The new DOJ regulations implement the expanded age-verification requirements enacted in the Adam Walsh Act.  Now primary and secondary producers of depictions of “simulated sexually explicit conduct” and “lascivious exhibition” must also comply with age-verification record keeping requirements. The regulations define a primary producer as the individual who records the depiction of the sexually explicit conduct, whether it’s by videotape, photography, or a digitally manipulated image.  Primary producers also include anyone who digitizes an image of sexually explicit conduct.  A secondary producer includes anyone who “produces, assembles, manufactures, publishes, duplicates, reproduces, or reissues a book, magazine, periodical, videotape, or digitally or computer-manipulated image, picture, or other matter” that is intended for commercial distribution.  This definition also encompasses anyone who includes sexually explicit depictions on a computer site or service or otherwise manages the sexually explicit content on a computer site or service.  The breadth of the initial definition of secondary producer raised protest from the media industry and it was later amended to exclude those who merely distribute sexually explicit conduct, without altering or editing the content. Simulated sexually explicit conduct includes conduct that would cause a reasonable viewer to believe that the performers were actually engaged in sexually explicit conduct.  However, the depiction must amount to more than the mere suggestion of sexually explicit conduct.  While lascivious exhibition is not defined within the regulations, the DOJ website describes a few components of a lascivious depiction: “(1) the focal point is on the subject’s genitalia or pubic area, (2) the setting of the visual depiction is sexually suggestive . . . (3) the visual depiction suggests sexual coyness or a willingness to engage in sexual activity; or (4) the visual depiction is intended to elicit a sexual response in the viewer.”  Under this description, producers who show only fleeting nudity might still be subject to the age-verification recording procedures. 

The new regulations require the primary producer to examine a government issued photo ID of every performer before the production of the sexually explicit depiction.  The producer must then make a record of the performer’s name, aliases, date of birth, the date of the production of the sexually explicit image, and make a photocopy of the identification.  These records must be maintained in accordance with specific requirements and the visual depiction must be labeled with the location of the record.  A secondary producer of sexually explicit content must obtain all age-verification records from the primary producer, but does not have to independently verify the age of the performers.

While these requirements might have proven burdensome for mainstream media, the DOJ regulations contain an important safe harbor which offsets some of this burden:  Specifically, the record keeping provisions do not apply to a producer of simulated sexual conduct or lascivious images if the images are intended for commercial distribution as part of a commercial enterprise and they meet one of two requirements: (1) if the visual depiction is not “produced, marketed, or made available in circumstances such that an ordinary person would conclude that the matter contains a visual depiction that is child pornography” or (2) the depiction is subject to regulation by the FCC in its regulation of the broadcast of obscene, indecent, or profane programming. 

Producers seeking eligibility for the exemption must send a letter of certification to the Attorney General. The certification letter must state the statutory basis for eligibility, and, in the required language, state that the producer, in the regular course of business, collects and maintains identifying information for all performers. The letter must be signed by an executive officer of the entity or, if the entity does not have executive officers, by a senior manager who oversees the entity’s activities.  There are specific requirements for foreign entities seeking certification, or entities which have used foreign performers. 

The deadline for submitting the certification is June 16, 2009.  For all production that begins after June 16, 2009, the certification is due within 60 days of the start of the production.   After the initial certification, there is no need to recertify unless there are any material changes to the information provided in the certification.  In that case, a subsequent certification must be filed within 60 days of the material change. 

Our New Media, Entertainment and Technology practice group has been closely monitoring these regulations and would be happy to answer any questions regarding the impact of the same on your content production, broadcast and distribution initiatives or assist you in filing your own certification letters. 

We would like to thank Kate O’Donnell, a summer associate with the Firm, for her assistance in the preparation of this alert.

