August 25, 2005 - By Chris Marlowe, The Hollywood Reporter

Mobile content deals are amazingly complex in ways most people never think of. That was the common thread that ran through a lively "Digital Deal Making" discussion held Tuesday in Century City.

Take free promotional ringtones, for example. Ira Rubenstein, Sony Pictures Digital senior vp digital sales and marketing, said they seemed like a great idea and noted that fans of "Bewitched" can download a free ringtone of the "recognizable sound" of Nicole Kidman's character twinkling her nose. "But carriers are not interested in giving anything away free," he said. "So it then becomes a merchandise and licensing deal, which has implications for contracts with creators and talent."

There's also an underlying worry that the value set on content is not realistic and that the nascent businesses will collapse. "We're a little concerned at the dollar figures, which seem inflated," WMA's Lewis Henderson said. "We need to take a close look at who these people are and will these companies disappear."

Robert Nau, a partner in the law firm Alexander, Nau, Lawrence, Frumes & Labowitz, said he is working a lot with content aggregators. He shares some of that feeling but doesn't think waiting it out is a viable option. "Maybe it's a bubble, maybe it's the train leaving the station, but it's something happening, and it's happening right now," he said.

Gary Stiffelman, partner with Ziffren, Brittenham, Branca, Fischer, Gilbert-Lurie, Stiffelman & Cook, drew a parallel to the Internet boom. "Every new platform creates opportunities to monetize new and existing content, but as a revenue model it's complex," he said. "I think a lot of the money you're seeing is capturing content for an IPO or flip, and a lot of money will be lost."

The panel agreed that rights issues were one of the big challenges facing digital dealmaking. Rubenstein related his travails in trying to make "The Nanny" available digitally. "One particular episode represents $3 million-$4 million in music clearances," he said. "That's not going to happen. Do I offer the whole series without that episode? What pricing is reasonable for everyone involved?"

Many existing rights issues will be resolved as new contracts gradually replace the ones that have no specific determinations regarding these new formats. "We're in a transitional stage," Stiffelman said. "You still have old models that need to be supported -- pay-per-view, CD, etc. -- that are very valuable. It's very risky to throw them out in the hope that new model will take off."

Coming the day after the Supreme Court issued its ruling regarding file-sharing technology, piracy was another hot topic of discussion. Monday's ruling itself would have little effect on piracy, the panel agreed. "I think it's like invading Iraq to protect us against terrorists in this country," Stiffelman said. "It won't change anything. But a loss to Grokster would have been tragic."

Others felt the ruling established useful guidelines for going forward. "It provides the tech industry a lot of focus, showing where they can and can't go," Henderson said. "I don't think it's such a blow to the tech industry as it is an opportunity."

The event was hosted by the nonprofit group Digital Coast Roundtable, which also announced the election of five directors to its board. Robert J. Dowling, publisher and editor-in-chief of The Hollywood Reporter, was re-elected and will serve with fellow returning members Bill Doeren, Kodak Digital Entertainment vp and general manager; Peter Marx, VU Games' former chief technology officer; Tim Sarnoff, Sony Pictures Imageworks president; and Leonard Washington II, Paramount Digital Entertainment president.

Copyright 2005, The Hollywood Reporter. All rights reserved.