FEDCAC

• 4.1 Each distributor and each exhibitor will deal with the other on a fair and equitable basis at arms length and in the manner set out in this Code.
• 4.2 In addition to compliance with the requirements of this Code regard should be had to the following in determining what constitutes dealing “on a fair and equitable basis”:
• 4.2.1 principally, the legitimate commercial objectives of the distributor and the exhibitor; and
• 4.2.2 the relative bargaining strengths of the distributor and the exhibitor; and
• 4.2.3 whether, as a result of conduct engaged in by a party, the other party is required to comply with conditions that are not reasonably necessary for the protection of the legitimate interests of the first mentioned party; and
• 4.2.4 whether a party is able to understand documents relating to the transaction or proposed transaction that are supplied by the other party; and
• 4.2.5 the commercial basis on which, and the circumstances under which, a distributor could make the film available to another exhibitor, or an exhibitor could receive supply of an equivalent film from another distributor; and
• 4.2.6 the extent to which a distributor’s or exhibitor’s conduct towards an exhibitor or distributor is consistent with that distributor’s or exhibitor’s conduct toward other like exhibitors or distributors in similar transactions; and
• 4.2.7 the extent to which a party is willing to negotiate the terms and conditions of the transaction with the other party; and
• 4.2.8 the extent to which a party acts in good faith.
• 4.3 Distributors and exhibitors recognise their joint responsibility to combat film piracy and agree to put in place commercially reasonable measures to prevent unauthorised recordings of films. These measures may include:
• 4.3.1 for exhibitors, the installation of appropriate equipment to detect digital recording devices, appropriate surveillance and staff training programs to increase awareness; and
• 4.3.2 for distributors, the investigation and prosecution of copyright offences, the provision of secure content through encrypted files, decryption keys and watermarked Film Copies, and staff training programs to increase awareness.

