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Viviane Reding

Member of the European Commission responsible for Information Society and Media

Audiovisual media services directive: the right instrument to provide legal certainty for Europe’s media businesses in the next decade

Seminar “Regulating the new media landscape”
Brussels, 7 June 2006

Ladies and Gentlemen

I am talking to you at the end of a day full of speeches and discussions on the European Commission proposal for the modernisation of the Television without frontiers Directive (TVWF). You have already had a detailed presentation on the border between linear and non-linear services, the need for, and the criticism of the country of establishment principle, or the rules which would be part of the basic tier of rules enabling the free movement of all form of audiovisual media services on all possible platforms according to the country of establishment principle. You will continue your discussion tomorrow with similarly detailed deliberations regarding commercial communication and the implementation of the Directive.

So I think you will forgive me if I don’t give you another lecture on the legal implications of the Commission’s proposal. Instead I will explain why I feel that the modernisation of the TVWF Directive is essential and how to achieve our objectives in this area.

But first I think it is necessary to correct a misperception with which some players try to influence the discussion. This Commission proposal is not about new restrictive provisions but about giving effect to the freedoms of the EC Treaty and about paving the way for a better exercise of the fundamental right of freedom of expression across the borders in the EU.

One of the basic principles of the European Union is, indeed, freedom of expression and hence the fundamental importance of media freedom and media pluralism. This right is enshrined in the Charter of Fundamental Rights of the European Union, as well as in the European Convention on Human Rights. The new Directive on Audiovisual Media Services, once adopted, will give effect equally to the Charter as well as to Art 10 of the European Convention.

It will create the legal framework and the legal certainty which new business models and technological developments need in order to achieve full consumer acceptance and to successfully deploy new services in the internal market. The Directive completes the internal market by further coordination of minimum standards and therefore reinforces the freedom to provide these services.

The audiovisual world is changing faster than ever: Just a few weeks ago major Hollywood studios[1] started selling digital versions of films such as Brokeback Mountain and King Kong on line, the first time recent films have been made available online for purchase. The move is seen as a step toward full digital distribution of films on line.

At the same time we see how technology is giving viewers increasing control over what they see and when. For example, they can skip the advertising spots thanks to personal video recorders.

We already see signs of a move towards hybrid business models. In Italy, football matches are available live on digital terrestrial television thanks to pay-per-view (a “new” linear service). Terrestrial broadcasters have decided that the best way to finance these expensive rights was to develop a hybrid business model combining pay-per-view with some advertising.

The rapid development of the market for TV and TV-like services confirms the need for a substantial modernisation of the existing framework of EU rules. The audiovisual industry is undergoing a major revolution, driven by the convergence of technologies and services as well as expansion of fixed broadband, digital TV and 3G networks accompanied by a corresponding increase in the provision of non-linear services, notably video on demand. In the next few months, broadcast on mobile phones allowed by the DVB-H standard will probably generate an additional market, with 200 million potential users in Europe, with a need for adapted linear and non linear contents.

Is it really conceivable to stick to the rules invented in the eighties when approaching the problems of the next decade?

In 1989 non-satellite commercial television was still in its infancy and ICT- based fixed-line methods of service provisions were not ready for market. EU Member States at that time only had 3-4 mainstream TV channels each. Cable TV existed in just a handful of countries, no-one watched TV-style content on the internet and few had heard of (then) exotica such as digital TV, broadband internet access or digital subscriber lines. Even technicians would have doubted that TV signals would one day travel by phone lines.

Today trans-frontier satellite commercial television has become maybe even more popular than local terrestrial broadcasting. This evolution has been accompanied by exponential change in channel capacity, especially via digital cable and satellite, increased market penetration of multi-channel homes and an increasing number of platforms. Expansion of fixed broadband, digital television and 3G networks was rapid and ubiquitous. Europe now enjoys better domestic broadband penetration than the United States. Broadcasting and datacasting over mobile networks has been taking place, and peer- to- peer exchange have supplied the pent-up demand for multimedia content. The multimedia environment has been changing rapidly. Internet Protocol TV and video on demand are making their way in the audiovisual market.

