EUROPEAN COMMISSION Brussels, 9.12.2015 SWD(2015) 270 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the document Proposal for a Regulation of the European Parliament and of the Council to ensure the cross-border portability of online content services in the internal market {COM(2015) 627 final}

{SWD(2015) 271 final}



Table of content 1.Context 2.What is the problem and why is it a problem? 3.Why should the EU act? 4.What should be achieved? 5.What are the various options to achieve the objectives? 6.What are the impacts of the different policy options and who will be affected? 7.How do the options compare? 8.Therefore, the preferred option is Option 3. How would the actual impacts be monitored and evaluated? 9.Annex 1 – Procedural information 10.Annex 2 – Stakeholder consultation 11.Annex 3 – Who is effected by the initiative and how 12.Annex 4 – Copyright, sports rights and the content industries in the EU economy 13.Annex 5 – New technologies, new ways of access to and distribution of content 14.Annex 6 – International and European legal framework 15.Annex 7 – Examples of access or use restrictions in terms of services by online content providers 16.Annex 8 – Technologies for delivering online content services 17.Annex 9 - Glossary

1.Context The digital economy has been a major driver of growth in the past two decades, and is expected to grow seven times faster than the overall EU GDP in coming years. Under the political guidelines of the European Commission, adapting the current EU copyright rules to the realities of the Digital Single Market (DSM) “in light of the digital revolution, new consumer behavior and Europe’s cultural diversity” is one of the flagship projects for the next years. In particular, the DSM Strategy puts forward a range of initiatives, among others, in copyright with the objective of creating an internal market for digital content and services. It calls for addressing a set of key obstacles to the functioning of the DSM, including allowing wider online access to copyright-protected works by users across the EU. The Strategy however also recognizes that these obstacles are very different in scope, nature and complexity; therefore it endorses a step-by-step approach. This Impact Assessment report (IA) accompanies a self-standing initiative to enhance the cross-border portability of online content services in the DSM. This is one of the first of those initiatives under the DSM Strategy that aim at facilitating access to digital content, in particular by removing the barriers that currently stop consumers, when travelling in the EU, from accessing services they subscribed to or digital content they have purchased or rented in their home Member State (MS).Cross-border portability is a specific aspect of the broader discussion on access to services across borders where currently there are ongoing consultations both as regards the rules applicable to satellite broadcasting and cable retransmission services and, more generally, to services . The problems with cross-border portability however are specific and they necessitate a specific solution (as explained later in this IA). They could not be addressed and resolved by the above or any other initiative under the DSM Strategy. In particular, the ongoing review of the Satellite and Cable Directive has a different scope (e.g. as regards the relevant services). Moreover, limited or no access of consumers in a MS to online content services provided in other MS is a situation that is very different from cross-border portability (as described above). The former would require a different legal solution and would have different economic impacts. These issues are not addressed in this IA. Specific early intervention on the cross-border portability of online content services is also timely now that consumers are nearing the date where there will be an end to roaming charges for travelers within the EU . This initiative will be followed by others regarding the further areas identified in the DSM Strategy. 2. What is the problem and why is it a problem? With growing access to the internet digital has become, for many, the main way to enjoy content such as music, games, films or sport and a means to participate in society. More and more consumers access content online: between 2009 and 2013, consumers' spending increased by 86% on digital music downloads and by 413% on streaming . Today there are close to 600 online music services in Europe. The same trend is observable for video: consumers' spending on digital video increased by 400% between 2010 and 2013 . In 2014 there were more than 3000 video-on-demand (VOD) services in Europe, including catch-up TV services of broadcasters (1196 services) and VOD services providing access to a catalogue of programs (2101 services). In 2014, subscription VOD services had 25 million users in 14 EU MS. In 2013 the online on-demand TV revenues reached €938 million and online on-demand film revenues €588 million in the EU. As regards e-books, Europeans have embraced them only to a limited extent so far: sales of e-books in Europe accounted for 7% of the global digital sales (a total of €8.1 billion in 2014). A trend towards more digital revenues is forecasted for the coming years but these remain far behind revenues from hard copies. In Europe consumer spending on video games is estimated at more than €20 billion in 2015, out of a global market of €68 billion. The number of active social network game users rose in Europe from 17 million a month in 2008 to 376 million a month in 2013. Furthermore, 58% consumers in the EU access live events (such as sports, concerts, etc.) online. Online sports consumption is also growing globally, including in the major European markets. Online content services (for the purposes of this IA: services giving access over the internet to copyright-protected content such as films, music, e-books or games and to radio and TV programs) provide viewers with flexibility when watching audiovisual (AV) programs, including sports events, listening to music, reading books or newspapers, by giving them vast catalogues to choose from and the possibility to access such content at the time of their choice. Tablets and smartphones further facilitate such uses by providing access from wherever the viewers are. Smartphone penetration has almost doubled in Europe in the last two years and the use of tablets has increased from 18% in 2012 to almost 50% of households in 2014 . In 2012, 36% of individuals in the EU used a mobile device to connect to the internet. In 2014, this share has risen to 51%. In 2012, 14% of individuals in the EU used a mobile device for reading or downloading news and 12% for playing games, watching images, video or listening to music. Online content services rely predominantly on content that is protected by copyright and related rights, e.g. films or music. However these services may also include content that is not necessarily protected by copyright, the most notable example being sporting events. At the same time, when sporting events are broadcast, broadcasting organisations can invoke rights in such broadcasts under EU copyright law. Providers of online content services wanting to use copyright-protected content need to get a licence from the holders of the rights in the content they want to use and for the territories in which they want to provide the services. The manner in which online rights are licensed depends on the type of content and the category of right holder. For example, rights in AV content are normally licensed by AV producers and, as far as premium AV content is concerned, on an exclusive territorial basis, whereas rights in music are licensed in part by record producers and music publishers and in part by authors' collective management organisations (CMOs) and, normally, without territorial exclusivity. The rights to transmit sporting events, i.e. the authorisation given by a sports organiser to a broadcaster (to be distinguished from the rights the broadcaster has in broadcasts itself – see above) or to another service provider so that they can transmit the sporting event to the public, further referred to as “sports broadcasting rights”, are often sold jointly, in particular when sport clubs entrust national or international sport associations to sell these rights on their behalf. As indicated by the Commission's decisional practice in competition cases, in a number of EU markets premium sports content broadcasting rights are sold in open tenders and in packages. However, such selling practices are not yet spread in all EU markets: there are markets where rights are sold in one bundle without a tendering process. Premium sports content is routinely marketed on an exclusive territorial basis. Non-premium sports content may be licensed by sports organisers without geographic restrictions. At EU level, there is a significant body of legislation that applies to the provisions of online content services including copyright and related rights, audiovisual media services and broadcasting. The legal framework is explained in Annex 6 in detail. Problem tree Cross-border portability, or the absence of it, concerns online content services to which consumers have lawful access (whether in exchange for a payment or free of charge), or content that they purchased or rented online in their country of residence and to which they want to continue to have access when travelling in another MS. It is one of the issues identified in the DSM Strategy and it is a question separate from the discussion on cross-border access by consumers to online content and to online content services which are available in MS other than their own. Cross-border portability and possible other initiatives under the DSM Strategy will eventually complement each other in removing barriers to the functioning of the DSM. They are however different and need to be addressed separately. An initiative on cross-border portability does not pre-empt any decision as regards other DSM-related initiatives but those initiatives would not be able to resolve the problem with cross-border portability either. Therefore, they will be addressed subsequently. The problem identified in the context of cross-border portability is summarised in Figure 1 below. Its drivers are related to contractual practices and, as far as copyright-protected content is concerned, to copyright law. There are significant differences between the sectors of the content industries. As a result, the scale of the problem varies depending on the sector. Figure 1: Problem tree Description of the problem When using online services, consumers either purchase or rent content on a one-off basis ("transactional services", e.g. those services provided by Amazon or iTunes where particular films or songs are offered for purchase or rent) or they establish a longer-term contractual relation with them ("subscription services", e.g. Netflix, Deezer or Skoobe).

