What the Hollywood Writers Strike Can Teach Information Content Businesses

February 12, 2008

Television fans have waited eagerly for the arrival of the recent news that the Hollywood writers strike might be coming to a close. With a tentative agreement in place between the studios and the Writers Guild of America, votes are expected shortly on whether to end the strike and ultimately to approve the new bargaining agreement.

One of the main issues reportedly behind the strike was a dispute between the studios and the writers regarding how writers should be compensated for use of their work in new media channels, such as Internet downloads, video-streaming and smartphone video clips. (For a look at some other legal considerations regarding these new media channels, see “Viacom vs. YouTube: Lessons for Marketing with User Supplied Content.”) Earlier collective bargaining agreements had not anticipated the growth of these new media channels. With many industry observers expecting broadband delivery of content to one day replace the DVD format as the distribution channel preferred by consumers, the studios and writers alike see these new media channels as critical to their future profits. Early indications suggest that the tentative agreement establishes residual rates and credit rights related to many of these new media channels.

Hollywood isn’t the only industry dependent on information content. In the same way that scripts are fundamental to the entertainment industry, information as varied as product or market pricing data, geo-location data, health records, customer preferences, news sources, and building designs, to name just a few, is just as fundamental to those particular industries. While other industries might not involve unions with collective bargaining agreements or traditional residual royalty structures, all information content businesses are faced with complex decisions on how to adapt their key assets – i.e., their information content – to unexpected and new distribution channels and platforms. The decisions can be further complicated when the key asset/information content is actually licensed from a third party.

1. Anticipate the Future: Both the studios and the Writers Guild of America would likely admit that the true size and scope of the new media channels for their works is largely unknown. In many ways, both sides hoped to take advantage of the lack of clarity about these new media channels in order to establish some reasonable footholds, footholds that will likely be the starting point for future negotiations as the true nature of these new markets become more clear. Similarly, companies licensing third-party information content should do their best to structure the license to anticipate future uses the company might wish to make of the information content, and not just the present-day needs. Beyond obtaining the most sweeping and broad of licenses, which may not always be feasible or financially viable, a myriad of strategies can be deployed in an effort to provide a good starting place for later discussion of these future uses: rights of first refusal, most-favored pricing commitments, forms of exclusivity, or agreed upon procedures for determining final terms and pricing for these new uses when sufficient information is available.

2. Anticipate Diverse Internal Objectives: The Hollywood writers strike revealed some interesting tensions, from late-night comedians who continued to perform despite disagreement on whether they could write their own monologues to writer-producer types who had to balance their producer duties with their commitments to their writers’ union. Other information content businesses can also expect to navigate diverse and occasionally conflicting internal objectives. For example, many companies consist of multiple legal entities with contracts being entered into by any or all of the legal entities. One operating division of the company might find a wonderful new use for information content of another operating division. However, if those divisions are not housed within the same legal entity, the contract might not provide the operating division with the new product idea any right to use the information content licensed to the other operating division. (For a further discussion of contracting across multiple legal entities, see “Recent Lawsuit Illustrates Need For Legal Review of IT Contracts.”) Differing business objectives and separate budgets complicate internal discussions regarding the effort to expand the license rights with a third-party content provider. Companies are well advised, wherever possible, to obtain enterprise-wide rights to use the information content, if only to avoid the hurdle of a legal-entity barrier to capitalizing on some future use otherwise permitted by the contract.

3. Anticipate Negotiations: Some theorize that the Writers Guild of America called its strike when it did (rather than waiting for the summer 2008 expiration of the collective bargaining agreements of other guilds) with the hope of preventing the studios from amassing scripts for use during negotiations over the new Minimum Basic Agreement. Likewise, information-content businesses should take a proactive approach to developing their strategy for re-opening negotiations with any third-party content providers about new uses they might like to make of the information content. Legal counsel should be contacted early in the new product development cycle so that problems can be identified and potential solutions can be explored while as many options as possible are still available.

Best practices strategies for the licensing of information content is one of the areas supported by the McGuireWoods Technology Transactions Practice Group. This practice group is part of the firm’s integrated Technology & Business Department, which provides legal services for business transactions driven by technology. These service areas are led by Department Co-Chair Steve Gold. For further information about this or any related topics, please contact us.