Who's going to make money behind the screens?

The boom in the TV industry, with the arrival of digital transmission offering more and more channels, promises a host of legal problems and potentially a new balance between in-house and outsourced work in the area.

Observers believe that more programmes will be made, bought and sold, and new European and domestic regulatory issues could well spring up. And intellectual property rights will throw up more legal and conceptual problems for the TV companies' lawyers to get their teeth into.

Some media companies are preparing for these developments. Scottish Media Group has split its legal department into two to create a legal division dedicated to TV work. It is now advertising for a head of the department (The Lawyer, 27 September).

Channel 4 International, the body responsible for selling Channel 4 programmes and coordinating co-production activities, has created its first legal department, headed by Ceetah Grieves (The Lawyer, 12 July).

And News International brought over US lawyer Jay Itzkowitz to head the group's commercial legal activities in the UK and Europe (The Lawyer, 9 August). His role includes buying up other TV companies in Europe.

Itzkowitz says: “As technology expands, lawyers will have to keep up with it. We are going into a 500-channel world. And the 500-channel world today is going to be replaced by the five-million channel world through the internet.”

He says that because of the nature of the TV business, lawyers are needed on lots of levels.

“Even small issues to do with this world require lawyers. Deals have to be made. Each programme must be viewed by a lawyer to make sure it is legally sound. Programme providers need lawyers. Programme producers need lawyers.

“Because of its abstract nature TV takes a lot of protection.

“It also requires lots of lawyers to get it from an idea to a product and to make sure it is commercially viable.

“Another level of this work is the corporate level. It is strategic, it is about mergers and acquisitions of other providers.”

But there is some debate about whether in-house legal departments will spring up and expand to sizes that are able to cope with this wide variety of work, or whether media companies will look to outsource.

Jonathan Kembery, head of legal at Open, a digital interactive TV service due to be launched this month, says: “We are building up our legal department. At the end of this year there will be five qualified lawyers. There are three now.

“A lot of expertise in this area rests with in-house lawyers. To provide the correct legal advice you really have to understand the company and the issues. You best do that if you are in-house. Very few external lawyers can understand the industry well enough.”

But he does seek outside legal advice on some issues. Slaughter and May is Open's principal legal adviser, but Olswang and niche IT practice Kemp & Co are also consulted on certain issues.

Kembery adds: “If I ask for external advice I am looking for people who really add value. That is hard in this area because it is so technical. Interactive TV companies have significant legal teams.”

But he thinks that in the long run, outside firms will build up enough expertise to deal with the work. Kembery says: “A trend will be to build up in-house teams until technologies stabilise and then it will ripple out into private practice.

“It is similar to IT. A few years ago there was a lack of understanding of IT companies. Now there are several firms that understand IT. Digital TV is where IT was a few years ago.”

But some in-house lawyers at TV companies think technology is moving so fast that outside firms will not be close enough to it to keep up.

Robert MacKenzie is group managing director of legal affairs at media company NTL, which has 18 lawyers. NTL recently bought Cable & Wireless Communications (The Lawyer, 2 August).

MacKenzie says: “We don't outsource any work. All of it is done internally. Outside lawyers do not have the right knowledge of what we do. They are good people but lack the relevant skills.

“Outside lawyers can't respond quickly enough. This company needs speed because there are so many players. It is also very complex. Negotiations require involvement. We have been working flat out over the past year on digital TV.

“We are more than lawyers. We give business information and advise the company as a whole.”

Ceetah Grieves at Channel 4 International outsources to DJ Freeman and Hammond Suddards. She says that in-house teams want to do more of the specialised work themselves, but there is a lack of personnel.

Grieves says: “When you are in a large production company, or even a small one, you have to be up to speed or you look completely stupid. There are always in-house roles, but one of the problems is getting people experienced to do that job and TV covers an increasing volume and variety of work.

“You can learn the type of work we do. But the difficult thing is finding the time to do so.”

However, law firms remain confident about their own stake in the growing market. Tony Leifer, head of media at DJ Freeman, says: “This means more work for lawyers in private practice. In-house lawyers will have to continue to come to outside firms to help on specialised things.”

He says that most of his work for TV companies comes through the in-house department. “There are so many areas of law that work is expanding a lot. Areas include regulation, defamation, contempt, and transactions on programme agreements and deals to set up channels. All of these are also separated into many subgroups.”

Nicholas West, media partner at Denton Hall, says the amount of specialists in TV law will grow in firms as well as in in-house departments.

West says: “We are going to see an expansion in this area for lawyers but there is also an expansion of in-house legal teams.”

He also thinks the more technical work will go to firms and not be dealt with in-house.

He says: “As the industry becomes bigger there will be specialised contracts that in-house lawyers can't handle themselves. So they will continue to outsource regulatory, transactional, and copyright issues. It is a complex area of law and it needs industry knowledge.”

But MacKenzie strongly disagrees and reels off a list of legal issues his in-house department deals with.

It includes legal problems attached to regulations, transactions, content, negotiations, equipment, software, and hardware.

David Zeffman, media partner at Olswang, agrees that many firms will not be able to cope with technological changes in the TV industry, but he says those private practice lawyers who do keep on top of it will still receive much of the work. He points to the terrestrial TV industry to illustrate his argument.

“When the traditional terrestrial broadcasters moved into launching new channels they found their usual law firms were not able to handle the work because of the technology, so they went to firms that had experience on the satellite channels. These were firms that could understand pay TV,” Zeffman says.

The logic, then, is that work will be outsourced, but only to lawyers who understand the TV industry.

Kembery agrees. He says: “It will be done by a few firms. Big firms like Clifford Chance have a head start in this industry, along with a few smaller ones like Olswang and Wigan & Co.”

But he stresses that as time progresses, more of the work will be handled by in-house lawyers. He says: “There is a change in the role of in-house lawyers. They do not take off at 5.30pm.”

Kembery believes that the UK is getting closer to the US model, where in-house lawyers have a much more important role within their company.

And even some outside lawyers are willing to admit that in-house lawyers are increasingly doing the specialised work traditionally given to firms.

Media partner Medwyn Jones at Harbottle & Lewis says: “Initially the work may be left to outsourcing because in-house departments will be used to working in a traditional way. But as they handle more work, they will add lawyers to in-house departments. At that stage they will not outsource as much.”

It remains to be seen how much TV legal work will be outsourced, if any. The UK digital and interactive TV industry is expanding rapidly but it is still fairly new.

However, all lawyers agree that in-house teams are strengthening.

Firms looking to capitalise on the expanding market will be watching the balancing act between keeping work in-house and outsourcing carefully over the coming months.