In This Issue:

  • Hashtags and Ads: Top 10 Legal Considerations for Brands Involved in Digital and Social Media Advertising
  • Brands, the New Media Companies/MCNs? Red Bull and Now Marriott
  • Case Study: Manatt Digital Media (MDM) Accelerates a Beauty Products Company’s Transformational Shift Into a Full-Fledged Media Company
  • Welcome to Hallyu-wood! The Addiction to Korean Dramas – Why Big Brands Should Be Watching
  • MDM Client Company Spotlight: Whistle Sports

Hashtags and Ads: Top 10 Legal Considerations for Brands Involved in Digital and Social Media Advertising

By: Jesse M. Brody and Suemyra A. Shah

In today’s competitive marketplace, brands are relying heavily on social media and other digital methods to communicate with consumers and to structure innovative and edgy marketing campaigns. Marketing departments and advertising and public relations agencies are staffed with hip Web-and-mobile-savvy professionals who wish to execute highly elaborate marketing campaigns that often include a mix of user-generated content, text messaging, Twitter messaging, Facebook applications, blogging, viral marketing and other social networking elements. However, these same tech-savvy marketing professionals are often unaware of the complex legal overlay of the digital world and the potential significant financial repercussions of their companies’ failure to comply. Advertising, marketing and promotions, both via digital and traditional channels, are governed in the United States by a patchwork of federal, state and local laws and regulations. Failure to understand and follow these requirements can potentially lead to expensive litigation or government enforcement actions and negative publicity that can harm a brand. Further, the advancement of technology makes things possible that may not be well-received by consumers, even if they are currently legal. Understanding the evolving legal and consumer protection landscape will help brands to identify and manage their legal risks and to more effectively work with employees and vendors in developing and implementing campaigns. We recommend that you consider the following legal issues before launching a social media and digital advertising campaign:

1. The Content: The content of your ad needs to be cleared with respect to intellectual property and other potential third-party rights arising out of the materials used. While numerous companies now maintain an active presence on social media sites, such as Twitter, Facebook and Instagram, the extent to which brands can lawfully interact with other platform users for advertising and similar commercial purposes is still not clearly defined, and, consequently, the legal risk associated with each post is not always properly weighed before a promotional social media campaign is launched.

2. The Claims: Any advertising message is deceptive if it contains a statement or omits material information that is likely to mislead a reasonable consumer and is material or important to a consumer’s decision to buy or use the product or service. A statement may also be deceptive if the advertiser does not have a reasonable basis to support its claim. These traditional advertising law concepts apply regardless of the specific medium where the ad will appear. Advertisers should make sure their disclosures are clear and conspicuous on all devices and platforms that consumers may use to view their ads. This means that if an ad would be deceptive or unfair (or would otherwise violate an FTC rule) without a disclosure – but the disclosure can’t be made clearly and conspicuously on a particular device or platform – then that ad shouldn’t run on that device or platform.

3. Advertising on Third-Party Platforms (“Like” Facebook): Each social media platform has its own terms of use that determine issues of ownership and control of the content and activities on that platform. Some websites and other social media platforms prohibit any commercial use other than as a paid advertiser. Before engaging in a promotional campaign on a third-party website, it is a good idea to review and follow the rules of the applicable venue. Also, just because a user posts something online does not mean advertisers can reuse it to promote their products or brand on another platform.

4. Sweepstakes, Contests and Prize Promotions: The first step when structuring a promotion where you give away a prize to entrants is to ensure it is not an illegal lottery. It is not uncommon for people to use the terms “sweepstakes” and “contests” interchangeably without realizing that distinct legal differences exist between them. A promotion that is administered on a social media platform may also be subject to platform-specific promotions guidelines, so make sure to review any such guidelines when structuring your promotion. Next, ensure that there are official rules made available for the promotion and that you include mandatory material disclosures on all advertising of the promotion, including disclosures on the entry form and abbreviated disclosures in any social media advertising of the promotion. Also, make sure you don’t need to register and/or bond your promotion, which is required in certain states. Finally, obtain a release from the winners.

