<PAGE>
                                                                    Exhibit 10.3


"Pages where confidential treatment has been requested are stamped 'Confidential
Treatment Requested and the Redacted Material has been separately filed with the
Commission', and the confidential section has been marked in the margin with a
star (*)."

                                 REVENUE SHARING
                              OUTPUT LICENSE TERMS



As of February 28, 2000

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

1 .  TERM: Five (5) year period commencing upon the "Street Date" of the first
     "Rental Picture" (as such terms are defined below) released by WHV on or
     after May 16, 2000 (subject to change by Retailer upon notice to WHV).

2.   TERRITORY: United States and its territories and possessions only.

3.   DEFINITIONS:

     a.   "LICENSED UNITS" shall mean the total number of units (VHS and DVD)
          licensed to Retailer hereunder.

     b.   "MONTH" shall be defined as each calendar Month, and each Month shall
          end on the last day of such Month.

     c.   "PICTURE TERM" means for each Rental Picture the first twelve (12)
          months following the initial release of a title in either the VHS or
          DVD format.

     d.   "RENTAL PICTURE" means each and every "New Release" on videocassette
          and DVD of a feature motion picture distributed by WHV in the
          Territory (subject to any and all approvals required by any third
          party, including, without limitation, New Line and HBO) of not fewer
          than seventy (70) minutes in length, provided, however, that product
          controlled by third parties who do not approve of the terms hereof
          shall be specifically excluded from Rental Pictures. "New Release"
          refers to the initial release of a title in either the VHS or DVD
          format. WHV reserves its right, upon notice to Retailer, prospectively
          to withdraw any Rental Picture or distributed line from the terms
          hereof in the event WHV ceases to own or control homevideo
          distribution in the Territory with respect thereto.

     e.   "REVENUE" means all consumer-generated videocassette rental revenue,
          related extended viewing fees, lost unit fees, and any other fees, and
          any and all interest accruing thereon per rental transactions, of all
          Licensed Units, less actual Bad Debt (as


<PAGE>

          defined below), if applicable, and net of any and all Taxes (as
          defined below). The parties agree that Retailer's calculation of Bad
          Debt and Taxes shall be subject to review and verification by WHV.

          (i)  "BAD DEBT" shall mean, for purposes hereof (A) Retailer's total
               gross rental revenues (including extended viewing fees) relating
               to WHV Rental Picture product multiplied by (B) the quotient of
               (x) actual net write-offs by Retailer on an annual basis divided
               by (y) Retailer's total gross rental revenues (including extended
               viewing fees) chain-wide, provided that in no event shall
               Retailer's Bad Debt exceed 10% of Retailer's total gross rental
               revenues relating to WHV Rental Picture product.

          (ii) "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 Retailer's customers, and (C) the taxes are
               actually paid by Retailer to taxing authorities.

     f.   "STREET DATE" means the first day retailers are permitted by WHV to
          make a title available for rental to consumers or, for purposes
          hereof, in the case of DVD product, the first day Retailers are
          permitted to make a title available to consumers.

     g.   "TURN" shall mean one (1) actual rental transaction generated by a
          Licensed Unit. The parties acknowledge and agree that invoicing and/or
          payment of extended viewing fees, lost unit fees or other similar fees
          shall be considered a part of the Turn with which it is associated and
          shall not be considered a separate transaction or Turn.

4.   LICENSED RIGHTS:

     a.   HOMEVIDEO DISTRIBUTION LICENSE: WHV licenses to Retailer on a limited
          and non-exclusive basis homevideo distribution rights to the Rental
          Pictures in VHS and DVD formats only for rental only in the retail
          market in the Territory during the Term, subject to the terms
          hereunder and subject to Retailer's agreement to accept all Rental
          Pictures offered by WHV pursuant to the terms hereunder and to acquire
          sufficient quantities of such Rental Pictures to support the marketing
          efforts of WHV and Retailer contemplated hereby, subject to Paragraph
          5(a) below.

