee associated with Licensee’s transmissions or other delivery of the Included Programs hereunder, or (c) in the public domain. In the event that music referenced in (a) above is included in an Included Program, Licensee shall be responsible for obtaining, if and to the extent required, a license from the relevant PROs to publicly perform such music. Except as set forth in (b) above, 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 to a PRO, and if a performing rights royalty or license fee is required to be paid in connection with the exhibition of Included Programs, 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 Included Program shall be transmitted or exhibited except in accordance with the terms and conditions of this Agreement. Without limiting the generality of the foregoing, no Included Program 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 the breach by Licensor of any of its representations or warranties or any material provisions of this Agreement and claims that any of the Included Programs or Advertising Materials, under U.S. and/or applicable 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; 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 Included Programs or using Advertising Materials in a form other than as delivered by Licensor or due to Licensee’s editing or modification of any Included Programs or Advertising Materials or Licensee’s authorization of a third party to do any of the foregoing.
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 Included Programs, or (iii) the infringement upon or violation of any right of a third party other than as a result of the exhibition of the Included Programs in strict accordance with the terms of this Agreement; 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.
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; and
The party seeking indemnification shall fully cooperate with the reasonable requests of the other party in its participation in, and control of, any compromise, settlement, litigation or other resolution or disposition of any such claim. The indemnifying party shall not consent to the entry of any final judgment in any action without the indemnified party’s prior written approval except, in the case where Licensor is the indemnifying party, where such consent involves the agreement not to further exploit an Included Program.
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 (i) the aggregate number of unique Registered User viewers for each Included Program 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, (ii) the total number of Broadband Subscribers per ISP that contracts with Licensee in the Territory, and (iii) a detailed statement showing how Licensee calculated any License Fee increases set forth in Section 2 hereof. Additionally, Licensee shall provide Licensor, at least once during each calendar quarter, with an informal business review, which if available and not subject to confidentiality restrictions will include (1) data and discussion regarding the performance and relative performance of Included Programs on the SVOD Service, Hardware Devices and/or Software Devices such as the performance of Included Programs by content type (e.g., episodic vs. feature) and age; (2) 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; (3) the percentage of Registered Users who during the applicable reporting period have had registered with such Registered User’s account more than six (6) Approved Devices (including any Approved Devices which are de-registered during such period) [STILL UNDER DISCUSSION]; and (4) such other information that Licensor may reasonably request from time to time. 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 with an SVOD license agreement in the Territory materially greater, relevant reporting information than provided to Licensor hereunder.
TERMINATION.
Without limiting any other provision of this Agreement and subject to Section 16.3, 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 an Included Program 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 Included Programs and Advertising Materials with respect thereto and/or suspend Licensee’s right to exploit any Included Programs, 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 23.
Subject to Section 16.3, 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 16.1 or 16.2 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. Subject to Section 2.2, 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 or its parent (but notto a person or entity which is under common control with Licensee (the term “control” meaning the power to unilaterally direct the policies and management of Licensee, whether through the ownership of voting securities or otherwise), but in no event an unaffiliated third party), that in each case is a U.S. legal entity (or which is a legal entity of any country in which any assignee of Licensor, if any, is formed) and that does not have a tax presence in any other country provided further that such assignment shall not release Licensee from any of its obligations hereunder. Licensee shall provide Licensor with prompt written notice of any permittedsuch assignment, transfer or hypothecation of its rights or licenses hereunder, which notice shall include the assignee’s name and address, and the assigned territories. Other than explicitly set forth in the first two sentences of this Section 17, Licensee shall not sell, assign, sublicense, subdistribute, transfer, mortgage, pledge or hypothecate this Agreement or any rights or licenses thereunder 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 the Agreement or 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 (as hereinafter defined) or otherwise. A “Change of Control” shall occur: (i) with respect to a party that is a Public Company (as defined herein), if as a result of any event (including but not limited to any stock acquisition, acquisition of securities convertible into or exchangeable for voting securities, merger, consolidation or reorganization) any one or more persons or entities who together beneficially own, directly or indirectly, more than 20% of the combined voting power of the then-outstanding securities of such party immediately prior to such event (the “Public Company Controlling Shareholder(s)”) together fail to own, after such event, more than 20% of the combined voting power of the then-outstanding securities of such party (or any successor, resulting or ultimate parent company or entity of such party, as the case may be, as a result of such event); or (ii) with respect to a party which is not a Public Company (as defined herein), if as a result of any event (including but not limited to any stock acquisition, acquisition of securities convertible into or exchangeable for voting securities, merger, consolidation or reorganization) any one or more persons or entities who together beneficially own, directly or indirectly, more than 50% of the combined voting power of the then-outstanding securities of such party immediately prior to such event (the “Non-Public Company Controlling Shareholder(s)”) together fail to own, after such event, more than 50% of the combined voting power of the then-outstanding securities of such party (or any successor, resulting or ultimate parent company or entity of such party, as the case may be, as a result of such event). “Public Company” means any company or entity (i) whose securities are registered pursuant to the Securities Act of 1933, as amended, (ii) whose securities are traded in any national or international stock exchange or over the counter market or (iii) which is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended.
