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SWD Impact assessment on the modernisation of EU copyright rules – impacts of third option

The core difference between Options 2 and 3 is that Option 3 also covers online linear TV and radio-like transmissions (webcasting services) and online services ancillary to webcasting. One general challenge in assessing impacts of this option is the fact that webcasting market (in the sense of online-only, linear TV or radio-like services) is at a development stage and not yet fully formed.

The impacts of Option 3 on broadcasters could in principle be comparable to the ones described under Option 2. In addition, broadcasters would be able to rely on the CoO rule for their webcasts. However, the higher risk of content disaggregation identified under Option 3 is likely to have a negative impact on transaction costs (even if licensing would be required only for one territory, the number of individual transactions may increase) and undermine the effectiveness of Option 3 in terms of facilitation of licensing.

Webcasters could in principle save transaction costs for their online transmissions and have better possibilities to offer their services across borders in the same way as in the case of broadcasters described under Option 2. However, they may also be negatively affected by the risk of disaggregation of repertoire brought about by this option.

Option 3 could substantially impact the competitive situation between service providers offering on-demand services (VoD, music on demand, which would not be covered under this option) and service providers offering webcasting services. Increasingly, webcasting services can directly compete with on-demand services. Especially over time, the boundary between on-demand services and online linear transmissions may be even more blurred.

With new models emerging, it becomes more difficult to distinguish what constitutes an online linear transmission and an on-demand service. Therefore, Option 3 could create a grey area, where it would not be clear whether certain online services would be covered by the legal intervention or not. As a result, it would not provide to the market players the necessary legal certainty nor would it ensure an even competitive situation. Furthermore, online service providers can relocate their services more easily than traditional broadcasters and therefore they can gain a competitive advantage over broadcasters by relocating their establishment to a jurisdiction with lower copyright fees.

Under Option 3, the application of the CoO rule to webcasters could lead to new forms of content exploitation (e.g. similar to near on-demand services) which would be fundamentally different from broadcasters’ online ancillary services. For example, it is possible to imagine linear streaming services providing access to a limited range of content (one or several films, one or several recordings) in a near on-demand manner over certain period of time – such services would be competing with on-demand services (where the latter would not be able to rely on the CoO rule).

Option 3 would generate market uncertainty for rightholders and significantly increase the risk of content disaggregation of rights currently held by CMOs. As mentioned above, it is easy for online operators to relocate their establishment in the EU, for instance in order to lower fees paid to rightholders or for reasons not related to copyright (e.g. taxes or the regulatory regime). The risk of “establishment shopping” would in particular apply when rights are managed by CMOs (especially music). As rightholders cannot directly control the tariffs fixed by CMOs for the licensing of rights, there is a risk that service providers, who heavily rely on music content, would establish in territories with lower tariffs.

Thus it could encourage “race to the bottom” in terms of copyright fees. This would be detrimental to rightholders and could trigger withdrawal of their rights from local CMOs in order to protect their revenues. Also, as the application of the CoO principle to a market which is not yet fully formed and where boundaries with on-demand (such as VoD) services are not clearly delineated would be likely to drive rightholders to withdraw rights from CMOs in order to exercise more control over the licensing. As a result, this could lead to disaggregation of repertoires managed by CMOs, contrary to the objective of the CRM Directive.