  Royalty Rate Analysis

After months of hearings, testimony and deliberations, on October 2, 2008, the United States Copyright Royalty Board (CRB) announced newly established rates for royalties to be paid to writers and composers (as opposed to performers) whose musical compositions are made and distributed as sound recordings (i.e., phonorecords), including via (1) physical recordings (e.g., CDs, tapes, vinyl, etc.), (2) permanent digital downloads, (3) ringtones, (4) limited/tethered digital downloads and (5) interactive streaming.

 These new rate determinations, which will remain in effect until December 31, 2012, break new ground. Following a drawn-out battle between the National Music Publishers’ Association (NMPA) (representing song writers and composers) and the Recording Industry Association of America (RIAA) and the Digital Media Association (DiMA) (representing the record labels and digital music retailers, respectively), the CRB established, for the first time, a rate for the distribution of ringtones (24¢ per delivery), while surprisingly maintaining the same rates for the distribution of physical recordings and permanent downloads of digital recordings that had been in effect since January 1, 2006 (9.1¢ per delivery). The rates for the distribution of sound recordings as limited/tethered downloads (i.e., downloads that only play a fixed number of times or for a fixed period of time) and as interactive streams (i.e., online digital streams of recordings selected by an end user on an on-demand basis), both of which had been slated for resolution by the CRB among the other rates at the outset of the lengthy proceedings, were actually negotiated to a consensus by the parties during the hearings, and their settlement was adopted by CRB, subject to ratification following public comment.

The announcement of the rates for limited downloads and interactive streaming of recorded music are of the utmost importance to both the publishers and the record labels alike because, prior to the announcement of the proposed rates, any service seeking to offer limited downloads and/or interactive streaming of recorded music was required to negotiate a royalty rate with individual writers, publishers or mechanical royalty collections agencies such as Harry Fox. In other words, copyright ownership in a sound recording alone (or obtaining a license from the owner, typically a record label) does not allow for the distribution of that recording without first obtaining a license from the song writer or publisher owning and/or controlling the copyright in the musical composition contained therein. Section 115 of the Copyright Act, also known as the “mechanical compulsory license”, however, provides a mechanism whereby a licensee (typically retailers or record labels) may be automatically granted a license to distribute sound recordings containing songs that they neither own nor control simply by adhering to the terms of the compulsory license and paying the rates set by the CRB. In other words, the express permission of song writers and publishers is not required to make and distribute sound recordings incorporating their musical compositions, provided that the licensee pays the applicable rates and complies with the terms of the statute.

As evidenced over the last two years, the trend among social networking websites (e.g., MySpace, etc.) and other digital entertainment websites (e.g., imeem, last.fm, etc.) has been the inclusion of digital music in forms other than traditional webcasting or internet radio (i.e., non-interactive streaming, where the end user does not select each individual sound recording) in favor of a more personalized user experience. Obtaining a license to provide interactive streaming, however, has thus far been both a lengthy and expensive process, but now website publishers will only be required to negotiate licenses with the sound recording owners or providers and pay the required mechanical license fees and the applicable public performance fees without the need to negotiate a separate licensing arrangement with the publishers.

The new mechanical royalty rates for limited downloads and interactive streaming are unlike the statutory rate structure for physical recordings, permanent digital downloads, and ringtones, all of which are all based on per unit calculations (i.e., “penny rates” or a fixed amount per distribution). Instead, these new rates are based on a percentage of revenue formula, with varying rates based on the business model of the service offering the musical recordings, including subscription-based and ad-supported models. In other words, the amount due to each publisher whose work is incorporated in a sound recording selected by an end user for streaming or downloading is a certain pro-rata percentage of revenue earned by the service or digital platform.

   The calculations are relatively complex, requiring multiple steps that vary according to the type of service. For all service models described in the proposed rate settlement, however, the calculation begins with a determination of monthly “service revenue” for the applicable accounting period, or all revenue recognized by the service from end users from the provision of the licensed activity, including subscription fees, sponsorships, commissions and third party advertising in connection with the interactive streaming and limited downloads offered on the service. The service revenue is then multiplied by the applicable percentage, which is identical across the all service models (10.5%). This amount is then subject to increase based on the applicable minimum payment amounts if the percentage of service revenue fails to exceed the minimums according to the type of service (i.e., whether music subscription fees are charged or whether the service is free or ad-supported).

