By Eva Dickerman
Rights, Restrictions & Compatibility: The Challenges of Mobile TV
Seth Metsch, Digital Counsel, Business & Legal Affairs, A&E Television Networks (Moderator); Jeffrey D. Neuburger, Partner, Proskauer Rose LLP; Shirin Malkani, Vice President, Legal & Business Affairs, National Basketball Association; Sharon E. Kopp, Assistant General Counsel, Business & Legal Affairs Verizon FiOS TV & V CAST Video; Salil Gandhi, Co-Founder, Crybaby Media
Due to the increasing capabilities of mobile devices, the cell phone has become the primary gadget for Americans. Television content providers are eager to take advantage of the unique opportunity to get their programming quite literally into the pockets of consumers. As they negotiate the deals that make mobile distribution of television programming possible, the panel members are shaping the law in this area. The panel discussed the obstacles and issues they face in making top shows and events available to our fingertips.
How Should Clients Be Advised As They Draw Up New Deals?
One of the primary issues is that it is difficult to define a mobile device. Is it just a device that fits into your pocket? How should the iPad be categorized? If mobile but not Internet rights are granted, can the content be hosted on an iPad? One of the greatest difficulties with mobile video distribution is its very newness – in previously written deals there may not have been mention of mobile distribution.
Neuberger noted that there are no clear definitions of the different kinds of mobile devices. As technology evolves, we have to ask whether those distinctions are even meaningful. Neuberger suggests that licensing should be articulated in terms of functionality. Agreements written in the past defined scope of rights in terms of the device, but now the scope of rights should be defined in terms of functionality. Gandhi, referring to his experience at Joost, noted that the focus should be on branding and functionality rather than screen size.
Going forward, when negotiating deals, distributors will want to secure all rights in all media.
There is also the possibility of longer term contracts to define the license based on external factors that will exist even in spite of technological change (i.e. target demographics.)
The Evolution of the Mobile Platform
Kopp noted that Vcast serves as an aggregator. She described the unique position of Verizon – it seeks to provide content to customers in any format that customers might want – so the company is simultaneously negotiating television, mobile and Internet rights. The goal is to give customers a uniform experience across screens.
Vcast is offered using carrier bandwidth. The service has some streaming and downloadable programs. From the perspective of delivery method, Vcast uses mobile bandwidth, and, vis-à-vis the discussion above, is clearly a mobile service. An app that uses WiFi, however, will be harder to describe as a purely mobile app.
The Sports Context
Malkani discussed some of the idiosyncrasies of delivering sports content on mobile devices. All leagues do not deal with rights in the same way – there are some national rights and some team rights, the latter of which serve internal markets. It is hard to know if the consumer can ever have a single, unified package in light of these different markets.
Malkani also noted that although mobile is a desirable new format, traditional television is still incredibly important for sports because fans want to see the action on the big screen. Furthermore, since sporting events are live, fans want to watch a game when it’s happening. Malkani explained a little bit about NBA’s developing mobile strategy. The app Gametime allows users to get scores, stats, and video highlights. There is also a ‘league pass’ that is offered through the Gametime app. Although previously the NBA had separate apps for the League and the team, now users will get league updates or team versions within Gametime – in other words the strategy shifted to allow for a single streamlined app, rather than a set of disaggregated apps. Verizon also has an NFL app that has been quite successful – Kopp credited the ‘front and center’ branding of the app – when a Verizon user looks through the icons on a phone’s display screen, the NFL symbol is clearly visible.
How Important Is the Screen Size?
Several of the panelists noted that older deals articulated the distinctions between devices in terms of screen size. Neuberger suggested that screen size might not continue to be as relevant.
Indeed, the importance of the labels given to different devices is a shifting one. For example, in the past the terms “TV” or “television” were equivalent to broadcast television, but as time went on, the definitions came to include cable networks.
TV Remains a Driving Force…
However, the screen size issue does still matter to a certain extent. As the big cable networks pay content providers large license fees, the networks want to make sure that these agreements are still valuable to them by ensuring the uniqueness of the content that they are receiving.
