Experts Explore Sports, Entertainment Property Rights in Digital Age

February 8, 2007

Redefining content distribution in response to rapid technological change is a critical matter for lawyers in the sports and entertainment industries, explained a panel of eminent experts in Caplin Auditorium Feb. 2.

The panel, "Negotiating Sports and Entertainment Property Rights in the Digital Age," was part of the first annual Sports and Entertainment Law Symposium, a conference that explores legal concerns connected with these industries for the benefit of both beginning and experienced law practitioners. Serving as panelists were Frank Golding '93, assistant general counsel of ESPN; private practitioner Philip Hochberg; George Kliavkoff '93, chief digital officer of NBC Universal; and Byron Marchant '87, executive vice president and general counsel of BET. The conference was co-sponsored by the Virginia Sports & Entertainment Law Journal, the Virginia Entertainment and Sports Law Association, and Virginia Continuing Legal Education.

In his opening comments, Marchant pressed upon two points he said distributors are "scrambling" to address in the digital age: protecting content and "slicing and dicing" that content for economic success.

It could be nothing less than a scramble, with the explosion of countless forms of full-motion video available through iPods, cell phones and other wireless devices, as well as "user-generated" content and the notorious Web site YouTube, all amidst unclear regulation and undrawn boundaries of use.

"Sixty percent of the traffic on YouTube up until about four or five months ago was embedded video players on MySpace pages—and MySpace is owned by Fox," Kliavkoff said. "It's the kind of world where there are no barriers to how you can distribute video content. And that's a great opportunity for us, but it's also a huge challenge."

Traditionally, Kliavkoff explained, a large chunk of NBC's revenue derives from "bundling" channels and distributing those channels through cable operators and satellite providers. Not all viewers will watch all available channels, but by paying for the full package, customers subsidize channels they do not view in addition to those they do view. Through this type of distribution, along with revenue from advertising, NBC Universal has established a favorable business model.

Times are changing, however.

"The younger generations have all figured out how to get their content when they want it and how they want it," Marchant said. "Some try to get it for free when it shouldn't be free, and some just want it whenever they want it, and not on the traditional TV broadcast schedule."

The major medium through which this departure from tradition takes place is YouTube. Soon enough, video material will be available on any device the consumer desires, including the television, which is "really scary for companies that have historically been involved in varied and often dual revenue-receiving models," Kliavkoff said.

Furthermore, as the panelists pointed out, technological advancements severely limit the distributor's ability to monitor use and abuse of intellectual property. This is where protection of rights and slicing-and-dicing must come into play.

One border yet to be drawn around YouTube involves delegating responsibility for removing copyrighted content, particularly considering that sites have "a technical capability to filter and protect copyright," as Marchant said.

For example, the Digital Millenium Copyright Act of 1998 "creates a safe harbor for folks who distribute video on the Internet [that] is pirated material," Kliavkoff said. "It shifts the burden to the owner of the IP to actually send a notification saying, that's my IP — take it down. They take it down, and they're in the safe harbor. They're protected."

The problem arises, Kliavkoff explained, when a video is so popular it might reappear hundreds of times on the same site despite instructions to remove it.

"We have an army of people monitoring thousands of Web sites where this stuff appears, and we could, in the course of a day, tell YouTube to take the exact same clip down 100 times," he said. "And 101, and 102. The question is, at what point do the industry and the policymakers agree that the burden of using technology to say that's the same thing I told you to take down 100 times is now your obligation to take down without me having to tell you to take it down? At what point does that shift?"

Marchant also predicted the question to be posed to courts will be "whether user-generated content sites have an obligation to protect copyright without even receiving notes of cease and desist, and therefore put themselves in a position where they really need to go out and affirmatively negotiate these rights before they publish."

"Now that Google is making a million dollars per quarter," Marchant said, many deep questions will surface related to "legal rights, piracy, defamation, slander — all lawsuits that are possibly going to come out of this."

Defamation suits already abound from people who appear "for a nanosecond" on licensed content aired on television, Marchant said. He believes a similar issue is likely to arise with regard to involuntary actors in YouTube videos. Largely lacking in newsworthiness, these videos will not fall under the category of fair use. Finally, Marchant identified collective rights and negotiations with television networks over content as potential areas of tension.

Yet as they addressed current issues and shared predictions for future concerns, the panelists also peeked down avenues for solutions. To that end, Kliavkoff referred the audience to the music industry's battle with piracy.

"For me, the music industry went about it by suing everybody, including their users," he said. "And then, a couple of years later, along came Apple iTunes, and it was an elegant solution, and a fair price point, and easy to use. And I think at the heart, folks who consume content are generally good people. They don't want to pirate stuff."

Capturing his company's relationship with YouTube in the single word "frienemy," Kliavkoff revealed what he believes is the lesson of YouTube.

