by JSEL | Nov 19, 2019 | Highlight
The National Football League and Major League Baseball’s players associations have entered into a deal with RedBird Capital Partners to maximize profits from player likenesses, the Wall Street Journal reports. This agreement is a major milestone in cross-sport partnerships, as it “marks the first time players unions have joined forces across sports in this way.” With the amount of money that the players and RedBird are putting together, the possibilities are likely endless. I would recommend players focus on replicating the success of athletes like JuJu Smith-Schuster in reaching new fanbases across different platforms to truly see the biggest gains from this new arrangement.
The RedBird deal creates a new company called OneTeam Partners LLC—the company will look to facilitate revenue generation from player portrayals. Bloomberg notes that “[t]he sports unions will have 60% of [OneTeam’s] equity, with RedBird taking the rest.” These intellectual property rights are no joke; from video games to trading cards: usage of player names, images, and likenesses is the cornerstone of various sports products that third-party companies offer (Bloomberg cites Electronic Arts and Nike; while WSJ mentions Sony and Panini America). As the frequent JSEL reader knows, the NCAA has recently taken note of how important these name, image, and likeness rights can be for players.
That the NFL and MLB players are coming together demonstrates a shared understanding among players that pooling resources can have a profoundly positive impact on the overall bottom line. NBA players just “reclaimed their group licensing rights in the last round of labor talks with the league,” and could therefore be next in line to join. One could also imagine a scenario in which other players (such as those in the Women’s National Basketball Association, Major League Soccer and on the U.S. women’s national soccer team) join OneTeam, and the WSJ article states that some are already slated to be OneTeam investors.
RedBird will pool an initial investment of $125 million with annual revenue from the two players associations to get the company going. The players associations make roughly $120 million per year from standard licensing agreements—the players “will still receive their standard annual payouts from the deals, but RedBird will use the funds to invest in other opportunities.” The well-financed company will begin to pursue various opportunities, and in so doing, I would encourage the dealmakers to “Be like JuJu.”
Building a fanbase is key to financial success in the age of athlete celebrities on social media. One great example of this phenomenon is JuJu Smith-Schuster, a young wide receiver for the Pittsburgh Steelers who has already established himself as the third-most popular NFL player on social media. Smith-Schuster’s superstardom is actually no surprise when you consider how he has creatively expanded his potential fanbase past just Steelers or NFL enthusiasts. Smith-Schuster is a well-known Fortnite player and was part of a record-breaking 2018 Fortnite stream (with hip hop artists Drake and Travis Scott, along with streamer “Ninja”) that garnered over 600,000 viewers. As a result, he is reaching consumers that many other NFL players never would.
Smith-Schuster’s example is one to follow. NFL players should look into their contracts with Electronic Arts and see whether Madden NFL has the exclusive right to their portrayal in video games. If so, OneTeam could perhaps figure out a way to structure a limited use arrangement in which the players can become bonus characters in games like Fortnite or other popular titles. For example, maybe Call of Duty could add—as an in-game purchase—an unlockable Lamar Jackson character with turbo speed and extra distance/accuracy on grenade throws (thereby exposing Jackson to CoD players who might otherwise not ever hear of him or interact with him or his likeness in any meaningful, goodwill-inducing way). CoD has already included NFL players Le’Veon Bell and Alejandro Villanueva in a prior game, but it doesn’t appear they are playable characters. Another possible crossover would be encouraging more players to start streaming certain non-sports video games on Twitch, with a special card reward in Madden Ultimate Team (MUT) for those who subscribe to the player’s stream. Related to this, perhaps OneTeam cuts a deal with Panini and Electronic Arts to start putting special cards in actual trading card packs, redeemable for virtual cards on MUT (thus encouraging trading card buyers to buy and play Madden with this new found favorite player, and vice versa).
RedBird may have struck gold with this investment, if player rights stay as lucrative as they have been. With the right awareness of how to build fanbases up over time, OneTeam should be a highly profitable endeavor.
“JuJu” by Brook-Ward is licensed under CC BY-NC 2.0
Eli Nachmany is a Sports Highlight Contributor for the Harvard Journal of Sports and Entertainment Law and a current first year student at Harvard Law School (Class of 2022).
by JSEL | Nov 6, 2019 | Highlight
With the 2019-2020 NCAA College Basketball season tipping off, most would expect the Kansas Jayhawks to be looking to make a run at the National Championship. However, amidst program allegations, could Kansas’s performance in the courtroom be more important than its on-court performance for the future of Kansas Basketball? When the National Collegiate Athletic Association (NCAA) handed down allegations on the storied, blue-blood basketball program of the University of Kansas in September, the administration at Kansas quickly acted not just to deny the claims, but to go on the offensive and point the finger elsewhere.
