Re-MEDIA-ble – A discussion on contracts relevant to Media and Entertainment Industry
“I holly- wood”. On his honeymoon in 1886, when H.J. Whitley met a Chinese man who said he was ‘hollying’ (hauling) wood, a little town in Los Angeles California was named as the Hollywood by real estate entrepreneur Whitley.
By 1920s, Hollywood became the fifth largest industry in the nation with the set-up of major film companies like Paramount, Warner Bros, Columbia and RKO. Today, the media and entertainment industry of the United States is the largest in the world, valued at a whopping USD 598 Billion in 2014. By 2018, this industry is set to generate USD 723 Billion in revenues. The US happens to be a larger market place than other regions and has rightly tapped onto its benefits. Bollywood Parks in Dubai – the first theme park dedicated to all things Bollywood and regular news featuring wax statutes of Bollywood personalities at Madame Tussauds is no surprise to ever-growing Bollywood media industry as well.
The burgeon nature of the media and entertainment industry indicates Asia and MENA combined have the potential to provide stiff competition to the US Media and Entertainment industry. With the fair share of challenges that each of these regions have to face, the odds-on have been less fathomed yet.
UAE becoming the hub for international events
Speaking truly in terms of the United Arab Emirates, Dubai is fast moving on to become a major hub for media and entertainment players. In 2004, Dubai set up a specialized zone for catering to ‘media’ companies. Following closely in the footprints are the neighboring Emirates with the Abu Dhabi TwoFour54 and Fujairah Media free zone as emerging platforms. Many factors have contributed to the growth of UAE including the general stability that the region provides amidst growing instability in the Arab countries. For the Asian industry, UAE happens to be a preferred base due to its geographical proximity with Asia besides being a nonpartisan foreign terminus with an avant-garde infrastructure.
A variety of events take place in the region, with popular ones being the IPL, PPL, awards ceremonies and celebrity shows. The usual question which arises then is the nature of contracts and laws governing such contracts in the region. Before we come to that question, let us understand the general market trends in the region. Most audiences in the region are expats, as such there is a vacuum in the types of content available locally and that in turn is bound to invite international players to provide services within the region. Although smaller in terms of the land size, there is a conjecture that the land of sand is becoming the entertainment hub for MENA region.
Contractual Must Haves
When entering into a media contract, most parties rely on set international covenants. Often the parties agree to such conditions which will either be unenforceable in the civil law jurisdiction or would be capable of rendering the primary contract voidable. More often than not, the parties fail to understand jurisdictional restrictions and often set clauses which become a bane in the post execution period. The most commonly used agreements in the industry are the sponsorship agreement, stadium or venue leasing contract, shareholders agreement, agreement concerning broadcasting rights, event support services, licensing agreement and more. When entering into a typical media contract, one must understand the following key issues:
- Capacity to contract
Unlike general trading activities, the entertainment industry is regulated by the Department of Tourism and Commerce Marketing (the DTCM) in Dubai and the Tourism and Cultural Authority (the TCA) in Abu Dhabi. In most cases, the activities are also supervised by the respective municipalities in the Emirate. In such a case, one must understand whether or not it has the capacity to enter into an M&E related contractual relationship which relates specifically to the UAE. The fulfilment of necessary approval criteria for a particular activity should be fulfilled if such activity may be regulated by the aforesaid bodies.
- Contract and Commercial Terms
Depending broadly on nature of contract/event, parties would need to ensure that contracts per se are consistent in nature. For instance, if Grammy or GiMA were to hold music awards in Dubai, it is likely that they will be dealing with a broad range of operators and service providers and enter into venue or stadium agreement, ticketing agreement(s), dealing with external advertising agencies, entering in to television, radio and/or internet broadcasting rights, security arrangements, food and beverage arrangements, to name a few. Planning is the key and adequate safeguarding provisions should be embedded within these contracts to buy peace of mind. Due diligence is required to ensure third party operators have proper license, no-objection certificates and corporate documentation in place (regard and caution should be had in dealing with free-zone companies if event is to be held within mainland). The applicability and impact of UAE competition law on exclusive deals, competition among broadcasters, and expensive access to viewers (thereby eliminating clubs or other channels) will raise pertinent questions. Choice of jurisdiction should also be consistent within contracts to avoid multiplicity of courts and arbitration tribunals. Likewise, licensing of intellectual property (if any), and advertising and signage, upsell provisions in ticketing contracts, and other commercial terms require careful consideration.
