Opinion of the French Superior Audiovisual Council on a draft decree concerning on-demand audiovisual media services
Opinion no. 2010-22 of September 27, 2010 on a draft decree
relating to on-demand audiovisual media services
The French Superior Audiovisual Council has been asked by the French Government, in application of articles 9, 27 and 33-2 of the amended law no. 86-1067 of September 30, 1986 on freedom of communication, to give its opinion on a draft decree setting out the rules applicable to on-demand audiovisual media services (SMAD). Having deliberated at its plenary session on September 27, 2010, it issues the following opinion.
In accordance with the provisions of directive 2007/65/EC of December 11, 2007, transposed into articles 33 and 33-2 of the law of September 30, 1986 by law no. 2009-258 of March 5, 2009, the purpose of the draft decree is to create a specific scheme for SMADs, covering support for the production and promotion of European works and works of original French expression, in order to promote cultural diversity. It also defines the regulatory manager for commercial communications on these new services, and modifies that applicable to television services.
In its contribution to the debate on the transposition of the directive, adopted at the plenary session on April 15 2008, the Council pointed out that, with regard to the rules governing the promotion of European works on SMADs, two risks could arise from excessive obligations:
"On the one hand , the risk of relocation of services, which is particularly easy for online services, and, on the other, the risk of restricting innovation and the diffusion of new formats corresponding to the expectations of viewers and Internet users. This is why the French Superior Audiovisual Council considers that such obligations should only be adopted cautiously and gradually, following the development of these services and taking into account their characteristics ". This analysis is still valid today.
The Council thus considers that the objectives of promoting cultural diversity and developing the legal supply largely come under the control of the economic viability of national SMADs, whose development and competitiveness must be encouraged by regulation in order to establish a "virtuous circle" for the promotion of national and European works. In the spirit of recital 58 of the directive, which states that SMADs should benefit from lighter rules than those laid down for linear services, the Council stresses the need to take account of the new nature of these services, whose profitability remains fragile, and the economic constraints under which they operate (head-on competition from transnational services, higher VAT rate than that applicable to television services, low levels of aid and access to the support fund, difficulties in accessing rights, etc.).
The economic equilibrium of new services depends not only on effective support for the production of European audiovisual and cinematographic works and original EOF, but also on the development of an attractive legal supply. The Council therefore hopes that all measures will be taken to encourage the development of a rich and diversified legal supply.
To ensure the effectiveness of the scheme, operational rules must be put in place for its application and control.
However, the Conseil considers that the draft decree, despite having been significantly improved compared with previous versions submitted to it, imposes excessive obligations on SMADs. In particular, the high level of financial contribution rates and their lack of progressivity are likely to severely hamper the development of services in France, and penalize them in the face of competition from foreign services which are not subject to such restrictive rules. This situation may also encourage relocation outside France.
In view of this concern for economic realism, the Board has decided to issue an unfavorable opinion on the text as it stands, and to make the following proposals in response to the concerns set out above.
I/ Proposals concerning obligations to contribute to the development of the production of European audiovisual and cinematographic works and original French-language works.
Introduction of a review principle
In addition to the economic context mentioned above, the Council summons the Government's attention to the uncertainties that exist in four areas:
- the availability of rights, on which the a ttractiveness of supplies largely comes under the control of ;
- public consumption levels of these works;
- possible developments in support funds for SMADs;
- media release chronology.
On this last point, the Council notes that the 26% and 21% rates will only apply subject to developments in the media release chronology, which will have to be defined by professional agreements under the conditions laid down in the Code du Cinéma et de l'Image Animée.
It therefore seems imperative to re-examine the scheme put in place by the draft decree in the medium term, under the provisions of the directive which calls for a periodic reassessment of the arrangements for the promotion of European works for audiovisual media services. This review could take place 18 months (or 24 months at the latest) after the scheme comes into force, and could focus in particular on the threshold chosen, the levels of financial contribution, and the distinction between SMADs based on contract and other SMADs. This period will also allow us to observe real competition on television services, as well as the development of terrestrial and non-terrestrial SMADs, in order to assess the relevance of any distinction in their contribution regime. Finally, this review will make it possible to assess the competitive impact of transnational SMADs on SMADs established in France.
The Conseil summons the conclusion, during this period, of professional agreements establishing the terms and conditions for making works available on SMADs, in particular the duration of exploitation rights, the remuneration of rights holders, and measures to reconcile respect for the moral rights of authors and advertising interruptions of works. Finally, it invites public authorities to establish an economic manager adapted to the development of these services, by strengthening the support mechanisms for their development.
The introduction of an annual progression of contribution obligations
Setting a threshold for triggering the financial contribution obligation for SMADs other than catch-up TV takes into account the recent nature and economic fragility of these services. However, the Conseil considers that taking into account the newness of SMADs also implies an annual progression in contribution rates once the service exceeds the threshold of 10 million euros in net annual sales, so that they only reach the provision for contribution rate after five years, with an increase of one percent per year.
The non-exclusive nature of the SMAD market
The introduction of exclusivity is likely to lead to fragmentation of the legal supply and a loss of appeal. The Council notices that the acquisition of exclusive rights through pre-financing of works should not be favored, in order to promote their wider exposure and circulation. It demands the deletion of the last paragraph of article 7, which imposes a pre-purchase obligation representing 25% of expenditure on subscription SMAD publishers with net annual sales in excess of 50 million euros. With regard to the criteria for independent production defined in article 8, it also suggests lowering the maximum duration of exclusive rights to 18 months.
