European Film Industry Criticizes Paramount's EU Antitrust Deal

Brussels - H 2016
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Paramount Pictures has offered concessions to the EU in a high-profile probe into the film licensing practices of the six Hollywood studios in Europe.

Representatives of the European film industry have sharply criticized Viacom's Paramount Pictures for offering concessions to European regulators in an ongoing antitrust case involving all six major Hollywood studios.

Paramount last week became the first studio to offer the European Union a deal in exchange for the European Commission dropping the probe into the studios' European film licensing deals.

But Alfred Holighaus, president of German film industry body SPIO, slammed the deal as a threat to the European film industry.

The Commission filed an antitrust complaint last summer, accusing Paramount, Disney, NBCUniversal, Sony, 20th Century Fox and Warner Bros. of illegally restricting customers' access to content within the European Union in their licensing deals with Sky U.K., part of pan-European pay TV giant Sky. 21st Century Fox owns a 39 percent stake in Sky.

Paramount's offer to the Commission would see the studio agree to allow Sky U.K. to sell its licensed Paramount films to customers from outside the U.K. and to let pay TV companies outside Britain, which have deals with Paramount, to offer their films to U.K. customers.

In essence, it would break down territorial boundaries between European countries, something the Commission is pushing for as part of its strategy to create a digital single market across Europe by 2017.

Holighaus, like many in the European film industry, is having none of it, however. “It's very simple: There is no viable German or European film industry without the possibility to negotiate film licenses exclusively on a territorial basis,” Holighaus said in a statement. “Territoriality is the financial basis for every European film that wants to transcend its national boundaries.”

SPIO, which represents German film, TV and video producers, distributors and exhibitors, is an interested third party in the case, meaning they have the right to submit comments to the Commission, including on Paramount's offer.

The European film industry is united in its opposition to the Commission's digital single market plans, which they believe will dismantle the current model whereby independent producers finance their films by sell off exclusive licensing rights country by country within Europe.

“In spite of appearances, this case is not about TV licensing. It’s about the financing of film productions. If the case goes forward, the fragile financing structure of European filmmaking would collapse,” says Alfonso Lamadrid, a lawyer with the firm Garrigues in Brussels, which is representing British industry association PACT, another interested third party in the case. "Films are put together through a complex and painful patchwork of funding from a variety of interdependent sources. If you remove one element then the whole deck of cards collapses. ... In the case of independent filmmaking, the financing ecosystem is even more delicate. The end (of territorial exclusivity) would severely threaten co-productions and output deals in particular."

But Lamadrid says Paramount's offer of concessions is unlikely to have much of an impact on the case as it doesn't address the fundamental question of whether the studios' current licensing deals are legal.

“I don't expect other parties (the other studios) to follow suit” and offer similar concessions, he says. “I don't think anyone is going to change practices, which they believe are legal in the light of the current legislation.”

Paramount may be under more pressure than the other studios to settle the case. Viacom is looking to sell a significant minority stake in Paramount Pictures, a deal that could be complicated by the threat of a hefty fine from the European Commission, should it find the studios' licensing deals are anti-competitive.

Lamadrid argues that while the Commission is pushing for a digital single market, European copyright law, as it now stands, gives the studios, like any rights holder, “the right to authorize or prohibit communications to the public in every territory of broadcast.” In effect, the studios can decide who watches their films and where, whether it is one territory or the 28 of the European Union. He believes the Commission “has gotten the cart before the horse” by launching this antitrust case before the bigger task of passing legislation to harmonize copyright law across Europe.