CMJ 2013 Entertainment Business Law Seminar photo Murad Erzinclioglu

CMJ 2013 Entertainment Business Law Seminar photo Murad Erzinclioglu


Friday’s CLE programming was packed with panels discussing pertinent legal issues of the day relating to the entertainment field. Top legal experts dolled out information and opinions, and took questions at all the full-house discussions. The following are concise reports about the panels from NYU law students.
 


Changing the Channel: Recent Cases and Developments Redefining the Television Landscape

Given the critical and commercial success of shows like Breaking Bad and Mad Men, many believe we are in the golden age of television, But what they may not realize is that with all the litigation between networks like Fox and TV providers like Aereo and FilmOn, we are actually in the midst of TV wars! This panel was moderated by Toby Butterfield, partner at Frankfurt Kurnit Klein & Seltz, PC, and included Rick Stone, partner at Jenner & Block,, Christine Pepe, assistant vice president of legal affairs of ASCAP, and Eric Gardner, a journalist from Hollywood Reporter’s award winning “Hollywood, Esq.” blog. The panel spent most of the time discussing the recent controversial Aereo case. Aereo captures over-the-air TV signals and relays them to subscribers via individual antennas and digital devices. Broadcasters claim that Aereo’s transmissions infringe the public performance copyright the broadcasters have in their TV programs. On the flipside, Aereo contends that they are not infringing broadcasters’ copyrights, and that all they are doing is providing equipment to consumers (like Sony was allowed to do under the famous Betamax case). The New York district court found, and the 2nd Circuit Court of Appeals upheld, that Aereo is not infringing broadcasters’ public performance rights because it found that each Aereo subscriber was receiving a private, individualized transmission, which is a private not public performance, and thus not an infringement.
 
Although Aereo has been a much talked about case, Gardner pointed out that Aereo has only a few thousand subscribers. However, Stone quickly established the importance of this controversial decision. Stone said that retransmission royalties (which Aereo is not paying) are often the difference between a broadcaster breaking even or making a profit, and this decision will have a detrimental ripple effect. If Aereo is able to provide television to subscribers without paying such royalties, other television providers, like Dish Network, will argue that they should also not be required to pay royalties either, which will ultimately push the rates, which are negotiable, down. Stone posited that the effect of this may ultimately be that networks like Fox will convert to cable and consumers will only be able to see Fox’s programs if they subscribe and pay an additional fee.
 
Broadcasters have submitted an application to the Supreme Court for certiorari in the Aereo case. Also, there is a similar case in the 9th Circuit in California against a similar service called FilmOn. But unlike the Aereo case, the district court has enjoined FilmOn. That case is now on appeal. The result of that appeal may influence whether the Supreme Court grants certiorari. Either way, Stone is optimistic that the Supreme Court will accept Aereo and weigh in on this hot issue.
 
Words by Alicia Matusheski
 


Collective Versus Direct Digital Licensing

Although this panel was filled with speakers who represent the interest of parties on both sides of the table—music licensees and licensors—there seemed to be a consensus from all the panelists that reform is greatly needed for public performance licensing in the U.S. The panel was moderated by Mark Jacobson, and included Barry Massarsky, President of Massarsky Consulting, Inc., Roger Miller, CEO/CIO of Bicycle Music Publishing, Brieanne Elpert, Counsel, Licensing and Enforcement at SoundExchange, and James Duffett-Smith, Head of Licensing and Business Affairs at Spotify. The hot topic of the panel was the recent Pandora v. ASCAP decision handed down by Judge Cote in the Southern District of New York. That decision is the latest development in the trend in recent years of many major publishers carving out and withdrawing their digital public performance rights from the rights that they grant to the public performance organizations ASCAP and BMI and negotiating direct licenses with licensees like Pandora. Although this might allow publishers to maximize profits by licensing directly, this makes the licensing process for licensees difficult and uncertain because they may not be able to go to ASCAP and BMI to get all the rights that they need. In Pandora v. ASCAP, the court came down in favor of Pandora and determined that ASCAP’s public performance blanket license must include all of its repertoire. Interestingly, the panel pointed out that the court provided this remedy, but neither party to the case had asked for it. If this decision is upheld, music publishers will have to choose to allow ASCAP and BMI to license all public performance rights (and will not be able to carve out digital rights as they have been doing), or withdraw their entire catalogue and license directly or sign up with another collection society or administrator. As one might expect, the publishers are intervening as they feel that the copyright that the publisher holds is a property right and is divisible. So this decision is viewed as unfair and was unfairly made by third parties without the publisher’s input.
 