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 Entertainment Inc.
10202 West Washington Boulevard
Culver City, California 90232
Attention: Executive Vice President, Legal Affairs
Facsimile: 1-310-244-2169
with a copy to:
Sony Pictures Entertainment Inc.
10202 West Washington Boulevard
Culver City, California 90232
Attention: General Counsel
Facsimile: 310-244-0510
If to Licensee:
Netflix, Inc.
Maple Plaza
345 North Maple Drive
Suite 300
Beverly Hills, CA 90210
Attention: Jason Ropell, Vice President, Content
Facsimile: 310-734-2999
With a copy to:
Netflix, Inc.
100 Winchester Circle
Los Gatos, California 95032
Attention: General Counsel
Facsimile: 408-540-3642
Notice given by personal delivery or facsimile shall be deemed given upon delivery and notice given by overnight delivery or courier service shall be deemed given the first Business Day following the Business Day of delivery to the overnight delivery service.
GOVERNING LAW/ARBITRATION. This Agreement shall be construed and enforced in accordance with the laws of the State of California without regard to the choice of law principles thereof. Any controversy or claim arising out of or relating to this Agreement, including but not limited to its enforcement, arbitrability or interpretation shall be submitted to final and binding arbitration, to be held in Los Angeles County, California, before a single arbitrator, in accordance with California Code of Civil Procedure §§ 1280 et seq. The arbitrator shall be selected by mutual agreement of the parties or, if the parties cannot agree, then the arbitrator shall be appointed by JAMS/Endispute. The arbitration shall be a confidential proceeding, closed to the general public. The arbitrator shall issue a written opinion stating the essential findings and conclusions upon which the arbitrator’s award is based. The parties will share equally in payment of the arbitrator’s fees and arbitration expenses and any other costs unique to the arbitration hearing (recognizing that each side bears its own deposition, witness, expert and attorney’s fees and other expenses to the same extent as if the matter were being heard in court). Nothing in this Section 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 and any reporting information provided pursuant to the terms of the Agreement. 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.
THIRD PARTY CONTRACTORS. Licensor acknowledges and agrees that, in order for Licensee to operate and maintain the SVOD Service in the Territory or otherwise host, serve, exhibit and distribute Included Programs in the Territory, Licensee may use the communications, hosting, data processing and/or fulfillment services of third parties; provided, however, that Licensee will remain, in all respects, directly and primarily liable to Licensor for all of Licensee’s obligations hereunder and for all acts and omissions of such third parties, including any breach of this Agreement, or acts or omissions, which if taken by Licensee, would be a breach of this Agreement.
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 Included Programs 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 Included Programs, 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.
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.
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.\
NO MODIFICATION OF OTHER AGREEMENTS. In no event shall this Agreement (i) modify the terms of any other agreement or licensing arrangement between the parties with respect to motion pictures, television programs or other entertainment content which are not the subject matter hereof or with respect to the Included Programs in territories other than the Territory or (ii) grant rights to or impose restrictions on either party with respect to such other content or territories.
