Under American jurisprudence, for a contract to be legal, each side must provide what is called “consideration.” That means that each side promises to do something, or not do something, in return for the other side agreeing to do something or not do something. If I sign a contract agreement agreeing to give you $1,000, that contract is not enforceable unless you promise to give me something in return, or do something in reliance upon my promise. Given that parties to contracts, by definition, value what they are getting more than what they are giving, courts do not get involved with the comparative values of the promises. As long as each side gives at least something, the contract is valid. As Lord Somervell noted in Chappell v Nestlé, half a century ago “A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn.”
The Huffington Post
The Huffington Post is a news website, distributing posts from over 9,000 unpaid bloggers. As noted in The Huffington Post Terms and Conditions:
(b) By posting or submitting content on or to our site (regardless of the form or medium with respect to such content, whether text, videos, photographs, audio or otherwise), you are giving us, and our affiliates, agents and third party contractors the right to display or publish such content on our site and its affiliated publications (either in the form submitted or in the form of a derivative or adapted work), to store such content, and to distribute such content and use such content for promotional and marketing purposes. Without limiting the generality of the foregoing, with respect to any video submissions to us made by you from time to time, you understand and agree that (unless you and we agree otherwise) we may, or may permit users to, based solely on functionality provided and enabled by our website, compile, re-edit, adapt or modify your video submission, or create derivative works therefrom, either on a stand-alone basis or in combination with other video submissions, and (unless you and we agree otherwise) you shall have no rights with respect thereto and we or our licensees shall be free to display and publish the same (as so compiled, re-edited, adapted, modified or derived) for any period.
On February 7, 2011, AOL announced it had agreed to acquire The Huffington Post for $315 million. In response, a group of The Huffington Post bloggers brought a class action lawsuit against AOL, Inc., asserting the roughly 9,000 Huffington Post bloggers deserved to split $105 million of that purchase price. The lawsuit alleged The Huffington Post engaged in deceptive business practices, deceiving the bloggers as to the popularity of their posts, and was unjustly enriched by the revenue generated therefrom. The lawsuit alleged that “Unlike social networking internet platforms, micro-blogging internet sites, and other digital media sites, such as TheDailyKos.com, TheHuffingtonPost.com selects its content providers and does not allow content from non-vetted providers. [...] Plaintiff and the Classes were not officious contributors to the TheHuffingtonPost.com and, rather, were carefully selected, and in some cases recrutited, by TheHuffingtonPost.com to perform services for it.”
Yesterday, U.S. District Judge John Koeltl dismissed the bloggers’ lawsuit, ruling “No one forced the plaintiffs to give their work to The Huffington Post for publication and the plaintiffs candidly admit that they did not expect compensation.” The Judge went on to note “[t]he principles of equity and good conscience do not justify giving the plaintiffs a piece of the purchase price when they never expected to be paid, repeatedly agreed to the same bargain, and went into the arrangement with eyes wide open.” In response to the dismissal, the bloggers’ attorney stated “We are reviewing the decision and considering our options.”
Content, Content, Content
Social media is all about the content. Bloggers leverage better content to convince bigger content distributors to distribute that content to a wider audience. Most bloggers never attract the eye of a content distributor with a million plus unique visitors a day, like TheHuffingtonPost.com. Often, it is only when a content distributor generates large amounts of revenue, that the blogger begins to think about compensation. The bloggers may become indignant “That distributor is generating huge amounts of revenue our work, and we are not receiving any money.” But the bloggers are getting some compensation, at least according to Judge Koeltl. The fact that the bloggers are only getting publication in return for their work does not matter, as long as they are getting something in return, even if that is only a peppercorn.
Negotiate Before, Not After
If you are a blogger, website developer, graphic designer or other content provider, negotiate the terms of your service up front, in writing. You may decide that the opportunity to garner you work some exposure is worth the cost of creating it. If so, that is fine. Just be prepared if your work starts generating revenue for some third party, beyond your wildest expectation. The increased exposure of your work is likely the only additional compensation you will receive, which is nothing to sneeze at.