Changing Channels

The way we watch our movies and listen to our music is rapidly evolving. Fordham Law alumni are entertaining the most recent developments.

The dozen or so framed records gracing one wall of The Davis Firm’s fourth-floor office in the Flatiron District in Manhattan serve as a shrine to some of this century’s most popular musical acts: Usher, Kelly Clarkson, and Black Eyed Peas. These million-selling records, all released in 2008 or earlier, conversely stand as a monument to a bygone era in the music business—the days when consumers purchased albums and singles en masse.

In Midtown, the office of BET legal affairs executive Khadijah Sharif-Drinkard ’97 features numerous framed pictures of her two children—themselves a testament to her industry’s changing dynamic. Both “watch their phones,” she notes, as opposed to TV.

Doug Davis ’98, founder of The Davis Firm, and Sharif-Drinkard are among a prominent group of Fordham Law alumni who have helped shape the entertainment industry’s landscape over the past decade and figure to be on the front lines as it continues evolving in the near future.

Among the major changes these alumni must navigate daily are the ways in which content is consumed, the near-constant creation of content, and how contracts are negotiated and written to keep pace with these developments. The ideas of brand creation and loyalty to that brand are also emphasized on both individual and corporate levels as a means to connect the artist’s vision and values with an audience.

“We all know the emerging technologies have impacted every business and every industry,” says former Fordham Law Adjunct Professor Howard Siegel, who has represented Carly Simon, the E-Street Band, several American Idol winners, Aerosmith, and other top-selling acts. “But probably no industry is as profoundly and pervasively impacted as the entertainment industry, and most specifically the music industry.”

In that industry, the platinum album or single has recently become an endangered species as first downloads and now streams replace physical music sales. The result? The RIAA plaque is not the unalloyed triumph it once was.

“In 2015, you can be a very successful artist who doesn’t sell many albums,” says Davis, who has represented numerous artists, producers, songwriters, and executives associated with the once-coveted records on his wall.

Wholesale changes have also swept across the television industry—in the metrics it uses to gauge success and in the way consumers find and view content. No longer are Nielsen ratings the most accurate gauge of who’s watching what when, not when viewers are streaming shows in high definition on their phones or tablets and binge-watching entire seasons in one or two sittings.

“It’s sort of amazing in 15 years how much things have changed,” says Joey Molko ’97, who started as in-house attorney at MTV in 2002 and until late October worked as Senior Vice President for Content Distribution and Marketing at Viacom Media Networks (he now heads the content partnership team at advertising technology firm Mirriad). “Video on demand was nascent. There was no HD. YouTube didn’t exist, so there was no broadband. There were no smartphones and no iPads.”

In essence, the world as it is today did not exist.

Nap Time for the Status Quo

In 1999, the entertainment revolution was accelerated—some may argue started—when teenagers Shawn Fanning and Sean Parker launched a file-sharing service that allowed users to easily swap MP3s and other audio files over the Internet. Their program was called Napster.

By 2000, Napster comprised a community of 20 million users sharing an encyclopedic amount of music. To music fans, Fanning and Parker were heroes who had unearthed a treasure trove of music that was inconceivable in the laborious days of making mixtapes. To labels, they were pirates. Besieged by lawsuits, Napster had ceased operations by September 2002. In terms of sheer financial and cultural impact, however, Napster never really went away.

Since 1999, U.S. album sales have collapsed 70 percent ($14 billion), according to the Recording Industry Association of America and Bureau of Labor and Statistics.

“Napster was a near-instantaneous bomb dropped on the music business that caused sales to crater,” Davis says, calling the peer-to-peer file-sharing platform a “game changer.”

As Napster lost steam, Apple’s iTunes platform became synonymous with consumers’ growing tastes for downloaded content. No longer did they purchase whole albums. Instead they populated their iPods, another revolutionary Apple product launched in the early 2000s, with songs they purchased for 99 cents on iTunes. More recently, the advent of music- streaming apps like Spotify, Tidal, and Beats Radio has eliminated the need to download music at all.

Since Napster’s launch, track sales have plummeted 57 percent, from a peak near 10 billion sold in 1999 to around 4 billion in 2014.

Purchasing declines amid streaming’s increasing popularity have not only sparked questions about music’s inherent value but also changed the way artists and labels interact.

Streams, for Revenue and Content

Los Angeles rapper Earl Sweatshirt, who gained notoriety as a member of the hip-hop collective Odd Future, is a prime example of Davis’s belief that album sales are no longer necessary for a successful career. Sweatshirt’s most recent album sold just 27,500 copies in its opening week earlier this year. That seemingly low number doesn’t phase Sweatshirt’s attorney, Julian Petty ’06.

The sources from which artists can make money have grown over the past decade to include more than physical and digital sales, says Petty, who works on both coasts for Nixon Peabody. He represents current artists as well as the estate of legendary New York City rapper Notorious B.I.G.