• 5.1 Each distributor will formulate its decisions as to whether an exhibitor will be offered supply of a Film Copy, on a film-by-film basis, in first run, second run or at all, having regard to the distributor’s own distribution strategy in relation to the film, the nature of the film and its anticipated performance in Australia, and having regard to the following objective criteria:
  • 5.1.1 primarily, the expected return from the exhibitor with respect to such supply, based (where available) on past box office returns from the exhibitor and any other relevant financial data and considerations;
  • 5.1.2 the overall business relationship, including the existing supply arrangements, between that exhibitor and that distributor;
  • 5.1.3 the geographical location of the exhibitor, provided that exhibitors located in the same geographical area will continue to be supplied subject to the other provisions of Section 5.1 and the provisions of Section 5.2 being satisfied;
  • 5.1.4 the general condition and facilities of the cinema, including the auditorium, front of house, projection and audio facilities; and
  • 5.1.5 the extent of any marketing and promotional activities of the exhibitor which may be of benefit to the film.
• 5.2 Exhibitors acknowledge that the formulation by every distributor of a distribution strategy for each film is dependent upon the skill, experience, expert intuition and business judgment of the individuals responsible for such decisions within each distributor. The matters to be considered in the formulation of a distribution strategy are not susceptible to being boiled down to an exhaustive list of objective criteria but include (but are not limited to) such matters as:
  • 5.2.1 the distributor’s own assessment of the nature and quality of the film;
  • 5.2.2 the audience to which the film is likely to appeal;
  • 5.2.3 the other films expected to be released at the same time;
  • 5.2.4 the time of the year the film will be released;
  • 5.2.5 the film’s anticipated life at the box office;
  • 5.2.6 the proposed advertising support for the film;
  • 5.2.7 the film’s overseas box office performance;
  • 5.2.8 the presence of any well regarded actors or directors involved with the film;
  • 5.2.9 the requirements of the film’s producer or other profit participants;
  • 5.2.10 the level of any pre-release publicity; and
  • 5.2.11 the nature of any film reviews.
• 5.3 In considering whether to offer supply of a Film Copy to a newly constructed, renovated or up-graded cinema, (not including a cinema upgraded to complying digital projection systems), or to a cinema with which it has not previously dealt, each distributor will make a good faith estimation of the expected return with respect to such supply, based on its general experience in the market and any other relevant financial data, and having regard to the criteria detailed in Sections 5.1 and 5.2. Upon the written request of an exhibitor, a distributor will convey the grounds for its decision to the exhibitor concerned. If a distributor declines to supply a Film Copy to a newly constructed, renovated or up-graded cinema and the exhibitor notifies the distributor in writing of a dispute in relation to that decision then, within seven (7) working days from the date on which the exhibitor notifies the distributor in writing of the dispute:
  • 5.3.1 the distributor will provide to the exhibitor; and
  • 5.3.2 the exhibitor will provide to the distributor their respective good faith estimates of the expected return with respect to the supply of the Film Copy to that newly constructed, renovated or up-graded cinema.
• 5.4 Each distributor will formulate its decisions as to whether an exhibitor will be offered supply of a Film Copy for an advance screening or screenings, on a film-by-film basis, having regard to the criteria detailed in Sections 5.1 and 5.2, as well as the specific marketing and promotional objectives associated with advance screenings.
• 5.5 Distributors and exhibitors will continue to co-operate to facilitate the conversion of cinemas to complying digital projection systems and, in this regard (without limiting Sections 5.1, 5.2, 6, 9.1, 9.2, 9.3 and 9.4):
  • 5.5.1 distributors shall not alter booking practices and patterns relating to an exhibitor in a manner which adversely impacts the exhibitor solely because of the distributor’s obligation to pay a VPF to the exhibitor; and
  • 5.5.2 if the exhibitor is operating 35mm projection systems in its cinema then, during the period of transition for the installation of complying digital projection systems in cinemas, and subject to availability, distributors will continue to supply 35mm prints to the exhibitor on reasonable commercial terms (which terms may have regard to the cost to distributors of acquiring 35mm prints).
• 5.6 Without limiting Sections 5.1, 5.2, 6, 9.1, 9.2, 9.3 and 9.4, distributors will not unfairly discriminate against any category or class of cinemas with respect to the supply of Film Copies. However, if a complex is reasonably identified by the distributor (having regard to specific reliable information) as having been the subject of significant film piracy activities, then:
  • 5.6.1 the distributor may reasonably defer or withhold the supply of Film Copies to the complex until the exhibitor appropriately addresses the piracy risk;
  • 5.6.2 the distributor will give prompt notice to the exhibitor of a decision made by the distributor under Section 5.6.1, including reasonable details of the reasons for the decision; and
  • 5.6.3 if the distributor makes a decision under Section 5.6.1 to defer the supply of a Film Copy after the film has been booked for the complex, then the distributor and the exhibitor will undertake good faith negotiations with a view to reaching agreement on the amended terms of supply for the film.

• 6.1 Subject to Sections 5.1, 5.2, 9.1, 9.2, 9.3 and 9.4, contracts between distributors and exhibitors will be freely negotiated in a manner which allows flexibility with respect to:
• 6.1.1 film hire rates;
• 6.1.2 length of seasons;
• 6.1.3 sessions requirements; and
• 6.1.4 bonds and guarantees.
• 6.2 Subject to Sections 5.1, 5.2, 9.1, 9.2, 9.3 and 9.4 and without limiting Section 6.1, negotiations between distributors and exhibitors may allow for flexibility in terms by way of trade off between film hire rates, length of seasons and sessions requirements.
• 6.3 Subject to Sections 5.1 and 5.2 and without limiting Section 6.1, contracts between distributors and exhibition chains or groups should allow flexibility between specific locations in the chain or group, in regard to supply of films, film hire rates, length of seasons and sessions requirements, and having regard to the specific circumstances of each screen.
• 6.4 Distributors and exhibitors acknowledge the unique role that regional and country cinemas and cinema circuits play in their communities and consequently, the special importance of flexibility in the negotiations between distributors on the one hand and exhibitors who operate regional and country cinemas on the other hand. Distributors acknowledge that Section 5.5.2 may have particular application to regional and country cinemas and cinema circuits.
• 6.5 Subject to Sections 5.1, 5.2, 9.1, 9.2, 9.3 and 9.4, should an exhibitor not wish to negotiate individual terms with a distributor under Section 6.1 then that exhibitor shall continue to trade with that distributor on the basis of that distributor’s prevailing film policy.

