By John G. Browning

Editor’s note: The following story is reprinted with permission from the Fall 2013 Texas Entertainment and Sports Law Journal. Read more from the Journal here.

Once upon a time, if you mentioned the topics of “social media” and “contract clauses” in the same sentence to entertainment industry big shots, they would associate it with a way to limit entertainers from discussing their projects on Facebook, Twitter, and other social networking platforms.

As recently as October 2009, the Hollywood Reporter was revealing that “there’s a growing number of studio deals with new language aimed specifically at curbing usage of social-media outlets by actors, execs, and other creatives.”1

The article further reported that, due to concern about confidential information being leaked out over social networks, studios like Disney and DreamWorks had added clauses requiring actors and others not to share information “via interactive media such as Facebook, Twitter, or any other interactive social network or personal blog.”2 

The overriding concern, apparently, was related to celebrities who jumped the gun on official announcements before studio spinmeisters had a chance to break the news; one example given was Paula Abdul, who announced her decision to leave “American Idol” via Twitter and surprised Fox executives.

But fast forward a few years to 2013, and now studios, agents, and talent in the entertainment and sports realms regularly sit down to negotiate how much social media activity the actor or athlete will be required to engage in as a way of supporting his or her work and burnishing a brand image. What accounts for the new change in attitude?

 

For one thing, the reality of social media’s inexorable spread has sunk in. According to the latest Pew Internet Study, 72 percent of all adult Americans who are online have at least one social networking profile.3 One out of every seven minutes spent online is spent on Facebook alone, while one out of every five page views online occurs on the social networking giant.

And it’s not just Facebook and its 1.12 billion users worldwide that’s captivated society; YouTube serves over 1 billion visitors each month. YouTube is available on over 350 million mobile devices, and each week 100 million people engage in some form of social action on the video-sharing site, such as comments, shares, or “likes.” Twitter, which was processing 5,000 tweets per day within a year of its founding, was processing over 400 million tweets a day by late 2012.

The reach and influence of social media has been embraced by corporate America as well. According to a study by the University of Massachusetts-Dartmouth, Fortune 500 companies are paying increasing attention to social media. Seventy-seven percent of the Fortune 500 maintain active Twitter accounts, while 70 percent have a Facebook page and 69 percent own YouTube accounts.4

Some of the leading companies on Twitter and Facebook are entertainment industry titans like Walt Disney, which boasts over 44 million Facebook fans and nearly 2 million followers on Twitter.5 While other social networks aren’t quite as popular with the Fortune 500 crowd, they are still very present.

Forty-four of the Fortune 500 have accounts on Instagram and Foursquare as well, while 45 of them are on Pinterest. As the study points out, corporate America “now seems comfortable and even excited with its newfound ability to engage its vendors, partners, customers, and others in ways that could not have been imagined when most of their corporations began. Judging by the increased use of tools, fans, and followers, they are making some very powerful new connections.”6

Another reason for the new emphasis on ensuring that actors, recording artists, athletes, and other celebrities are contractually bound to promote themselves, their projects, and the brands with which they are associated via social networking comes down to the value not only of the celebrities themselves, but of the people who follow them.

According to a 2011 Nielsen Study, 64 percent of adult U.S. Internet users who follow a celebrity also follow a brand—making the celebrity fan four times more likely to follow a brand than the average U.S. adult online.7

In addition, the study found that those fans were more likely to offer advice and share opinions with fellow online consumers, particularly in the case of entertainment subjects. Thirty-two percent of celebrity fans provide advice on movies (making them 44 percent more likely to do so than the average online user), and 28 percent offer guidance on music and television choices.8

Of course, all is not completely rosy when it comes to actors or athletes speaking out on social media. The celebrity can become embroiled in scandal, such as Paula Dean, causing an empire of product endorsements, television shows, and book deals to crumble almost overnight.

Sometimes, it’s the personality’s own social media activities that can ignite the flames of controversy, such as a young Disney star undermining her carefully cultivated family friendly image with ill-timed “selfies” on Twitter or Instagram, or NFL star Rashard Mendenhall’s controversial tweets about Osama Bin Laden and 9/11 (more on that later).

There is also the ever-present danger of a figure engaging in a social media faux pas related to the product he or she is endorsing. Former Pepsi spokesperson Britney Spears was dumped by the soft drink company after the pop star was photographed in public drinking Coca-Cola, while Helena Bonham Carter’s relationship with Yardley Cosmetics ended after the actress’ online revelation that she doesn’t wear makeup.

