India - The Show Must Go On: Covid-19 And After A Media And Entertainment Sector Perspective.
Legal News & Analysis - Asia Pacific - India - Labour & Employment - Dispute Resolution
12 May 2020
The central and state governments of India have taken several unprecedented and drastic measures to curb the spread of the novel coronavirus (“COVID-19”), characterized as a pandemic by the World Health Organisation. 1 These measures include imposing lockdowns throughout the country, prohibitions under section 144 of the Criminal Procedure Code, 1973, and issuing various government advisories on social distancing2 and mass gatherings.
3 Specifically in the context of the media and entertainment sector, the lockdowns and prohibitions imposed by the governments, along with the stalling of the film and television productions, sporting events and other industry events; shuttering of cinema halls and theatres across the country, and the ‘social distancing’ and ‘stay at home’ advisories from authorities, have severely affected operations in the media and entertainment industry, resulting in reduced revenue prospects for several businesses. This article seeks to discuss the impact on the media and entertainment sector, some of the key measures adopted by various media bodies, legal and contractual remedies available to affected parties, and some key considerations for the post COVID-19 scenario.
2. IMPACT ON THE MEDIA AND ENTERTAINMENT INDUSTRY
The state governments of various states announced a complete lockdown of public places like theatres in their states by March 15, 2020. This was followed by the social distancing advisory issued by the Ministry of Health and Family Welfare on March 16, 2020 (“Advisory on Social Distancing”). 4 These state and central government measures led to not only a shutdown of theatres countrywide, but also an indefinite halt in production of several films, television (“TV”) series, web-series, advertisements, and cancellation or indefinite postponement of all live events including the 13th edition of the Indian Premier League (“IPL”).
The release of several big-ticket films was also deferred indefinitely, for example the Akshay Kumar starrer “Sooryavanshi”, and multi-lingual historical epic “Marakkar: Lion of the Arabian Sea”. With the extension of the lockdowns (even with some relaxations from the Government), production activities and live events remain suspended, and cinema halls and theatres continue to be shut.
While the segments that rely on social gatherings like films, theatres, live events and theme parks have been affected adversely, the public adhering to the Advisory on Social Distancing has led to an increase in consumption of content on other mediums - such as television, digital streaming platforms, and gaming platforms. In fact, reportedly, viewership across several digital entertainment platforms in India, has increased by almost 20%.
However, despite viewership on television channels and digital platforms increasing, monetisation and revenue earnings of these mediums are seeing a downward curve, as revenues in the media and entertainment sector depend largely on advertising spends from other industries. The impact of the pandemic and the global recession on various industries such as e-commerce, manufacturing, financial services, fashion and retail, automobiles, hospitality and travel among others, has led to reduction in advertising spends from these sectors.
The Indian Broadcasting Foundation claimed that advertisement bookings have gone down by almost 50%, owing to various factors including cancellation of big events like the IPL, repeat content on television, and slowdown in other industries.6 Though, subscription-based revenues could improve over a period of time, as people get more and more accustomed to consume content at home and seek a greater variety of content. However, availability of new content could prove to be a key factor in retaining and increasing the subscriber base for subscription-based platforms.
On the other hand, continuity of business for small to mid-size media and production houses have also been severely affected, and has had a direct impact on sustenance of daily wage earners like chain artists, camera men, spot boys, light boys and other contractors engaged in the entertainment business.
Similarly, the newspaper industry is also reportedly among the worst affected in India, with decreasing revenues from both advertising and circulation, given the nationwide lockdown; and is estimated to have affected lakhs of workers engaged in the news industry.
3. PARALLEL MEASURES TAKEN BY VARIOUS BODIES IN THE MEDIA AND ENTERTAINMENT INDUSTRY
Considering the practical and commercial impact on the media and entertainment industry, government departments along with various media bodies implemented several parallel measures relevant to the sector. Some such measures are as below:
The Cellular Operators Association of India (“COAI”) on March 22, 2020, requested the Department of Telecommunications to issue orders to ease the pressure on the internet infrastructure and facilitate working from home, online education, digital healthcare, banking and payment systems, and other critical services which are “essential” during a health crisis.7
In lieu of this request by the COAI, over the top (“OTT”) platforms in India unanimously decided to reduce the streaming quality to standard definition (“SD”) on cellular networks in India.
The Ministry of Information and Broadcasting also advised TV channels to broadcast the videos, advising people on the basic do’s and don’ts of COVID-19.8
3.2 Industry Bodies/ Media Companies
The Producers Guild of India (“PGI”), Federation of Western Indian Cine Employees (“FWICE”), Indian Film & Television Directors’ Association, Indian Motion Pictures Producers’ Association, Western India Film Producers’ Association, Indian Film and TV Producers Council (“IFTPC”), Association of Film & Video Editors decided to put all shootings of films, television serials, web series, and advertising films, on hold from March 19, 2020 till March 31, 2020. Due to imposition of the nationwide lockdown, all shooting schedules continue to be suspended.