On September 21, the University of Kansas received notice of a list of violations against their basketball program citing recruiting violations and a lack of institutional control. The Hall of Fame coach of the Jayhawks basketball team, Bill Self, was also levied with a responsibility charge. These charges are the result of a “pay-for-play” investigation by the NCAA that was sparked by an FBI investigation into Adidas, where employees testified to making payments to college basketball recruits. Kansas has pointed blame at Adidas, insisting their own involvement is as a victim of the same Adidas scheme that the FBI investigated.
At this time, it is uncertain the exact defense that the University of Kansas will employ, but experts look to a similar defense the University of Missouri employed to represent themselves during their similar allegations scandal in early 2019. The University of Missouri, amid allegations of academic fraud with respect to their football program, hired a Kansas City law firm that specializes in cases involving the NCAA. More specifically, Missouri was looking to the expertise of Mike Glazier, who spent seven years at the NCAA dishing out allegations to collegiate sports teams and has since represented over 100 schools and coaches in NCAA related cases. Though an expensive defense to put on, costing the University of Missouri over $350,000, that was pennies in relation to the potential lost revenue the university could suffer depending on the severity of potential penalties. The University of Kansas will similarly have to weigh these options when deciding how to proceed with their defense.
As the Jayhawks gear up for their season, it will be interesting to see what happens as the NCAA continues to investigate and the University of Kansas begins to put on its defense. Will Kansas be willing, like Missouri, to pay hundreds of thousands of dollars to bankroll its categorical denial of the allegations, or will we see a new legal strategy, ushering in new standards for dealing with NCAA regulations? The allegations against the university are serious, and if Kansas is found guilty, the NCAA could choose to make an example out of them and impose strict penalties, thereby broadcasting to other schools that pay to play behavior will not be tolerated. In the end, Kansas’s most important victories this season might not end up coming from the hardwood.
“Basketball vs. Emporia State” by Kelsey Weaver is licensed under CC BY-NC-ND 2.0
Jason Fitzgerald is a Sports Highlight Contributor for the Harvard Journal of Sports and Entertainment Law and a current first year student at Harvard Law School (Class of 2022).
by JSEL | Nov 2, 2019 | Highlight
On Tuesday, the National Collegiate Athletic Association (NCAA) made headlines when its governing board voted to “start the process of modifying its rule to allow college athletes to profit from their names, images and likenesses ‘in a manner consistent with the collegiate model.’” This change comes on the heels of California passing the Fair Pay for Play Act into law. This legislation, set to take effect in 2023, would prevent the NCAA from prohibiting college athletes from profiting off of their names, images, and likenesses. I recently wrote a JSEL blog post on the implications of this law on EA Sports’ NCAA Football video game franchise returning; check that out here.
Chris Vannini, a reporter for The Athletic, cautioned on Twitter that mainstream media headlines are overstating what occurred. This news is a big deal, but the NCAA has only agreed to start a process of modifying its rule—a great deal remains to be determined. Key thought leaders in the sports business world, like Professor Andrew Zimbalist, have homed in on a specific clause in the NCAA’s announcement: the new rule will be created “in a manner consistent with the collegiate model.”
What does that mean? We don’t yet know. The “collegiate model” tends to point to the preservation of amateurism in college sports, which some may find incompatible with the concept of compensation altogether. The decision makers are sure to haggle over how the NCAA can reconcile amateurism with compensation in the new rules, consistent with the direction that this vote has given them. This is not the last we will hear of this question.
A recent post on Inside Higher Ed highlighted an interesting division on the political right regarding college athlete compensation following the NCAA vote. U.S. Senator Richard Burr, a Republican from North Carolina, tweeted: “If college athletes are going to make money off their likenesses while in school, their scholarships should be treated like income. I’ll be introducing legislation that subjects scholarships given to athletes who choose to ‘cash in’ to income taxes.”
U.S. Representative Mark Walker, also a North Carolina Republican, responded to his colleague in the upper chamber: “If scholarships are income, that makes them employees, not student-athletes. This isn’t about income. It’s about basic rights that every other American has to their own name.” Rep. Walker is the author of a bill that would amend the Internal Revenue Code to “prevent qualified amateur sports organizations from restricting student-athletes from using or being compensated for use of their name, image, and likeness.” Andrew Distell covered the Walker bill for JSEL back in April 2019. Walker’s point seems to be that the NCAA’s current model is anti-free market.
