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Chipping away at territorial content licensing

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From Australia’s ban on geo-blocks on software to the U.S. Supreme Court’s ruling in Kirtsaeng v. John Wiley & Sons, courts and policymakers have been chipping away at the legal foundations of the long-standing practice of licensing rights to movies, TV shows, books and other media on an exclusive territory-by-territory basis. Today the European Union got into the act.

The European Commission has opened an antitrust investigation into the use of restrictive licenses by five major Hollywood studios in their dealings with pay-TV distributors that prohibit those services from selling movies outside their home territories. The pay-TV providers targeted by the probe are BSkyB of the UK, Canal Plus of France, Sky Italia of Italy, Sky Deutschland of Germany and DTS of Spain. The studios are 20th Century Fox, Warner Bros., Universal, Sony Pictures and Paramount.

The statement issued by the Commission makes clear that the use of territorial licensing per se is not at issue in the probe. Instead, the investigation will focus on the narrow question of whether the use of geo-blocking to prevent, say, a French subscriber to Canal Plus from accessing that service from other countries in the EU, violates EU antitrust laws.

The probe is an outgrowth of a 2011 ruling by the EU Court of Justice involving exclusive territorial broadcasting rights to English Premier League football games. “These licensing provisions entailed that TV viewers could only watch the matches transmitted by the broadcasters established in the Member State where they resided,” the Commission noted in its statement. “The Court noted that licensing provisions preventing a satellite broadcaster from providing its broadcasts to consumers outside the licensed territory enable each broadcaster to be granted absolute territorial exclusivity in the area covered by the license, thus eliminating all competition between broadcasters and partitioning the market in accordance with national borders.”

Limited or not, though, the EU investigation could take another stone out of the foundation of a business model that has helped media companies maximize revenue for decades.