disney law streaming television

Bill Nye Makes Disney Sigh: Residuals in the Streaming Era

A recent piece by Gene Maddaus published in Variety takes a look at a decision made by Judge David Cowan this February in regards to a lawsuit between Bill Nye (the Science Guy) and the Walt Disney Company. The beloved entertainer took Disney to court in 2017 over their practice of keeping 80% of streaming revenue from older content under the pretense that the relatively new method of distribution can be considered “home video,” leaving a mere 20% for talent like Nye and other profiting parties. Apparently, Disney has historically taken such a high margin due to the costs associated with distribution of home video. However, Nye has called out this practice, noting that in the modern era of streaming, distribution is far cheaper than when the Science Guy negotiated his contract in 1993. Nye’s representation, Raymond Hamrick, intends to appeal after Cowan’s siding with Disney on the grounds that streaming does qualify as home video. On the contrary, Nye’s attorneys argue that “Disney is simply grabbing whatever it can based on a tortured reading of contracts that predate the streaming era.”

This case strikes up a compelling debate over the implications of evolving technology within entertainment law. Nye’s initial negotiations were conducted under the assumption that home video implied the production of a physical product or “video device” such as a DVD or VHS tape. Nye and his attorneys argue that streaming equates far more to pay TV than home video, as much of the presumed costs associated with home video distribution do not apply to streaming. Disney, on the other hand, claims that from the audience’s perspective, “streaming is similar to home video and represents an evolution from the earlier technology.” These contrasting views are well grounded in both logic and legality, forcing the reader to think critically as to the ethical implications of such a conflict. Accelerated by COVID-19, the streaming era will only continue to grow and dominate distribution influencing development, production, and all other facets of the industry for the foreseeable future. As such, it is essential to discuss and ponder these squabbles, for their outcomes will likely determine how similar conflicts are to be resolved going forward.

The core of this issue boils down to the fact that Disney, and presumably other such media conglomerates, continue to rake in profits under outdated legal justification. Given how rapidly and overwhelmingly the entertainment industry has evolved over the last decade or so, concerns of ethics and legality as they relate to business practices need to be continually recontextualized. Because of the increasing unanimity of streaming services as a dominant platform of distribution, the key to addressing this situation arises in the law rather than in the particular case of Bill Nye vs. Disney. When it comes down to it, Nye has the stronger argument. I feel a bit biased to side with creators as opposed to enormous corporations when the situation calls for it (despite my admitted love of all things Disney), so I give credence to the qualms of Bill Nye and his representation. Judge Cowan went as far as to say that Nye was “credible”, but that he found his arguments legally unconvincing, “because it would mean that Disney would not be able to collect any distribution fee at all.” Disney’s argument that streaming is an evolution of home video comes across as porous and theoretical in comparison to Nye’s more grounded claim that the same profit structures should not apply to an entirely digital medium of distribution which does not entail the production of a physical product.

Personally, I don’t find either party to necessarily be in the wrong here. Nye understandably feels entitled to a higher share of profit, given the outdated nature of his contract. Whereas, Disney is entitled to the profits they currently take as the judge has ruled under the protection of the law. Thus, it seems to me like the issue is found within the law itself more so than with either party. As is highlighted in the article, streaming operates far differently than the traditional methods of physical distribution, to which Nye’s contract originally pertained. “Unless the ruling is upheld on appeal, it does not establish a precedent that could be applied in other cases. But it still bothers attorneys who represent performers in profit participation lawsuits.” As such, the legality of the division of profits in cases like Nye’s needs to be reconsidered and potentially amended to more justly reflect the evolving industry. Otherwise, the various other streaming platforms like Netflix, Amazon Prime, Paramount+, HBO Max, and so on, which also hold the rights to vast libraries of legacy properties and valuable IPs will likely take advantage of this same loophole assuming they are not already doing so.

The article quotes Douglas Johnson, managing partner of Johnson & Johnson LLP, throughout, ending on his comment that “streamers are paying those big first window license fees that are usually your largest gains on the title. This should be a wakeup call to the artists and the people who make movies. This is outrageous.” In this statement, Johnson hits the nail on the head in highlighting the implications of such a case, in that while Disney’s business practices may be technically legal, they are detrimental to creatives and artists and indirectly harmful to the industry as a whole. As is the nature of business, there is an imminent danger that competitors will adopt this seemingly obvious yet morally questionable strategy in order to boost profits in the streaming era at the expense of talent. In conclusion, I think the solution to this issue comes in a reconsideration of the legality of back-end contracts like Nye’s to more fairly represent all parties in the context of the era of streaming.

While I find the legal minutiae of this case to be quite fascinating, the true interest for me comes in how much it seems to have slipped through the cracks of public consciousness. Though the article states that a legal precedent has not necessarily been set unless the ruling is upheld after further appeals, it’s difficult to imagine such a loophole going unnoticed by competitors, given the prevalence of streaming as the potentially dominant method of distribution in a post-COVID world.