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Continued from: Face-Off! NET ASSAULT BERRY:The principles are there. We have dealt with the opportunities and the abilities to violate the laws being greatly enhanced because of such technological advances as the Internet. I go back to when the audiocassettes and the ability to tape off radio was first seen as a problem. Then videocassettes came along. I gave a course this summer in Greece on the international issues dealing with sports and entertainment. I asked how many of these students from Greece and Yugoslavia and the United States, etc., made use of the Internet — and a very high percentage of them did. Almost on a daily basis there are new ways for people to violate the basic principles. CC:So it’s just more of the same? RASKOPF:I don’t think so. No. LITVIN:Although the legal principles haven’t really changed, the volume of activity that the lawyers have to deal with in this area has grown exponentially because of the Internet. It’s like we’re under siege from companies and people who on a daily basis are stealing our content, our trademarks, our copyright, our domain names. It’s almost like the wild, wild West out there. All the sports leagues are devoting tremendous resources and time and money to protecting their rights. But the legal principles involved haven’t changed. I think the district court decisions on both Napster and MP3 stand for that proposition. There also was a very important case that the NFL had, involving a company called iCraveTV. This was a guy who located himself in Toronto and was taking broadcast signals that he was getting from Buffalo, and streaming those signals onto his site, and essentially showing the full-blown telecasts of not just sports but television shows, movies, and whatnot. He claimed that this activity didn’t fall under U.S. copyright law because to get onto his Web site you had to type in a Canadian area code. Well, any idiot who knows the area code in Toronto can type in 416. And all of a sudden, they’re on the site, watching for free copyrighted material belonging to the NFL. The NFL and a coalition of leagues and other rights holders went to court, I think it was shortly before the Super Bowl – GERTZOG:That’s correct. LITVIN:– to get an injunction against this company. They were successful based on basic U.S. copyright law. GERTZOG:Joel expressed it well. I would like to add in terms of the action taking place shortly before the Super Bowl: We found out that they had solicited a number of major advertisers, saying, “Here is a cost-effective way to advertise on the Super Bowl.” That was a particularly good piece of evidence to make our case. Right before our marquee event for which companies were paying upwards of $2 million per 30-second commercial, someone in Canada was advertising a more cost-effective way to advertise on the game. CC:You went to federal court to shut this guy down? GERTZOG:We were in Pittsburgh federal district court working with the NBA and some of the movie studios. BERRY:One of the questions that I never saw in answer to this was whether, once he was shut down in the United States, was he able to change so that his site was only consumed in Canada? Because my understanding was that perhaps Canadian law did not prohibit that kind of transmission. ZIMMERMAN:My recollection was that he shut the whole site down. BERRY:He made noises as if he had the technological ability to cut off the non-Canadian users, but I don’t think he did. DERSHOWITZ:We proved that his technology couldn’t do it. We had hackers get into his site easily and showed the proof to the judge. ZIMMERMAN:There really is no effective game. Log on in Singapore or Stockholm and you see the exact same thing on any one of our Web sites as if you’d signed on in New York City. That’s why, similarly, there’s no club that can take the position, “This is a club property because I can show it only in my metropolitan area.” There’s no effective dating technology. There may be one day. BERRY:I assume that there will be one day. ZIMMERMAN:We all assume, but … MIKING THE PLAYERS CC:This is mostly directed toward Gary: There are plans to wire players’ helmets for broadcast during preseason games. We were wondering if there will be any measures to control what the players say on the record. GERTZOG:Certainly this is an issue. We feel a lot better about the umpire-cam because the umpires are employees of the league; we can control that a lot better. We’ve also worked on wiring the coaches. The NFL has been doing that for years. But there is an understanding as to what would be edited out if by some chance a coach happens to cross the line or say something that might offend. Obviously you have to consider this as all the leagues look into how to increase the entertainment value of their sports product. We see where entertainment is going with the popularity this summer of the television show “Survivor.” People like to get a peek inside sports or entertainment or people on an island. It will be a continuing trend. But you do have to worry about intruding on players’, coaches’, or anyone’s ability to conduct themselves within the confines of the game. Certain NBA coaches were concerned about being miked. Would that interfere with the competitive product? It’s a balancing act. We have a good relationship with our union, and we discuss these things in advance. Sometimes we need to, and other times we don’t need to do so in advance because we have a legal right. But we still want to get the players association on board. LITVIN:In the NBA there is a pending unfair labor practice charge that was brought by our union against us over the miking of coaches and the placement of cameras in locker rooms. We were disappointed that the players brought this action. This is a way to bring fans closer to the game, and, as Gary said, increase the entertainment value of our television product. It is something we talked to the union about before we did it. Nothing is broadcast live. It’s all on tape delay. We have no interest in embarrassing anybody. The players themselves aren’t miked. It’s just the coaches through a mike attached to their ties and the cameras in the locker room at halftime. We’re simply going to show the players entering the locker room and sitting down. That was going to be it. The players claim that this is something we were required to bargain over. We disagree strongly. We have a very, very long practice of doing this sort of thing. So where that proceeding winds up remains to be seen. CC:When is it scheduled to be heard? LITVIN:It’s just sitting before the National