TV Everywhere, Naming Rights, Licensing: Law At The Intersection Of Sports And Technology

Friday, January 20, 2012 - 10:03

The Editor interviews Robert E. Freeman, Partner, Proskauer.

Editor: Rob, please tell us about your professional background.

Freeman: I started my career as an intellectual property and antitrust litigator. After five or six years, I decided to shift gears and focus on developing a transactional practice. Litigation was fantastic training and gave me the perspective to focus on what's really important when negotiating deals. I see attorneys all the time who have not had any litigation experience and who spend too much time focusing on unimportant issues, which wastes time and their (and my) client's money.

Today, I am a partner in Proskauer’s Corporate Department and a member of the Sports and the Technology, Media and Communications practice groups. My practice focuses on intellectual property-related transactions in media and sports. I also have handled every type of technology-related transaction, from software development and licensing to outsourcing, technology JVs and acquisitions. Much of my day is now spent on TV-related deals, including carriage agreements between major cable, satellite and telco distributors and networks like Disney/ESPN, Fox and Viacom. This naturally causes me to be involved in rights issues and disputes involving all of the available platforms for distributing content. Many of my deals involve sports content, and I have handled many negotiations with the national and regional sports networks. I have also represented any number of sports technology companies in all aspects of their business and have handled a wide variety of sports and arts-related sponsorship and licensing matters.

Editor: I understand you recently represented Lagardère in its acquisition of Gaylord Sports Management. Would you describe this deal?

Freeman: Based in France and one of the largest media companies in the world, Lagardère in 2009-2010 entered the United States sports market through its significant acquisition of the sports management agency Blue Entertainment Sports Television, or BEST. In doing so they acquired a number of agents prominent primarily in tennis and football and, to a lesser extent, basketball. Close to that time Lagardère also acquired Saddlebrook, a resort-like training facility for premier athletes. The strategic acquisition of Gaylord extends Lagardère’s presence in the U.S. sports industry and, in particular, in the golf industry. Gaylord has represented Phil Mickelson for most if not all of his career, along with many other top athletes in a number of sports. Furthermore, the acquisition gives Lagardère an entry into golf course design, as Mickelson and his managers have been increasingly focused on developing the Mickelson design brand.

Editor: Please walk us through one or two of the sports media rights agreements you have worked on.

Freeman: I have been involved in many of the largest and most complicated sports television deals. As one example, in 2010, I represented a major cable operator in its negotiations with Disney/ESPN covering all of Disney/ESPN's broadcast, cable and online products and programming services. The result was one of the first "TV Everywhere" deals in the industry and, at the time, was truly groundbreaking. More recently, I have just completed the renewal of a major RSN carriage deal and have been advising a client who is heavily involved in the college sports content space regarding conference realignment issues.

Editor: Describe some of the legal issues for networks, Internet/cable providers and sports franchises when writing contracts regarding “TV Everywhere.”

Freeman: “TV Everywhere” basically refers to getting content onto the best available screen, including iPhones, iPads, computers, laptops, Droids etc. The issues surrounding it are not new; they are similar to the issues faced whenever new technologies come on the scene. In particular, parties on both sides of the aisle – both content owners and distributors – must consider whether they have the necessary rights to distribute the content at issue over the many platforms and to the many devices that are now available. I would say the entertainment side of the house has been slower to move into the TV Everywhere space than has the sports side.

Much of this is being driven by rights issues. Sports networks – particularly ESPN – have been very aggressive at making sure they get all of the necessary rights from their league and team partners to deploy a multi-screen strategy. Entertainment networks that do not produce their own content have, to date, been less successful at securing digital rights and often must deal with older rights agreements that are either unclear about Internet or digital rights or expressly hold them back. So, a particular show that airs on an entertainment network may only be licensed to be distributed via cable or broadcast television and only for a limited window. Along with the challenge of monetizing content, rights issues probably comprise the greatest stumbling block to TV Everywhere for entertainment networks.

Editor: Because television and film don’t have the time stamp that sports events do, does their value change less over time?

Freeman: Yes, compared with sports content, entertainment content has a much longer shelf life. Consumers will watch a particular episode of “Modern Family,” for example, weeks after the episode originally aired, and it doesn't lose its impact. In contrast, sports fans live and die for live games. Who's going to watch a division playoff game two weeks after the fact? Not many of us. This is why live sports content is so valuable. We have seen this value skyrocket in recent rights deals. 

Editor: Interactive sports apps – some of them developed by independent, non-sanctioned entities – will likely continue to proliferate on the sports fan landscape. Do you foresee legal issues such as copyright or trademark infringement (or violations of exclusivity arrangements) arising as a result?