[Signature Page Follows]
INN WITNESS WHEREOF, the duly authorized representatives of Netflix, Inc. and Columbia Pictures Industries, Inc. have executed this Agreement as of the date first written above.
|CPT HOLDINGS, INC. |NETFLIX, INC. |
|By: |By: |
|Its: |Its: |
Schedule A-1
AVAIL YEAR 1 TELEVISION EPISODES
[pic]
Schedule A-2
AVAIL YEAR 1 FEATURE FILMS
(POST SECOND WINDOW FEATURES)
[pic]
Schedule A-3
AVAIL YEAR 1 SECOND WINDOW FEATURES
Schedule A-4
CANTINFLAS FEATURES
Schedule A-5
AVAIL YEAR 1 DTVS, MOWS AND FOREIGN FILMS
Schedule A-6
AVAIL YEAR 1 LIBRARY FILMS
|# |
Schedule B
Content Protection Requirements And Obligations
1. Content Protection System. All Included Programs 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 Included Programs shall be approved in writing by Licensor.
1. Explicitly Prohibited. For the avoidance of doubt.
1. Unencrypted streaming of Included Programs is prohibited.
2. Unencrypted downloads of Included Programs is prohibited.
3. All Included Programs shall be transmitted and stored in a secure encrypted form. Included Programs shall never be transmitted to or between devices in unencrypted form.
2. 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:
1. 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);
2. 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);
3. 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);
4. Advanced Access Content Systems (“AACS”) specification version 0.95 (and any successor and/or update thereto that maintains a level of robustness that is equal to or greater than the robustness as of the Effective Date);
5. 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);
6. 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);
7. 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/or
8. SSL 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.
9. “http live streaming” (HLS) protocol. Licensor’s classification of http live streaming as an Approved Protection System is only temporary and Licensee shall migrate from use of http live streaming (implementations of which are not governed by any compliance and robustness rules nor any legal framework ensuring implementations meet these rules) to use of an industry accepted DRM or secure streaming method which is governed by compliance and robustness rules and an associated legal framework, by end March 31st, 2012.
3. High Definition Requirements (Both Hardware and Software Devices)
1. 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.
2. Systems must not allow unencrypted video signals on busses accessible by users using widely available tools. Notwithstanding anything to the contrary herein, to the extent Licensor makes Included Programs available in High Definition for exhibition on Approved Devices that are Software Devices, this Section 1.3.2 will apply to Software Devices.
1.4. Requirements for HD delivery to Software Devices.
1. 1.4.1. Requirements for HD delivery to Software Devices. The requirements in this Section 1.4.1below shall apply for the delivery of HD Included Programs which are Second Window Features and Post-Second Window Features to Software Devices.Films to Software Devices. [Changes not acceptable. It is for Netflix to determine in advance what device is requesting HD content and to know if such device meets our output control requirements or not, and to not deliver HD if device does not. In addition, SPE’s requirement is that analogue outputs are limited to SD in all cases, not explicitly excluded and there is therefore no need for us to set any ICT flag – the ICT flag or equivalent should be considered set in all for HD]
1. 1.4.1.1. For avoidance of doubt, HD content may only be output in accordance with section “Digital Outputs” above unless stated explicitly otherwise below.
2. 1.4.1.2. If an HDCP connection cannot be established, as required by section “Digital Outputs” above, the playback of Included ProgramsProgrammes over an output on a Software Device (either digital or analogue) must be limited to a resolution no greater than Standard Definition (SD).
3. 1.4.1.3. An HDCP connection does not need to be established in order to playback in HD over a DVI output on any Software Device that is registered for service by Licensee on or before the later of: (i) 31st December, 2011 and (ii) the DVI output sunset date established by the AACS LA. Note that this exception does NOT apply to HDMI outputs on any Software Device.
