Martin Whiteford: How can we benefit from digital single market?

Orange is the New Black on Netflix which could be covered by the new rules
Orange is the New Black on Netflix which could be covered by the new rules
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The new arena in Europe-wide cyberspace offers much opportunity for creative firms, writes Martin Whiteford

The single market is one of the EU’s greatest achievements. No market remains static, however, and the inexorable rise of digital technology demands a new arena, one in which creative industries can showcase themselves.

The European Commission’s Digital Single Market (DSM) agenda was launched earlier this year. The scale of the proposals could have a major impact on the creative industries of Scotland. It is hoped that a DSM would boost the accessibility and infrastructure of the audio-visual download industry, open doors for online content streaming, provide increased protection to creators, establish a single area for online payments and protect consumers.

To achieve a proposal of such magnitude, dramatic reform along the digital supply chain will be necessary, much of which could have a significant impact on the creative industries in Scotland.

A potentially game-changing proposition is the suggestion that the rules promoting European content might be expanded beyond linear broadcasters to online content services and internet TV. Online services would most likely have to ensure their catalogue contained at least 20 per cent European works or that a particular percentage of revenue was spent on procuring local content. With high budget producers such as Netflix and YouTube investing heavily in their own movies and TV shows, Scotland’s creative industry could market itself and benefit from an influx of new investment as online content providers attempt to meet these quotas.

What about enjoying your favourite programmes on holiday? ‘Geoblocking’ occurs where online providers deliver specific content or products on the basis of a consumer’s location. The Commission take the view that this practice segments the e-commerce market to the detriment of consumers in certain Member States. In July 2015, they served formal charges on Sky’s UK broadcaster and six major film studios including Sony and Walt Disney for restricting consumers in other EU countries from accessing Sky’s UK TV services via satellite or online.

Under plans for a Digital Single Market, businesses are prohibited from offering different prices, products or services on the basis of a consumer’s location unless restrictions on supply or price can be justified by reference to specific law. Much to the delight of viewers, they could enjoy unrestricted viewing of BBC iPlayer throughout Europe under the new plans.

However, such an approach risks undermining the creative industry’s ability to finance new productions. TV shows and films benefit from increased revenues when distribution rights are sold off in different geographic tranches. Without this option, projects financially viability will be under closer scrutiny and it could limit the amount of cash producers have at their disposal.

As financing decisions are often taken long before the cameras are rolling, producers should be aware of the changes on the horizon before they happen. It is ultimately about achieving a balance; the Commission has to protect the creative industries revenue streams while maximising the delivery of fresh, award winning content.

It is essential in a flourishing online broadcasting industry that the service providers and other intermediaries responsible for transmitting content are allowed to operate without fear of being held to unknowable and unquantifiable liabilities. The EU threatens to review this limited legal immunity, by placing – presently uncertain – additional obligations on them. Many commentators argue this is an attack by the Commission on the large US-based online platforms such as Google and Facebook. Others go further and argue that it poses a threat to free speech if platforms are forced to review and censor content before it goes live.

At the same time, with the protection of copyright in mind, the EU proposals to harmonise the many different notice and takedown rules applicable across Europe to digital platforms could protect producers from the ‘pirates’. The proposals for a Digital Single Market may unsettle some members of the industry, but is it really all doom and gloom? Opening up the EU market will create a wider consumer base and improvements to the infrastructure will help to safeguard producers against piracy. We should also stress that the decisions made at EU level will take a while to filter down to national politics and the industry itself. Just like its dynamic and forward-thinking constituents, Scotland’s creative industries should monitor developments closely to capitalise on the opportunities provided by such an ambitious plan for change.

Martin Whiteford is a partner in Anderson Strathern’s Corporate Department and leads the firm’s Creative & Future Industries Sector Group