The keynote speaker of the CLE program, David Israelite, the president and CEO of the National Music Publishes’ Association, echoed the sentiment of this panel by pointing out that the rate that master owners are paid for their public performance rights (a rate set by congress under the copyright act) and the rates, which are established by federal judges through consent decrees under, are unbalanced, where the master owner is getting a better rate on a 14:1 ratio (however, the master owner is only able to collect performance royalties on a limited type of exploitations whereas the publishers are able to collect public performance royalties for all public performances).
 
Many of the panelists said that, at a minimum, the ASCAP and BMI rate court methods, which were established over 50 years ago when the economic markets of the world were very different, need to be revisited. Some of the panelists – and Israelite also echoed this during his keynote address – hope that we ultimately arrive at a one-stop shop licensing system. Although this would make music licensing so much easier, it seems that because of the complex history of the music industry and the competing interests it has created, a one-stop shop system may be near impossible to achieve without federal legislation.
 
Words by Brette Meyers
 


Copyright 2013

This panel consisted of an amazing array of panelists who covered a wide variety of topics such as recent developments in intellectual property law, the first sale doctrine, fair use and litigating. The panel also discussed several recent cases including the Supreme Court decision, Kirtsaeng v. John Wiley & Sons.
 
The piece was very interesting because copyright has become a very compelling topic due to the changes in the industry. It was a very interactive panel led by Christine Lepera who talked about the first sale doctrine. Gary Greenstein began the panel by tackling the issues with direct licensing and PROs. Mr. Greenstein discussed with great detail ASCAP’s consent decree, along with a discussion of the Pandora case, which, as Mr. Greenstein stated is “Shacking up the world of ASCAP.” Everyone on the panel participated in the dialog about the economics concerns with licenses. Next, Joe Salvo, the current president of the Copyright Society, discussed the cases that dealt with the first sale doctrine, mainly addressing to what extent does the first sale doctrine apply when a good, a copy or copyrighted work is manufactured and sold aboard? And to what extend does the first sale doctrine apply to digital copies? Describing the first sale doctrine along with summing up its purpose, Salvo said that basically, as a matter of public policy, once the copyright owner has reached the economic benefit of the copyrighted work, we are not going to let the copyright owner continue to control the distribution of the copyrighter work.
 
The panel continued with discussing cases such as Viacom v. YouTube, Capitol Records v. MP3Tunes, Colombia Pictures v. Fung and the recent decision in Cariou v. Prince. Overall the panel was very informative, and every panelist was short and to the point of the topics they each discussed. The panel ended with questions led by Lepera and the audience.
 
Words by Candy Santana
 


The DIY Paradox

Technological advances in hardware and software have made it increasingly easy to produce original content. The desired global reach that at one point was only possible with the help of established record labels is now easier than ever. “Just go DIY,” the collective “they” advise us. But what does it really mean to “do it yourself,” and is it even possible, or desirable? Rich Bengloff, President of the American Association of Independent Music, Paul Sommerstein, Esq., Evan Krauss, Partner at Gray Krauss Stratford Des Rochers, LLP and Ari Taitz, Esq. SVP of Business Affairs at the Independent Distribution and Strategic Development, Alternative Distribution Alliance, joined for an early morning discussion of this DIY paradox. Christopher Marino, Esq., Associate at Giodano Halleran & Ciesla, moderated the panel.
 
Bengloff started off by arguing that, despite the ease with which content can be created, artists need a label now more than ever, since digital technologies require us to focus on so many more moving parts and perpetuate an overly saturated market. He also questioned whether these DIY artists are really doing it themselves, as many artists are hiring managers, producers, attorneys, PR agencies, distributors and marketing teams and calling themselves “DIY” nevertheless.
 
Taitz echoed Bengloff’s sentiment and argued that, especially in the digital world, truly going DIY might be limiting. From the distribution standpoint, distributors take care of four crucial functions, which an artist could likely not handle alone. First, distributors make agreements with every separate retailer, involving ringtones, streaming, downloads and the international scope of the distribution. Second, distributors deal with supply chain issues, which can be particularly difficult where certain retailers require different formats and encode their digital content differently than other infrastructures throughout the world. Third, distributors need to ensure the artist is adequately represented in the various retailers, which is becoming more difficult to streamline in a vast digital setting. Lastly, distributors need to validate that the artists are actually getting paid correctly. In a digital world of millions of micro transactions of streams, downloads, monthly subscriptions—all of which deal with extremely complex compensations schemes—reporting must be validated and retailers must be audited to ensure as few mistakes as made as possible.
 
