European Court hears arguments in a dispute over broadcasters&apos rights to protect territorial exclusivity - the results could have serious consequences for content rights holders throughout the EU

United Kingdom

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

On 5 October the Court of Justice of the European Union ("ECJ") examined the right of British pub landlords to show foreign broadcasts of live FA Premier League ("FAPL") games (using decoder cards).  The ECJ has been asked to consider a number of questions referred to it by the English High Court in two separate cases concerning the application of EU law (including broadcast and copyright laws, competition law and the fundamental principles of free trade within the EU), and the Advocate General will hand down her opinion on 13 January 2011. Here we describe some of the key arguments presented to the ECJ and consider the potentially serious impact of the final judgment for all rights holders of premium content.

Background

In 2005, landlady Karen Murphy was prosecuted under UK copyright law for showing live FAPL games at her Portsmouth pub using a Greek satellite decoder card instead of an authorised UK BSkyB subscription – five years on, the ECJ's Grand Chamber is considering the arguments of the EU institutions and a number of European governments as to whether the market for broadcasting services and satellite decoder cards should remain regimented along national borders, or whether a pan-European approach should be adopted.
Until now, the FAPL has sold its broadcasting rights on a country-specific basis, whereby broadcasters agree to restrict their services to their own territory, maximising revenue for the Premier League. The richest league in the world, it is the pinnacle of English football (Sky has paid almost £1.8bn for its rights from 2007-2010), and the revenue received since the FAPL's inception in 1992 has transformed the game.

Arguments

Murphy, along with satellite decoder card traders AV Station and QC Leisure, argues that the European broadcast market is artificially partitioned along national lines, and as such is contrary to the principle of free movement of goods and services upon which the EU is based.
The Czech government and the European Free Trade Association ("EFTA") also argue that such practice restricts competition, as consumers are deprived of choice when it comes to satellite providers. They argue that the FAPL's agreements are aimed solely at restricting parallel trade, and "the European interest in the functioning of the single market outweighs the interest of the Premier League in maximising its revenues."
The FAPL, on the other hand, warns that to adopt any alternative measures would distort the European broadcasting market and "damage the audiovisual industry". Interventions from the UK, French, Italian and Spanish governments supported the view that there were no legal prohibitions on cross-border broadcasting services, but that this was merely the market determining the most appropriate way of selling rights. This situation was labelled a "reflection of viewer preferences", after pan-European licences had been put up for sale with no buyers.

Consequences for content providers

The potential impact of this decision on rights holders is huge, not just in the sporting arena but in all areas of the entertainment industry.
If Ms Murphy's arguments are successful, the FAPL could potentially have to offer pan-European rights deals in order to allow competition between broadcasters across the EU. This would be likely to undermine the overall revenue that the FAPL can earn, which could have serious knock-on effects for the football clubs involved (each of which currently receives a proportion of the revenues derived from the sale of broadcasting rights).
Furthermore, the Football Association currently imposes a broadcasting blackout in the UK on games starting at the traditional time of 3pm on a Saturday, in order to encourage attendances at live games. This objective would also be undermined if UK consumers could have legitimate access to European satellite feeds, which again would have financial consequences on the clubs suffering dwindling gate receipts.

The FAPL's current contracts with broadcasters preclude the use of their decoder cards outside the relevant territory, which forms the basis of the argument that these contracts are anti-competitive as they create territorial monopolies. The alternative proposed by Ms Murphy is that all broadcasters compete for pan-European licences, which provides the consumer with a choice of providers within their own country. However it may be the case that such monopolies will be strengthened further, as only the largest broadcasters will be able to afford the licences offered and smaller competitors will be squeezed out of the market. The consequences of such a decision would extend far beyond football, to movies and all forms of video content with international appeal.

Potential outcome

It remains to be seen how the ECJ will interpret EU laws. A decision in favour of Ms Murphy would allow publicans across the country to cancel their existing subscriptions and find cheaper deals from abroad, something which would have obvious important consequences for broadcasters currently enjoying territorial protections.

However this is perhaps the least likely outcome. The European Commission reviewed FAPL's practice of selling broadcasting rights in 2005 and essentially approved it, with the imposition of a requirement for broadcasters to bid for rights packages. BSkyB maintained its monopoly, despite the introduction of Setanta and subsequently ESPN, as it still won the large majority of packages offered. Similar outcomes were seen in the German Bundesliga. It is also difficult to see the ECJ sympathising with copyright infringers, despite the fact that the decoder cards are unlikely to be considered "illicit" for the purposes of the EU legislation. Such a decision would no doubt be a boon to the FAPL's enforcement team, as hundreds of publicans across the country would find themselves open to heavy fines.

The Advocate General Juliane Kokott will deliver her Opinion on 13 January next year and the ECJ's judgment is likely to be handed down in mid-2011. The High Court must then apply the judgment to the specific proceedings.