As per our recent update, the European Commission (the Commission) has published guidelines on the rules concerning the promotion of European works on on-demand providers in the revised Audiovisual Media Services Directive (AVMS Directive), focusing on: (a) the calculation of the share of European works in the catalogues of on-demand providers; and (b) the definition of low audience and low turnover.
This article will focus on the second limb of the European works guidelines. In case you missed it, see our article focusing on the first limb of the guidelines here: AVMS Update – European Commission publishes guidance on calculation of European works.
The definition of low audience and low turnover
The AVMS Directive provides an exemption for on-demand providers with a:
- “low turnover”; or
- “low audience”,
from the obligation to ensure that at least 30% of their content is deemed to be “European works” (note this exemption also covers the requirement for media service providers to contribute financially to the production of European works). The exemptions are designed to ensure that the obligations relating to the promotion of European works do not undermine market development and do not inhibit the entry of new market players.
The guidelines, while not binding, are designed to foster a coherent implementation by each Member State of the AVMS Directive rules concerning on-demand providers and European works by clarifying the definition of “low turnover” and “low audience”, as used in the AVMS Directive. However, the guidelines, in part, raise more questions than they answer.
Low Turnover
In order to define low turnover, the Commission has linked the threshold for low turnover to the definition of a “micro enterprise”, being enterprises with a total annual turnover not exceeding EUR 2 million. However, it could be argued that this threshold is too low as many new market players will be unlikely to fit the definition of a micro enterprise.
The guidelines do acknowledge that the calculation of low turnover is not a ‘one size fits all’ approach and the determination of low turnover should take into account the different sizes of audiovisual markets in Member States.
Low Audience
Measuring audience
The Commission acknowledges that, unlike for linear services, the concept of audience is less established for on-demand services and audience data is rarely available to third parties. Notwithstanding, the methodology proposed by the Commission for calculating low audience is directly linked to audience share which will require audience data.
The Commission considers that the most appropriate method of measuring audience on VOD services is by reference to the ‘sales of the service’ i.e. the number of users/viewers of a particular service. The Commission provides that audience share could be calculated, for example, on a SVOD service, by reference to the number of paying subscribers to such service as a percentage of the total active users across (similar) VOD services in the market, on a TVOD service by reference to the number of unique accounts used for acquisition of works and on an AVOD (or FVOD) service by reference to the average number of unique visitors for such service over a defined period of time.
One issue with this approach, however, is that this methodology does not take into account the fact that an active user on one service may watch 99 programmes and an active user on another service may only watch one programme and yet such active users are treated equally.
An issue that the Commission does acknowledge is the means of calculating audience share where a subscriber pays for bundled services that include a VOD service, as in such cases audience share of the VOD services might not reflect the actual number of users of the VOD service. The Commission notes that in such cases national authorities may apply a measurement “based on users who have in fact accessed the video content of the service within a defined time-period”. As noted above though, the question of public disclosure of data will be key where audience share needs to be compared with number of users of (similar) VOD services and, in an industry where such information is rarely made available, one can already envisage the problems regulators may have in determining audience share (particularly where the “Country of Origin” regulator is trying to calculate the market share in many different Member States of one of its regulated service providers which operates across multiple countries).
Further, a question that the Commission does not seek to answer is that of what a “similar” service is, for example should SVOD audience share consider AVOD, FVOD and/or TVOD services or, conversely, could a distinction be made by reference to genre.
Threshold
Turning to the definition of low audience itself, the Commission considers that on-demand services with an audience share of less than 1% within a Member State should be deemed to have a low audience share. This threshold, in the view of the Commission, shows a limited uptake of the service of the on-demand provider compared to the national market. The Commission considers that such a threshold is appropriate given that the main SVOD providers in Europe tend to have an audience share that is significantly higher than 1% in the national markets in which they are present.
It is worth noting that this threshold is different from the threshold established for linear services in the guidelines, which is set at 2% in a given target Member State for cross-border channels, as the Commission considers that the linear services market is different from the VOD market.
Implementation by Member States
When defining low audience and low turnover, the Commission has advised that, ultimately it is important for Member States to find a balance between the objectives of preserving a necessary innovation space for smaller audiovisual players and that of promoting cultural diversity through adequate financing for European works.
Given that the guidelines are not binding, and the inherent issues with the thresholds and methodologies proposed by the guidelines (some of which are identified in this article), it seems likely that the approach taken by each Member State to achieve such balance might look quite different.
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