The Streaming Evolution: Lessons in Monetization, Opportunities, and Myths

The entertainment industry’s transformation over the last decade, driven by the rise of streaming, has illuminated three critical areas attorneys and their clients should monitor: advertising, licensing models, and content strategies. These areas represent immense opportunities for those who understand the shifting landscape.

Advertising Renaissance

Streaming platforms once touted ad-free content as their premium offering. But in recent years, the introduction of ad-supported tiers by platforms like Netflix and Disney+ has reshaped revenue models. Certain insiders claim that, contrary to early fears, ad-supported subscriptions often generate higher Average Revenue Per User (ARPU) than their ad-free counterparts, premium subscription services. This trend, combined with the advent of sophisticated targeting tools, marks the beginning of a new advertising golden age.

However, as a profit participation auditor, I am skeptical. While industry leaders point to higher Average Revenue Per User (ARPU) for ad-supported tiers than for premium subscriptions, I’ve yet to see a single case where this holds true. Premium subscriptions consistently outpace ad-supported ARPU when all factors are accounted for.

In any case, despite insider optimism, ad-supported tiers are not a guaranteed financial boon. ARPU from ad-supported services relies on robust targeting technology, a consistent influx of high-quality ads (i.e., ad inventory quality) and on advertisers paying market rates (currently Amazon is charging below-market rates as a loss leader, making it difficult for video streamers to sell advertising at market rates). 

Further, for clients producing content, ad-supported models can represent a double-edged sword. While they expand audience reach, they often necessitate stricter content guidelines to ensure “brand safety.” Navigating these constraints requires careful contract negotiations to protect creative integrity while maximizing revenue opportunities.

This and the discrepancy between insider optimism and real-world evidence demands scrutiny. Attorneys representing creators should be prepared to question ad revenue forecasts and insist on transparency in revenue-sharing agreements and prepare to negotiate both for:

1. Ad revenue shares, ensuring equitable participation in this growing segment
2. Detailed audits and data-sharing provisions to verify claims (a subject best addressed by a consultant at my firm, Boschan Corp., as there are many considerations)

The Case for Windowing

Exclusivity defined streaming’s first decade, but the pendulum is swinging back toward the traditional windowing model. Licensing content to multiple platforms has proven its value, as demonstrated by recent success stories like Suits, which found a massive new audience years after its original release.

Clients with legacy content libraries should explore licensing opportunities with ad-supported platforms or free streaming services. These platforms are hungry for proven content that can attract viewers without the development costs of original programming. Moreover, content that has outlived its exclusivity period on one platform can enjoy a second (or third) life elsewhere, creating new revenue streams.

Attorneys advising studios and production companies should prioritize flexibility in contracts, ensuring that exclusive rights revert to their clients after a reasonable time. This allows studios to pursue licensing deals that benefit from the growing appetite for library content.

Cost Control and Strategic Incentives

One of the most pressing issues in streaming today is the unchecked rise of production costs. Expensive, sprawling productions were standard when the likes of Netflix was competing to gain market share. But now that Netflix is established and the industry is going through consolidation on its path in the direction of an oligopolistic marketplace, the industry is waking up to the reality that financial sustainability requires moderation.

Attorneys should ensure that contracts reward clients who produce high-quality content within reasonable budgets. For instance, performance-based incentives tied to efficient production could foster a healthier balance between artistry and fiscal responsibility.

Moreover, the return of contingent/performance-based compensation models aligns incentives between platforms and creators. Attorneys must advocate for transparent success metrics and fair back-end deals that reward efficiency and audience impact, rather than sheer budget size.

Embracing Opportunity

The entertainment industry stands at a crossroads. Advertising is making a comeback, the windowing model is ripe for revival, and cost control is no longer optional. Attorneys have a pivotal role to play in shaping these trends, ensuring their clients navigate this evolving landscape with clarity and confidence.

By asking tough questions, negotiating strategic terms, and leveraging data-driven insights, attorneys can turn challenges into opportunities for their clients—and themselves.

Exploring the Delayed Discovery Doctrine, Doctrine of Estoppel, and their Implications on Contesting and Objecting to Incoming Profit Participation Accountings and Royalty Statements

Your favorite royalty auditor and forensic accountant is here to make sure California attorneys know of the potential application of the delayed discovery doctrine and the doctrine of estoppel in contesting incoming profit participation accountings or royalty statements, notwithstanding contractual or statutory limitations. I believe such legal doctrines, along with the relevant cases I will highlight, provide compelling grounds for certain creative and licensor clients to challenge such accountings or statements.

1. Delayed Discovery Doctrine: The delayed discovery doctrine allows for the tolling or extension of limitations periods when a plaintiff could not have reasonably discovered the existence of a claim. It recognizes that in certain situations, a plaintiff may be unaware of the facts giving rise to a cause of action until a later date.

By applying the delayed discovery doctrine, our clients may be able to argue that they were not reasonably aware of the inaccurate or improper profit participation accountings/statements until a later point, beyond the contractual or statutory limitations. This would provide them with an opportunity to contest and seek redress for the extended period covered by the accountings or statements.

