Film and Television Distribution and the Internet

A Legal Guide for the Media Industry

Andrew Sparrow

• Editorial: Routledge
• Año: 2016
• ISBN:
  9781317135272
• Edición: 1
• Categoría: Commerce
• Categoría: Industrie des médias et des communications

There is no area of business that is more dramatically affected by the explosion of web-based services delivered to computers, PDAs and mobile phones than the film and television industries. The web is creating radical new ways of marketing and delivering television and film content; one that draws in not simply traditional broadcasters and producers but a whole new range of organizations such as news organizations, web companies and mobile phone service providers. This companion volume to Andrew Sparrow's Music Distribution and the Internet: A Legal Guide for the Music Business focuses on the practical application of UK and EU law as it applies to the distribution of television and film through the internet. This includes terms of contract and copyright as they affect studios, broadcasters, sales agents, distributors, internet service providers, film financiers, and online film retailers; as well as areas such as the licensing of rights. It also covers the commercial aspects of delivering film and television services to a customer base, including engaging with new content platforms, strategic agreements with content aggregators, protecting and exploiting intellectual property rights, data and consumer protection, and payment, online marketing and advertising. The opportunities for companies operating in this area are extraordinary (as are the legal implications) and Andrew Sparrow's highly practical guide provides an excellent starting point for navigating through what is a complex area of regulation, contract, copyright and consumer law.

CHAPTER 1
The Impact of the Internet on Film and Television Distribution

It is hard to imagine that, as late as 2005, at least two-thirds of all independent film distribution deals did not account for internet rights. Such rights went unrealised and were licensed as part of all-rights packages or bundled within the video or television deal. That position is now changing as it is recognised that, for the first time, the internet provides filmmakers with the means of distribution as well as the means of production. Moreover, they can interact directly with their target audience. The internet extends the range of what we think of as filmmaking. It has taken more than a decade for the internet to find a role as a commercial medium with a meaningful impact on the film and television industries. In that time a communications revolution has penetrated the day-to-day operations of industry all over the world and afforded individuals with access to information hitherto unobtainable. There are now close to a billion people with access to the internet.

In the last decade a number of now household names have proved the efficacy of the internet for business. Amazon spawned a revolution in book retailing and created a paradigm for consumer purchases of books, DVDs and CDs which others have since followed. Easyjet led the way in the use of the internet for flight reservations and, through the cost savings achieved by use of the web, also developed the low cost airline model which is now a part of the commercial aviation industry. In 2005 Google was the highest valued media company in the world. Yahoo has around 400 million users per month. YouTube has taken even new media experts by surprise in terms of its hugely successful online video file sharing service. To say that the internet has changed our way of life is no understatement.

Digital technology enables information, software, text, pictures and, importantly, films to be copied millions of times without loss of quality, downloaded without the knowledge of the copyright holder and transmitted around the world instantly over networks. Traditional models for film distribution are being overturned. Faced with an ever wider array of on-demand and sell-through delivery mechanisms it is vital that content owners exercise more control over their distribution destinies.

Whilst the fortunes of the internet’s commercial career have fluctuated, the legal issues surrounding internet business have always been founded on an essential need to safeguard the interests of all who use the medium.

The law relating to internet film and television distribution is complex. There is hardly an aspect of internet film promotion, sale and distribution which does not have a legal dimension. It will be seen that the majority of the law in this field has been introduced very recently. Such is the process of legal development that legislation must be interpreted by the courts to establish how it impacts on specific facts. This is the preserve of case law. Given the short time since the introduction of the variety of legislation, at the time of writing there is very little case law precedent. Undoubtedly it will develop in the coming years.

The problem facing lawmakers in the digital era is the sheer pace of development. The dynamics of the technology are changing very rapidly and the law must constantly adapt to the continuing stream of innovation. This presents difficulties because, whilst it is recognised that the internet will continue to advance, one cannot be certain of the direction the new media industry is taking and which services will become widespread. There are some indicators. Patterns of internet use are emerging. Most people use their computer at home for internet access. The evidence suggests the PC is moving from the bedroom to the living room and it is gradually competing for attention with the television. Forecasts predict that half of all mobile phone users in Europe will subscribe to a 3G service by 2010. Video downloading is expected to account for approximately one-third of the downloading market by 2011.¹ By that year it is believed that Internet Protocol Television (IPTV) revenues will rise to £6.4 billion worldwide and there will be 36 million IPTV homes.² Current analysis has revealed that following five years of double digit growth, the retail DVD market tumbled into sharp decline in 2005 as consumers lost interest in collecting DVDs.

It all points to one thing. The opportunity for the film and television industries to offer content direct to internet and mobile phone audiences is huge.

