How social media and smart devices are influencing the negotiation of Sports Media Rights Agreements

Published 11 November 2014 | Authored by: Tom Burrows

Over the last few years, and as a result of the creation and development of new technology, the sports media market has experienced a cultural shift in the way in which viewers access and consume sports content. 61% of consumers are reported to now follow sport online and the last 3 years has seen an increase in the percentage of fans that view sports content on their smart devices from 21% to 39%1.

This is a significant development not only for the sports media industry itself, which demonstrates the ‘anywhere, anytime’ requirements of the modern day sports fan, but also for sports lawyers.

It is not just the medium by which content is accessed that has changed, the exponential growth of platforms through which fans can consume sport has also had a significant impact on the sports media landscape, with one in four fans now accessing sports content via social media.2

This article will explore the challenges and opportunities that both social media and smart devices present as well as key provisions that sports lawyers may consider when drafting and negotiating media rights agreements in order to appropriately reflect, and deal with, the impact of new technology on sports media rights programmes.

 

Opportunities

Fan Engagement

As recently noted by Simon Greenberg (global head of rights at News Corp), social media platforms and smart devices provide rights holders and broadcasters with a number of important opportunities, including "the connectivity you get with the user, the speed you can get to the user, and the way you can target the [sports] fan."3 This is driving rights holders, such as the NBA, to increase the quality of the engagements and interactions with fans via social media by entering into agreements with Twitter to stream official video clips of games.

The opportunity afforded by social media to provide a platform for “consumers [to] react to live sports4, is demonstrated by the increase in the use of so-called ‘second screens’ by sports fans (e.g. the use of computers, laptops, smartphones or tablets whilst watching sport on television), and the provision of interactive features by licensees (e.g. red button services) for additional sports content (e.g. text commentary, live scores, clips and/or live footage), in-match betting, engaging with teams, athletes and other fans about the content being broadcast and accessing match statistics.

This connectivity presents a range of opportunities for rights holders and licensees to provide added-value not only to their fans and consumers, but also to their commercial partners, for example through access to additional premium content, competitions, in-play fantasy games, targeted advertising, sponsor-led content and as a mechanism for extending the commercial reach of commercial partners. For example, Manchester City Football Club has recently announced the launch of CityMatchday, a dedicated second screen match day app, which will allow users to watch live footage from the players’ tunnel, the post-match managers’ press conference and in-match and half-time commentary from pundits, fans and special guests5. In addition, users watching the match at the Etihad Stadium will be able to stream 2 additional live video channels via their mobile devices, in the form of a highlights channel (which will provide multi-camera angle replays) and a 'Tactical Cam' (which will give fans the opportunity to view the match from high above the pitch).

However, whilst the use of ‘second screens’ or interactive services presents a fantastic opportunity for rights holders and licensees, it does need to be carefully managed within the relevant media rights agreement.

In particular, rights holders need to ensure that the integrity of their product (e.g. sport, league, team etc.) and the rights granted to their commercial partners are not compromised by any additional content and/or services provided by their licensees. As such, the rights holder may look to impose strict conditions and/or ensure that it retains approval rights over what can be broadcast as part of a licensee's interactive services. Furthermore, particularly where an interactive service relates to a category of rights already granted to an official sponsor (e.g. official data partner or betting partner), the media rights agreement should prohibit the applicable licensee from exploiting the service during its coverage unless licensed through the relevant official partner (e.g. a licensee should be prevented from providing match statistics unless that data is licensed from the official data partner). In addition, where a rights holder is seeking to exploit rights itself (e.g. Manchester City’s distribution of content to spectators at the Etihad Stadium via its mobile app), it is critical that this exploitation is carved out of the media rights agreement (e.g. as part of the reserved rights).

Fan Reach

Whilst social media clearly provides an effective method for enhancing the quality of the engagements between a rights holder and fans, it also provides an incredible platform for exponentially increasing a rights holder’s reach. For example, 3 tweets sent by Cristiano Ronaldo relating to the 2014 UEFA Champions League Final reached an estimated 113,000,000 people, 135 countries and 43% of twitter users6.

However, social media does not only provide a platform for increasing an official sponsor’s fan reach. It also enables third parties that are not officially associated with an event to use the goodwill created by that event to increase its brand exposure. For example, research carried out by Repucom relating to the use of social media during the 2014 FIFA World Cup, highlighted the fact that Nike (who was not an official sponsor of the tournament) received 213,965,724 views on social media during the course of the tournament compared to 100,242,944 received by Adidas (who was an official FIFA partner). Whilst there will obviously be a number of factors that contribute to Nike’s ability to generate significant social media exposure, it also highlights the fact that brands that are not official sponsors or partners of events can use the interest surrounding a major tournament to develop its own social media presence, particularly where that brand is associated with stars of the tournament (e.g. Nike and Cristiano Ronaldo). 