The virtually instantaneous exposure and, in some cases, embarrassment that can accompany a celebrity’s missteps thanks to social networking tools is yet another reason to address and manage that individual’s activity through a contractual provision. Such precautions might have prevented one recent social media flub, when BlackBerry’s newly appointed “global creative director,” singer/songwriter Alicia Keys, tweeted about her new endorsement—from an iPhone.

Another potential issue that needs to be addressed in any celebrity’s contract is the potential exposure from paid endorsements made on social media. In May 2013, reality star Kim Kardashian posted on Twitter: “Pregnancy lips…@EOS to the rescue! LOL.” along with a photo of her using EOS lip balm. Although the tweet did not make it clear if she was being paid or not for her endorsement, Ms. Kardashian is among a growing number of celebrities who can command fees of up to $20,000 for a single tweet to their millions of followers on social media.

Others are more forthcoming: after actor Michael Ian Black tweeted a plug for Dos Equis, he followed up with a tweet to his 2 million Twitter followers that the beer company had paid him “thousands of dollars to run it.”9

When pop star Miley Cyrus was traveling to promote her latest album, she tweeted “Thanks @blackjet for the flight to Silicon Valley!” to her 12 million followers on Twitter. Although the post didn’t disclose her status as a paid endorser for the Silicon Valley start-up company that arranges for private jet travel, Blackjet CEO Dean Rotchin later acknowledged “she was given some consideration for her tweet.”10

Ashton Kutcher, star of TV’s “Two and a Half Men” has also faced criticism for shamelessly plugging tech companies that he invests in (like Foursquare and Flipboard) on the CBS show, without disclosing his financial ties.

The topic of celebrity social media endorsements has received heightened scrutiny in recent months, when even D-list celebrities and reality TV personalities are being paid to utilize their fame in 140 characters or less; “Jersey Shore” star Snooki, for example, commands up to $7,900 per tweet, while faded “Malcolm in the Middle” actor Frankie Muniz pays a few bills at $232 a tweet.11

Some of that scrutiny is coming from the Federal Trade Commission. Under FTC guidelines, companies and the celebrities they sponsor risk being deceptive by not disclosing that such social media postings are, in fact, advertisements.

Mary K. Engle, associate director of the Advertising Practices Division at the Federal Trade Commission, sums it up this way: “In a traditional ad with a celebrity, everyone assumes that they are being paid.12 When it’s not obvious that it is an ad, people should disclose that they are being paid.”

While the FTC has yet to assess fines against a celebrity for not disclosing his or her financial connection to a company, attorneys for both the endorser and the company receiving the plug need to be aware of the risk, and address it contractually. Engle suggests using the word “ad” in front of the tweet, pointing out that “it only takes up two extra characters.”13

The FTC updated its consumer protection rules for online activities in March 2013, taking specific aim at celebrity tweeters.14 These guidelines make it clear that the FTC holds marketing companies and their celebrity endorsers to the same standards with social media and other online ads as they do with more traditional media. Full disclosure is mandatory, even in a 140-character tweet. The agency suggests flagging Twitter ads by including “Ad:” at the beginning or the word “sponsored” at the end of the post.

And the FTC also makes it clear that companies need to be conscious of the disclosures’ locations, ensuring that they are visible to consumers viewing them on a smartphone; if the disclosure won’t fit within the constraints of a social network ad or mobile ad, then according to the FTC the ad copy needs to be altered so as not to require a disclosure.15

The FTC even provided hypothetical scenarios for celebrity Twitter endorsements in its new rules. Using a fictional celebrity named “Juli Starz,” the FTC presented her posting the tweet “Shooting movie beach scene. Had to lose 30 lbs in 6 wks. Thanks Fat-Away Pills for making it easy,” along with a URL to the product’s site.

According to the FTC, such an endorsement would violate its rules, since it doesn’t specify that it’s an ad, and doesn’t have qualifying language saying how likely (or unlikely) it was that other consumers could expect the same kind of result.

Even adding the “#spon” hashtag at the end, to show that it’s a sponsored posting, would not pass FTC muster. According to the agency, the tweet should be marked clearly as an ad and include the typical results for any product.16 If the FTC finds advertising to be misleading, it can assess civil penalties ranging from the thousands of dollars to the millions; in addition, some advertisers have been ordered to issue full or partial refunds to consumers.