Artists increasingly make their bread on advertising, subscription, performance rights, and sync licenses (TV, film, or video game rights). One such example, Petty offers, is Sprite contracting with Notorious B.I.G.’s family to put his face and lyrics on a can as part of a recent promotion.

“Those revenue streams opened up more opportunities for artists,” Petty says, “and artists are finding ways to make money and have a career, which gives them leverage with labels. There’s a paradigm shift in the industry.”

Social media has aided in this shift.

Tech-savvy younger artists know how to market their music and lifestyle to young fans on numerous platforms, Petty adds, listing Harlem rapper Azealia Banks as one example. Others include Chicago’s Chance the Rapper and Brooklyn’s Joey Bada$$, rappers in their early 20s who have built devoted fan bases while remaining independent from label control.

More and more, artists are forgoing major labels and instead seeking marketing dollars from distribution agencies, according to Petty. This is a marked contrast from the days, not too long ago, when “labels had the majority of the power except in very limited situations,” he says.

Labels, however, are not completely irrelevant. They still play major roles in curating talent, supplying artists with resources to reach their potential, and marketing their works, Davis notes.

“It’s almost unheard of for someone to come out of nowhere to be a major success,” he says.

Labels are also using social media in a proactive way. Now a label can view an artist’s video on YouTube and see how many views it has or listen to a song on SoundCloud and see its spin count.

“Record companies want to see a story,” says Davis, who, as an early adopter of Twitter, now has more than 250,000 followers (@DJD). “They want to see it reflected with your social media following. It saves the record company time. Social media allows the record company to access where the act is immediately.”

Speed of Sound

The changing dynamic between artist and label as well as artist and artist, in terms of collaborations, is also changing how contracts are written.

Record companies can no longer rely on album sales to recoup money spent “breaking the artist” and recording music, Davis says. Instead, labels sign artists to “360 deals” in order to increase revenue from touring and merchandise sales in addition to record sales and a smaller cut of music publishing profits. What the labels are saying is, according to Siegel, “We have to have additional sources of income, or we’re not going to be here, and if we’re not here, that’s bad for everybody.”

David Rappaport ’05 represents recording artists with a focus on the electronic dance music genre, which has mushroomed in the past decade. This year, Rappaport’s client Major Lazer partnered with DJ Snake and Danish singer MØ for the international smash “Lean On.” The song’s video is set in India and has received over 300 million views on YouTube. The partnership between these three artists signed to three different labels on one master recording represents a common occurrence in today’s music industry. This was not the case a generation ago when artists would generally have to be in close proximity to each other in order to write and record music together. A generation ago, physical borders, scheduling, recording studio technology, and exclusive contractual obligations to multiple labels may have prevented a track like this from being created.

“We’re to the point where music intellectual property is part of a communal world,” Rappaport says. “The law can’t keep up with this new environment because clients are now able to work on a global basis and far faster than they ever have before. The policies which have guided intellectual property law are becoming outdated and unfit for today’s communal environment.”

However, the business advantages of this speed are self-evident, particularly for artists looking to expand beyond borders.

“My label clients and independent artists can get a record out all over the world with one click of the mouse,” Rappaport notes. “That in turn leads to a demand for live performances not only in their home territories, but everywhere the records are released. That demand then translates to an increase in touring, touring revenue, and consequently, overall net revenue.”

Attorneys must ensure there is no ambiguity in contracts regarding this intellectual property, Siegel adds. The difference between compensating artists based on licensing fees and paying them royalties based on sales, as a famous case involving rapper Eminem showed, is massive. Licensing often nets artists a 50-50 split with their labels while royalty sales might generate only 10 to 15 percent for the artists.

Anywhere and Everywhere

To see the show Inside Amy Schumer you can switch your TV to Comedy Central, the cable channel that carries the popular sketch comedy series. Or you could just as easily, if not more so, watch a clip on a friend’s Facebook page, in an e-mail, or on YouTube. The number of times programs like Inside Amy Schumer or The Daily Show are shared suggests they would be ratings powerhouses in a different era, says Molko, who oversaw content distribution for Viacom’s 26 channels.

The story in today’s entertainment climate, where viewers are able to view content everywhere at all times, is not that simple.

“In an ideal world people would tune in at 10,” he says. “That’s not the way viewers behave anymore. We have to go where they are.” Where viewers are is a range of physical and technological spaces: the Comedy Central app, iTunes, and Schumer’s comedy tours are just a few examples.

The situation is similar for Lip Sync Battle, which airs on Spike, another Viacom network. The show generates tens, if not hundreds, of millions of views on YouTube, but the traditional Nielsen ratings don’t reflect its status as the latest cultural phenomenon.

“From Viacom’s perspective, they’re getting viewership, but the monetization models have not caught up,” Molko says.

Sharif-Drinkard, who works in the Viacom family of networks, agrees. “The reality is that we are not getting credit for all of our viewers,” she says. “Many people watch our content on tablets and mobile devices, and we have not been able to fully monetize this type of consumption as of yet.”    