For example, in the case of music subscriptions services (4 of the 5 service models), the applicable minimum payment is the greater of (a) a fixed amount for each paying subscriber ($.15-$.80) or (b) a fixed percentage of the amount paid by the service to the owners of the sound recordings (i.e., licensing fees paid to the recording labels and content aggregators) for the rights to steam and offer downloads of the recordings (17-22%). In the case of free or ad-supported models, the only applicable minimum is the fixed percentage of the amount paid to the owners of the sound recordings (18%-22%). Ultimately, the total amount due to the publishers is the percentage of service revenue or the applicable minimum payment amount (which ever is greater), less all public performance fees paid by the service provider to the applicable performing rights organizations for the rights to stream the applicable recordings.

These first time mechanical rates for music on ad-supported and free services represent a significant shift in the digital music space. First, it effectively removes any fixed payment obligation on such services (i.e., no penny rates based on the amount of subscribers, downloads, or streams) other than 10.5% of service revenue or the fixed percentage paid to the owners of the sound recordings. Second, the absence of fixed dollar minimums provides much-needed flexibility for new business models to emerge and should allow them to continue to exist, as many would cease to be profitable if required to remit fixed dollar amount minimums when all revenue generated is dependent on alternate sources, including the receipt of advertising dollars.

Once the proposed rates are ratified, expect to see increased streaming activity in the digital music space among purveyors of online content, especially social networking websites. In fact, within a few days of MySpace’s recent launch of its streaming music functionality, MySpace Music, the service had already well surpassed one billion streams, providing further evidence that a per stream or subscriber/member minimum would be cost prohibitive.

  Royalty Rate Analysis

After months of hearings, testimony and deliberations, on October 2, 2008, the United States Copyright Royalty Board (CRB) announced newly established rates for royalties to be paid to writers and composers (as opposed to performers) whose musical compositions are made and distributed as sound recordings (i.e., phonorecords), including via (1) physical recordings (e.g., CDs, tapes, vinyl, etc.), (2) permanent digital downloads, (3) ringtones, (4) limited/tethered digital downloads and (5) interactive streaming.

 These new rate determinations, which will remain in effect until December 31, 2012, break new ground. Following a drawn-out battle between the National Music Publishers’ Association (NMPA) (representing song writers and composers) and the Recording Industry Association of America (RIAA) and the Digital Media Association (DiMA) (representing the record labels and digital music retailers, respectively), the CRB established, for the first time, a rate for the distribution of ringtones (24¢ per delivery), while surprisingly maintaining the same rates for the distribution of physical recordings and permanent downloads of digital recordings that had been in effect since January 1, 2006 (9.1¢ per delivery). The rates for the distribution of sound recordings as limited/tethered downloads (i.e., downloads that only play a fixed number of times or for a fixed period of time) and as interactive streams (i.e., online digital streams of recordings selected by an end user on an on-demand basis), both of which had been slated for resolution by the CRB among the other rates at the outset of the lengthy proceedings, were actually negotiated to a consensus by the parties during the hearings, and their settlement was adopted by CRB, subject to ratification following public comment.

The announcement of the rates for limited downloads and interactive streaming of recorded music are of the utmost importance to both the publishers and the record labels alike because, prior to the announcement of the proposed rates, any service seeking to offer limited downloads and/or interactive streaming of recorded music was required to negotiate a royalty rate with individual writers, publishers or mechanical royalty collections agencies such as Harry Fox. In other words, copyright ownership in a sound recording alone (or obtaining a license from the owner, typically a record label) does not allow for the distribution of that recording without first obtaining a license from the song writer or publisher owning and/or controlling the copyright in the musical composition contained therein. Section 115 of the Copyright Act, also known as the “mechanical compulsory license”, however, provides a mechanism whereby a licensee (typically retailers or record labels) may be automatically granted a license to distribute sound recordings containing songs that they neither own nor control simply by adhering to the terms of the compulsory license and paying the rates set by the CRB. In other words, the express permission of song writers and publishers is not required to make and distribute sound recordings incorporating their musical compositions, provided that the licensee pays the applicable rates and complies with the terms of the statute.

