This document summarizes key aspects of financing for media and entertainment businesses. It addresses whether a studio is a publisher or distributor, and what types of contracts are involved in work for hire, development, and completion financing deals. It also discusses growth investment from angels to VCs, including legal documentation like subscription agreements and articles of association. Key concerns for investors addressed include warranties, consent rights, information rights, and protections against dilution or a bad exit. The document is intended to provide a legal perspective on different stages of financing in the media industry.

1. Lawyers for the business of media and entertainment The Funding Cycle: legal and other
perspectives on financing
Mark Phillips
5 April 2016
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2. Funding Cycle

3. Question No 1
Is a studio a publisher and is a publisher a:
a)distributor?
b)wholesaler?
c)platform?
d)marketing and/or PR provider?
e)localiser?
f)studio?
g)Q&A?
h)analytics?
i)business development/agent
j)financier?

4. Question No 2
Is a publishing contract for:
a)work for hire development?
b)prototype/early stage development?
c)completion financing?
d)pick up deal?
And if so, what about:
Milestones/Royalties and deductions/
Recoupment/Cross collateralisation/
IP exploitation/Slice the cake (format/territory/sequel)?

5. Growth Investment
Investor
Family & friends/angels/super angels/incubator/accelerator/VC
Process
LOI
Due Diligence
Documentation (entrepreneur's flexibility v protection of
investment)
Tax breaks for investment (EIS/SEIS)

6. Growth Investment cont.
Documentation
Subscription and Shareholders’ Agreement
New Articles of Association
Disclosure Letter
Loan/Finance Documentation?
Option Documentation?
New Service Agreements?
IP Assignments?
OR
Share certificate

7. Business Plan or
Prospectus/Regulation
Basic Rules
do not make misleading statements
any financial promotion needs to be issued or approved by
authorised person (Financial Services and Markets Act 2000
(“FSMA”)
If for more than £5million and to more than 100 recipients need a
prospectus complying with Prospectus rules and FSMA.
Exceptions for non prospectus
Qualified investors or
Self-certified sophisticated investors and high-net worth
individuals
N.B. rules on equity crowd funding

8. Subscription and Shareholders
Agreement
 Function is:
 To set out terms between parties
 Deal with future situations/exit routes
 Deal with existing business
 Key = to protect the minority/non-management shareholders
 Key Concerns for Investors:
 Warranties – To flush out information about the business
 Director/Observer Rights – To have a degree of management input and
control
 Investor Consents – To give Investors knowledge of and veto over key
matters
 Management and Information Rights - To give investors key financial
information about company
 Restrictive Covenants – To prevent key executives from competing and
poaching staff and customers
 Option pool

9. Articles of Association
 Key Concerns for Investors:
 Pre-emption rights on new issues of shares and transfers of shares
– to avoid being diluted
 Restrictions on share transfers – the investors are investing in the
entrepreneurs themselves
 Drag and Tag Along Rights – to stop the minority jeopardising a
deal and to enable them to benefit from exit
 Good/Bad Leaver provisions – to discourage key employees from
leaving.
 Others? (e.g. dividend preference, liquidation preference, “down
round” protection)

10. Any questions?
Mark Phillips
Partner
020 7667 5000
mark.phillips@harbottle.com