• 7.1 Each distributor will formulate its decision as to whether, when and to what extent an exhibitor will be offered trailers and/or advertising materials, having regard to the criteria detailed in Sections 5.1 and 5.2, as well as the specific marketing and promotional objectives associated with trailers and/or advertising materials. Subject to availability and the distributor’s terms and conditions, each distributor will make available to each exhibitor to which it intends to offer supply of a Film Copy at least one trailer and two one-sheet posters.
• 7.2 In advertising material entirely paid for by distributors, where it is not practicable for all exhibitors screening the film to be identified individually, no exhibitor shall be identified individually with the exception of capital city CBD locations and limited release films or where the distributor makes a good faith determination that the circumstances are exceptional and warrant the individual identification of an exhibitor.

• 8.1 Each distributor shall, within four (4) working days (seven (7) working days where Section 5.3 applies) after a written request by an exhibitor who has been refused supply of a Film Copy or of the trailer and/or advertising materials for a film, provide such exhibitor in writing with such information as is reasonably requested to demonstrate to which criteria in Sections 5.1 and 5.2 it has had regard in determining whether to supply such exhibitor with a Film Copy in first run, second run, or for an advance screening, or at all, as the case may be or, as applicable, in determining whether to supply such exhibitor with the trailer and/or advertising material. Where such criteria have included box office returns relating to a competitor exhibitor, the distributor will supply such information to the exhibitor where reasonabley requested. The distributor must not disclose information relating to an exhibitor which is not a signatory to the Code. By signing this Code exhibitors agree to the provision of information under this Section 8.1. The distributor must not disclose confidential financial data of an exhibitor except for box-office returns. Nothing in this Code shall require a distributor to provide an exhibitor with box office returns relating to an exhibitor who has withheld the relevant box office returns from that distributor under Section 8.6.
• 8.2 Each distributor shall, periodically and as soon as is reasonably practicable, give reasonable details of its proposed upcoming product and release dates to all exhibitors by publication in appropriate media, except to those it considers ineligible for supply of a print pursuant to Section 10.6. Publication on the distributor’s website or in film industry publications generally distributed throughout Australia will constitute publication in appropriate media for the purposes of this Section.
• 8.3 Prior to the booking deadline for a film, each distributor shall in a timely manner give written notification (which may be by facsimile transmission or email) to each exhibitor to whom it has offered, or intends to offer, a Film Copy of a film, of its intended terms of supply, and shall in a timely manner confirm those terms in writing (which may be by facsimile transmission or email) once the booking has been made. The terms of supply shall include the booking deadline, rental terms, season and session policy, any applicable VPF, any applicable bonds or guarantees and any relevant promotional opportunities relating to the film. The terms of supply shall also include, where possible, the running time and classification of the film provided that, if the distributor is unable to provide details of the running time and/or the classification of a film prior to the booking deadline, then:
• 8.3.1 the distributor will provide that information to each such exhibitor as soon as possible after it is known by the distributor;
• 8.3.2 as part of the intended terms of supply written notification the distributor will provide its estimate of the running time and/or its expectation of the classification of the film to the exhibitor, noting that it is an estimate, on the basis that the exhibitor will have no recourse whatsoever against the distributor if the information provided proves to be inaccurate; and
• 8.3.3 if an exhibitor schedules a film for screening relying on information provided by a distributor pursuant to Section 8.3.2, which information subsequently proves to be materially inaccurate, and the exhibitor will be demonstrably adversely affected because the information is materially inaccurate, then the parties will negotiate in good faith with a view to overcoming or minimising the adverse impact on the exhibitor (but the exhibitor will not, in any event, have any recourse against the distributor because the information provided by the distributor proves to be inaccurate).
• 8.4 Where a distributor supplies a film to an exhibitor for exhibition, both the exhibitor and distributor will, on request, supply information to each other on the nature and extent of promotional and media activities in relation to the release of that film on a confidential basis.
• 8.5 Each exhibitor shall upon request and on a strictly confidential basis, make available to any distributor who is a signatory to the Code, cinema-by-cinema and film-by-film box office receipts. Any distributor who receives that information must not make the information available to another exhibitor without the prior written consent of the exhibitor that supplied the information.
• 8.6 Subject to each exhibitor’s contractual obligations with each distributor, an exhibitor may withhold box office returns requested under Section 8.5 if that exhibitor reasonably determines that the supply of that information will result in a competitor receiving an unfair competitive advantage.
• 8.7 If an exhibitor does not accept a Film Copy offered by a distributor under Section 8.3, upon request by that distributor the exhibitor will inform that distributor of the reasons why that exhibitor has chosen not to accept the Film Copy.

