Aggregators

Major content buyers (tv program services like HBO, VOD platforms like Netflix, etc) mostly create their own content or obtain it from major studios or the biggest independent producers.  However, they want to be sure that content from lesser producers and distributors do not elude their consideration.  (They could vet the candidate content inhouse, but instead they engage specialists to collect content and present it to them.)  These specialists are aggregators.

There are a number of additional reasons that they outsource their acquisitions activity:

First, the aggregator turns down content that are not a good fit for the content buyers that they work with, saving both parties time and effort;

Second, the content buyers are spared the effort of educating the distributors as to the material requirements, contract fine points and general procedures of doing business with the content buyer.  This is left to the aggregator.

Major content buyers attend market events in substantial numbers.  For promising projects in development, they will usually deal directly with the program producer, pursuant to negotiating a pre-sale or co-production.  But, for content from a lesser distributor they will usually refer the distributor to contact them via aggregator.

So, to which aggregator do they refer the distributor?  They can be cagey here, and generally leave the distributor to find their own.  And, with good reason.  They don’t want to alienate aggregators that are not chosen, and by not recommending candidates they do not run this risk.

The Distributor/Aggregator Agreement.

A Distribution Fee of twenty-five percent of the total revenues received by the aggregator (“gross”), with expenses of up to five percent of the gross collections deducted from the remaining sum (“off the bottom”).  This translates to the distributor receiving not less than seventy percent of the gross.

Expenses: Assuming that the delivery materials are of an acceptable standard, the Aggregator has relatively few expenses.  Expenses come in two forms: Direct Expenses and Indirect Expenses.

Direct Expenses are all expenses directly related to the content in the distributor/aggregator agreement, including shipping, advertising and creation of delivery materials.

Indirect Expenses are costs such as participation at market events and the travel expenses related to same.  If indirect expenses cannot be included in the distribution fee, they should be limited to a percentage (perhaps five percent) of the gross revenues received by the aggregator.

Length of the Agreement.  A two year assignment of distribution rights in specific media (e.g. satellite, cable and VOD) in the specified territory is the norm.  Usually, the aggregator will be able to get a yes or no within a few months as to whether the buyer is interested or not, with negotiations and contract execution rather soon thereafter.  (More appealing content will always be fast-tracked.)  If two years pass without the aggregator making a deal, they know they are unlikely to make one and will have no use for the content.  So, the short term of the rights assignment is normal.  The aggregator will have the right to service any agreement that they make with a buyer for the duration of the aggregator/buyer agreement.

The Territory is usually the United States only, but the aggregator can always come back to the supplier if the buyer has interest in additional territories.  Both, Netflix and HBO have increasingly bought international rights.  Both companies will-under most circumstances–exclude specific territories from a worldwide agreement.

Keep in mind that aggregators are specialists in placing content with a limited number of buyers that are off limits to most suppliers.  Sales agents and distributors deal with everyone else.  So, when aggregators inquire about rights beyond the United States, they are usually talking about an expansion of rights on a license covering the United States.

Some aggregators charge a fee in addition to the commission, but the commission gives the aggregator an incentive to get the highest license fees and non-refundable advances against royalties (“minimum guarantees”).  Nonetheless, the distributor may wish to have the minimum amounts allowable specified in the agreement.

Delivery Materials to be provided to the aggregaror are rarely negotiable, but the provision of same can often be conditional upoon actual licenses being effected.  For example, the aggregator can be provided with a lab access agreement which will allow it to order and pay for videomasters that will be provided to the buyer at their expense.  The full or partial cost of errors & omissions insurance can be delayed until it is actually required as a delivery item on a aggregator/buyer license.

Wherever possible, the distributor should supply the materials specified in the agreement, rather than allow the aggregator to arrange for same and charge the costs to the distributor.