Cold, warmer, hot – the approach of EU bodies to geoblocking

The recent reforms of the digital market introduced at EU level as well as the pending discussions about the future of online distribution of culture may be divided into three essential subjects. The first indicates positive changes, the second arouses considerable emotion, while the last is a clear cause for concern for the creative industry.

On 6 February 2018 the European Parliament adopted the text of the Regulation on addressing geographical blocking and other forms of discrimination based on customers nationality, place of residence or place of establishment within the internal market and amending Regulation (EC) no. 2006/2004 and (EU) 2017/2394 and Directive 2009/22/EC. It stipulates that in November 2018 continued application of so called geoblocking, that is making a distinction in terms of access and attractiveness of the sales or services offer for clients placing online orders from other EU member states, will be banned.

It was agreed that for the time being the new Regulation will govern purchasing by internet users of licenses for using content protected by copyright (as discussed below). The Regulation stipulates that in principal a seller cannot differentiate between the general terms and conditions of access to goods and services available in online stores depending on the client’s nationality, place of residence or place of establishment of his or her business. Among others this means that airlines, car rentals, hotel chains and distributors of tickets for cultural events will not be able to use currently popular automatic re-routing from the home page of the online store to the website of the local distributor (appropriate for the location of the client), who charges much higher prices than the parent website. It will also no longer be possible to differentiate between the prices of the goods or services on the basis of the IP number of the computer or number of payment card, or for the online store to reject a public tender from another EU member state. Although for some vendors the change of regulations will force amendments in the rules of their e-sales and e-services, the revision must be considered a very positive step for the development of domestic markets.

“Expropriation” of authors under the Regulation

From 20 March 2018 the Regulation on cross border potability of online content services in the internal market, which among others introduces for users of streaming platforms (which include services offering VOD, Spotify, Netflix and Showmax) the ability to use, during temporary stay in another member state, eg. on holiday or business travel, the contents of the platform to which they subscribed in their country of permanent residence. The new possibility is not a result of annexes to license agreements concluded by streaming platforms with authors expanding the territories on which the licensor’s work may be used. It is a result of „legal fiction” introduced by Art. 4 of the Regulation whereby „providing a service (..) to a subscriber who is temporarily located in a member state as well as access to the service and its use by the subscriber takes place only in the member state of the subscriber’s residence”. The cited provision clearly constitutes partial expropriation of the author whose work, without additional remuneration on the grounds of generally applicable regulations, may be used in within a wider scope than agreed with the licensee.

By way of an example, a film producer who granted an exclusive license for a specific fee for use of a film by the owner of a VOD portal offering services on the territory of Poland by means of a user subscription, cannot effectively object to extending the scope of the VOD service to enable the user to use the service during his trip to Austria. The licensees of the producer who regularly pay a specific amount for exclusive access to the service on the territory of Austria may well be dissatisfied with this solution.

At this point it is difficult to estimate the scale of the problem of actual use of works outside the territorial boundaries defined in the license agreement negotiated between the author and the service provider. Unfortunately, the Regulation does not define the concept of „temporary stay”, during which such use by the internet user of a streaming platform „imported” from his place of permanent residence will be allowed without an additional charge to the service provider. It is not certain that only several days of stay are intended, or several months as well. Thus the introduction of the Regulation gives rise to considerable controversy and practical problems for the operation of the creative content market. On the other hand, users of the services are pleased and to a certain extent it enables them to feel in a sense at home in other parts of Europe. It is to be pointed however, that some content service providers have already voluntarily unified their offer long before the Regulation came into force and its availability is not limited to temporary stays of users abroad.

Pending discussions about elimination of geoblocking in the creative sectors

No binding decisions have been made so far with regard to whether the next step in abolishing barriers on the digital market, in 2 years’ time, on the same principles as in the e-sector, will also embrace works protected by copyright. A distinct voice of representatives of the film and phonographic sector may be heard in the pending discussion: the compulsory introduction of a repertoire of content throughout Europe may bring more damage than benefit. Why is that?

The need to unify the offer for the inhabitants of each member state of digitalized musical works, serials, films, e-books and audiobooks and other creative materials provided by subscriber services on streaming platforms (eg. Spotify, Netflix, platformy VOD) would create the necessity to conclude additional license agreements with authors for the distribution of their works all over Europe. For distributors this would mean incurring a considerable financial cost. There are also concerns that abolishing geoblocking on the market of digitalized content protected by copyright could lead to eliminating small enterprises and start-ups involved in only local distribution of works, due to the heavy costs of expanding their offer for all Europeans. Total liquidation of barriers on the digital market could also lead to eliminating content adjusted to local conditions and the preferences of audiences in a given country from the streaming platforms. If the condition for maintaining in a VOD offer of a program popular only in Poland would be paying a higher license fee than so far to the program producer for making the content available throughout the EU, it would seem commercially justified for the distributor to remove it from the repertoire. The same issue may be looked at from a different perspective. If the producer of a local serial persistently wishes to maintain his material on the VOD platform his negotiating position will be so weak that he may agree to grant a license to broadcast the serial throughout Europe for the same price which the so far obtained for a local license. It is the latter scenario that appears most likely. In effect of the contemplated reform less popular, local content may be eliminated from legal sources, and in search of them a user frustrated by the absence of a legal source… will resort to pirated copies.

If since 20 March we have the ability to travel all over Europe with a full range of VOD subscriptions to music, e-books and audiobooks, it is worthwhile to ask for more, putting at risk the financial condition of our domestic authors and small distributors?