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The EU Court of Justice, Europe’s highest, ruled on Wednesday in favor of Canal+, voiding an agreement struck between Paramount and European regulators in 2016.
The decision could have a wide-ranging impact on efforts by the European Union to crack down on so-called geoblocking, where pay-TV broadcasters in one European country stop consumers in another EU country from accessing their products or services.
The EU Commission doesn’t like geoblocking, claiming it violates the principle of a single digital market across Europe. If a British pay-TV channel acquires rights to broadcast films from a U.S. studio, for example, the Commission thinks the channel should be allowed to sell those films on to customers anywhere in the EU.
But, traditionally, movie and other TV licensing rights have been split up territory by territory, with national broadcasters acquiring exclusive rights for their country alone. Many argue getting rid of territoriality could undermine the entire business of film licensing.
In 2016, while under investigation by the EU Commission for alleged antitrust behavior, Paramount agreed to scrap its movie-licensing deals with British pay-TV group Sky UK. Three years later, Disney, NBCUniversal, Sony Pictures, Warner Bros, and Sky TV all struck similar deals with the Commission, effectively killing off territorial licensing deals across the EU.
Canal+ sued, claiming the Paramount-EU deal breached contract law by effectively voiding the licensing agreements the French channel had signed with the Hollywood studio. Paramount had a deal with Canal+ for exclusive pay-TV rights to its movies in France. The EU deal would have allowed Sky UK to off its service —with the same Paramount films —to customers in France.
Canal+ initially took its case to the Luxembourg-based General Court, Europe’s second-highest, arguing the Paramount deal violated the interests and procedural rights of third parties and that its own agreement with Paramount was justified by intellectual property laws. It lost. But the EU Court of Justice on Wednesday overturned that decision, backing Canal+’s arguments and ruling against Paramount and the EU Commission.
“By adopting the decision at issue, the Commission rendered the contractual rights of the third parties meaningless, including the contractual rights of Groupe Canal + vis-à-vis Paramount, and thereby infringed the principle of proportionality, with the result that the decision at issue must be annulled,” the judges said in their decision.
The ruling is a major victory for the European Film Industry, who are united in their opposition to the Commission’s digital single market plans, which they believe will dismantle the current model whereby independent producers finance their films by selling off exclusive licensing rights country by country within Europe.
It’s a more mixed picture for Hollywood. Territorial licensing has been highly profitable for the major studios in the past but the growth of streaming platforms has changed the market. A studio like Warner Bros, which has separate territorial deals for its films in different European countries, may find it harder to roll out pan-European or pan-global streaming platforms since the rights to many of their movies will be tied up in other deals. Warners’ streaming platform HBO Max, for example, is set to launch in select European territories in late 2021 but not in the four biggest countries —Germany, France, Italy, and the U.K. —in part because of rights deals already in place in those regions.
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