Florence Leroux and Eliott Costet a recent opinion from the French Competition Authority (FCA) which argues that the Government should ease constraints on French TV operators to enable them to compete more effectively with new “over the top” (OTT) players operating online video platforms such as Amazon, Netflix, Google 

Current audiovisual framework in France

Aiming at preserving cultural and media pluralism, the current French audiovisual framework imposes significant obligations on French TV operators, in return for which they are granted free-of-charge terrestrial frequencies. Such obligations concern:

  • Audiovisual broadcasting: TV operators must comply with specific broadcasting quotas for European and French cinematographic works depending on the type of their TV channels, and they are not allowed to broadcast movies on certain weekdays in order not to affect local theatre business.
  • Audiovisual production: TV operators are required to devote a percentage of their turnover (broadly 15%) to the production of European and French works. In addition, they must comply with a specific production rate of so-called “independent works” on which they may only have limited broadcasting rights on their TV channels for a short period of time, regardless of the amount they have invested in the production.
  • Advertising: TV operators are not allowed to broadcast TV commercials falling within specific economic sectors, in particular ads relating to cinema, books or mass marketing discounts. They are not allowed either to carry out TV targeted advertising (no possibility to broadcast separate ads depending on areas where TV channels are received).
  • Merger control: there is a specific mechanism applicable to TV operators that addresses not only merger’s competitive aspects but also impacts on media pluralism (so that a single company may only own a limited number of different media).

Disruption in the audiovisual sector caused by the market entry of OTT players

In its opinion, the FCA notes that, on one hand, TV operators’ business model is gradually weakening given that (i) they must comply with the above regulatory obligations, (ii) they cannot offer on-demand services as “classic” TV broadcasting over terrestrial frequencies as necessarily linear and therefore does not allow interactivity, (iii) their advertising and subscription resources are stagnating or even decreasing in some cases and (iv) attractive content like movies, TV shows or sports events, is becoming more and more expensive making them unprofitable unless there is a very wide broadcasting mode. The FCA believes that this creates a downward spiral that no longer encourages TV operators to fund original content.

The FCA notes on the other hand that OTT players are disrupting the audiovisual market as they do not face any of the French TV operators’ investment barriers:

  • They provide over the internet affordable video-on-demand services increasingly attractive to consumers, as they offer freedom of choice both in terms of content and distribution mode. Consumers can decide to watch what they want on any device, where and when they want.
  • They are not required to comply with any of the aforementioned regulatory obligations, as OTT players do not use terrestrial frequencies.
  • Some of them are vertically integrated, allowing them to produce freely and on a large scale the content they want, while ensuring that they retain long-term exploitation rights on such content in order to ensure broadcasting exclusivity on their respective platforms.
  • They have access to their users’ data in order to improve their service offerings and content recommendations.
  • Some of them may rely on other profitable activities to finance their investments (e.g. on the home delivery market for Amazon or the advertising market for Google).

FCA’s proposals to restore effective competition

In the circumstances, the FCA considers that TV operators are not in a position to effectively compete with OTT players. The French audiovisual regulatory framework has led to an excessive fragmentation of the audiovisual market which hinders their production of innovative and exportable content.

Consequently, the FCA believes that the French audiovisual regulatory framework is outdated and urges the French government to reform it without waiting for the transposition of the revised Audiovisual Media Services Directive 2018/1808 of 14 November 2018 (which the FCA deems rather unsatisfactory) by taking the following measures:

  • Broadcasting: lift the ban on broadcasting movies on specific weekdays.
  • Audiovisual production: (i) enable TV operators to jointly pool their obligations at the level of the TV group to which they belong, (ii) gradually reduce the production quotas of independent audiovisual works and (iii) allow TV operators to retain broader exploitation rights on such works.
  • TV advertising: lift the targeted TV advertising ban and a number of sector-based TV advertising bans, as they lead advertisers to opt for online advertising (which is far less regulated) instead of TV advertising.
  • Merger control: completely revise the specific merger control system so that it covers all content providers and in particular OTT players.

An opinion not unanimously accepted

While advertisers welcome the FCA’s opinion, which is broadly in line with the recommendations made by the French National Audiovisual Council (Conseil Supérieur de l’Audiovisuel) in September 2018 on this subject, the same cannot be said of the independent producers’ union. The latter considers such an opinion to be “an unprecedented attack on cultural diversity” and regrets that the FCA advocates removing all regulations applying to TV operators rather than seeking to extend them to OTT players.

It remains to be seen which position will ultimately be retained by the French government. Initially scheduled for spring 2019, the French Minister of Culture announced that this reform will be postponed until the end of 2019 and even possibly until the beginning of 2020.

For more information: please refer to the full opinion of the FCA here (in French) or the press release available here (in English).