U.S. Studios Agree to End Geoblocking in Europe Union

The European Commission has accepted commitments made by The Walt Disney Co, NBCUniversal Media, Sony Pictures Entertainment, Warner Bros Entertainment and Sky TV to end the practice of “geoblocking” their content, an agreement that brings to an end a years-long antitrust case. Under the agreement, the studios and Sky UK will open up pay-TV markets, allowing consumers across the European Union (EU) to access to a wider range of content regardless of their location. Previously, the content could only be accessed in the United Kingdom and Ireland.

The commission, the EU's antitrust watchdog, announced it would accept the offers that came from the five companies late last year. The offers are legally binding, the commission said, and if the companies fail to honor their commitments, they could be fined up to 10% of their global turnover.

The entertainment/media companies made the offers in November and December 2018, after an investigation launched by the commission in 2015 found that the companies were involved in anticompetitive behavior.

The commission said the restrictions that the companies imposed on Sky UK harmed competition because customers from outside the UK and Ireland who wanted to subscribe to its pay-TV services were prevented from doing so. This is known as “passive sales” because the service provider does not actively market its content to those consumers.

In its investigation, the European Commission found that the companies had inserted clauses into their licensing agreements with Sky UK that obliged the company to block their content from being available on Sky's satellite and cable pay-TV services.

NBCUniversal, Sony Pictures and Warner Bros also had insisted on clauses that required Sky to ensure that other broadcasters were prevented from making their pay-TV services available in the UK and Ireland. Sky has now agreed it will no longer apply such clauses.

The commitments also include the studios' promise to end the practice of taking pay-TV service providers to a tribunal if any restrictive clauses are breached.

All current and future subsidiaries of the committing parties are covered by the commitments. This means that, following the acquisition of Twentieth Century Fox by Disney, the commitments will also apply to Fox.

Meanwhile, the European Union negotiators agreement on new Copyright Directive rules would give content rightsholders a greater share of revenue from platforms such as YouTube, Google and Facebook that host rightsholders' content.

The agreement by representatives of the EU's 28 national governments and lawmakers came after two-and-a-half years of negotiations and an intense lobbying campaign that pitted tech giants such as Google and Facebook against film and music companies and digital rights campaigners.

The main change to EU copyright rules, if officially approved, would introduce, via Article 11, a requirement for platforms such as YouTube to negotiate licenses with film producers, record companies, collecting societies and other rightsholders to host content on their sites, while Google News would have to buy licenses to host newspaper articles. Small excerpts, or snippets, will be permitted without licensing, however. And hyperlinks are not covered by the rules.

The aim of the copyright directive is to redress what rightsholders call the “value gap” between what platforms earn by hosting others content and what rightsholders themselves are paid.

The EU's Council of Ministers and the European Parliament still need to formally sign off on the new copyright directive, followed by a 24-month period within which member countries are to legislatively adopt the directive.

Julia Reda, a German lawmaker from the digital freedom Pirate Party — fiercely opposed to the deal — organized a campaign to block approval of the agreement. But that opposition campaign was not expected to succeed.

Helen Smith, executive chair of independent record companies association IMPALA stated that her organization has been one of the longstanding porters of the legislation. It's a huge step forward in how platforms deal with rightsholders.”

Record companies managed to insert into the final agreement the principle of “appropriate and proportionate remuneration,” meaning rightsholders should be paid an amount based on the revenue generated by their material when it is used, rather than a flat fee. Online platforms will also be responsible for content illegally uploaded to their sites.

Critics of the final compromise argue it would harm freedom of expression on the Internet because, per Article 13, vast amounts of content would be blocked by automated filters designed to weed out unlicensed content. “This deal is a threat to small publishers, authors and Internet users alike and risks putting the Internet as we know it solely in the hands of the tech and media giants,” Reda said.

She said that the algorithms of upload filters would not be able to tell the difference between copyright infringement and legal parody. “Even the most sophisticated upload filters routinely block perfectly legal content. Requiring platforms to use upload filters would not just lead to more frequent blocking of legal uploads, it would also make life difficult for smaller platforms that cannot afford filtering software,” she said.

However, IMPALA's Smith said that the claims that Internet memes would be banned are “completely exaggerated” and that the directive has been carefully drafted to provide for exemptions, such as parody or quotation. “It's one of the most complicated pieces of legislation” the EU has produced, she said.

Mark Jansen, spokesperson for Google Northern Europe, said copyright reform needs to benefit everyone, including European creators and consumers, small publishers and platforms. “We'll be studying the final text of the EU copyright directive and it will take some time to determine next steps,” he said. “The details will matter, so we welcome the chance to continue conversations across Europe.”

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Simon Taylor writes for Legal Week, the London-based ALM sibling publication of Entertainment Law & Finance.