Friday, February 04, 2011

One ring to rule them all / International Rights Sales & the EU

Advocate General Kokott in FAPL v QC Leisure / Karen Murphy v Media Protection Services has really thrown a cat amongst the pigeons.

The principle that rests behind many sports rights holders business models is to maximise sales in home country and then parcel up rights into a many different boxes as possible and sell them off to international clients (each deal is small compared to home country but it all adds up). This now appears to be in conflict with Articles 34 and 101 of the Treaty on the Functioning of the European Union.

In practical terms Karen Murphy decided she did not want to pay £6,000 per year to show Sky in her Pub so set up a dish / decoder and brought in a signal from another European country which cost £800 per year. The local licensee will have paid a far lower rights fee than Sky so can probably still make the numbers work at £800. Understandably this did not play well at Isleworth.

Her comments (AG Kokott) were

“Where a programme content provider enters into a series of exclusive licences each for the territory of one or more Member States under which the broadcaster is licensed to broadcast the programme content only within that territory (including by satellite) and a contractual obligation is included in each licence requiring the broadcaster to prevent its satellite decoder cards which enable reception of the licensed programme content from being used outside the licensed territory, such licence agreements are liable to prevent, restrict or distort competition. They are therefore incompatible with Article 101(1) TFEU.”

Taken to an extreme does this mean consumers can source their programming / entertainment from anywhere within the EU ? If it does (and we are waiting for the full ECJ ruling on this) then rights holders will most likely see a drop in revenues. Bidders in the home country will be concerned that they have effectively lost territory exclusivity as the consumer has now got a wide range of choice from where they can source their content - any EU licensee.

Common sense suggests however that AG Kokott did not intend to wipe out the international sales business and that this will be softened. The logic of her arguments could extend across many industries so unless the EU really is one single market and domestic governments have been neutered it is difficult to imagine this standing up. However - what happens in the uncertain interim ?

Since it is Friday the last word goes to Groucho Marx

"Politics is the art of looking for trouble, finding it, misdiagnosing it, and then misapplying the wrong remedies."