The European Commission on Tuesday accepted a proposal by iconic Hollywood studio Paramount to end geographic blocking of its films in licence deals with TV channels.

The deal is a small step towards the EU's dream of building a digital single market, in which the European Union's 500 million people will no longer be blocked from subscribing to TV channels such as Sky or Canal Plus from abroad.

The EU last year accused six top Hollywood studios and Britain's Sky TV of breaching antitrust laws by using movie licences to block access to pay TV content in other countries in Europe.

Paramount, which is currently up for sale by Viacom, agreed to end the practice in a side deal with the Commission, the EU's executive arm, a statement said.

One of Hollywood's mythic movie studios, Paramount is behind the multi-billion-dollar Star Trek and Indiana Jones franchises as well as classics like The Godfather movies or the Ten Commandments.

The case is being closely watched by the film industry as it calls into question the wide use of such contracts in which Hollywood studios sell their content individually to national markets.

Filmmakers and actors in Europe furiously defend this status quo, which also helps finance and defend national film industries against what is seen as Hollywood's domination of the European film industry.

The end of national markets would undermine "this successful and fragile eco-system," said a letter from the International Federation of Film Producers' Associations to Commission head Jean-Claude Juncker.

Its demise would "threaten cultural diversity and sustainable jobs for talent, crew and all other workers in our industries," said the letter, which was dated July 11.