5. E-mail and Mobile: CAN-SPAM governs the sending of commercial e-mails, which requires, in part, that the e-mail identifies the sender, the subject line accurately reflects the contents of the message, the sender provides the recipient with the ability to opt out of receiving future commercial e-mail from the sender, and that the sender maintains and scrubs against a “suppression list” of prior opt-outs. CAN-SPAM violations have resulted in expensive settlements with the FTC, and consumers can bring e-mail marketing claims if deception is alleged. The TCPA, telecom carrier rules and the Mobile Marketing Association’s Best Practices Guidelines govern the sending of text messages and e-mails to mobile domain addresses. Companies must satisfy notice and express advance-consent requirements before sending a commercial text message. TCPA violations have spawned many class-action lawsuits, resulting in tens of millions of dollars in settlements paid by advertisers that failed to fully comply.

6. Product Endorsements and Testimonials: Brands that are involved in encouraging a message about their products/services in traditional and nontraditional media (e.g., Twitter, blogs), even if the speaker is a consumer or a celebrity, will be responsible for the message and for making reasonable efforts to ensure that those it activates to spread the word about the products/services disclose any material connections to the advertiser, such as an entry into a promotion, employment, payment or being the recipient of samples or other things of value.

7. User-Generated Content (UGC): Beware that when consumers submit videos to your website, they may violate the rights of others or include negative content about the sponsor’s brand, product or service. To the extent user content will be published on the company’s website, it may be possible to take advantage of certain protections afforded Web operators under two federal laws, the CDA and DMCA, from some but not all types of content-related infringement and tort claims. Each law has its own set of requirements to qualify for the protection. A company runs the risk of losing protection under these laws depending upon the degree of involvement it has with the UGC.

8. Special Rules When Advertising to Children: Given that children lack the same capacity as adults to recognize and evaluate advertising messages, both the government and industry self-regulatory bodies have put greater burdens on advertising when it is targeted to children. For example, a federal law known as COPPA requires Internet sites and services and mobile app operators to obtain verifiable parental consent before knowingly collecting personal information from a child under the age of 13, and sites that target kids have further complex obligations. Compliance includes requiring a clear and prominent link to the Web operator’s privacy policy, which must include certain information about the advertiser’s privacy practices.

9. The Content: The content of your ad needs to be cleared with respect to intellectual property and other potential third-party rights arising out of the materials used. While numerous companies now maintain an active presence on social media sites, such as Twitter, Facebook and Instagram, the extent to which brands can lawfully interact with other platform users for advertising and similar commercial purposes is still not clearly defined, and, consequently, the legal risk associated with each post is not always properly weighed before a promotional social media campaign is launched.

10. IT and Data Security: Technology has enabled advertisers to track consumers with precision and more effectively communicate with and service them as a result. However, the issues of notice, consent and choice, protection from intrusion into sensitive areas, and the need to secure data to prevent identity theft and other potential harms have become the focus of the press, regulators and elected officials. As a result, consumer data privacy and security have become the consumer class-action issues of the moment, sucking hundreds of advertisers into expensive lawsuits. A variety of laws and self-regulatory schemes already address consumer data privacy and security, and a number of additional measures are working their way through state and federal legislatures. Companies need to understand their consumer data and behavioral advertising practices, reflect them in understandable policies that are effectively communicated to the public, give consumers meaningful choice and protect the security of the data. In the age of outsourcing, companies need to ensure that their vendors and contractors are complying with the companies’ policies, providing adequate safeguards, defending and indemnifying the company and maintaining adequate and appropriate insurance.

Conclusion

The last decade has seen technology change the ways brands can interact with consumers in ways hardly imagined before. The results can be beneficial to both the company and consumers, but consumers also face real risks and burdens as a result. Companies need to weigh the benefits and risks of proposed advertising and sales schemes and campaigns and be aware of the changing regulatory landscape that is evolving as technology advances. Further, the most important asset a brand has is its consumer goodwill. New marketing and sales approaches that consumers appreciate build goodwill, but those that are perceived as misleading, unfair or too intrusive can harm the brand.