- Restrictive covenants
An important caveat in M&E contracts is the restrictive covenant. A standard restrictive covenant in most contracts would be refraining a party to the contract from entering into competitive practices. The scope of such restrictive covenant should be widened to encompass requirements of Federal Law Number 15 of 1980 concerning the Publications and Publishing which governs all content- digital or print. The restrictive covenants under the aforesaid law are applicable to television broadcasting and include religion, politics, national security and public morals.
- Intellectual property rights
When structuring an IPR clause where any and every intellectual property is protected, it is worthwhile to note that IPR rights will be governed pursuant to the Federal Law Number 37 of 1992 and Federal Law number 40 of 1992. Intellectual property is regulated directly by the Ministry of Economy as against any specialized enforcement. Parties tend to have clauses on protection of IP which is unregistered. Such clauses raise a concern particularly because a party cannot be restrained from registering a trademark if there has been no prior registration. A more subjective discussion on this subject is the courts outlook for a claim on infringement and the possible remedies. While there are possible remedies available, one view holds that the IP registration need not be withdrawn only on the grounds that there has been an IP clause without prior registration. To circumvent the possible issues arising out of exploitation of IP rights, clear covenants need to be undertaken on present and future license to use a trademark. Ownership of customer data, data protection policies and rights attached therewith are some other aspects that call for attention.
- Royalty, license, assignment and public use of copyrighted material.
The use of copyrighted material by an unrelated third party for the purpose of acquiring direct or indirect commercial revenue is prohibited under the Federal Law Number 7 of 2002 (the Copyright Law). The absence of a collection agency imposes a challenge where a royalty clause has been agreed and to some extent a carefully drafted clause would come to the rescue of the holder of rights.
Dispute resolution for a contract always needs to be carefully chosen. Conflicting jurisdictional clauses vulnerable and the degree of vulnerability increases when the dispute resolution process agreed between the parties in not in compliance with the mandatory provisions of the prevailing laws. The choice of arbitration or courts, the signatories, seat of arbitration and several other factors should be discussed before a boiler plate is agreed for.
Are free zone media houses considered to be ‘offshore’ for the purpose of Federal Laws governing conduct of media?
Most of these companies were clouded by the fact that the old Commercial Companies Law (Federal Law Number 8 of 1984) did not apply to the free zones. This position was further strengthened by enactment of the new Commercial Companies Law (Federal Law Number 2 of 2015), Article 5 of which confirms the exclusion of free zone from the purview of CCL. In reality, there has been a misconception on the status of a media or entertainment service provide which is registered with a free zone in UAE.
Free zones are governed by their respective regulations and codes. Taking into consideration the example of TwoFour54 or the Dubai Creative Clusters (an arm of the TECOM investment authority), each of the licensed companies are governed by the regulations. In accordance with the National Media Council, all media companies are governed by the Federal Law on publications cited in this article. The content code or codes of guidance for the above free zones have drawn inspiration from the British Standards Commission, British Broadcasting Corporation and UK Independent Television Commission. Yet, the codes specifically provide for the licenses companies to take into account the prevailing social and religious beliefs of UAE and Islamic religion in general. There is then little doubt that the free zone company can be held liable for violation of the federal laws on media and entertainment.
The recipe for a perfect contract is the inclusion of local flavor. True, most international players rely heavily on more commonly accepted forms of contract. Whether these contracts remain binding or not remains a clear point of contention.