Legal Issues for Sports and Entertainment Marketing May 2010

The Law There are an overwhelming number of laws governing sports and entertainment There are an overwhelming number of laws governing sports and entertainment These laws have a major impact on the marketing of sports and entertainment products These laws have a major impact on the marketing of sports and entertainment products Products that deal with sports and entertainment are perishable products Products that deal with sports and entertainment are perishable products

The Law Technology allows easy duplication and transmission of many products Technology allows easy duplication and transmission of many products Protecting celebrities, producers, promoters, and investors is the purpose of most of the laws Protecting celebrities, producers, promoters, and investors is the purpose of most of the laws Laws also increase the safety of the consumers, viewers, and fans Laws also increase the safety of the consumers, viewers, and fans

Managing Risk Sports, entertainment, and recreation marketing require an initial examination of the laws and legal issues to ensure compliance and to prevent liability for injury or loss Sports, entertainment, and recreation marketing require an initial examination of the laws and legal issues to ensure compliance and to prevent liability for injury or loss Being liable means that you are legally responsible for damages Being liable means that you are legally responsible for damages Being familiar with the laws and knowing when to seek legal counsel are prerequisites for business success Being familiar with the laws and knowing when to seek legal counsel are prerequisites for business success

Managing Risk Inviting large groups of people to view an event is asking for potential legal action Inviting large groups of people to view an event is asking for potential legal action Risk analysis requires an analysis of potential problems and a plan for reducing or preventing the problems Risk analysis requires an analysis of potential problems and a plan for reducing or preventing the problems Risk is the possibility of financial loss or personal injury Risk is the possibility of financial loss or personal injury

Managing Risk One method of transferring the risk to the fans is the inclusion (on the back of most event tickets) is a statement that the promoter is not responsible for any harm to the ticket holder One method of transferring the risk to the fans is the inclusion (on the back of most event tickets) is a statement that the promoter is not responsible for any harm to the ticket holder By accepting the ticket, the holder agrees to accept liability for their own possible risks By accepting the ticket, the holder agrees to accept liability for their own possible risks This does not relieve the facility or event management from providing a safe environment This does not relieve the facility or event management from providing a safe environment An event sponsor has a legal duty to protect the spectator from unreasonable risk of harm or injury An event sponsor has a legal duty to protect the spectator from unreasonable risk of harm or injury

Steps to Risk Management  Identify risks  Estimate the possibility of each risk  Determine how great the consequences are  Determine how to control the risk

Control the Risk Limit the possibility of risk through planning Limit the possibility of risk through planning Purchase insurance that transfers the cost of the risk to the insurance company Purchase insurance that transfers the cost of the risk to the insurance company Transfer liability through a contract Transfer liability through a contract Cover the risk in the event budget Cover the risk in the event budget Avoid offering the risky event Avoid offering the risky event

Who has the Rights? Musicians, artists, and athletes make money by selling their product, which happens to be their talent Musicians, artists, and athletes make money by selling their product, which happens to be their talent Laws are necessary to protect the rights of celebrities Laws are necessary to protect the rights of celebrities When pricing their product, artists and athletes take into consideration that the work is protected by copyright law and is theirs alone to sell When pricing their product, artists and athletes take into consideration that the work is protected by copyright law and is theirs alone to sell The price of a CD includes the cost of the materials to make the CD and the amount of money to pay the writer of the material for its use on the CD The price of a CD includes the cost of the materials to make the CD and the amount of money to pay the writer of the material for its use on the CD

Copyright Laws Laws protecting the unique work of the originator within the geographic boundaries to which the laws apply Laws protecting the unique work of the originator within the geographic boundaries to which the laws apply Before 1978, works were copyrighted for 28 years and then renewed for 28 years, making a total of 56 years Before 1978, works were copyrighted for 28 years and then renewed for 28 years, making a total of 56 years Since 1978, works may be copyrighted for life plus 70 years Since 1978, works may be copyrighted for life plus 70 years

Copyright Laws Owners of a copyright have the exclusive right to reproduce, sell, or perform a product Owners of a copyright have the exclusive right to reproduce, sell, or perform a product For the life of the copyright, the owner must give permission for the work to be used For the life of the copyright, the owner must give permission for the work to be used Usually the owner of a copyright is paid for the use of the work Usually the owner of a copyright is paid for the use of the work

Copyright Laws Payment for the use of a work is known as a royalty Payment for the use of a work is known as a royalty After a copyright expires, the work can be used by anyone without cost or permission After a copyright expires, the work can be used by anyone without cost or permission Many types of works can be copyrighted Many types of works can be copyrighted

Copyright Laws The most common items are books, songs, and computer programs The most common items are books, songs, and computer programs In order for a work to be copyrighted, it must be fixed and original In order for a work to be copyrighted, it must be fixed and original Fixed means that it must be set down on some permanent medium such as paper or a computer disk Fixed means that it must be set down on some permanent medium such as paper or a computer disk

U.S. Laws U.S. laws are not enforceable in other countries except where the United States is part of an international copyright convention U.S. laws are not enforceable in other countries except where the United States is part of an international copyright convention The United States and China battle verbally over the piracy of intellectual property, such as music The United States and China battle verbally over the piracy of intellectual property, such as music In the mid-1990s the U.S. threatened trade sanctions against China because 90% of the compact discs made in China were believed to be illegal copies In the mid-1990s the U.S. threatened trade sanctions against China because 90% of the compact discs made in China were believed to be illegal copies

