Understanding the Industry Standard Distribution Deal for Subscription Channels Paying Per View

When a subscription channel aims to pay per view for content, navigating the licensing deals and payment structures can be complex. This article dives into the industry's current standard distribution practices.

Overview of Per View Payments for Content Providers

Values for per view payments for subscription channels vary depending on the quality and nature of the content. For new and higher-quality independent films, the typical per view rate is around $2 per VOD OTT rental. However, these rates can be recouped through a minimum guarantee (MG) ranging from $2,500 to $10,000 per film.

Structure of Typical VOD Premium OTT Deals

A typical transactional premium OTT VOD deal splits the revenue between the distributor and the channel. The revenue split usually stands at 50/50, but can be adjusted based on the distributor's size. For independent distributors like Relativity Media, the split may be slightly higher for reliability and trust. For smaller distributors, the deal might be more favorable, with a split ranging from 35-60% of the revenue received.

Pricing for HD Independent Films

In the U.S., VOD pricing for HD independent films typically ranges from $3 to $5. This means per VOD rental payments generally fall between $1 to $3, with the average being around $1.50 to $2.50. These figures can be lowered through negotiations, especially when aiming for a library of titles rather than individual ones.

Minimum Guarantee and Library Deals

To secure access to content that was previously released directly to video, a minimum guarantee (MG) is often essential. The MG is the minimum amount that a content provider will accept to ensure they are compensated for their work. The least a distributor will accept for an MG is the cost of their legal accounting and formatting/dubbing associated with the deal. A typical MG includes additional factors such as the distributor's business goals, the popularity of the content, the lost opportunity cost, and their trust in the subscription channel's ability to pay royalties.

Negotiating for a Library vs. Single Titles

Negotiating for a library of titles rather than individual films can significantly lower the MG cost. For an average independent film, plan between $2,500 and $10,000 per title as a minimum guarantee. The lower end is more common when negotiating for a library, while the higher end applies when looking to purchase individual titles. For recent major independent releases, the MG cost could be significantly higher, potentially reaching up to $25,000.

Exclusive Licensing and Floor Rates

For exclusive licensing deals, the rates mentioned above serve as a starting point. Exclusive deals may demand higher floor rates, reflecting the unique nature of the content and the distributor's increased trust in the subscription channel's ability to fulfill the deal terms.

Conclusion

Understanding the industry-standard distribution deals for subscription channels is crucial for negotiating fair and beneficial agreements with content providers. By being aware of typical per view rates, revenue splits, and minimum guarantees, subscription channels can skillfully navigate the complexities of the market and secure the best content at the right price.