Background

It has been over 12 months since regulation of video on demand (VOD) or “on‑demand programme services” (ODPSs) came into force in the UK and there is still considerable uncertainty over which services fall within the scope of the regulatory regime. It was also announced in June that the fee structure for service providers will change (see "What Fees Are Payable?"), which may significantly increase costs for certain providers.

In the UK, the VOD rules (which stem from the 2009 EU Audiovisual Media Services (AVMS) Directive) are administered by a co-regulator appointed by Ofcom – the Authority for Television on Demand (ATVOD). ATVOD is responsible for deciding which services are regulated and for ensuring editorial content on regulated ODPSs meets the statutory requirements. Responsibility for advertising standards on ODPSs lies with the Advertising Standards Authority.

The regulatory framework imposes a number of duties on ODPS providers who meet the jurisdiction tests in the AVMS Directive and fall under UK jurisdiction. Although these obligations are relatively light, they do create an administrative burden (and increased cost) for businesses providing regulated VOD services. The key challenge is determining if a particular service is regulated (see "What Are The Areas Of Uncertainty?"). By June 2011, ATVOD had already found over 20 service providers – including News International and Elle magazine – in breach of the regulations by failing to make the required notification to ATVOD .

Which Services Are Regulated?

To be a regulated ODPS, a service must meet all the following criteria:

  • TV-like programmes: The service must include programmes whose form and content are comparable to the form and content of programmes of a kind normally included in television programme services.
  • VOD service: The “principal purpose” of the service must be to enable users to (1) select individual programmes from among the programmes included in the service, (2) receive the programme using an electronic communications network and (3) view the programme when the user chooses.
  • Editorial responsibility: The programmes comprising the service must be under a person’s editorial responsibility.
  • Made available to the public: The service must be made available by that person for use by members of the public.

If a service meets all the above criteria, the service provider must notify ATVOD and pay a fee.

What Fees Are Payable?

For the initial period of 1 April 2010 to 31 March 2011, ATVOD set the fees at a flat rate of £2,900 per service. Following a joint Ofcom and ATVOD consultation on fees for 1 April 2011 to 31 March 2012, ATVOD has decided to move to a variable fee structure based on the turnover of the service provider. Concessionary rates of between £100 and £150 will apply to non-commercial or small-scale commercial ODPS providers. Larger commercial providers will pay considerably more with service providers with a turnover of over £25.9 million required to pay £10,350 for the first service and £800 for the second and subsequent services. Rates for a service provider with a turnover between £6.5 million and £25.9 million will be £5,175 for the first service and £800 for all other services. Finally, if the service provider's turnover is less than £6.5 million, the rates will be £800 for the first service and £400 for subsequent services. There will be an overall cap on a single service provider of £25,000 for all services it offers.

If Our VOD Content Is Regulated, What Do We Need To Do?

The provider of an ODPS must comply with a number of content and advertising rules. Broadly speaking these are:

  • The service must not contain any material likely to incite hatred based on race, sex, religion or nationality.
  • If an ODPS contains material which might seriously impair the physical, mental or moral development of persons under 18, the material must be secured so that such persons will not normally see or hear it (i.e. PIN protection or similar).
  • The service must not be sponsored by cigarettes or other tobacco products, or by an undertaking whose principal activity is the manufacture or sale of cigarettes or other tobacco products.
  • The service must not be sponsored by prescription-only medicine products.
  • The service must not include a sponsored news programme or sponsored current affairs programme.
  • Any sponsorship must not influence the content of that service or programme in a way that affects the editorial independence of the service provider.

Service providers can include product placement in on-demand programmes and services. Unlike traditional “linear” television services, the restrictions on products which can be placed within a programme on an ODPS are relatively narrow and only product placement of cigarettes and prescription medicines is banned. On traditional television services, the rules also restrict product placement for alcohol, gambling and high fat, high salt foods.

What Are The Sanctions?

If an organization has broken any of the regulatory requirements, ATVOD will normally publish a finding as to the breach. If necessary, ATVOD can issue statutory enforcement notifications potentially requiring a service provider to:

  • cease providing or restrict access to the ODPS;
  • provide additional information to users, and
  • publish a correction and/or a statement from ATVOD.

ATVOD can also refer regulatory breaches to Ofcom for consideration of more serious sanctions, including financial penalties or suspension of the service. The financial penalty imposed on a provider cannot exceed five per cent of the revenue generated by the provider from the particular service or £250,000, whichever is greater. If a service provider disputes a finding that it is a regulated ODPS, it can appeal to Ofcom. As mentioned, News International, BBC Worldwide and Hachette are among the companies that have already taken this step and this may well increase if ATVOD continues to take a broad approach to determining what are regulated VOD services.

What Are The Areas Of Uncertainty In Deciding If A Service Is In Or Out Of The Regulatory Framework?

  •  Although it was expected that ATVOD would take a narrow approach to the regulations so that they principally capture ODPSs offering “television-like” full-length programmes (e.g. full catch-up TV services), in practice it has cast its net more broadly, creating uncertainty over which online video services are in or out of scope. ATVOD guidance on who needs to notify states that it is necessary to interpret the meaning of "programme" in a dynamic way, taking into consideration developments in television broadcasting. ATVOD has followed this approach in practice by finding services to be regulated even if they only offer short-form video content. For example, ATVOD has found that the Top Gear and BBC Food channels available on YouTube are regulated services despite arguments from BBC Worldwide that the short-form clips available on these channels are not “television-like”.
  • The regulations and ATVOD guidance are not clear cut. Consequently, many services do not fit neatly into the regulatory regime and could potentially be caught. A factor ATVOD places importance on based upon its published adjudications is whether video content is available within a separate dedicated video section of a website. If this is the case, it increases the likelihood that a particular video service will be found to be a regulated ODPS. For example, even though electronic versions of newspapers are expressly excluded from regulation under the AVMS Directive, ATVOD has issued breach notifications against providers of newspaper and magazine websites featuring video content such as The Sun and The Daily Telegraph on the basis that the video content sections on these sites form standalone VOD services. Both News International and BBC Worldwide together with a number of other service providers have challenged ATVOD's finding that the online video service they are offering constitutes a regulated ODPS by appealing to Ofcom. Ofcom’s decisions on these appeals are still awaited, but it is to be hoped that the decisions will make it clearer which type of services fall into the regulatory regime and the extent to which ATVOD's approach to date is correct.
  • Expressly excluded from regulation is video content on corporate websites distributing information about a company's operations as well as user-generated content (UGC) posted by individuals on video-sharing websites. However, given the lack of certainty in the regulations it remains unclear where ATVOD will draw the line in relation to sites offering UGC where a degree of editorial control is exercised in selecting the featured videos, and advertising and sponsorship are sold around the video content.