Introduction:  An internet distributor (�Distributor�) wants to exhibit your movie or program (�product�) over the internet on its website and provides you with its �standard� distribution agreement.  Of course, you are flattered, but now what do you do?  First, check with your partners, colleagues, and business and legal advisors to determine if the internet is your first choice for exposing your product.  There are a number of issues to consider in this arena including your collective analysis as to whether or not theatrical, television, video, ancillary and international distribution of your product are available options, the costs and expenses associated with traditional distribution means, and whether or not the genre, subject matter and quality of your product is appropriate for internet exploitation.  Once you have determined that the internet route is indeed right for your product, here are some key issues to consider:

The Grant of Rights: It�s no secret that internet start ups are trying to build libraries and assets, so don�t be surprised if your internet Distributor hands you an agreement granting themselves all rights, in all media worldwide, not just internet rights.  Internet Distributors may point out that they are spending huge sums marketing your product to make you famous and that accordingly they should control all other exploitation of your product, but, in all likelihood they are spending the marketing dollars primarily for promoting their website.  Nevertheless, a good number of web Distributors are agreeing to license only the internet rights for a limited term, allowing you to keep the copyright and all other rights in your product.  You may wish to split internet rights between a number of distributors: those licensing downloads only, those utilizing the streaming method of exploitation, and those also involved in traditional means of exploitation like theatrical, television, and video. Before you agree to grant any or all rights in your product, make sure you feel comfortable with the Distributor, the individuals involved, their business plan and marketing strategy for the internet exploitation of your product.  If you do agree to grant additional rights, make sure there�s a fair advance, and/or split of the revenue, try to retain approvals over off internet deals, if any,  they are allowed to make, retain some input or control over marketing and distribution plans, and if they are publicly traded, ask them for stock options so that if the stock in their website becomes valuable as a result of your early participation, you will benefit financially for taking an early risk with them.

Exclusivity:  Most, but not all, internet Distributors ask for exclusivity for internet exploitation.  Because the internet programming market is so new and no leaders have yet emerged, it is risky to grant exclusivity as your internet Distributor may not be around in 6 months, or it may struggle along but get no exposure.  A safe philosophy, if you can get the Distributor to accept it, is to grant a non-exclusive internet license for a limited period.  This will allow the market to mature and you will be able to re-assess your position after a relatively short window.

Crosslinks:  Make sure you include a provision which requires crosslinking of the internet Distributor�s site with your official website for your product.  Try to retain the right to exhibit the product on your official site as well as the right to sell merchandise, videos, and DVD�s of your product from your own site.

Territory:  Internet distributors will likely ask for worldwide rights.  Nevertheless, the technology is available through blocking of telephone area codes and registration procedures to limit the territory to the United States or some other geographic designation.  Since you may prefer to license international rights in a completely different manner try to get the internet distributor to limit the territory to the United States.

Licensing Period: Your license term for internet exploitation will first depend on what other rights, if any, you've previously licensed.  If you�ve already had a theatrical release, you may want to try to fit your internet license period into the 2-3 month pay per view window prior to video release so as not to infringe upon video and subsequent pay and free television exploitation.  If you�ve had no previous exploitation, despite the internet distributor�s request for a 5-10 year term, try to limit the license period to 6-12 months so that you can re-assess the internet marketplace in short order.  With technology changing at such a rapid pace, your internet Distributor�s market share and strategy may be obsolete before the ink on your contract dries.  Keep your license periods as short as possible.

License Fee/Payment Terms/Audit: Most internet start-ups claim poverty, so obtaining an advance against royalties for an internet license is difficult, but not impossible.  In lieu of an advance ask for a large share of the gross revenues (30-50% is obtainable) for downloads or licenses, and try for a share of advertising revenues associated with the viewing of your product.  Try to limit the amount of advertising and promotional expenses that are recoupable against your royaltys as most of those expenses are probably incurred in promoting the site and not your product specifically.  If merchandise related to your product is being sold on the site, retain a 30-50% share of that revenue as well.  Ask for stock options, and the right to purchase stock at lower than market rates.  Specify the minimum rates to be charged for downloads or viewings (current prices for download licenses appear to be averaging $2.95 for a one day license, $4.95 for a 5 day license, and $13.95 for an unlimited use license).  Make sure, you receive not less than quarterly accountings not later than 60 days after the end of each quarter, require detailed accounting statements, and obtain the right to audit the books and records of the distributor.  If an audit proves underpayments of more than 5%, get the Distributor to pay for the audit.

Conclusion:  Other terms customarily dealt with in internet license deals include Delivery Materials (deliver a digital master and as little else as possible), Piracy, Unauthorized Playback and Duplication (try to work with companies that have the latest anti-piracy technology),  Residuals and Contingent Compensation Payments (the internet companies don�t want to hear about them), Representations Warranties, and Indemnities (the standard reps and warranties that you own the product, have acquired all the rights, you haven�t infringed and you�ll indemnify the Distributor will apply but you should also require the Distributor to indemnify you from claims arising from its conduct), Confidentiality (you and the Distributor won�t disclose the terms of your deal to any third party), and Protection of Intellectual Property (you own your copyright, and the Distributor owns its technology).  Don�t be afraid to ask for provisions that protect your product.  Particularly in the web business, there are no �standard� deals.  Everything is negotiable.  For a more extensive review and analysis of an internet distribution deal visit my website at www.medialawyer.com.