Won’t someone think of the footballers?

The end of sports and sport broadcasting is nigh. Or rather, Justice Rares in the Federal Court yesterday cut a large chunk out of the value of sports broadcasting rights in new media by ruling that Optus is allowed to offer its TV Now Service. TV Now lets Optus customers use all kinds of devices (tablets, smartphones, computers) to record broadcast television in “the cloud” (i.e. Optus servers) and play it back any time within 30 days. The privileged Apple-owning classes can even watch the recording nearly live — only two minutes after the broadcast starts.

Much gnashing of teeth has ensued, with the News Limited-owned Australian claiming the decision “puts at risk the ability of every sport to sell their new media broadcast rights”, the AFL and the (also News Ltd part-owned) NRL expressing their disappointment (and intention to appeal) and Telstra claiming the decision will “destroy enormous value”.

It’s easy to understand why the sports bodies are upset: if you can get your AFL on your Optus phone (or any other telecom provider that decides to offer a similar service), new media rights aren’t nearly as valuable. But disaster for Telstra? Yes, in the very short term it’s not ideal: it agreed to pay over $150 million for exclusive new media rights in AFL matches. But in the longer term, it could avoid paying for exclusive rights — and do something such as TV Now itself. I guess competing on services and technology isn’t quite as attractive to Telstra as using its insider status, sheer size and ability to pay for exclusivity.

Sometimes it feels like, unlike their early-adopting customers, the broadcasters and their various commercial partners never met a new technology they didn’t hate (let’s not forget that online access to television shows has been a long time coming in Australia too). The TV Now case is just one of a long string of similar fights. We’ve had the Ice TV case about ownership of electronic program guides, in order to control the functions of digital video recorders in the home. We’ve also had The Panel case (about re-use of clips from television in a comedy show) and Telstra verses the Premier Media Group (about re-use of sporting clips in sports highlights packages).

The quest, in all these cases, is for total control over broadcasts, so that maximum dollar can be extracted via licensing and advertising.

This quest crashes up against two cold, hard facts: that access to sports broadcasts is practically a right in Australia, and that people — including politicians — are pretty accustomed to recording television to watch later. The right to sport is enshrined in anti-siphoning laws; people’s right to record is recognised in an exception in the Copyright Act in 2006.

I’m sure we can expect more litigation (an appeal has already been flagged) and lobbying. But we’d better hope the courts and the government can resist the pressure, because the risk of unintended consequences is high.

You see, there are two key legal issues involved. The first is fundamental: when a customer clicks the “record” button on their iPad, is the copy made on the Optus server made by the customer, or by Optus (and similarly, when they later click “play”, is it the customer, or Optus, that is responsible for the streaming of the show to their device)? It was a relief to see Justice Rares decide — like US and Singaporean courts before him — that it’s the customers, and not Optus, who make the copies and play the recordings back later. Any other holding on this fundamental question in copyright would have put at risk the large and growing industries in cloud computing as well as a host of other activities and services in the digital environment.

The second legal issue is whether, if the customers are doing the recording and playing, their actions fall within the detailed drafting of the home recording exception in s111 of the act. Certainly government could confine the home recording exception; so could a court through a narrower reading than that of Justice Rares. This would, of course, mean overcoming the natural hesitation of politicians and judges to curtail Australians’ rights to sport and television, ruling against the cloud in home recording, and slamming down a service that Optus offers that people clearly want.

And you have to ask whether saving one of many revenue streams for live sports is worth the cost to consumers, and to the ability of companies such as Optus to offer innovative (and clearly appreciated) new services to its customers. No government should jump lightly into protecting this one revenue stream given all the various revenue streams open to the AFL and NRL, and all the other government rules that impact on revenues — like anti-siphoning rules, or the various rules that protect the exclusivity of big events such as the Olympics or the Rugby World Cup. This copyright rule is only a very small part of a very big picture when it comes to money in sport.

One more irony in all this is worth noting. In 2006, Australia flirted with introducing a general fair use exception into copyright law. Copyright owners opposed such a move, and instead more specific and purportedly narrow exceptions were introduced instead, like the home recording exception. But a fair use defence would have required the court to consider the impact of any exception on the copyright owner’s market. And so I wonder whether, if we had fair use, Optus would have got away with playback on a two-minute delay, which undermines any market for exclusive rights to live broadcast of sports online?

Food for thought as the Australian Law Reform Commission takes on a new inquiry into copyright exceptions in 2012.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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