The NCAA vote likely buys the organization some time to figure out the issue of athlete compensation on its own terms, but the clock is certainly ticking. We are not out of the woods just yet.
Image: “SELU LSU 9718 037” by tammy anthony baker is licensed under CC BY 2.0
Eli Nachmany is a Sports Highlight Contributor for the Harvard Journal of Sports and Entertainment Law and a current first year student at Harvard Law School (Class of 2022).
by JSEL | Oct 28, 2019 | Highlight
The
Copyright Alternative in Small Claims Enforcement (CASE) Act sailed through the House of Representatives last week after a
410-6 vote, a move industry organizations and lobbying firms are calling a major win.
“The Recording Academy applauds the House for passing the CASE Act today, a…victory for music creators,” said Daryl P. Friedman, the Recording Academy’s Chief Industry, Government, & Member Relations Officer.
As its title suggests, the bill would create a small claims tribunal, the Copyright Claims Board, before which musicians, artists, and other content creators would be able to bring infringement claims totaling less than $30,000. Under current copyright law, infringement claims must be brought in federal court, where litigation can be prohibitively onerous and expensive.
Artists “currently have rights but no means to enforce them because federal court is too expensive and complex to navigate,” explains Keith Kupferschmid, CEO of the Copyright Alliance, the Washington-based advocacy organization whose members include the Motion Picture Association of America, The National Association of Broadcasters, and the Recording Industry Association of America.
Critics have voiced fears that the bill would provide copyright trolls with an easy means to bring a wave of opportunistic claims and point to copyright profiteering in the wake of the Digital Millennium Copyright Act as evidence that trolls will similarly benefit from the CASE Act.
Additionally, organizations such as the ACLU have voiced concerns over the bill not creating effective checks on the power of the Copyright Claims Board. Decisions made by the panel would not be subject to broad judicial review, but rather could face such review under limited circumstances enumerated in the bill, such as when decisions were based on “fraud, corruption, misrepresentation, or other misconduct.”
The President has already signaled his support for broad copyright reform last year by signing into law the Music Modernization Act. It is expected that the Senate will also act quickly in confirming the bill. If the Senate acts as decisively as the House, a veto-proof vote passage of the CASE Act could make the creation of the Copyright Claims Board a near inevitability.
Matt Shields is an Entertainment Highlight Contributor for the Harvard Journal of Sports and Entertainment Law and current second year student at Harvard Law School (Class of 2021).
Image: File:US Congress 02.jpg, Bjoertvedt, CC BY-SA 3.0
by JSEL | Oct 25, 2019 | Highlight
Electronic Arts (EA) CEO Andrew Wilson recently expressed interest in bringing back the once-popular NCAA Football video game franchise, if the legal framework governing college athletics changes in such a way that would permit its existence. Wilson made the comments at the WSJ Tech Live conference in California, favorably citing a newly signed California law that, starting in 2023, would allow college athletes to profit off of their name, image, and likenesses. The hope is that such a law could “clear the way” for NCAA Football’s return. To be sure, the NCAA opposed the California law and prefers to solve the issue of athlete compensation on its own terms.
EA Sports, a division of EA, last released NCAA Football in 2013—reporting indicates that the game was immensely “popular, ranking behind the FIFA soccer game and the NFL Madden game among EA Sports’ titles[.]” In 2013, the NCAA allowed its licensing deal with EA Sports to expire, citing “the current business climate” and litigation, like the Ed O’Bannon lawsuit, that challenged the revenue scheme related to the usage of college players’ names, images, and likenesses in broadcasts and video games.
The NCAA Football franchise is definitely still on the minds of some at EA Sports headquarters. As Business Insider recently pointed out, EA folded some college football gameplay into its latest installment of Madden NFL—Madden 20—but safely included it in a pre-set, scripted mode (QB1: Face of the Franchise) which does not allow for player customization.
It seems unlikely that EA Sports would spite the NCAA and bring back some iteration of NCAA Football with only California schools. After all, EA jeopardizing its relationship with the NCAA could complicate future efforts to re-introduce NCAA Football in full if the legal landscape settles in such a way that creates the conditions necessary for the franchise’s return. Further, given the opposition to the California law from “[t]he University of California system, California State University schools, Stanford and USC[,]” it would be quite a reversal for the schools to come together and make their own deal with EA Sports for a video game, independent of their governing body.
The possibility of NCAA Football returning is sure to excite football fans and sports gamers (this author included). However, given the uncertain legal future of compensation in college athletics, it remains too early to tell if the once-prominent video game franchise will be making its way back to the shelves of local game stores anytime soon. If profit is any incentive, however, there certainly appears to be a deal waiting to be struck here.
