Digital Single Market Update: Revision Of The European Union's Audiovisual Media Services Directive - Media & Entertainment Law

SUMMARY

The European Union's legislators have reached an agreement on the revision of the EU's Audiovisual Media Services Directive (AVMSD). The reform aims at providing a uniform legal and market framework for different types of video streaming services provided via the Internet, and a more level playing field for all stakeholders. It introduces new advertising rules and a quota on the provision of European content, as well as provisions to secure enhanced protection for minors and to suppress "hate speech".

BACKGROUND

The European Commission launched its Digital Single Market (DSM) strategy in May 2015. We have written a number of articles following the DSM's progress: on its inception, one year in, and in 2017 following a mid-term review. The DSM strategy consists of three "pillars" and 16 "Key Actions".

Key Action 10 required the EU to review the audiovisual media framework to make it fit for the 21st century, focusing on the roles of the different market players in the promotion of European works (e.g., TV broadcasters, on-demand audiovisual service providers). The Commission also planned to look at how to adapt existing rules to new business models for content distribution.

After the Commission initiated the legislative process with its proposal in May 2016 (see our previous client alert), the European Parliament presented its draft report in September 2016 followed by a vote on compromise amendments in April 2017, and the European Council reached a decision on a general approach in May 2017. It became clear that the three EU legislative institutions diverged significantly from each other with regard to certain key provisions. Since then, nine inter-institutional "trilogues" were necessary to find political agreements on all pending issues between the three institutions. Finally, in June 2018, the legislative bodies announced that they had concluded their negotiations.

While the new agreed wording of the revised Directive has not been officially released so far, the Commission and the Parliament have already released a Q&A Fact Sheet as well as an updated Briefing on the legislation progress. Moreover, the German Institute of European Media Law has prepared a synopsis giving detailed insight into the results of the trilogue procedure. Deviations from the Commission's initial proposal relate to several key areas of the revised AVMSD, including changes concerning its scope, more detailed rules for video-sharing platform services, the redefinition of advertising limits, the introduction of new provisions to protect signal integrity, as well as an increase in the quota for the provision of European content.

KEY CHANGES

1. Further Expansion of the Scope of AVMSD

The updated revision of the AVMSD retains the fundamental structure introduced by the Commission's initial proposal, dividing audiovisual content services into three categories:

Audiovisual media services consisting of linear (traditional) broadcast services;
Audiovisual media services, such as non-linear, on-demand video services that are under the editorial control of the provider, including dissociable subsections of a service provider's offering dedicated to video content and regardless of comparability to the form and content of linear television broadcasting (e.g., the video section of an online newspaper); and
Video-sharing platform services.

However, the EU institutions agreed on several changed definitions, including of video-sharing platform services, implying a broader scope of application with regard to social media services and user-generated videos.

Video-Sharing Platform Service. In the updated revision of the AVMSD, "video-sharing platform service" now means:

a service where the principal purpose of the service, or of a dissociable section thereof, or an essential functionality of the service is devoted to providing programs or user-generated videos to the general public,
for which the video-sharing platform provider does not have editorial responsibility,
in order to inform, entertain or educate,
by means of an electronic communications network within the meaning of the Framework Directive for Electronic Communications (2002/21/EC), and
the organization of which is determined by the video-sharing platform provider (including by automatic means or algorithms, i.e. by displaying, tagging and sequencing).

The updated revision of the AVMSD also introduces more detailed obligations for video-sharing platform services in respect of third-party video content hosted on their platforms. These include:

an obligation to provide transparent, easy-to-use, and effective procedures for the handling and resolution of complaints between the platform provider and its users related to "hate speech", harmful advertising, or the protection of minors, and
an obligation to provide a functionality for users who upload user-generated videos to declare whether such videos contain commercial communications (such as sponsorship or product placement), including the obligation to be transparent about such commercial communications. Sponsored contributions and paid display of products by bloggers and other influencers in their videos would be subject to this obligation.

Social Media Services. Social media services (e.g., Facebook, Twitter, Snapchat) will only be subject to these provisions as long as they qualify as a video-sharing platform.

However, the new term, as outlined above, requires neither that a video-sharing platform service consist of the storage of a large amount of programs or user-generated videos nor for a dissociable section of the service to be devoted to providing programs or user-generated videos. Instead, it now also covers services (e.g., in particular, social media services) where only an essential functionality is devoted to providing such content. This broad definition will include video platforms (such as YouTube and Vimeo) but likely also "traditional" social media platforms (like Facebook).

Under the Commission's initial proposal, social media platforms might have avoided qualification as a regulated video-sharing platform service where video content is included only in the general social media content mix. Now, going back to a change introduced by the Council, the scope of the AVMSD is extended to cover all social media services that provide a significant amount of audiovisual content.