2. Doctrine of Estoppel: The doctrine of estoppel, in the context of profit participation accountings and/or royalty statements, can block entertainment companies and licensees from imposing statutory or contractual limitations on audit or other damages claims, if they have previously acted in a manner inconsistent with the position that such claims shall be limited. Estoppel arises when a party's prior conduct or representations reasonably induced another party to rely on those actions to their detriment.

Applying the doctrine of estoppel, our clients may argue that a company's past conduct, representations, or acceptance of actions misled them into believing their rights were being properly accounted for, and as a result, they refrained from auditing or taking legal action within the contractual or statutory limitations periods. This would potentially estop the other party from invoking those limitations to shield themselves from our clients' challenges.

Relevant Cases: I would like to draw your attention to two notable cases that support certain arguments for delayed discovery and motions to estop a company from imposing limitations on your clients audit and damages claims:

1. Weatherly v. Universal Music Pub. Group, 23 Cal. Rptr. 3d 157, 125 Cal. App. 4th 913 (Ct. App. 2004). This case showed that conducting an audit is not necessary to reach the level of diligence required to make delayed discovery claims.

2. Wind Dancer Production Group v. Walt Disney Pictures, 10 Cal. App. 5th 56, 215 Cal. Rptr. 3d 835 (Ct. App. 2017): This case involves a dispute over profit participation accountings and the application of the doctrine of estoppel. It establishes that a party's acceptance, authorization, or prior conduct can estop them from using contestability clauses and written amendment clauses to defend against claims challenging the accuracy of profit participation statements, thereby allowing for a longer contestability period.

Conclusion: Given the potential application of the delayed discovery doctrine and the doctrine of estoppel, along with the persuasive precedent set by the mentioned cases, it is crucial that you, as counsel to profit participants or royalty recipients, thoroughly explore these legal doctrines to contest the incoming profit participation accountings/statements for periods longer than the contractual or statutory limitations allow. By leveraging these arguments, we can effectively advocate for our clients' rights and pursue a fair resolution.

I would greatly appreciate the opportunity to discuss these matters further with you. Call my office to clear conflicts for a consultation (424) 248-8866.

And, if you know of other important cases, please comment!

Top Items Shared - Past Two Weeks

Here are the most popular news items in the world of music and interactive royalties that I shared publicly over the past couple of weeks:

• "Video Game Audits: What You Need to Know"@IGDA #WednesdayWebinar with "The Game Attorney" Tom Buscaglia
• EU Court rules content embedding is not copyright infringement | Music Week 

• Tricks to negotiating #screenplay prices: Q&A With Dinah Perez, Esq.

• "Sixty-one percent of people who buy CDs are 36 and older, according to MusicWatch's estimate."

• "More than 70% of the music consumed in the first six months of the year in the US was either downloaded or streamed"
• "The history of the Laugh Track" by Stephen Herrera

• Disney Wants to Build a New "Authentic" Search Engine... - Digital Music NewsDigital Music News

• Female PC gamers outnumber males - PC Gamer

• @bwerde The latter.  I think as video ad budgets rise, more artists will start to appreciate how much money can be made via YouTube though.

Join me 6/24/10 for Lunch with Google and Disney @ The BHBA: Targeted Marketing and Privacy

Are your actions tracked by digital media companies? Who accesses this information and how is it used? Will legislation in the pipeline change our experience of the Internet? Is your company or client compliant?

Join me next Thursday for a very special "Targeted Internet Marketing and Privacy" panel discussion at the Beverly Hills Bar Association's June 24 luncheon at Lawry's. Please reserve your meal at bhba.org if you would like to attend in-person, or sign up for the webcast here.

Speakers:

• Halimah DeLaine Prado, Esq., Sr. Product Counsel, Google Inc.
• Jonathan Avila, Esq., Chief Privacy Officer, The Walt Disney Co.
• David D. Johnson, Esq., Sr. Attorney, Epstein Becker & Green, P.C.

Moderator:
Cedar Boschan, Compliance Auditor, Hurewitz, Boschan & Co. LLP

Date:
Thursday, June 24, 2010
Registration & Lunch: 12:00 p.m.
Program: 12:30 - 2:00 p.m.

Place:
LAWRY’S
100 N. La Cienega Blvd.
Beverly Hills, CA
(1/2 block North of Wilshire)
Free underground parking

Price:
$65.00 for BHBA Intellectual Property Section members who pay in advance*
$85.00 for BHBA members who pay in advance*
$40.00 for Law Students who pay in advance*
$105.00 for non BHBA members who pay in advance*
(Additional $20.00 more at door for all)
This event is FREE for members of The Order of Distinguished Attorneys
*Refund with 48 hours notice, raincheck with 24 hours notice

MCLE Credit: This activity has been approved for Minimum Continuing Legal Education credit by the State Bar of California in the amount of 1.5 hours and the Beverly Hills Bar Association certifies that this activity conforms to the standards for approved education activities prescribed by the rules and regulations of the State Bar of California governing minimum continuing legal education.