Recent pay-TV developments: the dawning of a new era?

27.04.2016

As part of the European Commission’s ongoing pay-TV investigation, it was announced last week that Paramount Pictures have offered commitments in order to address competition concerns. As we have previously discussed, the Commission’s July 2015 Statement of Objections considered that six Hollywood studios (of which Paramount is one) and Sky UK had bilaterally agreed contractual restrictions that prevent Sky from allowing EU consumers located elsewhere to access, via satellite or online, pay-TV services available in the UK and Ireland.

The Commission’s preliminary view was that these clauses restrict Sky’s ability to accept unsolicited requests for its pay-TV services from consumers located in other Member States (“passive sales”) where the company is not actively promoting or advertising its services. As a result, these clauses grant BSkyB ‘absolute territorial exclusivity’, eliminating cross-border competition between pay-TV broadcasters and partitioning the internal market along national borders.

Margrethe Vestager said: “European consumers want to watch the pay-TV channels of their choice regardless of where they live or travel in the EU”

Paramount’s proposed commitments, to apply throughout the EEA, include the following:

• When licensing its films for pay-TV to an EEA broadcaster in the EEA, Paramount would not prevent or limit a pay-TV broadcaster from responding to unsolicited requests from consumers within the EEA but outside of the pay-TV broadcaster’s licensed territory (No “Broadcaster Obligation”).
• When licensing its films for pay-TV to an EEA broadcaster, Paramount would not prohibit or limit pay-TV broadcasters located outside the licensed territory from responding to unsolicited requests from consumers within the licensed territory (No “Paramount Obligation”).
• Paramount would not bring an action for the violation of a Broadcaster Obligation in an existing agreement licensing its films for pay-TV.
• Paramount would not act upon or enforce a Paramount Obligation in an existing agreement licensing its films for pay-TV.
If accepted by the Commission, these commitments will apply for five years and cover both online and satellite broadcast services. Paramount is the first studio to have offered commitments in an attempt to settle the Commission’s investigation, the other parties are still disputing the allegations.

Separately, it was reported recently that Sky has signed its first pan-European movie deal with Sony Pictures. While the immediate driver for the deal appears to be Sky’s acquisition of Sky Deutschland and Sky Italia from 20th Century Fox and the resulting increase in its European subscriber base, it is also likely to allow Sony to address the seemingly imminent shift in the way the EU views content licensing agreements.

The background to the Commission’s investigation into the Hollywood studios is that in 2011 the CJEU held, in a case concerning the exclusive licensing of broadcasting rights for Premier League football matches on a territorial basis, that any agreement designed to stop cross-border provision of broadcasting services is deemed to be anti-competitive and prohibited by EU competition law.

What is the likely consequence for licensors?

The Commission’s investigation seems certain to have far-reaching consequences for the business model of content licensors across the EU, as splitting rights into multiple national territories as opposed to selling a single, pan-European license is a key part of many business models.