     b.   CREDIT APPROVAL: WHV and Retailer agree that this License is and shall
          during the Term be conditioned upon and subject to (i) Retailer's
          credit approval by WHV or its designee and (ii) maintenance of such
          level of credit worthiness during the Term, which level may be
          evaluated periodically by WHV or its designee at any time during the
          Term.

     c.   RESERVATION OF TITLE: Legal title to, and risk of loss of, the
          Licensed Units hereunder shall remain vested in WHV, subject to
          disposition of Licensed Units pursuant to


                                      -2-
<PAGE>

          Paragraph 8 below. Retailer shall not permit any encumbrance to attach
          to any Licensed Units delivered pursuant to this Agreement.

     d.   LIMITATIONS ON BUNDLING: In the event Retailer elects to bundle Rental
          Pictures with any other of Retailer's products, the effective retail
          price of the Rental Picture(s) shall be proportionate to the effective
          rental and/or retail price of each of the other products in the
          bundle, subject to WHV's minimum Revenue Share, pursuant to Paragraph
          6.a. below.

5.   INITIAL PAYMENT TO WHV:

     a.   INITIAL PAYMENT: For each Rental Picture licensed hereunder, Retailer
          shall advance to WHV a non-refundable aggregate amount (the "Initial
          Payment") as follows:

*         (i)  MUTUAL DETERMINATION: [***] per Licensed Unit, with WHV and
               Retailer mutually determining the number of Licensed Units per
               Rental Picture and WHV's decision final; or

*         (ii) RETAILER'S DETERMINATION: [***] per Licensed Unit, with Retailer
               unilaterally determining the number of Licensed Units per Rental
               Picture.

     b.   PAYMENT TERMS. For each Rental Picture, if applicable, the Initial
          Payment shall be due and payable by Retailer sixty (60) days after
          Street Date.

     c.   RECOUPMENT: Retailer shall recoup each Initial Payment from WHV's
          Revenue Share on a Rental Picture-by-Rental Picture basis. No Initial
          Payment or any other amount due or owing on any Rental Picture shall
          be cross-collateralized with the Initial Payment or any other amount
          due or owing on any other Rental Picture(s).

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.   DURING THE PICTURE TERM: During the Picture Term, on an average
          aggregate basis per Licensed Unit per Turn, WHV's Revenue Share shall
          equal the greater of (i) [***] of Revenue or (ii) U.S.$[***] which is
          net of Bad Debt and Taxes as defined in Paragraph 3.e. above.

     b.   POST-PICTURE TERM: After the Picture Term, Retailer retains all
          revenue.

---------
* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.


                                      -3-
<PAGE>

7.   STATEMENTS AND PAYMENTS:

     a.   STATEMENTS: On a Monthly basis, within ten (10) business days after
          the Month, for each Rental Picture, Retailer 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, including, without limitation, Initial
          Payment, WHV's Revenue Share, (as defined below in Paragraph 8) and
          actual Bad Debt.

     b.   PAYMENTS: For each Rental Picture, to the extent any amounts are due
          pursuant to the Statements, such amounts shall be due and payable
          within ten (10) business days following Month-end.

8. DISPOSITION OF LICENSED UNITS AFTER PICTURE TERM:

     a.   NO SALES:  Retailer shall not sell any Licensed Units.

     b.   TREATMENT OF LICENSED UNITS AFTER PICTURE TERM: For each Rental
          Picture, at the expiration of the Picture Term, Retailer, upon written
          notice to WHV by the expiration of the Picture Term, may elect to keep
          some or all of the Licensed Units for purposes of renting such units
          to consumers for up to two (2) additional years (the "Additional
          Period"). At the end of the Additional Period, or in the event
          Retailer does not elect to retain some or all Licensed Units for all
          or part of the Additional Period, WHV, at its option, shall instruct
          Retailer to return or destroy such Licensed Units, subject to
          Paragraph 8.c. below.

*    c.   RETAILER'S RENTAL INVENTORY: For each Rental Picture, Retailer may
          elect to keep up to [***] of the Licensed Units, per format, for
          rental inventory ("Rental Inventory).

