The Movielink movies on demand anti-trust investigation: Another example of a misconceived regulatory intervention?

The announcement on 3 June that the US Department of Justice has found that the Movelink joint venture between five major movie studios which provides video on demand (VOD) services gives rise to no competition problems, is further proof of the difficulties anti trust authorities encounter when they try to enforce competition rules in emerging markets with a limited number of players.

After an investigation that was initiated over three years ago (after some independent VOD operators claimed that Movielink had caused them to fail) and which involved extensive information requests throughout the industry, the Department of Justice eventually decided that the joint venture did not restrict competition.

The Movielink joint venture comprises five of the major studios who account for 50% of the domestic box office revenues each year in the United States. Each partner studio entered into a content licensing agreement with the joint venture authorising Movielink to deliver new release films as well as older library titles over the Internet. The main advantage of VOD is that it allows consumers to have the ability to set start times, pause and rewind films during viewing – unlike existing PPV services. Importantly, each studio member of Movielink determines pricing and release dates for its own films.

The Department of Justice analysed the product market at the licensing level and at the downstream consumer retail level. At the licensing level, they found that there was no reduction in competition in the terms on which the studios licensed movies to third party services that competed with the joint venture. Secondly, at a customer level, the Department of Justice was satisfied that competition was not distorted with other products such as home video and PPV (some of the key content of which ultimately comes from the same movie studios).

The EU Commission is currently investigating the terms on which the studios license TV film rights and the use of most favoured nation provisions. Doubtless future enquiries will be launched as the Department of Justice has promised to keep the industry under review. However, unless and until the basic market structure somehow changes, the regulators’ fond hope that new technology will somehow open up concentrated media markets for other players (which has underpinned many of their interventions throughout the world) is unlikely to be realised.

As in the music industry, the economic reality is that the major part of key film content is held by the majors. Without their consent and/or participation, legal forms of new delivery of copyright protected material will not fly and there is little that competition law can do about it.

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