Decoder Ruling May Impact Traditional TV Distribution Model

PREMIUM: A European court ruling on the trans-border use of pay-TV decoder cards may have a significant impact on the way television programs are sold in the future, reports Jay Stuart.

The European Court of Justice (ECJ) last month ruled in favour of a pub owner in Britain who saved money by using a Greek pay-TV decoder card to access live Premier League soccer on Greek TV rather than obtaining a license from BSkyB. The court said that restricting the import, use and sale of foreign decoder cards is contrary to European law.

Last week, one of the EU’s most senior officials, Michael Barnier, Commissioner for Internal Market & Services, stressed that the ruling is not revolutionary for the television business. “The judgment reinforces the single market by ensuring that there is cross-border access to programming,” he said in Brussels. “But the consumer must pay. The rights-holder is not required to make programming available in all markets or to sell pan-European rights. What it means is that the consumer cannot have his access cut off on the basis simply on the basis of territoriality if he is willing to pay for access.”

While the case centred on sports programming, the implications of the ruling extend to the distribution business generally because deals are normally done on a territorial basis. The regulatory issues are complex and the practical meaning of the ruling remains unclear as yet, according to legal experts. Indeed, it would seem to raise as many questions as it answers.

“Can rights owners still sell on territorial basis? The answer is yes. But it’s a qualified yes,” said attorney David Naylor, a partner in London law firm Field Fisher Waterhouse.

Licensing by language is still allowed in Europe. “Language is a way to protect territoriality but it is not massively comforting,” he said.

While distributors might argue that deals based on national boundaries enable them to extract more revenue from the market, the ECJ does not seem to see this as a legitimate reason to allow such agreements. “The court sets out that the rights owner is not guaranteed the opportunity to demand the highest possible remuneration for intellectual property, but only appropriate remuneration,” Naylor said. The definition of this appropriate remuneration seems to be left to commercial negotiation in a market where exclusivity cannot be based on national borders.

The crux of the ruling is the definition of communication, according to lawyer Tom Moody-Stuart of 8 New Square Chambers. “European law is based on the uplink in this context. What the law says is that when you broadcast in Greece and the program is received in Manchester, you are still only communicating one time, and that communication cannot be restricted on a territorial basis. So distributors need to look at their potential audience in the whole of Europe for that one communication, no matter where it originates.”

In other words, the Greek-speaking audience in England will be able to obtain smart cards to watch Greek channels legitimately. Therefore, you probably need to work into your negotiation with the Greek channel those potential viewers in England as an additional audience that’s buying your program in the first place.

When it comes to the smart cards, the ECJ ruling might also impact the marketing of pay-TV services in the long run. Marie Demetriou of Brick Court Chambers, the lawyer who successfully represented pub owner Karen Murphy in the Premier League case, said the pricing power of pay-TV companies in their domestic markets could be affected by smart cards from potentially cheaper foreign pay-TV providers being available.