A next step for territorial copyright licenses for on-demand audio-visual services in the light of the EU Digital Single Market

ABSTRACT

Despite recent efforts to establish a European Digital Single Market (DSM), access to audio-visual (AV) works through on-demand service providers, such as Netflix and Amazon Prime, continues to be restricted across jurisdictions to the detriment of consumers through geo-blocking measures. This paper introduces a proposal for a central clearing house for AV rights which facilitates the cross-border provision of AV services and thereby contributes to the creation of the DSM. To ensure that the adoption of the proposal enhances the efficiency of the market, we assess whether it meets specific criteria that pertain to market design and the functioning of the market for AV works.

KEYWORDS:

• Digital Single Market
• on-demand audio-visual works
• geo-blocking
• copyright
• central clearing house

Acknowledgement

We are grateful to Thibault Schrepel (Dept. of Public Economics Law, Utrecht University) and two anonymous reviewers for helpful comments and suggestions.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 For example, determined via the payment method's origin, i.e., the country where a credit card was issued.

2 We abstract from workarounds like virtual private networks (VPNs) which allow users to disguise their location when accessing content outside their home jurisdiction because of uncertainty regarding its legality. This is particularly the case when users subscribe to paid services unavailable in their own jurisdiction using a VPN. Thereby, the copyright holder is not deprived of compensation. However, such an approach seems to counteract the underlying principles of the copyright system which our proposal aims at preserving.

3 See also Weiss (2016) for similar observations (p. 884).

4 See Haunss (2013) for an overview of the evolution of CMOs in Europe.

5 See Alaveras, Gómez, and Martens (2017) for a broader discussion on geo-blocking of non-AV content.

6 One example are the Creative Commons which facilitate access to copyright protected works such as music and books through ‘free and easy-to-use copyright licenses’ (Creative Commons, 2016).

7 This view is supported by Langus et al. (2014) who critically oppose any policy proposals abandoning the system of territorial licenses.

8 Langus et al. (2014) provide an overview of factors contributing to high transaction costs in the AV industry. See also Weiss (2016).

9 See Ibáñez Colomo (2017) and Mazziotti (2015) for similar observations.

10 Public broadcasting can be motivated by various reasons, such as a need to support national culture and values, and media plurality – which are subject to ongoing debate (see e.g., Picard & Siciliani, 2013). In the future, it might be worthwhile to explore the possibilities to add free on-demand catch-up services and pay-to view services via pay-TV platforms to the proposal.

11 Note that the scope of the proposal is limited. For instance, from a media policy perspective, it can be desirable that content is framed, explained and displayed in the appropriate local cultural context. Under the current proposal, there does not seem to be a direct role for the clearing house to achieve this goal (except perhaps for providing monitoring data regarding cross-border viewing of locally-textured content). As there are no clear complementarities between the legal (geo-blocking) aspects and the media policy goals, the clearing house should aim at eliminating avoidable frictions while policy goals regarding content may be addressed at the level of distribution.

12 To allow for the cross-border provision of AV rights, a corresponding exemption needs to be included in the copyright framework as discussed in the ‘Evaluation’ section.

13 Experience in the telecommunications and the postal sector with wholesale pricing rules may provide guidance on the impact of wholesale prices on the incentives of AV providers. See for instance Laffont and Tirole (2000) and Geradin (2017).

14 It is outside the scope of this paper to introduce a suitable matching and due diligence mechanism.

15 See, for example, Euroclear (2012) for language requirements related to clearing documentation (p. 24).

16 Cf. solutions based on application programming interfaces (APIs) and communication links between different software platforms’ APIs.

17 For discussions of blockchain technologies applied to clearing and settlement, see for instance Peters and Panayi (2016). For a broad discussion of blockchain applied to the copyright sphere, from a legal and computer science perspective, see Savelyev (2018). Schrepel (2018) discusses how blockchain, as a means to facilitate contracting and ‘cut out the middleman’, creates new challenges for antitrust law.

18 For an exposition on the central economic features of the blockchain technology, see Catalini and Gans (2018).

19 Public (also called permissionless, i.e., without access control) blockchains rely on ‘mining’ as a means to receiving value. Private (permissioned) blockchains add value through applications, for instance, as a means for the transfer of assets, as registers of exchanges, and as execution mechanisms for smart contracts. See Schrepel (2018) for a more elaborate description and discussion (in the context of antitrust law).

20 Based on a private blockchain, as public blockchains currently do not allow any form of governance other than the ‘consensus protocol’.

Additional information

Notes on contributors

Miriam Ettel

Miriam Ettel is a M.Sc. Economics of Competition and Regulation Graduate from Utrecht University School of Economics. She is working as a Specialist Advisor for Regulatory Engagement (Treasury) [email: [email protected]].

Paul W. J. de Bijl

Paul W. J. de Bijl is senior lecturer Competition and Regulation at Utrecht University School of Economics, owner/principal of Radicand Economics, and extramural fellow of TILEC, Tilburg University. His research interests include regulation of electronic communications, information policy, and the digital economy [email: [email protected]].