Film Financing in the Digital Single Market: Challenges to Territoriality

This article discusses the role of territorial licences for feature films against the background of judicial and market developments in the EU. Currently, territorial licences are deemed a cornerstone of the exploitation and financing of films in Europe. However, current models of film financing are under increasing pressure both from market developments such as the turbulent growth of global online video platforms, and from developments in EU law aimed at removing national territorial barriers to the Single Market. Examples are the rule of Union-wide exhaustion of the distribution right, the EU Portability Regulation and the country of origin rules for satellite broadcasting and online simulcasting. EU competition law sets additional limits to grants of territorial exclusivity, and prohibits clauses in broadcasting and pay television licences that prevent or restrict “passive” sales to consumers/viewers in non-licensed territories. The freedom of right holders to preserve territorial exclusivity by way of contract is likely to become increasingly vulnerable to EU competition law, as underlying territorial rights no longer support territorial grants. For the film sector where territorial exclusivity remains indispensable, the European Commission could create specific competition law rules in the form of “block exemptions”. Language exclusivity – i.e. exclusive grants of rights for distinct language versions of a film – could provide a practical and legally more robust alternative to territorial licensing.