The European Commission is investigating Sky and six Hollywood majors – Disney, NBCUniversal, Paramount Pictures, Sony, Twentieth Century Fox and Warner Bros – for agreeing content rights deals on a geographically restricted basis in the EU.
The EC has sent a statement of objections to the parties alleging that they have put in place contractual restrictions preventing Sky UK from allowing EU consumers not resident in the UK or Ireland from viewing its pay TV services.
The Commission said that, if its preliminary findings are confirmed, each of the companies would have breached EU competition rules. The EC has identified clauses in the studios’ deals with Sky that require the latter to block access to films available through its online pay TV services or through its satellite services to consumers outside the licensed territory of the UK and Ireland.
According to EU rules, Sky should be able to accept unsolicited requests for its services from consumers in other member states. The Commission noted that some agreements also prevent the studios from selling rights to pay TV operators outside the UK that make their services available to consumers within the UK.
According to EU rules, rights that grant ‘absolute territorial exclusivity’, preventing cross-border competition, are in serious breach of EU rules.
The EC has previously expressed concern about deals between the studios and other broadcasters including Canal+, Spain’s DTS/Canal+ and Sky Deutschland and Sky Italia – the latter two now part of the wider Sky organisation.
Disney immediately condemned the Commission’s action and said it would oppose it.
“The Walt Disney Company is a leader in embracing new and innovative digital technologies that bring its unique entertainment to families and fans worldwide. Our approach is one that supports local creative industries, local digital and broadcast partners and most importantly consumers in every country across the EU. The impact of the Commission’s analysis is destructive of consumer value and we will oppose the proposed action vigorously,” said the studio in a statement.
“NBCUniversal confirms that it has received a Statement of Objections from the European Commission regarding the cross-border provision of pay TV services. We will have the opportunity to formally respond to the Statement and are communicating constructively with the European Commission,” said NBCUniversal.
Sky said that it is reviewing the EU statement of objections. “The European Commission is examining cross border access to Pay TV services across a number of member states. As part of its ongoing enquiry, we have received a statement setting out the Commission’s preliminary views. We will consider this and respond in due course,” it said.
The EU’s investigations in this area follow the 2011 EU Court of Justice ruling on a case pitting he English Premier League against a UK pub landlady who had shown foreign broadcasts of Premier League football matches on her premises, which found that territorially exclusive rights prevent competition by partitioning the market.
The statement of objections is a formal step, giving the recipients the right to reply before any further steps are taken. The investigation is open-ended and is likely to take some time to reach a conclusion, but potentially could have a dramatic impact on the pay TV business in Europe.
“European consumers want to watch the pay TV channels of their choice regardless of where they live or travel in the EU. Our investigation shows that they cannot do this today, also because licensing agreements between the major film studios and Sky UK do not allow consumers in other EU countries to access Sky’s UK and Irish pay TV services, via satellite or online. We believe that this may be in breach of EU competition rules. The studios and Sky UK now have the chance to respond to our concerns,” said EU competition commissioner Margrethe Vestager.