EU Copyright Reform: Contractual freedom under attack

Contractual freedom is under attack and consumers will suffer, warns Mark Lichtenhein.

Mark Lichtenhein | Photo credit: SROC

By Mark Lichtenhein

09 Feb 2017

Ever since the Juncker Commission announced its strategy for a digital single market (DSM) in Europe back in May 2015, there has been an uneasy feeling in both the sport and creative industries that we are witnessing the beginning of a fundamental change in the way that content will be licensed throughout Europe in the future. 

In September 2016, the Commission published its draft online broadcasting regulation, which would extend the so-called country of origin principle, enshrined in the 1993 satellite and cable directive, to the Internet.

This is a potential game-changer which would massively dilute the concept of national copyright and territorial exclusivity.


To fully understand the impact of this proposal, one has to take into account the ongoing investigation into pay-tv arrangements between the UK satellite broadcaster, Sky UK, and six Hollywood fi lm studios.

In summary, the Commission's view is that contractual clauses restricting "passive sales" are anti-competitive. These clauses prevent Sky from responding to requests for its pay-tv and online services from consumers located in member states where Sky UK is not marketing its services.

Significantly, these anti-trust investigations are relying on the EU Court of Justice (ECJ) ruling on the cases involving the Premier League and QC Leisure.

However, whilst the ruling is relatively straight-forward to define the passive sales of satellite services, it does not even mention one single time the "internet" or "online services". 

For the time being, nobody is able to define what "passive sales" in the internet environment would mean as an on-line service is potentially just a mouse click away and social media channels take the marketing of any such services out of a provider's hands.

Although the proposed online broadcasting regulation still refers to contractual freedom, the extension of the ECJ's QC Leisure ruling into the online environment would effectively destroy this contractual freedom because it would be impossible to enforce territorial exclusivity. 

The only way for rights holders to keep selling content on an exclusive basis would be to licence on a pan-European basis irrespective of the lack of demand demonstrated by the Commission's own figures.

Regrettably, digital content is being swept along by the DSM tide, within which it doesn't fit. Ironically, it is the demand from the market for exclusive territorial licensing that has led to the creation of such a rich and vibrant offer of digital content in the various EU territories.

Pan-European licensing will reduce diversity and increase consumers' frustration as content won't be tailored to local tastes and priced at local value. The EU legislator should think twice before agreeing upon a regulation which in the end will only benefit expats to the detriment of the average consumer within the EU.


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