Those involved in the media industry will be familiar with the long-established regulatory regime for linear and on demand audiovisual media services, however, from 6 April 2021, certain video-sharing platforms established in the UK will also be legally required to submit a formal notification of their service to Ofcom. The 6 May 2021 deadline by which existing providers must notify Ofcom is fast approaching. Failure to notify may lead to financial penalties.
The new regulatory regime is somewhat less intuitive than the existing regime, and therefore, anyone involved in any form of audiovisual content distribution should consider whether they are caught by the new regulations. In this note, we comment on the key criteria that video-sharing platform providers must review to determine whether their services (or any section of their services) fall under this new notification requirement, with reference to Ofcom’s recently released guidance notes, Video-sharing platforms: who needs to notify to Ofcom?.1
New regulations under the Audiovisual Media Services Directive 2018 came into force in the UK on 1 November 2020. The regulations, which are implemented under part 4B of the Communications Act 2003 (the Act), require video-sharing platforms (VSPs) established in the UK to submit a formal notification of their service to Ofcom. Existing providers must notify Ofcom by 6 May 2021, and VSP services commencing after 6 April must notify Ofcom at least 10 working days prior to launch.
Under section 3685S of the Act, a service or a dissociable section of that service may be deemed a VSP if either: (1) the ‘principal purpose’ of the service or relevant section of it is to provide videos to members of the public; or (2) it is an ‘essential functionality’ of the service to provide videos to members of the public. The VSP will be subject to regulation if, in addition, the VSP service is provided:
a) By means of an electronic communications network;
b) On a commercial basis;
c) By a person with general control over the manner in which videos are organised on the service, but without control over what videos are available; and
d) By a person with the required connection with the UK.
According to Ofcom, livestreaming services which host users’ video streams, services which allow users to upload videos and engage with others’ content supported by advertising or subscriptions, and sections of services that prominently feature user-generated video content without editorial control by the host service are likely to be deemed VSPs.2
While certain elements of the criteria are relatively straightforward, four elements in particular may require more careful consideration: (1) dissociable section; (2) principal purpose or essential functionality; (3) control over the organisation of the service content; and (4) establishment in the UK.
1) Dissociable section
A ‘dissociable section’ is a section of a service which may be regarded as distinct from the whole. For example, where video services are provided on a subdomain of a website or on a particular part of an app, this might constitute a dissociable section. However, it is also important to consider whether video services are provided as a stand-alone feature of a service, rather than as a supplement to other content. According to Ofcom, this means that:
“[A] standalone section of a newspaper website which is dedicated to hosting user-generated videos on the site might be considered as a dissociable section of that service, if the videos were independent of the written press articles.”3
2) Principal purpose or essential functionality
‘Principal purpose’ refers to the main activity or objective of the service or a dissociable section of it, and must be considered from both the users’ perspective as well as the wider market context. Ofcom suggests that how the service refers to itself, how content is presented or described, the prominence given to video content, and how the service is commonly referred to by others are all relevant considerations.4
Unlike the ‘principal purpose’, which may be assessed against a dissociable section of the service, ‘essential functionality’ must be assessed against the service as a whole. Provision of video may be deemed an essential functionality of a service where it is more than ‘merely ancillary’ to the underlying activity of the service, such as where users upload videos on e-commerce platforms to demonstrate the good or service in use, thus encouraging sales.5 Both quantitative and qualitative factors must be considered to determine the extent to which provision of video content contributes to the functionality or market success of the service. For example, even where quantitatively the amount of video on a service is small, it may be deemed an essential functionality of the service where it is nonetheless key for revenue generation or forms a key reason why users select the service. Of all the criteria under the regulation, ‘essential functionality’ is perhaps the most challenging to apply, and is likely to prove particularly challenging for new services, as data may not be available to determine the key reasons why users might select a service, or the extent to which video may contribute to revenue generation.
3) Control over the organisation of the service content
It is important to note that on-demand programme services (ODPS) are also regulated under the Act. A service may contain dissociable VSP and ODPS sections, and a provider may be obliged to notify Ofcom for each section of the service. This means that even if a service qualifies and is notified as an ODPS, it may still be necessary to notify certain parts of the service as a VSP. Generally, where a service provider has control over the video content available on the service (that is, editorial responsibility), the service is more likely to be categorised as an ODPS. Where the provider is able to control and organise the ways in which video content is made available on the service, but does not have editorial control over the videos made available, the service is more likely to be categorised as a VSP.
Significantly, a provider may be deemed to have control over the organisation of the content even where videos are organised automatically by way of algorithms, or where the service provider relies on input from users (for example, liking or sharing content) to organise content.6
4) Establishment in the UK
There are two sets of criteria used to determine whether a VSP provider has the required connection to the United Kingdom: Case A and Case B.
Case A provides that VSP providers pursing an economic activity through a fixed establishment in the UK will fall within Ofcom’s jurisdiction. According to Ofcom, the fact that a service or a dissociable section of the service may be accessible in the UK, or that the technical means used to provide the service are in the UK will not necessarily be the deciding factor(s). Other relevant indicators such as registration in the UK, presence of a UK subsidiary or office, or existence of UK-based employees or agents must also be considered.7
Although generally a service provider will fall under the jurisdiction of the state where its main centre of activities for the relevant service is located, it is important to note that where a VSP provider is established in both the UK and an EEA state, and the entity that provides the VSP service in the UK is responsible for key management and commercial decisions for that service, that section of the service may still fall under UK jurisdiction.
Case B provides that VSP providers not falling within Case A may still fall within UK jurisdiction if the provider has a group undertaking established in the UK and does not fall under the jurisdiction of an EEA state.
It should be noted that even if it is determined that the relevant VSP is not established in the UK, it will be necessary to evaluate whether that VSP needs to be notified under the laws of an EEA state.
Consequences of failure to notify Ofcom
Ofcom has statutory powers to request information in order to make an assessment as to whether a provider falls under the regulations and also to take enforcement action – including imposing financial penalties – if a provider has failed to notify.