VHS Revenue Sharing License Agreement

Exhibit 10.10


[LOGO]
WARNER HOME VIDEO


January 20, 1999


Mr. Dean Wilson Executive Vice President General Merchandising Manager Blockbuster Inc. 1201 Elm Street Dallas, TX 75270


RE: VHS REVENUE SHARING LICENSE AGREEMENT


Dear Dean:


The following (the "Letter Agreement") sets forth the terms of the license agreement (the "License") between Warner Home Video, a division of Time Warner Entertainment Company, L.P. ("WHV") and Blockbuster Inc. ("Blockbuster") for revenue sharing on WHV's Rental Picture output.


1. TERM: Three (3) year period commencing upon the "Street Date" of the
first "Rental Picture" (as such terms are defined below) released by
WHV on or after March 1, 1999.


2. TERRITORY: United States only; provided, however, Blockbuster shall
have the option to enter into an agreement with WHV (Canada) on
substantially the same terms and conditions, and for a term coextensive
with the Term hereof, upon one hundred and eighty (180) days prior
written notice to WHV.


3. DEFINITIONS AND CALCULATIONS:


a. "Base Units":


(i) Calculation Based on Revenue Sharing Measurement Titles:
The following calculation shall be used for determining *


- ---------------------- * Pages where confidential treatment has been requested are stamped
"Confidential material omitted and separately filed with the Commission
under an application for confidential treatment", and the confidential
section has been marked with a star (*).


(A) *


(B) *


(C) *


(D) *


(E) *


(F) *


(ii) *


b. "Bonus Units" *


c. "Box Office Receipts" shall mean North American (United States
and Canada) gross box office receipts, as reported or estimated
in VARIETY or the HOLLYWOOD REPORTER *


d. "Guarantee Program" shall mean the program under which Blockbuster
nationally advertises a money-back guarantee or free rental to
consumers if videocassettes of certain titles are not available for
rental from the Stores or another comparable program.


e. "Licensed Units" shall mean the sum of the Base Units and the
Bonus Units for each Rental Picture.


f. "Month" shall be defined as set forth on Exhibit 3(e) attached
hereto and by this reference made a part hereof.


g. "Picture Term" means for each Rental Picture the first 26 weeks of
rental release beginning with Street Date.


h. "Rental Picture" means each and every new release on videocassette
of a feature motion picture for which WHV owns or controls home
video distribution rights in the Territory (subject to any and
all approvals required by any third party) of not


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under an application for confidential treatment.


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fewer than seventy (70) minutes in length, priced for rental in the
retail market; provided, however, the following shall be
specifically excluded from Rental Pictures: (i) New Line, MGM and
HBO distributed lines (unless and until the terms of this Letter
Agreement are accepted and agreed by any such distributed line),
(ii) product controlled by third parties who do not approve of
the terms hereof and (iii) videocassettes of sports events,
concert footage, stage plays, documentaries, video or theatrical
re-releases, foreign language titles or product rated NC-17 or
more restrictive by the MPAA, or library titles.


i. "Revenue" means *


(i) "Bad Debt" shall mean *


(ii) "Credits" *


(iii) "Taxes" shall mean any and all sales, excise, value added or
other taxes which meet the following qualifications: (A) the
taxes are separately stated, (B) the taxes are required by law
to be collected from Blockbuster's customers, and (C) the
taxes are actually paid by Blockbuster to taxing authorities.


j. "Stores" shall mean (i) all Blockbuster-owned rental retail stores,
(ii) any and all Blockbuster franchises that elect to participate
in, and comply with, the obligations set forth under this Letter
Agreement and any other obligations that Blockbuster may impose to
administer the terms hereof with respect to any such franchisees,
and (iii) Blockbuster-owned alternative direct-to-consumer VHS
rental distribution systems by which Blockbuster rents VHS
videocassettes to consumers for home use and/or sells PVTs to
consumers via internet, vending machines and/or kiosks
(collectively, "Alternative Distribution Systems"). * All
franchisees that participate shall be treated as Blockbuster Stores
for the purposes of this Letter Agreement, and the actual rental
transactions of such franchisees on Measurement Titles shall be
included in Blockbuster's total rental transactions. In the event
that there is insufficient historical data, the parties shall use
good faith efforts to agree on estimated rental transactions for
such franchisees. "Stores" shall specifically exclude any new store
or stores owned or controlled by Blockbuster operating under any
name other than Blockbuster. The parties agree


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under an application for confidential treatment.