• 9.1 Each distributor must separately establish terms of trade which incorporate its policies and/or guidelines in relation to:
  • 9.1.1 film hire rates, including film hire rates for Film Copies of films supplied after the national release dates;
  • 9.1.2 length of seasons, including minimum seasons applicable to exhibitors with four (4) screens or less;
  • 9.1.3 sessions requirements;
  • 9.1.4 advertising;
  • 9.1.5 bonds and guarantees;
  • 9.1.6 the ongoing supply of Film Copies otherwise than in Digital Form, having regard to the conversion of cinemas to complying digital projection systems;
  • 9.1.7 the quality of Film Copies supplied to exhibitors;
  • 9.1.8 for films supplied in Digital Form, the methods and timing of supply of DCPs and KDMs;
  • 9.1.9 3D glasses, including the provision of 3D glasses by exhibitors to their patrons and the treatment of revenues arising from the sale or hire of 3D glasses; and
  • 9.1.10 such other matters as the Code Administration Committee may determine from time to time (known as Terms of Trade Policies and Guidelines).
• 9.2 Each distributor must make its Terms of Trade Policies and Guidelines available on a confidential basis to exhibitors and the Conciliator.
• 9.3 The Conciliator must take into account the Terms of Trade Policies and Guidelines in conciliation disputes made under the Code.
• 9.4 Where a distributor amends its Terms of Trade Policies and Guidelines, the amended Policies and Guidelines must be made available on a confidential basis to exhibitors and the Conciliator at least fourteen (14) days before the amended Policies and Guidelines come into force;
• 9.5 Where a film has under-performed substantially relative to the distributor’s original estimate then, upon reasonable request by an exhibitor, the distributor must make a good faith review of the sessions commitment contractually agreed to between it and that exhibitor, having regard to all relevant factors including:
  • 9.5.1 the investment by the distributor in the release of the film; and
  • 9.5.2 the performance of the film relative to other films then currently available in the market place to that exhibitor.
• 9.6 A distributor will not unreasonably refuse a request by an exhibitor to review the sessions requirement for a film.
• 9.7 In conducting a review under Section 9.5 or Section 9.6, the distributor will undertake good faith negotiations with the exhibitor with a view to promptly resolving the issue, and the parties will as necessary apply the dispute resolution procedures set out in Section 15.1 to facilitate those negotiations.
• 9.8 The fact that a distributor has agreed to review a session commitment with respect to one location shall not bind the distributor to review a session commitment with respect to any other location. Each case shall be considered on its own merits.

