Flixnet provides a video streaming service focused on classic horror films and romantic comedies.
It has approximating 1,500 copyright licenses from movie studios that allow it to stream films for
the next five years. Under the terms of the contracts, Flixnet pays the studio fees based on the
number of views of the studio’s films each month. For their part, the studios remain free to license
the copyrights to third parties, but if any of those third parties are video streaming services, the
studios agree to pay 3 percent of any resulting licensing fees to Flixnet as a “competition loss
abatement bonus.”
Facing stiff competition from other video streaming companies and a falling demand for horror
movies from the 1970s, Flixnet files for bankruptcy. Its library of copyright licenses includes 153
films from various studios that Netflux, one of its competitors, has long wished to stream. The
studios have, however, refused to license the films to Netflux directly because of concerns about
being associated with Netflux’s core business, which consists of Albanian porn movies.
In order to continue to operate in Chapter 11, Flixnet proposes that it assume all its copyright
license agreements. In addition, it wishes to assign its rights under 153 of the licenses to Netflux
for a considerable profit. Since the studios negotiated their original license agreements with
Flixnet, the market value of video streaming rights has increased markedly. Accordingly, the
studios object to Flixnet’s efforts to assume the contracts. They hope of renegotiate more favorable
fee arrangements. In addition, they strenuously object to the assignment of any licenses to Netflux.

May Flixnet assume the contracts over the objections of the studios? May it assign the 153 licenses
to Netflux?

pur-new-sol

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