WHEN OPPOSITES ATTRACT - foley.com · When Opposites Attract October 16, 2007 LACA_879478.1 Moderator: Carole E. Handler, Foley & Lardner LLP, Entertainment and Media Team Panelists:

©2007 Foley & Lardner LLP

CONVERGENCE 2007

CONVERGENCE 2007New Media on a Global Economic Stage:When Opposites Attract

October 16, 2007

LACA_879478.1

Moderator: Carole E. Handler, Foley & Lardner LLP, Entertainment and Media Team

Panelists:Jonathan H. Anschell, EVP and General Counsel, CBS Broadcasting, Inc.Jared Jussim, Executive Vice President, Intellectual Property, Sony Pictures EntertainmentDavid Wertheimer, Executive Director, Entertainment Technology Center @ USCMaren Christensen, Executive Vice President and General Counsel, Universal Studios

CONVERGENCE 2007 – New Media on a Global Economic Stage 1


Topics for Discussion

Integration of media companies makes them more effective competitors in a global universe;The impact of digitization and a vibrant consumer culture; how are “new” media being integrated? Are there conflicts as well as opportunities?Legal challenges to integration on an international stage; protecting content while broadening access.



I. The Importance of Entertainment andMedia to Domestic Economics

Entertainment is a global undertaking; the U.S.’s most successful and substantial export;As international markets open up in Asia, Latin America, Europe, they demand American content, creating new opportunities;Consumers demand accessibility to entertainment, “on demand,” where and when they want it, commensurate with new technology;New financial sources expand offerings (more pictures are being released, more outlets for copyrighted content);What are the problems and opportunities of such convergence?



Media Companies Emphasize Criticality of Rights Protection

Dauman October 2 speech; Protection of intellectual property must be a priority;“In the long run, we must depend on the preservation of strong intellectual property rights to survive and thrive. And that includes, network operators, search engines, site operators, and device makers. They rely on great content, and great content depends on strong copyrights.”



Technology and Globalization Have Altered Traditional Models And Sources of Entertainment

The traditional model for motion pictures

Theatrical Release - Domestic

Theatrical Release International

Pay-Per-View DVD/Home VideoGames and Merchandising

Premium Cable

Cable and Television

Second-Run or Syndication

[Windows]

[Windows]

Financing; Studios or Limited Packages



Technology and Globalization (cont’d.)

The new model;Games and merchandise may drive creation of movies;Traditional geographic windows have compressed;Traditional time sequencings have compressed;DVD has become less important, direct-to-internet more so;



Technology and Globalization (cont’d.)

Private equity funds are investing in diverse genres and cost levels; production up 11% over 2005;Consumers now create and demand content, where they are, on their schedules, using all available technological resources;Expanded opportunities in new markets,particularly Asia, where “movie magic”is perceived as tied to economic

development.



Traditional Third Parties May Be Dislocated By These Changes

Theatre owners;Independent station groups; Independent international distributors, video and satellite companies, theatres;Video retailers;DVD distributors;Merchandisers – game creators, publishers, movie-based books.



II. What Business Models Accommodate Both Integrated Content Producers/Distributors and Consumer-Based Media?

Concentrated companies are acquiring and licensing social networking sites;Site users want to use copyrighted content of others as well as creating their own?Can they coexist in the same corporate family as content providers?



Business Models Are Changing; Corporations and Consumers Create and Distribute Content

“Cyberspace too arose from the displacement of a certain architecture of control. The tolled, single purpose network of telephones was displaced by the untolled and multipurpose network of packet-switched data. And thus, the old one-to-many architectures of publishing (television, radio, newspapers, books) were supplemented by a world where everyone could be a publisher.”

Lawrence Lessig, CODE



The Focus Is On The Individual

After TIME magazine recognized technology as its “Man of the Year” in 1983, the influence of technology in the home increased exponentially. Today, the consumer controls multiple devices thatallow him/her to organize, receive,create, and interact with content. Digital media open new opportunities to the user/consumer; new media is allabout “me.”

But those opportunities depend on content from the copyright industries.



Can Consumer-Driven Sites and Content Industries Live Profitably Together?

Two significant trends; media consolidation and end user control and interactivity.To what extent are traditional and “new” media “opposed ideas?” Can they comfortably coexist within the same companies?

“The test of a great mind is the ability to hold two opposed ideas at the same time and still retain the ability to function.”

The Crack-Up, F. Scott Fitzgerald



Media Consolidation; Some Important 20th Century Landmarks

Nov. 7, 1989Sony Corp. buys Columbia Pictures Entertainment Inc. for $3.4 billion.

Jan. 10, 1990Time Inc. and Warner Communications complete $14.1 billion merger, creating the

world's biggest media conglomerate.July 7, 1994

Viacom Inc. buys Paramount Communications Inc. for $10 billion.July 31, 1995

The Walt Disney Co. announces merger with CapitalCities/ABC.Feb. 9, 1996

The Walt Disney Co. completes $19 billion merger with Capital Cities/ABC.Oct. 11, 1996

Time Warner and Turner Broadcasting System complete $7.6 billion merger.Sept. 7, 1999

Viacom Inc. announces deal to buy CBS Corp. for $34.5 billion.Jan., 2001

AOL/TimeWarner Acquisition

The trend continues . . . .



Some Recent Acquisitions

Importance of news markets as a source of content News Corp./Dow Jones;MSNBC acquiring Newsline, a user-generated news site;Tribune;

Diversifying demographics and building cable brands; NBC Universal acquires Oxygen, following acquisition of iVillage;Numerous other “traditional” content or distribution acquisitions.