• 10.1 Exhibitors will provide distributors on request with suitable credit references.
• 10.2 Exhibitors shall not prevent or seek to prevent a distributor from supplying films to a competing exhibitor.
• 10.3 Each exhibitor and distributor shall observe its agreed obligations to each other including:
  • 10.3.1 the material terms of any exhibition agreement concluded between them;
  • 10.3.2 the timely provision of:
    • accurate daily box office totals on a film-by-film basis to the distributor or the distributor’s nominated representative; and
    • accurate weekly box office returns on a film-by-film basis and session-by-session basis to the distributor including total receipts and the number of paid and complimentary admissions;
  • 10.3.3 the payment of licence fees or other sums to the distributor within the contractually agreed time;
  • 10.3.4 the conduct of promotions including complimentary admissions;
  • 10.3.5 allowing access to the distributor or its agent for records checking inspection and audit of box-office and cinema operating expenses on a confidential basis;
  • 10.3.6 the delivery of Film Copies including, in the case of Film Copies in Digital Form, the supply of DCPs and KDMs;
  • 10.3.7 safe handling, exhibiting and timely return or destruction (as applicable) of Film Copies including, in the case of Film Copies in Digital Form, DCPs and KDMs; and
  • 10.3.8 the prohibition of duplicating Film Copies or sub-licensing rights.
• 10.4 Each exhibitor agrees, subject to the availability of materials:
  • 10.4.1 to play any trailer supplied to it by a distributor relating to a film which it will be exhibiting, at reasonable times during a period of at least 2 weeks immediately before the opening date of such exhibition;
  • 10.4.2 to display prominently such posters and other advertising materials as have been supplied by a distributor relating to a film which it will be exhibiting, for a reasonable time but not less than two weeks immediately before the opening date of such exhibition; and
  • 10.4.3 in any advertising and publicity for such film to refer to such film as a release of the relevant distributor, and to comply with such credit obligations as have been notified to it by such distributor.
• 10.5 Each exhibitor shall maintain its cinema or cinemas in good serviceable condition in line with generally accepted standards within the exhibition industry, including standards relating to cleanliness, acceptable temperature, improved access for the disabled and properly serviced and functioning equipment.
• 10.6 Without limiting Sections 5.5.2 and 6.4, each exhibitor shall install complying digital projection systems in its cinemas in a timely manner having regard to the projected timetable for the phasing out of 35mm prints and supply of all films in Digital Form. If a distributor considers that a digital projection system installed by an exhibitor is not a complying digital projection system then the distributor shall:
  • 10.6.1 give notice in writing to that effect to the exhibitor, including reasonable details of the manner in which the distributor considers the digital projection system is non-complaint; and
  • 10.6.2 allow the exhibitor a reasonable opportunity to rectify the non- compliance provided that, if the non-compliance directly relates to the security of the distributor’s Film Copies and other materials then, until such time as the security risk has been adequately rectified, the distributor may withhold or defer supply of its Film Copies and other materials to the exhibitor to the extent reasonably necessary to address the security risk.
• 10.7 An exhibitor who has failed to comply with any of the above requirements applicable to exhibitors after reasonable notice of the distributor’s objection to the exhibitor’s behaviour may be considered as ineligible for supply of a print by a distributor.

cinema:
includes a drive-in cinema.

complying digital projection system:
a digital projection system which complies with the requirements of a majority of the Major Studios in order for the Major Studios to permit their films to be exhibited on the system.

DCP:
Digital Cinema Package, being the collection of digital files used to store and convey digital cinema audio, image and data stream for films which are made available in Digital Form.

Digital Form:
the digital format of a film which complies with the requirements of a majority of the Major Studios in order for the Major Studios to permit the film to be exhibited (described as “DCI Specification Compliance”), capable of being exhibited on complying projection systems.

film:
includes:

1. feature length theatrical motion pictures in 2D or 3D format; and
2. programming content (other than feature length theatrical motion pictures, trailers and advertising content) in 2D or 3D format including, but not limited to, television programs, sporting events, theatrical stage productions, religious services, concerts, educational classes or presentations, live events, speeches and meetings.

Film Copy:
any current or future medium in which a film is made available for commercial distribution including, without limitation:

1. as a 35mm print; and
2. in Digital Form.

KDM:
Key Delivery Message, being the security key encryption system used with digital projection systems which is unique and allows only a specific DCP to play on a specific cinema complex playback server for a specified period of time.

Major Studio:
each of Twentieth Century Fox International Corporation, Universal City Studios LLP, Warner Bros. Entertainment Inc., Sony Pictures Entertainment, Inc., Paramount Pictures Corporation and The Walt Disney Company.

supply:
in respect of a film includes:

1. physical delivery of a 35mm print;
2. for a film made availabe in Digital Form:
1. physical delivery of a hard disk drive;
2. terrestrial, cable or satellite delivery; and
3. on-line delivery, being digital delivery by means of the Internet, any proprietary computer service, any local area telecommunications network or system used to communicate audiovisual work (including, without limitation, films) and/or any audio and/or video and/or digital data or content, on a point to point or point to multi-point basis (Network) and/or any other Network (linked by any transmission means including, without limitation, RF, broadband, wireless, satellite and coaxial or fibre optic cable).

VPF:
a so-called “virtual print fee” (including so-called “Alternative Content Fees”) paid by a distributor to a third party ‘integrator’ in connection with the exhibition of a film in Digital Form on a complying digital projection system operated by an exhibitor and applied in financially assisting the conversion to complying digital projection systems in the exhibitor’s cinemas.