*    d.   RENTAL INVENTORY PAYMENT: For each Licensed Unit retained as "Rental
          Inventory" within ten (10) business days after the end of the
          Additional Period (or if there is no Additional Period, at the end of
          the Picture Term), Retailer shall pay to WHV the non-recoupable sum of
          $[***] per unit.

     e.   EFFECT OF NON-COMPLIANCE: The parties agree that failure by Retailer
          to comply with this Paragraph 8 shall constitute a material breach of
          this Agreement.

*9.  MARKETING/PROMOTION: [***] Retailer agrees that this positioning shall be
     no worse than the positioning for the video product of any other Studio (as
     defined below). Both parties agree to review Retailer's marketing/promotion
     of WHV's product on an on-going basis during the Term.

*10. ADVERTISING SUPPORT: WHV shall provide advertising support funds to
     Retailer [***] on a by-Rental Picture basis, with media to be pre-approved
     by WHV. [***]

---------
* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.


                                      -4-
<PAGE>

11.  DELIVERY: WHV, at its cost, shall use its good faith reasonable efforts to
     deliver product to a distribution center designated by Retailer not less
     than ten (10) business days prior to Street Date for each Rental Picture,
     subject to timely placement of purchase orders by Retailer (i.e., by
     standard order due date).

12.  INFORMATION TO BE PROVIDED BY RETAILER: To the extent reasonably available
     to Retailer and with respect to WHV product only, Retailer agrees to
     provide the following information to WHV at Retailer's expense:

     a.   REVENUE SHARE REPORTING: On a weekly basis, no later than Tuesday
          morning for activity through the previous Sunday, Retailer shall
          deliver to WHV, via EDI or hard copy as reasonably requested by WHV,
          reports detailing the number of copies, the number of rental
          transactions and gross revenues per Rental Picture, in each instance,
          by format, by warehouse, provided that for the first ninety (90) days
          of the Term, the parties will work together to establish an
          appropriate reporting system for Retailer.

     b.   OTHER INFORMATION: Retailer and WHV shall mutually agree on other
          information, reporting formats and/or tracking or information formats
          and systems to be provided to each other.

13.  AUDIT RIGHTS: Upon not less than seven (7) days advance written notice to
     Retailer, WHV, or its representatives or designees, shall have the right
     during normal business hours, but not more than one (1) time per year
     during the Term and all the Picture Terms and one (1) time after the
     expiration of the Term and all the Picture Terms (but not the Additional
     Period), to inspect, audit and make extracts of the books and records of
     Retailer insofar as said books and records relate to the calculation or
     determination by Retailer of (a) Revenue, (b) WHV's Revenue Share, (c) Bad
     Debt, and (d) the rights licensed hereunder. Such rights of audit shall
     continue for a period of one (1) year following the expiration of all
     Picture Terms, (but not the Additional Period) as provided for under this
     Agreement. For purposes of clarification, there shall be no more than one
     (1) audit per year during the auditable period. The parties agree that
     Retailer shall have the right reasonably to approve independent auditors
     hired by WHV to conduct an audit, provided that the internal auditors of
     WHV and/or Time Warner and the accounting firm of Ernst & Young or WHV's
     then existing auditors shall be deemed pre-approved for any and all audits
     conducted pursuant hereto.

14.  SELL-THROUGH PRODUCT: WHV agrees to offer sell-through product (including
     catalog) to Retailer at WHV's best cost price for Retailer's category.

15. EQUITY POSITION: In partial consideration for the rights granted hereunder,
     Retailer agrees to give WHV or its designee $10 million in Retailer's
     Series F Convertible Preferred.


                                      -5-
<PAGE>

     Stock ("Stock") to be issued in its private placement. The parties agree to
     execute and deliver any and all documentation required to effect such stock
     conveyance.

