EU Takes First Step Towards Digital Single Market with Online Content Portability

The European Union has passed portability rules allowing cross border access to online services between all member states, which would give consumers ubiquitous access to content such as movies and live sports streams that they have paid for, wherever they are. The agreed measures await formal ratification by the two EU executive bodies, the Council of the European Union and European Parliament, which if forthcoming as expected means they would come into force around the beginning of 2018.

If that happens that would be the first major step towards establishment of the EU’s long promised single market for all digital content and services.

Agreement was reached on February 7th on proposals that were originally submitted in December 2015. “Today’s agreement will bring concrete benefits to Europeans. People who have subscribed to their favorite series, music and sports events at home will be able to enjoy them when they travel in Europe,” said Vice-President in charge of the Digital Single Market, Andrus Ansip just after the announcement. “This is a new important step in breaking down barriers in the Digital Single Market”.

In fact, this first step is the least controversial and unlikely to cause too much consternation among rights holders and broadcasters. The rules would apply only to individual consumers for content they had already subscribed to in one country, in which case it is hardly unreasonable to be able to access it while travelling. These first rules do not by themselves allow users to shop around the EU to find the cheapest deal for content they want to watch. The rules will be mandatory upon online service providers, including subscription VoD platforms like Netflix, HBO Go and Amazon Prime, as well as online TV services such as Viasat’s Viaplay and Sky’s Now TV. It would also apply to other categories of OTT provider such as music streaming services like Spotify, Deezer and Google Music, as well as eBooks and online game marketplaces. The Commission itself cited as an example the case of a French consumer subscribing Canal Plus’ film and series online services, who would be able to access films and series available in France when on holiday in Croatia or a business trip in Denmark after the rules come into force. Such a consumer would be highly unlikely to subscribe separately to the service in Croatia and Denmark in any case, so there would be no net loss of revenue for Canal Plus. The main concern would be loss of blanket geoblocking to protect against unauthorized cross border access, with greater reliance upon user authentication.

Estonian Andrus Ansip, current European Commissioner for Digital Single Market, has won the first round of his battle to establish a European common market for digital services.

Estonian Andrus Ansip, current European Commissioner for Digital Single Market, has won the first round of his battle to establish a European common market for digital services.

The more contentious part of the EU’s Digital Single Market Strategy is yet to come, concerning extension to broadcasters’ online services of the “country of origin” principle currently in place for cable and satellite pay TV packages. The country of origin principle holds that when goods or services are delivered across borders the transactions are governed by the laws of the source country. Extending this to online services would be a much bigger deal because it threatens the long-established model whereby content rights are negotiated territorially on a country by country basis, which are widely regarded to maximize the total revenue for a given asset. Users would then be able to shop around the whole EU for the best content deals, rather than paying the going rates in their own countries.

This would deprive content owners of revenue across the EU on a per country basis. The market for content in smaller countries would be diminished because it would be assumed consumers there would access content via a service in a neighboring country.

For this reason, European broadcasters are much more split over allowing seamless cross border access to online simulcast and catch up services without geoblocking. While public service broadcasters (pubcasters) are generally in favor of the draft legislation put forward by the European Commission, commercial broadcasters with more at stake financially are more opposed.

The European Broadcasting Union (EBU), which represents pubcasters, has come down in favor after some uncertainty, arguing that the proposal on broadcasters’ Internet transmissions and retransmissions will enable more Public service media (PSM) content to circulate online without damaging rights holders’ business models. Given that cable and satellite pay TV or broadcast services already allow cross border access so that subscribers can watch their subscribed content wherever they are, it made sense to extend the same rules to online services, according to the EBU’s Head of European Affairs Nicola Frank.

However, the Association of Commercial Television in Europe (ACT), which represents leading commercial broadcasters and international channel groups, has taken the opposite view, contending that the proposals undermined the financial model of content production.

ACT has argued that on top of undermining the ability of rights-holders to license on a territory-specific basis, the proposals would by the same token reduce investment in content. ACT estimated total losses of €9.3 billion a year in the short term, settling down at €4.5 billion a year in the longer term, as a result of less European content being produced as well as less accessible, affordable content being generally available.

Ansip though is determined to see the whole program through and is clearly buoyed up by his success so far over portability. “Agreements are now needed on our other proposals to modernize EU copyright rules and ensure a wider access to creative content across borders. I count on the European Parliament and Member States to make it happen,” he said, clearly alluding to the proposed overhaul of copyright and extension of the “country of origin” principle.

We can expect some harder kick-back from commercial broadcasters against this, but the tide appears to be flowing towards implementation of the whole Digital Single Market package without significant watering down.

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