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Sports & Entertainment 2017: Trends & Conclusions

The digital age has heralded major changes in entertainment and sports, with more ways to view, hear and generally consume media. Such changes are showing up traditional models in television, music, gambling and sport as increasingly outdated and ill-suited to the demands of consumers. Lawyers are deeply involved in how these markets are catching up to the ever-evolving digital world, whether in disputes between stakeholders, multibillion-pound rights deals or regulatory changes. We spoke to dozens of leading practitioners to get their thoughts on some of the major trends affecting these areas at the moment.

The consumption of media in sports and entertainment – a changing landscape

The worlds of sport and entertainment are becoming ever-more entwined, and the distinction between them is constantly narrowing. Media has become a key driver of sporting development, as consumers continue to seek the thrill of sport’s unpredictability while broadcasters and stakeholders look to exploit the necessity of watching fixtures or events live in a world where media is increasingly watched or listened to on demand. Consumers are willing to pay for the opportunity to watch sport, not necessarily by attending live matches, while broadcasters and governing bodies are using the money gained through sponsorship, advertising and subscriptions to invest in a higher-quality, and flashier, product.

“We’re in the middle of a huge change in media,” said one US lawyer, noting that ESPN, a major global sports broadcaster, has lost 12 million subscribers in six years, from a 2011 high of 100 million. This has resulted in substantial job losses, including high-profile talent.

For the moment, though, traditional broadcasters are still the dominant force behind the massive rights deals seen recently, particularly in football. “TV is providing all the money,” as one lawyer put it. In 2016, the global rights to the English Premier League were sold for £8.3 billion, to go along with the domestic rights sold to Sky and BT for £5.14 billion a year before. However, as more and more broadcasters seek to obtain a slice of the pie, they risk alienating consumers who are reluctant to pay for multiple subscriptions, where previously they only needed one. A similar trend is seen in other television products, with competing companies such as Amazon, Netflix and Hulu all vying to gain the rights to popular series and films. Lawyers are often central to such negotiations, and the proliferation of competitors in the market, as well as the enormous sums involved, are ensuring a high volume of work for practitioners in the industry.

Indeed, sport in particular is seeing a substantial increase in so-called “cord-cutters”, who are moving away from traditional models of watching sports through cable or satellite networks. These consumers tend to turn instead to viewing on a more ad hoc basis through, for example, single-sport subscription packages offered by leagues such as the NFL, or pay-per-view subscriptions frequently seen in boxing and other sports. Such changing behaviour from increasingly savvy and discerning fans is undoubtedly an area of concern for broadcasters, report interviewees, but it is also an opportunity.

Allied to this is the problem of piracy. An interviewee stated, “It’s a major issue – the quality [of illegal streams ands feeds] is fantastic, so convincing people that buying is better is the tactic.” What “better” means in this context varies – and is often a case of carrot and stick. Causing inconvenience is an option, by such means as shutting down illegal streams, or prosecuting or suing pirates. Several lawyers we spoke to were keeping busy with copyright claims. The fact that “the digital world doesn’t really recognise borders” has not stopped service providers trying to impose them – for example, in 2016 Netflix banned the use of virtual private networks (VPNs) in order to protect its individual regional agreements with content rights holders.

In addition to such “inconvenience” tactics, broadcasters are also seeking to encourage people who illegally access or download content to pay. In sports, broadcasters attempt to sell on the basis of better image quality, such as through “ultra high-definition” broadcasts, or through more and higher-quality content and ease of use.

In other media, synchronised worldwide releases of major properties such as Game of Thrones are both meeting fans’ desires to share in the collective enjoyment of such launches and minimising the impact of piracy caused by delays in old-style staggered releases (although, in fact, Game of Thrones suffered substantial data breaches in July 2017, resulting in some episodes being released early by hackers). The days of fans having to wait a year or more for their favourite TV programmes or films to be released in their territory are largely past, with IHS reporting that the average delay in US TV programmes making it to the UK dropped from 102 days in 2015 to just 37 days in 2016. However, negotiating the distribution of such popular IPs in a shorter time frame, alongside the increasing complexity of the licensing agreements themselves, poses a challenge – one that entertainment practitioners around the world are rising to meet.

