ECJ’s guidance on FAPL and Karen Murphy and the law on unintended consequences

Once upon a time, small and impoverished countries could still enjoy top quality TV programmes, even if it meant having to acquire most of them from abroad. This was because the value of these secondary rights reflected these countries capacity to pay and the basis on which the programme rights were sold and bought; by country. To those wishing to bring about an integrated Eurostate however, this is tantamount to heresy. Fresh from their success from the one-size fits all Euro, we now have the ECJ attempting to legislate from the bench by issuing guidance in the cases of  FAPL v QC Leisure and Karen Murphy v Media Protection Services Ltd. (cases C-403/08 and C-429/08) that broadcasters such as BSkyB can no longer expect to have their “exclusive” territorial rights protected from cheap parallel imports.

//curia.europa.eu/jcms/upload/docs/application/pdf/2011-10/cp110102en.pdf

At first sight this might seem like a victory for the ‘consumer’ by enabling them to acquire the cheapest content anywhere within the EU. For those with cheap broadcasting rights in small countries, this must seem like a licence to print money. Freed from their contractual obligations not to re-distribute rights outside their exclusive territories, the ECJ guidance would now legalise the the arbitrage of hitherto locally licenced rights across the whole EU market. The key focus of the ECJ guidance relates to live rights that are not covered by copyright and the re-sale of the rights to commercial users such as pubs and clubs where BSkyB generates over £200m pa of marginal revenues.  The limited adverse reaction in the BSkyB share price on this news however suggests that markets are not overly concerned by the apparent challenge, and perhaps with some justification.

So what does the ECJ guidance actually say?

1)   “In its judgment delivered today, the Court of Justice holds that National legislation which prohibits the import, sale or use of foreign decoder cards is contrary to the freedom to provide services and cannot be justified either in light of the objective of protecting intellectual property rights or by the objective of encouraging the public to attend football stadiums.”

– a fairly clear validation of Karen Murphy’s (and other Pub & Club owners) use of cheaper offerings of Premier League content from Greece (Nova) which were around a tenth the price of Sky’s.

2) “So far as concerns the possibility of justifying that restriction in light of the objective of protecting intellectual property rights, the Court observes that the FAPL cannot claim copyright in the Premier League matches themselves, as those sporting events cannot be considered to be an author’s own intellectual creation and, therefore, to be ‘works’ for the purposes of copyright in the European Union.”

– a cast of actors kicking a football around a pitch would therefore be a protected work of copyright. How this differs from many PL football matches though is a mystery to me! In the meantime a few clever lawyers will no doubt recommend that Sky includes a major work of copyright in its live transmission feeds to overseas rights holders such as its logo, which would provide it with copyright protection.

3) “Also, even if national law were to confer comparable protection upon sporting events – which would, in principle, be compatible with EU law – a prohibition on using foreign decoder cards would go beyond what is necessary to ensure appropriate remuneration for the holders of the rights concerned.”

I believe the translation would be “not so fast eenglish! We don’t care what clever legal trick you pull, you’re still going to have to compete with cheap Greek decoders and services.”  In other words, although the ECJ is offering guidance on what it deems non-copyright live broadcasts, the principle can and will be extended to copyrighted works if this is what it takes to establish a pan-european market.  The veil slips further with regards the ECJ’s underlying political agenda with is subsequent comments

4) “payment by the television stations of a premium in order to ensure themselves absolute territorial exclusivity goes beyond what is necessary to ensure the right holders appropriate remuneration, because such a practice may result in artificial price differences between the partitioned national markets. Such partitioning and such an artificial price difference are irreconcilable with the fundamental aim of the Treaty, which is completion of the internal market.

For similar reason the system of exclusive licences is also contrary to European Union competition law if the licence agreements prohibit the supply of decoder cards to television viewers who wish to watch the broadcasts outside the Member State for which the licence is granted”
 – the real agenda, remove these internal “partitioning”, notwithstanding that they reflect the inconvenient fact that there is not even a common language.

Perhaps the ECJ is courting Murphy’s law here, or just the law of unintended consequences. As with the Euro experiment, the initial benefit to Greek rights holders, may prove less advantageous with time. Will the FAPL really risk its >£600m pa UK TV rights for the <£120m pa that it receives from the whole of the rest of Europe? If it can only sell exclusive rights across all of Europe, rather than nationally, then that is surely what it will do. In this circumstance, what chance will Nova get in securing the current low price it pays for the PLFA games? The hard truth is that audiences in small markets such a Greece benefit enormously from separate local markets for content. By encouraging Greek rights holders to arbitrage this content into richer markets (in contravention of their contractual obligations they agreed to when they secured these rights in the first place) may provide a short term revenue advantage, but at considerable longer term risk as these contracts renew. For larger operators, such as BSkyB, the ECJ’s guidance might actually result in a greater concentration of rights ownership and subscribers. If this is not what the ECJ intends, it may be forced to further restrict the ability of rights holders to sell exclusive rights, and therefore fundamentally impair content valuations across the EU.