Analysis The European Parliament has approved a draft law that geo-blocking, the act of offering an online content service in one European Union (EU) country and that country alone, will be scrapped in the first half of next year.
Coupled with the recent law to end mobile roaming charges in the EU as of next month, the OTT industry as a whole stands to flourish in Europe over the next few years. However, the losers here will be the content creators, which argue that the removal of geo-blocking will weaken the financial value of content, as well as the pay TV operators, as the ruling will trigger a small spate of cord cutting for consumers with two or more properties in multiple EU countries. But the move is also a hammer blow to content pirates.
Of course no one wants to upset US studios, but those in Hollywood have always limited distribution to a local country inside the EU, believing they can get more money by licensing movies exclusively in each territory. The other side of the argument believes distributing content evenly will lead to more jobs and economic growth. And those studios will have more customers but less exclusivity and they can always ensure exclusive rights in a particular language which solves the problem for Europe.
Axing geo-blocking is a significant decision in the broader plan to create a Digital Single Market, but the wider reaching effects of this initiative are still open for debate –spanning varying competition laws, overseas litigations, consumer protection, and piracy.
If the draft law passes the final stage by receiving sign off from the EU Council of Ministers, EU member states will be given nine months to roll out the ruling, when the Commission should release additional details on how it intends to go about the process of merging copyright laws.
We highlight piracy as a point of contention because the European Commission stated in its initial proposal in 2015 that the financing of the audio-visual sector relies on a system based on territorial exclusivity, yet unjustified geo-blocking is the main cause of piracy. The ruling should therefore go some way towards alleviating piracy, particularly for sports fans who travel regularly.
However, this week's ruling should not be confused with the more ambitious push to create a Digital Single Market, which aims to protect consumer rights and data, while allowing companies big and small to market their products across the EU. This should, in theory, help the smaller companies which struggle to break out of their home markets – giving them a chance to market to the 500 million consumers in the EU.
Last week's ruling simply means that subscribers can access their video or music subscription services while abroad on holiday or business, without running into copyright infringement laws. The legislation states that viewers will be able to access content abroad for “a limited period of time” but it has not yet specified for how long, or if it will vary by service or country.
For example, if a consumer is signed up to Canal+ in France and travels to Germany, they will be able to access their TV Everywhere account. Which of course does not help Canal+ sell its content in Germany, but it is a step in the right direction towards consumer protection.
Subscribers to paid services such as Netflix, HBO Go, Amazon Prime and Spotify are freed from their border chains which have restricted access to their video and music catalogs while traveling, but providers of free programming also have the option to opt in to the EU initiative. Although ad-supported services, particularly those showing sports content, will likely come up against some additional barriers in terms of litigation, but also how to sell advertising abroad.
Public service broadcasters therefore have the choice to launch pan-EU online services – profiting from cheaper content deals across borders as online distribution rights will no longer be tied to home soil, while also benefiting from a wider audience reach. However, nothing says that Hollywood studios cannot sell rights based on the number of viewers attracted to a service, so overseas distribution may result in higher content fees anyway.
The impact on the big pure play OTT services like Netflix and Amazon will be minimal, due to these platforms already being widely available across the EU member states, but now they will be able to bolster their content catalogues in regions of Eastern Europe, which have very limited programming compared to the West.
Netflix noted that the Digital Single Market could accelerate the company's target to shift to an even share of original and third-party titles in its offering.
To combat piracy, the EC states that online video or music service providers will be able to ensure that their subscribers haven't permanently moved abroad or are sharing log in details by verifying methods of identification including payment details, ID cards, tax information, and IP address checks.
The draft law plans to unify copyright laws of various EU member states to legalize content portability. The Commission will go as far as reducing VAT problems when selling across borders – right now you have a clumsy process of reverse charging, where the seller takes a copy of the transaction and the authorities then collect the VAT from the buyer directly, rather than in the price of the goods.
The Irish media has picked up the news as a big consumer positive move, while the major UK news outlets have ignored it – left red-faced after the first Brexit backlash to directly impact the digital media market in the UK.
The EC also published results of a recent survey showing that 64 per cent of people in Europe accessed content via the internet in 2016, including videos, images, music and games.
“European citizens have been waiting for these new rules, which represent a step towards a common digital market. The new rules increase mobility and successfully offer portability to users of European online content, without affecting copyright," said French MEP Jean-Marie Cavada.
The vote was 586 to 34, with three abstentions.The European Parliamentary Research Service stated that “ensuring portability of content would promote access to legally acquired content and avoid end users using technical means such as virtual private networks (VPNs) to bypass territorial restrictions created by licensing schemes.”
It has been a busy week for the various institutions of the EU, as the European Council, the group of EU government heads, has reached an agreement that VoD content catalogues should adhere to a minimum quota of 30 per cent European content, rising it from 20 per cent. This also applies to international SVoD giants Netflix and Amazon.
The Council's recommendation will be discussed in the European Parliament before the directive is adopted.
European Council VP for the Digital Single Market, Andrus Ansip, said, "I am pleased that the Council adopted today a general approach on the update of the Audiovisual Media Services Directive.
"It is essential to have one common set of audiovisual rules across the EU and avoid the complication of different national laws. We need to take into account new ways of watching videos, and find the right balance to encourage innovative services, promote European films, protect children and tackle hate speech in a better way."
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