Brands, the New Media Companies/MCNs? Red Bull and Now Marriott

Disruptive times. Transformational times. That is the media and entertainment world we are living in. The ascension of mobile as the most important single screen has driven consumption of short-form video. And this screen is with you 24/7, especially for Millennials born and bred with smartphones in their hands.

It is about a new form of engagement – ongoing engagement using authentic video content that creates a real relationship with the user.

It is no longer just about “traditional” media companies, nor is it just about “new world” media companies, such as multi-channel networks (MCNs).

Now, it is also about brands. Major brands. Brands looking to transform themselves into full-fledged media companies. Brands that are no longer content with simply making consumer packaged goods that touch consumers only intermittently.

Red Bull is THE prime example of this. The poster child. Red Bull is no longer simply an energy drink. It is now first and foremost a lifestyle/media company (a lifestyle of adrenaline/action) that amplifies and promotes that lifestyle via brilliantly executed media (primarily video – Felix Baumgartner anyone?). Cans of caffeine are only one manifestation of that lifestyle and the primary way that lifestyle/media company monetizes. To put an exclamation mark on this point, Red Bull has established a full separate and major media operation known as Red Bull Media House. If there is any doubt about Red Bull’s lifestyle/media company-first strategy, just take a look at its website. There is not a can of Red Bull anywhere to be found! Now there is ongoing consumer engagement with compelling video content. That’s the magic!

Other major brands see this (or should at least see it) and the potentially massive opportunity to transform themselves into something much more meaningful than a company that simply sells products. To emulate Red Bull and morph into major lifestyle/media companies.

Marriott sees this and has now entered the fray. Marriott announced in late September that it is establishing its own major production studios to develop premium video content across the full spectrum of short- and long-form. Marriott hopes to become the media company and destination for the lifestyle of global travel and, in particular, travel for “the next-generation traveler.” In other words, mostly Millennials. Pepsi, too, has just made “noises” to the effect that it will enter the media company fray in order to “own” a lifestyle. And, ESPN has gone so far as to now actively court brands to develop their own video projects – entertainment first, marketing stealthy second – to be featured on its own ESPN platform (rather than on YouTube). A new major announcement in the “lifestyle media company” realm now hits virtually every week.

2014 is a transformative moment in time in the media and entertainment world. For major brands that already “own” – or at least partially “own” – a lifestyle, now is the time to expand the definition of who they are.

Case Study: Manatt Digital Media (MDM) Accelerates a Beauty Products Company’s Transformational Shift Into a Full-Fledged Media Company

A company with a historical background in manufacturing and distributing beauty products has, in recent years, expanded its capabilities in content production, creating video and editorial content for its television, print magazine and digital properties. Faced with the challenge of building its revenue streams and expanding its audience reach and engagement in a shifting media landscape, the company engaged MDM to help guide it through its transformation into a lifestyle media company.

Becoming a media company requires more than just the ability to produce content that integrates products and services. It is a transformational shift that requires reevaluation of an organization’s operations and processes, roles and resources and a careful planning and analysis in building out the business and operating model, content strategy and branding strategy for the new platform.

MDM proposed a three-phased approach: (1) define a transformative vision; (2) develop the strategy and road map in line with that vision; and (3) execute against that road map to transform the company. In the first phase, MDM conducted an internal-focused analysis on the client’s current state, including identifying all their assets and key metrics for each, measuring their current audience reach and engagement, and analyzing customer experience across all touch points, to fully understand their strengths, capabilities and opportunities for improvement. Next, MDM conducted a market analysis to provide the client with insights into strategic plays, players and trends in the beauty lifestyle magazines and online lifestyle brands space.

Based on these analyses and industry insights, MDM presented the client with quick wins (actions they could take immediately to improve current operations) as well as a new VISION and MISSION that serve as the foundation and guiding principles for the client’s shift into a full-fledged media company. The final recommendation included details on the proposed business model and revenue streams, target audience, value propositions for all players involved, differentiating factors in the competitive landscape, and the steps required for transformation.

Welcome to Hallyu-wood! The Addiction to Korean Dramas – Why Big Brands Should Be Watching

Hallyu-lujah! The Korean drama is the perfect case for the new globalization of content.

