Law Times

Law Times • June 4, 2012 Lawyers challenged to help media clients adapt Internet/E-Commerce Law New business models FOCUS ON D BY JULIUS MELNITZER For Law Times igital media has made many old business ated new markets and invited new competitors. Media content no longer flows through discrete channels where networks broad- cast TV shows, movies screen in theatres, and books are available in stores. Instead, content provid- ers can express movies, music, and books in the same binary code and transmit them as digital infor- mation over fibre-optic, coaxial or copper pipes. "The message is now inde- ies obsolete. In the process, boundar- it has cre- market itself but also on the way business is done in the market, including by lawyers. "From the perspective of content produc- ers, the challenge is to find the dividing line between granting away rights that broadcasters want and holding back the rights that allow producers to benefit from secondary and tertiary revenue sources that new distri- bution models and technologies might afford, Heenan Blaikie LLP. His practice embraces film and TV produc- tion and financing, as well as digital media and gaming. As it turns out, the new pendent of the medium," wrote Michael Wolf in The Entertainment Economy earlier this century. According to Casey Chisick of Cassels Brock & Blackwell LLP, the growth of digital business has been both a blessing and a curse for his clients, many of whom are content distributors and rights holders. The music business, for example, fell on hard times as the business model changed with the advent of digital distribution highways like iTunes. Bandwidth expansion has forced similar concerns on the film and TV industry and the growth of the e-book market is changing the fun- damentals of book publishing. Then there' to-peer, but nobody cared very much until e-book read- ers became popular, and other tablet computers came on stream, it became very convenient to download and read pirated copies of e-books, movies, and music." These pressures also affected the live audience market. " "Digital copies of books have long been shared peer- " says Chisick. "And when the iPads s the piracy factor, an ever-growing threat. 'We're in a transitional stage, but that doesn't mean producers have been getting less money for their projects,' says Joey Mastrogiuseppe. sources as consumers display an increased willingness to pay for access to a wide variety of content on demand. In these models, consumers who access Netflix or its " As soon as people discovered that content was available free, its intangible value also diminished," says Chisick. "It musical equivalents like Spotify and Rhapsody never get to own anything and instead rent the content on a month- to-month basis. The difficulty, however, is that these new revenue streams are a long way from making up losses incurred by traditional distribution models. Netflix, for example, has had an impact on the traditional home-vid- eo rental and DVD sales businesses that represented one of the few good news stories in the retail entertainment market in recent years. Still, there hasn't been a perceptible reduction in the value of or prices for content. "We're in a transitional stage, but that doesn't mean producers have been getting less money for quickly became dissonant to spend large sums on concert tickets." But digital media brought good news, too. "We've seen promising new business models in music, projects," says Joey Mastrogiuseppe of Fraser Milner Casgrain LLP. He acts on the money side of transactions for lenders and investors. "What valuators are saying is that either there' their TV, and film," says Chisick. "What we call the over-the-top models because they provide add-ons to conventional broadcasting, like Netflix, have become attractive revenue on demand] will cover the shortfall in DVD rentals and sales or perhaps the value of film and TV content has just increased. Still, the impact of the new players isn't just on the " s a perception in the market that [video " says Jim Russell of PAGE 9 lem because the bank was not inclined to finance the film in the absence of these standard terms in the rights agreement, although we ultimately did find a way to get the lender comfortable, players take this approach, it could become a widespread issue." The point is that the entertainment industry and its " he says. "But if all the newer lawyers are struggling on a daily basis to figure out the new economics. "Can you imagine the kind of pressure Netflix is put- ting on video on demand supplied by traditional broad- casters?" Chisick asks. "Who' or 12 dollars to rent or see a single movie when you can access Netflix' huge library repeatedly for $9 a month?" The upshot is that traditional providers, with whom s going to spend eight or 10 studios and distributors still have important relationships, keep trying to restrict access to content. But as the music business learned the hard way, customers who don't get what they want will find another way to get it even if it means accessing pirated content. "The challenge for entertainment lawyers is to help clients interpret the law in a way that helps them develop business models that will stick," says Chisick. LT players have their own ideas. Kendall Andersen of Borden Ladner Gervais LLP, a com- mercial lending practitio- ner with a niche in produc- tion financing work, recalls an instance in which Netflix almost scuttled a deal because it refused to agree to contrac- tual terms that had become standard in the industry. "That created a major prob- Heydary-FOCUS_LT_Apr23_12.indd 1 www.lawtimesnews.com 12-04-17 9:56 AM

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