March/April 2014
Volume 34 No. 3

April 2014
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The European Union Questions Territorial Pay-TV Exclusive Rights

By Bob Jenkins

In George Orwell’s book 1984, The Ministry of Love’s O’Brien, a powerful member of the Inner Party, tells the protagonist, Winston Smith, “the thing that is in Room 101 is the worst thing in the world.” Now, we’re left wondering: Has the European Commission opened the door to content’s “worst thing in the world”? The issue at hand is a current investigation into whether the present system of licensing movies on a territory exclusive basis contravenes Clause 101 of the Treaty of Functioning of the European Union.

The implications of the investigation announced in January 2014 could be that sales of exclusive territorial pay-TV rights to premium sports and newly released Hollywood movies break competition law by stopping licensees from selling to other European Union countries.
The Commission’s announcement of this investigation, which states that its purpose is to examine whether the traditional basis of licensing content on a territory exclusive basis “prevents [pay] broadcasters from providing their services across borders, for example by refusing potential subscribers from other member states or blocking cross-border access to their services,” sounds as if it is readying itself to create the content industry’s worst nightmare. But it isn’t.

The statement also sounds as if this investigation is about the “free movement of goods and services” within the E.U. But again, it isn’t. What it is, is an investigation into a relatively simple issue, but one that also forms part of a much larger, and much more complex evolution of the European Union’s view of, and relationship with, the provision of audiovisual content.

The announcement specifically names five Hollywood majors: Twentieth Century Fox, Warner Bros., Sony Pictures, NBCUniversal and Paramount, and five European pay-TV services: BSkyB, Canal Plus, Sky Italia, Sky Deutschland and Spain’s DTS.

Given the very early stage of this investigation, (when contacted by VideoAge a Commission spokesperson stressed, “there is no timeframe for this investigation, it will take as long as it takes”) there was an understandable reluctance amongst the named parties to be interviewed, however, two statements were offered. NBCUniversal’s statement read, “following an earlier informal request for information on the subject of territorial licensing of pay-TV rights to certain broadcasters the Commission has now opened a formal investigation into the pay-TV licenses between certain E.U. pay-TV broadcasters and major Hollywood studios. We believe we are in full compliance with E.U. competition law.”

BSkyB gave VideoAge a statement that read: “We are cooperating with the European Commission in its investigation into cross-border provision of pay-TV services in the E.U. At this very early stage, it is too early to speculate on the outcome.”

This apparently bland statement actually cuts to the heart of the matter. This is not an investigation into the licensing of content per se, so much as an investigation into “the cross-border provision of pay-TV services in the E.U.”

As Joaquin Almunia, vice president of the European Commission for Competition Policy, emphasized in a press conference following the January announcement, “I want to be clear on one point: we are not calling into question the possibility to grant licenses on a territorial basis, or trying to oblige studios to sell rights on a pan-European basis. Rather, our investigation will focus on restrictions that prevent the selling of the content in response to unsolicited requests from viewers in other Member States — the so-called ‘passive sales’ — or to existing subscribers who move or travel abroad.”

Ross Biggam, director general of The Association of Commercial Television, said, “this inquiry into the provision of movies to Europe’s pay-TV services is part of a larger overall look at the way in which content is licensed and exploited in Europe, stretching from the Karen Murphy case, through an examination of the current copyright situation, to this investigation into the licensing/provision of movies.”

The “Karen Murphy case” to which Biggam refers concerns a pub landlady from Portsmouth in the U.K. who was prosecuted for showing British Premiership football (soccer) matches via a decoder purchased from Greek pay-TV service Nova. The outcome of the case is complicated, but in its October 2011 judgment, the European Court of Justice explicitly ruled that having an exclusive system [of licensing] was, “contrary to E.U. law.”

While there are other issues complicating the Murphy case, and the investigation into the provision of movies to European pay-TV services is running alongside a separate investigation into the current copyright situation, Biggam said, “From the perspective of commercial exploitation of content, the key issue is territoriality and portability.”

Biggam’s points are supported by the concerns expressed by the E.U.’s Almunia, who explained, “If I live in Belgium and want to subscribe to a Spanish pay-TV service, I may not be able to if there is absolute territorial exclusivity.”

It is easy to envisage relatively straightforward solutions to these questions, offered by technology. But it cannot be too greatly stressed that this inquiry is part of a much broader look the E.U. is taking at the whole question of the exploitation of content — including a consideration of whether or not to revise its copyright laws. A process Biggam claims has been subject to, “heavy pressure from the IT and tech lobbies and anti-copyright activists.”

Is this Europe’s ‘Room 101?’ No. But with a White Paper on copyright reform due in June, and this investigation only now starting, it would be foolhardy to think that the door to the “worst thing in the world” will never be opened.