4. 1.4.1.4. With respect to playback in HD over analog outputs on Software Device that are registered for service by Licensee after 31st December, 2011, Licensee shall either (i) prohibit the playback of such HD content over all analogue outputs on all such Software Device or (ii) ensure that the playback of such content over analogue outputs on all such Software Device is limited to a resolution no greater than SD.
5. 1.4.1.5. Notwithstanding anything in this Agreement, if Licensee is not in compliance with this Section, then, upon Licensor’s written request, Licensee will temporarily disable the availability of Included Programs in HD via the Licensee service within thirty (30) days following Licensee becoming aware of such non-compliance or Licensee’s receipt of written notice of such non-compliance from Licensor until such time as Licensee is in compliance with this section “Requirements for HD delivery to Software Devices”; provided that:
1. 1.4.1.5.1. if Licensee can robustly distinguish between Software Devices that are in compliance with this section “Requirements for HD delivery to Software Devices”, and Software Devices which are not in compliance, Licensee may continue the availability of Included ProgramsCurrent Films in HD for Software Devices that it reliably and justifiably knows are in compliance but is required to disable the availability of Included Programs in HD via the Licensee service for all other Software Devices, and
2. 1.4.1.5.2. in the event that Licensee becomes aware of non-compliance with this Section, Licensee shall promptly notify Licensor thereof; provided that Licensee shall not be required to provide Licensor notice of any third party hacks to HDCP.
1.4.2. The requirements in this Section 1.4.2 shall apply for the delivery of HD Included Programs other than Second Window Features and Post-Second Window Features to Software Devices.
1.4.2.1. For avoidance of doubt, HD content may only be output in accordance with section “Digital Outputs” above unless stated explicitly otherwise below.
1.4.2.2. For digital outputs, HDCP shall be applied.
1.4.2.3. For analog outputs, CGMS-A shall be applied.
1.4.2.4. For both digital and analog outputs the activation of a particular output protection shall only be required if the Software Device in question supports such activation.
6. 1.4.3. Secure Video Paths:
The video portion of unencrypted content shall not be present on any user-accessible bus in any analog or unencrypted, compressed form on a device with a protected media path with known functioning hardware and drivers. In the event such unencrypted, compresseduncompressed content is transmitted over a user-accessible bus in digital form on a device with a protected media path with known functioning hardware and drivers, such content shall be either limited to standard definition (720 X 480 or 720 X 576), or made reasonably secure from unauthorized interception.
7. 1.4.4. Secure Content Decryption. [Changes and deletions are not acceptable. This is one of our standard requirements for HD on an open OS device. In addition, it is for Netflix to determine whether a device requesting HD supports the necessary secure video paths. There is no point protection unencrypted content whilst not protecting the keys used to protect the content when in an unencrypted state.]
1. Decryption of (i) content protected by the Content Protection System and (ii) CSPs (as defined in Section 2.1 below) related to the Content Protection System shall take place in an isolated processing environment such that decrypted content and CSPs are protected at all times in the device, including during transmission to the graphics card for rendering, from attack from other software processes on the device. “CSPs” shall mean keys, passwords, and any other information that are critical to the security robustness of the Content Protection System.
2. Outputs.
1. For Approved Devices with respect to which Licensee exercises sole control over design and manufacturing, if any, such devices shall limit analog outputs to a maximum resolution of 1080i and shall not permit analog outputs at a resolution of 1080p or greater.
2. The Content Protection System shall enable CGMS-A content protection technology, where 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 Included Programs provided pursuant to the Agreement.
3. The Content Protection System shall prohibit digital output of unprotected, unencrypted Included Programs. 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.
1. An Approved Device that outputs decrypted Included Programs provided pursuant to the Agreement using DTCP shall:
1. Deliver system renewability messages to the source function;
2. 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;
3. Map the analog protection system (“APS”) bits associated with the program to the APS field of the descriptor;
4. Set the image_constraint_token field of the descriptor as authorized by the corresponding license administrator;
5. Set the eligible non-conditional access delivery field of the descriptor as authorized by the corresponding license administrator;
6. Set the retention state field of the descriptor as authorized by the corresponding license administrator;
7. Deliver system renewability messages from time to time obtained from the corresponding license administrator in a protected manner; and
8. Perform such additional functions as may be required by Licensor to effectuate the appropriate content protection functions of these protected digital outputs.
