Netflix Seen Benefiting From EU Scrutiny of Europe Pay-TV Deals

Netflix Inc. and consumers who want entertainment on the go may have the most to gain from a fresh wave of regulatory scrutiny of the pay-TV industry in Europe.

European regulators are seeking to upend the current system of negotiating TV rights country by country and make it easier for pay-TV customers to watch shows and movies online no matter where they are.

That system means a Sky TV subscriber in London who wants to watch a film on an iPad in Paris is out of luck right now.

To press their case, the European Union sent an antitrust complaint Thursday to six Hollywood studios and Sky Plc, Britain’s biggest pay-TV provider. A victory could unravel deals that dictate films and TV shows may be shown only in the country where the cable or satellite service is based. It could reduce pay-TV revenue for the studios and help online TV services like Netflix, which is expanding across the continent.

“The EU’s goal is to create a single market,” said Erhan Gurses, an analyst at Bloomberg Intelligence.

The companies named in the complaint are Walt Disney Co., Time Warner Inc.’s Warner Bros., Comcast Corp.’s NBCUniversal, Viacom Inc.’s Paramount Pictures and the film divisions of Sony Corp. and 21st Century Fox Inc.

For regulators, an antitrust action is a way to address the changing viewing habits of a more integrated Europe, where more consumers are watching TV and movies online or on the go, using a wide array of devices, such as tablets and smartphones.

While the case focuses on the inability of consumers in the British Isles to watch pay TV when they’re in other parts of Europe, it could apply more widely.

“European consumers want to watch the pay-TV channels of their choice regardless of where they live or travel in the EU,” antitrust chief Margrethe Vestager said in a statement Thursday from Brussels.

Differing Rates

U.S. studios have enjoyed a lucrative business by selling pay-TV rights to their films and shows country by country. That’s allowed them to charge different prices based on a country’s demographics and income. They can charge higher rates in wealthier countries and lower rates to distributors in poorer countries, maximizing profits across Europe, Gurses said.

“Hollywood studios can exploit the pricing differences,” he said.

Sky, based Isleworth, England, said in a statement it’s reviewing the EU statement of objections. The company is 39 percent owned by Rupert Murdoch’s 21st Century Fox. Disney, based in Burbank, California, said it will fight.

“The impact of the Commission’s analysis is destructive of consumer value and we will oppose the proposed action vigorously,” Disney said in a statement. “Our approach is one that supports local creative industries, local digital and broadcast partners and most importantly consumers in every country across the EU.”

Warner Bros. and Universal acknowledged the complaint and said in statements they are cooperating. The other studios declined to comment or didn’t respond.

Netflix Effect

Netflix, the world’s largest online subscription video service, stands to benefit if regulators win, since the company would be able to offer its content to customers when they’re outside their home countries.

The company has 65.6 million subscribers in 50 countries and plans to be in all European markets by 2017, yet viewers can’t access their accounts when they’re away.

Wider access to Netflix programming could prompt more consumers across Europe to cut the cord and drop their current, pricier pay-TV accounts. The company declined to comment.

“It will definitely benefit Netflix” if regulators succeed in their case, Gurses said.