Besides the understandable need to stay within the FTC guidelines, keeping a tight rein on an actor or athlete’s social media postings is also a good idea to avoid bringing yet another omnipresent clause into play—the morals clause.

In the aftermath of the tsunami in Japan, actor/comedian Gilbert Gottfried made insensitive and tasteless jokes about the disaster on Twitter, resulting in his termination as the voice of the AFLAC duck by the insurance giant. In Australia, Olympic gold medal-winning swimmer and Jaguar spokesperson Stephanie Rice tweeted a homophobic comment after a swim meet in South Africa. Despite a later apology for the offending tweet, the car company dropped her as a spokesperson.

However, tweets by Pittsburgh Steelers running back Rashard Mendenhall shortly after the May 1, 2011, killing of Osama Bin Laden put a spotlight on morals clauses and social media. Mendenhall tweeted: “What kind of person celebrates death? It’s amazing how people can HATE a man they never even heard speak. We’ve only heard one side…” And of the 9/11 attacks, the player tweeted, “We’ll never know what really happened. I just have a hard time believing a plane could take a skyscraper down demolition style.”17

The public uproar over the tweets resulted in Hanesbrands terminating Mendenhall’s endorsement contract, citing the morals clause in it. At first blush, one would have to say that legally the running back was likely to be tackled for a loss. After all, morals clauses are routinely upheld by courts, and there was no reason to believe that results would be different in the use of social media.

For example, in the 2010 case of Galaviz v. Post-Newsweek Stations, San Antonio, Inc., a federal court rejected the appeal of a TV news reporter fired following her arrest in a domestic dispute.18 And in Nader v. ABCTV, Inc. in 2005, the court upheld the termination of an “All My Children” soap opera actor after his arrest for cocaine possession and resisting arrest.19

A typical morals clause might read something like this:

If Artist has committed or commits any act which is a felony, or a misdemeanor of moral turpitude, or commits an act which offends the community or any segment thereof and/or public morals and decency that may, in the reasonable judgment of the Advertiser, cause a diminution in the value of the Advertiser’s commercial association with Artist and which is of sufficient magnitude to require, for commercial reasons, the discontinuance of the Commercialization of Artist’s persona hereunder, then Advertiser shall have the right to immediately terminate this Agreement on written notice to Artist.

In the age of social media, however, there are several challenges when it comes to enforcing such a morals clause; because of these, sponsors are well advised to incorporate a specific reference to communications using social media.

One such challenge is the difficulty in measuring brand diminution and pinpointing a particular tweet or post as the cause. Another challenge is proving that the actor or athlete did in fact author the offending tweet or post, a potential obstacle when many celebrities have someone writing their tweets or otherwise “managing” their social media presence, and where the first defense of a number of public figures confronted with a offensive tweet is to say “my account was hacked.”

In the case of Rashard Mendenhall, his approach was a variation on “the best defense is a good offense.” He filed suit against Hanesbrands in July 2011 in U.S. District Court in North Carolina for breach of contract. Mendenhall’s argument was a novel one; pointing to previous offensive or controversial tweets he had made (which, among other things, included comments against women and ones comparing the NFL to slavery), he argued that Hanesbrands had waived its right to use his tweets as grounds to terminate the contract since he had previously tweeted so many offensive things that Hanesbrands didn’t object to.20

The argument survived a motion to dismiss by Hanesbrands, and ultimately the lawsuit was settled.

The lesson to be learned from examples like the Mendenhall case and others is best summed up by Professor Porcher Taylor of the University of Richmond: “Every celebrity endorsement contract of any kind in the future must have a Twitter/Social Media clause … I will be so bold as to state that the failure to not have such a clause would be tantamount to endorsement contract drafting malpractice.”21

It is advice that sports and entertainment agents, movie studios, and marketers appear to be heeding. According to an article in Advertising Age, Peter Hess (co-head of commercial endorsements for Creative Artists Agency) says more and more social media guarantees are being written into celebrity contracts. Hess says, “We’re starting to have in negotiations, ‘We’d like to include X number of tweets or Facebook postings.’ It’s similar to traditional advertising—instead of two commercials, now we want two tweets.”22

Indeed the importance of a robust social media following has not been lost on an entertainment industry faced with declining box office revenue, online downloads that have decimated the recording industry, and online fan bases that can alter a television program’s future.