Some independent record labels recognize the hesitation artists have in signing a deal that strips them of their rights or control over how their music is being released. As such, Sommerstein discussed how many deals now involve shorter commitment periods, rights of reversion and more equitable profit splits; all of which are stipulated on a basic template, which necessarily reduces the artist’s legal fees up front. This may be good for blossoming artists to experiment with varying DIY marketing strategies, but absent someone or something investing time and money into them, the DIY route may still only take an artist so far. Indeed, Marino questioned what, from a negotiating standpoint, the “up end” might be on the label side? And if these deals are designed with the purpose of being so artist-friendly, might it not inadvertently demonstrate a label’s lack of ability to really provide the services an artist would look for in signing such a deal in the first place, given such loose terms?
 
While everyone has their own story of the road to their success, many of the functions required to break an act have not changed. DIY artists who sign deals are still faced with issues of control that the non-DIY generation faced. As Krauss highlighted, are these deals non-exclusive? While there might not be creative involvement from the distributors, will they be actively seeking synch and licensing opportunities and at what rates? How will royalties be collected? Each distributor has a different suite of services it offers, and so is it truly “DIY” to pick among the dozens of services?
 
The digital landscape has created more options and tools to effectuate these same, much needed functions, but perhaps “DIY” is a misnomer. There are simply too many variables at play to truly “do it yourself.” What we can gain comfort in is the ease with which you can “do it your way.”
 
Words by Marc Pellegrino
 


Ethics: The Law of Anyplace: Ethical Considerations of Lawyering WEithout Borders (Virtual Practices, Outsourcing, Tecnology)

Professor Stephen Gillers spoke at the 2013 Entertainment Business Law Seminar. Professor Gillers addressed the legal profession’s break away from the traditional geocentric model for practicing law as a result of the advances in technology.
Traditionally, lawyers viewed the market for legal services as local. But now, technology and travel allow lawyers to easily connect with other jurisdictions. Further, lawyers can now easily access the tools necessary for providing legal services. With the click of a button or swipe of a screen, an entire case file or even law library is made available to you. These factors have increased the awareness of the problem of unauthorized law practice. At what point do lawyers render legal services outside of the jurisdiction in which they are licensed? Is it by sending an email? By stepping foot outside the state? By the work done on a plane? And at what point does a lawyer violate the rules of professional conduct?
 
Professor Gillers also addressed the conflict between specialization and the geocentric model. Whereas before it made sense to test law graduates on the laws of the jurisdiction in which he or she wishes to be licensed, now American lawyers offer their legal services more broadly. The interest in developing the specialization is heightened if you have a larger market in which to sell your specialty. 46 states have adopted some form of a rule stating that a lawyer cannot permanently relocate, but may, on a case-by-case basis, render legal services. This raises the issue of lawyers cherry-picking the best cases from small lawyer states. Two states have affirmatively rejected this rule: New York and Kansas.
 
Lastly, Professor Gillers discussed the issue of non-lawyers pitching legal services. We have seen these websites—Rocketlawyer, Legalzoom, Axiomlaw—that directly offer legal services to clients. However, these services are not those that one would find on a traditional law firm site. Currently, the legal profession is not entirely sure of how to handle these services. Professor Gillers suggests to regulate the services, as it is necessary to protect the people who use these websites.
 
In sum, the legal profession is still learning to navigate through the changes and advances in technology. Professor GIllers left us with this thought: is the legal profession fencing out invaders or fencing itself in?
 
Words by Samantha Sannazzaro
 


Film Finance: It’s to Your Credit: Getting the Full Use of Tax Credits for Film Production

Conference room 914 started off the day with a lesson in film production tax credits. The panelists filed in and jumped right into business, as CPAs are apt to do. Marc Reisler started off the panel with a discussion of the tax credits offered in Georgia and Connecticut. A tax credit is a credit that is awarded to an individual or entity that can be used to reduce taxable income. Both Georgia and Connecticut offer non-refundable, transferable tax credits to films that spend a certain dollar amount or percentage on in-state qualified production expenditures. Connecticut, however, has recently become more interested in promoting television production (which brings in more permanent residents) over film and currently has a two-year wait for tax credits for film production companies. While Connecticut is cutting back, New York is welcoming film production with open arms. Randy Coburn spoke of the New York tax credit program which offers tax credits if 75% of either production or post-production takes place in New York. The state also offers a credit to commercials that spend 75% of their production costs in New York.
 
