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Copyright decision threatens value of Australian internet media rights

2012 February 2
by Robert Macdonald

Yesterday (1 Feb 2012), Federal Court of Australia Justice Rares ruled in favour of Optus (SingTel), Australia’s second-largest telecommunications company, in a case that upholds their right to offer an internet/cloud-based service allowing subscribers to record free-to-air (FTA) television for private playback on mobile devices. The service allows recorded programs to be played back with as little as a two minute delay from the FTA telecast. 

This threatens the viability of the exclusive internet broadcasting rights agreements negotiated by Australian sports. Telstra, Australia’s largest telecommunications company, holds exclusive rights to the live internet streaming of two largest Australian sports, the Australian Football League (AFL) and the National Rugby League (NRL).  Optus was opposed by Telstra, the AFL and the NRL in the case, which tested the Australian Copyright Act 1966 (Cth) and the right of individuals to make recordings for private or domestic use. 

Such internet rights were evidently a AUD $153 million component of the AFL’s AUD 1.25 billion broadcasting rights deal (2012-2016) negotiated last year.  Four of nine regular season AFL games will be broadcast on FTA TV each week, along with the entire AFL Finals Series.  The Optus service allows all such FTA games to be time-shifted.  Negotiation of the next round of NRL brodcasting rights will formally commence  some time this year. NRL executives and analysts had previously talked up the NRL rights as being worth a similar amount to the AFL rights. 

The case will almost certainly be appealed by Telstra, the AFL and the NRL to the Full Court of the Federal Court. The Australian Government may also amend the Copyright Act in due course and the sports will lobby the Australian government hard if future judicial decisions uphold the decision of Justice Rares.  In 2011, the Australian Government announced a review into media policy in light of the convergence of technology, so this case will doubtless be considered.

From an economic perspective, interesting questions arise as to whether Optus is a free-rider, and the appropriate public policy response to such behaviour (the argument of the sports and Telstra), whether the decision is good for sports consumers (the argument of Optus) as well as whether courts and/or legislatures should construct walls in the form of property rights that individuals have been unwilling, or unable, to construct themselves via contract.  

If Optus prevail in the long-run, this decision will certainly put a significant dent into the value of sports internet media rights and exclusive internet rights will be worthless, at least until sports devise new ways to protect such rights.  It could feasibly also diminish the value of FTA rights. Whether the benefit to consumers is offset by the utility lost to those who benefit from such revenue flowing to a sport is open to debate.

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