Image: Photo a day project: December 2005, Jenny Lee Silver, CC BY-NC 2.0
Eli Nachmany is a Sports Highlight Contributor for the Harvard Journal of Sports and Entertainment Law and a current first year student at Harvard Law School (Class of 2022).
by JSEL | Sep 18, 2019 | Highlight
August was dominated by reports that Spider-Man would be leaving the Marvel Cinematic Universe following an impressive theatrical run of the newest movie “Spider-Man: Far From Home.” Spider-Man’s possible departure is due to Disney and Sony failing to reach an agreement on funding and revenue sharing for future Spider-Man films. The very concept of this kind of split raises wider questions regarding intellectual property law and the future of the entertainment industry.
Fictional characters are often protected by copyright laws. An author’s copyright over a character provides them with the exclusive right to use, adapt, or market the character as they see fit. Because the rights are exclusive, no one can use the character unless they are given explicit permission from the author. However, permission is not all or nothing, and authors can place conditions on how the character is used and how long the permission lasts. This kind of permission is referred to as a license and is what Marvel originally sold to Sony in 1999. At that time, Marvel sold Sony Pictures an exclusive license to make Spider-Man movies. Because the license was exclusive, Marvel lost the right to produce its own Spider-Man movies. Marvel had previously granted merchandise rights to Sony in 1995. Because of the agreement, Marvel received 5% box office revenue of Sony-produced Spider-Man pictures while Sony was entitled to 5% gross of all Marvel merchandise sales.
Sony’s Spider-Man license came with numerous conditions, including one stating that it would lose the license unless it releases a new Spider-Man movie every 5.75 years. Over the course of the last several years, Marvel and Sony have renegotiated the terms and conditions of the film license on numerous occasions. In 2015, Sony hit a snag and struggled to produce commercially successful Spider-Man movies. Marvel, which had been recently acquired by Disney, gained considerable bargaining power and negotiated a new deal. In this deal, Marvel would assist Sony in production of Spider-Man movies in exchange for 5% gross revenue and the right to use Spider-Man in Marvel produced movies (MCU), while Sony would retain creative control, marketing and distribution. Marvel was also able to re-acquire all merchandising rights, generating an estimated $200 million per year.
This resulting deal is a shared license agreement. A 2011 amendment made to the license agreement between Sony and Disney lays down the groundwork for what the deal entailed for Sony and Marvel. The leaked documents reveal a series of conditions that limit how Sony can depict Spider-Man, including requiring that the character be a heterosexual male and abstain from sexual relations before the age of 16. The leaked documents also provide a precise account of exactly which characters are covered by the license — including a test that could be used to determine whether future characters would be covered. Those terms provide some insight into how Sony and Disney approached the character-sharing question and accounted for the possibility that Spider-Man would join the MCU for just a limited time. The agreement states that Sony “holds exclusive film rights to all characters in the Spider-Man universe,” and refers to an explicit list of characters covered by the agreement. This list includes 627 covered characters (Black Cat/Felicia Hardy, Mysterio, Electro, etc.), 70 “Teams/Groups/Gangs” (The Sinister Six), 544 “Supporting Characters” (Uncle Ben, etc.), and 82 businesses (Oscorp, etc.).
Finally, the agreement contains provisions that apply to new characters, which are defined as “characters first appearing” after the agreement becomes effective. The agreement states that Sony has the rights to any new character who first appears in a work with “Spider,” “Spider-Man,” “Peter Parker,” or another Sony-exclusive character in its main title, and to new characters who shoot webs, have “Spider” in their name, or have a spider or spider web on their costume. While the specific terms of the leaked draft agreement are five years old and may not have ended up in the final agreement, it nevertheless provides a high-level understanding of how Marvel and Sony approached the license negotiations. It is clear that both studios had a plan for what they would do if their Spider-Man-sharing agreement broke down.
This shared license agreement initially seemed like a win-win: both companies would enjoy increased revenue at the box office in their respective productions through the shared-use of characters. However, in 2019, renegotiations collapsed and the exclusive film rights to Spider-Man reverted to Sony with Sony Pictures CEO stating that the “door on any potential deal is closed for now.” This may signal a permanent divorce between Sony and Disney.
Naz Khan is an Entertainment Highlight Contributor for the Harvard Journal of Sports and Entertainment Law and a current LLM Candidate at Durham University.
Image: Miles Morales Spider Man, Pat Loika, CC BY 2.0.
