The European Commission’s wide-ranging Digital Single Market Strategy has attracted both acclaim and criticism over the last 18 months, the latter especially from the audio-visual industry. The latest proposal, published in May, is an update to the Audiovisual Media Services Directive (AVMSD).
What is the AVMSD?
Historically, the AVMSD has applied to broadcasters and certain video-on-demand (VOD) services that are established in, or have editorial responsibility located in, a European member state. One of the cornerstones of the AVMSD is the “country of origin” principle. This allows regulated services to be regulated by one European member state but operate throughout the EU. In exchange for this flexibility, service providers must adhere to certain minimum standards and obligations, which each European member state must implement.
The Commission’s proposal will change some of these minimum standards and, significantly, will extend the services covered by the AVMSD to video-sharing platforms such as YouTube.
What is changing for video-on-demand providers?
The proposal that has probably attracted the most attention is the requirement that VOD providers ensure that at least 20% of their catalogues are comprised of European works. The AVMSD already contains a broad obligation that VOD services promote EU content but while some countries have introduced specific quotas to address this, a 20% quota will now be mandatory. In fact, many of the larger VOD services already meet this threshold. Netflix and iTunes, for example, already devote 21% of their film catalogue to European content.
However, there remain a number of unanswered questions that VoD services will have to navigate. For one thing, it is not clear how the 20% will be measured – will it be based on number of titles, duration, or some other measure? Regardless, there may be an opportunity for European distributors and we can expect to see more VoD-backed European productions like Netflix and TF1’s Marseille. The proposed amendment also requires VOD services to ensure “prominence” of its European works. This will create new challenges when presenting catalogues. Simply designating a specific “European works” or “foreign films” section of a service may no longer be sufficient.
The Commission’s proposal also raises the spectre of EU member states imposing financial contributions on VoD services, based on revenue from activities in that member state. This might be through direct investments or levies allocated to national film funds. However, it remains to be seen how the proposal will be implemented by member states and they are unlikely to apply it to services with low revenues and audiences.
Video-sharing platforms: a new frontier
The amended directive will, for the first time, bring video-sharing platforms (such as YouTube) within the remit of the AVMSD. This represents just one way in which the Commission is seeking to increase regulation of the platforms through its Digital Single Market strategy. The provisions of the AVMSD that will apply to video-sharing platforms are relatively minimal; limited to implementing measures that protect users from incitement to violence or hatred, and protect minors from harmful content. However, by bringing video-sharing platforms within the scope of the AVMSD, there is a risk that these uncontroversial provisions pave the way for more extensive regulation in the future.
A word on Brexit
While this is not the place to examine in detail the potential ramifications of Brexit on the compatibility of existing and future EU law, no commentary would be complete without considering the “B” word: Brexit. Interestingly, the quota provisions in the AVMSD define European works by reference to membership of the EU or the Council of Europe’s Convention on Transfrontier Television. UK-based productions will therefore count towards the new quotas even after Britain formally leaves the EU. This should be a welcome relief to the UK production industry, albeit other significant challenges undoubtedly arise from Brexit.
The amendment needs to pass through the European legislature; a process that can take many months. Once completed, European member states will likely have a further 12 months to implement the amendment into their own national legislation. In the meantime, VOD services, video-sharing platforms and European producers should be considering the impact to their business of the proposed amendments.
James Tobias is a lawyer within the Entertainment and Media Industry Group at global law firm Reed Smith LLP. He has particular experience in advising clients on IP and media regulation and has been closely monitoring the challenges and opportunities that arise from the European Digital Single Market