In the case of transactional services, where a copy which is purchased by the consumer is downloaded on the consumer's device (e.g. a film bought on iTunes and downloaded to an iPad), the consumer may access such a copy anywhere and no issues related to portability arise. The question of portability however arises where the content is accessible via a digital locker or where it is streamed by the service provider, which is typical for rental, as in these cases the access to content is not within the consumer's control. Transactional services increasingly use streaming and/or cloud-based technologies. Subscription services give consumers access to an unlimited amount of content from the provider's catalogue on an ongoing basis either upon payment of a monthly fee or, e.g. where the service is supported by advertisers, free of charge. A typical feature of subscription services is that they allow consumers to access content on different devices, either on a program-scheduled or an on-demand basis. The question of portability arises also in these services as content is normally streamed by the service provider. In many cases, the access to these online content services is only possible in the MS of the consumer/service provider. When consumers travel abroad, they often cannot, or can only partially use the service that they have subscribed to in their home country or they cannot access the online content that they have previously purchased or rented. It is important to note that many online content services are freely accessible in the sense that they do not involve any explicit contractual relation between the service provider and the consumer or that they do not involve the verification of the consumer's MS of residence. These services are out of the scope of this IA. The presence and the scale of the problem is not the same in all sectors. While the business models are changing and the consumer demand is rapidly increasing, the description below captures the main features of the different sectors: The problem is particularly present in online audiovisual (AV) services. In most cases these services are not portable across borders at all. Consumers travelling in other MS cannot access the service or the content to which they have lawful access in their home country. This concerns both standalone VOD platforms and those operated by pay-TV operators regardless of whether the services are subscription-based or transactional. Examples: A subscriber of HBO Nordic staying for some days in Italy will not be able to access his account and watch films and will, instead, see a message saying that the service "is only available in Sweden, Norway, Denmark and Finland". The same will happen to users of the Belgian IPTV service Proximus TV Partout who can watch their favourite TV channels on tablets and smartphones, but only in Belgium. Similarly, the Internet TV platform Magine TV Germany, which encompasses both a limited unpaid service and paid subscription services, is only available to users residing in and accessing the service from the territory of Germany. A French user of the transactional MyTF1 film and series service will not be able to rent a new film while staying temporarily in the UK. An Italian user of the transactional ChiliTV film and series service will not be able to rent and stream a film while on holiday in Spain. In some cases online AV services are partially portable. This can mean that A) only content that the consumer previously downloaded (if the provider offers such a possibility) to his portable device is available when travelling abroad or B) that a consumer's access is limited to a selection of the content the service normally offers. C) Partial portability can imply that only the content offered by the same service provider in the visited MS is available. In this case, the availability of the service depends on the presence of the online service provider in the visited MS and on the catalogue of content offered in that MS, which may be very different from the one offered in the home country (and in a different language or without specific features available in the home country such as accessibility features for persons with disabilities). Examples: A) If a user of the transactional Universciné (Belgium) film service wants to watch an already rented film while staying temporarily in the Netherlands, he has to download it before travelling – he will not be able to rely on the streaming feature. B) A subscriber of one of the main French online AV services - Canal Play - could benefit from its "Summer to go" option allowing to download a selection of content and then watch it for 30 days. Users of the German RTL Now TV service can access it using a PC, smartphone or tablet, but will have only partial access to the content (mostly to RTL own productions) when they are outside of Germany. C) A Dutch subscriber travelling to France will only be able to watch films offered by Netflix to French consumers. The same subscriber travelling to Poland will not be able to watch films on Netflix as Netflix is not available in Poland. In the above cases, consumers are cut-off from their online content services or – in the case of partial portability - significantly limited in their experience. Using services offered in the visited country may not be an option as it may not be practical to enter into a subscription when only visiting a country for a limited duration, the content may not be available or available only in a foreign language, etc. and in any event this is not a reasonable proposition from the consumer's point of view. Similarly to AV content, much of premium sports content made available online is not portable across borders, in particular the streaming of live sporting events. As explained above, the offers by broadcasters to watch their programs (including sports programs) on the "second screen" are currently limited to the national territory. The same trend is observed concerning broadcasters' standalone online services for sports.

Examples: Viasat's Viaplay is one of Europe's first unbundled online TV sports services, available in Denmark, Finland, Sweden and Norway. However, a consumer cannot login to his account while travelling in the EU. Sky's Now TV is an online service offered by Sky in Italy, Germany and the UK, which includes unbundled online sports offerings. These services cannot be accessed by consumers while travelling in the EU. As a result of territorial restrictions, consumers can only enjoy the services of the broadcaster/service provider they have subscribed to in their home MS and not when travelling abroad. Again, consumers cannot easily replace their home services by services available in the visited country as e.g. the desired content may not be available at all in the visited MS, e.g. if that sport is not popular in the visited MS or not available due to other preferences in that market . In particular, the offer of premium sports content by other service providers can be limited. One specific feature of sports is the value of live watching, i.e. consumers want to watch sports live and therefore, a delayed viewing/listening, e.g. upon consumer's return via catch-up TV, is not a substitute. As for watching other (non-premium) sports content, consumers may also experience problems while travelling in the EU, as - even though there may not be territorial restrictions in place - major pay-TV operators offer access to their programs away from home only in the national territory. In other content sectors, the cross-border portability of online services is more present. In the music sector, consumers, when travelling, are normally able to access and use the online music services to which they have subscribed in their home country. Therefore, in practice, there seem to be no restrictions to the cross-border portability of online music services. At the same time, the legal situation appears to be less clear as some end-user agreements limit uses to the home country of the subscriber. There do not seem to be issues with the cross-border portability of e-books. Most online services offer the possibility to download e-books to the reader's device (at present, this is the typical use pattern in the sector). There are also more and more subscription-based streaming services in the market. These are generally portable across the MS. Finally, streaming services that offer access to video games are also generally available across borders. Subscription is not the main mode of access. The business models used by video game providers include free to play online or free applications, models relying on advertising and/or in-game sales of features enhancing the gamer's experience, subscription-based as well as pay-per-download. It appears that the free to play model has been gaining ground at the expense of other models. Cross-border portability is usually not restricted. The scale of the problem in the AV sector and in sports coverage is important and it continues to grow, partly due to the increasing number of online subscription-based services and partly because of the increasing consumer demand. As regards the number of services, in 2013, 3087 on-demand AV services were identified, out of which 2733 were established in an EU MS and 447 were focused on films. Figure 2 gives an overview of their presence in the different MS. Figure 2: Film on-demand services in the EU (+ Norway and Switzerland) by country of establishment (2013) Source: European Audiovisual Observatory, 2013c Moreover, in AV, subscription VOD (SVOD) services experienced the strongest growth for digital video (2013) with an increase of 147.5% (compared to a 43% increase for digital rental and 37% increase for digital purchase). Digital subscriptions accounted for 26% of digital video services in 2013 . For sports content, new offerings are emerging, where broadcasters offer unbundled online TV services allowing consumers to access sporting events "à la carte" , alongside all-encompassing broadcasters' offers to view their programs on a "second screen". As regards the consumer demand, the lack of cross-border portability is a missed opportunity to offer better services. The Body of European Regulators for Electronic Communications (BEREC) estimated that Europeans, who travel at least once a year, spend abroad on average 11.6 days per year. For citizens of Cyprus and Luxembourg the yearly average is 30 days, and for citizens of Finland, Ireland, Lithuania and the Netherlands close to 20 days. Indeed, the growing use of connected mobile devices (smartphones, tablets), in particular for watching video, indicates consumers' interest for accessing content wherever and whenever they want. The current consumer demand was confirmed in a recent Eurobarometer survey . 16% of the respondents (representing 20% of internet users) indicated they pay a subscription to access online content and 17% of people having a subscription indicated they have already tried to use it abroad, while 21% responded they would be interested to do so in the future. In addition, 33% of those who do not have a subscription consider cross-border portability as an important element if they were to take one. Having combined these findings with the results from a previous Eurobarometer survey carried out on tourism , it is possible to estimate the percentage of European consumers who would potentially use this feature of online subscription services. They would represent over 29 million people (5.7% of European consumers) at EU28 level , with significant differences by countries (from 1% in PT and GR to 20% in SE and 22% in DK), as indicated in the graph below. This number does not include European consumers who may want to benefit from portability of content acquired on a transactional basis nor of free-of-charge subscription services. Figure 3 – The current potential demand for portability of paid subscription-based services, by country Source: own calculations on the basis of Flash Eurobarometer 411 and Eurobarometer 392 The fast evolution of the market for online content services as well as the rapid increase in the number of consumers travelling within the EU show that the level of demand can increase significantly in a short while. This is explained in the baseline scenario. Drivers

