CHANNEL4 & PACT MEMORANDUM OF UNDERSTANDING
Terms of Trade 2012
1. RETURNING SERIES PROVISION
1.1 If C4 gives notice within 6 months of its first TX of a one-off programme or the last episode in a series, it shall have the right to acquire a More 4 or an E4 licence for such programme/series;
1.2 The licences shall be exclusive for 2 years from 1st Tx on those services, with 8 play-days on each service;
1.3 The residual for More 4 is unchanged at 1% (renewable on a rolling basis at the same rate);
1.4 The residual for E4 shall be 5% (renewable on a rolling basis at the same rate). For the avoidance of doubt, this residual replaces the ‘E4 market price’ mechanism and therefore the requirement for Indies to account to C4 for 50% of Net Receipts will not apply to any licences obtained under this new arrangement;
1.5 If C4 does not exercise the option in 1.1 above, and subject to there being no sales to other PSBs, legal or compliance issues, or talent exclusivity deals, the Producer shall be free to sell into the UK secondary market (subject to the release criteria currently set out in Appendix 2 to the Commissioning Agreement) with transmissions commencing not sooner than the later of 3 months from first TX of the last episode of the following series OR 15 months from the first TX of the last episode of the first series;
1.6 In respect of one off programmes or non-returning series, if C4 does not exercise the option and subject to there being no sales to other PSBs, legal or compliance issues or talent exclusivity deals the Producer shall be free to sell into the UK secondary market in accordance with the provisions of section C of Appendix 2 and the release criteria set in Appendix 2.
1.7 C4 shall be entitled to continue to exploit its rights in one-offs or series until the end of the term (and in the case of returning series, until the end of the term of the last series commissioned, subject to any applicable repeat fees);
1.8 The holdback and option arrangements shall continue to apply on a rolling basis series by series thereafter.
2. COMMISSIONING FOR E4
Channel 4 agrees to recognise PACT’s authority for the purposes of collectively bargaining a template commissioning agreement for E4 commissions, and agrees to engage in a negotiation process to create such template with a view to agreeing the same within 3 months of the date hereof.
3. LINEAR/NARRATIVE REPEATS
Each of C4’s 2 cleared transmissions shall have one additional free narrative repeat within 7 days of 24:00 of the date of each transmission, which C4 may elect to convert into up to 5 plays on 4Seven, within 7 days of 24:00 of the date of each C4 TX.
Channel 4 agrees that if Channel 4 was to engage in a significantly higher level of second-run 4Seven TX’s, PACT would be entitled to ask Channel 4 to revisit the standing of the ‘second package’ in good faith.
4. VOD ISSUES
4.1 PROPOSALS FOR PENCE-PER-PLAY PAYMENT MECHANISM FOR VOD (EXCLUDING SVOD & TVOD)
The scheme has 3 time-related rates applicable during the term:
Day 0-7 VoD Pot (Catch-up window – C4 exclusive rights) / Day 8-180/2RS(First archive window – C4 exclusive rights) / Day 180+/2RS+
(Second archive window – C4 non-exclusive rights to end of term or RS end of term of last series commissioned) / Total
2012 / £500k / 2.0p / 1p
2013 / £250k / 2.25p / 1p
Notes:
1. PPV rates to be reviewed during 2013 and to have effect in 2014;
2. All numbers exclude any TVOD/Netflix Net Receipts;
3. Exclusivity continues to apply (expiry of the first archive window notwithstanding) if the programme includes on-screen talent subject to an exclusivity arrangement with C4, and/or if there are legal/compliance issues, but with the rate to be adjusted to the second archive window position.
For the avoidance of doubt, no change to the current arrangements for C4’s participation in Net VoD Receipts derived from Indies’ exploitation activity in VoD.
4.2 PROPOSALS REGARDING DTO WINDOWS
Channel4 and PACT have agreed not to amend the current Terms of Trade agreement insofar as it relates to DTO rights. However, PACT has acknowledged that it will enter into good faith negotiations with Channel 4 as and when Channel 4 proposes to launch a DTO service, regarding DTO rights, including details such as windowing as between FVOD and DTO.
5. ONLINE COMMISSIONING FRAMEWORK
Channel 4 agrees to a commissioning framework for online commissions, based upon the following key principles:
· Producer originated format related online/digital projects to accompany linear projects will be commissioned and contracted under C4’s online commissioning framework.
· IP in the format-related online content created (excluding underlying technology/infrastructure elements) will be owned by the producer.
· C4 shall have a minimum 3 year exclusive licence (or the exclusive licence term will be commensurate with the term of the last series commissioned or further projects commissioned) within the UK and Ireland (not geo-blocked) and a non-exclusive licence thereafter (excluding those projects where exclusivity continues due to talent agreements or legal and compliance reasons).
· Subject to C4 premiere rights, the producer can sell the content and/or format to geo-blocked third parties outside of the UK and Ireland subject to SEO guidelines and 50/50 net receipts’ split.
· C4 will retain all advertising and sponsorship revenue; net receipts from any transactional revenue generated will be split 50/50.
· Producer will store assets, code and project materials.
· C4 aims to simplify and standardise its contracting relationships to ensure that a single company is responsible for delivering the project wherever possible.
· C4 may contract outside of the framework where the nature of the commission requires bespoke terms (e.g. user experience design, education, third party format or technology owner etc.).
6. OTHER ONLINE ISSUES
The current interactive rights’ consultation procedures are replaced with a new first look mechanism to cover the exploitation of digital manifestations of the producer’s merchandising and publishing rights (to be called Digital Spin Off Rights).
This first look procedure would provide that where the producer intends to exploit any Digital Spin Off Right(s), the producer shall submit to Channel 4 a proposal (including editorial description, an outline business plan etc).
For a period (4 months) following receipt of any submission of the proposal, Channel 4 shall have an exclusive first right of negotiation to participate in and/or to acquire the rights to the proposal. The producer will not enter into any negotiations with any third party in respect of the proposal and or itself exploit the proposal prior to the expiry of the exclusive negotiating period.
If the parties cannot agree terms in respect of the proposal then the producer shall be free to exploit the proposal with a third party (on not more favourable terms than offered to Channel 4).
Pact acknowledges that exploitation of Digital Spin Off Rights is subject to other issues (for example legal and compliance issues or exclusive talent deals, use of C4 branding guidelines, no use of programme content without specific agreement etc).
The definition of Merchandising and Publishing Rights within the Commissioning Agreement will exclude Interactive Television Rights and Support Site Rights and the definition of Support Site Rights would include commercial purposes (and as currently all promotional and social media uses) and Interactive Television Rights.
In addition, Pact and C4 have committed themselves to continue a series of discussions over issues which C4 believes will be of increasing importance to C4’s core business activity in an era of internet-connected TV and which may arise from producers’ exploitation of Digital Spin-Off Rights in the event that no agreement is reached between C4 and the producer during the Exclusive Negotiating Period. Pact has confirmed that its Council has mandated its negotiating team to continue meaningful dialogue with C4 with the aim of reaching such supplemental agreements as may be mutually agreed within a reasonable timescale (target of 3 months from the date hereof).
All other terms remain unchanged.
4 May 2012
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