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A cascade effect will roll through all parties from the leagues to the hot dog sellers, stirring legal activity and scrutiny of contracts, says top ents lawyer

PMG: JOSEPH GALLIVAN  - Friday March 13, 2020 and the Aladdin Theater in Portland's Brooklyn neighborhood is dark until the state lifts it anti-coronavirus ban on gatherings over 250 people. All live sports and entertainment stakeholders are going to have to figure out who, if anyone, gets paid.

With concerts and sporting events being canceled in the name of preventing the spread of the new coronavirus, the legal landscape is about to get ugly.

So says prominent Portland sports and entertainment attorney Paul Loving, senior counsel at Holland & Knight LLC. Loving, who brokered Beyoncé's apparel deal with Adidas, says there is a cascading effect when an entity like the National Basketball Association suspends its season.

"The biggest impact of what's going on right now is this ripple effect," Loving told the Business Tribune hours after the NBA suspended its 2019-20 season on March 12. "Suspension of the NBA flows down through everything that the league touches: Player contracts, and contracts they might have with their athletic apparel company. But you've also got vendor and concession agreements, you've got the lease for the facility, and the staff has employment agreements also impacted."

The first thing people think about is how the athletes are affected by not playing, but it goes all the way down to the food vendor who is out of work and the security guard with canceled shifts, Loving said.

"Somewhere along the line, someone is going to have to deal with the payment issue, right? Because revenue is going to be lost, and when revenue is lost, people look to try to determine, 'How am I going to get that revenue back?'"

PMG: JOSEPH GALLIVAN - Timbers fans will have to give up thir social intimacy for a while with Major League Soccer postponed becasue of the coronavirus pandemic. Lawyer Paul Loving says as vendors seek to get paid for lost revenue at unplayed games, legal contracts will come under scrutiny.

The art of negotiation

Loving says that lawyers for the NBA, the team owners, the players, the TV networks that carry the games, and the advertisers will all have to sit down and negotiate.

It can be tricky for an advertiser, who is often offered a "make good" when the content they wanted to advertise around is canceled.

"A make good has to be similar content," he said. "If you think about the demographic audience for pro sports, you can't then take that ad and say, 'Well, I'm going to give you an ad in a sitcom on the same network that skews to a different age bracket, a different gender bracket.' That's not going to work. And if not, you have to have the conversation about what you are going to do financially here?"

He notes that the parties usually have long-term relationships that make negotiations more attractive than litigation.

"It's not something where you're going to have two parties trying to rush to litigation without trying to work it out in the first place," he said.

Negotiation and settling might be the more common option in such a busy and litigious time.

"There's a way to handle issues like this without litigation," he said. Parties can work through the problem collaboratively and come up with something that equitably addresses the situation.

"(That's) my guess a lot of what's going to happen here," he said.

Contracts usually have clauses around an act of God, natural disasters and unforeseen changes in events. "But not every agreement includes that," Loving said. "Now, they need to be reviewed to determine what are the rights of each of the parties? You'll see everything from litigation to parties negotiating and coming up with some creative solution that you and I will never hear about."

COURTESY: PAUL LOVING - Entertainment lawyer Paul Loving (center) says with major league sports and concerts on hold, contracts will come under review as vendors in the chain seek to get paid

The same applies to the sausage vendor or the brewpub with a concession at the local stadium.

"The Blazers, for example, and the Timbers, I think they are community partners," he said. "I think that what their values will be is, 'How we're perceived in the community with how we deal with small local businesses.'"

Loving expects more shakeups in the athletics world. While organizers of the 2020 Tokyo Olympics say they are going ahead, Loving expects the games to be postponed or canceled. As a global spectacle with big money sponsors, it has the too-big-to-fail momentum to happen still, but with the Olympic Village and large crowds, it has a huge health risk, Loving said.

"I think it's going to be very, very difficult for them to say we're going to move forward if the (coronavirus) numbers continue to increase," he said.

It's not just sports. Loving also sits on the Oregon Film Board, where he has been getting questions about whether the scheduled film and television shoots will go ahead as planned.

A local problem

Major League Baseball, the National Hockey League and Major League Soccer are also on hold, as well as all the top European soccer leagues that supply much of the soccer on TV globally. The Hollywood writers' strike in the 1990s gave rise to unscripted reality TV shows, which never went away. Could this holiday from live entertainment break the system and produce something new?

"I think it's difficult, if not impossible, to replace the excitement and the spectacle of live sporting events," Loving said. "Watching a football match that has been played with no crowd? It's just boring."

There is talk of playing English soccer games without fans and banning pubs from showing them live to cut down on crowds. But with so much live sports, it seems unlikely fans will pay to watch matches alone at home, or on tape delay after the score is known.

Loving says the way people write contracts in the future will change. But individual athletes with endorsements can keep doing brand work — up to a point.

"Athletes are paid to authenticate the product, on the field, on the court, on the pitch," he said. "If they're not doing that, are there creative ways that brands can use those athletes to continue to authenticate the product and to push the message?"

After NBA player Derrick Rose was injured, "there was a campaign around his comeback and the training he was doing. It's a little different here because not only do you have the athletes not on the court, but you actually don't have their sport. You've got kind of a double whammy there."

Joseph Gallivan
Reporter, The Business Tribune
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