16.  CONFIDENTIALITY: Each of WHV and Retailer acknowledges that (i) the terms
     and conditions of this Agreement, and (ii) all information and data
     (including, without limitation, rental and revenue forecasts, projections
     and estimates and actual results, in whatever form or medium)
     (collectively, the "Confidential Information") provided by each party to
     the other under this Agreement are highly proprietary and confidential.
     Each of WHV and Retailer agrees that it shall not use Confidential
     Information (other than in connection with the performance of its
     obligations under this Agreement or the exercise of its rights under this
     Agreement) or disclose Confidential Information to any person (other than
     its officers, employees, agents, representatives and licensors and
     licensees on a need-to-know basis only and who agree to be bound by the
     confidentiality obligations hereunder) or unless compelled by subpoena or
     court order or state or federal securities laws to disclose any such
     Confidential Information. This Paragraph 16 shall survive expiration or
     earlier termination of this Agreement.

17.  INDEMNIFICATION:

     a.   INDEMNIFICATION BY RETAILER: Except as otherwise provided in Paragraph
          17.b. below, Retailer shall defend, indemnify and hold WHV, its parent
          company, their affiliates and subsidiaries, and the officers,
          directors, agents and employees of each, free and harmless from all
          suits, claims, demands and other liabilities and expenses (including
          reasonable attorneys' fees) (each, a "Claim") which may arise directly
          or indirectly out of or by reason of (i) the unauthorized use by
          Retailer of any patented invention, or of any copyrighted material
          provided by WHV, (ii) a Claim from a customer arising out of
          Retailer's rental or retail practices or course of dealing with
          respect to such customer, and/or (iii) a breach or violation of this
          Agreement or any obligation, covenant, representation or warranty made
          hereunder by Retailer.

     b.   INDEMNIFICATION BY WHV: Except as otherwise provided in Paragraph
          17.a. above, WHV shall defend, indemnify and hold Retailer, its parent
          company, their affiliates, subsidiaries, and franchisees, and the
          officers, directors, agents, and employees of each, free and harmless
          from all Claims (including reasonable attorneys' fees) which may arise
          directly or indirectly out of or by reason of (i) copyright or
          trademark infringement by, or other third party Claim against, WHV or
          Retailer with respect to the content of any Rental Picture, provided
          such Claim or infringement is not the result of the negligence of
          Retailer or any employee or agent of Retailer, (ii) a physical defect
          in any Licensed Unit provided to Retailer hereunder by WHV, provided
          such defect was not caused by the negligence of Retailer or any
          employee or agent of Retailer, and/or (iii) a breach or violation of
          this Agreement or any obligation, covenant, representation or warranty
          made hereunder by WHV.


                                      -6-
<PAGE>

18.  REMEDIES:

     a.   GENERAL: Each of WHV and Retailer acknowledge and agree that a
          material breach by either party of any of its obligations under this
          Agreement, gives the other party the right to terminate this Agreement
          upon thirty (30) days prior written notice; provided that in the event
          the breaching party cures such breach within the notice period, the
          termination notice shall be void with respect to such cured breach
          only. Retailer waives any rights to seek injunctive relief with
          respect to the sale, license and/or other distribution of any Rental
          Picture, provided that Retailer does not waive any right it may have
          to seek specific performance under this Agreement with respect to any
          Rental Picture being distributed by WHV in the rental retail
          marketplace. The termination of this Agreement shall not relieve the
          parties of any obligations incurred prior to such termination.

*    b.   LIQUIDATED DAMAGES: In the event of termination by Retailer due to
          a material breach by WHV of any of its obligations under this
          Agreement, WHV shall pay Retailer liquidated damages [***]. At
          WHV's option, in lieu of paying liquidated damages to Retailer
          pursuant to the foregoing and subject to applicable securities laws
          and regulations, WHV may convey back to Retailer for no
          consideration that number of shares of Stock [***]. The parties
          agree that in the event of liquidated damages or reconveyance of
          Stock hereunder, the number of shares shall be adjusted as
          appropriate to reflect conversion and/or reverse splits of such
          shares. Nothing contained in this paragraph 18.b. shall preclude
          Retailer from seeking other remedies as permitted under this
          Agreement.

