The alarm bells that went off in the wake of the recent Coca-Cola Canada-tsn court decision have not been particularly loud, but they have been insistent.
They are signalling to media buyers and sellers it is not business as usual any more.
The fluid informality that has characterized the media industry can expect to be crystallized before long, especially when high-priced, multi-year deals are at stake.
At issue
What was at issue in the case heard before Justice James Farley in the General Division of the Ontario Court was whether Coke, not Pepsi-Cola Canada, had exclusive soft drink category rights to Toronto Blue Jays games on The Sports Network cable service.
Coca-Cola contended a two-page contract drawn up by Coke and tsn executives for the 1989-91 seasons gave it the right of first refusal on any future soft drink advertising and the traditional incumbent advertiser’s right to renegotiate a new pact.
Justice Farley disagreed, calling the Coke-tsn contract unenforceable in law.
In a 2-1/2-hour verbal ruling he delivered the first week of September, the judge upheld the three-year contract signed this year by tsn and Pepsi-Cola Canada for exclusive soft drink advertising on Blue Jays games.
‘Shocked’
Hugh Dow, president of Initiative Media in Toronto and past president of the 30-member Canadian Media Directors Council, says he is ‘shocked’ at the outcome of the Coke-tsn decision.
Dow says it has some ‘major implications’ for the media business, noting the contract between the two parties was ‘quite explicit’ by industry standards.
A lawyer familiar with the Coke-tsn lawsuit backs Dow.
He says he is concerned traditional media business documents will not do any longer, adding scrutiny of the multi-billion dollar industry is long overdue.
Pessimistic
An executive familiar with the Coke-tsn case, is pessimistic about Justice Farley’s ruling.
The executive, who declined to be identified, says the rules for the media business will be much more difficult to deal with in future, with short contracts drafted by experienced businesspeople giving way to 20-page affairs drafted by lawyers.
Dow says what the Canadian Media Directors Council will do in response to the court ruling is collectively develop a ‘boilerplate clause’ for media contracts, spelling out in legal terms such things as incumbency and the right of first refusal.
Dow, who is not keen on replacing existing agreements in the media business with more formal arrangements, believes it will be in multi-year contracts legality will be emphasized.
He says short-term tactical media buying will not be affected.
Rick Lee, general sales manager at the CTV Television Network, echoes Dow.
‘More crossed Ts’
Lee hopes the practice in which many deals are done on a ‘word and a handshake’ continues, although he expects more ‘crossed Ts and dotted Is’ and a more formal approach with larger media deals for such things as the Olympics, Blue Jays baseball and hockey.
Bruce Claassen, president and chief executive officer of Genesis Media in Toronto, predicts little change because of the ruling.
‘I don’t think the decision will change things,’ Claassen says, noting any ‘involved booking [of media] is generally nailed down in contracts.’
A lot more
He says a lot more than $5 million (the approximate value of the Coke-tsn contract) is changing hands on less than a two-page contract.
John Foss, president of the Association of Canadian Advertisers, says he cannot argue with the ruling, per se.
Foss says it is clear in this case ‘industry understanding’ did not work.
As a consequence,there will be more stress on specific rights in the media business, but not a complete move away from informality.
