DLA Piper UK LLP

Monetising social media: turning hashtags into pound signs

Question

What are the legal issues associated with monetising social media?

Answer

In the modern age, the use of social media is ever more key to business. Most media companies have now established user engagement across numerous digital channels, both online and on mobile platforms, and maintain an active presence on social media platforms such as Twitter and Facebook. Some have even added social plugins to their services, giving customers the opportunity to use social logins and share their social identities.

Now that companies have recognised social media presences and are driving reach and consumption to grow their audiences, the question becomes not, "How do I establish a social channel?" but "How do I extract value from social media data?". In exploiting consumer behaviours to extract this value, companies must consider the legal ramifications.

Below we summarise some of the key issues surrounding the monetisation of social media.

1. Digital rights management

Digital rights managements (DRM) refers to access control technologies which restrict use of branded hardware, software or content. DRM is arguably a controversial concept in the digital scene. DRM offers rights holders in today’s media landscape the promise of “not so much how to prevent access and use as how to monitor access and use”. However, its ability to successfully take account of important factors such as consumer rights, privacy, exceptions to copyright infringement, private copying, interoperability and accessibility in its monitoring remains open to debate.

The rise of social media has seen DRM evolve though various concepts and techniques. Indeed, as use of social media adapts around the introduction of new applications or as more rights holders begin to distribute premium content through those channels, DRM will no doubt develop further. In time, it may well be the channels as well as the rights holders who set the agenda – in social media it is the platform terms that matter alongside the law. There is a risk that failure to take that into account may mean, with or without DRM, the content is unavailable to anyone.

2. Data

Social media allows us to collect an enormous amount of data. Where such data is considered personal data, privacy issues arise. Watch this space, because a new European general data protection regulation should be approved in the spring and will provide for a new framework entailing new rights, strengthened safeguards and higher sanctions, among other things, which should help to tackle these issues and protect privacy.

3. Safe Harbour

EU privacy law requires that European citizens must not move their data outside the European Union unless the territory they transfer to is considered to have privacy safeguards to the standard of those in the European Union. The 'Safe Harbour' scheme refers to the data protection agreement between the European Union and the United States - made in 2000 - that provided a legal basis for European citizens to transfer data to the United States. This allowed companies such as Facebook to self-certify that they would protect such data when transferred and stored in the United States. Controversially, this agreement has now been ruled invalid and an alternative grounding must be found. While standard contractual clauses and binding corporate rules can still be used, authorities are still considering alternative transfer mechanisms. If no solution to Safe Harbour is found by 31 January 2016, the authorities will start enforcement.

4. Legal aspects

When using social media for advertising and direct marketing purposes, at least the same rules apply as for other online and offline media. A host of issues therefore arise. Third-party copyright, portrait rights and trademark should be respected; data protection rules apply, as do general advertising rules (eg, the advertiser should be clearly identifiable). In the Netherlands last year, a social media code was introduced requiring the disclosure of the relationship between advertiser and distributor (ie, the person who posts a communication for the advertiser’s benefit). This can be done by using text such as ‘#adv’ or ‘#spon’.

5. Recent trends

The trend of brands acquiring content creators in the social space expanded dramatically in 2014-15. Multichannel Networks (MCNs) have been a particular target - and source of value - for acquisition by traditional media companies as they: 

  • provide an effective way for traditional brands to reach a younger audience;
  • have proven nimble and adept platforms for experimentation with new programming formats and content types; and
  • provide an almost instant global market, absent of many of the restrictions attendant with legacy linear and digital deals to which many traditional media companies are subject.

Brands are increasingly producing premium content themselves, including via custom shows, signature channels, and a push into promotion via MCN channels, for closer, more targeted associations with consumers, and for control over data.

YouTube recently announced an online, subscription-based ad-free video service, priced at $10 a month. Consumers will get original content from various sources, including Time Warner, Fox and NBC Universal. YouTube has long been the dominant video ad revenue player worldwide and while this will remain the case, its market share will diminish as competitors such as Facebook and Twitter join the fray. For media companies, YouTube Red presents a chance to leverage the YouTube platform globally and obtain a share of ad revenues.

Conclusion

The monetisation of social media is a key trend among businesses and it is likely that this will continue. Social media platforms provide enormous opportunities to exploit modern consumer behaviours, extracting maximum value from them. Nevertheless, as social media evolves, so too do the potential issues arising from it, some of which are flagged above. Therefore it is important for businesses to bear in mind possible ramifications and keep in tune with the law.

Katie Mullally is a trainee solicitor at DLA Piper’s London office. Katie wishes to thank Duncan Calow, Gianluigi Marino, Richard van Schaik, Richard Flaggert and Nick Fitzpatrick, all of DLA Piper, for their contributions to the piece.

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