Content portability and beyond

The proposed EU Content Portability Regulation may not alone revolutionise the European content licensing market, says Kalle Hynönen of Krogerus Attorneys

The digital world has revolutionised the way we enjoy music and audio-visual content. People expect access to digital content anywhere, anytime, and from any device across Europe.

The ability to impose territorial limitations and apply different prices to different territories has, however, been at the heart of licensing of audio-visual content for decades. Within the EU, with some exceptions, each national broadcaster or other content distributor has typically acquired rights only for their own territory.

This practice has allowed content rights holders to monetise their content rights effectively, but it also has allowed national distributors to acquire exclusive rights only for their respective territory.

In the world of territorial (and analogue) distribution networks, this practice was largely unproblematic, as the technical distribution means simply did not allow for a larger coverage of the transmissions.

Occasional signal overspills over national borders were an unintended side-effect of technology.

The borderless nature of the internet, however, has changed this and artificial borders in the shape of ‘geo-blocking’ have been deployed. According to an issues paper published by the European Commission on 18 March 2016, 68 percent of the responding content providers use geo-blocking within the EU. Typically, geo-blocking is a contractual requirement imposed by the content suppliers.

The territorial exclusive licensing has been under critical discussion for some time and now the European Commission is beginning to take up arms. In 2011, in the so-called Murphy case (joined cases C‑403/08 and C‑429/08), the Court of Justice of the EU (CJEU) ruled that EU free movement of services and competition rules prohibited contractual provisions (and national legislation) that prevent viewers in one EU member state from importing satellite decoder devices from another member state in order to watch the services of a foreign broadcaster.

While the English Premier League could still grant rights on a territorial basis, the relevant provisions in the Premier League’s broadcasting licence agreements against the supply of decoding devices outside the contracted territory (in that case Greece) were artificially making that territorial exclusivity “absolute”, and therefore infringed Article 101 of the Treaty on the Functioning of the EU. These restrictions could, according to the CJEU, not be justified on the basis that they were necessary to ensure appropriate remuneration for the Premier League.

According to the CJEU, when licensing its rights, the Premier League could take into consideration the actual and potential audience of the applicable broadcaster, both in its own member state and in the other member states in which its broadcasts could be received.

The Murphy ruling revealed the EU’s ambitions to make content truly portable throughout the EU, and while it only addressed ‘traditional’ distribution technologies, its wider implications on internet distribution have remained a somewhat open question. In January 2014, the European Commission announced that it had opened a competition investigation concerning the cross-border provision of pay TV services, particularly the use of absolute territorial restrictions in the licensing agreements between a number of US movie studios and EU pay TV broadcasters. The commission adopted a statement of objections in the matter on 23 July 2015 and in December last year, almost five years after the Murphy ruling, the first concrete legislative proposals in relation to the matter were released.

The first step of an ambitious reform?

The proposal for the Content Portability Regulation was released on 9 December 2015. As explained in the relevant press release: “At present, Europeans travelling within the EU may be cut off from online services providing films, sports broadcasts, music, e-books or games that they have paid for in their home country. Today’s proposed regulation on the cross-border portability of online content services addresses these restrictions in order to allow EU residents to travel with the digital content they have purchased or subscribed to at home. Cross-border portability, a new EU right for consumers, is expected to be a reality in 2017, the same year as the end of roaming charges in the EU.”

Essentially, cross-border portability concerns online content services to which consumers have lawful access, or content that they purchased or rented online in their own member state of residence. According to Article 3(1) of the proposed regulation, the provider of an online content service must enable a subscriber who is temporarily present in another EU member state to access and use such online content service that he or she has acquired in his or her home member state.

Furthermore, according to Article 5 of the proposed regulation, any contractual restrictions, whether between service providers and subscribers or between content right holders and service providers, that seek to limit this right will be unenforceable.

In practice, this means that a Finnish person should continue to have access to the Finnish content service that he or she has subscribed to in Finland while on holiday in Italy. It does, however, not mean that a Finnish subscriber should be able to subscribe to, and access, an Italian online content service while in Finland or another member state. Moreover, the proposed regulation excludes from its scope online content services that are provided without the payment of money and whose providers do not verify the member state of residence of their subscribers.

Consequently, the proposed regulation alone is unlikely to revolutionise the European content licensing market and it does not challenge the territorial exclusivity of licences. Indeed, the European Commission has not yet gone so far as to say that consumers in one member state must have free access to services in all other member states.

However, Recital 11 in the preamble to the proposed regulation recalls that in its judgement in Murphy, the CJEU held that “certain restrictions to the provision of services cannot be justified in light of the objective of protecting intellectual property rights”. One might, therefore, ask why would such restrictions need to be removed only for subscribers temporarily present in a member state other than the one of their residence, and not for all subscribers present, whether temporarily or not, in a member state other than their own?

Furthermore, the proposed regulation seems to leave room for interpretation. By way of example, the notion of “temporality” is not defined in the draft regulation. Can a month be temporary enough for the sake of the proposed regulation, while three months would be too long? In the same vein, the concept of “habitually residing” set forth in the definition of “member state of residence” is equally ambiguous.

If these key concepts stay as they now stand in the draft, it seems the regulation may need at least a few CJEU rulings to clarify the meaning of these concepts.

A modern, more European copyright framework: what’s next?

The ultimate goal of the European Commission is far more ambitious than what the Content Portability Regulation covers. Indeed, in its 9 December 2015 communication, the commission sets as the ultimate objective the “full cross-border access for all types of content across Europe”.

In the communication, which was published on the same day as the proposal for the Content Portability Regulation, the European Commission unveiled its vision to modernise EU copyright rules, and the proposed regulation is, as stated by digital commissioner Günther Oettinger, only the first step. Based on this vision, the commission will consider legislative proposals during 2016 aimed at further enhancing cross-border access to online television and radio broadcasting services.

Several of these will likely be in the form of ‘soft law’ and measures that seek to encourage cross-border availability and licensing practices without actual legislative intervention, but at least the review of the Satellite and Cable Directive may, later down the line, result in concrete legislative proposals that may have an impact on the market operators.

Therefore, while it seems unlikely that territorial exclusive licensing and geo-blocking will disappear just yet, the local operators should certainly be on the lookout. Contracting practices in content licensing are notoriously slow to change, but as media companies have learned the hard way, the digital environment may change quickly. So far, the media landscape has been re-shaped by disruptive technologies and business models, rather than by laws. This time, EU legislation might, however, work as a catalyst for wider changes.

Amid the changes it should also be kept in mind that the current licensing model that is based on territorial licences, as a side-effect, protects local operators and, consequently, may contribute to some extent to the preservation of local audio-visual culture. In the borderless world where rights are licensed without territorial limitations, premium content rights are much more likely to be acquired by global giants than small local operators. A truly pan-European content market may be a tough place for small players.
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