Labor Relations Board. CC:And with hockey? ZIMMERMAN:We occasionally might mike our referees, our linesmen, some of our coaches. Like Joel said, we do it with the intention of bringing our fans closer to the game. It’s not live. It’s not instantaneous. We don’t do anything that puts our players, our officials, and our game in anything less than a positive light. CC:And the WNBA? DERSHOWITZ:We’ve had cameras in the locker room and microphones on referees and coaches and occasionally on players since our inception in ’97. CC:Have you ever run into any issues? DERSHOWITZ:No. Our players, coaches, and referees are very cooperative and I think fully understand the importance of trying to bring the games closer to the fans. Because we are a startup, we have no issues whatsoever. HIGH-TECH ADS CC:What’s the deal now with virtual ads? GERTZOG:I was at a conference where there was an in-house counselor from one of the major soft drink companies that buys a lot of signage. One thing that they’re focusing on increasingly is writing into their contracts that the teams, or whoever controls the sports areas, cannot zap out their low-field signage. A large part of the value that they’re paying in certain sports is to get the exposure on the television broadcast. In football we don’t permit low-field signage because it detracts from the rights that we sell to our broadcasters. But you’ve got the dasher boards in hockey and you’ve got the rotating signage in basketball, and in baseball now it’s all over the place, including behind the catcher. Those advertisers are not just paying for the 10-, 20-, 30-, 50,000 people watching the game on the day it’s played. They’re really advertising to the television viewers. This is one issue that’s come up that no one had to focus on in terms of writing a contract about three years ago. We have experimented with virtual ads with our international league because we’ve got a little more flexibility there. The relationships that we have there are not of the measure that we have domestically. We’ve used one of the companies called Princeton Video Image, Inc. It’s certainly very interesting technology. Certainly there will be a continual need to find revenue streams and leagues, clubs, or some combination that will be creative. BERRY:Adding to that mix, of course, is the competing interest of the clubs and leagues and the players. As players become more involved with commodities, you have the increasing possibility of conflicts, not just on the playing field, but also in general advertising. You have, in the course of the negotiations, the possibility that the club will want to exclude the players from advertising for certain specific companies or competing companies. The list on both sides may grow so great that they’re almost impossible to resolve. I suppose if you pointed to one important change in the last 30 years — maybe “growth area” is a more accurate way of putting it — it’s the handling of endorsement conflicts with advertising sponsorships and various kinds of new revenue generation. It’s growing tremendously. RASKOPF:The Internet has helped accelerate the advertising possibilities and problems. For example, where do you draw the line between what’s advertising and what’s editorial? You’ve had the traditional media, broadcasts, magazines, newspapers… . But now you have sports leagues developing their own networks, controlling their own content, themselves becoming publishers. And you have, as Gary mentioned, the issue of ads that are sort of on field. Is it really an ad? Is it really protected by the First Amendment? Every one of these questions gets magnified. ZIMMERMAN:Then there’s the problem of having sponsors. Say PepsiCo, Inc., puts its name on your stadium, and that may conflict with your having a game or event sponsored by The Coca-Cola Company. RAH RAH SALARY CAPS CC:We’ll move onto antitrust. We have to talk about team and individual salary caps, which has been a contentious issue with the NBA collective bargaining agreement. There is the claim that the salary caps are anticompetitive. Your thoughts? RASKOPF:Do you need to ask? [laughs] LITVIN:We think salary caps are pro-competitive. ZIMMERMAN:Really? LITVIN:Salary caps really serve two functions. The first is that they’re a mechanism for dividing revenue between players and owners. If you accept the proposition that both players and owners contribute to the success of the product and should each share in the revenues from the product, then the only questions are: How much does each side share? And how do they share it? What’s the mechanism? We could just before the season write the union a check for some percentage of our projected revenues and tell Billy Hunter [executive director of the National Basketball Players Association]: Here’s your billion dollars or whatever, distribute it to your players. He’s not interested in doing that, for obvious reasons. So, instead, we have since 1983 had a salary cap system that is designed to distribute money between owners and players. But it’s done in the context of individual salary negotiations that are done within a salary cap system. That’s function number one. Function number two, and this goes more to the competitive issue: The cap is designed to make sure that the well-endowed, deep-pocketed, high-grossing teams can’t just go out and buy all the best players. Because if they could, and if you had a league of haves and have-nots, then all of a sudden you have a much less attractive entertainment product to compete against other forms of entertainment, such as football and hockey. So caps actually are not only pro-competitive in that sense, but also beneficial to both sides, the players and the owners. ZIMMERMAN:The other thing that Joel is alluding to is that it also causes clubs to spend the minimum. If the average league salary is — just making up a number — $20 million, you don’t have a club spending $3 million for players and then putting on what we might characterize as a minor league performance while taking major league TV revenues. You could probably run a profitable business off TV revenues even if you’re not filling up your arena. So it actually helps your players by keeping salaries above a minimum. LITVIN:That’s a good point. It helps you avoid the baseball situation, in which you have low-grossing teams whose payrolls are next-to-nothing who collect revenue-sharing proceeds from the high-grossing teams, and in that manner make a profit. Well, the problem is that they’re not putting a very good product on the field. Back t Face-Off!

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