These are areas of significant growth for the EU economy in the medium term. The market for VOD is expected to reach €235 million in Western Europe by 2008. In the European mobile industry, 3G handset penetration is expected to reach 60% with 57 million mobile TV subscribers by 2010.

This is why last December I tabled the proposal for the modernisation of the TVWF Directive: to keep pace with rapid technological and market developments in Europe’s audiovisual sector.

The proposed new rules also respond to changing consumer behaviour. Viewers today have a much wider choice of TV and TV-like content, such as sports and premium films, delivered via a huge variety of digital cable and satellite channels. Today’s consumers use their TVs to interact with service providers in ways unheard of in 1989 or even in 1997 when the Directive was last revised.

Keeping the TVWF Directive as it stands now would aggravate increasingly unjustifiable differences in regulatory treatment between the various forms of distribution of identical or similar content. “Traditional” television broadcasting services would remain regulated on the basis of the regulatory approach of the 1980’s and 1990’s. With the current rules, non-linear service providers have to comply with different - often diverging - national rules applying to the new services. This bears the risk of closing markets for on-demand audiovisual services and creating or reinforcing monopolies. This is in my opinion not acceptable!

The Commission’s proposal aims to create a single market framework for all types of television and television like services irrespective of the technology used to transmit or receive them. This common framework provides the legal certainty necessary for the new audiovisual service providers to offer their services on a pan-European basis. Indeed, we cannot expect the European audiovisual industry to lead the way in developing new services if it is confronted with 25 or more different regulatory regimes.

Given that the revised Directive can be expected to be implemented in the Member States in 2008/09 at the earliest, the internal market for broadcasting would be affected in the years 2009 to 2020 approximately. This is why we need the new Directive and why it must be made as future- proof as possible.

After reminding you briefly of the reasons why the Commission considered that it was necessary to take the initiative to modernize the current regulatory framework in the audiovisual field, I would like to outline the main features of the Commission’s proposal in bringing together some of the elements you already heard today and will discuss tomorrow.

The aim of the revision is to define rules for audiovisual media services in a platform neutral way, which would mean that the same basic rules apply to the same kind of services. However the two tier approach of the proposal takes into account the degree of choice and control viewers can exercise.

The draft Directive provides for a coherent regulatory framework for both linear and non-linear (on demand) delivery of audiovisual content. “Linear” services as you already heard are scheduled services such as broadcasting via traditional TV, the internet, or mobile phones, a service which “pushes” content to viewers. “Non-linear” services, by contrast, are those which the viewer “pulls” from a network, such as on-demand films and where the viewer decides on the moment of transmission.

This proposed piece of Community legislation complements other elements of Community legislation. This is especially true for the e-Commerce Directive which neither provides for measures relating to cultural and linguistic diversity nor for harmonised rules in some essential areas of public interest such as the protection of minors.

Action at the EU level in these fields would thus serve two primary and interconnected objectives:

  • Facilitating the free movement of audiovisual media services including non-linear services within the EU internal market through the application of the country of establishment principle;
  • Ensuring the protection of fundamental public interest objectives, including protection of minors and human dignity, the ban on hate speech and essential rules concerning consumer protection.

Key for a good understanding of the proposal are its definitions. The definition of “audiovisual media services” defines the scope of the proposal.

This provision provides that, to qualify as an “audiovisual media service”, the following six conditions must all be filled:

- It must be a Service as defined by the Treaty

- Having as its principal purpose

- The delivery of moving images with or without sound

- In order to inform, entertain or educate

- Addressed to the general public

- By electronic networks

As Recitals 13 to 17 of the amending Directive further explain, this notion covers mass media in their function to inform, entertain and educate, but excludes any form of private correspondence, such as e-mails sent to a limited number of recipients or private web-logs.