Freeman: If a fan or an entity creates an app or website that incorporates copyrighted or trademarked materials without authorization, IP claims will follow; likewise, use of a particular athlete’s image without a license can result in publicity rights claims. In the early days of the Internet, fan sites popped up everywhere, and depending on the impact they had either on a particular property’s or athlete's brand or revenue stream, those sites often found themselves embroiled in litigation. Apps are no different; IP rights are incredibly valuable and vigilant owners will be sure to do what they can to protect those rights. Any survey of the cases pending in the courts would reveal dozens or hundreds of cases involving unauthorized use of intellectual property over the Internet and other digital platforms. The Stop Online Piracy Act (SOPA), now pending before Congress, if passed, may make it easier to shut down sites that distribute content over the Internet in an unauthorized manner. At the end of the day, if you believe that IP rights are valuable and should be protected – and I do – then we must either pass legislation like SOPA or litigate under the existing laws to block or prevent unauthorized uses.

Editor: Speaking of publicity rights, have fantasy leagues’ issues been ironed out?

Freeman: To a large extent, yes. In 2006, MLB Advanced Media sued CDM Fantasy Sports: at issue was whether CDM’s use of player names and statistics violated the players’ rights of publicity. Largely on First Amendment grounds, the court ruled that it did not. I will say there were many out there who thought the court got it wrong, but, at least for now, that area appears to be pretty settled.

Editor: You have worked on a number of naming rights deals with professional sports teams. Can you give us a few examples of your work in that area?

Freeman: One of the great things about my practice is its variety. I’ve always tried to be exposed to as many different types of transactions in the sports and media industries as possible. Since the mid-1990s I have handled all types of sports sponsorship deals. One of my early significant deals was representing Deutsche Bank in the late 1990s in the negotiation of a title sponsorship deal with IMG and the PGA Tour for the event that is now well-known as the Deutsche Bank Championship. It's a signature PGA tour event played over Labor Day weekend. Later, I negotiated the renewal of the title sponsorship, but that time there was the added complication of the FedEx Cup being introduced. On the naming rights front, I have represented brands such as Time Warner Cable in its deal for the Time Warner Cable Arena in Charlotte, NC, and teams such as the Orlando Magic in its recent naming rights deal for the Amway Center.

Editor: Please describe your work on a joint venture with Discovery, Sony and IMAX to develop a 3-D network.

Freeman: We represented Discovery in a three-way joint venture with Sony and IMAX to create 3net. The JV brought together assets, content and technology from each of these major media companies. The network successfully launched and has a distribution deal in place with DirecTV. Adoption of 3-D is still in its nascent state. I imagine sports will play an important role in driving consumer interest in 3-D content.

Editor: I understand that you recently represented a mid-size cable operator in the first successful "baseball-style" arbitration ever against a regional sports network. What can you tell us about that matter?

Freeman: With increasing consolidation in the media industry, regulatory agencies such as the FCC are concerned with the potential for abuse of the power wielded by vertically integrated media companies such as Comcast and DirecTV. These are companies that operate both major producers and distributors of content. The FCC has put in place a number of regulations and specific orders intended to put a check on such entity's ability to discriminate against unaffiliated entities. My case involved DirecTV, the second largest distributor of television content in the U.S. after Comcast and also the owner of a number of regional sports networks acquired from FOX. DirecTV is subject to an FCC Order that enables a competing distributor to commence a “baseball style” arbitration if it feels it is being asked to pay rates for DirecTV's RSNs that it believes do not reflect fair market value. In such an arbitration, both sides submit a “final offer” in the form of a contract – i.e., it must include both the substantive distribution terms and the proposed rates to be paid. Ultimately the final offers are considered by an arbitrator charged with determining which offer more closely approximates the fair market value of the programming rights at issue – in this case the rights to carry the regional sports network and the games on that regional sports network. In our case, a five-day evidentiary hearing was held with experts and fact witnesses appearing for both sides. Here, my litigation experience combined with my knowledge and expertise regarding the RSN industry really paid off; I actually ended up handling a number of the cross-examinations and the arbitrator ruled in our favor. The Media Bureau of the FCC affirmed the decision over the summer and the case is now on appeal to the full FCC.

Editor: Do you have anything else you would like to add?

Freeman: The world of sports rights is fascinating today. Proskauer has many clients in this space, and it’s a great time to control sports programming rights. The market for those rights is red hot and does not appear to be cooling down. Of course, the question being raised by many is how high is too high? And, at what point will the model break? No one really has the answer to those questions, but we’re trying to figure it out and are doing our best to make sure the model doesn’t break.

 

Please email the interviewee at rfreeman@proskauer.com with questions about this interview.