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Hollywood Anti-Trust Probe in Europe Might Be Softened, E.U. Official Hints

Brussels anti-trust head appears to acknowledge importance of territory-by-territory business model

A speech by Europe’s powerful anti-trust commissioner sparked hope Wednesday that the E.U.’s probe into Hollywood studios’ licensing deals with pay-TV operator Sky might be softened.

Comments by Margrethe Vestager suggested that she is open to maintaining territorial licensing in Europe, the financial backbone of Hollywood and other studios’ business in the region. But Vestager’s speech in Brussels on Tuesday, while viewed as more conciliatory in tone, does not mark a total climb-down or end to the investigation. And both the U.S. and European film and TV industries still want greater clarity on key points concerning their ability to license products country-by-country in Europe.

Initiated in July 2015, the investigation centers on whether the major studios and Sky enacted measures preventing consumers elsewhere in the European Union from paying for and accessing Sky’s programming in the U.K. and Ireland. Vestager contended at the time that such restrictions could be in breach of European competition rules.

Six studios – Disney, NBCUniversal, Paramount, Sony, Fox and Warner Bros. – attended closed-door hearings with the European Commission in January 2016. Paramount settled with E.U. anti-trust authorities last July by pledging not to enforce clauses in its contracts with Sky that prevented E.U. residents outside the U.K. from accessing Sky U.K.

On Tuesday, during a speech praising the export success of Nordic TV drama, Vestager said that “our only concern is about terms that stop broadcasters responding to requests from potential customers from other countries.” But, she added, such access “doesn’t stop filmmakers and distributors from giving different broadcasters exclusive rights in different countries.”

“Competition law doesn’t say that non-dominant broadcasters are obliged to serve those foreign customers. Our case is only whether Sky U.K. can be prohibited from doing so by contracts we are looking at,” Vestager said.

Her speech is “a recognition of reality and positive for the industry,” said Guy Bisson, research director at London-based consultancy Ampere Analysis. He said that “this may be one of the first indications that E.U. competition authorities recognize that territorial licensing is an economic model which may need supporting to maintain content investment.”

The European Commission’s drive to allow foreign customers to request access to pay-TV services in another European country merely legitimizes the gray market for expat audiences. Its impact on studios would be “minimal,” Bisson said.

Benoit Keane, at Brussels-based Keane Legal, agreed. “Vestager’s remarks are a clear indication that the commission is anxious to accommodate the interests of European and independent producers” he said. “This is a first attempt by the commission to put the European film industry at ease as to how it is proceeding with the case.”

That said, Hollywood’s studios are still worried by the idea that product licensed for one territory can be bought by someone in another. And they and European producers will be anxious for clarity on some points in Vestager’s speech.

The commissioner said Tuesday that “barriers between national markets may be justified under certain conditions, in particular when they are necessary to launch new products.”

That remark has triggered speculation that the commission may seek to favor independent and smaller content in its continued support for territory-by-territory licensing. But how that could be achieved without Hollywood crying discrimination is unclear.

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