TYGlobe

Introduction

In this article, the author will, based on past experience in commercial negotiations concerning influencer signing and litigation case handling, and particularly grounded in the first-hand practice of personally engaging in self-media operation and contract signing, conduct analysis of contract clauses for influencers who intend to enter the industry or have already become top-tier players in the sector. After all, only by avoiding risks at the stage of agreement drafting and negotiation can the situation be more controllable for influencers in the event of future disputes.

Third, will all efforts come to naught? — The Battle over Account Ownership

The ownership of accounts is actually the core issue in the conclusion of contracts, but it is very easily overlooked by influencers. MCNs usually stipulate in agreements that the accounts are owned by the company. Furthermore, a dominant MCN will, to the maximum extent, deprive the influencer of control over the account after the contract is signed: it will change the bound mobile phone number to a number owned by the MCN. The influencer, without knowledge of the bound mobile phone number and password, will have difficulty logging into the account and cannot control the final presentation of published posts. Even if the MCN does not completely deprive the influencer of control over the account, the agreement will also stipulate that the influencer shall inform the company of the account password and shall not alter it. Once the contract is terminated, the company will fully reclaim the account, and the influencer has to build a new account from scratch. All previous efforts invested in the account will come to naught, and the future monetization capacity of the account derived from the accumulated fan base constitutes the opportunity cost lost by the influencer. Although the MCN may make a verbal promise at the time of contracting that the influencer can use the account on a long-term basis, when the influencer intends to terminate the contract, he or she may only unbind the account through litigation or arbitration. At that time, the express stipulation in black and white in the contract that the account is owned by the MCN may result in the influencer losing the case.

The deep-seated issue implicit in the determination of account ownership is what contribution factors shall determine the right to use, control and obtain proceeds from such accounts. (Due to space constraints, the category of rights pertaining to accounts will not be elaborated in this article.) If an account is deemed as a type of virtual property or a virtual access point to tangible property, what factors contribute to the economic value of the account, and who is entitled to enjoy such economic value? Consistent with the principles set forth at the opening of Part I of this article, the assessment of accounts shall always take "people" as the core. Accounts are not purely economic in nature, but simultaneously possess both personal attributes and property attributes. However, the systems applicable to intangible property in China cannot be directly applied to account-related issues. An account is externally presented under the personal identity of an internet influencer, and cannot exist independently of the influencer, unlike a work. If an internet influencer has made extremely substantial contributions to the account, the influencer still has the possibility of recovering the account through litigation.

In judicial practice, there are numerous cases where courts rule that online accounts belong to internet influencers on the ground that there is a strong nature of personal dependency between the influencers and the accounts. Such cases generally involve the following circumstances: the account is registered through real-name authentication by the influencer, used personally by the influencer, and the MCN company has barely provided assistance in the operation of the account. The economic value created by the account is certainly inseparable from the labor contribution of the influencer himself/herself. Among the typical cases concerning disputes over account ownership recently released by the Supreme People's Court via its official WeChat account, there are analyses consistent with the judgment principles for account ownership adopted in the aforesaid judicial precedents. The presiding judge of the said case held that the basis for determining account ownership mainly lies in what contributes to the economic value of the account, that is, a comparison between the strength of the account's personal attribute (influencer-related factor) and its property attribute (operation-related factor) shall be conducted: Where the economic value generated by the account is strongly dependent on the operation and management of the MCN, the account tends to be recognized as property with weak personal attribute, which means it can be transferred away from the influencer in accordance with the contract; Where the economic value generated by the account is strongly dependent on the influencer, the account tends to be recognized as property with strong personal attribute, and separation of the account from the influencer will lead to waste of resources and violate the "Green Principle", thus it is inappropriate to order the separation of the account from the influencer, and the MCN may claim economic compensation from the influencer.[1]

Fourth: Will "Top-tier Players" Also Be Deprived of All Benefits? — Delayed Settlement and Excessive Control

If the influencer's account is handed over to the MCN for management upon signing of the contract, the MCN will generally stipulate that the influencer shall not dispose of the cash and virtual currency under his/her name without the prior consent of the MCN, which amounts to full vesting of the "financial authority" in the MCN. It is a common practice in the industry to settle accounts every other month, and many brands even habitually default on settlement payments, which further lengthens the already long settlement cycle. The influencer may only receive the final settlement payment after the MCN receives the relevant funds. The advertising models adopted by short video and graphic platforms are generally divided into two types: platform-reported and non-platform-reported. For commercial orders under the platform-reported model, the settlement flow follows the path of "brand owner (advertiser) - platform account - MCN - influencer"; for commercial orders under the non-platform-reported model, the settlement flow mostly follows the path of "brand owner (advertiser) - multiple intermediaries - MCN - influencer". In either case, influencers who do not operate their accounts on their own are subject to the payment distribution arrangements of the MCN.

