I have been practicing Internet law since the field first emerged in the early 1990s. I was fortunate to be able to directly participate in the Internet boom that established the web as a new commercial medium. Through my practice, I once again find myself observing the beginning of what might well be another commercial communications phenomenon: the emergence of mobile telephones as a new and critically important platform for providing content, services and advertising on a planetary scale. In my opinion, the look and feel of the current state of the mobile content industry is distinctly reminiscent of the beginning days of the Internet phenomenon. If this observation is correct, a second e-commerce boom for the adult entertainment industry might well be just around the corner.
It is interesting that this view is now supported by some of the very same analysts that accurately predicted the explosive growth of the Internet. For example, Juniper Research recently published a report predicting that annual worldwide revenue from adult content on mobile telephones and other portable devices will be approximately $1 billion this year. The same report predicts that mobile adult content revenue will more than double to $2.1 billion by 2009. The data does not include revenue generated by mobile company participation in affiliate programs or mobile computer games that include sexual content.
When one projects even further into the future, the picture gets even more interesting. Consider the following technological developments we are likely to see over the next 10 years:
- Mobile memory capacity comparable to that available in desktop and laptop computers.
- Mobile-bandwidth capacity and price comparable to hard wired sources.
- The development of heads-up mobile monitor "glasses" and immersive goggles.
- The development of accurate speech recognition and "virtual" input and control devices such as projected keyboards and virtual mice for mobile phone/computers.
Because of these developments, it is likely that the much anticipated "convergence" technology will not center on televisions or traditional computers but will, instead, center on our telephones.
It does not require a lot of imagination to see that recorded and live media of every kind, including that which is broadcast via satellite or cable, will eventually be delivered over wireless networks to mobile phones or their progeny.
It is only a bit more of a stretch to imagine that computer monitors and television screens may eventually be replaced by high-quality, immersive, heads-up displays.
Exploiting The Medium
It is not surprising that adult entertainment entrepreneurs are beginning to exploit the mobile phone medium. Distribution of adult content via cellphones is already big business in Europe, accounting for the lion's share of the revenue statistics published by Juniper.
In fact, in the past year alone, our firm has negotiated and/or drafted scores of agreements between European mobile companies and American content providers. I expect that over the next year or so, virtually every adult content provider will be approached to enter into some kind of mobile content exploitation agreement.
Unfortunately, however, few content producers possess a working knowledge of the emerging mobile phone markets, mobile technologies or, most importantly, the laws pertaining to telephonic distribution of adult materials. Because of this, all too frequently content producers are entering into terrible deals in which they unwisely and unnecessarily grant valuable rights that lock up their libraries for years.
The horror stories are, unfortunately, also reminiscent of the early Internet days when video companies and other content producers unfamiliar with web design and e-commerce also entered into bad deals, often with fast talking charlatans that represented themselves as experienced Internet gurus with promises of overnight wealth. Some of these ill-advised deals resulted in delayed exploitation of the Internet by some rather famous adult entertainment companies. In some cases the companies lost profits and market share that was never regained.
Many content providers are once again being offered quick and easy money in exchange for granting rights far in excess of what is reasonable or fair.
I frequently see proposed agreements presented to my content clients that would require them to grant the mobile content company exclusive worldwide mobile phone rights over my clients' entire libraries for five years or more.
It is hard to overstate the potential damage that such a deal could cause a company if entered into without thorough consideration. Also, on more than one occasion, I have found that a purportedly "big" and "highly experienced" mobile phone company with "the best contacts" with "all the big telecommunications providers" actually had little or, in some cases, no means of distributing my client's content throughout most of the world.
In fact, many times the company will not even have any means of lawfully distributing adult content via mobile phones in the United States. Moreover, it has often been said that an e-commerce year is equivalent to a traditional commerce decade due to the amount of innovation associated with the web.
With the preceding in mind, imagine the consequences of a content producer giving up worldwide Internet rights for five years to a relatively unknown start-up subscription site in 1996. The consequences would have almost certainly been disastrous.
Yet, many content providers are entering into what are, in my opinion, equally bad deals with fledgling foreign mobile phone companies that they know little or nothing about. It brings to mind the old saying that those who do not know history are doomed to relive it.
Consequently, in hopes of helping to avert a repeat of some of the disastrous intellectual property exploitation deals of the past, I have prepared a brief set of issues that I believe every company contemplating entering the mobile phone market should consider.
- Understand the technology. Before you commit your content to distribution via mobile phones, it is advisable that you acquire at least a basic understanding of the underlying mobile technology.
For example, it is important to understand that content is not distributed to mobile telephones the same way that content is distributed to computers on the web.
The primary difference is that cellphone content distribution currently requires that the material ultimately travel on the mobile telephone company's (i.e., Sprint's, Cingular's, etc.) private network. This is very different from the open architecture of the Internet, and it has profound economic and legal implications.
In Part 2, we'll look at the laws surrounding the distribution of adult content via mobile networks.
Gregory A. Piccionelli, Esq. is a senior member of Piccionelli & Sarno, one of the world's most experienced Internet and adult entertainment law firms. He can be reached at (310) 553-3375 or www.piccionellisarno.com.
