The revised EU Audiovisual Media Services Directive ("AVMS Directive") was published in the Official Journal of the European Union on 28 November 2018, meaning it will enter into force on 18 December 2018. The AVMS Directive establishes the regulatory framework for broadcasters and providers of audiovisual content in the EU, and Member States have until September 2020 to implement the updated provisions.

The changes to the AVMS Directive reflect the dramatic way in which the media landscape, and our own content viewing preferences, have shifted in recent years with the explosion of online content services available both in the home and on mobile devices. Over-the-top service providers are increasingly seen as direct competitors with traditional broadcasters, major players in the content ecosystem with extensive customer bases stretching across multiple jurisdictions, substantial revenues and the capacity to make meaningful investments that will shape the future of content production globally.

While the AVMS Directive previously applied to traditional broadcasters and on-demand services, it has now been expanded to cover video-sharing platforms, who otherwise benefit from the internet safe harbours in the e-Commerce Directive. This is part of the EU's Digital Single Market strategy and is intended to pave the way for a fairer regulatory environment for the entire audiovisual sector.

In this context, the revised AVMS Directive can be seen as a key element of Europe's response to the rise of over-the-top services, and part of a global wave of increased regulation alongside notable recent regulatory developments aimed at over-the-top services in other jurisdictions internationally, such as Vietnam and Turkey. As over-the-top services continue to attract increasing attention and audiences worldwide, we expect this trend to continue.

Key changes introduced by the revised AVMS Directive

Video-sharing platforms - these now fall within the remit of the AVMS Directive if the essential functionality of the service is to provide user-generated content to the general public in order to inform, entertain or educate.

Enhanced protection of minors from harmful content and inappropriate advertising - The revised AVMS Directive enhances the protection of minors. Media service providers will need to use appropriate measures to restrict the ability of minors to access harmful content, such as age verification systems and parental controls and video-sharing platforms must establish a user-friendly mechanism for users to flag and report inappropriate content, and react quickly when content is flagged. Children should also be protected from advertising communications for foods which are high in fat, salt and sugars. Member States will have the option to exclude sponsorship from children's programmes.

Newspaper websites - Sections of a newspaper website which feature audiovisual programmes or user generated videos will be considered as video-sharing platforms. However, the occasional use of videos on blogs, websites and news portals will be out of scope.

Strengthened country-of-origin principle - The revised AVMS Directive has maintained the country-of-origin principle which generally means that media service providers only need to comply with the rules of the one Member State where the provider is established. However, there is now clarification on how to determine the jurisdiction where a provider is established and each Member State must establish and maintain a register of media service providers in their jurisdiction. There are also, some important additional derogations to the country-of-origin principle such as in relation to financial contributions and the 30% European content quota for video-on-demand catalogues, which is applicable to service providers established in any Member State (each discussed further below).

Redefined limits of television advertising - Under the new rules for advertising on broadcasting (linear) services, instead of advertising limits applying on an hourly basis (i.e., limiting advertising to a maximum of 12 minutes per hour, which equates to 20% of broadcasting time in each hour regardless of the time of day), the 20% advertising limit will now apply across two longer time slots - the 12 hour period between 6:00 and 18:00, and the 6 hour period between 18:00 and midnight. This offers broadcasters more flexibility to adjust their advertising periods throughout the day, allowing them to allocate up to 144 minutes of advertising in total during the period between 6:00 and 18:00, and 72 minutes in total between 18:00 and midnight, with no specific restrictions on the amount of advertising offered during the broadcasting window between midnight and 6:00. This is beneficial for programming, as certain programs (which in some cases may run for several hours during the day, such as sporting events) may be more conducive to advertising than others, and the new rules will give service providers flexibility to adjust the quantity of advertising in line with the nature of programming, provided they remain under the total 20% limit during each extended advertising time slot.

30% European content quota for video-on-demand platforms' catalogues - The quota requirement is designed to ensure that major audiovisual service providers continue to invest in European content production and that users continue to have access to rich sources of local content. However, as a significant proportion of a provider's catalogue, the 30% quota poses practical challenges for both incumbent service providers (particularly those with a global content distribution platform) and new entrants to the European market. Incumbent service providers will need to review the content mix in their existing catalogues and carefully calibrate their production and licensing pipelines to ensure they comply with the quota on an ongoing basis. International audiovisual service providers seeking to enter the European market will need to take the 30% quota requirement into consideration as an important threshold which could present a potential barrier to entry depending on their preferred content mix (there is an exemption for companies with a low turnover and low audiences which may be of limited temporary use to a new entrant, but this automatically drops away once the provider reaches scale).

Financial contributions for European works - Member States have the option of imposing a requirement on media service providers to pay a financial contribution towards production of European works via direct investment in content or a contribution to national funds (or a combination of both). The existing AVMS Directive already includes a mechanism allowing Member States to impose such financial contribution requirements - and nine jurisdictions already impose financial contributions on locally established video-on-demand providers - but at present such local contribution requirements follow the country-of-origin principle and thus only apply to service providers established in the local jurisdiction. Under the revised Directive, financial contributions may also be applied (under a particular Member State's implementation of the AVMS Directive) where a media service provider is targeting a national audience in that Member State's jurisdiction, but where the media service provider is established in a different Member State. Note this obligation does not apply to non-EU established service providers or video-sharing platforms.

Brexit considerations

At the time of writing this alert it is unclear on what terms the UK will leave the EU ("Brexit"). If there is a transitional period for the withdrawal (currently expected to run until 31 December 2020), it has been agreed that current EU laws will continue to apply during that transitional period. However, if the UK leaves the EU without an agreed transition period on 29 March 2019 (the so called 'no-deal' scenario) then UK media service providers will have less time to prepare.

The UK has stated that as it will no longer be part of the single market after Brexit, the country of origin principle will no longer apply to services that are broadcast from UK media service providers into the EU. However, the UK is a signatory to the Council of Europe Convention on Transfrontier Television (ECTT) which 20 EU countries have ratified. The ECTT, which was drafted in 1989, broadly operates according to the same basic principles as the AVMS Directive and guarantees freedom of reception and transmission of programmes in territories that have signed up to the ECTT.

The UK's position is that Brexit will not impact their participation in the ECTT and the other EU countries must allow the reception of audiovisual content from UK media service providers. Note, however, that the ECTT does not apply to video-on-demand services, leaving a gap. Furthermore, there are seven Member States that are not signatories or have not ratified of the ECTT. These are Belgium, Denmark, Ireland, Greece, Luxembourg, the Netherlands and Sweden. Finally, the status ECTT vis-à-vis the AVMS Directive is unclear since the ECTT states that Member States should give precedence to EU legislation.

The UK Government issued a technical notice in September 2018 recommending that UK media service providers assess if their service is available in the EU and if so, whether they have the correct licences to provide those services after Brexit.

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