For the vast majority of global citizens participating in this social world, we are all too familiar with the phrase “oh-bba Gangnam style.” Psy’s Gangnam Style video is one of the most globally viewed videos of all time with over 2 billion views. Yet to grasp scale, Psy’s popularity is only a very small portion of the overall Hallyu movement – the term used to refer to the Korean Wave or Korean Fever, the global fascination with South Korean pop culture and media known as KPop. Hallyu emerged in the 1990s in other parts of Asia, but the movement has been propelled into a true international market with the global growth of online and mobile content consumption.

The two strongest areas of interest in KPop are in music and TV content. The popularity of KPop music is often covered and well-known. And now, TV drama series known as KDramas are grabbing the attention. The typical KDrama is most similar to what we know as a miniseries in the United States. They often tell a complete story in one series, self-contained typically in 16 to 24 episodes. With dozens of new shows produced each year, with a constantly revolving list of featured multimedia talent, there is no shortage of KDrama fandom.

With a deeply engaged and loyal audience, KPop is widely consumed not just in South Korea and throughout Asia, but also has rapidly growing interest from Latin America and the United States. In the United States, English subtitled KDramas are most popular on YouTube and streaming sites DramaFever, Crunchy Roll (KDrama), Viki, and MNet America, as well as select content available on Hulu, Netflix, Amazon and iTunes. KDramas are more popular than ever with Millennials, especially with 18- to 24-year-old American women, not of Korean heritage. DramaFever reports that 85% of its audience is non-Asian, with 45% being Caucasian and 25% being Latino.

It is no surprise that this premium content has sparked the interest of global investors, romanced by that growing, global loyal fan base.

In December 2013, The Chernin Group acquired a majority stake in Crunchy Roll, an anime and Asian drama streaming site, for roughly $100 million. In the months that followed, Crunchy Roll spun off a Korean entertainment-focused site called Kdrama, featuring a library of top K-Dramas, variety, and music shows. In May 2014, Crunchy Roll acquired Soompi, a Kpop news publisher and community website. And in recent days, it was announced that Kdrama and Soompi would rebrand to form SoompiTV. Currently, most of SoompiTV’s content is only licensed for the United States and Canada, but it is working on gaining licensing rights to the global audience. Impressively, Crunchy Roll and SoompiTV – distributors of KPop and other Asian content – are part of the first few video services invested in and managed by the highly anticipated and highly regarded The Chernin Group/AT&T OTT joint venture, Otter Media.

In September 2013, Japan’s Internet e-commerce giant Rakuten purchased Viki, a premium video streaming service run out of Singapore, featuring Korean dramas and other Asian content. That deal was rumored to be at $200 million.

With close to $20 million in revenue this past year and a very global audience, DramaFever is another leader in the KPop/KDrama media space. With a rumored valuation near $120-$140 million, Drama Fever is being pursued and courted aggressively. To date, DramaFever has raised $11.5 million from investors that include AMC Networks, Bertelsmann, NALA, and Softbank.

These are some serious bets being placed on the global value of KDramas as a major media asset. Here’s why more media companies and brands will be addicted:

1. Deeply engaged, fiercely loyal global audience

Not too long ago, before many of the streaming sites had international licensing rights, KDramas had limited availability outside of South Korea, and pirated videos made their way around the world fueled by the crowdsourced, multilanguage subtitling of popular series. A large community of fans was dedicated to making this content available, and the loyalty and following of audiences are still reflected in the ongoing virality of what many would deem as obscure, foreign content. Today, subtitling is still crowdsourced on sites like Viki and YouTube, with the more popular KDramas subtitled in over a dozen different languages.

Throughout Asia, the content has cross-generational appeal with both men and women. Earlier this year, a very popular series, My Love from the Star, debuted in Korea and had an average viewership of 24% in Korea. It then sold rights to China, where it’s been viewed online through iQiyi, a Chinese video streaming platform, over 14.5 billion times. The series finale was so widely anticipated and watched by all ages, that Chinese news outlets covered people calling in sick and taking time off to watch the finale and alluded to the high probability that the national productivity of China was impacted by the fandom around that show.