Some of the Difficulties of Mobile Deals
As previously mentioned, there is an overarching issue of how to define mobile devices and how to determine the rights required to distribute programming via those devices. Some contracts limit the definition of mobile to ‘cellular technology’ – but what about the increasing reliance upon WiFi networks? What about the phone versus tablet distinction? In general, contracts are also more likely to grant broadband rights rather than mobile rights.
Another important question concerns how to deal with territory restrictions on content. The whole point of a mobile device is that its owner takes it with him or her wherever he or she may go. How can companies ensure that restricted content stays within authorized territories? Do there need to be authentication license-keys?
Malkani explained that when the NBA launched a mobile app, the vendor incorporated a geofiltering device to make sure that the streaming complied with the geographical blackouts mandated by the different cable companies. When Malkani herself used the mobile app, if she were to be in LA in the morning, then the corresponding blackouts in the California market would mean that certain content would be unavailable on her phone. If she were to return to NY later that day, then the corresponding blackouts in the NY market would also be reflected in the content available on her phone.
Several panelists noted that content providers will also want to insure that the video is captive within the device, and cannot easily be acquired within the mobile context but watched on different screens. In other words, providers do not necessarily want to grant users mobile access to content if these users will simply be hooking up their phones to their televisions, and watching the content through the latter rather than their mobile devices.
Talent and Mobile Content
Gandhi noted that talent is now going directly to consumers through apps. He noted that the advantage of straight-to-consumer delivery is the allowance of preserving the rights needed to build a brand. There is also the desire, in the attempts to build a brand, to try to maintain as many revenue streams as possible; one is doing oneself a disservice in the age of television everywhere. Distributors want to make content available to customers in any way, but talent may want to divvy up the rights.
Furthermore, there are important distinctions based on the device, since the expectation will be that consumers will pay for mobile uses but not on the Internet.
There is also the sense that it may be better for talent to use short-form content in the mobile context – consumers want to see new and specially produced content. The NBA too looks strategically for potential other content beyond the games. Vcast however is moving towards long-form programming.
Where Is the Business Model of Mobile Video Going?
Neuberger suggested that as there is increasing pressure on companies to collect revenue from all of their interactive applications, there may be an approaching end to free, meaningful content, and hence, more rigorous pay models will emerge.
The panelists agreed that social networking would make its way into the mobile app context. Since consumer engagement is the ultimate goal, having ‘check-ins’ as a way to make television more social may increase consumers engagement with the content that they are purchasing.
The Changing Landscape of Film Distribution: A Digital Vision
Marc Jacobson, Entertainment Attorney, Marc Jacobson, P.C. (Moderator); Betsy Rodgers, Vice President, Legal and Business Affairs, IFC Entertainment; Jessica Nickelsberg, Director of Legal and Business Affairs, Tribeca Enterprises; John Logigian, Attorney and Independent Film Consultant, Isil Bagdadi, Co-founder and President of Distribution, CAVU Pictures.
The panelists began the discussion by explaining their work within the film distribution industry, with a focus on new and emerging modes of distribution.
Betsy Rodgers explained IFC Entertainment’s "festival stunt” partnership with film festivals. IFC acquires films at festivals (such as Sundance and SXSW), or immediately prior to the festival’s start date. Then IFC releases the film on VoD concurrent with the festival. Since IFC already had an established relationship with the cable companies, this creative turn seemed to be a natural step. These partnerships require IFC to establish a legal relationship with the festivals, and IFC must gain licensing rights to the trademarks, branding and intellectual property of the festival. Rodgers said these partnerships are valuable to IFC as a distributor, because the buzz from the festival can help to get viewers excited about the films. This arrangement allows the distributor to capitalize on the value created at the festival. Furthermore, many of these films would not be able to reach audiences otherwise. It is also a cost-effective process, because prints are incredibly expensive to create.
However there are also some complications with festival stunts.