As evidenced over the last two years, the trend among social networking websites (e.g., MySpace, etc.) and other digital entertainment websites (e.g., imeem, last.fm, etc.) has been the inclusion of digital music in forms other than traditional webcasting or internet radio (i.e., non-interactive streaming, where the end user does not select each individual sound recording) in favor of a more personalized user experience. Obtaining a license to provide interactive streaming, however, has thus far been both a lengthy and expensive process, but now website publishers will only be required to negotiate licenses with the sound recording owners or providers and pay the required mechanical license fees and the applicable public performance fees without the need to negotiate a separate licensing arrangement with the publishers.

The new mechanical royalty rates for limited downloads and interactive streaming are unlike the statutory rate structure for physical recordings, permanent digital downloads, and ringtones, all of which are all based on per unit calculations (i.e., “penny rates” or a fixed amount per distribution). Instead, these new rates are based on a percentage of revenue formula, with varying rates based on the business model of the service offering the musical recordings, including subscription-based and ad-supported models. In other words, the amount due to each publisher whose work is incorporated in a sound recording selected by an end user for streaming or downloading is a certain pro-rata percentage of revenue earned by the service or digital platform.

   The calculations are relatively complex, requiring multiple steps that vary according to the type of service. For all service models described in the proposed rate settlement, however, the calculation begins with a determination of monthly “service revenue” for the applicable accounting period, or all revenue recognized by the service from end users from the provision of the licensed activity, including subscription fees, sponsorships, commissions and third party advertising in connection with the interactive streaming and limited downloads offered on the service. The service revenue is then multiplied by the applicable percentage, which is identical across the all service models (10.5%). This amount is then subject to increase based on the applicable minimum payment amounts if the percentage of service revenue fails to exceed the minimums according to the type of service (i.e., whether music subscription fees are charged or whether the service is free or ad-supported).

For example, in the case of music subscriptions services (4 of the 5 service models), the applicable minimum payment is the greater of (a) a fixed amount for each paying subscriber ($.15-$.80) or (b) a fixed percentage of the amount paid by the service to the owners of the sound recordings (i.e., licensing fees paid to the recording labels and content aggregators) for the rights to steam and offer downloads of the recordings (17-22%). In the case of free or ad-supported models, the only applicable minimum is the fixed percentage of the amount paid to the owners of the sound recordings (18%-22%). Ultimately, the total amount due to the publishers is the percentage of service revenue or the applicable minimum payment amount (which ever is greater), less all public performance fees paid by the service provider to the applicable performing rights organizations for the rights to stream the applicable recordings.

These first time mechanical rates for music on ad-supported and free services represent a significant shift in the digital music space. First, it effectively removes any fixed payment obligation on such services (i.e., no penny rates based on the amount of subscribers, downloads, or streams) other than 10.5% of service revenue or the fixed percentage paid to the owners of the sound recordings. Second, the absence of fixed dollar minimums provides much-needed flexibility for new business models to emerge and should allow them to continue to exist, as many would cease to be profitable if required to remit fixed dollar amount minimums when all revenue generated is dependent on alternate sources, including the receipt of advertising dollars.

Once the proposed rates are ratified, expect to see increased streaming activity in the digital music space among purveyors of online content, especially social networking websites. In fact, within a few days of MySpace’s recent launch of its streaming music functionality, MySpace Music, the service had already well surpassed one billion streams, providing further evidence that a per stream or subscriber/member minimum would be cost prohibitive.