Clarification of the contribution base
It is necessary to define more precisely the annual sales on the basis of which the contribution of services is calculated, by listing the sales of the service and no longer of the service editor, in order to remove any ambiguity, particularly in the case of editors holding several services, some of which may not constitute, in whole or in part, SMADs.
Clarification of expenses taken into account
The Conseil is in favor of the provisions allowing the inclusion, as expenses contributing to the development of the production of cinematographic and audiovisual works, of the purchase of exploitation rights, which will mainly comprise payments to rights holders. However, for the sake of clarity and in line with the pay-per-view scheme, the decree should contain a provision specifying that the rights purchases referred to in article 7.4 may include, in addition to the guaranteed minimums, sums paid to rights holders according to the number of downloads or viewings.
Catch-up TV
The Conseil considers it appropriate to establish a specific contribution regime for SMADs, given their link with one or more linear services. However, it proposes that the draft decree define the notion of catch-up TV as proposed in the appendix.
Certification of accounts
The French Superior Audiovisual Council is requesting that the decree require publishers with net annual sales in excess of 10 million euros to produce annual cost accounting statements, certified by a chartered accountant or statutory auditor, to determine the net annual sales of each service according to its nature (catch-up TV or video-on-demand), its marketing method (subscription or other), the programs offered (audiovisual or cinematographic works, "non-works") and their consumption by the public.
The decree should also make provision for a declaration to be made by service editors whose net annual sales are less than 10 million euros, at the express request of the Conseil, should the latter wish to ensure that a service is not subject to the financial contribution.
II/ Proposals for schemes to guarantee the supply and effective promotion of European and original French cinematographic and audiovisual works
Retaining quantitative obligations to meet the legal objective of " guaranteeing the supply and ensuring the effective promotion of European cinematographic and audiovisual works and works of original French expression " leads to difficulties of application for publishers and control for the Conseil. The Conseil suggests that, if quantitative obligations are retained, they should be made more flexible.
Obligations to guarantee supply
The obligation for all service editors to devote 60% of the total number of cinematographic and audiovisual works in their catalog to European works, and 40% to works of original French expression, could justify a progression according to the service's sales. These proportions could be maintained only for services with net annual sales of at least 10 million euros, and lowered to 50% European works and 35% EOF works for services below this threshold.
In addition, the Council notes that the draft decree does not specify the periodicity for assessing compliance with this obligation. It proposes that the text specify that this obligation must be met at all times.
Development obligations
The draft decree makes provision for publishers to reserve a majority proportion of their home page for European and EOF works, by mentioning the title, displaying visuals or providing trailers. The Council stresses the difficulties of application and control that such an obligation would raise, given its continuous nature and the existence of personalized home pages. It demands that the draft be amended to make provision for SMAD publishers to reserve a "substantial" share of their home page for such works, a formula that would allow for more flexible application and assessment.
III / Proposals concerning commercial communications
The Council is in favor of the proposed relaxations on SMADs (notably the absence of advertising volume rules and the abolition of most advertising insertion rules), provided that consumer interests are safeguarded through the identification of commercial communications and that a clear separation is maintained between commercial communications and programs.
It hopes that the review provided for in I of this opinion will also cover the schemes relating to commercial communications, in order to assess the impact of the new rules.
Identifying commercial communications
To ensure satisfactory consumer protection, the principle of identifying all commercial communications must be reiterated. The Council therefore regrets that the principle of identifying advertising, provided for in article 43 of the law of September 30, 1986 and article 14 of the decree of March 27, 1992, is not reiterated in the draft legislation with regard to SMADs.
Similarly, the decree should specify that any teleshopping supply, whether or not it is part of a program devoted to teleshopping, must be clearly advertised.
With regard to sponsorship, it is proposed that the sponsor be identified " in a manner appropriate to the program, at the beginning of the program".
Comments specific to sponsorship
The Council recommends that the same means of identifying the sponsor be used for television services and SMADs.
With regard to the reference to the sponsor's products and services, and in the interests of consumer protection, it would like to maintain the exclusion of the presentation of the product itself or its packaging, for the purposes of identifying the sponsor, as is the case for television services.
With regard to the modification of the decree of March 27, 1992, applicable in particular to television services, the Council questions the methods of implementation of sponsorship of a television service, made provision for by the draft decree.
Clarification of schemes to promote alcoholic beverages
The draft decree should reiterate the principle of the ban on advertising for beverages containing more than 1.2 degrees of alcohol, laid down in article 8 of the decree of March 27, 1992. It is therefore recommended that the decree make provision for the application of the first indent of this article.
The Conseil emphasizes that the measures adopted will be of decisive importance in shaping the emerging SMAD market: the market shares acquired in the initial phase could in fact structure the supply for many years to come. It is therefore vital that domestic players are able to compete on equal terms with all their foreign rivals.
To implement the above observations, the Board proposes the editorial additions and amendments listed in the appendix.
Paris, September 27, 2010.
For the French Superior Audiovisual Council :
Le président,
Michel BOYON
Browse the appendix (PDF at the top of the page)
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