Territorial exclusive TV licences in breach of competition law?

The grant of exclusive broadcasting licences by several major US film studios (Twentieth Century Fox, Warner Bros., Sony Pictures, NBC Universal, Paramount Pictures) to European pay-TV broadcasters such as BSkyB (United Kingdom), Canal Plus (France), Sky Italia, Sky Deutschland and DTS (Spain), by means of which the broadcasting of audiovisual content is restricted to a specific territory, is under review.

The European Commission has initiated formal proceedings (European Commission – IP/14/15 – 13/01/2014) to examine whether the provisions in these licence agreements infringe European competition law.

US film studios typically grant exclusive licences to only one pay-TV broadcaster per Member State. This results in what is known as "absolute territorial protection". The broadcasting of licensed content outside the Member State for which the respective pay-TV broadcaster has acquired the licence is subsequently prohibited. This applies even in the case of unsolicited requests from potential customers in other Member States. According to the European Commission, this could constitute conduct restricting competition prohibited under Art. 101 TFEU.

Legal background

The background to the proceedings is the EU Cable and Satellite Directive and, based thereon, the decision Premier League/Murphy (joined cases C-403/08 and C-429/08) of the Court of Justice of the European Union (EuGH). Broadcasters were granted an exclusive licence for the transmission of matches from the English Premier League, which was restricted to a specific territory. This territory regularly corresponded to the territory of the respective European Member State. Television viewers could thus only follow the matches shown by the broadcaster established in their Member State of residence. The Court of Justice of the European Union (EuGH) saw in this an impermissible restriction of competition between broadcasters and a sealing off of the market along national borders.

Conclusion

Should the European Commission reach the conclusion that the licence agreements in question already constitute conduct in breach of competition law, this would confirm that the grant of territorially limited exclusive broadcasting and online licences is no longer possible without further restrictions. In addition to its relevance in the exploitation of rights, this question has particular significance for the financing of projects and the contractual design of international co-production agreements, since the exclusive marketing of individual territories can be an important part of the toolkit for preventing tax disadvantages associated with media relief through separate exploitation whilst still enabling an appropriate allocation of revenues.

This issue has been acute at the latest since the end of the transition period of the EU Cable and Satellite Directive, which is why exclusive licence grants of different language versions, or a functional division of respectively worldwide rights at different exploitation stages combined with exclusive exploitation windows, are often recommended for broadcasting and online rights.

A decision by the Commission providing legal clarity in this regard could therefore potentially also serve to remove financing impediments.