Curtains for the Cinema

New Zealand has a way of preventing cinemas from having to compete with different formats such as DVD, Blu-Ray, Pay-Per-View or Free-To-Air. The Copyright Act bans parallel importation of films into New Zealand for nine months from the international release date.

Government officials are likely to recommend removal of this mechanism. Does this mean curtains for the cinema?

Legislation

Section 35(3) of the Copyright Act 1994 provides that a person infringes copyright in a film if that person:

• imports a copy of the film into New Zealand within 9 months of first being made available to the public; and
• knows or has reason to believe that the film is imported into New Zealand within 9 months of first being made available to the public; and
• is not the licensee of the copyright in New Zealand; and
• imports the film into New Zealand other than for that person's private and domestic use.

Government officials say the ban is there to:

'give sufficient time for the domestic film industry to profit from their investment in the distribution and exhibition of films before opening up the market to competition from retailers and other commercial users.'

In the late '90s an amendment to the Copyright Act did away with the ban. The United States Trade Representative (USTR) promptly placed New Zealand on the Special 301 Watch List, a register of countries that the USTR considers to have inadequate copyright protection laws. A press release from the US Embassy stated that:

'New Zealand was placed on the Watch List ... after the New Zealand Government passed an amendment to the Copyright Act abolishing the exclusive importation right for copyright owners. The law was of serious concern because it eroded the level of copyright protection available to right holders in New Zealand and made it more difficult to combat pirated goods'.

The Government at the time revived the ban with an amendment to the Copyright Act in 2003. New Zealand was then taken off the Watch List.

Time for a change

It is unlikely that the ban will be in place much longer.

Section 35(5) automatically repeals the ban on 31 October 2013. The Ministry of Business, Innovation & Employment (MBIE) is currently conducting a review of the ban to form a view on whether to allow the ban to lapse or continue the temporary ban. MBIE published a discussion document in February 2013 titled 'Review of Ban on Parallel Importation of Films'. Submissions on the discussion document closed last week.

The vibe of the discussion document suggests that the ban is going to be allowed to lapse. The introduction notes that:

'[a]llowing for parallel importing is generally thought to encourage the competitive supply of consumer goods such as copyright works. Previous reviews of parallel importing undertaken by the Ministry of Economic Development have shown a net benefit to New Zealand from allowing parallel importation of copyright works. Despite the temporary ban on films, the Act otherwise allows for the parallel importation of non-infringing copies of all other works into New Zealand'.

I'm not sure that many rights holders were aware of the review and therefore would not have made submissions. In the absence of strong arguments in favour of continuing the ban it is likely that Government officials will recommend the ban be allowed to lapse.

What's the effect?

It is hard to anticipate the effect of removing the ban. The Discussion Document points to a Law and Economics Consulting Group report that suggests 'there is no link between parallel importing and box office revenue'.

I think it is likely that commercial cinema complexes will continue to show new releases of blockbuster films. We are likely to see the New Zealand release date for such blockbusters closer to the international release date.

Less popular and art-house films will face competition with parallel imported copies of films as the New Zealand release date is likely to be much later than the international release date. Some of these films may prove to be financially risky to distribute in New Zealand. Distributors may choose not to bring them in at all.

So does this mean curtains for the cinema? I don't think so. Cinemas will still be around showing films to New Zealand audiences. It's just that the films will increasingly be blockbusters rather than art-house.

What is not clear to me is whether we are still operating under the same environment today as we were back in the late '90s. Back then the removal of the ban caused us to be placed on the USTR Watch List. Are we likely to face the same situation in October when the ban lapses?

It will be interesting to see the views of the submitters.

Update - The Government proposes to retain the ban for another three years. The period of the ban will be shortened to five months from the current nine. See Curtains for the Cinema - the sequel.


Photo courtesy of author AndiH under Creative Commons licence.