United States: Green Hasson Janks – "Brave New Media World: The Various Forms Of New Media, Studio Reporting And Potential Concerns"

Michael Sippel, Senior Manager at Green Hasson Janks, writes:

EST, VOD, SVOD, FVOD, and ADSS... What do they mean, and why do we care? The ascent of new media markets – with the simultaneous decline of the hard goods home video industry – is evidence of a diversifying brave new media world. Understanding the nature of the emerging markets themselves and how the different studios report them is imperative for those who follow entertainment trends – as well as advocates on behalf of the actors, directors, producers, creators and investors of film and television series, such as lawyers, business managers and participation auditors.

The major new media streams can be broadly defined as:

  • EST (Electronic Sell Thru) is a permanent digital copy granting the viewer unlimited access forever. Purchases primarily occur via online, mobile (through a smart phone or tablet) and/or Smart-TV at home, through vendors such as Apple and Amazon.
  • VOD (Video-On-Demand) is a temporary download allowing the viewer to watch the film/series a limited number of times within a limited number of days. Rentals of such primarily occur on your television set at home, online and/or mobile through vendors such as DirecTV, InDemand and Apple.
  • SVOD (Subscription Video-On-Demand) is subscription based and allows the paid subscriber to watch the film/series an unlimited number of times within a limited license period (usually one year). This primarily occurs at home, online or mobile through "over-the-top" vendors like Netflix and Amazon Prime.
  • FVOD (Free Video-On-Demand) is similar to SVOD but is primarily related to network and basic cable providers like ABC.com, FX.com and Hulu and does not require any additional payment by the viewer.
  • ADSS (Advertising Supported Streaming) is very similar to FVOD but generates revenues by selling commercial time and/or "pop-ups" within the broadcast.

With these variations, you care about convenience and costs if you are a consumer. However, if you are the talent or the investor involved in the film/series or their representatives, you care about how the related revenues, if any, are derived and reported to you or your client.

In newer contracts, reporting requirements are often contractually defined. However, older agreements are often silent as to how such revenues will be treated. In most cases, the actual reporting of the noted new media is as follows:

EST revenues are derived on a per-buy basis, and the retail sales price generally fall within a range of $10 to $20. The studio generally receives the greater of (a) a minimum amount per buy, ranging from $6 to $15 or (b) 50-70 percent of the retail sales price.

Studios emphatically state that EST is merely a replacement for standard home video and, as such, EST revenues received by the studio are always reported at the standard home video royalty rate (typically 20 percent).

As a participations auditor, I might argue the reporting is unfair, as the 20-percent home-video royalty is a historical standard based on a 50/50 split after deduction of all related costs – most significantly manufacturing, mastering, advertising and distribution. However, as EST has no related manufacturing or distribution expenses and little to no mastering and advertising costs, one can make the argument that the 20-percent royalty is unjust and not within the original intent of the historic royalty arrangement.

Also, depending on the age of the product, reporting requirements for EST might not be included in the contract between the participant and the studio. If such is the case, and depending on the definition of "home video" (which may make specific reference to words such as "device" and being that EST is not a "device" of any sorts), one might again take the approach that EST revenues should be reportable at 100 percent.

VOD revenues are derived on a per-buy basis, and the retail sales price generally fall within a range of $4 to $6. The studio generally receives the greater of (a) a minimum amount per buy, ranging from $2 to $4 or (b) 50-70 percent of the retail sales price.

The reporting of VOD revenues differs by studio; however, most studios state that VOD also functions as a replacement for standard home video and as such, VOD revenues received by the studio are most commonly reported at the standard home-video royalty rate.

Similar to EST, one can make the argument that the 20-percent royalty is unjust because little to no costs exists. However, an additional argument exists to report VOD revenues at 100 percent based on the standard reporting of pay-per-view (PPV), which is nearly identical in nature to that of VOD. The only major variances between the two is that PPV can only be viewed linearly at scheduled increments (e.g., from 2 – 4:30 p.m.), whereas VOD can be viewed anytime (e.g. 2:21 p.m.) inclusive of the ability to rewind, pause and fast forward during the 1-2 day window.

Another argument also exists that the residual amounts paid to the guilds are contractually based on 100 percent of the VOD revenues received while home video and EST are based on 20 percent or a number of downloads. Therefore, the participant is receiving only 20 percent of the VOD revenues but is charged with 100 percent of the residual expenses based on 100 percent of the VOD revenues.