The variations in the availability of cross-border portability of online content services in the EU are caused mainly by different business practices in the different sectors. The problem described above, in particular, results from the deep-seated licensing practices of right holders and/or from the commercial practices of service providers in some sectors of the content industries. These practices are facilitated by the fact that copyright is territorial which means, in essence, that those rights under copyright which are harmonised at EU level are implemented in national laws and that the geographical scope of these laws only extends to the territory of the MS in question. In consequence, a service provider that is making content available online in more than one MS, including if it does so only for the purpose of cross-border portability, must have the rights to use such content for the relevant territories. Of course, the fact that copyright is territorial would not in itself prevent right holders from granting multi-territorial licences (where otherwise they are in a position to do so) . When they do so, the service providers would be able to offer portability (in those MS covered by the multi-territorial licence). Moreover, in principle, the territoriality of copyright also does not prevent right holders from granting licences to service providers which, taking into account the limited extent of use of the content in territories other than the home MS of the consumer, allow the use of the content in other MS but only for the purposes of cross-border portability. The licensing of sports broadcasting rights by sports organisers follows the same logic as the licensing of copyright. The economic incentives often drive sports organisers to exploit their sports broadcasting rights on a territorial basis. Hence, broadcasters/service providers wanting to offer cross-border portability would need licences for the affected territories. The licensing practices of right holders: I. In the audiovisual sector, the general practice is territorial licensing and territorial exclusivity for premium content (e.g. films and TV series of particular interest for the audience) that is characterised by high upfront investment. AV producers of premium content typically grant an exclusive licence to a single distributor/service provider in each MS. This form of licensing, in combination with release windows , allows applying different prices in different territories and for different types of media and ensuring that consumers wishing to watch a particular piece of content have access to it only through one provider at a given time. Rights are also often pre-sold at the pre-production stage to ensure the financing of the content. In exchange for a fixed upfront payment to the film producers, distributors obtain exclusive exploitation rights in a specific territory for a defined period of time. As a result, service providers willing to acquire a licence for another territory to be able to offer portability would not be able to do so despite the limited effect of portability on issues such as the exclusivity of the exploitation in a given territory (including on the release windows) because another provider would have the exclusive rights for the territory. Alternatively, the provider wanting to offer portability would have to bid for the licence against a provider who would want the rights to provide its service in the territory (not only to provide portability). The acquisition of such a licence would require disproportionately high investment. Cross-border portability is considered as an attractive feature of online content services not only by consumers but also by the AV industry. In 2013 their joint statement at the Licences for Europe forum confirmed their willingness to work towards cross-border portability. However, in order to be able to allow AV service providers to provide this feature to their consumers as regards every film or other piece of content in their service, right holders would need to A) take into account cross-border portability when negotiating new licences, B) review and amend the existing complex network of contracts that currently ensures territorial exclusivity to distributors/service providers (and consequently excludes cross-border portability) in 28 MS. The industry has not embarked on this exercise yet and if it does so, achieving a situation where cross-border portability becomes a standard feature of all online content services may take a substantial amount of time and lead to diversified practices in the industry. However, until cross-border portability becomes a standard element of all new and existing licences, consumers may only be able to watch certain parts of the online content when travelling abroad with black-outs for the "non-portable" parts. This is unlikely to satisfy the consumer demand. II. In the sports sector, the prevailing commercial practice of sports organisers is to sell sports broadcasting rights for premium content on an exclusive territorial basis. Such exclusivity enables right holders to collect higher revenues due to the uniqueness of the content, and also allows them to adapt the price of rights to the level of interest in different territories. As for the purchasers, i.e. normally broadcasting organisations as well as other service providers, the exclusivity gives them a competitive advantage as they can differentiate their offers from their rivals and a possibility to attract large audiences. This in turn helps them to maximise their revenues from advertising and/or subscription fees. As in the AV sector, the cumulative effect of exclusive territorial licences acts as an obstacle to cross-border portability. On the contrary, non-premium content sports organisers often do not require territorial exclusivity. In such cases, service providers may be entitled to stream the content without territorial restrictions (or sports organisers may launch such services themselves). III. In the music sector, the licensing of rights in musical works is often organised on a territorial basis although a number of music publishers and collective management organisations (CMOs) grant multi-territorial licences. The multi-territorial licensing of rights in musical works for online uses will be facilitated by the Directive 2014/26/EU on Collective Rights Management which has to be implemented by MS by April 2016. In June 2015, the CMOs PRS (UK), GEMA (Germany) and STIM (Sweden) received the clearance of their deal by the Commission with a view to establishing a multi-territorial licensing hub in Europe. Multi-territorial licensing is widely used for the rights held by record producers . Where multi-territorial licences are granted, service providers can provide their services, including portability, across multiple territories. On the contrary, where licences are granted for a single territory, the service provider would not be able to offer the cross-border portability of its service without having obtained licences for all affected territories (or without the possibility in the licence to engage in a certain "overspill" when providing the portability of the service). At present, online music service providers, also those that operate in a single MS and presumably license rights only for this MS only, seem to offer their services with a cross-border portability feature. The reason behind could be that the vast majority of music content is not licensed on an exclusive basis (e.g. most musical works are available from multiple service providers in the same MS), therefore the licensing practice of right holders does not create obstacles, beyond some legal uncertainty (in cases where a licence is granted only for one MS and the service provider offers portability in other MS), to the cross-border portability of services. IV. In the book sector, one publisher typically acquires from the right holders exclusive rights on, at least, a pan-European basis, often together with the translation rights that will enable the book to be translated (by that publisher or another one after rights are assigned to him) to other languages. As a result, publishers are in most cases able to license a retailer to sell the e-book in multiple territories and, in practice, usually do so. This also allows the retailer to provide cross-border portability of the service. For books in English language, there is generally a split of the rights that are granted by authors: publishers in the UK and Ireland generally hold the exclusive rights for these markets as well as the Commonwealth countries. The US publishers usually hold exclusive rights for the US, Mexico and South America. For all other territories, publishers generally hold non-exclusive rights. V. In the video games sector, online game developers were traditionally the holders of rights and would grant licences to game publishers without territorial limitations. However, as the sector evolves and new forms of distribution emerge, copyright ownership and licensing is changing too. On the one hand, game developers often distribute games themselves - directly over the Internet or through application stores (which act as agents for the game developers). On the other hand, game publishers tend to produce games themselves and rely less on independent game developers. In any case, a game developer or publisher has the ability to make a game available without territorial restrictions and typically publishes a game simultaneously in multiple territories . This general absence of territorial restrictions and the fact that downloading is still a prevalent mode to access games explain why a consumer is usually able to continue using an online gaming service or a particular video game while staying temporarily abroad. The commercial practices of service providers: The lack of portability of content across borders can also be the result of business decisions taken by service providers. As a result, there are instances where even if no obstacles to portability are created by right holders e.g. multi-territorial licences are granted and licences are granted without territorial exclusivity, portability is not offered. Service providers, especially in the AV sector and for premium sports content, may not be interested or financially capable of acquiring multi-territorial licences which require a substantial budget. Further, according to the feedback received from stakeholders, considerations such as regulatory requirements, technological constraints, the existing demand for the particular services, the position of competitors as well as the availability of advertising may result in service providers deciding not to enter certain markets at all and hence not to offer portability of their services in these markets. In the other sectors (music, e-books, video games) either online service providers are able to acquire multi-territorial licences and offer the portability of their services in the different territories covered by the licence or licensing is not carried out on a strict territory-by-territory basis (e.g. licences allow small-scale use of the service beyond the licensed territory) enabling service providers to offer cross-border portability. Consequently, service providers do not seem to apply restrictions to the cross-border portability of their online content services. Consequences In consequence of the above-described licensing practices and business considerations, a substantial number of online content services, especially in the AV sector, as well as premium sports content, remain locked in national territories (and are thus not portable). This situation generates frustration for a high number of consumers who, while travelling in other parts of the EU internal market, cannot use their subscription services or enjoy the online services or content they have previously purchased or rented.

Furthermore, either because of the licensing practices or due to the high costs of obtaining multi-territorial licences, online service providers miss out on the opportunity to innovate, better respond to consumers’ needs and provide them with an attractive additional feature of the service. In the AV sector, right holders may also lose out by not being able to allow service providers in their licences to provide for a value-added service to consumers as this would require the renegotiation of their existing network of exclusive licences in different territories. This is a missed opportunity as offering the cross-border portability of services would not affect the current functioning of the AV sector (as described above) as only consumers that have subscribed to the service in their home country or rented/purchased content there and are temporarily in another MS would benefit from it. The same logic applies in the premium sports sector. Based on the evolution of the market, as explained below, the consumer demand that is unmet by the online service providers can be expected to increase rapidly in the coming years.

