Our latest client alert on the European Commission’s Digital Single Market strategy sets out some of the key aspects of the most recent proposal from the Commission relating to the Audiovisual Media Services Directive and some of the effects they will have on the industry.

Background On 25 May 2016, the European Commission published its latest proposals regarding its Digital Single Market (DSM) strategy. The Commission has been developing its strategy in earnest over the last 12 months and previously issued a number of public consultations1 to seek feedback from stakeholders.

One of the aspects for which the Commission sought feedback was in relation to performance and effectiveness of the Audiovisual Media Services (AVMS) Directive. From July to September 2015, 434 different stakeholders responded to the consultation, providing valuable information and opinions that have helped to shape the Commission’s approach to the regulation of audio-visual content.

As part of the Commission’s latest proposals, it has published a new legislative proposal2 to amend the AVMS Directive (the Proposal). If adopted, the Proposal would extend provisions of the AVMS Directive, not just to video-on-demand (VoD) services, but also to video-sharing services. We will set out below some of the key aspects of the Proposal and the practical effect that they may have on the audiovisual industry.

The key amendments affecting VoD and video-sharing services

  1. Quota of European works – The Proposal includes the introduction of a quota that may require VoD services to ensure that their catalogues offer at least 20 per cent content share for European works (as defined in the AVMS Directive) and ensure prominence of such works, when they are offering a video on-demand service in an EU member state. The Commission considers that this is necessary to create “a more level playing field in the promotion of European works” and solidify the general obligation to promote EU content currently contained in the AVMS Directive.
  2. Financial contributions – The Proposal enables EU member states to impose financial contributions on VoD services, either by way of direct investments or levies allocated to national film funds. These financial contributions can be imposed by member states on VoD services that operate in their jurisdiction and, under certain conditions, where VoD services are established in a different member state but are targeting their national audience. The financial contribution would be based only on the revenues earned in the targeted member states and account shall be taken of any financial contributions imposed by other targeted member states. Any financial contribution shall comply with EU law, in particular with state aid rules.
  3. Hate speech and the protection of minors – The Proposal seeks to strengthen the rules that protect minors and prohibit hate speech. Notably, these provisions will apply to video-sharing platforms (such as YouTube), as well as to VoD services. Programmes that may impair the physical, mental or moral development of minors must only be made available in such a way as to ensure that minors will not normally hear or see them. The Commission proposes restrictions that “may include selecting the time of the broadcast, age verification tools or other technical measures”. The most harmful content, such as gratuitous violence and pornography, “shall be subject to the strictest measures, such as encryption and effective parental controls.” The Proposal also seeks to update the AVMS Directive’s prohibition on hate speech (i.e. the incitement of violence and hatred against a particular person or group of persons), including expressions of racism and xenophobia.

Legislative process The European Commission has submitted the Proposal to the Council of the EU and the European Parliament for review. The Proposal must now go through the European legislative process before it is adopted. Each member state will also perform its own review ahead of adoption.

If approved, the amended AVMS Directive will require each member state to change its own laws to implement the amendments. The Proposal suggests that member states should be given 12 months to do this. Of course, the implementation of the Proposal in each member state is also subject to the principle of minimum harmonisation, which may lead to individual member states adopting more onerous rules than those provided by the Proposal.

Conclusions and what to do Given the proposed amendments, VoD services should start to review their current EU content offering to see whether they comply with the 20 per cent European content quota. However, the Proposal makes clear that the Commission does not want to “undermine market development” and will “allow for the entry of new players in the market”. Service providers with a particularly low market presence or turnover may therefore avoid being subject to such requirements. So long as VoD services already have content restriction measures in place with regard to the protection of minors, it is unlikely that major changes would need to be made in order to comply with the extended protection of minor rules. Video-sharing services, however, will need to consider these rules more closely and ensure compliance with them in due course.

It is noteworthy that the Proposal brings video-sharing services into the scope of the AVMS Directive. While the obligations imposed by the Regulation in relation to protection of minors and hate speech are relatively light, it can be expected that future reviews of the AVMS Directive may increase the burden and obligations on these services.

There is the possibility that the AVMS Directive may not apply to certain VoD services. In circumstances where (i) the VoD service’s head office is located outside the EU; (ii) it can be established that editorial decisions are also taken outside the EU; and (iii) a significant part of the workforce does not operate in a member state, that VoD service may be outside the scope of the regulations.