The show must go on

The show must go on - Griffith Hack

23 April 2012

The Australian Federal Court’s recent decision in Singtel Optus Pty Ltd v National Rugby League Investments Pty Ltd (No 2) [2012] FCA 34 will impact on commercial deals entered into by rights holders such as sporting bodies and broadcasters, and also concerns consumers in terms of the way they record live television shows for their own personal use.

What you need to know

  • The decision (if it is upheld) will allow the TV Now service or similar technology to remain on the market; this could affect the revenue that can be obtained by rights holders in some sponsorship arrangements.
  • Parties negotiating commercial agreements should carefully consider the length of any term of an agreement where the subject matter concerns digital technology, because the digital environment is rapidly changing and this may affect a party’s rights.

Optus TV Now service

The TV Now service was launched in July 2011 and allows subscribers to record and watch free-to-air television shows on their computer or mobile phone. On some mobile phone devices, such as the iPhone, it is possible to replay the show on a delay of as little as two minutes while the show is recorded.

The Stakeholders

Since 2007, Telstra has paid the National Rugby League (NRL) for an exclusive licence in relation to NRL matches so that it can provide that content to the public via the internet and mobile phones. The agreement with the NRL is up for renewal in 2012. In 2011, Telstra renewed a similar agreement with the Australian Football League (AFL) which lasts until 2017. The AFL, NRL and Telstra alleged that Optus infringed their copyright because the TV Now service allows copies to be made of the AFL and NRL matches (TV Footage). Optus can essentially provide the same service as Telstra (but for a short delay) and is in direct competition. One of the key reasons why the AFL and NRL want to restrain Optus providing the TV Now service is to preserve the value of their agreements with Telstra.

Optus has always maintained that the TV Now service, used in accordance with its terms and conditions, does not infringe the copyright of sporting bodies such as the NRL and AFL. It argues that any recordings of the TV Footage are made by subscribers and are for personal use within an exception of the
Copyright Act 1968 (Cth) (the Act).

The Decision

Justice Rares held that no copyright infringement had occurred. In reaching his decision, the Judge considered the ‘timeshifting’ exception in the Act, which provides that a person does not infringe copyright in a broadcast: “If a person makes a copy of a cinematograph film or sound recording of a broadcast solely for private and domestic use by watching or listening to the material broadcast at a time more convenient than the time when the broadcast is made.”

In arriving at his conclusion that no infringement had occurred, the Judge made the following findings:

  • A person does not need to own the equipment used to record the TV Footage. Parliament contemplated a variety of techniques being used when drafting section 111 of the Act.
  • It is the subscriber of the TV Now services who makes each of the copies of the TV Footage and not Optus. The subscriber reviews the electronic program guide and selects, by clicking on the relevant control icons, those television programs he or she wishes to record. By determining the content and by making the copy, it is the subscriber and not Optus who may be liable for infringement.
  • It can be inferred that a subscriber who made a copy of TV Footage on their personal computer or mobile phone, and then viewed it, was doing so for personal use. There was no evidence to suggest otherwise.
  • A ‘time more convenient’ does not preclude the subscriber watching the replay at ‘near live’ times if they find that to be more convenient. The choice of time is subjective to the viewer and is a time more convenient for them.
  • Under section 22(6) of the Act, the person responsible for determining the content of a communication is deemed to be its maker. The subscriber is responsible for any communication by seeking to play the program that he or she had earlier recorded. Optus does nothing to determine the content of the communication and is not responsible for the communication.
  • No communication to the public (and consequently no infringement) can occur if the subscriber made the recording solely for private or domestic purposes and there was no evidence to suggest that was not the case here.

What can be expected?

The AFL, NRL and Telstra have appealed the decision of the Judge at first instance.

The fundamental issue for the AFL and NRL (and any other businesses that rely on sponsorship deals) is that the TV Now service (or similar technology) could affect a significant part of their revenue chain. Both the AFL and NRL have segmented their copyright in the TV Footage and are able to drive up the revenue through rights deals with broadcasters.

If the Court permits products like the TV Now service to enter the market, this may erode the value of the types of deals previously done and sporting bodies may need to consider alternative avenues to attract revenue from broadcasters or sponsors. Until sporting bodies have considered other revenue models, it may be difficult for them to negotiate and obtain
the same value for their rights deals in the future.

It is clear that in this day and age, technology is a shifting landscape and methods of communicating to consumers are constantly changing. A lesson to be learnt from Telstra’s situation is that parties negotiating with rights holders in the digital space need to consider carefully whether a lengthy term in their agreements, or even a five-year deal, is appropriate in this type of environment.

Click here to listen to Kellie's BRR Media interview on this case.

For further information, please contact:

Kellie Stonier, Principal
Email Kellie