Constantin’s Dieter Hahn on the Dangers of the E.U. Digital Single Market Drive

Films, TV shows and sports rights cannot be treated like ordinary goods, Hahn argues

Constantin’s Dieter Hahn on the Dangers

The gloves will come off this Cannes weekend. On Saturday, five leading lights of Europe’s film industry – Lord David Puttnam, Zentropa’s Anders Kjaerhauge, Mediapro’s Jaume Roures, Mike Ryan at GFM, and Artline Films Olivier Mille – will debate at a colloquium the impact on Europe’s film and audiovisual sectors of the European Commission’s Single Digital Market strategy.

On Sunday, European Commissioner Gunther H. Oettinger will attend a press point with “The Artist” director Michel Hazanavicius and Costa-Gavras to talk about how to promote European cinema in the digital era. This comes as the Commission is advancing on Single Digital Market plans which, it declares will at once respect territorial licensing and window releases while pushing towards a single digital market, which appears to be a contradiction in terms.

In an article first published in the Frankfurter Allgemeine Zeitung, Constantin’s Dieter Hahn, chairman of the supervisory board of Germany’s Constantin Medien, delivers argues in defence of territorial licencing for film, TV show and sports rights, the basis of European cultural diversity:


Geoblocking and the E.U. Single Market

In a demonstrative emotional outburst, rarely seen among Brussels politicians, the Estonian E.U. Digital Commissioner Andrus Ansip recently admitted that he hated “geoblocking.” This choice of words shows the high levels of emotion going on in a practice where the owners of audio-visual rights can geographically protect the distribution of their images. In the opinion of their opponents, the copyright-supported practice of a territorially-restricted licensing of sports, film and series rights is in violation of the basic rules of the E.U. Single Market, according to which the vendor of a commodity in a country of the E.U. may not obstruct its resale and transport to a different country.

They like to point out that geographic sales monopolies and re-import bans were systematically removed across industries over recent decades, in line with this basic principle. According to them, the unquestionable success of the E.U. Single Market would not have been possible otherwise – a problematic attitude when it comes to audio-visual content. Advocates of the unrestricted distribution of all content online do not want to accept that, for example, a program licensed to the BBC for England cannot also be seen on the BBC website in Spain without the permission of the licensor. Copyright gives the creator and owner of cinematographic works the right to receive financial compensation through time-limited or geographically restricted licensing, but also represents the economic basis for creative work and the culture, media and entertainment industries based on it.

The big difference between the copyrighted licensing, for example, of a film and the sale of other goods is the way the process operates economically: With a license, this does not involve a definitive sale of an item meaning a complete, permanent transfer of ownership. This is based on the conviction, developed over centuries, that the creator of intellectual work requires particular protection. In principle, their work stays their work even if it is used commercially. Without territorial control over the assignment of their rights, rights owners can no longer economically license their content, since the assignment of rights in one country devalues all other assignments in other countries if the same content were available there at any time via the internet.

If works protected by copyright are put on an equal footing with other goods, this would be to disregard major differences in the demand structure of audio-visual goods within the various countries of the EU. Unlike other goods and services, audio-visual content are not defined primarily by their utility, but rather in terms of a close relation to the culture of the creator and the user. As entertainment content, they must gain their relevance from the taste, humour and interests of the audience. Whereas a suit or a car has essentially the same utility in Finland as it does in Spain, sports events, films and ultimately all audio-visual content encounter varying levels of interest depending on the cultural region.

The result is that the same content has a differing financial value depending on its distribution area within the EU Single Market. The consequence of this is that the originator of a work can only realise the total value of his or her product by a differentiated assessment based on the distribution area. This is the only way the parties to a licensing contract can determine the value of a license in terms of the consumers who are reachable by the licensee. With unprotected geographical distribution of already licensed work, activists dreaming of unrestricted online freedom are ignoring precisely this economic reality.

For existing reasons such as language, culture or identity, European TV companies have oriented their business models geographically towards one country. The only providers pursuing business models that cover the whole of Europe are the U.S. internet giants Apple, Google and Facebook, as well as the streaming platforms of Amazon and Netflix, and this is why they are unsurprisingly strong lobbyists for the total freedom of utilisation online – hence for their own interests.

In doing this, they are not thinking about Europe, solely of a global market stripped of any diversity. At this point the absurdity of the debate becomes clear. While competition guardians and data protectors from Brussels try to draw up limits to the business policies of Google and Facebook, we simultaneously want to level the natural competitive advantage of our various national media companies and cultural diversity. Industry policies could not be more absurd. In Europe, we have a blooming media economy, precisely because it has developed country by country with specific aspects of culture and taste. However, if we force all market participants onto an artificial European playing field, we will lose this diversity and with it a major element of what makes up the European identity. Our film and TV producers would then have to fight with Apple and Amazon to have a reasonable “share”. The advantages of scale, which their business models also achieve in content distribution, would inevitably exclude national business models from the most important content.

– Dieter Hahn