Territories and windows are at the heart of the content licensing business, but a new initiative in the European Union, the Digital Single Market (DSM), threatens to blow apart the principle of licensing content country by country.

The objective is to create a single EU market for content, as there is for other goods and services.  Ostensibly the initiative is aimed at creating a better consumer experience – no longer will consumers find that digital content they’ve paid for at home fails to work when they go on vacation in another European country.

Exactly what DSM will involve and how it will impact the market for content and sports rights is not yet certain.  It seems that territoriality will not disappear completely, and that “unjustified” geo-blocking will be outlawed.

EU Commissioner Andrus Ansip is leading the drive, and so far has not exactly clarified things.  “We are in favor of the principle of territoriality, but I am not accepting absolute territorial exclusivity,” he told The Hollywood Reporter.

The content industry is rightly concerned about the potential to disrupt the market – particularly in view of the lack of clarity about exactly what is planned.  And the potential for unintended consequences is significant.

For example, a user of a popular free OTT streaming service like the BBC’s iPlayer in the UK will be all in favor of being able to watch it wherever they travel in Europe – it’s currently geo-blocked outside the UK.  But as a UK TV license fee payer, that same user is much less likely to be keen on every other EU citizen being able to watch the service and have a free ride.

Or suppose an entrepreneur in a smaller market like the Netherlands decides to launch an innovative OTT video service.  Today they will need to license content just for that territory.  If, under the DSM, they must open up their service to customers in every EU country the licensing cost could become prohibitive – if the content was available at all.  The inevitable outcome would be the large international players like Netflix and Amazon dominating at the expense of local players – the reverse of the EU’s objectives.

And sports rights currently vary in value wildly by country.  The English Premiership rights cost $8bn in the UK, but a fraction of that in another EU market like Greece.  If the DSM mandates that UK viewers can freely access the service in Greece at much lower cost, the result will be the end of sports rights being sold in other than the main country.

The industry is busy lobbying the European Commission to highlight these concerns, with representations from trade organizations including the Federation of European Publishers and the Sports Rights Owners Coalition – who fear the DSM proposals are motivated more by politics than a desire to bolster Europe’s digital content market.

Whatever the outcome, it’s a wake-up call for the industry to acknowledge that the digital mobile world requires a new approach to content licensing.  Old models still based on old physical disk or theatrical principles need to evolve.  Where content owners and distributors are leaving gaps in the market or dissatisfied consumers, it’s inevitable that either piracy, or governmental regulation like DSM, will emerge.