As such, it is important for rights holders and official partners to engage proactively with each other to produce premium additional content that official partners can use as part of their activation of the relevant rights. As discussed above, this enables official partners to provide higher quality engagements with consumers (e.g. behind the scenes interviews and footage, access to archive content and competition prizes7 etc.) and demonstrates value to official partners, who may otherwise look at the fact that non-partners are able to generate increased exposure around events without having to pay substantial rights fees and decide that there is no need to become an official sponsor.

Consequently, official partners and licensees (including broadcasters, as part of the relevant media rights agreement) will often seek to impose (and the rights holder may be willing to accept) various obligations to provide additional rights (e.g. in addition (in the case of media rights agreements) to the principal right to distribute the match footage) including: making players and officials available for exclusive interviews; providing tickets and hospitality places to the rights holder’s events; rights for the partner to organise competitions (e.g. ‘goal of the month’) and; distribution of the partner’s marketing materials to the rights holder’s database (e.g. season ticket holders).

Enhanced rights fees

The sale of media rights is of fundamental importance to the commercial programmes of most (if not all) rights holders, and generally represents the single most important source of revenue. The emergence of new technology provides rights holders with an opportunity to exploit new packages of rights8, and encourages new entrants to enter what has traditionally been a closed marketplace9, thereby enhancing the revenue that a rights holder can generate from its packages.

Also, the increase in new platforms for viewing content provides a vast increase in the opportunities for the distribution of sports programming by enabling content to be accessed in more territories around the world and facilitating increased exposure for less mainstream sports and/or content for which broadcasters do not provide linear television coverage10.

The potential for the creation of new packages of rights means that lawyers need to pay careful attention when defining the scope of rights in the media rights agreement so that the exclusivity afforded by each package does not overlap or conflict with the exclusivity afforded by any other package (for example, convergence has meant that the lines between 'television', 'internet' and mobile' are quickly disappearing, making it very difficult for rights (in particular the exclusivity of these rights) to be granted by reference to technology. As such, media rights sales are now generally made on a technology neutral basis (which allows rights to be exploited on all platforms and via all devices11), with exclusivity granted on the basis of the following:

  • type of programming (e.g. live, as-live, highlights, clips etc.);
  • territory;
  • language;
  • payment mechanism (e.g. free, pay-per-view and pay); and
  • transmission type (e.g. linear or on-demand).

It is also important, particularly when dealing with long term agreements, that potential rights are not locked away, for example it is important to ensure that where (at the time of the deal) certain rights are not able to be exploited, these are reserved for potential exploitation in the future. As such, when drafting media rights agreements, it is vital to consider the long term commercial plans of the rights holder and to ensure that the grant of rights within the media rights agreement does not restrict the potential opportunities afforded by new technology.

 

Challenges

Whilst new technology and new media platforms provide rights holders with a number of opportunities, they also create additional challenges and risks.

Unauthorised Footage

As highlighted above, the speed of getting content to, and interacting with, fans can offer rights holders and licensees with a fantastic opportunity to engage with their fans on a real time basis, thereby offering a way of enhancing the fan experience.

However, these real time interactions also pose a significant threat and challenge to those same rights holders and licensees. The FIFA World Cup in Brazil and the start of the new Premier League football season have provided perfect examples of this, through the emergence of users posting so-called ‘goal Vines’ on Twitter (six second video clips of goals via Twitter’s Vine application). The development of new technologies, in particular the ability to pause and rewind live television broadcasts has significantly contributed to the prevalence of 'goal Vines' on social media by making it much easier for television viewers to film footage from live broadcasts.

The availability of Premier League goal clips on Twitter poses a particular threat to News International, the official clip licensee for the 2013/14 – 2015/16 cycle. Obviously, the fact that goal Vines are freely available whilst subscribers to News International's Sun+ app are required to pay £8 per month is a significant factor in drawing subscribers away from the official licensee’s product, but more important are the restrictions under Article 48 of the UEFA Statutes which prevent News International from distributing near-live video content on Saturdays between 14.45 - 17.15 (blocked broadcasting hours). Whilst News International is prevented from exploiting its clip rights during the blocked broadcasting hours, licensees in other European countries are able to broadcast live coverage, thereby allowing viewers/subscribers in those countries to record clips from such television broadcasts (e.g. on a mobile phone) and, via Twitter, share those clips around the world (including in the UK) within seconds of the goal being scored. Therefore, fans in the UK are able to view content via Twitter before the exclusive Premier League licensee is able to distribute its official content.

The unauthorised availability of footage on social media is a difficult issue to remedy, particularly due to the speed at which content can be uploaded and then widely disseminated across various platforms. However, licensees may look to negotiate (within their media rights agreements) obligations on the rights holder to actively take steps (as soon as it becomes aware of the availability) to bring such unauthorised availability to an end, and to notify the licensee about the steps that have been taken.