This book is written for those industries or anyone associated with them. Whether they be studios, broadcasters, sales agents, distributors, Internet Service Providers, film financiers, online film retailers or lawyers wishing to gain an insight into the subject, all should find the work useful. Practical advice is given on how to approach key relationships with Internet Service Providers, content aggregators and the consumer who downloads film and television output. The law is explained in straightforward terms and applied throughout in a media business context. It is hoped the reader will gain a good understanding of the legal issues in the rapidly expanding, constantly evolving and fascinating world of internet film and television.

1 Verdict Research, 2006: http://www.verdict.co.uk/.

2 Informa Research, 2006: http://www.informa.com/.

CHAPTER 2
Online Contracts for the Sale of Film Titles and Merchandise

One of the features of new media is that there are multiple audiences. From video-on-demand cable services to download-to-own services, this is an exciting period of change for the film and television media industries. It is also an opportunity for content providers previously shut out of potential markets by the so-called gatekeepers or intermediaries. With the internet it is more than ever possible for the film to find its audience and that audience, as will be discussed elsewhere in this book, can be very precisely targeted.

Music retailers and record industry suppliers may have been slow to adapt to the world of internet music but at the time of writing the music industry is quickly taking advantage of the flexibility and low scale-up costs of digital music. The film industry is now facing the same issues for film content, although with the benefit of the music industry’s experience. In addition, there are still issues around the speed of film downloads, for example, and the differing nature of music and film content – one (music) requiring passive listening thereby increasing the range apparatus through which it might be enjoyed, the other (film) demanding a more focused effort.

There is a transformation taking place in the way in which people interact with film and television. Those with broadband connections use the internet more than they watch television, while young people familiar with sophisticated mobile phones are much more receptive to the possibility of watching television on the phone in the future. New services present new market opportunities for the film business. Nonetheless, whatever format is used transacting business over the internet requires the formation of legally binding contracts. The issue of how a contract comes into existence when dealing online is one which, from the first stirrings of e-commerce, attracted significant legal attention. There had to be an ability for website operators and their visitors to enter into binding legal relations. However, it was also clear that the very nature of the internet would present a raft of new legal problems. Which country’s law would apply to this global medium? At what point would a contract come into existence? These questions were resolved and are reviewed in this book. However, to understand how a film business can operate safely online it is necessary to consider how English law approaches the matter of contract formation generally. This is because these long-established legal principles apply to internet trade and shape the way which websites must be configured. In this section we will examine these contract law considerations and see how a contract can be made over the internet and by mobile phone text messaging.

The assertion by Bill Gates in his book The Road Ahead¹ that the internet would carry us into a new world of low friction and low overhead capitalism, in which market information would be plentiful and transaction costs low, has proved correct. It is this characteristic which is now exercising the minds of those in the film industry. The access to online film files is limitless and vast databases of film works can be maintained. The films can be distributed without the need for physical dispatch, thus making transaction costs almost non-existent. The internet represents a triumph of technology over the constraints which hitherto prevented instantaneous communication on a truly global scale.

As the medium thus fits within an established legal framework, so it is necessary to understand the process of contract formation. Such an appreciation is critical to online business, since the sheer openness of the system can cause problems.

ENGLISH CONTRACT LAW

English law requires a number of things to happen before it can be said that a legally binding contract has been formed. A contract is founded on agreement. In its purest form agreement arises from offer and acceptance. One person makes an offer, another person accepts that offer. However, to constitute a legally enforceable contract the law demands four elements. They are:

• offer;

• acceptance;

• consideration (usually payment);

• an intention to create legal relations.

In this chapter we will consider the concept of an offer as well as another important issue for proper contract formation, that of the capacity of those under 18 to enter into contracts.

OFFER

An offer is a proposition put by one person (or persons) to another person (or persons) coupled with an intimation that he or she is willing to be bound to that proposition. The offeror – that is, the person who makes the offer – may make his or her offer to a particular person or to a group of persons or, as in the context of the internet, to the entire world.

He or she may make this offer in writing, in spoken words or by conduct. The first two can be grasped immediately and the written contract often takes the form of an elaborate document with numerous clauses and sub-clauses. How can conduct create an offer? Well, an everyday act of conduct which constitutes an offer can be found in a bus driver pulling up at a bus stop.

The intimation that the offeror is willing to be bound need not be stated in words, be they written or spoken. It may be, and frequently is, inferred from the nature of the offeror’s proposition or from the circumstances in which the proposition is made.

When you make an offer, you are expressing a desire to enter into a contract based on specified terms and conditions on the understanding that if the other party accepts it the agreement will be legally binding.