2. Deep library of addictive, binge-watching-worthy content

With the soap opera-like cliff-hangers commonly written into each episode, coupled with the availability and ease of online and mobile consumption, KDramas are ideal for binge-watching through the series. I’d argue that KDramas were the original binge-watching type of content. There are hundreds of past KDrama titles, with constant, year-round production of new content. With this rich library, DramaFever reports that its subscribers watch, on average, 54 hours (3,234 minutes) per month. In comparison, subscribers on Netflix and Hulu are reported at monthly average views of 644 minutes and 223 minutes per month, respectively.

3. Growing interest in the KPop lifestyle

This past summer at the KCON conference, an annual K-Pop convention held in Los Angeles, attendance doubled from the previous year to over 42,000 in attendance, with nearly 40% coming from outside California. Most of the attendees were female, and less than 10% of the attendees were of Korean heritage. KPop is not only relevant in music, TV and film, but it is also making significant plays in fashion lines, and even skincare and makeup. There is also a very large global following of Korean beauty content creators on YouTube, furthering the allure and appeal of the KPop lifestyle with a highly engaged audience.

However, there are some significant challenges that KDrama creators and distributors need to overcome to fully optimize and monetize their assets.

  • Ad/Subscription Model: Currently, the majority of content distribution is supported via ad revenue. On subscription sites like DramaFever and Viki, audiences can subscribe to avoid ads. But given the well-known work-arounds (hint: use Apple TV to watch ad-free) and fans used to dealing with irrelevant ads, it’s going to take more sophisticated features and services to convert a larger number of people to a paid subscription model. Additionally, there is an opportunity for more sophisticated and targeted advertising. On one of the more popular streaming sites, with use of my Facebook login, it repeatedly rolled a 15-second spot from a utilities company 3 times in a row to make up the 45-second spot. Perhaps the right brands and advertisers just haven’t come yet. Or perhaps it was a strategy to drive me to subscribe to avoid the annoying, irrelevant ads. Either way, this is a clear opportunity for both brands and streaming platforms.
  • Discovery: Just like the rest of online content, discovery of premium content among the crowded and confusing space is often a barrier to entry for KDramas. Many rely on social community boards for recommendations and reviews. An interesting feature for one of the streaming services could be to curate and recommend shows based on interest. Perhaps that could be a friendly suggestion for the subscription model feature.
  • Crossover of KPop Talent: Fans of KPop stars in Asia are rabid. Simply put, they make the Beliebers look harmless. Just don’t tell them I wrote that! The most popular KPop stars are singers, dancers and actors, with numerous endorsement deals in Asia. However, the artists themselves have yet to make as strong of a crossover to English-speaking fans as they have in Asia. Perhaps it’s because many of the stars haven’t mastered the English language yet, or perhaps it’s because the management companies that control their careers are not able to monetize on the global market.
  • Product placements and brand integration are seen with every series. But it is obvious that most of those brands are still just aimed at that first Korean audience, not considering the global market thereafter. This should spark the interest of global brands. It’s a clear opportunity for the industry as a whole and a definitive growth area for further monetization.
  • Lastly, many of the distribution rights and licensing deals are still less than sophisticated and strategic. For example, My Lovely Girl (aka She’s So Lovable), a highly anticipated new series starring Rain concurrently broadcast in South Korea, is available in the United States on DramaFever, SoompiTV, Viki, and YouTube. Streaming services are fighting for the same audience with often the same content. For streaming services to differentiate, service features may not be enough. Licensing deals are bound to evolve. At the same time, building a licensing model with restricted access will be a challenge, especially for content that got its catapult from bootstrapping, resourceful, rabid fans.

As seen with the industry and ecosystem around KDramas, the growth and monetization of global content are still in their infancy, with great opportunities for distribution licensing/rights, brand integration, advertising and subscription models to advance. Welcome to Hallyu-wood!

