Prepared by: Michael Swinson and Helena Kanton
Australia’s major media companies are increasingly bumping shoulders as technology convergence brings them into closer competition with one another. The Internet has become a new common battleground for broadcasters, newspapers and new market entrants like Netflix and other streaming service providers all competing for the same eyeballs. In the most recent shoulder bump, WIN Television (“WIN”) (Australia’s largest free-to-air television broadcaster) has failed in its bid to prevent Channel Nine (“Nine”) from using the Internet to transmit programs in WIN’s broadcast licence area. Where licensing restrictions previously kept regional and metropolitan broadcasters separated, the Internet has now brought them into direct competition. It is cases like these that demonstrate the urgent need for Australia’s media regulation to be reformed so that it can catch up with recent technological advancements.
The decision of Justice Hammerschlag of the NSW Supreme Court in WIN Corporation Pty Ltd -v- Nine Network Australia Pty Limited [2016] NSWSC 523 is available here.
Background and facts
Since the late 1990s, WIN and Nine have been party to a series of Program Supply Agreements (“PSAs”), under which WIN has obtained the exclusive licence to broadcast Nine programming in the WIN licence area. The first of such agreements was entered into in 1997 – prior to the advent of Netflix, iTunes or online “catch-up” streaming services. The most recent PSA was entered into on 2 June 2013, with Nine and WIN entering into a Variation Agreement on 31 December 2015 to extend its operation to 30 June 2016. The current PSA includes the following clause 2.1:
Nine Grants WIN the exclusive licence to broadcast on and in the licence areas covered by the WIN Stations the program schedule broadcast by Nine on each of the channels known as “Nine”, “Nine HD”, “9Go”, “9Gem”, Extra” and “9Life” (“the Nine Channels”), to be picked up by WIN at Nine’s NPC (emphasis added).
In October 2015 (two months before the parties entered into the Variation Agreement), Nine announced its plans to launch 9Now. 9Now is an online service allowing members of the public to live stream or view (on an on demand basis) Nine’s programming via the Internet. People located across Australia, including in the WIN licence area, are able to access the 9Now service online. 9Now went live on 27 January 2016. In early February 2016, WIN commenced legal action against Nine for breach of the PSA and sought an injunction to restrain Nine from continuing to live stream its programming via 9Now in the WIN licence areas.
WIN argued that such an injunction should be granted on two alternate bases:
- Firstly, that live streaming via the 9Now service amounts to “broadcasting” under clause 2.1 of the PSA, and that by offering the 9Now service in areas covered by WIN’s exclusive broadcast licence Nine was therefore in breach of the PSA.
- Alternatively, that even if live streaming via 9Now did not amount to broadcasting within the meaning of the PSA, Nine was subject to an implied obligation not to live stream in the areas covered by WIN’s exclusive broadcast licence.
The decision
Justice Hammerschlag rejected both of WIN’s arguments, concluding that live streaming via the Internet was not “broadcasting” within the meaning of the PSA and that Nine was under no express or implied contractual obligation not to live stream its content via the Internet. WIN’s application for injunctive relief was therefore refused.
What is the meaning of “broadcast”?
The primary issue considered in this case was the meaning of the term “broadcast” in clause 2.1 of the PSA. Justice Hammerschlag stated that the “constructional choice” regarding of the meaning of this term was “a simple one” between two alternatives: (1) that “broadcasting” means the dissemination of Nine’s programming by any means (WIN’s contention); or (2) that “broadcasting” means free-to-air broadcasting only (Nine’s contention).
While the term “broadcast” was not defined in the PSA, there was some evidence that the parties had discussed or considered the impact of Internet streaming as part of contractual negotiations in the past. However, Nine’s bid to adduce evidence of pre-contractual negotiations to support its contention that “broadcasting” was not intended to include live streaming was rejected based on established and long standing principles of contractual construction. Nevertheless, Hammerschlag J ultimately concluded that as a matter of basic contractual interpretation, the correct meaning of “broadcast” in clause 2.1 was that contended for by Nine.
Hammerschlag J reached this conclusion in light of the “legislative framework” and “undisputed factual context”, for two main reasons:
- Firstly, clause 2.1 refers to broadcasting “on and in the licence areas covered by the WIN Stations”. His Honour held this could only be a reference to free-to-air broadcasting, as the licence areas described in this clause are geographical delimitations under the Broadcasting Services Act 1992 (Cth), which relate to free-to-air broadcasting rights only.
