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Distribution Advances and Broadcast License Fees |
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Page 3 of 4
Broadcast License AgreementsEach broadcaster in Canada has a standard form of broadcast license agreement that it uses to set out the terms of its license of a production. Such agreements will generally deal with the following matters:
Territory
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In what territory may the broadcaster exhibit the production, for instance, all of Canada or certain provinces?
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Term
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How long may the broadcaster exhibit the production? Each license agreement will stipulate the start date of the broadcaster’s right to exhibit the program, and the length of the license or “window”. Windows may be exclusive, or non-exclusive, or a combination of both. Exclusivity is discussed below
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Media
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In which media may the broadcaster exhibit the production, for example, free television, pay television or cable?
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Exclusivity
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Many license agreements set out whether the broadcaster will have exclusive rights to broadcast the production, and if so, for what length of time and in what territory. During the exclusion portion of the license term, no other broadcaster may air the production in the same territory and medium as the exclusive broadcaster. As a sample: the broadcaster may have exclusive rights to broadcast the production for the first two years of the license in the province of Ontario on free television, and then non-exclusive rights to broadcast the production in the province of Ontario for the remainder of the term.
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Delivery
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When must the production be delivered? In what format must the production be delivered? Many broadcasters will attach a detailed set of technical specifications to the license agreement that set out exact criteria.
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License Fee and Payment Schedule
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The license agreement will set out the amount of the license fee and the manner in which that amount will be paid. The timing of payments depends on whether the agreement is a “pre-sale” (with the broadcaster cash-flowing production prior to delivery) or an “acquisition” with the broadcaster paying on or even after delivery. In the case of a “pre-sale”, portions of the license fee are typically paid out upon the producer meeting certain production milestones, for example:
(a) 10% upon execution of the license agreement and receipt and approval by the broadcaster of the production’s budget, cash-flow statement, financing plan, production schedule, program outline or summary, and confirmation that the production is fully financed;
(b) 30% upon delivery and approval by the broadcaster of the script;
(c) 20% on commencement of principal photography;
(d) 20% upon delivery and approval by the broadcaster of the rough cut of the production;
(e) 10% upon delivery and approval by the broadcaster of the fine cut of the production; and
(f) 10% upon delivery of the completed production (including sound, closed-captioning, etc.).
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