Offers can be made using virtually any form of communication. Over the years, as new means of communication developed, the courts have had to establish how contracts were to be formed by the use of developing mediums, from simple letter post to the advent of the telephone, fax machine and now e-mail, SMS text and, of course, over the internet.

It is vital to consider this legal explanation of what constitutes an ‘offer’. English law states that if a reasonable person would interpret a particular action or communication as an offer (a readiness to bind oneself), it is an offer whether the party intended it or not. It is therefore the appearance of an offer that is more important than actual intent. It can be seen that this is where the danger to electronic business exists. Careless online statements or poorly constructed websites could amount to a film business making unintentional offers to the world that could result in unwanted binding legal contracts once consumers accept.

OFFER DISTINGUISHED FROM INVITATION TO TREAT

There is a concept in English contract law which at first hearing sounds odd but which is necessary in the sales environment and is actually central to website commercial dealings. It is necessary to distinguish a true offer from an ‘invitation to treat’. The importance of the distinction is that if a true offer is made and is then accepted, the offeror is bound.

Conversely, if what the offeror said or did is not a true offer but merely an invitation to treat, the other person cannot, by saying ‘I accept’, bind the offeror and thus create a contract. Important though this distinction is, it is not always easy to make.

The contrast between the two principles can best be illustrated by the use of examples common to commercial life. First, the tender situation. Here, the distinction between an offer and an invitation to treat is reasonably clearly seen. If a company asks a number of suppliers to put in tenders for supplying it with some particular goods or services, the company is not thereby making an offer to those suppliers. Consequently, the company is not bound to accept the lowest or any other tender. It is not the company that makes the offer; the offer comes from the supplier in the form of a tender or estimate.

The next example of an invitation to treat is the display of articles on shelves in a shop, for example, DVDs. The offer is not made by the shop owner. They are only making an invitation to treat. The offer is in fact made by the customer taking the DVD to the cash desk and tendering money to purchase. That offer by the customer can then be accepted or refused by the shop. The courts take the same view of goods displayed in a shop window.

The same rule applies to an advertisement placed, for example, by a company stating that it is willing to sell DVDs. The general rule is that an advertisement is not an offer, merely an invitation to treat. We consider advertisements in the context of the internet in Chapter 12.

For the online film business to protect itself from making unintentional offers, it needs to observe the fine distinction between an offer and an invitation.

The internet uses modern digital technology and ordinary telephone lines. It is not a closed system like telex and it offers much more through its interconnecting networks. Anyone with a modern computer, a modem, suitable programs and a paid-up subscription to an Internet Service Provider can gain access to the system. By means of that system, a user can obtain information from websites, send messages through e-mail, and order merchandise and services.

A contract need not be a detailed formal document. It is possible to form a legally recognised contract by the simple exchange of e-mail. There might be arguments over uncertainty of terms and perhaps the court might refuse to confirm a contract if there are so many aspects of the purported agreement unclear to make the contract void for uncertainty. Nonetheless, e-mail exchange can create legal relations, so care must be taken. A contract can also be formed by mobile phone SMS. An exchange of text messages could constitute a contract between the parties.

FILM WEBSITES

A website operated by a film company is the electronic equivalent of a shop window. Similarly, e-mail price lists for film merchandise, for example, are analogous to circulars in conventional commerce. The better view is that a website constitutes an invitation to treat by its form rather than an offer for sale. However, that is not implied by law.

It is important that the film company makes it clear that its website does not constitute an irrevocable offer for sale of the film content or merchandise made available or services detailed on the site. To minimise the risk the film website and e-mail solicitations should have disclaimers explicitly defining them to be invitations to treat and not offers.

If one considers the issue, if the content of the film company website constitutes an offer then the business will have no control over who it becomes legally bound to. This would be a commercially intolerable scenario. By the inclusion of an appropriate disclaimer it will ensure that it has the ability to select customers and manage its supply of content, merchandise or services.

For many reasons the film company may not wish to deal with all consumers from all jurisdictions across the world. The website might be targeted to specific audiences and it is common for film companies to operate various websites if the company is international, perhaps with one site covering Europe and another governing the US market. Thus it is important for a film company to retain the power to accept or refuse. In this way it can decline online customers without the fear of being in breach of contract.

In fact, if the film company only ever intends to accept orders from say, UK-based film-buying consumers, since the internet is a global medium it must place a notice on its website stating that the contents of its website are for UK customers only.

DISCLAIMERS AND EXCLUSION CLAUSES

We are all familiar with clauses in contracts that seek to restrict or limit a company’s legal liability in certain situations. A disclaimer or e...