Geo-Blocking is Going to be Banned in EU…But Wait! You Still Can’t Download the Foreign Songs You Like

Blerim Berisha, Yang Cao, Jan Kalina, Ikram Mallou, Thomaz Novaes, Ronald Piwele, Yin Zi

When consumers in EU countries are shouting hooray for EU’s anti-geoblocking regulation finally being passed by European Parliament earlier this year, German MEP Julia Reda undiplomatically expressed her disappointment.

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Reda is right. Geo-blocking banishment is working for e-commerce but not for access to other media. EU’s first “baby step” as she called is a great news for online shoppers to buy some goods, such as a refrigerator, some services, or for website hosting services. European consumers will enjoy a price with no difference no matter which EU member state they reside in. But if you are talking about Spotify, Netflix and TV, or any other copyrighted content like music, ebooks, and video games, sorry, the “wall” is still there. This is indeed a big bummer, and we all hate that error message telling us we are in the “wrong” country.

So, what are the main obstacles to tackle for realizing a truly no-barrier digital single market? Is it true that no one is willing to fight against powerful entertainment industry, as Reda claimed? At least EU is aware of the needs of consumers to break the “wall”, addressed that they will extend the geoblocking on copyrighted services in two years. But that sounds a bit long stretch.

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While a seamless cross-border access to popular streaming media services sound like a perfect dream to EU digital content consumers, there are indeed some substantial challenges the industry faces in order to reach such a goal. Most of online copyrighted contents in the European market are licensed on a national basis. For many digital content providers, the main reason of geoblocking is due to the expensive cost of buying copyrights covering extra geographic areas. This is even more common for smaller operators. Thus, one argument is that lifting geoblocking might bring unintended consequences to the industry and the market. The industry might suffer significant losses of revenues which will prompt uncertainty for the future, as nobody knows how long it would take for the industry to adapt to this new unrestricted cross-border access. Another concern is it might induce price arbitrage between country markets, which puts pressure on sellers to reduce price differentiation and push some prices up, others down. The price response of sellers is hard to predict and may have repercussions not only on downstream consumers but also on upstream parts of the supply chain.

Cultural diversity is considered as a strong incentive for lifting the digital content geo-blocking, because surveys indicate that one key reason people demand foreign digital content is they could not get it from the country they live in. There are about 20 million EU citizens who were born in one EU member state and live in another member state. Without geo-blocking, many of them could enjoy contents produced and licensed in their home countries. However, studies also show that the longer long-term intra-EU immigrants stay away from their country of origin, the less interest they have to buy audiovisual content of their home country. This is an important measurement for audiovisual business operators. One more concern on the unrestricted cross-border content is that there might be less investment in local production which leads to less diversity. EU citizens from the poorer countries will have to pay higher prices if they want to enjoy good quality content.

So, it seems that Mr. Ansip’s ambition will take quite some time to fulfill. But the future could be hopeful. The good news is that at least EU residents can watch streaming content they have bought in their home country while traveling in EU area, thanks to the new law. Even MEP Reda agreed that copyright is a delicate issue.  European Parliament’s economic assessment on geo-blocking prohibition shows that there will be notable economic and social welfare gains by lifting geo-blocking on audiovisual and copyrighted services, despite the risks and concerns. It will depend on the negotiation and cooperation between the public sector, the industry and society.

 

Reference

The statistics, evidences and study results used in this article are based on the analysis Extending the Scope of the Geo-Blocking Prohibition: An Economic Assessment published by European Parliament in 2017. (could put hyperlink: http://bruegel.org/wp-content/uploads/2017/02/IPOL_IDA2017595364_EN.pdf)

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