An artist’s following on social media can mean the difference in casting decisions (Rihanna was allegedly cast in the movie “Battleship” thanks in part to her 26 million Twitter followers) or even getting a project made (witness the Kickstarter campaign that crowdsourced funding for a “Veronica Mars” movie). As a New York Times analysis observed, “After largely ignoring social media—allowing fake Facebook pages to proliferate, sticking with tried-and-true publicity stops like ‘Entertainment Tonight’—stars and agents are realizing en masse that they need to get on that train.”23

In order to capitalize on and manage this increasingly important social media presence, the entertainment industry has turned to various social media start-ups. One of the best known is theAudience, formed by former Disney executive Oliver Luckett. TheAudience reaches over 800 million fans each month, publishing thousands of pieces of content on social media on behalf of over 300 accounts.24 Its clients include record labels, studios, and even the Coachella music festival as well as actors like Hugh Jackman, Mark Wahlberg, and Charlize Theron and recording artists like Usher and Pitbull.

Another prominent company that manages stars’ digital presence is WhoSay, which counts Tom Hanks, Shakira, Ellen DeGeneres, and Sofia Vergara among its clients. Other companies that manage celebrity brands across multiple social media platforms include ThisMoment, Digital Media Management and Crowd Factory.

Such companies have sprung up in part due to a recognition of both the marketing power of social media as well a sense that—with studio contracts requiring actors to use their “best efforts” to use social media—social media efforts are too important to be entrusted to the celebrities themselves or even just the studios.

As Mr. Luckett describes it, “We’re trying to prevent bad marketing from happening—making sure that our artists don’t get hurt by studios force-feeding fans with marketing messages.”25

The juggernaut that is social networking has already made its presence felt by consumers everywhere and been embraced by corporate America. With this increasing recognition of social media’s importance, addressing an actor’s or athlete’s activities on platforms like Twitter and Facebook in the context of his or her contractual obligations has become a necessity.

ENDNOTES
. 1 http://www.thresq.com/2009/10/check-your-contract-before-your-next-tweet.html
. 2 Id.
. 3 www.pewinternet.org
. 4 http://www.umassd.edu/cmr/socialmedia/2013fortune500
. 5 Id.
. 6 Id.
. 7 “Online Celebrity Fans More Likely to Follow Brands,” http://www.nielsen.com/us/en/newswire/2011/online-celebrity-fans-more-likely-to-follow
. 8 Id.
. 9 Nick Bilton, “Disruptions: Celebrities’ Product Plugs on Social Media Draw Scrutiny,” The New York Times, June 9, 2013.
. 10 Id.
. 11 Liat Kornowski, “Celebrity Sponsored Tweets: What the Stars Get Paid for Advertising in 140 Characters,” The Huffington Post, May 30, 2013.
. 12 Bilton, supra note 9.
. 13 Id.
. 14 http://www.ftc.gov/os/2000/05/0005dotcomstaffreport.pdf
. 15 Id.
. 16 Id.
. 17 Benjamin Haynes, “Athletes, Morality Clauses, and Social Media,” http://sportinlaw.com/2013/01/22/athletes-morality-clauses-and-social-media/ (last visited 8/26/13)
. 18 350 Fed. Appx. 457, 2010 WL 2294724 (5th Cir. 2010)
. 19 150 Fed. Appx. 54, 17 A.D. Case 490 (2nd Cir. 2005)
. 20 “Mendenhall Suing Champion, who dropped RB after 9/11 tweets,” http://www.nfl.com/news/story/09000900151820d6ae9/printable/mendenhall-suing-champion (last visited 8/26/13)
. 21 Id.
. 22 “Social Media Status Key to Endorsements for Today’s Celeb,” Advertising Age, Sept. 18, 2011.
. 23 Brooks Barnes, “A-Listers, Meet Your Online Megaphone,” The New York Times, Nov. 10, 2012.
. 24 Id.
. 25 Id.

John G. Browning is a partner in the Dallas office of Lewis Brisbois Bisgaard & Smith, where he handles civil litigation in state and federal courts, in areas ranging from employment and intellectual property to commercial cases and defense of products liability, professional liability, media law, and general negligence matters. Browning received his Juris Doctor from the University of Texas School of Law in 1989. He is the author of the book "The Lawyer’s Guide to Social Networking, Understanding Social Media’s Impact on the Law."