    Winning the Digital Race

On April 21, 2008, the Georgia Supreme Court rejected an argument that a promotional contest sponsored by NBC in connection with its hit show, “Deal or No Deal” violated Georgia’s anti-gambling laws. Because of the proliferation of text message-based promotional contests, this decision will likely have wide-reaching impact on the digital entertainment space.

The game at issue – the “Lucky Case Game” – encouraged viewers of “Deal or No Deal” to guess which of six briefcases is the “lucky case” by submitting their guesses online for free or via text message for a fee of $0.99. After the winning briefcase is revealed at the end of the show’s broadcast, the entrants who correctly chose the “lucky case” are entered into a random drawing, the winner of which receives a prize.

The plaintiffs, who are Georgia residents, submitted their guesses via text message but did not win. They sought to bring a class action against NBC Universal and the producers of “Deal or No Deal” claiming that the contest was an illegal gambling operation. Specifically, plaintiffs argued that the $0.99 fee charged for the text message entry represented “consideration” for a gambling contract, which is void under Georgia’s anti-gambling statutes.

The Georgia Supreme Court, however, rejected this claim and determined that the text message fee was not, in fact, “gambling consideration”, and therefore no “gambling contract” existed. In addition, the Georgia court rejected the plaintiffs’ claim that the “Lucky Case Game” constitutes an illegal lottery (which is considered “commercial gambling” under Georgia law and provides a civil cause of action to recover the money paid out or lost in the operation of a lottery). The court agreed with the defendants’ assertion that the game was used as a promotional tool and is not a lottery.

Under Georgia law, in order for a plaintiff to successfully recover “gambling consideration” (which implies that a gambling contract exists), one party needs to be certain to win, and the other party certain to lose, based upon the happening of a specific event. In this case, the Georgia Supreme Court agreed with the district court that the $0.99 text message fee did not constitute a bet or wager, that neither the defendants nor any participant were certain to lose, and the alleged consideration did not hang in the balance of the outcome.

This decision by the Georgia Supreme Court may provide comfort to mobile carriers and any organization that is currently offering, or planning to offer, similar types of contests and/or promotions. Many states have similar anti-gambling statutes and regulations governing promotional contests and games. While future claims will be fact-specific, the court’s reasoning that text message fees should not be considered a bet or wager likely strengthens the hand of any contest or promotion sponsor facing a similar challenge as to the legality of text message-based entry fees.

On April 21, 2008, the Georgia Supreme Court rejected an argument that a promotional contest sponsored by NBC in connection with its hit show, “Deal or No Deal” violated Georgia’s anti-gambling laws. Because of the proliferation of text message-based promotional contests, this decision will likely have wide-reaching impact on the digital entertainment space.

The game at issue – the “Lucky Case Game” – encouraged viewers of “Deal or No Deal” to guess which of six briefcases is the “lucky case” by submitting their guesses online for free or via text message for a fee of $0.99. After the winning briefcase is revealed at the end of the show’s broadcast, the entrants who correctly chose the “lucky case” are entered into a random drawing, the winner of which receives a prize.

The plaintiffs, who are Georgia residents, submitted their guesses via text message but did not win. They sought to bring a class action against NBC Universal and the producers of “Deal or No Deal” claiming that the contest was an illegal gambling operation. Specifically, plaintiffs argued that the $0.99 fee charged for the text message entry represented “consideration” for a gambling contract, which is void under Georgia’s anti-gambling statutes.

The Georgia Supreme Court, however, rejected this claim and determined that the text message fee was not, in fact, “gambling consideration”, and therefore no “gambling contract” existed. In addition, the Georgia court rejected the plaintiffs’ claim that the “Lucky Case Game” constitutes an illegal lottery (which is considered “commercial gambling” under Georgia law and provides a civil cause of action to recover the money paid out or lost in the operation of a lottery). The court agreed with the defendants’ assertion that the game was used as a promotional tool and is not a lottery.

