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EU probes licensing pacts between U.S. film studios, pay-TV firms

Security guards stand at the entrance of the Warner Bros beach during the annual MIPCOM television programme market in Cannes, southeastern
Security guards stand at the entrance of the Warner Bros beach during the annual MIPCOM television programme market in Cannes, southeastern

By Adrian Croft

BRUSSELS (Reuters) - The European Union opened an investigation into licensing agreements between major U.S. film studios and European pay-TV broadcasters on Monday, saying they may break EU anti-trust rules.

The probe by the European Commission, the EU's anti-trust watchdog, will focus on agreements requiring films licensed by U.S. studios to be shown exclusively in the EU member state where each broadcaster operates via satellite and the Internet.

The Commission, in principle, is against services being offered in one of the EU's 28 member states without people in other member states being able to access them.

It will focus on agreements between studios including Twenty-First Century Fox, Warner Bros, Sony Pictures, NBCUniversal and Paramount Pictures and European pay-TV broadcasters such as Britain's BSkyB, France's Canal Plus, Germany's Sky Deutschland, Sky Italia of Italy and DTS, which operates under the Canal Plus brand in Spain.

Films are licensed by U.S. studios to pay-TV broadcasters on an exclusive and territorial basis, typically to a single pay-TV broadcaster in each EU member state.

The Commission, which set no deadline for completing its investigation, said the probe would focus on the broadcasting of movies and not of sports events.

Companies found to have broken EU anti-trust rules can be fined up to 10 percent of their global revenues, which would be billions of dollars in the case of the studios and broadcasters.

Shares in BSkyB dipped 1 percent after the news and were trading 0.4 percent lower by 7:48 EST. Shares in Sky Deutschland were little changed.

SOCCER PRECEDENT

EU Competition Commissioner Joaquin Almunia said the Commission was "not calling into question the possibility to grant licenses on a territorial basis, or trying to oblige studios to sell rights on a pan-European basis".

He said the investigation, however, would focus on restrictions that prevented pay-TV firms from selling content to viewers in EU member states outside their home market, or to subscribers who travelled abroad.

"If you subscribe to a pay-TV service in Germany and you go to Italy for holidays, you may not be able to view the films offered by that service from your laptop during your holidays," Almunia told a news conference. "If I live in Belgium and want to subscribe to a Spanish pay-TV service, I may not be able to subscribe at all," he said.

Almunia cited a 2011 decision in which the European Court of Justice ruled against the English Premier League and BSkyB after pub landlady Karen Murphy was convicted for showing football matches live via a Greek network.

Europe's highest court ruled in that case that absolute territorial exclusivity given to a broadcaster may be anti-competitive if it eliminates all competition between broadcasters and leads to a partitioning of the EU's single market along national borders, Almunia said.

The Commission would now look at whether the principles set out by the Court of Justice in the soccer case should also be applied to films licensed by the U.S. studios, he said.

Asked why the Commission was not including soccer matches in its probe, Almunia said exclusive territorial restrictions for the screening of football matches were being eliminated following the 2011 Court of Justice decision.

(Additional reporting by Kate Holton in London; Editing by Susan Fenton)

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