How would the problem evolve, without EU action? Consumer demand for the cross-border portability of online content services is expected to increase with the growing use of mobile devices. To illustrate this trend, it is expected that by the end of 2020, the number of smartphones in Europe will have doubled, reaching 800 million, meaning that more than 70 percent of mobile subscriptions will be for smartphones. Smartphone viewers in Europe consume more than four hours of video content on a weekly basis, almost half of which they view on-the-go . Moreover, more than 59 million European households (20% of the European pay-TV market) are expected to pay for subscription streaming video services by 2020 . Overall, also taking into account the projections for the increase in tourism, it can be expected that the percentage of European consumers at EU28 level who would potentially use the cross-border portability feature of online subscription services could reach 14% by 2020. This would equal around 72 million people in Europe. In the public consultation, the vast majority of consumers who responded argued in favour of cross-border access to (including the cross-border portability of) online content services. As regards other measures related to the DSM, the end of mobile roaming charges as of June 2017 will have a beneficial economic effect on cross-border portability in sectors where it already exists and vice versa. On the one hand, the roaming measure will encourage consumers to use the online content services without the fear of incurring prohibitive telecoms charges and thereby increasing consumer demand for portable services. On the other hand, the cross-border portability of content will mean more traffic flowing through the networks, justifying further investments by telecom operators. The measure on roaming will however not be able to ensure cross-border portability of content in areas where it does not exist yet. Also, as explained earlier in the IA, cross-border portability is a self-standing problem that would not be resolved by any other initiative foreseen in the DSM Strategy. In particular, for those consumers who wish to access the services they subscribed to or the content they bought or rented in their home country, the barriers deriving from the licensing and distribution of content on a territorial and exclusive basis are likely to persist in the AV sector and for premium sports content due to the reasons described above. Exclusive territorial licence agreements would continue to restrict the cross-border portability of content, except where service providers have licences for all EU or for multiple territories (or where contracts allow for certain overspill, i.e. small-scale use of the service beyond the licensed territory). Changes in this area could be very slow to materialise, as shown by the lack of tangible progress after the pledge that the representatives of the AV sector made in 2013 at the "Licenses for Europe" stakeholder dialogue to facilitate cross-border portability. Two years after the "portability" pledge was undertaken, there do not seem to be any tangible results or concrete industry follow-up. While the cross-border portability of all online AV content services in the EU is not expected to materialize in the medium term for the reasons explained earlier, it cannot be excluded that some or all of the AV industry would still try and follow up on the pledge made at the "Licences for Europe" forum. In this case, right holders would have to negotiate and grant new licences all over Europe taking into account the limited cross-border use required by portability. These licences would however only allow for the cross-border portability of the "new" content covered by them. Therefore, right holders would also have to embark on renegotiating the existing licences with territorial exclusivity in all EU MS in order to allow the cross-border portability feature to function across the EU. It is also possible that a limited number of major providers try and gradually initiate such re-negotiation process to be able to propose portability services to their subscribers. For other (smaller) providers however re-negotiating contracts would likely represent a very burdensome exercise. Even if some progress is achieved by the market participants themselves, the situation would lead to consumers being put on an unequal footing in the internal market due to the disparities that will result from individual renegotiations of contracts. Moreover, even if right holders granted service providers the right to provide cross-border portability, the contractual arrangements surrounding it would be diverse and service providers may also eventually opt for not providing this feature to their consumers, e.g. due to the required safeguards or the obligation to black out parts of their service. Therefore, even if the AV industry follows up on the "Licences for Europe" pledge, also taking into account the relatively long duration of licences in the AV sector, the growing consumer demand can be expected to remain unmet or only partially met in medium term. In the sports sector, it may be easier to negotiate licences covering cross-border portability when sport broadcasting rights are licensed for a short duration. However, this may not ensure a uniform practice. Moreover, broadcasters/service providers who purchase rights for live events may be less willing to ensure portability, if they cannot offer the same for other premium content, including AV content. Otherwise, they would have to offer their services with "black outs" for consumers which could be unacceptable for reputational reasons. In the music sector, the cross-border portability of subscription and transactional services, which is already commonly proposed by platforms (both by larger players and smaller providers) would probably continue to be the norm. The existing business practice in the sector is unlikely to change in the short term and it would not be possible for new players to enter the market without such offer. In the longer term, the licensing practices in the market could develop in different directions. While the introduction of further territorial restrictions seems unlikely, it cannot be excluded. Both in short and in longer term, in those cases where the terms of the use of the service diverge from the actual practice, unless those online service providers review the terms and/or their licences with the right holders, legal uncertainty would remain. Book publishers and video game developers and publishers are likely to continue to generally grant multi-territorial licences enabling online services to offer cross-border portability; although due to the rapid evolution of these markets, longer-term developments are hard to forecast. To conclude, under the baseline scenario, in the AV sector and for premium sports content, there would be an increasing demand for portability of online services from an increasing number of consumers who travel abroad for work, studies or holiday and are unable to access online services they have subscribed to or online content they have purchased/rented in their home country. In the other sectors, cross-border portability is generally unrestricted (at least in practice) and at present it can be expected to remain so. This development in both technology and resulting consumer habits calls for the adaptation of the legal framework in the general interest. 3.Why should the EU act? Legal basis Article 114 of the Treaty on the Functioning of the European Union (TFEU) confers on the EU the power to adopt measures, including a regulation, which have as their object the establishment and functioning of the internal market. Removing the existing barriers to the portability of online content services during temporary presence outside of the home MS would, depending on the sector, be a first step to make possible or facilitate and encourage the free movement of those services in the internal market, and adapt the legal framework to the change in circumstances brought about by the very rapid growth of the use of portable devices across borders. Online content services which would be affected by EU action predominantly rely on copyright-protected content. The EU has harmonised the area of copyright as regards the rights which are relevant for online dissemination of content (notably the reproduction, communication to the public and making available rights) – see Annex 6. As explained in more detail in Section 2, these rights are territorial and in consequence a service provider that is making online content available in more than one MS must have the rights to use such content for the relevant territories. The rapid technological development as regards access to the internet and the increasing use of mobile devices whilst temporarily in other MS require reexamining the above framework as to whether it can continue contributing to the development of the single market. The present initiative would concern the exercise of these harmonised rights across borders. Without the adaptation of the way the rights are exercised it would be extremely difficult to respond to developments in technology and commercial practices of service providers that allow consumers to access their online content services on the go via portable devices. As this adaptation would affect the harmonised framework concerning the scope of copyright and related rights, it would have to rely on Article 114 TFEU as a legal base. As explained in Section 2, certain elements of online content services, e.g. sporting events, are not protected by copyright and therefore not subject to the copyright harmonised legal framework. However, certain aspects of TV transmissions of sporting events have been harmonised by Directive 2010/13/EU (see Annex 4). Also, sporting events are included in broadcasts in which broadcasting organisations can invoke rights harmonised at EU level. Other rightholders, as the case may be, can also invoke rights harmonised at EU level to works and other subject matter contained in those broadcasts. Furthermore, as indicated by the CJEU , sporting events, when broadcast, are often accompanied by copyright-protected elements such as the opening video sequence or the anthem. The present initiative has as its objective facilitating access, inter alia, to transmissions of broadcasting organisations which include transmissions of sporting events where such transmissions are offered to consumers as an online content service. In order to fully deliver to consumers the benefits of access to online content services when they travel in the EU, taking into account the rapidly changing development of technology and resulting consumer habits, it is important to include all elements of such transmissions in the initiative. Otherwise the result with regard to online transmissions, would be such that consumers would obtain access to those parts of the service which are protected by copyright while the other parts would be 'blacked-out' by service providers. This would be inconsistent with the objective of ensuring uninterrupted access to the entirety of the online content service to consumers who travel in the EU. Subsidiarity The subsidiarity principle (Article 5(3) TEU) requires the assessment of the necessity and the added value of the EU action. Necessity: The portability of online content services is per definition a question of a cross-border nature. It ensures that consumers who have subscribed to an online service in their home country or who have purchased or rented content there, could access this service or content when they travel to another MS. In addition to certain business considerations, a key reason why this is not possible today in some sectors (AV and sports content) is the complex system of contracts between the right holders and the distributors/service providers in the 28 MS which ensure territorial exclusivity. They would need to be reviewed one by one and in a consistent manner in all territories in order to carve out cross-border portability. While this possibility cannot be excluded, it would entail significant costs for the parties and it would lead to diverse solutions in the market (as it was explained in Section 2). Also, until cross-border portability becomes a standard element of all licence agreements, which can be expected to take a long time considering the need for a one-by-one revision of the contracts in AV and sports in 28 MS, some of the content in the catalogue of the service provider would be portable and some would not. This would require providers to black out some of the content during the consumers' temporary stay abroad. Therefore the fragmentation in the market would persist or even increase in the short to medium term. As copyright and rights related to copyright such as rights of broadcasting organisations in transmissions have been harmonised at EU level, MS cannot intervene via legislation in order to ensure cross-border portability. Therefore, such action can only be taken at EU level. Consequently, if the rights in question require adaptation in order to ensure cross-border portability, only the EU is entitled to act to adapt the legal framework.

