Along with the proliferation of web-based television services and pressure to make movies available for download sooner, Hollywood studios are facing a new challenge to decades-old business practices: European regulators.
The European Union's top antitrust authority on Thursday charged six American studios and a pay television company in Britain with unfairly blocking access to films and other content. The move is part of an effort by European Union officials to reduce barriers affecting how digital content is bought and sold in the 28-member bloc. The aim is to unify the market of more than 500 million people, giving Europeans unfettered access to services like movie streaming, online shopping and cloud computing no matter where they live.
The European Commission, the executive arm of the European Union, sent the charges, which are known as a statement of objections, to the British pay-TV broadcaster Sky UK, which is partly owned by 21st Century Fox, and to Disney, NBCUniversal, Paramount Pictures, Sony, Fox and Warner Bros. The charges relate to the studio practice of licensing movies under contracts that require Sky UK to block access for consumers outside Britain and Ireland.
In a statement, Sky UK said it would "respond in due course" to what it called the European Commission's statement of "preliminary views." A Warner spokesman said his company was "cooperating fully" with the European investigation, but declined to comment further. NBCUniversal said it would "respond and cooperate," while Disney said the commission's analysis was "destructive of consumer value," and promised to "oppose the proposed action vigorously." Representatives of the other studios did not comment.
A spokeswoman for the Motion Picture Association of America, which represents all six major studios, said it was not permitted to address issues that involve the companies' individual commercial dealings.
The studios do not disclose detailed information about their foreign contracts, making it difficult to calculate the precise impact of an unfavourable decision. But the charges threaten to disrupt a longtime business model under which studios and independent film companies have both bolstered profits and catered to different tastes by selling films and television shows on a country-by-country basis.
A main studio concern, according to several people briefed on studio dealings, speaking on condition of anonymity, involves a potential situation where subscribers to an online, Netflix-style service operated by Sky are allowed to view content on a pan-European basis. That could lower the prices studios are able to charge for rights elsewhere in Europe.
The studios, these people said, are likely to contend that the current system protects against homogenisation - consumers in, say, Italy, receive content that caters specifically to their culture and preferences. Universal access could undercut the viability of smaller distributors, ultimately lessening competition. (The counterargument: Small broadcasters could grow. They have not been able to offer their services beyond national borders because of limits imposed by the licensing deals.)
The European Commission, which opened this most recent investigation in January 2014, said the companies imposed limits on how people could watch content by blocking access to the satellite pay-TV services from abroad. The license agreements also included a technique called geo-blocking, which prevents consumers from, for example, watching Disney movies on Sky on the iPad of a Londoner who is traveling to Rome.
To enforce these rules, broadcasters have often installed geo-blocking software that prohibits individuals from accessing online content when they are outside specific areas.
The practices prevented consumers who buy films, music or articles from Sky UK online from retrieving that content while traveling elsewhere in Europe, the commission said. The practices, in some cases, also stopped rival broadcasters from making their services available in Britain and Ireland, it said.
"European consumers want to watch the pay-TV channels of their choice regardless of where they live or travel in the E.U.," Margrethe Vestager, the competition commissioner, said in a statement.
"Our investigation shows that they cannot do this today," she continued, "also because licensing agreements between the major film studios and Sky UK do not allow consumers in other E.U. countries to access Sky's UK and Irish pay-TV services, via satellite or online."
The European Commission added that it was also concerned about similar licensing agreements in France, Germany, Italy and Spain.
The objections are only a preliminary step in European antitrust cases. But companies that fail to rebut such charges can face fines of up to 10 percent of their most recent global annual sales.
One person briefed on the situation said he could think of no situation in which the major film studios had been challenged all at once by the European Commission. The companies must now respond individually to the charges and will face separate decisions regarding response or possible efforts at settlement.
The people briefed on studio dealings said final action could take years, as the companies respond, the commission investigates, and, possibly, court challenges follow.
Thursday's charges came just as many Britons were beginning summer vacations abroad and may want to watch movies using the online subscription services they bought at home. Many Europeans have taken their own steps to watch content while traveling overseas. That includes using so-called virtual private networks, or software that allows individuals to sidestep the geo-blocking.
Such tactics have become popular around the world. About 65 million people outside Britain - about the same size as the country's population - now use virtual private networks to watch online content from the British Broadcasting Corporation that is allowed to be watched only inside Britain, according to the research company GlobalWebIndex.
People briefed on the studios' dealings said access by travelers, or portability, was of far less concern to the companies than the possibility of subscribers anywhere in Europe being able to tap a single online resource like Sky.
© 2015 The New York Times News Service