U.S. Laws The two countries reached an agreement that included closing 15 of the 30 factories that produced illegal CDs The two countries reached an agreement that included closing 15 of the 30 factories that produced illegal CDs The illegal discs were said to be worth $2.3 billion in 1995 The illegal discs were said to be worth $2.3 billion in 1995 A celebrity has the right to give or deny the use of their likeness or voice A celebrity has the right to give or deny the use of their likeness or voice Many times this can be a major source of income for the individual Many times this can be a major source of income for the individual Vanna White sued Samsung for using a robot that resembled her in an advertisement — she won and collected $403,000 in damages Vanna White sued Samsung for using a robot that resembled her in an advertisement — she won and collected $403,000 in damages

Tech Copies The entertainment industry continues to be worried by new technology that makes it easier for consumers to make quality recordings of audio and visual performances The entertainment industry continues to be worried by new technology that makes it easier for consumers to make quality recordings of audio and visual performances The Recording Industry Association of America tried unsuccessfully to stop Diamond Multimedia Systems, Inc. from selling Rio software that allows storage and playback of music transferred from a personal computer The Recording Industry Association of America tried unsuccessfully to stop Diamond Multimedia Systems, Inc. from selling Rio software that allows storage and playback of music transferred from a personal computer The trade group believes that Rio supports illegal copying of music from the internet The trade group believes that Rio supports illegal copying of music from the internet

Federal Laws Federal laws affect sports and entertainment marketing Federal laws affect sports and entertainment marketing Article I of the U.S. Constitution gives Congress the power to regulated commerce Article I of the U.S. Constitution gives Congress the power to regulated commerce Sports and entertainment are considered commerce Sports and entertainment are considered commerce There are several long-standing acts that have major affects on the sports and entertainment industry There are several long-standing acts that have major affects on the sports and entertainment industry

Sherman Anti-Trust Act This Act was signed into law in 1890 This Act was signed into law in 1890 The Act declared restraint of trade and made price- fixing illegal The Act declared restraint of trade and made price- fixing illegal The Act also set monopolizing a trade as a felony The Act also set monopolizing a trade as a felony

Clayton Act This Act was written into law in 1914 This Act was written into law in 1914 The law set up the right to sue and receive threefold damages plus other costs and interest for monopoly and other commercial violations The law set up the right to sue and receive threefold damages plus other costs and interest for monopoly and other commercial violations It gave organized labor the right to confront violations of the Sherman Act It gave organized labor the right to confront violations of the Sherman Act

National Labor Relations Act Made a law in 1935 Made a law in 1935 Gave the right to organized labor to collectively bargain and to strike Gave the right to organized labor to collectively bargain and to strike Prohibited companies from coercing employees in union- related matters Prohibited companies from coercing employees in union- related matters

Contracts Agreements on the transactions of business Agreements on the transactions of business Anyone working in sports and entertainment law should be familiar with contract law Anyone working in sports and entertainment law should be familiar with contract law A contract should be worded so that it is not subject to multiple interpretations A contract should be worded so that it is not subject to multiple interpretations Examples of sports and entertainment contracts: Examples of sports and entertainment contracts: Player or performance Player or performance Concessions Concessions Sponsorships Sponsorships Broadcast Rights Broadcast Rights Facility Contracts Facility Contracts

Organized Labor Since the 1970s, athletes have organized themselves into labor unions Since the 1970s, athletes have organized themselves into labor unions These labor unions are called Players’ Associations These labor unions are called Players’ Associations Each sports league has a collective bargaining agreement with the Players’ Association Each sports league has a collective bargaining agreement with the Players’ Association

Organized Labor Collective bargaining happens when a group of employees join together as a single unit to negotiate with employers Collective bargaining happens when a group of employees join together as a single unit to negotiate with employers The league is made up of individual teams and includes all non-player employees The league is made up of individual teams and includes all non-player employees The labor side is made up of players, their agents, and the Players’ Association The labor side is made up of players, their agents, and the Players’ Association

Organized Labor Each group has a point of view on how the business should be operated and how the profits should be sent Each group has a point of view on how the business should be operated and how the profits should be sent Sponsors such as NIKE took a major hit in earnings during the 1998 lockout Sponsors such as NIKE took a major hit in earnings during the 1998 lockout

Organized Labor NIKE withheld payment to some players during the strike NIKE withheld payment to some players during the strike The bulk of TV advertising income was not affected because it is generated from the post-season games and the lockout ended before these games The bulk of TV advertising income was not affected because it is generated from the post-season games and the lockout ended before these games

Owners vs. Players The National Basketball Players’ Association was formed in the 1950s The National Basketball Players’ Association was formed in the 1950s The NBA Players’ Association was locked out through most of the basketball season The NBA Players’ Association was locked out through most of the basketball season Results of the lockout: Results of the lockout: Disheartened fans Disheartened fans Disgusted fans Disgusted fans Loss of revenue for advertisers Loss of revenue for advertisers Loss of concession revenues Loss of concession revenues Loss of salaries for ushers and maintenance Loss of salaries for ushers and maintenance

The image of super-wealthy owners and players refusing to find a common ground does not get sympathy from most fans The image of super-wealthy owners and players refusing to find a common ground does not get sympathy from most fans Players and owners hoped fans had short memories and would quickly return to the game Players and owners hoped fans had short memories and would quickly return to the game Prior to the lockout, the NBA had not had any labor problems Prior to the lockout, the NBA had not had any labor problems

NBA owners feared that the league would price itself out of business with high salaries and debt-ridden clubs NBA owners feared that the league would price itself out of business with high salaries and debt-ridden clubs The players believed fans would rally to their side and demand games at any cost The players believed fans would rally to their side and demand games at any cost Issues in the standoff included: Issues in the standoff included: Salary caps Salary caps Rookie contracts Rookie contracts Free agency Free agency Revenue sources Revenue sources NBA authority over the players NBA authority over the players