Indie Film Business Wins European Territory Rights Battle

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The European Union has agreed to a compromise, proposed by the local film industry, allowing producers to continue to finance projects by pre-selling individual territories.

The independent film industry won an important political battle this week when the European Union agreed to a compromise in a fierce debate over film rights.

With a vote of 460 to 53, the European Parliament on Thursday approved new rules governing the online broadcasting across the EU's 28 member countries. The goal of the legislation is to create a single digital market for goods and services across Europe. But in an important amendment, the Parliament accepted a change proposed by the European film industry that exempts film rights from the “single digital market” concept, requiring online services to acquire a national license for a film in each individual country before they can offer it to their customers.

This idea of individual licenses — called territoriality — has long been standard practice in Europe and forms the basis for independent film financing in the region. Producers typically “pre-sell” rights to a film to partners in individual European territories. European directors, from Lars von Trier and Ken Loach to Pedro Almodovar, rely on this form of pre-selling to get their films made. It's also the model for larger U.S. independent productions. When Lionsgate sold The Hunger Games to Europe, for example, it did separate territory deals with distributors, including StudioCanal in Germany and France's Metropolitan. Depending on the film, pre-sales in Europe can account for 30-60 percent of a movie's budget.

But, initially, the European Union proposed breaking up this system by allowing any company with a single national license for a film or TV series to offer it to consumers across Europe. The idea of "national silos" for film content was counter to the European Union's principle of a single, borderless market, argued European Commission president Jean-Claude Juncker. The film industry warned this would lead to a “buy one, get 27 free” model, where a company could buy rights to a film in even the smallest European country and then offer it to the more than 500 million citizens of the EU without additional charges. 

On Thursday, the EU found a compromise. The digital single market will apply to online services for news and current affairs — meaning the BBC or Italy's RAI can offer their online reporting to anyone in Europe. The same applies to productions, including films and TV series, that are fully financed by a single network. But co-productions or films pre-sold in the traditional manner, as well as sports rights, are excluded from the new law. Here the old rules apply: online platforms will have to clear rights in each territory they want to operate in.

“The European Parliament showed that compromise is possible in the digital single market and that regulation can balance the economic realities of the independent film industry without sacrificing cultural diversity to 'platform capitalism',” said Alfred Holighaus, president of German film industry association SPIO. “Buy one, get 27 free isn't a sustainable business model for the cultural economy.”

The legislation still has to be adopted by the European Council before being implemented across the continent. The Parliament said it would review the legislation six years after it has come into force to assess if changes need to be made.