SVOD revenues are not derived on a per-buy basis but are instead generated from monthly subscription revenues from SVOD customers. The revenues received by the studio are based entirely on negotiated license fees, extremely similar to those of free and pay television.

The reporting of SVOD revenues differ by studio. However, because of the nature and revenue recognition noted above, they are most commonly reported at 100 percent. For those studios reporting SVOD at a royalty, it is often that the agreement simply does not define the difference between VOD and SVOD and simply says "VOD." Thus, even though the nature is drastically different, the studio takes the more aggressive approach and subjects such revenues to a royalty because SVOD contains the words VOD. Some studios may agree that if the SVOD window is replacing the first pay television window, SVOD revenues should not be subjected to the royalty.

To make things more interesting, per Wikipedia, the pay television provider Epix, which is owned by Paramount, Lionsgate and MGM, signed a distribution deal with Netflix in August 2010 allowing its subscribers to view the movies only 90 days after their pay television premiere. Certainly, participation auditors and representatives of the talent/investors might be concerned with the overall reporting, if any, of such an arrangement.

FVOD revenues are generally not directly derived from FVOD exhibition because they are offered free to the customer. However, similar to ADSS, the platform may include abbreviated commercials and/or pop-up advertising. As such, FVOD revenues received by the studio, if any, are typically very immaterial. FVOD exhibition is much more prevalent in relation to television series than film.

Similar to SVOD, the reporting of FVOD revenues differ by studio. Some studios report FVOD revenues at 100 percent and others at the standard royalty rate. The arguments generally made by participation auditors and representatives of the talent/investors of the film/series are not based on the percentage of the amount reported to the participant but more specifically, exactly how much, if any, the studio is receiving from the applicable FVOD licensees, such as ABC.com or FX.com, etc., and Hulu, who is owned by NBC, Fox and Disney.

It is common that FVOD licensees do not report any applicable advertising revenues, etc., to the studio. Therefore, on a purely contractual/auditing basis, the studio won't report what it does not receive. However, this does not change the fact that they should usually be receiving revenues from the FVOD licensee. And, in many instances, the studio and the FVOD licensee are vertically integrated (ABC/Disney or FBC/Fox, for example).

The typical studio response to such emphasizes the silence or ambiguity of the language included within the agreement between the studio and the FVOD licensee. And, as they may effectively be a part of the same company, it is not uncommon to have verbal agreements and/or unsigned written agreements, resulting in the inability of either side to pursue legal action.

Participation auditors and representatives of the talent/investors of the film/series are generally of the opinion that the FVOD licensee should adequately compensate the studio, especially if they are vertically integrated, for the free content exploited on its websites, etc., some of which may generate advertising revenues but more of which is indirectly involved in building an audience for the FVOD licensees brand (i.e., free content drives consumers to the FVOD licensees website, which includes ads and other information regarding other products and projects and ultimately builds customers and promotes the entire brand).

ADSS is similar to FVOD in many ways but is different because, most of the time, the website is funded almost entirely by the generation of advertising revenues, usually through abbreviated and full-length commercials, pop-ups and banner ads.

Typically, the advertising companies will pay the ADSS licensees by spot or by number of clicks. The studios generally receive 60-70 percent of the ADSS revenue earned during the film/series exploitation. In many instances, the website is not affiliated with either (a) the studio involved in distribution and production or (b) the network or basic cable company airing the series. As such, studios report 100 percent of ADSS revenues to the participants.

The primary concern of the participation auditors and representatives of the talent/investors of the project is completeness and the inability to verify that the studio is receiving everything it should and reporting everything it receives. Another concern, for both talent and studio, is general piracy. Similar to Napster for music, many websites are not licensed to exploit the film/series and do so illegally. As such, the studios do not receive any related revenues. Piracy concerns are severe and trickle down to every market. If you know you can watch it for free, why buy the home video or download the digital content? Studios continue to spend millions on piracy protection, but continue to lose millions more on lost revenues due to piracy.

As those who follow entertainment trends as well as advocates for the actors, directors, producers, creators and investors of film and television series, we need to better understand the nature and reporting of new media markets, which continue to grow, evolve and spark debates regarding the sometimes controversial studio accounting. With the general decline of hard-goods packaged media (DVD and Blu-Rays), studios are finding themselves forced to make up the lost revenues elsewhere. And, what better arena exists than the ever-growing, ever-evolving and ever-ambiguous "brave new media world."

This post was originally published on the Green Hasson Janks Media Clips blog.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions