What started as platforms that generated viral cat videos and dance trends has quickly transformed into one of the most influential and profitable sides of the entertainment industry. In fact, Goldman Sachs has estimated that the creator economy is projected to reach a market valuation of almost $500 billion by 2027. Associates from our firm attended VidCon this year in Anaheim, CA, where content creators and industry representatives gathered for three days of cutting edge programming related to the creator economy.
The main takeaway from VidCon is that the creator economy has been legitimized as a mainstream commercial force, and is no longer a separate operation in Hollywood. And industry power players have arrived at the table – Creative Artists Agency, for example, has a dedicated team, “CAA Creators,” to manage representation of digital creators and build a dedicated infrastructure around them. As the entertainment industry at large continues to evolve, content creators, brands and traditional media companies should be aware of the legal landscape as it pertains to the current state of the creator economy, and where it is heading.
The New Frontier
Conversations at this year’s VidCon leveled up, now that creators have begun to cross over into mainstream media in ways that would have been unimaginable during the “Peak TV” days. In particular, YouTubers have achieved record-breaking blockbuster success at the box office this year, with Kane Parsons’ feature film, “Backrooms,” and Curry Barker’s “Obsession” each grossing over $300 million globally, both far exceeding their relatively modest production budgets. The content creators of today are quickly becoming the filmmakers and stars of tomorrow.
Consequently, studios, networks and streamers are increasingly leaning into creator-led content. For example, Tubi, a free ad-supported streaming service owned by Fox, partnered with TikTok to launch the “Creatorverse Incubator,” to develop original programming with creators that have an established fanbase. In addition, influencers have been engaged to cover major world events from the State of the Union to the Olympics. While traditional media is still alive, a combination of major industry disruptions including a pandemic, union strikes, wildfires and technological innovations has brought us to newer pastures.
The Next Frontier
Creators are starting to evolve themselves, moving beyond solely focusing on content generation and looking to scale their businesses, by positioning their operations to function as independent studios and/or prepare for an exit. A prime example is Dhar Mann, one of the top creators with more than 25 million followers, who has built a vertically integrated studio in Burbank, CA to film original content, and has also started to expand beyond short-form videos into feature films and microdramas. Brands such as Mattel and Lego have also started to operate as mini studios, by building internal infrastructures to greenlight high performing original projects such as “Barbie” and various Lego movies. The consensus emerging from VidCon’s industry programming is that these trends will only accelerate, as creators, brands and media companies continue to expand their operations to keep pace with a rapidly evolving market.
Looking ahead, the following are primary legal considerations for all parties involved in creator economy dealmaking:
1. Brand and Partnership Agreements
The transformation of creators from paid endorsers into brand partners has significant legal implications that earlier versions of influencer agreements were not designed to address. Such agreements were typically structured around transactional, campaign-level engagements, which contemplated specific content posts, hashtags, disclosures, etc. However, that model does not reflect the reality of a large scale creator roster that is integrated into a brand’s marketing strategy, nor the long-term commercial relationships that now define how many brands engage with creator talent.
As brand deals become more sophisticated, the agreements will need to reflect additional considerations such as:
- Tiered frameworks that govern ongoing creator relationships rather than one-off engagements.
- Content ownership and usage rights that are clear about who owns what, for how long, and across which platforms.
- Exclusivity carve-outs that accommodate creators who work with multiple brands.
- Morality and conduct clauses that are specific to the agreement.
2. Intellectual Property Rights
The intellectual property clearances in creator-generated commercial content can include many of the standard points provided in traditional media deals, such as talent agreements and music licenses. However, unlike film or television, consumers respond and react to digital content in a much different manner, often taking action with a higher degree of certainty than traditional advertising metrics could measure. Accordingly, creators with dedicated fanbases often have a strong pulse on what content will resonate most effectively with their audience.
The rise of AI as a standard creative tool has added an entirely new dimension to intellectual property risk in the entertainment industry, especially the creator economy. Content is produced, exploited and generates derivative works at a rapid rate, often ahead of standard practices or established governance.
As legal doctrine continues to develop, parties must ensure their agreements account for the following:
- Clearance strategies for content designed to be remixed, parodied or otherwise built upon.
- Music and underlying rights licensing in campaigns intended to travel across platforms with different licensing regimes.
- AI-generated content, which presents questions of ownership, liability and platform responsibility.
- IP ownership in creator collaborations.
- Creator IP protection against AI scraping and training.
3. Talent Representation and Agency Relationships
CAA’s move into the YouTube creator space (like other major agencies’ growing investment in creator-focused infrastructure more broadly) signals that the traditional agency model is being fundamentally reengineered to support a new category of talent. With that shift comes the full complexity of traditional representation relationships: packaging fees (which have been significantly curtailed following the WGA’s campaign against agency packaging), conflicts of interest, fiduciary duties and the existing regulatory framework governing talent agencies in states like California.