2. An Approved Device that outputs decrypted Included Programs provided pursuant to the Agreement using HDCP shall:
1. If requested by Licensor and if supported by a particular platform, deliver a file associated with the Included Programs named “HDCP.SRM” and, if present, pass such file to the HDCP source function in the set-top box as a System Renewability Message; and
2. Verify that the HDCP Source Function is fully engaged and able to deliver the Included Programs in a protected form, which means:
1. HDCP encryption is operational on such output,
2. Processing of the System Renewability Message associated with the Included Programs, if any, has occurred as defined in the HDCP Specification, and
3. There 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.
4. 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 Included Programs 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.
5. The Content Protection System shall prohibit recording, transfer or copying of protected Included Programs onto recordable or removable media except as explicitly provided for in the Usage Rules.
6. The Content Protection System shall prohibit recording, transfer or copying of Included Programs onto external devices except as explicitly provided for in the usage rules or the definition of Approved Device.
7. For Approved Devices with High Definition output capability, standard definition Included Programs 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 Included Programs to High Definition resolutions while maintaining all relevant output protections; provided that Licensee shall not advertise or represent the exhibition of such standard definition Included Programs as “high definition”.
8. High Definition streams (for Included Programs 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.
3. Watermarking Requirements.
1. The Content Protection System must not remove or interfere with any embedded watermarks in any Included Program; 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 Included Programs shall not be a breach of this Section 3.1.
4. Geofiltering.
1. The Content Protection System shall take affirmative, reasonable measures to restrict access to Included Programs to within the Territory.
2. Licensee shall periodically review the geofiltering tactics and perform upgrades to the Content Protection System to maintain “state of the art” geofiltering capabilities.
5. 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 Included Programs shall not be a breach of this Section 5.
6. Network Service Protection Requirements.
1. All Included Programs 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 Included Programs must be limited to authorized personnel who need such access for operational purposes and Licensee shall maintain auditable records of actual access.
2. Document security policies and procedures shall be in place. Documentation of policy enforcement and compliance shall be continuously maintained.
3. Physical access to servers must be limited and controlled and must be monitored by a logging system.
4. Auditable records of access, copying, movement, transmission, backups, or modification of Included Programs not encrypted with at least AES128 or the equivalent and of encryption keys for such Included Programs in Licensee’s possession must be securely stored for a period of at least one year.
5. Content servers must be protected from general internet traffic by “state of the art” protection systems including, without limitation, firewalls, virtual private networks, and intrusion detection systems. All systems must be updated, per Licensee’s standard operational procedures, to incorporate the latest security patches and upgrades.
6. All facilities which process and store Included Programs not encrypted with at least AES128 or the equivalent and encryption keys for such Included Programs 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.
7. 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 Included Programs must be submitted to Licensor for approval.
8. Each Included Program 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.
7. PVR Requirements. Any device receiving playback licenses must not implement any personal video recorder capabilities that allow recording, copying, or playback of any Included Program except as explicitly specified in the Usage Rules.
8. Unencrypted Audio. Notwithstanding anything herein to the contrary, unencrypted streaming of audio files associated with Included Programs shall be permitted; provided that if Licensor reasonably determines that the streaming of unencrypted audio files associated with Included Programs 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 C
License Fees
Second Window Features:
|Domestic Box Office* |Avail Year 1 Fee Per Title (USD) |
|≥$200,000,001 |$425,000 |
|$100,000,001-$200,000,000 |$360,000 |
|$75,000,001-$100,000,000 |$340,000 |
|$50,000,001-$75,000,000 |$290,000 |
|$25,000,001-$50,000,000 |$240,000 |
|$10,000,001-$25,000,000 |$205,000 |
|$5,000,001-$10,000,000 |$160,000 |
|$2.500,001-$5,000,000 |$120,000 |
|$1,000,001-$2,500,000 |$60,000 |
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