ECJ Decision On Exclusive Broadcasting Licences Could Reach Beyond Sports

A European Court of Justice ruling this week outlawing exclusive broadcasting licences that prohibit the supply of decoder cards to TV viewers outside the EU countries for which the licences are granted will likely affect rights holders and broadcasters of content other than sports, observers said. The decision could also have implications for European Commission attempts to update rules for digital content distribution.

The 4 October decision, available here, arose from attempts by several pubs in the United Kingdom to circumvent exclusive broadcasting licences granted by the Football Association Premier League (FAPL) that bar broadcasters from giving decoder cards to people who want to watch the games outside the licence territories. Several British pubs buy, at lower prices than British Sky Broadcasting charges, and use decoder cards issued by a Greek broadcaster to access the matches.

The ECJ ruled that national laws that ban the import, sale or use of foreign decoder cards breach EU law on freedom to provide services and can’t be justified by intellectual property rights. There is no copyright in the sporting events themselves because they are services, not “works,” the court said. Even if national legislation conferred IP rights on sports events, prohibiting foreign decoder cards would exceed what is necessary to ensure appropriate remuneration for the rights owners and fragment Europe’s single internal market, it said.

EU competition law does not preclude rights holders from granting to a sole licensee an exclusive right to broadcast protected content by satellite, during a specified period, from a single member county of broadcast, the high court said. But agreements must not stop broadcasters from providing any cross-border services relating to a sporting event because it would give the broadcasters absolute territorial exclusivity in the areas covered by the licences, eliminating competition and partitioning the market according to national boundaries, it said.

“Potentially Significant Change”

The decision “poses a very substantial threat” to the way content is now licensed territorially, said Hogan Lovells media partner Peter Watts. The ECJ has essentially said that if a content owner sells content to a broadcaster in one EU country, it can’t force the broadcaster to stop people in other member states from watching it, he said.

This is a major development for everyone involved in the media industry, Watts said. The challenge now is for the FAPL and other rights holders to “remodel their commercial strategies” to align with the court’s view, he said. Consumers might expect more choice and lower costs but that’s not inevitable, he said. The ruling could help broadcasters from smaller EU states but could equally strengthen the position of big media companies with the “scale and international reach” to buy up rights on a Europe-wide basis, he said.

The ruling’s potential implications are “particularly striking given the growing trend to make content available online,” a far less territorial medium than many traditional broadcasters, Watts said. As content owners, broadcasters and online operators struggle to perfect their business models in an increasingly connected world, this decision gives them a “further layer of opportunities and threats,” he said.

The court’s view that a premium paid for an exclusive license within a specified area cannot be regarded as appropriate remuneration for the licensor of the content may lead to uncertain, and possibly inconsistent, commercial consequences, Watts said. Rights holders might decide to licence just one provider across the EU and let thatextra word here? [take out “that”] it decide when and how to make content available in different member states, he said. Or they could opt to appoint multiple licensees, each of whom could decide to whom to make services available and at what price, he said.

The judgment is likely to “trigger a significant questioning of content distribution arrangements” in the short term, and new commercial models in the longer run, Watts said.

“Surprising” Decision

The ruling is, in part, “surprising and raises as many questions as it answers,” Baker & McKenzie lawyers Steve Holmes and Ben Allgrove wrote in a 6 October “Legal Bytes” posting.

The competition law aspect is puzzling, the attorneys said. If copyright remains a national right, “which the ECJ fails to mention,” then it’s unclear whether traditional country-by-country licensing models, especially online, are immune from scrutiny, they said. The decision seems to signal that competition law potentially applies to such models, raising the potential for “significant change to the content licensing landscape.”

But Brussels-based media and sports consultancy KEA said the ruling “may in the end be less detrimental than expected” for the audiovisual industry. Nonetheless, it said, the contractual freedom of rights owners and broadcasters in relation to content other than sports “may still be seriously affected.” They usually provide for exclusive territorial clauses justified by market demand, language and the lack of pan-European operators, particularly in the audiovisual sector, KEA said. The decision will influence the business model of sports satellite broadcasting as well of as of other types of content, it said.

Asked what impact the decision might have on European Commission efforts to create a pan-EU digital content licensing regime, a spokeswoman for Internal Market and Services Commissioner Michel Barnier said the EC is “examining the judgment carefully.” It published a “green paper” in July on online distribution of audiovisual works, and will “take into account relevant implications” of the judgment in moving forward, she said

International treaties on copyright for audiovisual performers and broadcasters are the subject of ongoing discussions at the World Intellectual Property Organization. But it is still unclear how this action by the ECJ will affect those WIPO processes. The EU spokesperson said they are not directly linked.