Fun fact: Korean management companies are run much like the old studio system, where the studio contracted talent and only made movies around those contracted artists. Similarly, Korean management companies target and manage talent, often with the triple-threat formula in singing, dancing and acting. Many of the KDramas are cast with stars who are solo artists or a member of a group, and are trained, cast, produced and promoted by the same major management company. Korean management companies constantly scout and train new talent, and are often seen as cutthroat talent factories. Implied criticism of this system comes as no surprise.

MDM Client Company Spotlight: Whistle Sports

The MCN Opportunity for Brands

Whistle Sports, a client of MDM, is the leading sports-focused MCN. Launched in January of this year, Whistle Sports already has over 7 million subscribers, over 1 billion video views and strategic partnerships with almost all major sports leagues. Whistle Sports has captured engagement in the world of sports, which is fueled by an unmatched intensity and passion felt by sports fans. This engagement in turn opens up monetization opportunities via multiple revenue streams.

Seeing the opportunities, Subaru sponsored Whistle Sports’ recent app launch on Xbox, which showcases content from the professional leagues as well as its own YouTube creators. The deal with Subaru includes a “branded takeover of the app” and a promoted video with Subaru brand integration.

5 Questions With The Whistle Sports Network’s CEO John West

1. What is the reason your company exists (and what problem(s) are you looking to solve)?

Sports fans are more excited, more engaged, and more loyal to their teams and the love of the game than anyone in any field. It’s a passion that starts young and lasts a lifetime. That’s why there are over 50 million young fans and athletes in America alone, and hundreds of millions around the world.

But I noticed with my own family that there was no single sports entertainment destination created specifically to speak to and engage the digital generation. There was no platform that ignored the steroids and scandals that made up most media and gave them, on any screen they wanted to use, content that was engaging, uplifting and gave them the chance to customize, discover and interact with that content on their own terms. That’s the “underserved audience” perspective.

From a content creator perspective, we saw the emerging multi-channel network (MCN) market and noticed that while Machinima was concentrating on gamers and StyleHaul was focused on fashion, nobody had stepped forward to own the sports vertical.

We now own that vertical from a YouTube perspective, are creating a community for those creators, and will help them migrate their content to multiple platforms like our new Xbox app.

2. How are you different from your competitors?

We are the first sports property to combine the content, support and investment of major pro leagues like the NFL, PGA, NASCAR and Major League Baseball with the excitement, talent, fan base and focus of a new generation of digital celebrities like Dude Perfect and Brodie Smith.

Our multi-channel network launched on January 1 and quickly scaled to over 156 channels, 7.25 million subscribers and 1.1 billion views. The launch of our Xbox app last month is another step in our building a Cross Platform Network that connects with engaged sports fans and creators on every device where they spend their time.

3. Why will you succeed (and what is your single most important ingredient for success)?

We built an incredible team, which includes founding members of the YouTube Sports and YouTube acquisitions teams, my cofounder Jeff Urban, who was the SVP and head of sports marketing at Gatorade, and a sales team with experience at Major League Baseball and Yahoo Sports. We’ve built an incredible community full of exciting content creators that are actively recruiting other top talent to join.

With the help of pro league partners like Major League Baseball Advanced Media, we’re building out multiple platforms where our underserved audience can be entertained, engaged and activated. Our target audience is at the point in their lives where they are creating lifetime commitments and lifelong patterns with brands that have been eager to join us.

4. What makes you unique (and what do you enjoy most outside of building your business)?

What I enjoy most is the chance with my wonderful wife to be an engaged parent to our sons and daughter. That also feeds my passion for the business – knowing that we are building something they can learn from, enjoy and be educated and inspired by for years.

The mix of support and engagement from over 10 pro leagues, hundreds of content creators, and millions of fans is unique to The Whistle Sports Network.

5. What digital media trend is most interesting to you (and what is the least)?

Our advisor and best-selling author of Grown Up Digital – Don Tapscott – splits the world into “digital immigrants” (who adopted technology as it was created) and “digital natives” (who grew up with the Web and mobile as part of their lives). Digital media began as an exercise by digital immigrants to change existing content into a new form for consumption by digital natives. The biggest change is that digital natives have taken control of the content creation and distribution themselves and are driving change from their own phones and screens. I am most interested in how eager they are to become part of a larger community and reach a larger audience.

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