User-Generated Videos. Moreover, new definitions of the terms "sponsorship" and "product placement" now also apply to user-generated videos, potentially broadening the scope of the AVMSD even further. However, due to the official wording not yet being available and official statements not covering this issue, the precise extent of this remains to be seen.

2. Harmful Content and Protection of Minors

The updated revision of the AVMSD keeps the new rules on harmful content and "hate speech" introduced by the Commission's initial proposal, according to which video-sharing platform providers are obliged to take appropriate measures to protect minors from such content as well as all users from "hate speech" – an apparent further building block in the recent trend towards filtering unwanted speech from the Internet.

Providers will also be prohibited from using the personal data collected by their mechanisms for the protection of minors – e.g., age verification – for commercial purposes, including for direct marketing, profiling or behaviorally targeted advertising.

3. Advertising and Product Placement

Television Advertising and Teleshopping. The revised rules on television advertising and teleshopping now impose a maximum 20% daily quota between 6am and 6pm as well as a prime-time window set between 6pm and midnight, during which the proportion of advertising and teleshopping spots is not allowed to exceed 20% of that period. Exceptions (e.g., image frames which are not included in this limit) are extended to advertisements for programs and ancillary products of entities belonging to the same broadcasting group.

While still giving broadcasters more flexibility in adjusting their advertising periods than the hourly limit currently in place, the overall extension of the limitation period by two hours as well as the introduction of a prime-time window cut down compared to the Commission's initial proposal, which imposed a more flexible 20% daily quota between 7am and 11pm. Moreover, under the Commission's initially proposed revisions, movies and news programs could be interrupted by advertising or teleshopping every 20 minutes, whereas the EU institutions finally agreed on a 30 minute period.

While the rules on advertising for alcoholic beverages remain unchanged (except for on-demand audiovisual media services now explicitly being subject to the provisions applicable to television advertising in order to further align provisions for linear and non-linear services), the prohibition on all forms of audiovisual commercial communications for cigarettes and other tobacco products is extended to also include electronic cigarettes and their refill containers.

Product Placement. The new rules on product placement initially proposed by the Commission remain unchanged in the updated revision of the AVMSD. Product placement will therefore, in principle, be permitted for all linear and non-linear services, excluding sensitive programs such as children's programs, news, consumer affairs programs, and certain product classes such as tobacco (now also including electronic cigarettes and their refill containers) and medical products, provided that:

the viewers are clearly informed about the product placement (with Member States having discretion to permit an exception if the provider was not involved in, and did not commission, the production of the promoted content – for example, for TV or video content merely licensed from third parties); and
the program does not directly encourage the purchase of products, in particular by making special promotional references to those products; and
the editorial independence and responsibility of the service provider is not affected.

Protection of Signal Integrity. Introduced by the Parliament, the scope of the updated revision of the AVMSD now also covers the protection of signal integrity. The new provision requires measures to ensure that audiovisual media services provided by media service providers are not overlaid for commercial purposes or modified without the explicit consent of those providers. As a result, third parties not subject to the rules of the AVMSD cannot profit from the program providers' investment by dynamically adding or replacing advertisements prior, during, or after the program while de facto circumventing the AVMSD's advertising restrictions. This rule applies, for example, to smart TVs, where the addition of windows with any commercial content to the screen without the consent of the broadcaster is prohibited. Note that this has no bearing on the question whether a licensed broadcasting service provider is entitled, under its broadcast license, to dynamically insert viewer targeted advertisements into its linear program, which remains a question of the licensing regime.

4. European Content Quota and Film Production Contributions

Deviating from the Commission's initial proposal to require video-on-demand (VoD) service providers to devote 20% of their catalogues to European works, the EU institutions agreed to raise the level to a minimum 30% quota in order to stronger support cultural diversity. VoD service providers will also be required to ensure prominence of this content in their services.

In addition, Member States will also have the right to require VoD service providers to contribute financially to the development of European productions, including those established in another Member State, to the extent they target the audience in the Member State's territory. Such obligations to financial contributions may include direct investments in content as well as contributions to national funds, such as the levy (Filmabgabe) payable under Section 153 of the German Film Subsidy Act (Filmförderungsgesetz) and shall be proportionate and non-discriminatory.

NEXT STEPS

Once the editorial work is finalized, the updated revision of the AVMSD will be put up for a vote in plenary session which is expected to take place in fall 2018. Due to the prolonged, in-depth negotiations, it seems likely that the Parliament will pass the new rules. After the updated revision of the AVMSD enters into force, Member States will have 21 months to transpose it into national legislation.