After using a personal anecdote to transition topics, Hal Peterson turned the presentation over to Katherine Oliver from the Mayor’s Office of Media and Entertainment. Oliver, a charismatic speaker, discussed the ways in which New York strives to be a welcoming environment for film production companies. In addition to offering tax credits, NYC offers “Made in NY” marketing credits, which help promote shows and films that were made in NYC by offering free outdoor media and discounted subway ads. Reel Jobs also helps create a mutually beneficial relationship between production companies and residents of NYC by connecting films to local businesses. Finally, Robert Fingerman finished up with a discussion on the intricacies of applying tax credits and the importance of ensuring that the film company has the correct entity structure for tax credit use.
 
Words by Samantha Horowitz
 


Foreign Touring: You’ll Suffer Taxation Without Proper Representation!

Since we’re nearing Halloween, Monika Tashman began the panel discussion on Foreign Touring by asking each panelist to tell a scary story. Without exception, the stories all revolved around artists either not being paid due to lack of proper tax forms or not anticipating taxes in their tour budgets. The general consensus was that many young artists are not aware of the tax implication of overseas touring and often don’t prepare the necessary forms in advance of their tour dates. Klein and Rubin stressed that this is where agents and managers need to step in and plan ahead for the bands. Despite the sense of urgency in this industry, best practice is to wait until all tax forms have been prepared and a budget has been calculated to confirm foreign tour dates. Since managers and agents are often the last to be paid, preparing ahead of time to ensure proper cash flow acts as an incentive. The panel wrapped up with a discussion of current controversies in touring. Recently, many artists have been offering VIP packages for concerts, where the fan can upgrade tickets to include a meet-and-greet or merchandise. These packages are often purchased directly from the artist’s website and the money often goes directly into a U.S. bank account, even if the tour dates are in another country, causing the tricky issue of determining where this income was actually earned.

 


Managing Risk: Live Venues and Sponors

Featuring Michael Poster, partner at Vandenberg & Feliu, LLP; Dr. Donald Cooper, Director of the Event Safety Alliance; Eric Kert, Executive Vice President of Business and Legal Affairs, Live Nation Global Touring; and Jim Cooperman, Executive Vice President of Legal and Business Affairs, MSG Entertainment.
This panel began with a practical, if not disturbing, notion. The likelihood that you could get hurt by faulty pyrotechnics, wind-strewn hydraulics, a rickety stage, nearly anything that could go wrong in the course of a live music performance. Perhaps more importantly, from the lawyers’ perspective, how do risk issues associated with live event productions affect the different industry players? Panelists discussed the biggest risks in live entertainment today, how they have changed and how awareness has drastically affected how often disaster strikes.
 
I enjoyed this panel because it wasn’t steeped in legalese. It almost followed my note on indemnification agreements, namely how venues and promoters protect themselves from the endless number of things that can go wrong during a show. The panelists even named incidents you wouldn’t expect, such as concert patrons who overdose and other cases you wouldn’t expect to implicate non-obvious parties.
 
Dr. Donald Cooper of Ohio’s Event Safety Alliance (the only non-lawyer on the panel) spoke about regulating emergency management procedures at small venues. Smaller venues don’t necessarily mean smaller promoters or greater safety precautions, as international players such as LiveNation also operate locally.
 
Regardless of who’s behind-the-scenes, Dr. Cooper said his organization works tirelessly to promote best practices. He urges event producers not to skimp on account of cost or rely on insurance for that matter. “Smaller venues can often be the most dangerous,” he explained. “Everyone’s got to allocate risk accordingly. From EMS to security and properly-worded contracts, it is often in the best interest of the deal for the venue to assume liability.”
 
This panel differed from the others because it urged every player in the live performance business to expect the unexpected.
 
Words by Jason Rindenau
 


Sync or Swim: Licensing Music for Film/TV/Video Games in a Digital World

This panel discussed the increasing presence of music in film, TV and video games and the various licensing approaches being taken in that domain. The panel was organized and moderated by Christine Pepe, and consisted of panelists Gregory Boyd, Jeff Brabec, Jeffrey Levy and Chris Hajian.
 
