As we all know Sky is a hugely successful broadcasting phenomenon. A major part of Sky’s success stems from its broadcasting rights in respect of major sports events and, in particular, the rights it holds to the broadcasting of Football Association Premier League (“PL”) matches. At present it holds 5 of the 6 broadcasting packages awarded by the PL. It would probably have all 6 if the European Commission had not raised objections to Sky’s dominance in the past and negotiated a settlement to the effect that no single bidder could win all the marketed packages.
As PL matches are, by far, the most popular sports broadcasts in the UK, Sky’s rights, which continue until 2013, give Sky an effective stranglehold over pubs and other venues that wish to broadcast live sports.
The PL grants exclusive licences to broadcasters on a territorial basis so that while Sky (and ESPN) have exclusive rights to broadcast in the UK, foreign broadcasters are awarded the equivalent exclusive rights for their respective jurisdictions. Whilst PL matches are also popular in many other countries, interest is obviously highest in the UK so that the PL can obtain far higher sums in the UK auction than elsewhere. However, as the business is so profitable, UK broadcasters, notably Sky are willing to pay “top dollar” to secure these rights.
All well and good for both the PL and Sky until the advent of a certain Karen Murphy, redoubtable landlady at the “White Red and Blue” in Southsea. Mrs. Murphy wanted to show live sports in her pub but contends that she could not afford Sky’s charges. She therefore subscribed to Sky’s Greek counterpart, Nova, the PL’s licensee for Greece using a Greek viewing card and decoder obtained through Mrs. Murphy’s co-defendant QC Leisure.
The PL claims that by purchasing the card and equipment, Karen Murphy was illegally circumventing the exclusive rights of the PL’s authorised domestic broadcasters.
However, as we all know, the idea behind a “common market” is that there should be a single European market without trade barriers so that competition is enhanced and efficient businesses and cost-conscious consumers both benefit. The Common Market is underpinned by various freedoms enshrined in the Treaty of Rome and subsequent multi-lateral treaties.
These freedoms include the freedom to provide services and goods across EU borders (Articles 28 and 49 EC Treaty) without restriction unless restrictions can be justified on the basis of general interest objectives such as protection of public policy, notably consumer interests. The disagreement between Sky and Karen Murphy therefore distils into a clash between fundamental freedom and competition principles of European law on the one hand and copyright and associated broadcasting rights on the other.
Mrs. Murphy and QC Leisure have both been prosecuted in the High Court and both cases were referred to the European Court of Justice (ECJ) under Article 234 of the Treaty of Rome to resolve this collision between copyright holders’ licensing rights and freedom of movement principles enshrined in the European Treaty.
Both cases raise the fundamental question as to whether in the EU there is really a single unified PL broadcasting rights market or a fragmented territorial one. This is a vital issue for broadcasters and rights holders and Sky was allowed to intervene in this case in order to participate in the reference.
This is a very complex situation and before further consideration, it is worth setting out the battle-lines in the form of the key legal provisions:
- Article 28 EC Treaty (freedom to provide goods)
- Article 49 EC Treaty (freedom to provide services)
- Article 81 EC Treaty (prohibits contractual obligations which appreciably prevent, restrict or distort competition)
- Sections 1 and 6 UK Copyright, Designs and Patents Act 1988 (CDPA) (copyright in broadcasts)
- Article 3 of the Information Society Directive Directive 2001/29/EC (authors to have exclusive right to authorise or prohibit any communication to the public of their works, by wire or wireless means)
- Section 298 UK Copyright, Designs and Patents Act 1988 (CDPA) (copyright holder control of conditional access technology e.g. decoder cards).
The key questions referred to the ECJ are as follows:
- Do Articles 28 or 49 of the EC Treaty preclude enforcement of a provision of national law in a Member State which makes it unlawful to import or sell a satellite decoder card which has been issued by the provider of a satellite broadcasting service in another Member State on the condition that the satellite decoder card is only authorised for use in that other Member State?
- Where a programme content provider enters into a series of exclusive licences each for the territory of one or more Member States under which the broadcaster is licensed to broadcast the programme content only within that territory (including by satellite) and a contractual obligation is included in each licence requiring the broadcaster to prevent its satellite decoder cards which enable reception of the licensed programme content from being used outside the licensed territory, does this contractual restriction contravene the prohibition imposed by Article 81(1) on contractual obligations which appreciably prevent, restrict or distort competition.
If QC Leisure and Mrs. Murphy are correct then the PL’s exclusive territorially based licensing arrangements infringe EU anti-trust and free movement laws as such agreements preclude European citizens from being able to benefit from an open competitive market and thereby preclude them from purchasing live PL matches from the cheapest EU provider.
Moreover, the defendants argued that the arrangement between the PL and national broadcasters infringe EC law because they preclude each authorised licensee/broadcaster from screening live pictures outside its own designated territory; and because they preclude consumers from viewing, or purchasing decoders to view, live PL matches from any broadcaster other than the one with the exclusive national rights.
The Advocate General, Professor Juliane Kokott has now opined and where the Advocate General leads, the ECJ usually follows.
In her opinion, the showing of Premier League live matches in pubs does not constitute communication to the public under Article 3(1) of the Info Society Directive therefore no violation of copyright could be affirmed, as no such communication occurs. In particular, she stressed that the showing of TV programs in bars and pubs does not fall within a specific category identified in the Info Society Directive, i.e. the communication to the public not present at the place where the communication originates (Recital 23). She believes that – when publicans show TV programs – the relevant public (i.e. the pub customers) is present at the place where the communication originates. In other words, the communication would originate on the TV screen (paragraph 144 of the opinion).
Exclusive national rights have been the lucrative basis on which the PL and Sky have based their business models and the aim of the PL is to secure the protection of its rights (and revenues) by procuring a ban on the import, sale, installation and use of ‘foreign’ decoders. If the ECJ upholds the Advocate General’s opinion, this will mean that the use of foreign decoders will be legitimate and this will undermine both the exclusivity arrangements and the concomitant value of the licensed rights.
This is, however, a big “if” as there have already been many comments, both neutral and partisan which question the validity of the Advocate General’s opinion and suggest that it is inconsistent with existing case-law. The ECJ will make a ruling on the matter later this year.
If upheld, this opinion will almost certainly lead to the development of a new trans-European licensing model. In principle this should mean more competition and a resultant better deal for UK consumers (and pub owners). However, in light of the fact that the PL screening packages are bound to be astronomically expensive and only justifiable for those who have an extensive UK customer-based, it is likely that Sky, albeit at a greater cost, will be able to maintain and, perhaps even extend its reach and power and this could ultimately result in a worse deal for the UK consumer.
Please click here to email Simon Halberstam, Head of Technology Law, or call 020 3206 2781.