SWD IA on EU copyright modernisation – Impacts of baseline on availability of EU AV on VOD

The limited availability of EU AV works on VoD platforms is expected to persist under the baseline option. The maturity of the VoD market in terms of revenues has not been reached yet. In the absence of any intervention at EU level, contractual blockages are likely to persist. In many cases, the licensing process for EU AV works would remain burdensome.

Most successful/mainstream works would find their way to VoD platforms. For other AV works (including numerous European works), low revenues and high costs would in many cases continue to prevent any online exploitation. The rightholders’ business model based on exclusivity deals and release windows would not be affected under this option. Rightholders would only have limited incentive to intensify the online exploitation of their works. Apart from increased revenues, a possible incentive could be if the VoD market grows to the point that it becomes essential from the rightholders’ point of view (e.g. as a marketing tool or as the main distribution channel). However, this is not likely to happen in the short term.

The development of intermediaries (such as aggregators) in the VoD market could have a positive outcome on transactions costs for rightholders. Aggregators could help rightholders concluding agreements on the digital exploitation of their works. This would particularly be true for small producers and distributors who do not always have the resources to start direct negotiations with VoD platforms. However, this positive impact would be limited as intermediaries would continue to face high transaction costs, which could prevent their development.

VoD platforms and aggregators would have no leverage under this option to unblock contractual blockages except for the growing importance of the VoD market (and revenues linked to it). Upstream, VoD platforms and aggregators are likely to face less clearance of rights issues. To facilitate clearance of rights, initiatives as the ones already launched in some countries could be launched in other countries. However, this would rely on individual initiatives, at national level. Downstream, even if reduced, costs would continue to be important. It would therefore still be difficult and expensive for VoD platforms and aggregators to conclude agreements with small and medium producers (and by consequence include their works in their catalogue).

With the development of the VoD market, VoD platforms and aggregators could gain in bargaining power and bring forward in the negotiation standard contractual practices (such as “block-agreements”). This could lead to some reduction of transaction costs. For some categories of works, VoD platforms and aggregators would also be able to better bargain the licence cost as VoD market gains in importance. Development of the VoD market could also lead to an increase of the licences prices but in proportion with an increase of the revenues. Under this option, VoD platforms would still face technical costs (when not borne by rightholders).

As the VoD market evolves, consumers would be offered a larger choice of AV works. However, this choice would be limited to some extent as access to some categories of works would remain limited: (i) works whose rights are blocked by rightholders; (ii) works (mainly small productions) for which transaction costs would be too high) and (iii) works that VoD platforms are not willing to include in their catalogue. Costs for consumers to access catalogues of VoD platforms would remain unchanged.

The baseline option will not sufficiently contribute to increase the availability of European AV works on VoD platforms, which participate in the cultural diversity. As a consequence, the visibility and circulation of European AV culture across the European Union would remain limited. This would constitute a lost opportunity for European AV works to reach a larger public. The baseline scenario would not have any impact on copyright as property right (Article 17(2) Charter) or on the freedom to conduct a business (Article 16), as it would not alter the current licensing system.