One of the first issues discussed was the potentially detrimental effects a parody use of a song could have on the value of that composition. By being “embedded in people’s minds,” the parody performance risks permanently damaging the value to the original composition. The panelists then proceeded to compare how film soundtracks, once a highly valued product during the ‘80s and ‘90s, have for the most part lost their commercial appeal. According to one of the panelists, this was largely due to the digital revolution, the rise of the single (via iTunes), and the general disaggregation of albums. Indeed, as explained by one of the panelists, while the soundtrack of Purple Rain had once sold over 13 million copies, this year’s highest selling soundtrack sold a little over half a million copies.
 
Regarding the practical implementation of video game music licensing, two types of license models were discussed: (1) the “work for hire” model, where the game publisher acquires all copyrights in the music, paying the composer up-front fees and granting back to the composer only the right to receive the writer’s share of the public performance royalties; and (2) the license model, where the composer grants the game publisher a broad license to use the music, while maintaining ownership as well as the right to use the music as he or she sees fit. An interesting difference between composing for film/TV versus video games was discussed. When composing for video games, composers work hand in hand with the development of video game, while composers for film/TV are usually asked to compose the music during the post-production phase. Also, while many video games incorporate popular pre-recorded music, others hire composers to create original music. Indeed, certain big budget games may incorporate a mix of original music and pre-recorded popular music. Music-centric games and TV shows (i.e., a video game such as Guitar Hero or a TV show such as American Idol), involve a different valuation of the music, as “the music is in fact the game,” and therefore command higher compensation for the use of that music.
 
Towards the end of the panel, the conversation focused on emerging trends, notably Twitch TV, an internet streaming site where one watches other players play and thus involves a public performance of the music in the game. The issue was also raised as to whether video games will shift to a streaming model of delivery (as opposed to the purchase of hard copy video game units). As the distribution models shift, the licensing models will inevitably have to adapt.
 
Words by Nicholas Barnabo
 


You’re Never Too Big for Your Breaches: The World of Mobile Data Security and Privacy

Marc Reisler, Josh Sessler, Steven Roosa, Sheryl Yamuder and Tanya Bridges conducted a panel regarding recent changes undergone by the Children’s Online Privacy and Protection Act. COPPA went into effect in1998 to keep companies and third parties from collecting, using and disclosing the personal information of children under the age of 13 without getting their parents’ verifiable consent. However, as technology continues to rapidly develop, so increases the number of young children in possession of mobile devices, laptops and social networking accounts. These developments have forced the Federal Trade Commission to have to revise the rules of COPPA in order to keep up, and some such revisions went into effect on July 1, 2013. The modified COPPA rule has widened the definition of “children’s personal information” to include persistent identifiers such as mobile device identifier, cookies, and IP addresses, as well as geo-location information, photos, videos and audio recordings of these children. COPPA allows the FTC to seek injunctive relief or penalties of up to $16,000 per violation, though it has agreed to exercise its prosecutorial discretion when enforcing the changes for companies and small businesses that make a good faith effort to comply.
 
The panel discussion of the revised regulation was based on a borderline hypothetical involving an advertisement that was alluring for both adults and children. The hypothetical required analysis of the appeal of everything from the music available on the related app or website, to whether or not any animation was used for advertising purposes.
 
The panelists made clear that there are ways to design your marketing strategies around the pitfalls of the legislation, as well as ways to strategically and legally market to children through their parents. One way to remain in compliance with COPPA when screening the ages of young children is to give them a wide range of dates and years of birth to choose from when applying for new accounts on their phones or online. The inquiry should be made amongst other basic sign-up questions, and if a child is deemed “too young,” they will be notified that they simply do not qualify for the service, rather than being told that they are underage so as to encourage such applicants to go back and modify their sign-up age. Companies can also seek to age gate their products and services. Age gating involves the use of a computing system on a website so as to confirm that the user attempting access is of the legally required age to view the site’s content. Such systems allow those inadvertently attracting young users to prove that their site or app doesn’t predominantly attract kids, and the process drives away far less users than notice and consent does. If a company has a site directed toward children, they will not be able to effectively age-screen unless they can show that the audience is not children, as the FTC takes the position that every user is a child. For the most part, those companies that seek to target children have made a conscious decision to do so, and it is the smaller marketing projects that have to be especially careful about bleeding over the line.
 
To avoid being liable for COPPA violations, the panelists recommend that companies write thorough indemnification agreements, that they be very straight forward about obtaining express consent from parents up front, and that they disclose how they plan to collect information about users, how they will use that information going forward and who else will have access to that information for future advertising purposes. The FTC is strongly committed to protecting children’s privacy, and it is important for companies and third parties collecting personal information from children online to do so appropriately or not at all.
 
Words by Ali Glaser