Not cleared from scrutiny; further information requested; drawn to the attention of the Committees on Culture, Media and Sport and on Exiting the European Union
Proposal for a Directive amending Directive 2010/13/EU on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services in view of changing market realities
Articles 53(1) and 62 TFEU; QMV; Ordinary Legislative Procedure
Culture, Media and Sport
(37812), 9479/16 + ADDs 1–4, COM(16) 287
4.1The way we watch television and video is changing, with an increasing amount of online viewing. In response, the European Commission is proposing a revision of the EU rules governing audiovisual media, which are designed to ensure cultural diversity and the free circulation of content. The UK is currently a hub for the EU audiovisual market.
4.2When the Committee first considered the proposal, at its meeting of 6 July 2016, it raised a number of issues to which the Government has now largely responded. The Committee invited the Government to update its position in the light of the vote to leave the European Union. Detail on the Government’s position on some of the suggested changes by the Commission was also sought, notably on the proposed requirement that on-demand services, such as Netflix, reserve at least 20% of their catalogues for European Works.
4.3The Minister for Digital and Culture (Matthew Hancock) confirmed that the UK expects to take a full part in the negotiations while it remains a member of the EU. Whether and how the UK might continue to benefit from the country of origin principle enshrined in the Directive will be considered in the negotiations. The Minister stated that the application of the terms of the Directive will form part of the negotiations. The Committee’s question as to whether divergent domestic and EU laws on the provision of audio visual media services could operate as a barrier to trade or have implications for businesses, consumers or any other affected group was not addressed.
4.4The Minister went on to set out the UK position on the specific issues raised about the substance of the Directive. His response is set out below. In summary, the Government will oppose the proposed quota and levy for video-on-demand providers. The Government is neutral about the proposed relaxation of rules on advertising.
4.5The Minister is unable at this stage to state whether or not the UK will be in a position to apply the terms of this legislation after withdrawal from the European Union. This is because, the Minister says, the terms will form part of the withdrawal negotiations. Such an approach is logical as application of the reciprocal aspects of the legislation cannot be resolved by the UK unilaterally.
4.6There are important questions arising from this. In the event that the existing rights and obligations associated with access to the EU audiovisual market are not maintained, to what extent would the Council of Europe Conventions on Transfrontier Television (CTT) and on Cinematographic Co-production cover the sector? How feasible would it be to amend the CTT to align it with the Audiovisual Media Services Directive (AVMSD), as was proposed when the Directive was last revised?
4.7The Government is yet to clarify the model of relationship between the EU and the UK that it will seek to negotiate, but one widely-discussed approach has been a Free Trade Agreement. Failing that, the UK may need to trade with the EU on World Trade Organisation (WTO) terms. We are aware that, in both multilateral and bilateral trade negotiations, the EU has traditionally excluded the audiovisual sector from any commitments it makes to open its markets to foreign competition. Most recently, it was excluded from the EU-Canada trade agreement (CETA). At the level of the WTO, it is one of the sectors where the number of WTO members with commitments is the lowest. Under the concept of “cultural exception”—introduced by France in the General Agreement on Tariffs and Trade (GATT) negotiations in 1993—culture should be treated differently from other commercial products and cultural goods and services should be left out of international treaties and agreements. What precedents can the Government point to that would provide some encouragement to the sector that the audiovisual sector could be included within any future EU-UK FTA?
4.8A substantial proportion of the EU’s broadcasters and television channels are based in the UK, with around 50% of content being broadcast outside the UK. What assessment has the Government made of the impact on the audiovisual sector and its consumers of any divergence between domestic and EU laws and any reduced access to the EU’s audiovisual market?
4.9We ask too for information on the nature of consultation undertaken by the Government to understand how best to accommodate the audio-visual sector outside the EU. How is the Government seeking to ensure that the interests of the creative sector are heard alongside those of others?
4.10In the original Explanatory Memorandum, the then Minister stated that a detailed assessment of the initiative was under consideration and that an update would be submitted to Parliament in due course. We asked that the update include a number of specific details but we had expected that it would touch any other issues of importance to the UK. As the update only covered those issues to which we referred, we ask the Government to confirm whether or not it has a position on other aspects of the proposal. Those include, but are not limited to, the protection of minors and accessibility. If so, we expect the Government to set out that position. Furthermore, we would welcome an update on the progress of negotiations.
4.11We consider that the issues raised are likely to be of interest to the Committees on Culture, Media and Sport and on Exiting the European Union and we therefore draw the proposal to their attention. We retain the proposal under scrutiny and look forward to receipt of the further information requested in due course.
Proposal for a Directive amending Directive 2010/13/EU on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services in view of changing market realities: (37812), + ADDs 1–4, COM(16) 287.
4.12The Audiovisual Media Services Directive governs EU-wide coordination of national legislation on all audiovisual media, both traditional TV broadcasts and on-demand services. Aspects of these rules, designed to ensure cultural diversity and the free circulation of content, are nearly 30 years old. As part of its work on the Digital Single Market, the Commission proposes to revise the rules to reflect the evolving needs of consumers and industry.