"What YouTube really is about is looking at the paradigm between amateur and professionally produced content, and the paradigm between poor content and really rich-quality content," he said. "I think we always knew that good-quality content wins, and I think even in the YouTube community, there are mechanisms for stuff to bubble up which is entertaining, even if it's different from traditionally entertaining content. But I think the lesson of YouTube is that it matters less, with all the technology tools people have available, whether something is professionally produced, or produced by amateurs. That distinction went away."

Kliavkoff's team conducts all digital distribution for NBC Universal, dealing with 350-400 potential distribution partners across 18 or 19 platforms, where a decade ago deals were made with less than 10 cable providers. For him, success rests on finding a way to "embrace" amateur-produced yet quality content, joining it with professionally produced content and constructing a new business model on that foundation.

"We really need to understand each of these different platforms as they develop, how to build economic models that are long-term, sustainable," he said. "Because again, the end result of folks stealing stuff is it creates the disincentive to not create new stories. And that's the business we're in, so we have to figure that out."

Despite experiencing similar digital-age issues as the entertainment industry, the world of sports is in many ways an entirely different ball game.

Golding highlighted one critical variable: Once the game is over, the fans have moved on. He said YouTube video and other "user-generated" content is not the central concern, since "not that many people are taking ESPN content and looking at it a week later."

Instead, ESPN tech personnel, who deal with 250 hours per day of live content, concentrate on releasing a unique, immediate product.

"Our audience is voracious, and they want stuff now," Golding said. When Reggie Bush was awarded the Heisman trophy, Golding recounted, ESPN representatives captured the moment on the ESPN mobile phone and played it back to Bush as he descended from the podium. The same content was available to all viewers who had the phone. "That kind of quickness is what our tech guys are trying to do all the time," Golding said.

He advised that lawyers interested in the sports industry pay assiduous attention to technology through magazines, blogs and other outlets. As the principal attorney at ESPN who deals with digital-related contracts, he has seen the importance of keeping up with fast-changing ideas for distributing content.

"Our tech team has figured out a way to send between 100,000 and 200,000 alerts right after a game ends as to who is the winner of the game with a little video on it," Golding said. "If the carrier can't handle that, we've got a problem. But if the lawyer doesn't know that we have a problem, he doesn't get the contract with us."

Another idea Golding mentioned is a massive multi-player video game, based on the one currently produced by EA Sports, that would be linked to and allow players to pause when the real game comes on.

Golding stressed that dealing with this "explosive" rate of change necessitates not only deep knowledge of technology on the part of lawyers, but of copyright as well.

"There are so many different rights that go into this that the notion of how you're going to slice and dice these contracts — they go from 10-page contracts to 80-page contracts — is just trying to keep as many balls in the air as you can," Golding said.

Hochberg also recognized several areas of development which, while presenting exciting opportunities, have ushered in numerous legislative and regulatory concerns. For example, free over-the-air television will switch in 2009 to an all-digital format, resulting in six sports channels to program. What is the significance for sportscasters?

"It means that, conceivably, a sale to a network could create not only the telecast of the principal game, but a fantasy channel, a statistics channel, and an end-zone camera," Hochberg said. Furthermore, the attempt to create "á la carte" sports channels, the involvement of telephone companies in traditionally regarded cable programming, the understanding of rights associated with international broadcasting, and the proliferation of fantasy sports leagues all present numerous legal challenges.

Panel members spoke at length about fantasy leagues in particular, prompted by moderator Glen Robinson's mention of a recent case involving CBC Distribution & Marketing, which operates as CDM Fantasy Sports. A Missouri district court held that the Major League Baseball Players' Association does not possess the rights to the use of players' names and statistics; therefore, fantasy baseball leagues operators are not required to obtain a license to use this information.

Still, Golding said, because the court case only allows for names and statistics, the licensing issue remains ambiguous with regard to player likenesses, league trademarks and other elements that a fantasy league might incorporate. As the law is not yet clear, negotiations involve improvisation.

"When we have done our fantasy licensing at Major League Baseball Advanced Media, we have generally taken the position that if you don't charge us too much money, we'll take a license," Golding said. "As long we pay some money, you won't sue us for going forward with our advanced media. We'll just agree to disagree."

Of course, this approach is very much a quick fix. Technology is advancing so rapidly, Golding added, that fantasy sports has moved light years beyond statistics, and the law will need to catch up.

"It's not all stats," he said. "It's about receiving this fantasy newsletter, or receiving this e-mail, somehow running a computer simulation of the game and putting that into a video game."

Hochberg agreed that in the long-term, developing fantasy league sports will undoubtedly depend on more than statistics.

"I would suggest that this dust-up between CBC and major-league sports is just the opening gambit, and that somehow, maybe as fantasy sports evolve, there will be some kind of licensing available," he said.

As legislation and regulation become more crystallized with the further proliferation of digital technology, a clear knowledge of the rights, issues and technologies is imperative for someone intending to break out in these industries.

"What you find out today as a lawyer in this field is that you need to understand the panoply of rights that are on the table, most of which are a function of distribution and technology," Marchant said. "If you understand that, it gives you a great leg up on how to negotiate on either side of the table in terms of what mutual interests would be."

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