Boost or bust for EU online content sector?

On Friday the European Commission decided to give a new boost to Europe's online content sector. The idea is that EU citizens should be able to enjoy easier and faster access to a rich variety of music, TV programmes, films or games via the internet, mobile phones or other devices.

Right: the interests of the consumer and the content provider are not always in harmony ...

According to this official release

"The Commission ... encourages the content industry, telecoms companies and Internet service providers to work closely together to make available more content online [the IPKat says, haven't they been doing this already? It's the lure of profit that motivates them rather than the Commission's encouragement], while ... ensuring a robust protection of intellectual property rights. The Commission also wants to facilitate copyright licences for online content covering the territory of several or all of the EU Member States. According to Commission studies, a truly Single Market without borders for Creative Online Content could strengthen considerably the competitiveness of Europe's music, film and games industry and allow retail revenues of the sector to quadruple by 2010 if clear and consumer-friendly measures are taken by industry and public authorities (see IP/07/95).

"Europe's content sector is suffering under its regulatory fragmentation, under its lack of clear, consumer-friendly rules for accessing copyright-protected online content, and serious disagreements between stakeholders about fundamental issues such as levies and private copying", said Viviane Reding, EU Commissioner for the Information Society and Media [says the IPKat, it's not surprising that there should be serious disagreements between stakeholders, given that the suppliers of content see the cost of dissemination of their content as a barrier to wider access to their work, while carriers see the cost of content as a barrier to their being able to supply more content. But someone has to pay, surely]. "We have to make a choice in Europe: Do we want to have a strong music, film and games industry? Then we should give industry legal certainty, content creators a fair remuneration and consumers broad access to a rich diversity of content online. I will work on these issues with my colleagues in the Commission and propose a Recommendation by mid-2008 on new ways for achieving a single market for online content. I ask in particular Europe's consumer associations to take a very active part in this debate [In other words, the IPKat says, if the consumer lobby shouts loud enough it can drown out the pleas of both content providers and carriers]. Because for online content, the demand and preferences of 500 million potential consumers are the strongest arguments for achieving new solutions at EU level." ["Give the people what they want!"]

The Commission has adopted today a Communication on "Creative Content Online in Europe's Single Market". This strategic document is the starting point for new EU actions to support development of innovative business models, cross-border services and consumer-friendly offers.

The retail sale and distribution of high value "creative" content online represents a major structural change in the European content market. Whilst the online market share of music sales is reportedly reaching 25% in some European countries such as the UK, the retailing of video content, and the availability of on-demand TV programming via the Internet is as yet still a nascent market. Such high value "creative content" also covers radio, online games, online publishing and educational content. New market developments also arise from Web 2.0, i.e. user-created content, that consumers themselves may wish to "protect" from unauthorised re-use.

The Commission consulted the public on these issues in 2006. On the basis of this, the Commission sees a need for strengthening the European content market and the influence of European consumers needs on this market.

In the Communication, the Commission identifies four main, horizontal challenges which merit further action at EU-level:

Availability of creative content – Owners of creative content are sometimes reluctant to make it available for online distribution. Amongst the reasons for this are concerns over illegal downloads and online "piracy". In addition, there are across the EU major difficulties in negotiating and settling terms of trade between the right owners and the online distributors of creative content.The Commission is therefore today strongly encouraging stakeholders to find innovative and collaborative solutions to exploit the market for content online. A first step into this direction was taken in 2006 with the "European Film Online Charter" (see IP/06/672), but the Commission notes a lack of ambition and implementation in the follow-up to this initiative.
Multi-territory licensing for creative content – Online environments such as the Internet and mobile services inherently allow content services to be made available across the single European market. However, the lack of multi-territory copyright licences – allowing the use of content in several or all EU Member States – makes it difficult for online services to be deployed across Europe and to benefit from economies of scale. [the IPKat says, this may give a clue as to which way "official" thinking will tilt the forthcoming ECJ reference in Murphy, noted here, in which the notion of Europe as a single market for the supply of copyright-protected content will be under review] While it is first for rights holders to appreciate the potential commercial benefits of multi-territory licensing, there is an underlying need, also from a consumer perspective, to improve on existing licensing mechanisms.

Interoperability and transparency of Digital Rights Management systems (DRMs) – Technologies that support the management of rights and the fair remuneration of creators in an online environment can be a key enabler for development of innovative business models. Lengthy discussions amongst stakeholders have yet to lead to the deployment of interoperable and user-friendly DRM solutions. The Commission therefore seeks to establish a framework for DRM transparency concerning, amongst others, the interoperability of different DRMs, and ensuring that consumers are properly informed of any usage restrictions placed on downloaded content, as well as of the interoperability of related online services [says the IPKat, if interoperability of technical standards is under review, the Commission will have to keep in mind the need for consistency between the treatment of cartels and oligopolies in this sector and their treatment in other sectors where the demands of the consumer lobby are less obvious].

Legal offers and piracy – Piracy, including the unauthorised up- and downloading of copyrighted content, remains a central concern. The Commission intends to instigate co-operation procedures ("codes of conduct") between access/service providers, right holders and consumers to ensure not only the widespread offer of attractive content online, but also adequate protection of copyrighted works, and close cooperation on the fight against piracy and unauthorised file-sharing [the IPKat says, the IP Enforcement Directive also talks of cooperation, but the Commission seems paranoid about the risk that such cooperation might appear anticompetitive].

The market for online content is developing at a rapid pace. According to a Commission study (covering EU-25), the retail revenues from content online will more than quadruple from €1.8bn in 2005 to €8.3bn by 2010 (see IP/07/95).

With the Communication "Creative Content Online in Europe's Single Market", the Commission is launching today a public consultation in order to prepare – by mid 2008 – an EU Recommendation on Creative Content Online for adoption by the European Parliament and the Council. Stakeholders are invited to comment on today's Communication by 29 February 2008.

In addition, the Commission will set up the "Content Online Platform", a stakeholders' forum, to initiate collaborative work with all stakeholders on issues where further discussions are needed. Consumers will be given a strong voice in this platform".

Merpel adds that any initiative is better than no initiative at all, but hopes that the Commission will be relaxed about letting this one be shaped by consultations rather than shoe-horning consultations within the structure of the Commission's statement here. A big problem faced in this sector is that developments happen quickly and the scene changes rapidly, whereas the mechanism by which the Commission identifies a problem and responds to it is slow, ponderous and linear. It's a bit like lining up a heavy cannon that has to be carefully primed and aimed before firing, when the target moves rapidly and -- when it comes to dealing with competition and IP issues -- one's friends, foes and allies can be one and the same.