Intervention only in copyright would facilitate the negotiations between right holders and service providers however it would not be sufficient to ensure that cross-border portability becomes available to consumers. This may only be achieved if the obligation to provide for this feature cannot be overridden by contracts. This must include existing contractual arrangements so as to ensure that portability becomes available for consumers at the same time across the EU. Action by MS would not be sufficient to achieve EU-wide results and the availability of content would remain patchy with limitations not only as regards certain pieces of content but also to certain MS. As far as the other sectors (music, e-books, video games) are concerned, currently there is no evidence of problems with cross-border portability. However, in the music sector, in some instances despite service being portable in practice, end-user agreements state that customers are allowed to access the service solely in a territory of the MS in which they subscribed to the service. This is due to the licensing practices for online uses which are, unlike in the AV sector and for premium sports content, generally not based on territorial exclusivity. Consequently, in principle, it would seem that these sectors could be excluded from the intervention. However, in order to provide for full legal certainty and for the initiative to be future-proof by avoiding possible future fragmentation , it is indispensable to cover all sectors of the content industry in an equal manner. If these areas would not be covered by this intervention, MS would not be able to address problems arising in relation to copyright-protected content for the reasons explained above. Legislative action at the EU level to adapt the copyright acquis would ensure greater legal certainty and would do away with the need to seek separate licences for the purposes of cross-border portability. It would provide service providers a guarantee that they will be able to provide portability to their consumers also in the long run and to consumers to be able to benefit from this feature. Added value: In the short to medium term, only EU intervention can ensure that the conditions for consumers’ access to online content services do not vary according to the MS they are located in at a specific moment. Including cross-border portability in all contracts by market participants may be attainable in the long term but it would be costly and will result in diverse solutions applied by different right holder and providers. On the contrary, in the case of EU intervention the consumer would have access to the service he has subscribed to or to the content he has purchased/rented under the same conditions, no matter in which of the other 27 MS he travels to. EU action providing for further harmonised conditions would also produce clear benefits to online service providers, compared to any national solutions, by creating a legally certain framework for the provision of cross-border portability of online content services across Europe. 4.What should be achieved? The goal of the EU policy intervention is to solve the problem identified in Section 2. The absence of cross-border portability in the EU is a specific problem that requires a specific solution. It is necessary to remove certain barriers in the functioning of the DSM to ensure that consumers can access online content services they have subscribed to or online content they have purchased or rented when being temporarily present in another MS. Other measures under the DSM Strategy will address other matters and would not solve this particular problem. They would not make this initiative obsolete but would complement it. Currently certain licensing practices by right holders and certain terms of use by service providers prevent consumers, when travelling abroad, from accessing the service they have subscribed to or the content they have bought or rented in their home country. This problem is particularly present with respect to AV and premium sports content. The initiative should aim at removing these barriers so that the needs of users can be met more effectively. In the other sectors (music, e-books and video games), the current contractual practices do not seem to limit cross-border portability (despite legal uncertainty in some services' terms of use – see Section 3). It cannot however be excluded that licensing practices change in the future or service providers decide to restrict the access of consumers to some of their currently available services. Furthermore, services may combine different types of content (e.g. AV, music, sports) with different degrees of portability. Therefore, in order for the EU intervention be future-proof and effective, it is necessary to cover all types of content and not to differentiate between online content services according to the content they use. At the level of the DSM, the general objectives aim at removing barriers that currently prevent consumers from using the services they have previously subscribed to or from accessing content they have previously purchased or rented, when travelling in other EU MS. From the perspective of right holders and service providers, the objective is to better respond to the needs of consumers. The specific objective of the EU action is to ensure the cross-border portability of online content services; it is one of the measures necessary to complete the DSM. Figure 4: Objective tree 5.What are the various options to achieve the objectives? As regards copyright-protected content, the objectives presented above could be achieved by the introduction of the rule localising all copyright-relevant acts occurring online combined with a further harmonisation of copyright law or by a full harmonisation of EU copyright law and a single European copyright title. Such options, while not excluded as a longer term project, are beyond what is needed to solve the specific problem identified in this IA as they would address not only the question of cross-border portability of online content services but also a much broader question of the exploitation of works and other protected subject-matter over the internet as well as other issues such as authorship and ownership of works. Due to the very wide scope of such options, the timeframe for their negotiation and implementation would necessarily be very long. Consequently, they are not part of the short or medium-term actions envisaged in the DSM Strategy which aim at providing targeted solutions to specific problems. Also, the problem of cross-border portability of online content services would not require such far-reaching measures and can be resolved under a much shorter timeframe. The above options are therefore discarded as disproportionate for the current objectives. Baseline No policy intervention. This option would consist in relying on market players to progressively offer portability of content online as well as on the courts, and notably the CJEU, to clarify the application of provisions of EU secondary law and of the Treaty relevant to the free movement of services. It would also mean continuing to rely on the application of competition law to address territorial restrictions as this may have an effect on the provision of portable online content services. Option 1 – Guidance to stakeholders on the cross-border portability of online content services This option consists in guidance to stakeholders by the Commission encouraging online content service providers to provide for cross-border portability of their services across the EU. In addition to service providers, this guidance would also be addressed to right holders, who would be encouraged, when licensing rights to online content service providers, to grant the rights allowing for portable uses i.e. temporary uses of the online content in a MS other than the MS where the consumer concluded the subscription (or the transaction in the case of download to own or rental services). The extent of the portable uses would have to be defined in contracts and so would be the necessary safeguards (e.g. as regards the authentication of customers). The guidance would also address MS which would be invited to actively monitor market developments and the conditions under which the portability of services is provided. Stakeholders' views This option is not favoured by consumers as their objective is to have a solution that delivers portability in a fast and efficient manner. It used to be favoured by right holders and service providers although over time, the views of at least a part of content industry evolved and support was expressed with regard to the legislative solution (see below). Option 2 – Legal mechanism to facilitate the cross-border portability of online content services in the EU Main elements This option would entail a legal mechanism according to which the provision of the online content service to a consumer who:

has lawful access to an online content service in his MS of residence, and is temporarily present in a MS other than his MS of residence, would be deemed to occur in the MS of consumer's residence (as opposed to in the MS of temporary stay of the consumer). The service provider could therefore, if not limited by contract, provide cross-border portability of his service across the EU without the need to acquire rights for the relevant EU MS; the right to provide an online content service in one MS would be sufficient. There would be no prohibition on contractual clauses which limit or prevent the application of the legal mechanism. Definitions and other provisions Services to be affected by the intervention: an audiovisual media service within the meaning of Directive 2010/13/EU of the European Parliament and of the Council as well as a service the main feature of which is the provision of access to content protected by copyright and/or related rights such as films, music, books, games, etc. or to transmissions of broadcasting organisations , portable (accessible from all locations that allow online access) in the MS of residence of the consumer , provided to the consumer against payment of money or without such payment (e.g. advertisement-based services), in the latter case only if the MS of residence of the consumer is verified by a provider. 'MS of residence' would be defined as the MS in which the consumer habitually resides. This is normally established by the use of proxies such as banking details, the existence of an agreement for broadband or telephone connection, IP address, etc. 'Temporary presence' would be defined, for a subscriber, as a presence in a MS other than his or her MS of residence. No concrete indication as to the length of such temporary presence would be provided in the intervention. Several factors explain the choice of this approach. Specification of duration of temporary presence is not required, as the main defining feature is that such presence does not change the habitual residence of the subscriber. The definition needs to accommodate temporary presences of various length and for various purposes, such as leisure, travel, work and study. This will benefit consumers without generating extra cost for service providers or undermining right holders' content distribution practices. Also, online content services are developing dynamically and are characterised by a variety of offers, which makes it difficult to set a uniform duration. Furthermore, the objective of the intervention is to keep the possible verification of the MS of residence within what is reasonable and necessary. This objective would not be served by a fixed period of temporary presence which would imply checks of the exact duration of consumers' presence in MS other than his or her MS of residence. The intervention would not require service providers to use any authentication tools but would leave this matter to arrangements between holders of relevant rights and service providers. The legal mechanism would apply to the ongoing licensing contracts for online content between right holders and service providers only if both parties would agree on its application. It would apply to all new licensing contracts between right holders and service providers. Full application to SMEs is envisaged (see Section 6). ' Legal instrument This option entails EU legislative intervention as only a binding instrument can guarantee that sufficient uniformity of the application of the legal mechanism and legal certainty are achieved for all stakeholders. A regulation would be directly applicable and would not need to be implemented in national law as it would have immediate effect and is a particularly suitable instrument when the objective is the uniform application of rules in a certain area. This type of instrument would be the best to achieve the objective of facilitating the portability of online content across the EU. It would allow a uniform application of the portability rules across MS and would guarantee that right holders and online service providers from different MS are subject to the exact same rules. This would be particularly important for online content services present in different territories. On the contrary, a directive would leave too much room for MS to choose how to implement the relevant rules in their national legislation. As a result, there would be a high risk that the conditions for the access to the relevant subscription services would be different for consumers when travelling to different MS. Furthermore, the conditions may be different for service providers wishing to offer services across borders in the internal market. It may also take longer time to deliver the expected results in the market. Therefore, a directive would fail to achieve the pursued objectives. Stakeholders' views