Under Georgia law, in order for a plaintiff to successfully recover “gambling consideration” (which implies that a gambling contract exists), one party needs to be certain to win, and the other party certain to lose, based upon the happening of a specific event. In this case, the Georgia Supreme Court agreed with the district court that the $0.99 text message fee did not constitute a bet or wager, that neither the defendants nor any participant were certain to lose, and the alleged consideration did not hang in the balance of the outcome.

This decision by the Georgia Supreme Court may provide comfort to mobile carriers and any organization that is currently offering, or planning to offer, similar types of contests and/or promotions. Many states have similar anti-gambling statutes and regulations governing promotional contests and games. While future claims will be fact-specific, the court’s reasoning that text message fees should not be considered a bet or wager likely strengthens the hand of any contest or promotion sponsor facing a similar challenge as to the legality of text message-based entry fees.

E-Alert: Impact of the Writer’s Guild

In the coming days, the 10,500 striking members of The Writers Guild of America are expected to ratify a new, three-year agreement, which secures the writers a share of the digital media market by way of compensation for television programming and films delivered via the Internet and new media distribution platforms, including those delivered on an ad-supported basis. The proposed deal recognizes that the Internet is a primary means for content creation and delivery and firmly establishes the union’s jurisdiction over programming created for and distributed via new media outlets.

The anticipated compensation formula provides for the writers to receive a flat fee for programs streamed for the first two years of the term of the agreement. In the third year, the writers will begin to receive a percentage of the distributors’ gross revenue. The proposed agreement also provides for compensation for programming written specifically for new media platforms that are distributed and syndicated later as a television series, special or motion picture. The new rate at which writers will be compensated for electronic distribution of movies and television shows is speculated to be nearly double the rate historically paid by distributors for DVDs.

The arrangement raises complex and daunting questions for content producers, providers, distributors, aggregators and syndicators operating in the new media space. These include:

• How will networks and studios take these additional fees into account in determining the license fee that distributors will pay or share of advertising revenue they will receive?

• Will the writers’ success in securing this compensation formula have a precendential effect on upcoming negotiations of the Screen Actors Guild contract?

• How will the well-established economic model for video downloads (i.e., fixed price per download) be impacted if content providers are compelled to evaluate download-to-own and electronic-sell-through pricing based on the popularity of a particular show?

• Will the distribution of promotional content trigger the payment of residuals? What distinguishes “promotional” programming from “commercial” programming for this purpose?

• What is the scope of the revenue model contemplated and how far do the writers’ residuals extend? Content providers will need to carefully structure their transactions with distribution partners to exclude consideration received that is not directly attributable to the programming that is ultimately distributed (e.g., ancillary on-air advertising buys, run of site banner advertising inventory appearing on pages where such programming is streamed via an embeddable/viral media player, etc.).

• How will residuals based on “gross revenues” be calculated? What exactly does “gross revenues” mean? Both content providers and content aggregators/distributors will need to be extremely vigilant in delineating applicable deductions for any royalty payments or revenue shares due in connection with the distribution of programming.

The reality is that many content distribution and syndication deals are multi-faceted and often involve multiple forms of distribution, equity components and revenue streams. Now, more than ever, it has become increasingly important for studios, producers, content providers, distributors and aggregators alike to seek competent legal counsel to mitigate the legal, economic and operational risks involved when contemplating the structure of these transactions.

We are here to help. We have extensive experience in assisting our clients with the development of new business models and the negotiation of cutting edge transactions that facilitate the exploitation of their programming, products and services on all new media platforms, and will continue to stay apprised of how the WGA agreement (once ratified), and other related industry developments, challenge and create obstacles for our clients to overcome.

Contact Dan Schnapp at schnapp@hugheshubbard.com or (212) 837-6258 or Hali Resnick at resnickh@hugheshubbard.com or (212) 837-6058 of our New Media, Entertainment and Technology practice group to find out how we can help you.

