Poolside video streaming

Digital content platforms are enjoying growing popularity. These include video streaming services such as Amazon Video, Netflix and the multimedia libraries of television stations, music platforms such as Spotify and Apple Music, and subscription models for e-books such as Skoobe. For licensing reasons, and to differentiate offers and prices, these are normally organised as national services. Service providers use geo-blocking to secure such regional offers against access from another country. They in particular block foreign IP addresses and in the case of services requiring registration check whether a domestic address or form of payment has been used.

The EU Commission sees such measures as problematic because in its opinion they restrict both competition between providers and the options available to consumers. The EU Commission has in light of this announced an action plan against geo-blocking as a prominent aspect of its strategy to achieve a digital single market. In a first step, the Commission is now tackling one specific aspect: geo-blocking prevents users from accessing their online content from outside their home country, for example when they are on holiday or on business trips, even if they are legitimate customers in their home country and have in particular paid for a corresponding subscription.

Key provisions of the draft Regulation

With reference to the issue of “portability”, the EU Commission published a proposal for a Regulation on 9 December 2015 (the press release and the proposed Regulation can be found here). This Regulation is aimed at enabling subscribers to access digital content services during temporary stays in EU countries outside their home country, is to be directly applicable in the EU Member States without requiring any transposing act and is also to apply for existing contracts and acquired rights.

The Commission expressly only wants to benefit consumers with this legislation, a fact which is problematic for providers of digital services. A clear distinction is likely to pose a problem for them because the status of consumer is determined according to the purpose of the usage of the service being non-commercial. In future, consumers should be able to use linear services such as pay television offers and on-demand platforms also when they are travelling outside their home country. This can concern both subscription-based services and free services; however, the requirement is always that users have registered themselves. Portability would accordingly, for example, have to be facilitated for registered users of the video platform YouTube, but not for its unregistered users.

The consumer must also have an existing contract with the service provider in the EU Member State in which the consumer has his or her habitual residence (not necessarily his or her domicile), and be temporarily present in another Member State. There is not, however, any time limit on this, as long as this does not become a habitual residence in this other Member State. Finally, the Commission also in its plans addresses issues relating to the licensing of digital content since the licences of service providers are often restricted to the domestic territory. In order to prevent a conflict in this respect, the proposed Regulation states that facilitating portability outside the user’s home country is deemed use in the Member State of habitual residence.

Impact on services and licence agreements

A direct consequence of the Portability Regulation coming into force would be that geo-blocking measures by affected service providers for registered, domestic customers would be restricted. This does not, however, affect measures taken to ensure that only domestic customers register themselves, and other technical restrictions, in particular the permissible number of end-user devices. The major change will in practice probably be that access will no longer be restricted from all foreign IP addresses, but only for IP blocks outside the EU.

Providers should take the planned changes into account at an early stage in connection with content licence agreements because in accordance with the current proposal, existing cases would be affected as well. One way of doing this is to agree portability regulations in advance subject to the condition that if a corresponding regulation comes into force, these are to be aligned with the requirements stipulated by such regulation. The proposed Regulation gives parties considerable leeway with respect to the formulation of the regulations necessary to comply with portability requirements.

It is essential in licence agreements that the obligations to use geo-blocking measures are formulated such that the portability provided for in the Regulation can be facilitated for users. In this context, the issue also has to be discussed of how it can be ensured by the service provider that it only facilitates portability for users who are only temporarily and not permanently present in other EU Member States, i.e. establish their habitual residence there. The parties can in particular agree that the checking of certain characteristics, for example a domestic address and method of payment, is sufficient. Licensors do, however, have to observe their own licence and contractual restrictions in this respect.

Another central area of negotiation is likely to be territorial restrictions on the content licences granted to the service provider. Although, according to the proposed Regulation, use in another EU Member State is to be deemed use in the home country, this only covers portability in the scope provided for by the Regulation. If the provider wishes to go beyond this, for example because a restriction to consumers will be virtually impossible for it to verify, it will require an appropriate extension of the licence territory. Limits for the licensor, however, result due its own possible restrictions of the licence territory, as well as based on exclusive rights which have already been granted.

Even if the discussion has only just started in detail with the proposal which has been presented and therefore changes to the proposed Regulation are still to be expected, the EU Commission appears determined to adopt a portability Regulation in the short term. The industry should therefore already start preparing for the necessary legal and technical adjustments which will have to be made.

 

Further reading: EU-Kommission: Harmonisierung im B2C-Kaufrecht