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Potentially Significant Change in European Media Rights Landscape

04 October 2011

LONDON, 04 OCTOBER 2011 - In handing down its judgment in the Football Association Premier League v QC Leisure and Murphy v Media Protection Services cases, the European Court of Justice (ECJ) significantly increases the pressure on the current, largely territorial, approach to licensing of TV, film, music and other content in Europe.

Five years ago, pub landlady Karen Murphy was fined £8,000 by a UK court for sidestepping BSkyB by showing live matches in her Portsmouth pub using a satellite card from a Greek broadcaster. In February 2011 advocate general Juliane Kokott, backed Murphy, advising the ECJ that British pubs and consumers should be free to screen Premier League matches using overseas satellite feeds rather than more expensive domestic services from Sky and ESPN.  Although not challenging the concept of territorial deals head on, Kokott said that certain aspects of those deals undermine the European Union’s internal market.

Today the ECJ has followed a substantially similar approach. Although some scope for further technically based argument remains, in essence it concluded that it is not possible for the Football Association Premier League (FAPL) (and UK domestic legislation) to prevent businesses in the UK using foreign decoding equipment to show Premier League matches broadcast from other member states even though the equipment may have been obtained by giving a false address.

Peter Watts, media partner at Hogan Lovells, commented:

"As ever, there are some specific facts to this case and some of the legal issues raised are highly technical so it is dangerous to rush to sweeping conclusions.

"This is likely to result in significant change over coming years in the business models which the industry uses and will inevitably impact on the way in which consumers can access some content.

"However, it should not automatically be assumed that the result will be to increase the availability, or reduce the cost to the consumer or value to rights holders, of all content such as football matches.

"There is little doubt that this judgment poses a very substantial threat to the way in which content is currently licensed on a territorial basis. In essence, the ECJ's approach is that if a content owner sells content to a broadcaster in one member state it cannot force the broadcaster to stop people from other member states watching that content.

"In many ways, the ECJ's latest decision continues a long trend toward treating content in a similar way to other goods and services and attacking barriers to free movement across the EU.

"This is a very significant development for everyone involved in the media industry. It does not automatically outlaw all territorial content licences. However, it does raise fundamental questions which go beyond simply English pubs showing a few Greek broadcasts of Premier League football matches.

"For the FAPL and football fans, whilst the legal position has been clarified, the endgame on the ground remains uncertain. The challenge for the FAPL and other rights holders will be to remodel their commercial strategies to align with the ECJ's view.  At first sight consumers might expect this to increase choice and reduce cost but that is far from the inevitable result.

"Similarly, this could help broadcasters from smaller member states. But equally it may strengthen the position of big media companies with the scale and international reach to buy up rights on a Europe wide basis.

"The potential implications of this case are particularly striking given the growing trend to make content available online - a far less territorial medium than many traditional broadcasters.  As content owners, broadcasters and online operators all struggle to perfect their business models for an increasingly connected world, this case will provide them with a further layer of opportunities and threats.

"The Court takes the view that it should be possible for a content owner to build commercial terms into its licensing deals to ensure that each of its broadcast licensees pays a going rate by reference to the people who watch that broadcaster's service wherever in the EU they live. In a striking passage, the judgment explicitly states that, as the EU is intended to be an open internal market, a premium paid for the fact that a licence of content is exclusive within a specified territory is not to be regarded for the purposes of EU law as "appropriate remuneration" for the licensor of the content.

"The commercial consequences of this are uncertain and are unlikely to be consistent across different forms of content.

"Rights holders such as FAPL might decide just to licence one provider across the whole of the EU in future and allow the licensee to decide when where and how to make content available in different member states. Conceivably, this could increase the power of broadcasters with international reach reduce future opportunities for "cut-price" access of the sort Mrs. Murphy was undertaking.

"Equally, rights holders may decide to appoint multiple licensees each of whom would be allowed to decide to whom to make their services available and at what price.

"In the immediate term, the judgment is likely to trigger a significant questioning of content distribution arrangements which are already in place. In the medium term there is significant scope for rights holders to develop new commercial models."

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