Time Constraints: In the case of the Sundance Film Festival, IFC might already have acquired some films before the festival has begun. In that case, the delivery materials might have been received from the filmmaker prior. The difficult situation is when IFC wants to license films that have not been acquired before the festival. By the time the IFC team discovers what films are in the festival, the delivery materials might already be due in order to ensure a concurrent release on the VoD platform. In this case, there needs to be an incredibly quick turnaround – in papering the agreement, making sure the films are fully cleared (which can be a challenge since often filmmakers will only have festival rights to music in their films), and in ensuring that the film is fully finished and can be encoded in time to make it onto the VoD platform.
Psychological Hurdles: Filmmakers often dream of having their films get wide releases in theatres. Since most big theatre chains will not take a film that has been previously released on VoD, accepting such a distribution ‘stunt’ for the filmmaker may mean giving up certain expectations. Furthermore, if the primary release of a film occurred on the VoD platform, the film might be disqualified from the big awards races.
Financial Hurdles: Producers need to read their agreements. Low budget films will often contain a provision that allows the use of SAG actors at a low rate. If the film is not given a theatrical release, however, there might be significant penalties.
Jessica Nickelsberg next explained the evolution of the Tribeca brand. From the flagship Tribeca Film Festival, Tribeca Enterprises has recently launched a new initiative, Tribeca Films, a distribution arm which underlying mission is to get independent films out to a wider audience. Tribeca Films distributes on a variety of platforms; in theaters, online, on DVD, and on demand.
Tribeca also has its own version of the festival stunt. During the 2010 festival, Tribeca Enterprises launched “Tribeca Film Festival Virtual,” a digital festival experience. For one week during the festival, viewers could (at the price of $45) go and watch eight feature films online (otherwise only available at the festival), at an encrypted site.
John Logigian focused on broader distribution trends within the industry. Traditionally it has been the ancillary markets (i.e., home distribution) that have been the big money earners. The profit margin is much greater in the home entertainment sphere than it is in the theaters. However, home entertainment is becoming less profitable for the studios. Now that delivery is digital, (whether digital streaming or downloading), there is no longer the ‘packaged goods’ element (i.e. selling of DVD’s at a retailer). Profit margin was much greater in the packaged goods market.
An upside of the digital revolution has been digital projection. Digital projection allows a reduction in the enormous cost of manufacturing and shipping of prints. Certainly there is a cost to convert to digital projection, but it is possible that companies will help theaters underwrite the costs of digital projection. Another notable development has been the spectacular growth of 3D.
Isil Bagdadi focused upon the growth of the DIY (do it yourself) movement in film. Her major concern was that filmmakers are losing ownership rights to their works by entering into certain agreements with distributors. Her concern with the festival relationships described above is that if festivals get into the distribution game, will there be favoritism in programming at the festivals themselves?
Bagdadi championed a ‘services deal’ agreement, in which a distributor gets a fee for providing the services of distribution, but does not get ownership rights. Bagdadi also suggested the possibility of self-distribution.
In response to Bagdadi, Logigian brought up some counterarguments to the benefits of the DIY approach. Although it looks great on paper to retain ownership rights, it is the distributors who have leverage in the ancillary marketplace – and most revenue comes from the ancillary marketplace rather than from the theatrical release.
The panel as a whole engaged in a discussion of the different types of financing arrangements for independent films. Investors will have different expectations and different risks depending on where their money is going. If investors are putting in money for marketing, then they will be the first individuals to be repaid. Investments in production, however, hold a different kind of risk profile.
The panel also discussed the option of bifurcating the investment (i.e., various parties investing money for production and marketing), which might allow the filmmaker to get a better deal. Logigian noted that the foreign pre-sales market (selling a film to distributors overseas before the film is made) has largely dried up except for the biggest-name films. The panel also briefly touched upon the value of getting a high net worth individual to put equity into a film if studio financing is not a possibility. Jacobson also mentioned the option of state tax credits as a means of filling gaps in the financing of a film, and providing early capital for a marketing or festival campaign.
