Territory Carve Out
Exclusion of specific geographic markets from broader distribution deals to preserve separate licensing opportunities.
Definition
A contractual provision that removes certain territories or regions from comprehensive distribution agreements, allowing rights holders to negotiate separate deals for those markets. These exclusions are typically made to capture higher values in premium territories or accommodate pre-existing obligations.
Carve outs enable rights holders to optimize revenue by treating different markets according to their unique characteristics, timing requirements, or existing relationships while maintaining broad distribution coverage for remaining territories.
Why It Matters
Strategic territory carve outs can significantly increase total revenue by allowing specialized treatment of high-value markets that might generate more income through separate negotiations than inclusion in broader deals.
Carve outs provide flexibility to accommodate pre-existing relationships, co-production requirements, or territory-specific obligations while still achieving broad international distribution coverage for remaining markets.
Examples in Practice
Distributors commonly carve out major English-speaking markets like UK, Australia, and Canada from international sales packages to negotiate premium deals directly with local distributors.
Co-production agreements often require carving out co-producing territories, where local partners retain distribution rights as part of their financing contribution to the project.
Streaming deals may carve out theatrical rights in key markets, allowing distributors to pursue traditional cinema release before digital availability in those premium territories.