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Knoxville News-Sentinel (Tennessee)
Celebrity fitness guru Jillian Michaels won a $5.7 million arbitration ruling against Lionsgate late Wednesday in a dispute over content posted for free on YouTube.
The legal dispute called into question whether free YouTube videos devalue a creator's paid content. Nashville attorney Richard Busch, who represented Michaels, called the victory a landmark decision that could benefit artists.
Record labels, for instance, regularly post music on YouTube or on Spotify's free tier. The labels collect advertising revenue, and also hope that fans who hear their artist's music are more likely to buy concert tickets, physical copies of the album or pay for a subscription streaming service.
"We are thrilled for Jillian," Busch said. "This is an incredibly important decision for all artists in the YouTube era in which we live. This decision represents a firm pronouncement that placing work on YouTube for free devalues it, and damages artists, like Jillian, who created it."
Michaels had a deal with Lionsgate to distribute her workout videos as DVDs and her contract allowed the company to post clips for promotional reasons. But when Lionsgate launched a free YouTube fitness channel called BeFit, Michaels argued she was not paid for her work.
Lionsgate and Michaels eventually reached a settlement over unpaid royalties from the YouTube revenue, but the dispute didn't end there. Michaels said that by continuing to post her videos for free on BeFit, fans were less likely to pay for her workout, fitness and wellness videos posted on a subscription-based site that she subsequently launched.
According to background information included in the arbitrator's ruling on Wednesday, BeFit content increased from 6.7 million views to 27.5 million views between 2012 and 2013.
"During that time, sales of Michaels' DVDs declined and continued to decline through 2015 as views on BeFit continued to increase or stay steady," according to the background information from arbitrator Bruce A. Friedman's ruling. "In fact, though Michaels' content accounts for approximately 3 percent of BeFit's total content, the views of Michaels' content have consistently accounted for 39 to 50 percent of BeFit's total views."
Lionsgate argued in the arbitration proceedings that Michaels benefited from the promotional value of the YouTube content. According to the documents, Lionsgate collected 55 percent of advertising revenue generated by Google on the BeFit channel. The company did identify $428,000 in unpaid royalties from the YouTube revenue, but Michaels' contract with Lionsgate didn't carve out how she should be paid from such content.
"Though the agreement clearly does not account for compensation to Michaels in any form outside per unit DVD sales, (Lionsgate) still argued that providing the content for free on BeFit actually benefited Michaels' brand, acting to promote the fitness videos online by reaching a widespread global audience... and having a positive effect on DVD sales of the fitness videos," Friedman said in his explaining his ruling.
That line of reasoning by Lionsgate will sound familiar in the music industry, where record labels post content on free-tiered streaming services. In addition to the $5.7 million award for lost past and future profits from DVD and digital distribution revenue, Friedman ordered Michaels' videos removed from the YouTube channel.
"We argued throughout that Liongate tried to build a YouTube business, BeFit, on Jillian's back and popularity, but did not care that it did not have the right to do so, or the damage it did to her," Busch said. "We are very happy with the arbitrator's decision, including the order requiring the removal of Jillian's content from YouTube."
Busch, who works for the Nashville office of the firm King and Ballow, has served as the attorney on several significant rulings, including successfully representing Marvin Gaye's family in its copyright dispute with Robin Thicke and Pharrell Williams over the song "Blurred Lines."
Lionsgate and YouTube could not immediately be reached for comment.
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