This article is written by Sushmita Choudhary, a student pursuing BBA LLB from New Law College, Bharati Vidyapeeth Deemed University, Pune. The article presents a detailed study of the impact of COVID-19 on Entertainment Law and the legal aspects of it.
As COVID-19 continues to spread its claws, health anxiety has also developed all over the world. However, fears have not only been constricted to health, it appears that COVID-19 also has plenty of legal consequences. COVID-19 has caused numerous prolonged disturbances to all industries worldwide and the entertainment industry seems to be majorly affected by it. Supply Chains have disrupted, travel restrictions have been imposed, numerous events have been cancelled, contractual obligations have been disturbed and force majeure instances have been documented both nationally and internationally because of the virus giving rise to severe legal implications for the media and entertainment industry. The entertainment industry includes several areas such as film, television, radio, music, the literary publishing industry; entertainment events, etc. All of them have been affected at varying levels.
We saw that by March 15, 2020, the Central Government and various State Governments introduced policies to limit social interaction ordering a complete shutdown of public places like theatres, amusement parks, gyms, etc. This was followed by an issuance of social distancing advisory on March 16, 2020, by the Ministry of Health and Family Welfare. Most states in India implemented 123-year-old legislation called the Epidemic Diseases Act 1897(Act) to limit the spread of COVID-19. As per this act, the state acquires powers to take any decision that it finds apt to control and manage the spread of the disease within its jurisdiction.
This leads not only to a complete closure of the theatres all over the country but also an indefinite standstill to the production of many films, television series, advertisements, web series, and either indefinite deferment or cancellation of all live events including the hugely celebrated Indian Premier League 13th edition. The release of several big-ticket films such as Akshay Kumar starring “Sooryavanshi” and the historical epic “Marakkar: Lion of the Arabian Sea” came to a halt. Films that were already in theatres such as “Baaghi” saw a huge decline in viewership and suffered substantially. With the extension of the lockdown with just a few relaxations from the government, the production activities and live events remain suspended.
While the activities that depend on social gatherings remain suspended and that’s why have been adversely affected, the public adhering to the social distancing advisory has led to a huge escalation in consumption of television, gaming, digital, and OTT (over the top) platforms.
KPMG (Klynveld Peat Marwick Goerdeler), a multi-professional services network has released a report titled “Covid-19: The Many Shades Of A Crisis- A Media And Entertainment Sector Perspective” which states that viewership across several digital entertainment platforms in India, has increased by almost 20%. According to the report, digital media consumption and particularly OTT has witnessed a surge during the lockdown period in aspects of time and newer audiences. It stressed that gaming is another sector that can benefit in the digital ecosystem while suggesting that media companies, including OTT platforms, could seriously consider gaming as an extension to their ecosystem offerings. While TV viewing has increased, it lacks fresh content. News channels are very popular nowadays however as viewers follow updates of COVID-19 religiously.
While viewership on television channels and digital platforms are increasing, revenue earnings and monetization of these platforms are witnessing a downward curve because revenues largely depend on advertising spends from other industries. The adverse impact of the pandemic on various Industries such as e-commerce, automobiles, hospitality, manufacturing, etc has led to reduced advertising spends from these sectors. The Indian Broadcasting Foundation claimed that there has been a dip of 50% in advertisement bookings.
Discontinuation of production houses has severely affected the sustenance of daily wage earners like cameramen, light boys, and other contractors engaged in the entertainment industry. Similarly, the newspaper industry is amongst the worst affected in India with decreasing advertisement and circulation.
Analysis of dip in profit of Media and Entertainment sector
According to the FICCI (Federation of Indian Chambers of Commerce & Industry) report, the Media and entertainment sector in India was predicted to cross rupees 2.4 trillion by 2022, at a CAGR (Compound annual growth rate) of 10%. However, these projections are now ended by the pandemic and the study by CRISIL( Credit Rating Information Services of India Limited) now expects that the Indian media and entertainment Industry’s revenue will decrease by 16% that is from Rs 25,000 crore to Rs 1.3 lakh crore in the present fiscal year.
The Event and Experiential Management Association Survey shows that more than 50% of the media companies have lost approximately 90% of their business since March 2020 and over 63% of the companies have faced a revenue loss of minimum Rs 1 crore.
It is evident that COVID-19 has fundamentally altered the landscape of the Media and Entertainment sector which is going to have long-lasting impacts. We are now going to categorically analyse various laws and regulations that will affect the M&E sector during the lockdown and after.
We can divide the workforce of the M&E sectors into two parts- permanent employees and contractual employees. Permanent employees consist of workers who are employed on a permanent basis and are on the rolls of the production houses, broadcasters, event management companies, and so on. Temporary employees consist of workers who are employed on a temporary basis and are kept on a contractual basis for particular projects. These two groups of the workforce are dealt with different regulations and hence impacted differently by COVID-19.
They are directed under general laws such as the Equal Remuneration Act, 1976, the Payment of Wages Act, 1936, the Employees Provident Funds Act, 1952, and so on. However, these statutes haven’t envisaged any situation such as a pandemic as it was highly unpredictable but the compliance to these laws are not suspended. Further, the Ministry of Home Affairs issued an order dated March 29, 2020, directing all the states and union territories to take necessary steps towards ensuring payment of wages to all workers whether in the industries or in shops and commercial establishments without any deduction, till the time their establishments are under closure due to the lockdown.