This obligation could be extended to include employing technology to bring the availability to an end, for example the Premier League has announced that it is "developing technologies like gif crawlers [and] Vine crawlers12 in an effort to protect its official licensees such as News International against the availability of goal Vines. There are also companies that employ video fingerprinting technology to enable rights holders to determine if any content shared online contains content registered with the fingerprint service. If registered content is detected, the rights holder can then determine the appropriate action to take, which may include removing the content or serving advertising of its official partners around it.

Ambush Marketing

Whilst the opportunity for a rights holder to share live content on social media sites allows it to provide its commercial partners with an enhanced commercial offering by enabling its commercial partners to sponsor the relevant content and to insert pre-roll, post-roll and/or in-skin advertising, it also raises important issues relating to ambush marketing.

For example, the Twitter Amplify service, which allows users to watch live clips and content (including of sports events) in real-time without leaving Twitter, means that content owners (for example a licensee) can grant third party brands (i.e. advertisers and sponsors which may or may not be official partners of the relevant event) the right to directly associate themselves with major sports events.

As such, it is important (in order to ensure the integrity of the marketing rights packages offered to its commercial partners) for rights holders to look to strictly control the ability of a licensee to exploit its rights in connection with the relevant event. Rights holders may look to reserve the broadcast sponsorship rights when concluding their media rights agreements, so that they can then pass them on for their commercial partners to exploit, as happens with the UEFA Champions League or (if the relevant licensee is unwilling to accept such as reservation of rights) to require, as part of the applicable media rights agreement, that any broadcast sponsorship packages and advertising spots are first offered to the event's official commercial partners on a product or service category exclusive basis.

Where a licensee is seeking to exploit content by means of the internet (including via social media sites or through smart devices), provisions can be included in the media rights agreement which contractually oblige the licensee to ensure that the content is shown free of any third party commercial identification (i.e. prohibiting the use of pre-roll, post-roll and/or in-skin advertising in conjunction with such content), unless such third party is an official sponsor.

Availability of content outside of the licensed territory

As discussed above, the increase in media platforms and new technology enables sports content to be accessed in more territories around the world, thereby increasing the global appeal of the rights holder’s sport, team or brand. However, mobile technology means that consumers are able to access content and subscribe to services via their smart devices whenever they want, wherever they are in the world which raises a number of issues around territorial exclusivity that need to be addressed in the media rights agreement.

Territorial exclusivity is a fundamental premise upon which most (if not all) media rights programmes are based, and therefore it is critical that this exclusivity is protected by rights holders. The key issue with regard to the ability of consumers to access services wherever they are through their smart devices is ensuring that users accessing content via the internet or a smart device are resident in that territory. The starting point for ensuring territorial exclusivity for transmissions made over the internet is to impose an obligation on the relevant broadcaster to geo-block its transmissions so that such transmissions cannot be accessed by users located outside of the licensed territory. Broadcasters will generally seek to resist the inclusion of an absolute obligation on the basis that geo-blocking technology is not 100% effective and that users may develop technology designed to beat the geo-blocking technology used by the broadcaster. Therefore, it is common for the licensee to be required to use geo-blocking technology that it is at least x% effective (generally 96%).

In addition to the obligation on licensees to geo-block their transmissions, the media rights agreement should look to impose obligations on any licensee to verify the users of its service (e.g. that the subscriber is registered to a legitimate address in the territory), and to ensure that content is limited to those verified users (e.g. via personalised logins). Rights holders may also look to limit the number of devices on which a user can access the service.

Whilst rights holders are keen to ensure that services within a territory are only accessed by residents of that territory, mobile technology means that mobile services from outside of a particular territory may be capable of being received and viewed in that territory by visitors. As such, this availability needs to be acknowledged and carved out from the territorial exclusivity obligations on both the licensee and rights holder included within the media rights agreement.

Lawyers should also be aware of the potential for the decision in Murphy13, (which confirmed that consumers within Europe cannot be prevented from acquiring satellite services available in their country, notwithstanding that the relevant services are primarily intended for reception elsewhere in the European Union) being extended to internet transmissions, thereby prohibiting the application of geo-blocking technology to carve up territories within the EU. Given the game-changing effect this would have on the media rights market, it is important that this risk is addressed in the media rights agreement and lawyers for both rights holders and licensees put in place a strategy for dealing with the implications.

 

Conclusion

As highlighted in this article, smart devices and social media provide a huge opportunity for both rights holders and licensees within the sports media market. However, there are a number of challenges and issues that need to be carefully considered when lawyers are drafting and negotiating media rights agreements in order to ensure that those opportunities are not outweighed by the risks that inevitably follow.

 

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About the Author

Tom Burrows

Tom Burrows

Tom is Head of Legal – Content at Perform Group. He is primarily responsible for supporting the content division of Perform's business, in particular advising on the global distribution of Perform’s digital sports media products. Prior to joining Perform, Tom was an Associate in the Sport Group at Sheridans.

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