Right holders and service providers which had initially favoured Option 1 expressed support for a legislative intervention. The content industry recognises that there is a demand for portability and that offering portability, especially for AV and premium sports content, is extremely difficult due to the existing network of agreements. Option 2 is the preferred option of the content industry as it would eliminate the licensing obstacle to portability while leaving the contractual freedom for the parties. Service providers would not be obliged to provide the cross-border portability of their services and right holders could influence the conditions on which this portability is provided by their contracts with service providers. AV producers would prefer to control the triggering of the legal mechanism, i.e. condition the application of this mechanism on the agreement between right holders and service providers. The option is not favoured by consumers as it does not include the mandatory element of providing portability. Option 3 – Intervention to ensure the cross-border portability of online content services in the EU Main elements The intervention would contain the following three elements: 1) The legal mechanism described in Option 2. 2) An obligation on the providers of online content services who lawfully provide a portable online content service in a MS of the EU to ensure cross-border portability of services, i.e. to provide customers who are residents of this MS with access, during their temporary stays in other MS, to the same content, on the same range and number of devices and the same range of functionalities (including, for instance, accessibility features for people with disabilities) as those offered in their MS of residence. Providers would not be however obliged (unless they commit to it in an express manner) to provide the same quality of the delivery of an online content service in other EU MS as in the MS of residence of the customer. 3) Prohibition of restrictions in contracts between right holders and providers of online content services or such service providers and their customers limiting cross-border portability of online content services. Definitions and other provisions Definitions would be the same as in Option 2. The intervention would not require service providers to use any authentication tools but would leave this matter to arrangements between holders of relevant rights and service providers. At the same time, there would be appropriate safeguards relating to the proportionality and necessity of the requirements potentially imposed by right holders to ensure that such requirements would be adequate for the objective of authentication and would not result in an excessive burden on service providers. There would be also general data protection safeguards to ensure that the potential use of authentication tools is made in a proportionate manner. The intervention would apply to the ongoing contracts for online content services between right holders and service providers and between service providers and consumers. Market players would benefit from a transitional period to make arrangements necessary to adapt to the new rules. Full application to SMEs is envisaged (see Section 6). Legal instrument This option entails EU legislative intervention as only a binding instrument can guarantee that the portability is achieved in all MS and that sufficient uniformity and legal certainty are achieved for all stakeholders. The considerations as regards the choice of legal instrument are the same as in Option 2. A regulation seems better suited to reach the objectives of the initiative. Stakeholders' views This option is favoured by consumers. As to the views of right holders and service providers see Option 2. 6.What are the impacts of the different policy options and who will be affected? Baseline

Effectiveness The impacts of the baseline scenario will significantly vary depending on the sector, the development of business models and on licensing practices, as described in the problem definition. Content industries: The pressure exerted by consumers who increasingly use mobile devices to access content might result, in the medium to long term, in right holders and service providers progressively finding solutions to allow cross-border portability of online AV content. However, this is likely to require long negotiations, as it would involve changes to multiple, often long-running licensing contracts, possibly also with regard to licence fees (though it is not evident given the negligible impact of portability on the territorial exploitation of content). Right holders are expected to be, at first, rather reluctant to allow for portable uses within the EU, due to the difficulty deriving from reviewing the existing network of licensing agreements and because of possible problems in determining/monitoring that the use is really a "portability" use, i.e. that the use in MS other than the home MS of the consumer is limited to temporary stays. In sports, gradually, due to consumer preferences, sports organisers may offer cross-border portability when selling their broadcasting rights. Where broadcasting rights for premium sports content are licensed for a short duration, such evolution could take place in a short to medium term. However, the duration of licences may vary significantly. Furthermore, due to different market dynamics applicable to different sports, this evolution can take some time and lead to diversified results. Sport right holders may, at first, have the same concerns as described above for the determination and monitoring of the portability use. In the short or medium term, there is no significant change expected in the licensing practices in music. Producers of music (majors and independent) are likely to continue to license on a multi-territorial basis if online service providers request such licences. As regards authors' rights, music publishers and CMOs (those that comply with the requirements of the CRM Directive) are likely to do the same. These multi-territorial licences would allow online service providers to continue offering portability. Even in the case of territorial licences being granted to online service providers, right holders are likely to accept a certain level of portability offered by service providers as these licences would not be based on exclusivity. In the same way, in the short or medium term, no change in the licensing practices for e-books and online games is expected. However, it is difficult to make predictions in that regard for the long term given the rapidly-evolving context in which these services operate. Service providers: Online AV services, in particular subscription services (including online content services offered by pay-TV operators), would be increasingly interested in offering to their customers the possibility to access the service when travelling in other EU MS. Certain operators have already announced their intention to explore with right holders the possibility to offer this. However, concrete results could be achieved only if right holders are willing to review existing licensing arrangements and accept to grant authorisations for portable uses. This would partly depend on the market power of service providers which in turn puts smaller providers and especially start-ups (SMEs) in a difficult position. In any case, it is likely that service providers would only be able to provide the cross-border portability of parts of the content offered by their service. Concerning sports, consumers who increasingly use mobile devices for viewing sports content online may exert pressure on broadcasters/service providers to ensure portability of their services. However, broadcasters/service providers, who acquire exclusive rights for live sporting events, may be less willing to ensure cross-border portability for consumers, if they cannot offer the same for other premium content, including AV content. Indeed, it could be difficult to explain to consumers why part of the content is portable, while the other is "blacked-out". Portability of sports content may then depend on the portability of other AV content. Also, the territorial exclusivity enjoyed by broadcasters/service providers leads to less competitive pressure to differentiate their offerings (including by offering cross-border portability) as such content is not available to consumers elsewhere. As both major and smaller music platforms already offer cross-border portability of subscription services, they are expected to continue to do the same under the baseline scenario (assuming no changes in the licensing practices of right holders). Portability is so common that it is highly unlikely that new players could enter the market without providing this service to their customers. The same would apply to e-books and video games. This option would have no impact either on competition in the internal market or the competitiveness of the creative industries. It would have no impact on employment either. Other than those mentioned above, there are no specific impacts on SMEs. Consumers: In the short term, consumers travelling abroad would remain cut-off from their home countries as regards the access to AV content and premium sports content). However, in the medium to long term, certain online services might be able to offer to their customers the cross-border portability of their service. However, under this option, this is not expected to become a standard industry practice. The number of consumers being able to use portability across borders is likely to increase slowly and unevenly across Europe. Specifically for premium AV and premium sports content, given that there are prevailing exclusivity arrangements, consumers may not have an option to switch services providers in favour of providers offering cross-border portability, as the content may not be available elsewhere. No significant impact is expected for consumers as regards other types of content (music, e-books and games). Cross-border portability is likely to continue to be widely available for EU consumers assuming no changes in the licensing practices of right holders. However, as far as the music content is concerned, the legal uncertainty as regards terms of use of the service would continue. Efficiency The baseline scenario would not entail any compliance costs and would not deliver any benefits. Coherence with other EU policies Cultural diversity: The baseline scenario would not have any impact on cultural diversity. It would not affect the production of new cultural content. Fundamental rights: The baseline scenario would not have any impact on copyright as property right or on the freedom to conduct a business, as recognised in the European Charter of Fundamental Rights (Articles 16 and 17). Third countries, trade and environment: The baseline scenario would not have any impact on third countries and trade or on the environment. It also does not affect the EU's and the MS's international obligations. Option 1 – Guidance to stakeholders on the cross-border portability of online content services Effectiveness The impact of this option would also vary across sectors, depending on the existing licensing practices (use of multi-territorial licences, territorial exclusivity etc.).