- Additionally, at the time the PSA was entered into, Nine was not in a position to grant Internet streaming rights to WIN in respect of all content broadcast on Nine’s free to air channels (including rights to the NRL). His Honour held it was “highly unlikely” that the parties would have intended clause 2.1 to operate so that “broadcast” meant dissemination by any means (including the Internet), but that WIN would only exercise the right to broadcast via the free-to-air platform. Although it was not strictly necessary to rely on this “contextual corroboration” in interpreting the meaning of “broadcasting” in clause 2.1, this consideration bolstered the argument that Internet streaming was not included in the definition of “broadcasting” in this clause.
His Honour also concluded that the mere fact that live streaming was technologically available at the time the PSA and Variation Order were entered into was insufficient to mean that this technology was encompassed in the meaning of “broadcasting” in clause 2.1.
Hammershclag J concluded that there was nothing “perverse, irrational, commercially nonsensical or commercially inconvenient” about construing clause 2.1 so that it did not inhibit Nine from live streaming via the Internet in the WIN licence areas. As such, the exclusive right to broadcast granted pursuant to clause 2.1 was not undermined by Nine’s live streaming service, as the exclusivity granted to WIN under clause 2.1 related only to the broadcast of free-to-air programming in WIN licence areas. There was no suggestion that Nine sought to undertake such activity in these areas.
An implied term not to live stream?
WIN’s alternative argument was that a term should be implied into the PSA so that Nine would be effectively prohibited from live streaming in areas covered by WIN’s exclusive broadcast licence. In considering this argument, Hammerschlag J relied on the general principles of implying terms in fact into written contracts which appear complete on their face as espoused in Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 and BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1997) 180 CLR 266. Hammerschlag J noted that terms are readily implied into contracts to the effect that each party must do that which is “reasonably necessary to secure performance of the contract” and “do all such things as are necessary … to enable the other party to have the benefit of the contract”. Ultimately, however, based on the construction of clause 2.1 discussed above, his Honour held that an implied term preventing Nine from Internet streaming was not necessary to give business efficacy to the PSA and was in contradiction of the express terms of the PSA. Therefore, such a term could not be implied into the agreement.
Injunctive relief: discretionary considerations
Hammerschlag J held that if he had found that Nine was in breach of the PSA, an injunction would have been granted to restrain Nine from live streaming its programming via the 9Now service, for the following reasons:
- had Nine been in breach, it acted with its “eyes wide open”;
- WIN’s delay in bringing proceedings was not sufficient to deprive it from relief; and
- WIN would have suffered some damage as a result of Nine’s live streaming activities, and Nine would be liable for this damage.
Implications of the decision
Whilst this decision is an interesting case study on contractual interpretation in the broadcasting and online streaming landscape, the findings of this case should not be taken as excluding live Internet streaming from the definition of “broadcasting” in all contracts and for all purposes. As with any issue of contractual interpretation, the meaning of a particular term will be construed in the particular context of the contract in which it is used and will not necessarily be a reliable guide for how the same term may be construed in a different contract.
In any case, this decision is a clear lesson for drafters that they need to use explicit language if they want to extend the effect of their contracts to future technologies – general terms that describe a particular technology will not necessarily be construed in a broad fashion to capture every technology that can be used for a similar purpose. Accordingly, references to contracts relating to “analogue era” technologies may not easily be extended to cover more recent developments in digital media (particularly not when they draw on existing concepts, such as licence areas, that have no clear application to newer technologies that are not constrained by licence boundaries).
The outcome in this case is further evidence that some of Australia’s existing media law regulation is outdated. For example, the “75% reach rule” that is intended to prevent a single broadcaster covering more than 75% of Australia’s population is effectively redundant if metropolitan broadcasters such as Nine can reach far more than 75% of the population by streaming their services over the Internet. The issues in this case highlight the need for regulatory reform in this area. The Government has made the first steps in this direction through a draft reform bill that was released for public consultation earlier this year. For further discussion of media law reform, see Michael Swinson and Helena Kanton, ‘Media Law Reform in 2016: How Much is Enough?” (2016) 3(3) Media, Technology and Communications Law Bulletin 31).
