Optus' copyright free kick

Optus has been cleared of breaching copyright laws on NRL and AFL broadcast rights, but with the combined political clout of the two codes, the telco's victory may be short lived.

About nine months ago the AFL pulled of a remarkable coup, and excited the other sporting codes, when it sold its broadcast rights to Foxtel, Seven and Telstra for cash and contra deals worth $1.25 billion. Today a significant slice of that value – and hundreds of millions of dollars of prospective revenue for the major sporting bodies alone – is in jeopardy.

Within the $1.25 billion, which the AFL was set to receive over the next five years, was $153 million Telstra agreed to pay for the exclusive internet and mobile telephony rights to AFL games. When the NRL broadcast deal is negotiated later this year it, too, was expected to attract big bids for the internet and mobile telephony rights to its broadcasts.

Today Federal Court judge Steven Rares delivered his judgement on a case initiated by Optus against the AFL and NRL after they claimed that a relatively new Optus service (it was launched last July) called TV Now infringed their copyright interests.

TV Now allows Optus customers, for a monthly fee, to record free-to-air programs, including AFL and NRL games, and download them to their PCs, smartphones and tablets.

As the judge said, TV Now uses a ‘’complex’’ recording system under which it makes copies of the broadcast and stores them in its data centre. When the user clicks ‘’play’’ on their device the program is streamed to them. Those with Apple devices can get an ‘’almost live service’’ under which they can watch the program on about a two minute delay relative to the live broadcast.

Thus, without paying the AFL a cent, Optus is able to offer its customers the core of a service for which Telstra agreed to pay $153 million. The case was relevant to all the other major sporting bodies – rugby league, rugby union, cricket, motor racing, soccer, tennis, the Olympic sports and perhaps the Olympics themselves – with a broadcast deal with free-to-air TV.

Justice Rares ruled in Optus favour, fundamentally on the grounds that it was the user rather than Optus that made the recording (by pressing the ‘’play’’ button on their device) and that it was the user (again when pressing the ‘’play’’ button) that made the transmission of the recording.

Under a 2006 amendment to the Copyright Act designed to protect individuals from ‘’time-shifting’’ their viewing by using recording devices there is an exception from the Act for people copying or recording a broadcast solely for their own private use by watching or listening to the material at a time more convenient than when the broadcast was actually made.

It is improbable that the lawmakers then foresaw the explosion of smart phone and 3G tablet technologies and their take-up by consumers or considered that time would be shifted as little as two minutes. The convergent environment is going to throw up a host of unforseen circumstances for legislators, regulators and industries.

In effect the Optus service on the Apple devices doesn’t really shift time as much as it shifts platforms and appears carefully – and lawfully – structured to circumvent the rights the owners of the copyright to the programming were previously thought to hold.

If the ruling stands up – and it will inevitably be appealed to the High Court, as Justice Rares himself anticipated – Optus’ service would definitely be lawful.

That doesn’t, however, necessarily make it right or fair that it can operate, for its own profit, a service that destroys hundreds of millions of dollars of value that would otherwise have flowed to the not-for-profit sporting organisations that actually create the content.

While Optus hailed the judgement as a victory for consumers, a Telstra spokesperson said Telstra believed protecting content rights was in its interests and those of the sporting bodies and fans who benefitted from the investment in the rights. She said Telstra was considering its options but that it also believed the digital economy would be best served by a system in which online and mobile distributors had the same legal certainty as traditional broadcasters.

With the AFL season looming, Telstra will have some tough decisions to make. It could wait for the sporting bodies to appeal to the High Court and take a chance on the outcome. Alternatively, it could, as David Thodey has previously threatened, tear up its deal with the AFL, depending on whether its contract gives it the ability to do so.

If it did walk away from the deal with the AFL it could emulate Optus and offer its own version of TV Now. It would lose its exclusivity – but that’s already happened and it would save itself $153 million and whatever it was prepared to pay for the rights to the NRL content and any other sporting or live free-to-air broadcasts.

Telstra isn’t, however, a central party in the dispute – the sporting bodies have far, far more at stake, which is why the NRL and AFL originally made most of the running in the case and are likely to initiate a High Court challenge regardless of what Telstra does or doesn’t do.


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