During the term of cooperation between the two parties, the MCN agency shall be responsible for handling negotiations on external cooperation conditions, fees and other relevant information as well as contract signing on behalf of the parties, and subsequently issue bills to the influencer for settlement. As a result, the influencer is often deprived of the right to be informed of the authenticity of the contents of the bills. In practice, the MCN agency may also arbitrarily adjust the income distribution ratio, default on the payment of the influencer's due income for a long time, and conceal the actual quoted amount. If the contract further stipulates that the overdue payment by the MCN caused by a third party's overdue payment shall not be deemed as a breach of contract by the MCN, such stipulation is equivalent to shifting the risk of non-recovery of accounts receivable to the influencer. The influencer may claim the right to inspect accounts, contracts, invoices and third-party cooperation vouchers at the negotiation stage, and undertake to comply with the confidentiality obligation. Otherwise, after the contract enters into performance, the MCN agency may fail to provide necessary assistance for the influencer to verify the bills.

In terms of content, when a Multi-Channel Network (MCN) considers entering into a contract with an influencer, it generally takes into account the degree of correlation between its own brand resources and the profile of the influencer's target consumer groups. The final effect of the notes published by the influencer shall also be consistent with the shooting requirements communicated to the MCN as specified in the release requirements (brief or script) approved by the brand owner's marketing department. Where an MCN has developed fixed publishing logic for images, texts and videos, the scope for independent creation granted to influencers will be limited. For influencers with a small fan base or amateur influencers, although the MCN may promise to provide substantial support for their freedom of creation during the preliminary oral negotiation between the two parties, it may compromise when faced with specific commercial orders and requirements of the brand owner, shift all creation pressure to the influencers, and require the influencers to comply with the influencer code of conduct and be on call at all times. More seriously, influencers endorse the content displayed on their accounts with their personal reputation. If an MCN fails to examine and verify the business qualifications of the brand and the quality of its products, the influencers shall directly bear the adverse consequences of damage to their public image caused by the brand's reputational collapse.

Many full-time self-media influencers, given the undisciplined nature of freelance work, expect that MCNs can guide their work and life rhythm in a disciplined manner after they sign contracts with MCNs. At this juncture, influencers shall pay attention to whether they can accept the mandatorily assigned work tasks. For example, MCNs will require influencers to produce a specified number of short videos or graphic and text contents per month (excluding the quantity of contents generated from commercial cooperation), cooperate to complete a certain number of live streaming sessions, with the duration of each single live streaming session no less than a specified number of hours. For relatively strict MCNs, such requirements are usually linked to clauses stipulating that failure to cooperate in completing work constitutes a breach of contract, and non-cooperative influencers will face the threat of incurring liquidated damages. If influencers fully accept such requirements, the power of work arrangement will be completely held by the MCN, which may also deprive influencers of the right to reject commercial orders and put them in a very passive position.

The common ground between account ownership disputes and settlement disputes is that internet influencers lose control over the proceeds from their accounts. It is recommended that before internet influencers ascertain the actual incubation capacity and industry reputation of an MCN institution, they agree on a probationary cooperation period with the MCN, during which they can get to know the MCN's settlement performance and the degree of compatibility between the two parties. After the contract commences performance, if serious payment arrears of the MCN make it impossible to continue the cooperation, and no corresponding liability for breach of contract on the part of the MCN was agreed upon when the contract was drafted, the internet influencer may request to terminate the contract with the MCN on such grounds as the MCN's failure to withhold and remit taxes as agreed, failure to pay taxes in accordance with the law, etc. Of course, it is still recommended that internet influencers explicitly clarify the ownership of the account, the MCN's obligation of timely payment and the corresponding liability for breach of contract at the stage of contract signing.

[1] Source: The article *When an Internet Celebrity Blogger Falls Out with the Operating Company, Who Owns the Short Video Account?* published on the official WeChat account of the Supreme People's Court.

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