The ambiguity in defining Internet commercials

The Screen Artists Guild-American Federation of Television and Radio Artists (SAG-AFTRA) Commercials Contract governs wages and benefits for talent appearing in commercial advertising productions.

The Screen Artists Guild–American Federation of Television and Radio Artists (SAG-AFTRA) Commercials Contract governs wages and benefits for talent appearing in commercial advertising productions. SAG-AFTRA signatories include major marketers, such as P&G, Coca-Cola, and Unilever, as well as most ad agencies. A significant issue for marketers bound by the Commercials Contract is whether branded online video content is properly classified as a "commercial" intended for use on the Internet.

Since the 2003 contract was negotiated, marketers and agencies have grappled with how to classify the online video content they produce and whether it falls within the SAG-AFTRA definition of "commercial." Once an issue only for ad agencies, it has now become a matter of prime importance to PR firms, since more and more have become fully integrated marcomms agencies and produce branded video content for the Internet.

The definition of an Internet commercial was not updated when marketers and the union renegotiated the Commercials Contract in 2013. This has left marketers and agencies – which are the SAG signatories – with ambiguity regarding what type of branded video content triggers the payment of applicable SAG-AFTRA rates to talent. 

The SAG-AFTRA Commercials Contract defines "commercials" as either "short advertising or [other] commercial messages" and which "depict or mention an advertiser's name, product, or service." The Internet-specific provision of that section deems "advertising messages" to be commercials intended for use on the Internet, so long as they "would be treated as commercials if broadcast on television and... are capable of being used on television in the same form as on the Internet."  

The critical inquiries are whether the marketer's video content produced for the Internet constitutes an advertising message and whether, in any event, the video could run on TV as a commercial in its current form. Some indicators include the presence of sponsor identification, a title card, or a call to action to consumers. In addition to these basic criteria, there are many factors to consider which tend to influence an evaluation of whether online content is deemed to be a commercial.

For integrated or branded content, the primary purpose of the videos is evaluated in order to determine if the content exists primarily to sell a product or to entertain. This is not a litmus test, but a potential jumping-off point to help assess if the video constitutes an ad or other "commercial message." 

The length of a video alone does not make a difference in this determination. Any video that is three minutes or shorter can qualify as a commercial under the SAG-AFTRA contract if the other criteria are satisfied.

Finally, a video may not be considered a commercial under the SAG-AFTRA contract if it contains a unique interactive experience. This is an important exception for PR firms. For example, even if a non-signatory PR firm is required to adhere to the Commercials Contract because its client is a SAG signatory, the branded online video the PR firm produces may escape the terms and conditions of the Commercials Contract if the video contained a unique interactive experience. For now, at least, the video produced by the PR firm would be unable to run on TV in its current form and, therefore, could fall outside the scope of the SAG-AFTRA contract.

Minimum scale rates for talent have been in effect for Internet commercials since April 2011. As a result, with the proliferation of Internet commercials, SAG-AFTRA has been more aggressive in bringing claims over marketers' branded webisodes, viral videos, case studies, and the like, and in seeking to have them classified as "commercials." Regretfully, the 2013 Memorandum of Agreement between SAG-AFTRA and its signatories did not clarify the definition of "commercials" made for the Internet. 

Branded content is increasingly being produced by PR firms. Whether or not that content constitutes an "advertising message" or "commercial message" is unsettled. Equally undetermined is whether that branded content could be deemed capable of running on TV in light of developments in new forms of interactive ads and mobile marketing, in order to fall within the definition of "commercial" under the SAG-AFTRA contract.   

Marketers and their agencies would surely benefit from more delineated parameters of what makes digital content a "commercial." This would allow project-production budgets to be prepared without the fear of costly subsequent claims by SAG-AFTRA. For now, and until the next round of SAG-AFTRA Commercials Contract negotiations, marketers and PR firms working with clients that are SAG-AFTRA signatories may face claims from the union that an Internet video provided should have been classified as a commercial.

When this occurs, marketers and their PR firms would be well advised to consult experienced legal counsel and to bring these disputes before the Industry-Union Standing Committee for potential resolution. This process will help clarify how SAG-AFTRA defines whether an item of digital branded content is, in fact, deemed a commercial intended for showing over the Internet.

Michael Lasky is a senior partner at the law firm of Davis & Gilbert LLP, where he heads the PR practice group and co-chairs the litigation department. He can be reached at mlasky@dglaw.com.

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