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EU moves towards digital single market with online content portability

Lawyers Chris Watson and Tom Scourfield explain how the EU is moving towards the creation of a digital single market with its proposal for online content portability

The European Commission released proposals in December for moving towards a “modern, more European copyright framework” as part of its digital single market initiative.

A regulation to ensure the cross-border portability of online content services in the EU is the most significant of the proposals. Although cross-border online content portability will affect broadcasters, producers and distributors in the media industry across Europe, it is arguably a more favourable outcome than a blanket prohibition on service blocking by geography.

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

Typically the rights to audiovisual content are sold on an exclusive territorial basis, which allows rights holders to maximise revenue in markets where demand is highest, and to tailor the content to the preferences of each individual 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.

The objective of the digital single market initiative is to eliminate obstacles to an internal single EU market for digital content and services. The initiative also involves reviewing the practice of “geo-blocking” of copyright works. Geo-blocking allows the providers of media content to restrict consumers in 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.

For example, consumers in Italy cannot take out a subscription with Sky UK to watch Sky Sports UK in Italy as Sky UK’s rights apply only to the UK. It also means that UK consumers with a Sky Sports UK subscription cannot watch Sky Sports UK while on holiday in Italy.

Geo-blocking block

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

The proposed regulation therefore introduces the concept of portability, a more achievable alternative.

Key aspects of the regulation

Cross-border portability does not remove the territorial nature of 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, although the provider may verify the subscriber’s member state of residence. Subscribers should be granted the same access they would be permitted at home, without any limitations on functionality, range of content or devices used.

To the extent that content quality is beyond their control, service providers are not required to deliver online content with the same level of quality as in the domestic territory.

As a subscriber’s residence is key to determining whether they can subscribe to the online content services in the first place, rights holders can oblige service providers to use effective means to verify a subscriber’s member state of residence to avoid abuses.

Finally, any contract provisions between rights holders and service providers that restrict or prohibit portability will be unenforceable.

Implications of EU proposals

The regulation is expected to come into force as early as 2017 and will automatically apply to contracts 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 so that a consumer’s member state of residence can be authenticated to prevent the system being 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.

Cross-border portability is a 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 consumers’ country of residence. 

Concerns

Although the European Commission has acknowledged the importance that territorial licensing plays in financing online content, there are concerns that cross-border portability erodes 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.

The European Commission also 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 at present.


Chris Watson is head of technology, media and communications at law firm CMS. Tom Scourfield is head of intellectual property at CMS

This was last published in February 2016

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