3.3 Social and charitable measures
Several associations and expert bodies operating in the media industry, remarkably took several relieforiented measures to extend their support to those most affected in the entertainment sector. For example:
(a) the Indian Performing Rights Society (“IPRS”) declared an emergency relief package to support its authors and music composer members across various geographies;
(b) the All India Cine Workers Association requested the government of Maharashtra to provide Rs.5,000 per month to each daily wage earner employed in the Indian film industry,
(c) the Indian Singers Right Association held a three-day virtual concert which streamed on several OTT platforms, with the aim to raise relief funds, and
(d) the PGI along with the IFTPC and the FWICE set up a relief fund to support those most affected by the industry wide shut down.
Further, various media companies, including broadcasters and OTT platforms also set up relief funds to aid daily wage earners in their production ecosystem.
4. CONTRACTUAL AND LEGAL REMEDIES
Due to the lockdown and consequential suspension of business and commercial activities, several businesses, such as production houses, content aggregators, event organisers, artistes, and talent managers are bound to suffer substantial business and operational interruptions. This may inevitably lead to their inability to perform their existing contractual obligations. In this context, we analyse below the key legal and contractual remedies that may be available to them.
4.1. Force Majeure – Not just a boilerplate
Most commercial contracts include a force majeure clause, which provides for either limiting or waiving the liability arising from non-performance of the party affected by occurrence of a ‘force majeure event’. A “force majeure event” refers to an unforeseen event or condition which is beyond the control of the parties to a contract, and because of which the parties are prevented from performing their obligations.
Such events typically include government actions, war, terrorism, strikes, civil unrest, acts of god, floods, earthquakes, hurricanes and other natural calamities, which are characterised as unforeseeable and outside the control of the contracting parties, making it impossible for the affected party to perform its obligations.
Force majeure provisions usually require that the party seeking such relief, should be affected by the force majeure event such that it cannot perform its obligations. Therefore, the occurrence of COVID-19 in itself may not lead a party to successfully claim relief, but depending on the nature of obligations of a party, such party will be required to demonstrate its inability to perform its obligations under the contract due to the spread of COVID-19.
Typically contracts also set out consequences of occurrence of a force majeure event, which include: (i) termination of the contract, (ii) suspension of performance by the affected party, without liability, during the subsistence of the force majeure event, and (iii) renegotiation of terms of the contract between the parties.
Corporate entities and individuals engaged in the entertainment business, will need to carefully evaluate their key contracts and the feasibility of invoking force majeure provisions, which are routinely included in contracts typical to the entertainment industry, such as talent contracts, production agreements, distribution arrangements, content partnerships, licensing and acquisition agreements, equipment hires, studio rentals, marketing agreements, advertising, event management, sponsorships, branding agreements and other industry arrangements. However, these provisions are often regarded as ‘boilerplate provisions’ and are not extensively negotiated in normal circumstances.
A party seeking to invoke ‘force majeure’ will need to analyse the specific language of the clause - in light of their facts and circumstances, the governing law of the contract, and the exceptions that may have been carved out - which are critical to understand if the contract remains enforceable, or if parties have sufficient basis to renegotiate terms or delay or alter the scope of their obligations. Further, the procedural terms set out in the contract in this regard, such as requirement of a notice to other parties, will also need attention.
4.2. Doctrine of Frustration or Impossibility
In cases where a force majeure provision is absent from the contract, parties adversely affected by the spread of COVID-19 or the lockdown imposed, may take defence under section 56 of the Indian Contract Act, 1872 (“Contract Act”) for its inability to perform its contractual obligations. Section 56 of the Contract Act embodies the doctrine of frustration or impossibility, providing that if a contract becomes impossible, impracticable, or unlawful to perform it will be deemed void. However, the threshold to establish impossibility of a contract is high as the courts infer impossibility of performance from the nature of the contract and the surrounding circumstances in which the parties must have made their bargain.
9 Under section 56 of the Contract Act, on occurrence of a force majeure event, if it can be established that the event has led to a change in circumstances not contemplated under their contract, and render the performance of the contract impossible or impractical, then such a contract will be deemed void and therefore automatically terminate.
Hence, in such a scenario termination may be the only recourse available to parties, as section 56 does not provide for suspension or variation in terms of the contract. Therefore, where a party is affected due to COVID-19 and does not have a force majeure clause in its contract, it may seek relief under section 56 of the Contract Act to avail termination of the contract.
Further, if a contract provides for a force majeure clause which contemplates an epidemic, pandemic or a lockdown situation then the contract will prevail, and the parties cannot seek relief under section 56 of the Contract Act for impossibility of performance. 10
For further information, please contact:
Tanu Banerjee, Partner, Induslaw