19.  REPRESENTATIONS AND WARRANTIES:

     a.    REPRESENTATIONS AND WARRANTIES OF RETAILER:

          (i)  AUTHORITY: Retailer hereby agrees, warrants and represents that
               Retailer has full authority, capacity and ability to execute this
               Agreement and to perform all of its obligations hereunder.

*         (ii) [***]

     b.   REPRESENTATIONS AND WARRANTIES OF WHV: WHV hereby agrees, warrants and
          represents that WHV has full authority, capacity, ability and right to
          execute this Agreement, to perform all of its obligations hereunder
          and to license the rights to Retailer hereunder pursuant to Paragraph
          4 above.

---------
* Confidential Treatment Requested and the Redacted Material has been separately
filed with the Commission.


                                      -7-
<PAGE>

20.  MISCELLANEOUS:

     a.   AMENDMENT AND WAIVER: Except as otherwise provided herein, no
          modification, amendment or waiver of any provision of this Agreement
          shall be effective against any party unless such modification,
          amendment or waiver is approved in writing by both Retailer and WHV.
          The failure of any party to enforce any of the provisions of this
          Agreement shall in no way be construed as a waiver of such provisions
          and shall not affect the right of such party thereafter to enforce
          each and every provision of this Agreement in accordance with its
          terms.

     b.   SEVERABILITY. Whenever possible, each provision of this Agreement
          shall be interpreted in such manner as to be effective and valid under
          applicable law, but if any provision of this Agreement is held to be
          invalid, illegal or unenforceable in any respect under any applicable
          law or rule in any jurisdiction, such invalidity, illegality or
          unenforceability shall not affect any other provision or any other
          jurisdiction, but this Agreement shall be reformed, construed and
          enforced in such jurisdiction as if such invalid, illegal or
          unenforceable provision had never been contained herein.

     c.   ENTIRE AGREEMENT. Except as otherwise expressly set forth herein, this
          document embodies the complete agreement and understanding between the
          parties hereto with respect to the subject matter hereof and
          supersedes and preempts any prior understandings, agreements or
          representations by or between the parties, written or oral, which may
          have related to the subject matter hereof in any way.

     d.   ASSIGNMENT:

          (i)  RETAILER ASSIGNMENT: This Letter Agreement shall not be assigned
               by Retailer without the prior written consent of WHV, which
               consent shall not be unreasonably withheld or delayed, provided
               that WHV has the right not to approve an assignment in the event
               of a sale of Retailer to a Studio (as defined below) or to a
               Third Party Retailer (as defined below).

          (ii) WHV ASSIGNMENT: This Letter Agreement shall not be assigned by
               WHV without the prior written consent of Retailer, except to any
               corporation or entity which controls, is controlled by, or under
               common control with WHV.

         (iii) PURCHASE OF RETAILER BY A STUDIO OR THIRD PARTY RETAILER.

               (A)  PURCHASE BY STUDIO: In the event a motion picture studio or
                    a company which produces or acquires theatrical or
                    non-theatrical product for release into the homevideo market
                    in VHS, DVD laser disc, and/or


                                      -8-
<PAGE>

                    other video formats, either directly to retailers or through
                    wholesalers (for purposes hereof, in each instance, a
                    "Studio") enters into an agreement to acquire Retailer, WHV
                    shall be given prompt notice of such agreement and shall
                    have the option to terminate this Agreement immediately upon
                    written notice to Retailer. Promptly following such notice
                    of acquisition agreement, Retailer, in consultation with
                    WHV, shall undertake to provide adequate assurance in
                    writing to WHV that proprietary and confidential information
                    of WHV shall not be disclosed to, or otherwise made
                    accessible to, the management or other employees of such
                    Studio following such acquisition. As used in this Paragraph
                    20.d.(iii)(A), the term "Studio" shall also include, without
                    limitation, the respective affiliated corporations which
                    control, are controlled by, or are under common control
                    with, any such Studio. The term "control" shall refer to the
                    ownership of at least fifty percent (50%) of the outstanding
                    voting power of the corporation or entity which is subject
                    to such "control".

