United States: Six Legal Bedrocks Of Successful Transmedia Franchises

The value of modern media companies is driven in large part by the extent to which they can distribute and monetize their intellectual property via multiple platforms. The sources of transmedia franchises can vary—from series of novels and comic books to toy lines, video games, and soon platforms like Roblox—but the aspiration is consistent: to generate revenue and engage audiences across platforms, products, and experiences. The potential business value of creating a content pipeline is exponentially higher than that of one-off releases, and it carries less risk when done well.

However, the best laid business and creative plans will be futile if rightsholders do not have the requisite rights and legal protections to permit them to distribute and protect their IP, and to participate in the upside of its exploitation.

To help realize these types of content plans, here are six key legal bedrocks of successful franchises:

1. Consolidate and Verify Your Rights

You cannot build a transmedia franchise that is capable of being distributed across platforms if you have a cloud on your chain of title. That means that for new IP, you need robust agreements, which include work-for-hire language, a waiver of injunctive relief, and other standard boilerplate, for every individual and entity that touches the IP. For an acquired property, it is important to draft the scope of granted rights precisely and unambiguously so there are no questions or disputes in the future. The exact scope of granted rights is highly negotiable, and acquiring parties should always have one eye on future opportunities and technologies. Once paperwork is signed, it should be registered or recorded with the US Copyright Office at the appropriate time. Additionally, you should consider registering trademarks (https://www.pryorcashman.com/trademark) (or making intent-to-use filings) in the relevant categories to protect future rights.

2. Make Deals Thoughtfully

In order to build a transmedia franchise, you need to make deals thoughtfully and strategically—because you will be living with them for a long time. Pay close attention to details around scope of rights grant (covered here), approvals, and participation in future revenues. Making deals is an absolute necessity for most rightsholders in order to leverage the skillsets and sometimes the capital of third parties. It's not uncommon to see creatives and other laypeople proclaiming that you should "never" grant IP rights to third parties. This is an oversimplification, and it is unrealistic for any party that does not have the means or inclination to self-finance and self-distribute. The key instead is to pay attention to the rights that you are granting and fully understand the deals that you make.

3. Build Workable Business Models

An entertainment franchise is ultimately a business—one that should be profitable and sustainable. Building a workable business model is a complex and multifaceted endeavor, and planning is critical. When administering revenues directly, rightsholders will want to build a structure that permits growth and reinvestment, while incentivizing creator and talent involvement to the extent appropriate. Rightsholders should be aware that any kind of "profit sharing" or royalty structure opens them up to accounting requirements and potential audit. On the other side of the equation, when contracting with third parties, rightsholders will want to make sure that they understand how third-party profits will be accounted and the various forms of potential participation (e.g., MAGR vs. "per points" vs. "off platform" for television). Profit definitions in entertainment can be extremely complex with many tricks and loopholes, so rightsholders will want to engage experienced representatives to help them navigate; likewise, they will want to make decisions about when and how to audit third-party licensees and partners as needed.

4. Attach Carefully

While a lot of scrutiny and discussion is placed on rights deals for good reason, the question of who to attach to a property is equally important. People outside of the entertainment industry sometimes do not understand that it is very difficult to detach a creative element from a project once attached (certainly without that element's representatives holding out their hands for payment). Accordingly, IP holders should be cautious about attaching elements—especially because a successful property can lead to being inundated with "producers" making big promises. Note also that even legitimate attachments may not add actual business value because of dense slates and crowded schedules. Rightsholders should seek to limit attachments to elements who can meaningfully move a project forward to financing and production on a reasonable timeline (and even then, they should craft the attachment deal carefully).

5. Exercise Necessary Control...

It is of utmost importance for rightsholders to have the right to exercise a reasonable and appropriate level of creative control across products and productions in order to maintain quality and consistency across productions and products. The key thing to note in a transmedia franchise is that while a successful release elevates and drives value across the entire franchise, a disappointing or "off-brand" product can damage the value of the entire endeavor in the eyes of fans. As we previously discussed here, standards and expectations around approval rights for rightsholders are shifting in the evolving marketplace. Absolute control may be unrealistic unless a rightsholder self-finances, but all rightsholders must stand their ground for a reasonable amount of contractual approval rights through all parts of the process.

6. ...But Consider Letting Your Users Co-Create

The next frontier of transmedia franchises is user-generated content (UGC), which can drive revenue and—perhaps most importantly—sustained engagement with users. Companies like Roblox and Epic are already creating sandboxes that enable users to create and even monetize using third-party IP, and others will follow. These kinds of endeavors are enormously complex and require making significant decisions concerning ownership and revenue splits. They also implicate a lot of regulatory questions (including with respect to COPPA), so the role of lawyers is key. However, IP holders that can find a workable path to engaging users within UGC platforms may be able to enhance audience loyalty and drive business value right across their franchises.

Resources

• Four Entertainment Deal Considerations for IP Rightsholders (and One for Entertainment Studios)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.