Content industries: Right holders in the AV and sports sectors would be the most impacted, as, in practice, this option would mainly address them and invite them to review their licensing practices which currently limit cross-border portability. They would be encouraged to grant licences for portable uses outside the home territory when they hold the rights for all EU territories, which is generally the case for AV producers. Their willingness to authorise portable uses would depend on the market power of online service providers and on the proposed safeguards concerning access to content from territories other than the MS of residence of the consumer and on the degree of difficulty to renegotiate licences they may have granted with territorial exclusivity. Portability is not expected to affect the value of territorial exclusivity, however the authorisation of portable uses would require changes in licensing contracts based on territorial exclusivity (portable uses would have to be carved out). Right holders are expected to be reluctant to authorise portable uses of their content if online service providers do not offer the sufficient guarantees in terms of authentication procedures, confirmation that the presence outside the home country is temporary, quality of the service provided to travelling customers, etc. Also (though it is not evident given the negligible impact of portability on the territorial exploitation of content), there could be negotiations on licence fees as right holders could, ask for higher licence fees when authorising portable uses (claiming additional use of content) while service providers could ask for lower fees (claiming lower value of their territorial exclusivity). In any case, a substantial change to licensing fees is not expected. All in all, this option could encourage right holders to consider adapting their licensing practices; however it is unlikely to generate a consistent approach across the AV or sports industry. The experience with the Licences for Europe stakeholder forum shows that in spite of the industry's commitment "to continue to work towards the further development of cross-border portability”; no visible progress has been achieved for the portability of AV and sports online services despite two years having passed in which many online TV and film service providers successfully introduced out-of-home viewing solutions. The Commission has monitored the market (e.g. by a systematic analysis of terms of use of online content services) for developments on portability but saw none except for one development (which falls short of cross-border portability), i.e. some streaming services offering to consumers the possibility to download films or TV programmes in their home MS before travelling and then to access the downloaded content in other MS. The discussions with stakeholders also confirmed that no progress has been made on the basis of the commitment – this is in contrast with certain other pledges made in the process of Licences for Europe. Right holders in other sectors (music, e-books and video games) are not likely to be impacted, in particular if they grant multi-territorial licences to online service providers. Where this is not the case, this option could encourage the introduction of specific terms in licensing contracts allowing service providers to offer portability. Service providers: In the AV sector, online subscription services and pay-TV operators are likely to be interested in developing a cross-border portability option in order to improve the service to their customers and better respond to their needs in terms of mobility. In the future, subscription video-on-demand (SVOD) services are likely to compete directly with pay-TV operators , notably through lower subscription prices. The development of the portability feature could constitute a competitive advantage for the “first mover” (SVOD service or pay-TV operator). As mentioned above, there could be negotiations between right holders and service providers on licence fees but a substantial change to licensing fees is not expected. In the sports sector, premium sports content is often exclusively licensed in packages to broadcasters/service providers, who may be entitled to make the content available across the platforms, including online. For these broadcasters/service providers, their willingness to offer portability may depend on their ability to offer it for their entire package, including AV content. As for portability for sports content only, the broadcasters/service providers may have less competitive pressure to be the "first mover", if they have exclusive rights to transmit live sporting events in a given territory. Indeed, such premium sports content is irreplaceable, so service providers are less likely to lose consumers in a short and medium term due to the lack of cross-border portability. On the other hand, portability is not likely to lead to higher licence fees because it would have a limited impact on how the sports broadcasting rights are licensed, i.e. in packages shaped taking into account the specific demand in a given territory, and because of vast differences in value of the rights between the primary market and other markets. In other sectors (music, e-books, games), the impact of this option would be marginal unless negotiations are deemed important by some service providers to gain legal certainty from right holders on portable uses. As explained above, this option could have an impact on the competition between online service providers in the AV sector and with pay-TV operators, with the first online services offering portability benefiting from a competitive advantage over the other services. It would however not affect the competition between service providers in different MS, if portability is offered on the basis of a residence requirement. This option would not have any impact on employment. For service providers that are SMEs, the specific impacts are proportionally higher costs (see below). Consumers: This option could bring benefits for consumers in terms of the higher number of portable online content services offering AV content and premium sports content. However, this development would likely be slow and heterogeneous, as it would depend on the willingness and possibility of online service providers to offer portability and on the result of their negotiations with right holders. In some cases, online service providers may only be in the position to offer portability for certain types of content (for which right holders would have granted a licence covering portable uses) but not for their entire catalogue. This option could potentially result in higher prices for consumers compared to the current situation, because of the combined effect of the potential increase in licence fees (see above), administrative costs of renegotiations of contracts and potential cost of technical improvements to the service (see section on efficiency). In this case, online service providers could decide to pass these costs through to the consumers. Their ability to increase prices is however likely to be limited by the competition between the different market players (in particular SVOD services and pay-TV operators). As portability becomes a standard feature (like in, for instance, music) the possibilities to charge additionally for it will diminish. The impact of this option on consumers' access to the portability of music, e-books and games online services is expected to be marginal, as portability is already offered in most cases, either on the basis of multi-territorial licences, or through territorial licences allowing a limited “overspill” in other territories. Efficiency This option could entail significant transaction costs for those right holders and online service providers in the AV sector who decide to follow the Commission's guidance and offer cross-border portability. This would generate administrative costs related to the review of licences and terms of services. To allow for portable uses in other territories, on the one hand, right holders would need to adapt all the contracts they have with distributors in the different territories where their content is licensed. On the other hand, online service providers may need to negotiate with a high number of right holders or intermediaries (distributors, online aggregators of rights) in order to obtain the necessary rights for ensuring the portability of their entire catalogue. Aggregators of online rights could play an active role to limit these costs, by negotiating directly with right holders and ensuring to online service providers the licensing of rights including portability. Costs associated to the renegotiation of contracts are very difficult to estimate as they would, among other things, depend on the number of parties involved, the extent of changes that parties would want to introduce and on the current practices of online service providers (e.g. with regard to authentication tools). As regards sports content, taking into account the way how the sports broadcasting rights are licensed (in packages and for a certain number of sporting events/seasons), the administrative costs related to the review of licences and terms of service may be less significant. Negotiations may result in higher licence fees (see above) and in a set of safeguard measures, required by the right holders, which service providers would have to implement if they want to ensure portability . This could entail some technical costs for online service providers (e.g. strengthening of their authentication measures, use of content delivery networks to improve the quality of the content delivered to users etc.) . Depending on their size and on their customer base, certain AV online services, especially SMEs may prefer not to engage into such negotiations in order to limit the transaction costs. In particular, their lower bargaining power may result in worse deals for them than for larger players which can reduce their competitiveness. The potential benefits delivered by this option could be for consumers (i.e. higher number of portable AV and premium sports content services) but they are expected to be limited as this option is unlikely to lead to a consistent change in the commercial practices of the industry. This option would have no compliance costs for other stakeholders or in other sectors. Coherence with other EU policies Cultural diversity: This option would not have impact on the production of culturally diverse content. Slight benefits may be expected in terms of enhanced access to cultural content as the current users of some online content services would have better access to some of the content they have acquired online while travelling in the EU. It is unlikely that heterogeneous cross-border portability would attract new consumers to online content services. Fundamental rights: This option would not have any impact on copyright as property right or on the freedom to conduct a business, as right holders and service providers would remain free to decide whether to follow or not the Commission’s guidance. Third countries, trade and environment: This option would not have any impact on third countries and trade or on the environment. It also does not affect the EU's and the MS's international obligations. Option 2 – Legal mechanism to facilitate the cross-border portability of online content services in the EU Effectiveness

