[This post is a rewrite of an old post from about a month back, which entered data oblivion under the “care” of my less than competent old hosting provider. Upside: I can include a comment on the directive draft for royalty collecting societies]
When I still lived close to the border, I liked to get groceries from the Netherlands and Belgium. Some foodstuffs are quite a bit cheaper in NL, especially coffee, so a caffeine fuelled student like myself could save a considerable amount of money. Also, some great food was only available there (Dubbelvla ftw). And Belgian supermarkets tend to have a range of goods in their regular line that are hard to come by on my side of the border without resorting to delicacy-shops.
Also, whenever I’m in the UK, I like to browse CD, DVD and video game shops for some new gems for my collection. Not only do I prefer the original English audio for my movies and games, but especially the latter usually have a considerably better price.
I then take all these goods home with me, without anyone at the border or customs bothering me about it.
This is a typical example of a European citizen and consumer profiting from the European four freedoms. And many people, in regions close to the border or anywhere else in case of mail order goods, do this every day. But you might have noticed, that these freedoms seem to end when talking about digital goods. As a continental European you cannot, for example, buy an MP3 album from amazon.co.uk, even though it might be cheaper than from your local amazon branch or possibly hasn’t been released in your country yet.
This is done via a technique called Geo-IP, which more or less successfully determines from where in the world you’re going online.
Another aspect that’s even harsher is that you couldn’t even buy these MP3s if you were in the UK! You need a British billing address and possibly a credit card issued by a British bank (I’m not sure if amazon implements the last part, but many shops do). This is nothing short of discrimination because of country of origin (actually country of residence, but the correlation is probably high). I can, after all, buy the same thing on CD if I just walked into the store. To take the analogy a step further, imagine the clerk refuses to sell you the CD, just because he recognized you as a foreigner.
So, why do and how can they do that? Don’t we have a single market? Sure, these practices can be seen all over the world, but can’t anything be done in the framework of the EU? The following are some different perspectives on this, though I will focus on the more common Geo-IP problem (getting a foreign download product while you are in your home country). Also, I will not go into detail on the actual artists. But I assume that an artists wants as much of a paying audience with as little bureaucratic effort as possible, so releasing once and selling to the whole of Europe should in principle be an attractive idea.
From an informed consumer‘s viewpoint it is anachronistic to assume that popular culture is regional. Many people know when something they like has come out anywhere in the world and they want it. They are willing to pay for it, but sometimes they just can’t buy it. A prominent recent example was people asking to pay for streaming video content, that is currently only available with a physical cable TV subscription in the United States. They also know how much their neighbours in the global village are paying and are not willing to pay more than the best global market price. The technical and legal reasons why they can’t aren’t intuitively understandable and they also plainly don’t care. They want to watch a movie, they are willing to pay for it, and they know what’s the best price and where. If they can’t do that, they tend to feel ripped off or, in the case of complete unavailability, resort to piracy.
The publishers / labels / rights-holders like to make money, obviously. One aspect of how to optimize your income is clever pricing. Ideally, you take the maximum amount of money a customer is willing to pay from him/her. This would result in perfect price discrimination. This isn’t practical in mass retailing. But pricing differently for each country is a major step to get closer to this ideal: There are slightly different price levels in each country for different categories of goods. People who live in a given region are used to these prices and are therefore on average willing to pay more or less for a certain good. Not every consumer is informed in the way described above, so this still works reasonably well. Therefore, the publishers assign different prices to different countries and increase their profits. With immaterial goods such as digital downloads, this is even easier. They are distributed relatively centralized from a countable number of online stores, so managing prices becomes an easy task. There are surely more reasons for pricing the same immaterial good differently in every country, but I believe this is the heart of the matter.
From the perspective of the EU (or the European Commission to be precise, as they would be the ones to start legal proceedings against a breach of the Treaties or European legislation) the free movement of goods first of all means, that no member state of the Union may prevent you from getting the stuff you bought in another member state over the border. It does not force a publisher to sell their digital good directly to any place in the Union. Nationally organized rights-holder organizations and different sets of copyright law even effectively prohibit them from doing so. The Commission isn’t necessarily happy about the current situation.
In the early days of the iTunes store, there were legal proceedings under anti-trust law against Apple, who had different prices even between Eurozone countries. Apple blamed the multitude of national copyright laws and the consequent national licensing. And they were probably even genuinely angered by becoming targets for EU anti-trust negotiations because of this: Later, they even actively lobbied for provisions for single European licenses.
Also, there have been attempts at making the single market a reality for media. The Audiovisual Media Services Directive of 2010 however, mainly offers an explicit analogy to what the regular internal market means: States may not hinder the broadcasting or reception of media to or from another member state. Conflicting copyright rules are explicitly excempt.
There has been non-binding action, such as the Green Paper towards a digital single market. It recognizes the problems of the current national copyright landscape and aims to achieve “rights clearance”
Just recently, a draft directive was proposed, that seemingly build on this. It focuses on breaking the national royalty collecting societies’ monopoly over their territories. This is a good thing, for artists and consumers alike, because competition in this field will probably allow better payment for the former and possibly generate better tariffs for the latter. Collecting societies probably won’t be able to afford an overhead like the German GEMA has today. However, besides being only concerned with music (not software or video), the current draft only facilitates the process of multi-territorial licensing. It does not require it!
“A collecting society may decide not to grant multi-territorial licenses for online rights in musical works, but it could continue to grant national licences […].” (Page 10 of the Directive proposal COM(2012) 372/2)
The new structure tries to give incentives to actually license EU-wide has other provisions like disallows cherry picking by taking foreign licenses but not internationalising one’s own – so no reaping the benefits unless a collecting society joins in completely.
However, I doubt the full effectiveness of this. After all, the current copyright situation seemingly benefits publishers, as explained above. And in an open “collecting society market” they can decide whether or not they want to go one that acts nationally or multi-territorially. If there remains one purely national collecting society in each country, publishers might do the cherry picking, by keeping price discrimination up and licensing to individual national societies or to a multi-territorial society in cases where price discrimination would reap less benefits than the lower bureaucratic overhead. A pure single digital market might be profitable as well, especially if this nation-specific overhead is completely eliminated, but I am not convinced that every rights-holder is prepared to take this leap of faith.
A full digital internal market would mean an obligation to sell something that’s publicly available on the internet in one country within the whole Union. The buyer would have to bear the transport costs, as he does for mail order from other member states, but fortunately, they are zero in this case. Also, the fact that there’s zero additional effort on either side (in fact, less on the store’s side if it doesn’t check the buyer’s origin any more) makes this more reasonable than forcing the few mail order companies that don’t ship outside their member state to do something alike.
A first step toward this might be to forbid the requirement of a local billing address. I imagine this might be achievable via anti-discrimination law, which should outweigh copyright concerns. This is of course a more of a normative than an actual legal argument (I’m not a lawyer) and I have no clue whether there have been any attempts to legally pursue the right to buy digital goods from (physically) within a foreign country this way. (I’d be very interested to read about it though, if anybody knows something…).
In the meantime, let’s watch the draft directive unfold, and let’s hope I’m wrong about my hunch that it will be abused by rights-holders in a way that neither consumers nor the actual artists profit from this.
Copyright hinders a digital internal market for the EU. The Commission’s working on it (which is good), but focuses on collecting societies. Loopholes seem to exist, especially on the level of rights-holders, and will probably be used to keep up regional price discrimination.