Integrated Content, Technology And Infrastructure Companies Are Primary Content Providers

CBS and Viacom – CBS Corporation includes CBS Broadcasting, CBS Radio, CBS Outdoor, Simon & Schuster, Showtime, television studio. Viacom retained Nickelodeon, MTV, and Paramount theatrical business. Company also includes othermotion picture interests and exhibition.

News Corp. – Satellite networks, Fox, 20th Century Fox, Harper Collins, NY Post, Times of London, Fox News Channel, other news, local sports, sports teams, cable channels. Very active in China.



Some Integrated Content, Technology And Infrastructure Companies (cont’d)

Time Warner – AOL, HBO, Time, Inc., Turner Networks, CNN, Time Warner Cable, Warner Bros., New Line, sports teams, television networks, exhibition interests.Disney – several film companies, theme parks, ABC, cable networks, Pixar.NBC/Universal – recent cable acquisitions.Sony – multiple forms of content provision, synergies with technology.



The Dominance of “Big” Media Remains Suspect

“If the Lord had intended things to be big, he would have made man bigger – in brains and character.”

Louis D. Brandeis,The Curse of Bigness

October, 2006 FCC hearings in Los Angeles sparked anti-bigness protests; “Homogenization is good for milk, but bad for ideas.” (President of WGAW).Fears that independent and dissenting voices will be silenced, despite explosion of user-generated content.



Acquisition of New Media Sites Presents Challenges

Competition for social networking sites is intense; News Corp. and MySpace, others compete for Facebook, other sites.CBS has acquired Wallstrip (humorous provider of online business news) and Last.FM (music social networking).Business models of interactive sites emphasize consumer goodwill; taking steps to limit infringement by user-generated content impacts that model, but may be essential.Meanwhile, integrated content providers plan to deliver content on sites like MySpace.Alternatives: creation by media companies of sites to distribute their own content “on demand;”

Television networksSimultaneous releases on iPhone, cableNews Corp. and NBC releasing to MySpacePeer to peer technology; Warner Bros. and Bit Torrent



New Technologies Are Driving Content Creation

Video on demand and DVRs allow consumers to obtain content when they want it;Broadband and VoIP redefine systems for carrying content;Bluetooth allows wireless exchange of data;Consumers demand content for these devices



New Technologies (cont’d.)

IPods and phone receive contemporary telecasts and mobisodes;PDAs, Blackberries, Smartcards, CDs and DVDs, digital music players, peer-to-peer file sharing, internet streaming, and universal devices redefine the creation and the delivery of content.



New Technologies (cont’d.)

Short videos are widely available on social networking sites, Google, YouTube;Current videos, news and television programming can be summoned on mobile devices;DVRs and SlingBox allow consumers to space shift as well as to time shift.



III. Does Technological and EconomicChange Require Legal Change?

“However much we may codify the law into a series of seemingly self-sufficient propositions, these propositions will be but a phase in a continuous growth … Just as the clavicle in the cat only tells of the existence of some earlier creature to which a collar bone was useful, precedents survive in the law long after the use they once served is at an end and the reason in them as been forgotten.”

O.W. Holmes The Common Law, 31-32 (1881)



The Legal Framework; Key Issues

How can copyright industries protect their property but maximize the economic opportunities that technology brings? The Constitution balances private reward and public benefit;

Congress has the “power to promote the progress of science and useful Arts, by securing for limited times to Authors and Inventors the exclusive right to their respective Writings and discoveries.”

U.S. Const., Article III, Sec. 8, Cl. 8.



Must Copyright Law Be Reformed?

“Can and should laws designed to manage the emergence of industrial and natural resource monopolies in the late 19th and early 20th centuries be applied to the technology and intellectual property giants of the 21st century?”

The New York Times editorialApril 28, 2000

Copyright principleshave consistently beenapplied to and adjustedto new technologies.



The Legal Framework; Key Issues

Fair use and Section 512 of Title 17 will be the main battlegrounds on which protection issues are fought.

If videos on social networking sites are short and only minimal (albeit key) elements are taken, might courts apply the fair use doctrine?Whether use is transformative or forecloses a market is key (Perfect 10 v. Google).Is it possible to regulate what users upload without licensing?Will licensing be broad enough to cover all users?What business models accommodate the interests of content creators and users?Who owns what?



Convergence 2007 – “Safe Harbor”Provisions May Apply To Service Providers

Liability for OSPs can be limited for information residing on networks at direction of users if service provider implements policy to terminate repeat offenders and accommodates standard antipiracy matters.Is site obligated to prescreen? And, if it does, does it open the door to liability by demonstrating an ability to control?What obligations will fall on corporate owners of such sites, should they invest?At what point does the service provider become a content owner protecting user generated content, and does that impact safe harbor status?



Convergence 2007 – Strategic Considerations

If content providers continue to acquire user-generated sites, both they and the OSP need to consider the following:

Qualify site for the Section 512(C) safe harbor;Utilize standard takedown language;Avoid controlling site content, but be proactive; (but advance screening is a two-edged sword);Seek licenses for content;Review marketing materials to avoid encouraging infringement;Sites provide new outlets for content, new customers, but is their “counterculture” identity part of their attraction and will that be lost by corporate acquisition?Who owns user-created content? And how is that to be deconstructed?

WHEN OPPOSITES ATTRACT - foley.com · When Opposites Attract October 16, 2007 LACA_879478.1 Moderator: Carole E. Handler, Foley & Lardner LLP, Entertainment and Media Team Panelists:

Documents