On 6 May 2015 the European Commission issued a Communication setting out its vision for a new ‘Digital Single Market’ for the European Union. The key aim of the strategy is to create an online free market across Europe so that consumers and businesses can seamlessly exercise online activities within the EU, irrespective of nationality or place of residence. The proposals could have a material impact on rights holders and broadcasters in the sports sector due to plans to eliminate ‘unjustified’ geo-blocking of digital services within the EU and reform copyright laws.

An overview of the Commission’s proposals

The Commission’s overall digital strategy is built on three pillars:

  • Better access for consumers and businesses to online goods and services across Europe – proposals intended to break down barriers to cross-border online activity;
  • Creating the right conditions for digital networks and services to flourish – proposals intended to create a regulatory environment that fosters innovation, investment, and fair competition; and
  • Maximising the growth potential of the European Digital Economy –proposals to secure investment in the infrastructures and technologies required to deliver an effective digital economy.

Of particular note to clients in the sport sector are proposals to prevent unjustified geo-blocking, and to reform copyright laws to enable consumers to benefit from greater access to digital content from other Member States (whether as a result of the consumer seeking to access content purchased in their own country whilst abroad, or to purchase content from providers in other countries).

Preventing ‘unjustified’ geo-blocking

In the Commission’s view, geo-blocking constitutes a significant cause of fragmentation within the EU Internal Market, and potentially leads to consumers paying markedly different prices for the same goods or services, depending upon their state of residence. The Commission has acknowledged that, in principle, sometimes geo-blocking restrictions can be justified, for example to comply with legal obligations. However, the Communication and accompanying documentation contain little detail on the circumstances in which the Commission regards geo-blocking as justifiable – the examples provided are either uncontroversial (e.g. to allow providers to comply with national laws such as restrictions on advertising tobacco products or making available online betting services), or are too high level to provide an indication of the likely scope of the Commission’s forthcoming legislative proposals (e.g. to enable providers to avoid incurring extra costs). It seems likely that justifications for geo-blocking will therefore be narrowly interpreted.

In this context it is important to note that the Commission’s geo-blocking proposals relate to all online trade – and not only to the availability of audiovisual content online. It is not clear at this stage whether the Commission intends to implement a ‘one-size-fits-all’ approach to determining whether a geo-blocking restriction can be justified, or will consider an approach that permits different treatments for different types of products or services.

The Commission has stated it intends to publish its legislative proposals in this area in the first half of 2016. These are expected to centre around amendments to the E-commerce Directive, and to Article 20 of the Services Directive (which prohibits discrimination in the provision of services based on place of residence, unless there are objective justifications).

The Commission also announced that it has launched a Competition Sector Inquiry into the e-commerce sector as a whole. This will analyse (amongst other things) the nature, prevalence and effects of geo-blocking restrictions. The Commission expects to publish a preliminary report for consultation in mid-2016, although the final report is not due until the first quarter of 2017. Since territorial restrictions on cross-border sales of decoder equipment were held in the Murphy cases to infringe EU competition law, there is a possibility that ge0-blocking restrictions will also be deemed to do so, at least where they are absolute in nature.

Reform of copyright laws

The Commission’s proposals also include increased harmonisation of the copyright regime within the EU. This is in part in recognition that copyright within the EU has a territorial dimension – i.e., the geographical scope of copyright protection under each national law is limited to the territory of the relevant Member State, which can lead to potential discrepancies or additional costs associated with licensing copyright on a pan-EU basis.

The Communication also focusses on two further areas where the Commission believes current copyright laws can serve as a barrier to cross-border access to digital content. Firstly, the Commission wishes to ensure the ‘portability’ of digital content so that where a consumer legally acquires online content in his ‘home’ Member State, that consumer can continue to access that content when he travels to other EU countries. Secondly, the Commission wants consumers to benefit from greater access to copyright-protected content from other EU Member States to ensure that consumers are able to purchase online content freely from other EU countries (and that access should not be prevented by contractual restrictions agreed between rights holders and distributors).

The Communication states that it will make legislative proposals to reduce the differences between national copyright regimes and allow for wider online access to works by users across the EU before the end of 2015, and provides that these changes may in part be achieved by the possible extension of the scope of the 1993 Satellite and Cable Directive to cover broadcasters’ online services.

Application of the Commission’s strategy to territorial licensing within the sports broadcasting industry

In a fact sheet accompanying the Communication, the Commission states that it does not wish to challenge the ability of rights holders to grant rights to exploit audiovisual content on a territorial basis, and that its legislative proposals will “[respect] the value of rights in the audiovisual sector“. However, if the aim of the Commission is to enable consumers to freely purchase online content from other EU Member States, it is difficult to see how the commercial purpose and effectiveness of territorial licensing will not be undermined (at least in part).

For sporting content in particular, there is a substantial difference between Member States in the value of media rights to the applicable competition or event. This is especially the case for some sports (e.g. rugby, handball or skiing) or competitions (e.g. some competitions involving only domestic teams) that benefit from a high level of popularity in some Member States but not others. Whilst the Commission recognises this in the Staff Working Document that accompanies the Communication, neither that Staff Working Document nor the Communication itself provide any indication as to how (or indeed if) the Commission’s proposals will reflect this disparity and protect the ability of rights holders to seek to maximise the value of their content.

Stakeholders would welcome clarification of various issues by the Commission before it issues its proposed legislative reforms, including:

  • whether the disparity in value in sports media rights between Member States should mean that geo-blocking audiovisual content of sports or sporting events should be deemed to be ‘justified’ for the purposes of the new legislative proposals; and
  • to the extent that geo-blocking is prohibited, what steps rights holders and broadcasters can take to protect the territorial licensing model – for example, whether it will be permissible for rights holders to restrict broadcasters to make content available in certain specified languages only, or to include restrictions on the active marketing or sale of a broadcaster’s online content outside its licensed Member State (as opposed to selling on a ‘passive’ basis in response to queries from individual consumers).

The Commission has set itself ambitious deadlines for publishing its proposed legislation to secure the aims of the Digital Single Market strategy. Bird & Bird will provide further updates when more detailed legislative proposals are made available.