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Internet broadcast rights in doubt following court ruling

The landmark ruling by the Federal Court, which found Optus did not breach copyright by broadcasting NRL and AFL matches via its new TV Now service, has cast a doubt over the financial viability of internet broadcast rights.

Telstra holds exclusive internet broadcast rights for both the AFL and NRL. Its latest $153 million deal with the AFL covers the 2012 to 2016 seasons. But the decision of Justice Steven Rares in the Federal Court may mean that Telstra paid too much.

Optus's TV Now service allows Optus customers who subscribe to the service to record the free-to-air AFL games and watch them with as little as a two-minute delay. Optus, however, has not paid rights holders to offer the service.

The court found that the TV Now service provides the same service as that of a personal video recorder, such as Tivo or Foxtel IQ. Currently, the Copyright Act allows individuals to record free-to-air television on their own video recorder to watch at a more convenient time.

"Significantly, Justice Rares found that the customer, not Optus, had made the recording, even though the recording was stored in Optus' servers," said Hamish Fraser, partner at law firm Truman Hoyle. "The Court rejected Telstra's argument that Optus had made the recording for its own commercial benefit."

In his decision, Justice Rares commented that even a two-minute time shift could be more convenient for the customer and that no copyright violation occurred when the customer played the recording.

"This decision is interesting not just because it has the dramatic effect of devaluing the rights purchased by Telstra but also that it seems to be prepared to look objectively at the virtualisation of the PVR into an online environment and treat it as the same conduct by the end user and may see a rush of other providers offering similar services" Fraser said.

With the London Olympics likely to be held before any appeal is heard, he added, Nine and Foxtel are likely to be reviewing their strategies. The companies hold not only the TV rights but also the internet and mobile rights for the Olympic Games.

The court has granted leave to appeal to the full Court of the Federal Court and an appeal seems likely. The case has been adjourned until 3 February, 2012.

Follow Georgina Swan on Twitter: @swandives

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