“We have people on our creative side who want the content distributed and accessible to everybody,” she adds. “There’s also the side where we have to protect content that we create. The key is that we want our content to be seen. We’re not trying to withhold our content from our viewers. We want to get the hits.”

View More

Companies like Viacom, which generates $13 billion–14 billion per year, make money in two major ways: 1) selling networks to cable and satellite distributors and 2) selling ads against the number of viewers shows attract. Much of these traditional advertising dollars are now moving to digital properties, whether they are websites or apps.

These days, Viacom’s cable networks compete not only with other cable networks but also streaming services from Netflix, Amazon, and Hulu that are creating original programs.

“The content options have proliferated dramatically,” Molko says. “This atomization of content makes any one provider of content work that much harder to get these eyeballs.”

At Viacom, that means a network like MTV might have up to 100 programs in development at one time. Nickelodeon, for instance, produced 500 new hours of programming last year.

“You’re constantly refreshing what’s on your channel so people will stick with you,” Molko says. Netflix, Amazon, and Hulu make reruns so easily available that viewers no longer want to “stick around and watch reruns anymore,” he adds.

In keeping with Viacom’s push for more original content, BET aired its first hour-long scripted drama in 2013: Being Mary Jane, starring Gabrielle Union.

“Our focus is making programming that is palatable for viewers and that lives as long as it possibly can,” Sharif-Drinkard says, emphasizing the importance of capturing the rights from the outset so Viacom can reap the show’s financial rewards from every possible avenue. Whereas in the past, rights-related verbiage in contracts included a few basics like channels, price, subscriber base, and an end date, contracts today customarily feature anticipatory language covering technologies that may appear in the future. The increased contractual complexity mirrors the money at stake. Molko, for example, oversaw around $2 billion annually in content for Viacom.

“In terms of the deal value, these contracts are like mergers and acquisitions transactions in that they can be billions of dollars over the life of a deal,” he says.

Fordham Network

Shortly after graduating from Fordham Law, Petty registered his first trademark, for multiplatinum R&B artist Ciara. He attributes this precocious feat to Adjunct Professor Stephen Feingold’s teachings. Fordham’s central location in Manhattan also proved advantageous.

“Being in New York and in the middle of everything, it’s easy to make things happen,” Petty explains, calling his choice to attend Fordham “a strategic decision.”

For Molko, his Fordham experience, he recalls, “put me miles ahead” when he clerked for fellow Fordham Law alumnus Hon. Kevin Thomas Duffy ’58 in the U.S. Southern District Court. He also gained self-reliance, problem-solving skills, and thoughtfulness from the Law School’s clinics, which he likened to a “public interest law firm.” Sharif-Drinkard participated in the same litigation skills clinic as Molko.

“I had to focus on my clients, make sure their needs were met, and communicate in a way that was direct and sensitive,” she says of the “sink or swim” experience. She described the Law School as “an incredible and robust community of educators and scholars who were invested in us as students.” Like Petty, she highlighted the importance of knowing how to draft applications for copyrights and trademarks, as well as being published in the Fordham Urban Law Journal while she was in school.

Fordham’s educational offerings have placed its students in front of their peers from other law schools, Siegel says.

“I’ve always felt, particularly as new technologies emerged and became a more significant ingredient in the marketing of music, that Fordham was several steps ahead of other law schools,” he says. “The School has traditionally had a strong copyright and IP base.”

The New Show

Fordham’s IP strengths have primed entertainment lawyers for what lies ahead in the new media landscape. That future includes everything from the battle over artist streaming royalties to net neutrality.

Attorneys must fight to get their artists a “fair share,” Davis says, as revenue increases from streaming services, and powerful corporate entities like Apple, Spotify, and Tidal seek to claim more of the profits. Labels currently take home around 70 percent of the share, distributing a small amount to artists. For instance, a Spotify play generally nets an artist half a cent in royalties.

“The only way that’s going to change is with artists putting their foot down and being aggressive with revenue sharing on streaming income,” Petty says. “When you have a deal on the table, sometimes you have to be willing to walk away.”

Territorial-based competition is slowly evolving into a far larger global competition, and the more competition, the more gross revenue will increase, Rappaport predicts, calling streaming “the greatest thing to ever happen to the music industry.” It allows cash-strapped artists to “get their art out there, and for listeners to listen to whatever they want, when they want it, without taxing their hard drives,” he explains.

Molko agrees that royalties on Spotify, as well as SoundCloud, will be an interesting issue to follow. As for content on the television side, net neutrality will remain front and center, he says.

“More and more content is delivered through broadband,” Molko notes. “The original structure of the Cable Communications Policy Act and how government regulates broadband are going to be a huge battleground throughout the next decade.”

Educating students on the issues facing the entertainment industry is a vital endeavor, says Sharif-Drinkard, who serves on the board of directors for the Black Entertainment and Sports Lawyers Association and will be its incoming vice president. For current lawyers, it’s imperative to stay abreast of emerging technologies.

“In order for us to be really successful in what we do, we have to figure out not only how to be a strong advocate but also how to be a trailblazer in it,” she says.

–Ray Legendre