April 2014 28 E.U. Quest ions thing in the world”? The issue at hand is a current investigation into whether the present system of licensing movies on a territory exclusive basis contravenes Clause 101 of the Treaty of Functioning of the European Union. The implications of the investigation announced in January 2014 could be that sales of exclusive territorial pay-TV rights to premium sports and newly released Hollywood movies break competition law by stopping licensees from selling to other European Union countries. The Commission’s announcement of this investigation, which states that its purpose is to examinewhether the traditional basis of licensing content on a territory exclusive basis “prevents [pay] broadcasters from providing their services across borders, for example by refusing potential subscribers from other member states or blocking cross-border access to their services,” sounds as if it is readying itself to create the content industry’s worst nightmare. But it isn’t. Thestatementalsosoundsas if this investigation is about the “free movement of goods and services” within the E.U. But again, it isn’t. What it is, is an investigation into a relatively simple issue, but one that also forms part of a much larger, and much more complex evolution of the European Union’s view of, and relationship with, the provision of audiovisual content. The announcement specifically names five Hollywood majors: Twentieth Century Fox, Warner Bros., Sony Pictures, NBCUniversal and Paramount, and five European pay-TV services: BSkyB, Canal Plus, Sky Italia, Sky Deutschland and Spain’s DTS. Given the very early stage of this investigation, (when contacted by VideoAge a Commission spokesperson stressed, “there is no timeframe for this investigation, it will take as long as it takes”) there was an understandable reluctance amongst the named parties to be interviewed, however, two statements were offered. NBCUniversal’s statement read, “following an earlier informal request for information on the subject of territorial licensing of pay-TV rights to certain broadcasters the Commission has now opened a formal investigation into the pay-TV licenses between certain E.U. pay-TV broadcasters and major Hollywood studios. We believe we are in full compliance with E.U. competition law.” BSkyBgaveVideoAgea statement that read: “We are cooperating with the European Commission in its investigation into cross-border provision of pay-TV services in the E.U. At this very early stage, it is too early to speculate on the outcome.” This apparently bland statement actually cuts to the heart of thematter. This is not an investigation into the licensing of content per se, so much as an investigation into “the cross-border provision of pay-TV services in the E.U.” As Joaquin Almunia, vice president of the European Commission for Competition Policy, emphasized in a press conference following the January announcement, “I want to be clear on one point: we are not calling into question the possibility to grant licenses on a territorial basis, or trying to oblige studios to sell rights on a panEuropean basis. Rather, our investigation will focus on restrictions that prevent the selling of the content in response to unsolicited requests from viewers in other Member States — the socalled ‘passive sales’ — or to existing subscribers who move or travel abroad.” Ross Biggam, director general of The Association of Commercial Television, said, “this inquiry into the provision of movies to Europe’s pay-TV services is part of a larger overall look at the way in which content is licensed and exploited in Europe, stretching from the Karen Murphy case, through an examination of the current copyright situation, to this investigation into the licensing/provision of movies.” The “Karen Murphy case” to which Biggam refers concerns a pub landlady from Portsmouth in the U.K. who was prosecuted for showing British Premiership football (soccer) matches via a decoder purchased from Greek pay-TV service Nova. The outcome of the case is complicated, but in its October 2011 judgment, the European Court of Justice explicitly ruled that having an exclusive system [of licensing] was, “contrary to E.U. law.” While there are other issues complicating the Murphy case, and the investigation into the provision of movies to European pay-TV services is running alongside a separate investigation into the currentcopyrightsituation,Biggamsaid,“Fromthe perspective of commercial exploitation of content, the key issue is territoriality and portability.” Biggam’s points are supported by the concerns expressed by the E.U.’s Almunia, who explained, “If I live in Belgium and want to subscribe to a Spanish pay-TV service, I may not be able to if there is absolute territorial exclusivity.” It is easy to envisage relatively straightforward solutionstothesequestions,offeredbytechnology. But it cannot be too greatly stressed that this inquiry is part of a much broader look the E.U. is taking at the whole question of the exploitation of content— including a consideration of whether or not to revise its copyright laws. A process Biggam claims has been subject to, “heavy pressure from the IT and tech lobbies and anti-copyright activists.” Is this Europe’s ‘Room 101?’ No. But with a White Paper on copyright reform due in June, and this investigation only now starting, it would be foolhardy to think that the door to the “worst thing in the world” will never be opened. By Bob Jenkins Ross Biggam, director general of The Association of Commercial Television CRTC, and various Chinese authorities. Once the channel is in place, the operator has to deal with local production and promotion, and advertising revenues. A+E’s channels, like the History Channel and Crime & Investigation (CI), require local content in order to be attractive to a local audience and, according to Cohan, “the older the channel is, the more local production is done.” That’s production that the company almost always fully owns, and can represent anything from one percent to 50 percent of the channel’s schedule. Promotion is achieved through several means — on air, by cross-promoting with other channels, and off-air by using social media and local traditional media, including TV guides, subscribers’ guidesandby leveragingpromotional tours of the channels’ talent, and press tours that often get front cover coverage. For example, last month History Japan brought a group of journalists from Japan to Los Angeles for a press event supporting the series Storage Wars. A+E Networks organizes these events throughout the year and, at times, they bring talent to other countries. Last summer, A+E brought Rick and Cory Harrison from the series Pawn Stars to Japan, the Philippines, Singapore, Malaysia and India, where they did publicity, consumer events, ad sales events and distribution events. Theyhave alsobrought talent fromseveral series to an advertising Upfront event in Mexico for their Latin American joint venture (where they have A&E, History and Bio channels). This is in addition to organizing a press tour in Las Vegas last year to support three of their series that are shot there: Pawn Stars, Counting Cars andAmerican Restoration. Advertisingrevenues—oneofthetwo-tiersystem under which the channels’ business model operates (the other is sub fees) — are produced by five main methods: sponsorship, spots, global brand, regional brand and direct response. Other revenue streams include home video, EST, merchandising and events. For advertising, networks are sold individually or packaged in bundles with pricing often based on GRPs or spot rates. Channels like A+E can offer specific demographics (e.g., 60 percent of CI’s audience is female and 60-70 percent of History Channel’s is male). Revenues are shared among channels by prearranged formulas and when spots are sold as stand-alone, channels like A+E can offer specific demographics (e.g., 60 percent of CI’s audience is female and 60-70 percent of History Channel’s is male) or an across-the-board demo by combining the ad inventory. A+E Networks would not release advertising figures or their percentage versus sub fees, possiblybecause they tend tovaryaccording to the countries’ economic climates. Last April VideoAge reported that, in some regions, like LATAM, advertising is not as important as it used to be; therefore, content providers and platforms are focusingmore on piracy and, in particular, underreported subs. When the advertising market was robust, these unreported extra eyeballs improved spot sales, but with a weak ad environment, per sub income becomes more valuable. Launching Channels (Continued from Cover) (Continued from Page 26)
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