This week, execs from NBCUniversal, Disney, plus four other Hollywood studios and Sky UK attend a hearing with the E.U. antitrust regulators to answer charges of anti-competitive movie trading. Meanwhile, threatening territory-by-territory licensing, the European Commission’s Digital Single Market drive for Digital Single Market cross-border access – whereby people in the E.U. would be free to buy content situated on other countries’ digital platforms –had the world’s film and TV industry on tenterhooks since officially announced May 8, just before Cannes. What encouragement has a distributor in Germany got to put up good money for a movie’s P & A, if it suddenly appears on a digital platform in Ireland, so can be accessed online across Europe? By second-half 2015, the Commission appeared to have pulled back on its cross-border access plans for movies and TV. But with a new Cable & Satellite Directive up for review in 2016, industry dialogue with EC authorities on its Digital Single Market plans is likely to stretch way into the future. As 2016 E.U.-industry talks resume, Variety asked Mike Ryan, chairman of the global trade assn. Independent Film & TV Alliance, and Jean Prewitt, IFTA CEO, to explain key issues at stake in the EU Digital Single Market drive.
The European Commission unveiled draft regulation Dec. 9 on portability. What is it, and how is it different from cross-border access that has raised such opposition from the IFTA, and indeed the MPAA and world producers’ org FIAPF?
“Portability” in the draft regulation requires that providers of online content services in the [E.U.] Member States enable their subscribers to access those services when they are temporarily present in another Member State. “Cross-border” would require online service providers to allow permanent residents of other Member States to access the service as if they were local subscribers. For IFTA and other producers’ organizations, the concerns relate to the potential to undercut the system of territorial exclusivity that is at the core of independent film financing. That is, distributors in the Member States currently invest in film production through pre-sales, trading the risk of recouping their investment against the exclusive right to exploit the film in their territory. Cross-border availability (whether direct or through a poorly drafted portability regulation) drives sales away from a territory toward the territory of first-availability, thus undercutting the distributor’s ability to develop a distribution plan that is best suited to reach local viewers and recover his investment.
Does the portability regulation apply equally to film TV and sports?
Yes. The draft regulation commentary refers broadly to film, television, televised sporting events, music, games, news and current events.
Questioned by Variety, some national VOD operations – – France’s Molotov.tv, Filmin in Spain – welcome portability. Denying people traveling access to their local platforms encourage people to sign up for global, multi services such as Netflix and Amazon, or find illegal alternatives, argues Molotov.tv’s Jean-David Blanc. What is IFTA’s take on the new draft regulation?
There is no question that some online platforms are moving toward providing portability on a market-driven basis and there is no impediment under current law that would prevent them from doing so. IFTA and industry colleagues have long urged the Commission to allow these market forces to play out since this is a far more reliable mechanism to meet true consumer demand than imposing artificial requirements through regulation. However, we note that many local platforms lack the ability or resources to deliver up access throughout the Member States at the quality or with the type of content that will allow them to compete with the larger, multi-national services.
We also believe that the current draft regulation creates significant risks of eroding copyright protection and film financing. Among other issues, the draft regulation does not define “temporarily” present (in another Member State) nor does it mandate full authentication to ensure that “portability” does not become permanent “cross border” access. The regulation encompasses both subscription services (as to which no authentication requirements are imposed) and other services (if the provider can authenticate merely “location”), broadening the potential reach far beyond the subscriber base that is contemplated when content is licensed to the platform initially and doing so without protection against sharing or misuse. Finally, the draft regulation is intended to be effective in a rapid six months and also retroactive to all content supply licenses relevant to every online service as of that date. While the Commission has alluded to the licensing parties (content suppliers and platforms) negotiating the details of content protection, pricing and other license terms as this new regime goes into place, the proposed timetable removes the ability to have meaningful negotiations.
So you have fears that portability regulations may allow the re-introduction of an E.C. push for cross-border access by the back door?
Yes. The draft regulation already creates the risk of cross-border access beyond the original concept of temporary portability for paying subscribers to legal online services. Moreover, the Commission has openly signaled its intention to pursue broad cross-border access to audiovisual services through multiple other avenues, including its review of the Copyright Directive, the Satellite & Cable Directive, and other instruments.
You’ve mentioned the Satellite & Cable Directive, which the Commission plans to review in 2016. At least in May, the Commission envisaged broadcaster digital services, such as, foreseeably, the BBC iPlayer, being received in countries outside their origin. Is this still on the table?
The Commission has taken comments on the Satellite & Cable Directive and on its views that broadcaster services should be accessible outside the country of origin. IFTA and others have filed comments, urging that the existing policy framework be retained. We strongly believe that altering the basis on which these services are delivered and received will do a disservice to consumers, both by undermining the territorially-based pre-sale and financing structure but also by de-incentivizing investment in the locally-themed content that currently is delivered by local broadcaster organizations to a consumer base that appreciates it.
How important do you think portability is? Yes, lots of people travel, work part of the week abroad, but they’re still exceptions to the E.U, rule. And if portability strengthens national VOD services, couldn’t this have an impact on the kind of money they could put up to buy film and TV content?
The marketplace itself is the only reliable indicator of how important portability is to consumers overall — whether consumers will select services based on a portability offer versus price and content remains to be seen. Under current circumstances, national VoD platforms do not routinely participate in production financing at the pre-sale stage; anticipated returns from those services are at best factored into the pre-sale minimum guarantees put forward by national all-rights distributors. As noted above, those distributors look broadly to all revenue prospects to recoup their advance investment and will determine how to price and time sub-licenses to these services.
The Commission also announced Dec. 9 an action-plan for copyright reform. One part addresses piracy. The Commission says it will take immediate action setting up and applying “follow-the-money” mechanisms and is looking to enforce more rigorous action and notice take down procedures. What does this mean? Has this been applied effectively anywhere and so is not just wishful thinking?
IFTA supports stronger legislative instruments to require use of “notice – take down – stay down” and – ideally – clearer obligations on others in the value chain (payment processors, search engines, ad placement organizations, etc.) to address commercial scale piracy. While the pursuit of voluntary industry wide agreements, which the Commission hopes to facilitate in the first part of 2016, is a useful exercise to clarify the needs, concerns and capabilities of the stakeholders, it remains to be seen whether such agreements can have sufficient “teeth” to curb large-scale illegal activity.
The same document, Making E.U. Copyright Fit for the Digital Age,” talks about the E.C. exploring “alternative models of financing, production and distribution in the animation sector.” Do you sense that Europe’s animation sector may receive some priority support?
We have little insight here but would be concerned if “alternative models of financing” is meant to refer to compulsory licensing and/or mandatory collective management that substitute a “one size fits all” system of compensation for the rigors of the marketplace and the tough test of true audience demand.
Looking forward, what pieces of legislation could prove flashpoints between the E.C. and major industry orgs? Or is avoiding cross-border access, its danger, by far the main priority – as somebody said: When the house is burning you don’t check if someone’s cleaned up the barbecue….
IFTA and its industry colleagues’ main concerns are to preserve the strong copyright and licensing framework that encourages the creation of compelling and diverse audiovisual programming that appeals to the entertainment, education and cultural interests of the world’s audiences. It is fundamental that the creator be able to rely on clearly defined exclusive rights and the freedom of contract through which to raise production finance, to pursue a national and global distribution plan that reaches the broadest audience, and to protect the work against theft and misappropriation. As the Commission moves forward, we anticipate responding to initiatives on copyright, enforcement, online platforms and broad media policy.