They consist of mostly freelance workers who work as independent contractors and are typically engaged in the cast and crew of the project. Contractual workers paid either on a daily basis work or on achieving a certain milestone in regard to the project allotted. There is an agreement between them and their employers which is governed by The Indian Contract Act, 1872. The workforce of M&E predominantly depends on the contractual group, that’s why it is adversely hit by the cancellation of shoots and events. The order dated 29th Match, 2020, issued by the Ministry of Home Affairs would be applicable to these workers as well. These agreements, however, usually have a termination clause. So, issues with respect to payments will persist. Being a creative industry, the protection of intellectual property and licenses in case of termination is important. It is the need of the hour that parties work in mutual cooperation towards changes to the agreements.
There is certain welfare legislation which covers workers in the Media and Entertainment industry such as The Working Journalist and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955; and The Cine-workers and Cinema Theatre Workers(Regulation of Employment) Act, 1981. There are obligations under these provisions which will persist.
The lockdown has impacted contractual obligations between parties and particularly, the non-performance of obligations under the contracts. As above discussed, the M&E industry depends heavily upon the contracts. So, the non-performance of contracts is going to affect this sector quite adversely.
Now, we will be discussing the principles guiding the non-performance of contracts:
Most commercial contracts include the provision of Force Majeure. It is a French term that means ‘superior or irresistible force’. This clause is a contract provision that releases the parties from performing their contractual obligations when certain circumstances beyond their control arise thus preventing the performance of the contract. Force Majeure events typically include acts of gods, war, strikes, government actions, and other conditions that are unforeseeable and uncontrollable. The Force Majeure clause requires that the party seeking relief from the obligations should be affected by the force majeure event in such a way that it is not able to perform its obligations. So, just the occurrence of the COVID-19 pandemic in itself will not relieve a party from its obligations, rather the party will be required to demonstrate how the pandemic made its functions inoperable. The nature of the obligations matter here.
Typically contracts also lays down consequences of a force majeure event, which contain:
- Termination of the contract,
- Adjournment of performance by the affected party relieving it of its liability, during the subsistence of the event, and
- Renegotiation of the terms of the contract.
A party seeking to claim relief from the ‘force majeure’ clause will need to examine the specific language of the clause considering their facts and circumstances, also the law governing the contract, and the exceptions that may have been set aside. These are very important to understand the contract’s enforceability and other probability such as renegotiation or deferment of their obligations. Moreover, procedural terms mentioned in the contract such as the requirement of a notice to the other party is also important.
Force majeure provisions are included in contracts typical to the entertainment industry like talent contracts, content partnerships, studio rentals, event management, etc. However, these clauses are generally regarded as ‘boilerplate provisions’ and are not extensively negotiated in normal circumstances.
The doctrine of frustration or impossibility
The doctrine of frustration is covered under Section 56 of the Indian Contract Act, 1872 which states that if a contract becomes impossible, unlawful or impracticable to be performed due to some event which could not be controlled, it becomes void. The Supreme Court of India has made sure that the threshold to determine impossibility is high as it has interpreted that impossibility does not refer to the physical or literal impossibility only but also to the ‘impracticality’ in the eyes of the parties. Courts usually take into consideration the nature of the contract and the surrounding circumstances which make the performance of contractual obligations impossible or impractical. Section 56 does not allow for a suspension of the contract, so if recourse is taken to Section 56, the contract is deemed void. Therefore, where a party to the contract is affected due to the coronavirus pandemic and does not have a force majeure clause in its contract, only then the doctrine of frustration is available to it to terminate the contract. Further, if the clause of force majeure contemplating an epidemic, pandemic or a lockdown situation is provided in the contract, then the contract will prevail and the parties cannot seek relief from contractual obligations under Section 56 of the Contract Act.
Considering the nature of the entertainment industry, the sector is bound to require insurance to cover losses arising during production, cancellation shoot, etc. due to the occurrence of unforeseen situations. There are many variants of insurance available for the entertainment industry. Amongst them, the few which are important for the current pandemic scenario are as follows:
General liability insurance
This is the most commonly available insurance in the Indian entertainment industry. It protects the business from all kinds of liabilities incorporating third-party liabilities. This insurance is quite essential as it can cover the delays in projects due to unpredictable circumstances. However, it is important to note that all such insurance policies don’t cover pandemics.
This type of insurance covers any extra financial losses incurred due to illness, disability or death of a cast member which results in delay, interruption or cancellation of the film. This is very useful for the current situation as it may happen that some cast member gets infected with the virus which causes delay or cancellation of the film even after the lockdown ends.
Workers compensation insurance
This type of insurance is helpful when the business is not able to earn enough revenue to pay its workers. It generally includes the backstage crew workers like lighting workers, sound workers, etc. present on the scene.
Above given are some examples of insurances which could protect the entertainment industry from unforeseen events. However, whether losses incurred due to the suspension of activities during this pandemic situation will be covered under insurance policies requires an examination under case by case basis.
The entertainment sector being a creative industry is intellectual property intensive and it is probable that issues such as patents, copyrights, etc. may arise during lockdown which may call for an injunction against third parties from doing such acts. In this hour, the courts in India have restricted themselves to hearing only serious issues which generally are limited to matters of right to life and liberty or demolition of properties, etc. However, if the applicant is able to establish the seriousness of his matter in the court, his case may be taken up.
Further, most contracts related to the entertainment industry have significant IP obligations for both parties. Any change in the contract due to coronavirus will require to critically analyse the impact on IP rights as well.
As a result of this pandemic, the social and economic lives of people have changed across the globe. The lockdowns and restrictions have changed the content consumption patterns very much. The home consumption medium of content has significantly increased in these times while traditional and outdoor mediums of content distribution remain suspended. The pandemic has adversely impacted a large number of composers, singers, authors and daily wage earners and has also triggered pay-cuts in the entertainment industry. The industry will need to lay emphasis on various operational and legal aspects of the business like production costs and schedules, legal commitments, etc. to adjust to the ‘new normal’.
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