A Greek Tragedy in the Making For Europe's AV.

Author:Westlake, Blair

In 2015, the European Commission (EC) set in motion what film, TV producers, and broadcasters alike consider to be a serious erosion of their right to exploit content on a territory-by-territory basis in the European Union by mandating cross-border access to audiovisual (AV) content and services, known as the European Commission's Digital Single Market strategy.

In 2013, the European audiovisual industry generated revenues of approximately 83 billion euro (U.S.$103 billion), of which about half of that was spent on content.

It has been common practice for content to be licensed exclusively by a territory or country because this typically yields the highest license fees and return on investment for producers (generally, a premium is paid for exclusive rights by a licensee, instead of a licensor having to line up multiple non-exclusive licenses).

Similarly, broadcaster and cable/ satellite programmers gravitate to exclusive content and pay the premium associated with such rights, as a key means of differentiating their service from rivals.

Producing films and TV series is one of the riskiest of businesses. Each new series or film is an entirely new product--effectively a "prototype." Content creation is a unique business, like no other industry in the world, with few companies returning significant profits to its shareholders.

In the U.K., the British Film Institute estimates that between 2003 and 2011, less than seven percent of independent films were profitable. Most content is funded by the success of a few "hits." Likewise, most funding arrangements require commitment of funds up front--before the cameras ever roll. Less funds in the system means more risk, and marginal content will suffer most and likely never be made.

A study jointly undertaken by consultancies Oxford, U.K.-based Oxera and London-based Oliver & Ohlbaum (May 2016) found that if the changes proposed by the E.C. become law, the industry will be exposed to considerable losses in the short run. The study concluded that producer revenue losses would be up to 8.2 billion euro (U.S.$10.24 billion) per year, output reduction of up to 48 percent for TV content, and up to 37 percent for films and consumer welfare losses up to 9.2 billion euro (U.S.$ 11.49 billion) per year.

Consumers would be worse off through a combination of two main effects:

* Less access to content, and/or higher prices: consumers, particularly those in lower-income E.U. member states, would have less access...

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