Content industries: The impact of this option on right holders would depend on the existing licensing practices in place in the different content sectors and on the bargaining power of right holders vis-a-vis service providers. The most affected, in terms of the manner in which the content is licensed, would be AV and premium sports content sectors. Producers of AV works and sports organisers (as far as premium content is concerned) could continue to license this content on an exclusive territorial basis but no separate licence from them would be required for a service provider to offer portability of its services to consumers who are temporarily present in other EU countries. In principle, a provider could offer such portability across the EU based on a licence for one EU MS. However, as right holders and service providers would be free, within the limits of competition law, to limit or prevent the cross-border portability of online content services, the actual application of the legal mechanism would depend on the outcome of contractual negotiations between the parties as well as on the commercial decisions of service providers. Negotiations between the parties would be facilitated in the sense that the solution for cross-border portability would be ready in the form of the legal mechanism, only conditions of its application could be negotiated. Right holders are expected to be reluctant towards the legal mechanism if online service providers do not offer the sufficient guarantees in terms of authentication procedures, confirmation that the presence outside the home country is temporary, quality of the service provided to travelling customers, etc. Also (though it is not evident given the negligible impact of portability on the territorial exploitation of content), there could be negotiations on licence fees as right holders could, ask for higher licence fees when the legal mechanism applies (claiming additional use of content) while service providers could ask for lower fees (claiming lower value of their territorial exclusivity). Right holders willingness to allow portable uses would depend on the market power of online service providers and on the proposed safeguards concerning access to content from territories other than the MS of residence of the consumer. As regards ongoing contracts, right holders would be in a stronger position as without their agreement the legal mechanism would not be triggered. As regards new contracts, the position of right holders would be weaker as the legal mechanism would apply and right holders wishing to limit its effects would have to introduce appropriate provisions in their contracts with service providers. Right holders could also opt not to license the online content at all or not license it on the portable basis. If right holders prevented portability, the option would not have any impacts on them. In cases where service providers would be able to resist the demands of right holders, the decision whether to provide portability of online content services would rest only with service providers. If service providers decide to use the legal mechanism, limited impacts as described below for right holders would arise. In any case, as the cross-border portability of online content services does not extend the range of users of the service, i.e. it merely allows the current users of the service to use it while temporarily present in other MS, the expected impact on the industry would be marginal. Impacts arising if service providers use the legal mechanism On the one hand, the portability feature may attract more consumers, especially those that frequently travel, to subscribing to or purchasing AV or sports online content services and could result in more revenues for right holders. Also, the right holders licensing works on a per-use basis (e.g. where the licence fee depends on the number of streams by users of a service) are likely to generate additional revenue in case of increased uses by subscribers as well as from transactional services as consumers would be more willing to purchase or rent online content while travelling in other MS. On the other hand, it cannot be excluded that as the result of this option, the affected customers would be less likely to use local services (especially advertisement-financed or transactional AV or sport services as these are more likely to be used by persons staying only temporarily in the given MS) in the MS to which they travel. This would not have an impact on revenues from services which are advertisement-based as occasional viewing does not generate any advertisement revenues and therefore the loss of such viewing is neutral for the service. On the other hand, there could be potential marginal decrease in revenues of local services that are transactional and this in turn could reduce the revenues of the AV producers (depending on the structure of fees payable to producers). However, such effect would be limited to the cases where different right holders have the rights for different territories for the same piece of content. This is not necessarily the case in the area of AV and premium sports content as rights tend to be held by a single right holder (unless e.g. rights are split between co-producers, in case of films, or sub-licensed, in case of sports). Moreover, the revenues of the holders of rights would be compensated by higher revenues from the increased use of services as mentioned above. Finally, the scenario based on the assumption that a consumer could buy content in a visited country is theoretical, especially if the temporary stay is short: few consumers would engage in exploring a new market for content services (especially in languages they do not know). Therefore, no (or negligible) negative impact on AV and sports right holders' revenues is expected. Incentives to create and produce for right holders would therefore remain unchanged. The impact on AV industry's and sports organisers' possibility to exploit content on a territorial basis could be negative if customers residing in other MS than the MS in which the service is offered would be able to use the portability functionality to access the service in the MS of their actual residence (i.e. the portability function would be used to achieve a cross-border access to content). However, such risk could be averted by the use of adequate authentication mechanisms which would ensure that the service is provided only to those customers who are residents of the MS in which the online content service is provided and that the stay in other MS is indeed temporary. As mentioned above, the possibility of imposing requirements as to authentication tools would depend on the bargaining power of right holders vis-a-vis service providers. The impact of this option on the industry would be very limited in the music, book and games sectors where generally the licensing practice is not an obstacle to portability. In these sectors this option would mainly deliver legal certainty for market participants. In the music sector, the fact that most online services, including local services, already grant portability and that generally right holders do not grant a separate licence to service providers for use of works in additional territories on a temporary basis, suggests that right holders in the music sector view possible impacts of portability as negligible. This is despite the fact that contrary to AV and sports, in the music sector rights are often held by different right holders in different territories and different CMOs are often involved in the management of these rights and therefore theoretically right holders holding rights in the 'visited market' could be affected as customers would be less likely to use local services in the MS to which they travel. The impact is however limited as the effects in the 'visited' market are minimum. As mentioned above, the scenario according to which a consumer could buy content in a visited country seems theoretical, especially if the temporary stay is short: few consumers would engage in exploring a new market for content services. Moreover, if consumer demand for online services was to increase thanks to the portability feature, revenues for right holders would also increase (the licence fees that right holders receive would increase as well in cases where they are, at least partly, calculated on the basis of revenue per stream). In cases of lump sum payments, the revenue would remain unchanged. This option is not likely to have a significant impact on the right holders in the e-books sector. Firstly, in most cases an e-book is downloaded to the reader's device, and the providers of subscription-based services typically offer portability. Secondly, rights to e-books are granted on a per-language rather than per-territory basis, therefore in most cases the current licensing contracts do not prevent access from another MS. The same applies to the video games sector, where already now right holders are not restricting access to online video games from abroad. Service providers delivering video games through streaming are likely to continue offering portability of such video games, including across borders. Service providers: Under this option, service providers would benefit from the legal fiction applicable to the licensing of the rights, unless agreed differently with the right holders. They would not be obliged, however, to ensure that consumers can benefit from cross-border portability. In the AV sector, the availability of cross-border portability to consumers would depend on service providers' business decisions and their bargaining power towards right holders. The right holders' possibility of imposing increased licence fees would depend on their assessment of the impact of portability on the existing business models and on the bargaining power of the service providers. It cannot be excluded that the fact that the service provider has a choice whether to offer cross-border portability or not could result in pressure from right holders to increase licence fees due to an increased functionality of services if the service provider opts to offer portability. Even though cross-border portability would not increase the size of audience, the fact that the service provider has a choice whether to offer it or not may turn the portability function into a provider's competitive advantage which thus could arguably be monetized. Therefore, the right holders could ask for a share of such perceived value. At the same time, service providers could ask for lower fees claiming lower value of their territorial exclusivity. It is therefore not entirely evident that right holders would demand an increase of licence fees or that they would succeed in raising such fees. The potential increase in licence fees could have more negative impact on smaller providers than on larger ones as the larger ones would have stronger bargaining power vis-à-vis right holders and would be in a better position to absorb the increased cost of licence fees. However, given the limited effect of the portability feature on the territorial exploitation of rights, it is expected that such increase, if any, would not be significant. As concerns sports content, portability is not likely to lead to higher licence fees because it would have a limited impact on how the sports broadcasting rights are licensed, i.e. in packages shaped taking into account the specific demand in a given territory, and because of vast differences in value of the rights between the primary market and other markets. As mentioned above under Content industries, it cannot be excluded that the consumers benefiting from portability would be less likely to use local – especially AV transactional - services in the visited MS. However, as explained above, such scenario is rather theoretical, especially if the temporary stay is short. Music, e-books, and games payment-based online services which do not offer portability yet could benefit from the legal certainty because they would be sure not to infringe copyright laws or their licences with right holders in any of the MS by granting portability. Consumers: This option could bring benefits for consumers in terms of the higher number of portable online content services offering AV content and premium sports content. However, this development would likely be heterogeneous and relatively slow, as the availability of cross-border portability would depend on the outcome of the negotiations between right holders and service providers. The legal mechanism under this option would facilitate these negotiations but the decision to provide portability to consumers would remain subject to the agreement between right holders and service providers. Consequently, consumers are unlikely to have access to the entire catalogue offered by a service provider when travelling in another MS in short and even in medium term. Like Option 1, this option could also result in higher prices for consumers compared to the current situation, because of the combined effect of the potential increase in licence fees, administrative costs of renegotiations of contracts and potential cost of technical improvements to the service. Nonetheless, the ability of service providers to increase prices is likely to be limited by the