E-Alert: Impact of the Writer’s Guild

In the coming days, the 10,500 striking members of The Writers Guild of America are expected to ratify a new, three-year agreement, which secures the writers a share of the digital media market by way of compensation for television programming and films delivered via the Internet and new media distribution platforms, including those delivered on an ad-supported basis. The proposed deal recognizes that the Internet is a primary means for content creation and delivery and firmly establishes the union’s jurisdiction over programming created for and distributed via new media outlets.

The anticipated compensation formula provides for the writers to receive a flat fee for programs streamed for the first two years of the term of the agreement. In the third year, the writers will begin to receive a percentage of the distributors’ gross revenue. The proposed agreement also provides for compensation for programming written specifically for new media platforms that are distributed and syndicated later as a television series, special or motion picture. The new rate at which writers will be compensated for electronic distribution of movies and television shows is speculated to be nearly double the rate historically paid by distributors for DVDs.

The arrangement raises complex and daunting questions for content producers, providers, distributors, aggregators and syndicators operating in the new media space. These include:

• How will networks and studios take these additional fees into account in determining the license fee that distributors will pay or share of advertising revenue they will receive?

• Will the writers’ success in securing this compensation formula have a precendential effect on upcoming negotiations of the Screen Actors Guild contract?

• How will the well-established economic model for video downloads (i.e., fixed price per download) be impacted if content providers are compelled to evaluate download-to-own and electronic-sell-through pricing based on the popularity of a particular show?

• Will the distribution of promotional content trigger the payment of residuals? What distinguishes “promotional” programming from “commercial” programming for this purpose?

• What is the scope of the revenue model contemplated and how far do the writers’ residuals extend? Content providers will need to carefully structure their transactions with distribution partners to exclude consideration received that is not directly attributable to the programming that is ultimately distributed (e.g., ancillary on-air advertising buys, run of site banner advertising inventory appearing on pages where such programming is streamed via an embeddable/viral media player, etc.).

• How will residuals based on “gross revenues” be calculated? What exactly does “gross revenues” mean? Both content providers and content aggregators/distributors will need to be extremely vigilant in delineating applicable deductions for any royalty payments or revenue shares due in connection with the distribution of programming.

The reality is that many content distribution and syndication deals are multi-faceted and often involve multiple forms of distribution, equity components and revenue streams. Now, more than ever, it has become increasingly important for studios, producers, content providers, distributors and aggregators alike to seek competent legal counsel to mitigate the legal, economic and operational risks involved when contemplating the structure of these transactions.

We are here to help. We have extensive experience in assisting our clients with the development of new business models and the negotiation of cutting edge transactions that facilitate the exploitation of their programming, products and services on all new media platforms, and will continue to stay apprised of how the WGA agreement (once ratified), and other related industry developments, challenge and create obstacles for our clients to overcome.

Contact Dan Schnapp at schnapp@hugheshubbard.com or (212) 837-6258 or Hali Resnick at resnickh@hugheshubbard.com or (212) 837-6058 of our New Media, Entertainment and Technology practice group to find out how we can help you.

On February 13th, 2008, Rep. Edward Markey, D-Mass., chairman of the House Energy and Commerce Committee’s subcommittee on Telecommunications and the Internet, introduced a bill to promote the principle known as “Net neutrality,” which prevents Internet service providers from playing traffic cop with Web content based on its source, destination, or ownership.

As drafted, the “Internet Freedom Preservation Act of 2008” would not legislate “Net neutrality”—the principle under which all Internet traffic is treated equally—but rather proposes to add a provision to the “Broadband Policy” section of the Communications Act which spells out principles the Federal Communications Commission (“FCC”) is expected to uphold. The bill was drafted in response to reports that some companies are unreasonably interfering with and stifling connections over the Internet and comes on the heels of an investigation launched by the FCC into Comcast last month, following complaints by a video start-up company, as well as advocacy groups, that Comcast was impeding traffic to peer-to-peer sites such as BitTorrent.