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that with respect to stores and/or chains of stores acquired by
Blockbuster during the Term, such stores shall be eligible to assume
the rights and obligations set forth hereunder provided Blockbuster
shall report for such new stores through its existing established
reporting mechanism, and, any existing revenue sharing agreement of
any such store with WHV shall terminate. Upon the addition or
acquisition of stores, Blockbuster shall notify WHV immediately in
writing, and the parties shall begin good faith discussions to
immediately increase the number of Base Units to reflect such store
acquisitions and/or additions.


k. "Street Date" means the first day retailers are permitted by WHV to
make a title available for rental to consumers.


4. LICENSED RIGHTS:


a. Homevideo Distribution License: WHV licenses to Blockbuster on a
limited and non-exclusive basis homevideo distribution rights to all
Rental Pictures in the VHS format for rental (i) only to consumers
for home use and (ii) only from Stores in the Territory during the
Term, subject to the terms hereunder.


b. Reservation of Title: Legal title to, and risk of loss of, the
Licensed Units hereunder shall remain vested in WHV, subject to
disposition of PVTs pursuant to Paragraph 8 below. Blockbuster shall
not permit any encumbrance to attach to any Licensed Units delivered
pursuant to this Letter Agreement.


5. INITIAL PAYMENT TO WHV:


a. Calculation:


(i) For each Rental Picture licensed hereunder with Box Office
Receipts of *


(ii) *


b. Payment Terms: For each Rental Picture, if applicable, the *
shall be due and payable by Blockbuster within *


c. Recoupment: Blockbuster shall recoup *


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under an application for confidential treatment.


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6. REVENUE SHARING: For each Rental Picture, subject to Paragraph 5(c)
above, WHV's share of the Revenue shall be calculated as follows:


a. For weeks*


b. For weeks *


c. *


7. STATEMENTS AND PAYMENTS:


a. Statements: On a Monthly basis, * Blockbuster shall provide to
WHV, in the formats reasonably requested and as periodically
amended by WHV, a statement (the "Statement") which reflects the
rental and related activities for such Month, *.


b. Payments: For each Rental Picture, to the extent any amounts are due
pursuant to the Statements, Blockbuster shall wire transfer such
amounts to an account designated by WHV no later than *.


8. DISPOSITION OF PREVIOUSLY VIEWED TAPES:


a. Sale: For each Rental Picture, WHV may direct Blockbuster, as its
licensee, to sell previously viewed tapes ("PVTs") to consumers
pursuant to the following conditions:


(i) For Rental Pictures with *


(ii) For Rental Pictures with *


(iii) Restriction on Sale of PVT's: In addition to and without
limiting in any way the foregoing, the following
restrictions shall apply on a title-by-title basis for all
Rental Pictures:


(A) *


(B) *


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under an application for confidential treatment.


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(iv) No Revenue Share: There shall be no revenue sharing between
Blockbuster and WHV with respect to the proceeds from sales
of PVTs by Blockbuster except *.


(v) *


(vi) In the event WHV changes its current practice with respect to
directing Blockbuster to sell PVTs consistent with
Subparagraphs (i)-(v) of 8.a. above ("Redirection"), the
parties shall in good faith review and reduce WHV's Revenue
Share effective with any Redirection, if necessary, to
provide for the sharing on a pre-established * basis of
revenues generated by Blockbuster under this Letter
Agreement in excess of the revenues Blockbuster would have
earned prior to the parties' revenue sharing relationship.
The calculation of WHV's Revenue Share shall be based on
historical data relating to revenues generated from the
Rental Pictures during the prior year and shall be subject
to audit. The Minimum Share shall be adjusted on a pro rata
basis to reflect any new WHV Revenue Share percentage.


b. Other Disposition:


(i) Box Office Receipts of *: Subject to the foregoing, with
respect to Rental Pictures with Box Office Receipts of * at
the end of the applicable Picture Term, the Licensed Units
shall be treated as follows:


(A) Base Units: * of Base Units * except as otherwise
specified herein.


(B) Bonus Units: Blockbuster and WHV shall * of Bonus
Units by the end of the Picture Term for each Rental
Picture, with *. To the extent any Bonus Unit is *
WHV * within * after the end of the applicable
Picture Term, which * shall not be recoupable.*


(C) * of Licensed Units: In the event that * the Bonus
Units, then, * thereafter for each such Rental
Picture. The parties agree that, *.


(ii) Box Office Receipts of *: Subject to the foregoing, with
respect to Rental Picture ...