Landmark case undermines territorial rights trade

A ruling by Europe’s highest court on a U.K. sports rights case has the potential to undermine the international TV and independent film production and sales biz.

The court found that British pub owner Karen Murphy was within her rights when, five years ago, she started using Greek satellite TV provider Nova’s decoder to show Premier League soccer to her customers, rather than News Corp. paybox BSkyB’s more expensive Sky Sports service.

Sky paid $1.54 billion for exclusive U.K. rights to the matches but, crucially, the court decreed Tuesday that the sale of rights on a country-by-country basis broke EU law.

The implications of the decision are still unclear, but could effectively undercut the way that content is funded in Europe.

“We finance our productions by selling rights on a territory-by-territory basis, a strategy that … only works if it is exclusive,” said Stephen Garrett, chairman of Kudos Film and TV and exec chairman of Shine Pictures, in an interview with London’s Times newspaper.

“An episode of ‘Spooks’ (aka ‘MI-5′) costs around £1 million ($1.54 million) to produce and employs hundreds of people. High-quality entertainment is not cheap, and as a producer, Kudos has effectively to mortgage these territorial rights to secure the upfront funding to make the show in the first place.

The incentive for broadcasters to buy is the guarantee that they will be the only one airing the show, which means maximum ratings and advertising revenues, Garrett said. “Without (that guarantee), why would they bother to invest?”

Garrett added that the ruling could see smaller companies squeezed out of the market.

“Broadcasters would (be) forced to buy more rights than they need to secure the ones that they really want,” he said, “creating a fictitious and fundamentally unsustainable market for unwanted rights. Only the biggest broadcasters could afford to play such a game, fueling concentration detrimental to media pluralism and competition, he added.

Movies that are released in specific windows in each country due to exclusive territorial licensing could see that distribution structure erased on television under the ruling.

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