A Legal Guide to the Commercial Risks and Rewards ... - Reed Smith

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Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media PhenomenonWelcome to the New WorldIntroductionIntroductionSocial media is a revolution in the way in which corporations communicate with consumers. This White Paper will help you tomaximise the huge potential benefits of this revolution and protect against the inherent legal risks surrounding social media. Inthis document, you will find practical, action-oriented guidelines as to the state of law in the United States and Europe in thefollowing areas: Advertising & Marketing; Commercial Litigation; Data Privacy & Security; Employment Practices; Food & DrugAdministration, Government Contracts & Investigations; Insurance Recovery; Litigation, Evidence & Privilege; Product Liability;Securities; Copyright & Trademarks. As we continue to expand the White Paper, we will add additional chapters as well asupdates. So be sure to bookmark http://www.legalbytes.com/ and subscribe to the Legal Bytes blog.What is Social Media and What Does it Mean to Business?Everyone has heard of Facebook, YouTube, and MySpace. These are just the tip of the iceberg. There are thousands of socialmedia sites with billions of participants. And it’s not just individuals. Multinational companies and their CEOs are increasinglyactive in the social media space via blogs, Facebook fan pages, and YouTube channels. Everyone is a user and, as with everynew communication channel—billboards, radio, television, the Internet—there is huge potential, and huge potential risks.The speed of development in social media outstrips corporate risk management capability. It took radio 38 years to reach50 million listeners. Terrestrial TV took 13 years to reach 50 million users. The Internet took four years to reach 50 million people.In less than nine months, Facebook added 100 million users. 1It’s All About the ConversationOne-way communications with advertising, press releases, labels, annual reports, and traditional print media is going the way ofthe dinosaur. We no longer just listen. Audiences are not static. We now engage in a conversation. What was said in the livingroom is now published on Facebook. What we do in public and private is now broadcast on YouTube. What employees talkedabout at the water cooler now appears as tweets on Twitter. All of it memorialised in discoverable form. All of it available tomillions with the simple press of “post.”Social media is about “changing the conversation”—getting people to say the right things about your company and its productsand services. 2A Shift in Media ValuesBroadcasters have now caught on to the idea that social media fundamentally affects the presentation and even the content oftheir product. The music industry now embraces social media, using it as a valuable promotional tool. Even the movie industryget in on the act, perhaps even earlier than intended, with the phenomenal success of the online marketing program for the “BlairWitch Project.” At the time of its release, the “Blair Witch” site was in the top 50 most-visited sites on the Internet, creating avibrant “word-of-mouth” campaign that ultimately helped a $750,000 film gross revenues of $250 million. Social media representsa huge opportunity for media and entertainment companies. They can engage with their audience in ways that were previouslyimpossible, and can leverage that engagement with commercial opportunity. However, with this opportunity comes a threat—Introduction 1
Network Interference: A Legal Guide to the Commercial Risks and Rewards of the Social Media PhenomenonYouTube allows everyone to be a broadcaster. As our chapter about copyright demonstrates, social media strikes at the veryheart of the proprietorial foundation upon which traditional media campaigns are built.Managing Reputation – The Asymmetrical Consumer RelationshipHistorically, brand owners were able to determine the relationship that consumers had with their brand. Now, thanks to socialmedia, consumers are the ones who increasingly define how the brand is perceived.A major retailer asked a simple question on its Facebook page—”What do you think about offering our site in Spanish?”According to its Senior Director, Interactive Marketing and Emerging Media, the response “…was a landmine. There werehundreds of negative responses flowing in, people posting racist and rude comments. Our contact center was monitoring this,and they were crying, waiting for a positive comment to come in.” The racist and negative responses posted by purported “fans”were so bad that the site was shut down, with a spokesperson noting, “We have to learn how to respond when negativecomments are coming in.” 3United Airlines broke a passenger’s guitar. They handled his complaint through traditional procedures, eventually refusing to payfor $1,200 in repairs. In response, the passenger posted a humorous music video to draw attention to United’s consumer supportincompetence on YouTube. 4 To date, there have been nearly 6 million views of the video. After two other videos, and afterUnited donating the cost of the guitar repairs to charity per the musician’s requests, United managed to lose the musician’s bags,an event that was reported to millions in the blogosphere. 5 The story was a lead story on CNN’s Situation Room, reported byanchor Wolf Blitzer. 6 As a result, United’s stock value fell considerably. 7 To add insult to injury, the incident is impacting the law.U.S. Sen. Barbara Boxer (D-Cal.) is championing the Airline Passenger Bill of Rights Act of 2009 8 , citing the United debacle. 9We can’t help but wonder if United would have fared better if it had discarded the old way and instead engaged in theconversation using the same social media platforms that were used to attack its brand.For at least one major company, engaging made all the difference. Two employees of Domino’s Pizza posted a disgusting videoon YouTube in which they adulterated the chain’s food. In addition to reporting the video to the police, Domino’s Pizza’s CEOposted his own video, apologising for what consumers saw and assuring them that such things were neither condoned norpracticed at Domino’s. It all made the “Today Show” and other media reports. 10 Both traditional media and the blogosphereapplauded his open communication and willingness to engage in a conversation about the problem. 11 Rather than seeing itsbrand value and reputation take a major blow, it survived the negative media.As social media pioneer Erik Qualman puts it, “A lot of companies say we’re not going to do social because we’re concernedabout letting go of the conversation, and what I argue is that’s like an ostrich putting their head in the sand. You’re not aspowerful as you think. You’re not going to enable social to happen, it’s happening without you so you might as well be part of theconversation.” 12The New WorldThe key lesson is that rather than trying to control, companies must adopt an altered set of rules of engagement. Doing so whilebeing mindful of the laws that apply in a social media context will help alleviate risk.What You Need to DoEvery concerned party needs to take some important steps if it is going to be prepared for the new media revolution. Here are afew:• Read this White PaperIntroduction 2
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A Legal Guide to the Commercial Risks and Rewards ... - Reed Smith

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