Other “convenience” tactics designed, in part, to combat piracy are seen in the music industry, with streaming services rapidly overtaking more traditional selling models, which has had the intended effect of reducing piracy. A July 2016 report showed that the percentage of people listening to music through legal means had risen from 74 per cent to 80 per cent in the preceding year. However, it has also caused a reduction in artist remuneration, as fewer people buy tracks instead of streaming, with the latter only netting a fraction of a penny per “listen”.

Despite the many changes in recent years, an increasingly settled new landscape of broadcasting seems to be developing. Music streaming has become more or less ubiquitous in parts of the world with reliable internet connections, while consumers are, for the moment, content to pay for subscriptions to a handful of services that will satisfy the majority of their entertainment needs. Lawyers will certainly be required to iron out some of the rougher edges in the new markets, as outdated regulations catch up and companies acquire and divest intellectual property rights to optimise their businesses.

Trends in gambling

Gambling remains a major part of legal practice in the entertainment industry – understandable, given both the money involved and the varied regulatory complexities seen around the world. In the UK, lawyers highlighted a “huge change in approach” by the Gambling Commission under its chief executive, Sarah Harrison, resulting in her being described as “the punters’ champion” by The Guardian. In July 2017, Harrison stated, “We will take robust and effective action when gambling companies don’t meet their obligations,” – a departure from the often-softer approach adopted in the past. “Gone are the gung-ho days where you could set up an operation and worry about everything else later,” said one lawyer, adding: “I can see one of the big operators getting caught out.” This hard-nosed approach is likely to be good for lawyers, according to sources, owing to the probable increase in and seriousness of disputes that may arise.

Elsewhere, lawyers are having to wrestle with the problematic effects of technology and the internet on gambling, as regulatory regimes around the world vary hugely – from countries such as China, where online gambling is completely illegal, to much more open yet regulated markets such as the UK and Spain. In between lie countries such as the US, which has varied regulations by state. Attempts to circumvent these rules, for example through “fantasy betting” sites such as DraftKings and FanDuel, have met with mixed success, with some US states ruling them illegal.

The changing nature of disputes in football

Numerous lawyers told us about a recent shift in football-related disputes, caused in large part by FIFA’s deregulation of agents in 2015, coupled with an increasing devolution of dispute resolution to national governing bodies and, where necessary, the Court of Arbitration for Sport (CAS). One lawyer told us, “The number of intermediaries [FIFA’s new name for “agents”] has gone from 500 to 2,000 in two years.” Many of these are the parents of footballers, “who never used to be able to be paid” as representatives of their children.

The inevitable result in deregulation has been a substantial increase in family feuds and disputes that need resolving. The problem is only exacerbated by the fact that “the stakes are higher and disputes are worth running”, owing to the vast amounts of money involved in transfer fees and salaries. Agents, understandably, are “very protective of their contracts with players”, with some “quite aggressive in their approaches”, according to sources.

This higher-stakes landscape, coupled with an increasing backlog of cases at CAS, is causing some alarm within the sport. Time is often of the essence, and on average CAS disputes take five months to resolve (but sometimes up to two years), although an expedited procedure is available in cases of greater urgency. In addition, bodies such as the Football Association in the UK are picking up the slack through their “Rule K” arbitration procedures, while more CAS arbitrators are also being appointed.

All of this is, of course, good for lawyers, but the lack of regulation in the post-agent world of football is nevertheless a cause for concern, which FIFA seems reluctant to address.

***

The sports and entertainment fields continue to face a range of challenges and opportunities, in a world that craves more of both than ever before. For many of us, a combination of television, music, film and sport consumes a substantial proportion of our free time, and as stakeholders seek to jockey for position to reap the financial benefits of this centrality to people’s lives, disputes, regulatory issues and complex problems arise. In both entertainment and sport, the digital revolution continues to be both a boon and a potential headache, and this duality looks set to keep lawyers in these sectors busy over the coming year.

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W11 1QQ, UK