               (B)  PURCHASE BY/OF THIRD PARTY RETAILER: Subject to Paragraph
                    20.d.(i) above, in the event a third party retailer (a
                    "Third Party Retailer") enters into an agreement to acquire
                    Retailer, or Retailer enters into an agreement to acquire a
                    Third Party Retailer, then WHV and Retailer agree that in
                    such event, the terms of this Agreement shall apply only to
                    Retailer, unless and until WHV approves in writing inclusion
                    of such Third Party Retailer hereunder.

               (C)  DEFINITION OF "PURCHASE": For purposes of this Subparagraph
                    20.d.(iii) the term "Purchase" shall include acquisition,
                    merger and/or other consolidation.

     e.   COUNTERPARTS. This Agreement may be executed in separate counterparts
          each of which shall be an original and all of which taken together
          shall constitute one and the same agreement.

     f.   DUE AUTHORIZATION. Each of WHV and Retailer represents and warrants
          that the officer executing this Agreement has been duly authorized and
          that this Agreement when executed and delivered shall be valid and
          binding and enforceable in accordance with its terms.

     g.   NOTICES. All notices provided for in this Agreement shall be in
          writing and shall be either personally delivered, or mailed first
          class mail (postage prepaid) or sent by reputable overnight courier
          service (charges prepaid) to the parties as follows:



                                      -9-
<PAGE>

          If to Retailer:

          Kozmo.com
          80 Broad Street, 18th Floor
          New York, NY  10004
          Attention:  Yong Kang, President and C.A.O.
          Gerry Burdo, C.F.O.
          Cindy Holland, V.P. Business Development

          with a copy to Alan Sutin, Esq.
          Greenberg and Traurig
          200 Park Ave.
          New York, NY  10166

          If to WHV:

          Warner Home Video
          4000 Warner Boulevard
          Burbank, CA  91522
          Attention: Jim Cardwell, Executive Vice President
                     North American Operations
                     Beth Baier, Senior Vice President, Business
                         and Legal Affairs and General Counsel

     h.   GOVERNING LAW. This Agreement and all matters or issues material
          thereto shall be governed by the laws of the State of California,
          applicable to contracts performed entirely therein.

     i.   DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are
          inserted for convenience only and do not constitute a part of this
          Agreement.

     j.   RELATIONSHIP OF PARTIES. Nothing contained herein shall constitute a
          partnership, joint venture, association or principal and agent
          relationship or be construed to evidence the intention of the parties
          to constitute such. Retailer and WHV are independent contractors and
          neither has any authority to act on the other's behalf or to bind the
          other in any way.

     k.   FORCE MAJEURE. Whenever performance by any party of its obligations
          under this Agreement, other than any of Retailer's payment obligations
          hereunder, is substantially prevented by reason of any act of God,
          strike, lock-out, or other industrial or transportational disturbance,
          fire, lack of materials, law, regulation or ordinance, war or war
          conditions, or by reason of any other matter beyond such party's
          reasonable control, then such performance shall be excused and this
          Agreement shall be deemed suspended during the continuation of such
          prevention, and the term shall be extended for a period equal to the
          time of such suspension.

     l.   THIRD PARTIES. None of the provisions of this Agreement is intended
          for the benefit of or shall be enforceable by any third parties,
          including creditors of Retailer or WHV.


                                      -10-
<PAGE>

In WITNESS WHEREOF, this Agreement was executed by the parties on the date first
written above.

RETAILER                                WARNER HOME VIDEO, a division of
                                        Time Warner Entertainment Company,
                                        L.P. ("WHV")

By: /s/ illegible                       By: /s/ illegible
    ------------------------------          ------------------------------

Its:                                    Its:
     -----------------------------           -----------------------------

Retailer:
          ------------------------










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