How to (Legally) Make an App for That - Dealmaking in the Mobile Media and Gaming Arena
Kenneth N. Swezey, Esq., Managing Partner, Cowan DeBaets Abrahams & Sheppard, LLP (Moderator); Hayley Geftman, Esq., Vice President, Business and Legal Affairs, MTV Networks; Sam Howard-Spink, Clinical Assistant Professor of Music Business, NYU; Amy Lauren, Esq., Vice President, Digital Legal & Business Affairs, EMI; Stephen Sternschein, Esq., Founder, Heard Games; Artist Manager, Heard Games
Sam Howard-Spink began by discussing some sweeping trends. He noted that in the first half of 2010, between 2.6 and 2.9 billion dollars were spent on content (excluding consoles, controllers and other devices). Spink also noted the importance of the growing phenomenon of “in-app” purchasing; once a consumer is inside the app, the consumer makes a further purchase. Spink suggested that when a consumer has taken the effort to spend a few dollars to buy the app, the consumer is more likely to go spend more money on content within the app itself. Spink also noted the different ways that music can be used within app games: original compositions, the use of existing music licensed into the game, rhythm action games (i.e. Guitar Hero), and generative games (the user creates music in real time by using a set of protocols – although such games might pose greater licensing issues).
What Is the Best Business Model For An App?
Geftman noted that apps have had an increasing presence at MTV for the last few years. MTV has been involved in the apps world in different contexts: distribution of content to third party apps, creation of paid apps, free apps surrounding certain temporal awards, and ad-supported apps.
Sternschein noted that at Heard Games, apps are being built and designed to engage and monetize a particular brand. In other words, each app has a unique and specific approach on a band-by-band basis. Sternschein hopes for the growth of artist-based apps as a means to re-contextualize and repackage music in the digital environment. Apps may play a role in integrated marketing campaigns promoting artists.
Lauren noted that at BMI, apps are still a hybrid form. Certainly many apps are getting traction, and sometimes these apps are tied into the overall strategy of an album release.
Then the audience had some fun as Spink showed a few apps, including the Gorillaz app (BMI), Shinobi Ninja Attacks (Heard Games), and Bloom – a generative game. These apps are just a few examples of a new approach in the music industry. These games create a narrative framework, which is in turn tied to music and lyrics, and reward users for interacting with the content that is being promoted.
a) Costs There are different costs associated with the development of apps depending on the level of involvement – if creating a highly customized app, the process might be quite expensive. There has to be a developer deal in place, in addition to due diligence review on all of the content going into the app. Geftman noted that there must be clear language about merchandising and marketing within app agreements, since apps generally will be tied to MTV’s content.
b) Artist Concerns v. Developer Concerns When working with a developer on an app, the primary concern of the artist will always be: what is the scope of the intellectual property rights being given away? Will use of the song be limited to one app? Developers, on the other hand, are trying to get as many rights as possible.
c) Licensing to Different Devices As previously discussed by the Mobile TV panelists, there is segmentation in the current licensing schemes – different rights are granted for mobile, television and Internet (and apps may be used in any of these contexts). Therefore rights owners must be very specific about the rights they are granting to developers.
It is possible that a ‘new creature’ might come about – that of the music game, in which music and coding is treated as a single creative gesture. Such an evolution of the app might be an alternative to the segmentation of rights.
App Developer Agreements
Geftman stressed that the developer agreement should stipulate that apps are being created as works for hire. The developer will own his or her own source code, but anything being built for the content provider, will remain the provider’s property. In general, the panelists concurred that there should be a flat fee, such that at the point of delivery the process is completed. BMI’s Amy Lauren noted that the app developer agreement has many similarities to a standard software development agreement.
The Apple Deal
Although typically when dealing with Apple, content providers will serve as the retailers, in the context of apps, EMI or MTV may serve as the retailer. This arrangement shifts the risk from Apple, and is in some sense new terrain for record labels based on previous relationships with Apple. As a retailer, the content provider will face consumer issues, tax implications, and territorial issues. Although Apple has an end-user license agreement for retailers, this agreement may not address all of the issues relevant to the app. It can be difficult to renegotiate the terms of a developer agreement with Apple. Yet in the case of an independent entity (such as Heard Games), since there is less of a potential financial gain at stake, Apple may be more flexible with the types of marketing it allows.