The nation’s largest telephone and cable operators, which have become the Internet gatekeepers, have fought “Net neutrality,” arguing that the ability to manipulate Web speed and to assess additional charges for quality of service to certain Internet applications are necessary to maintain Internet traffic for everyone, protect their investments and encourage additional network innovations.

The bill directs the FCC to conduct a series of proceedings, or “public broadband summits,” to assess “competition, consumer protection, and consumer choice issues relating to broadband Internet access services.” Specifically, these summits would investigate whether broadband operators are “blocking, thwarting, or unreasonably interfering” with the ability of consumers to access the internet on broadband networks, most notably, access speeds to certain Websites and applications.

The theory behind the bill is simple: To enforce baseline protections on the Internet to guard against unreasonable discriminatory favoritism for, or degradation of, content by network operators based on the source of such content. But how and when these principles will be enacted in law will be something that all businesses operating in the Internet marketplace will need to monitor closely.

We have extensive experience in assisting our clients in understanding the impact of new developments in the law on their businesses across all new media platforms, and will continue to stay apprised of how the “Internet Freedom Preservation Act of 2008,” and other related industry developments, challenge and create obstacles for our clients to overcome.

Contact Wayne Josel at josel@hugheshubbard.com or (212) 837-6448 or Matthew Syrkin at syrkin@hugheshubbard.com or (212) 837-6046 of our New Media, Entertainment and Technology practice group to find out how we can help you.

On February 13th, 2008, Rep. Edward Markey, D-Mass., chairman of the House Energy and Commerce Committee’s subcommittee on Telecommunications and the Internet, introduced a bill to promote the principle known as “Net neutrality,” which prevents Internet service providers from playing traffic cop with Web content based on its source, destination, or ownership.

As drafted, the “Internet Freedom Preservation Act of 2008” would not legislate “Net neutrality”—the principle under which all Internet traffic is treated equally—but rather proposes to add a provision to the “Broadband Policy” section of the Communications Act which spells out principles the Federal Communications Commission (“FCC”) is expected to uphold. The bill was drafted in response to reports that some companies are unreasonably interfering with and stifling connections over the Internet and comes on the heels of an investigation launched by the FCC into Comcast last month, following complaints by a video start-up company, as well as advocacy groups, that Comcast was impeding traffic to peer-to-peer sites such as BitTorrent.

The nation’s largest telephone and cable operators, which have become the Internet gatekeepers, have fought “Net neutrality,” arguing that the ability to manipulate Web speed and to assess additional charges for quality of service to certain Internet applications are necessary to maintain Internet traffic for everyone, protect their investments and encourage additional network innovations.

The bill directs the FCC to conduct a series of proceedings, or “public broadband summits,” to assess “competition, consumer protection, and consumer choice issues relating to broadband Internet access services.” Specifically, these summits would investigate whether broadband operators are “blocking, thwarting, or unreasonably interfering” with the ability of consumers to access the internet on broadband networks, most notably, access speeds to certain Websites and applications.

The theory behind the bill is simple: To enforce baseline protections on the Internet to guard against unreasonable discriminatory favoritism for, or degradation of, content by network operators based on the source of such content. But how and when these principles will be enacted in law will be something that all businesses operating in the Internet marketplace will need to monitor closely.

We have extensive experience in assisting our clients in understanding the impact of new developments in the law on their businesses across all new media platforms, and will continue to stay apprised of how the “Internet Freedom Preservation Act of 2008,” and other related industry developments, challenge and create obstacles for our clients to overcome.

Contact Wayne Josel at josel@hugheshubbard.com or (212) 837-6448 or Matthew Syrkin at syrkin@hugheshubbard.com or (212) 837-6046 of our New Media, Entertainment and Technology practice group to find out how we can help you.