As creators focus increasingly on scaling their businesses, parties on all sides of these relationships should have a clear understanding of the following:
- Agency agreement terms, including duration, commission, scope of representation, and termination rights.
- Packaging and bundling arrangements.
- Cross-collateralization of revenue streams (e.g., platform ad revenue, brand deals, merchandise and live event income).
- Corporate structure, including the tax, liability and succession considerations for individuals or loanout and holding entities.
4. Branded Entertainment Integration
As brands increasingly function as studios, and traditional studios increasingly depend on brand partnerships, the line between entertainment and advertising is effectively blurring. What was once a negotiated product placement is now a foundational element of how content gets made, distributed and monetized. The legal structures governing these relationships must reflect that new reality, and the parties who fail to address them clearly at the outset are the ones inviting disputes down the line.
Accordingly, the following are the primary considerations that creators and brands should address in any branded entertainment deal:
- Revenue sharing and participation rights.
- Creative approval and brand integration standards.
- Exclusivity within a title or platform.
- Term and rights reversion in the event the property is sold, licensed or adapted.
- Co-production and development rights, including creative control and the right to relocate the IP to another brand or platform.
- Distribution and platform commitments, including which channels the content may be exploited on and who controls distribution decisions.
- Sequel, franchise and derivative work rights, including whether brand integration carries forward into subsequent productions.
5. Regulatory Compliance
The Federal Trade Commission’s endorsement guidelines require clear and conspicuous disclosure when there is a material connection between a creator and a brand. As creator relationships become more structured, compliance analysis becomes significantly more nuanced. For example, a creator embedded in a brand’s long-term roster would be subject to different disclosure obligations than a one-off paid post.
All parties should ensure a solid understanding of the following:
- FTC compliance, enforcement trends and penalty exposure.
- Contractual provisions that allocate compliance responsibility between the brand and creator.
- Platform-specific disclosure requirements and formatting standards.
- International and cross-border advertising law obligations.
- State-level advertising law requirements, including jurisdictional variations in disclosure and endorsement rules.
- Contractual allocation of compliance responsibility when content is distributed across multiple platforms with differing disclosure regimes.
- Disclosure obligations for native and organic content that blurs the line between entertainment and advertising, particularly in long-term creator-brand relationships.
6. Data, Privacy and Audience Relationships
Many brand strategies that drive the creator economy involve the collection, use and monetization of consumer data at scale. For instance, product and content integrations, community-building and audience data analysis are common components of such deals. And the platforms that foster creator relationships are part of the core commercial infrastructure of brands and other major media outlets.
Brands, platforms and media companies involved in the creator economy must follow the legal framework that governs data, which includes state privacy laws, the Children’s Online Privacy Protection Rule, platform data policies and international data transfer rules for brands operating globally.
All parties should ensure their agreements address the following data and privacy considerations:
- Data ownership and portability, including rights to audience data generated through creator campaigns and the treatment of such data upon termination of the relationship.
- Consent and data collection practices, particularly where creator content targets or attracts younger demographics, implicating COPPA and state privacy laws.
- Platform data-sharing limitations, including what audience data each party is entitled to receive and use.
- Cross-border data transfer obligations for creators and brands operating internationally, including compliance with GDPR and other international data protection regimes.
- Data breach notification and liability allocation in the event consumer data collected through a creator campaign is compromised.
As the volume and complexity of data-driven creator campaigns continue to grow, the parties involved should ensure that their agreements keep pace with the evolving regulatory landscape governing data collection, use and transfer.
7. Protecting Minor Creators
Child influencers represent a significant and growing segment of the creator economy, but often lack the legal protections afforded to child actors and performers in traditional entertainment.
Most states have not extended Coogan-style earnings protections to social media content creators. And federal child labor law contains a broad exemption for children employed by parent-owned businesses, which covers most family-run influencer operations. The result is that commercially active minor creators may have little statutory protection to ensure that their earnings are preserved for their benefit.
However, states such as California, Illinois, Washington and Minnesota have enacted specific child influencer legislation, and other states are following. Brands that engage minor creators, platforms that monetize their content and families managing a child’s commercial presence need to remain informed about this quickly evolving area of law.
The Bottom Line
The commercial “Wild West” era appears over, but the legal landscape remains unsettled. The creator economy is no longer a niche market ruled by disruptors on the latest iPhone. Rather, it has evolved into a dominant commercial and cultural force reshaping entertainment, advertising and media simultaneously, and is creating new opportunities throughout the entertainment industry.
However, many of the legal frameworks governing these relationships have not evolved at the same pace as the creator economy itself. For that reason, all parties involved in commercial content creation should make sure to understand and address the issues discussed above.
Our Entertainment, Technology and Advertising team at Sheppard regularly advises brands, influencers and media companies on all aspects of creator economy dealmaking, including collaboration agreements and content partnerships. We are always available to support our clients through the rapidly changing market expectations in the current landscape of entertainment and digital media.