On 8 December 2015, the European Commission released a set of proposals on moving towards a “modern, more European copyright framework”, as part of the Digital Single Market Initiative.

The most significant proposal is the introduction of a Regulation to ensure the cross-border portability of online content services in the EU. Although this will have an impact on broadcasters, producers and distributors in the media industry across Europe, it is arguably a more favourable outcome than a blanket prohibition on geo-blocking. Key aspects and the implications of the Regulation are summarised below.

Background

The proliferation in recent years of smartphones and tablets means that around half of all internet users in Europe access audiovisual content online with many doing so on the move. As well as becoming a mainstream channel for traditional broadcasters (such as Sky), this online consumption has led to the emergence of new online platforms offering media content (such as Netflix and NOW).

Rights to such audiovisual content are typically sold on an exclusive territorial basis which allows rights holders to (i) maximise revenue in markets where demand is highest; and (ii) tailor such content to the preferences of each domestic market. For example, the rights to live Italian league football matches are likely to receive most interest from Italian consumers and commentary and advertising is likely to be tailored towards them accordingly.

Digital Single Market Initiative

The objective of the Digital Single Market Initiative is to eliminate obstacles to create an internal market for digital content and services and part of its remit is to review the practice of “geo-blocking” of copyright works. Geo-blocking allows media content providers to restrict consumers from one Member State from accessing content available in another Member State precisely because the rights holder has licensed the content to the provider on an exclusive territorial basis.

This means, for example, that consumers residing in Italy cannot take out a subscription with Sky UK to watch Sky Sports UK in Italy as the rights only cover the UK territory. It also means that UK consumers with a Sky Sports UK subscription cannot watch Sky Sports UK whilst on holiday in Italy.

The Commission initially considered a blanket prohibition on geo-blocking. However, this was met with strong resistance by the media industry as territorial licensing is the basis upon which media content is financed. Without effective territoriality restrictions, many have argued that only the largest European content providers would be able to afford pan-European rights and revenue received from licensing and advertising would be significantly reduced. There could also be less demand and investment in regional creations which could reduce the quality and range of content available to consumers, in particular for minority languages and cultures.

The new Regulation therefore introduces the concept of portability, a more achievable alternative.

Key aspects of the Regulation

Cross-border portability does not take away the territorial nature of the digital content rights but allows consumers to access their digital content subscriptions when they are temporarily in another Member State. The portability obligation applies to online content services that the subscriber has either paid for or are free but the subscriber’s Member State of residence is verified by the provider.  Subscribers should be granted the same access that they would be permitted at home, without any limitations as to functionality, range of content or devices used. However, to the extent that this is not in their control, service providers are not required to deliver the online content with the same level of quality.  As a subscriber’s residence is key to determining whether they can subscribe to the online content services in the first place, rights holders are able to oblige service providers to use effective means to verify a subscriber’s Member State of residence to avoid abuses. Finally, contractual provisions between rights holders and service providers which restrict or prohibit portability will be unenforceable.

Implications

The Regulation is expected to come into force as early as 2017 and will automatically apply to contracts that were concluded prior to its adoption. As such, clauses which restrict cross-border portability in any existing licensing agreements will be unenforceable.  The concept of cross-border portability has generally been welcomed by all stakeholders, including the UK government. However, there are areas of concern. There will need to be an effective technical mechanism in place whereby a consumer’s Member State of residence can be authenticated so that the system is not abused. It may be too easy for consumers to “shop around” and purchase online content services in the Member States offering the best price if such safeguards are not implemented. In addition, the Regulation does not give any guidelines or set time limits on what would constitute being “temporarily” in another Member State.

Comment

Introducing cross-border portability is small step towards creating a digital single market in copyright protected content and a less controversial alternative to prohibiting geo-blocking. Rights holders and content providers will need to ensure that geo-blocking clauses in licensing agreements do not restrict cross-border portability and should also carry out a review of the technical measures in place to identify consumer’s country of residence.

Although the Commission has acknowledged the importance that territorial licensing plays to financing online content, there are concerns that cross-border portability does somewhat erode rights holders’ exclusive rights. Already, the Regulation gives consumers the ability to access a service in a country where it is not actually available by virtue of them being temporarily present there.

In addition, the Commission still maintains that a long-term vision of a single copyright code and a single copyright title should not be relinquished even if this may seem inconceivable for now.