4.13In particular, video-sharing platforms, such as YouTube, will be brought within the scope of the Directive for the first time. Controversy has been engendered by the proposed requirement that on-demand services, such as Netflix, reserve at least 20% of their catalogues for European Works. Other notable changes include those on advertising thresholds, allowing more frequent breaks for advertising, and the size of enterprises that are exempted from the rules. The proposal reinforces the role of the European Regulators Group for Audiovisual Media Services (ERGA), composed of all 28 national audiovisual regulators. Further information on the background to, and content of, the proposal was set out in our Report of 6 July 2016.
4.14When it first considered the proposal, the Committee noted that the Government’s Explanatory Memorandum had been submitted before the UK had voted to leave the EU. It raised the following Brexit-related issues:
4.15In terms of the substance of the proposal, the Committee expected the update due to Parliament to include views on the following key issues:
4.16The Committee retained the proposal under scrutiny and drew it to the attention of the Culture, Media and Sport Committee and the Business, Innovation and Skills Committee in the light of that Committee’s inquiry into the Digital Economy.
4.17The Minister notes that, since the Explanatory Memorandum, the UK negotiating position for the Directive has been agreed and negotiations have begun. He emphasises:
“Given the process that the UK is preparing to undertake to leave the European Union, our negotiating position on this Directive will remain flexible. Nevertheless, I have sought to respond to each of the points your letter raised below.”
4.18On the likely timeframe for the legislation to take effect, he says:
“The timeframe for adopting a directive varies greatly and realistically we would expect this to be not before mid-2017. This would be followed by a period of implementation, which would take around two years. Please be aware this is subject to change and largely dependent on the progress of the negotiations with other Member States, and the EU institutions.”
4.19As to the other Brexit-related considerations, he says:
“We expect the UK to take a full part in the negotiations while we remain a member of the EU. […] We will consider, as part of the negotiations on the exit from the EU, whether and how the UK might continue to benefit from the country of origin principle enshrined in the Directive. The application of the terms [of the] Directive to the UK after its exit from the EU will form part of those negotiations. Issues around audiovisual matters are not a devolved matter.”
4.20On the levy for video-on-demand providers, he explains:
“The UK does not believe that the proposed film levy for video-on-demand (VoD) providers would be of benefit to the UK audiovisual sector as a whole. The proposal would introduce an optional film levy on VoD players (such as Netflix) within countries in which these services are received. France and Germany proposed this measure as their film funding systems have been breaking down. These systems imposed a levy on hard copy video cassette and DVD rental, and with the emergence of VoD services (which is replacing hard copy rental), these funds are running dry. The UK has a successful tax relief system in place for film and high-end TV programmes to incentivise productions which are subject to state aid. On this basis, and because the levy has the potential to create a barrier to growth of smaller VoD suppliers, the UK will oppose this proposal.”
4.21Concerning derogations for specific issues, he says:
“On the issue of derogations from the AVMSD country of origin principle with regard to national security and public health matters, the UK will look to ensure that these derogations are fully defined and when they can be used, to ensure that these measures are only used in most severe cases. Derogations in severe cases are already permitted, so this provision would be making explicit the grounds and basis for any derogation.”
4.22The Government has concerns about the quotas for VoD providers:
“I have some concerns on the effectiveness of the proposed 20% quota for European Works on VoD services, especially what is intended by the requirement to give European Works prominence. I believe that quotas could impose unnecessary burdens on new innovative services and prominence could interfere with viewer choice. There is very little evidence that quotas actually work. The UK will therefore be strongly opposing any quota in this area, but will be realistic in what can be achieved given the majority of other Member States are in favour of a quota system.”
4.23On advertising liberalisation, the Government’s position is as follows:
“There are two proposals in relation to the relaxation of advertising. The first is around relaxing the rules on lessening the timeframe from 30 minutes to 20 minutes before either news or films can be interrupted by advertising. The second is around creating flexibility in advertising minutage, such that instead of 12 minutes per clock hour, the broadcaster could have an average of 20% advertising per day. (This equates to an average of 12 minutes per hour but would allow the broadcaster to choose when to schedule this). There is no available evidence as to how the proposals to liberalise advertising this would affect the UK market therefore we will take a neutral position with regard to the Commission’s proposals.”
4.24The Minister considers that the exclusion of small and micro businesses from the requirements aimed at boosting European Works is the correct approach as “we should avoid any regulation that is over burdensome to business”.
4.25The Government supports the proposals on ensuring the independence of national regulatory authorities from national government influence:
“Ofcom, the UK communications regulator by law is, under the Communications Act 2003, independent from Government when it make its decisions on how the UK’s communications and media sectors operate on a daily basis. There have been some notable issues recently in how a minority of some other EU Member States’ governments have influenced how their communications regulatory bodies are run and the output and decisions that they reach, which needs to be addressed satisfactorily. This issue does cut across issues of sovereignty with the Commission setting out principles of how the governments of Member States should operate. We are therefore outwardly neutral in the early stages of the negotiations in order to see how the matter develops.”
4.26On the proposed enhanced role for the European Regulators Group for Audiovisual Media Services (ERGA), the UK is “listening carefully to the arguments put by other EU Member States both for and against ERGA”.
5 Seventh Report 71-v (2016–17), (6 July 2016).
28 November 2016