The overwhelming majority of blogs would not be covered by the Directive because they would not respond to the six cumulative criteria recalled above: in particular, the following would not be covered: private websites or blogs of a non-commercial nature; Blogs that do not have as their “principal purpose the delivery of moving images”. This would exclude for example, a blog put up by the local village football team, even if it is sponsored, for example, by the local building firm.

The Directive only covers audiovisual media services the principal purpose of which is to deliver audiovisual content. Examples of ancillary audiovisual content range from animated graphics to advertising spots or information related to another product or non-audiovisual services. Having looked at The Sun's website for instance where they show a short News Bulletin video, it appears that The Sun web site is THE service, the few seconds of video footage (one to two minutes) are part of this service but only ancillary to it. Therefore this web site is NOT an "audiovisual media service" within the meaning of Art 1(a) of the draft directive as explained above and therefore not covered by the proposal.

Since the proposal only covers moving images with or without sound - as Recital 15 explicitly states - the draft Directive does NOT cover electronic versions of newspapers or mere audio transmissions and radio. With regard to all these non- audiovisual services, the Commission did not identify, in its wide consultations, a need or a justification for harmonised rules.

Another important feature of the Commission’s proposal is that it aims to modernise the rules on television advertising and adapt them to today’s challenges. New methods of advertising have to be considered to allow also in future a sustainable free-to-air business model which is important to our social model. The Proposal lays down some basic principles governing advertising, and at the same time simplifies and liberalises rules on the insertion of advertising in TV programmes.

Whilst the current Directive covers only scheduled broadcasting services including televised advertising, the Commission’s proposal for a new directive sets out some basic “qualitative” requirements for advertisements that accompany non-linear audiovisual media content. At the same time, the new directive removes a number of restrictions on advertising within linear audiovisual services.

The proposal abolishes a number of quantitative limitations. The insertion rules are simplified and made more flexible.

The current three-hours-per-day limit on advertising is dropped. Insertion rules are made simpler and more flexible. Broadcasters, and not regulators, will choose the best moment to insert advertising in programmes, rather than being obliged, as they are now, to allow at least 20 minutes between advertising breaks. The new directive specifies that feature films and films made for television, children’s programmes, current affairs programmes and news must not be interrupted more than once for every period of 35 minutes. The 12-minute upper limit on all advertising in any given hour will stay.

The new Audiovisual Media Services directive clarifies rules on “product placement”. Product placement as such is not addressed by the current TV without Frontiers Directive, which prohibits this only if it takes the form of “surreptitious advertising” by a broadcaster. Product placement is nonetheless common practice in independently produced works and feature films, without any appropriate consumer protection and without clear rules that would give investors in content certainty on the applicable laws.

It is therefore only reasonable to give product placement a clear, legal framework, allowing it in certain programmes after clearly informing the consumer, but excluding it in sensitive programmes such as documentaries and news and children’s programmes.

The proposal also encourages Member States to have recourse, where appropriate, to co-regulatory regimes in the fields covered by the Directive. This is an innovation and the first time Community legislation refers to co-regulation. Member States, according to the proposal, shall “encourage co-regulatory regimes in the fields coordinated by the Directive”. They are not obliged to have recourse to such regimes. If they do, the regimes must be broadly acceptable by the main stakeholders and provide for effective enforcement. If Member States entrust tasks in achieving the Directives objectives to self-regulatory bodies, the entrustment mechanism must be sufficiently clear and strong so as to ensure that regulatory measures may be used in the event of the failure of the self-regulatory measures to achieve the Directive’s objectives.

Art 3(3) AVD encourages co-regulatory regimes in the fields coordinated by the Directive. This implies the obligation for Member States to examine whether co-regulation would be an appropriate tool to implement the Directive. Member States freedom of choice of form and method with regard to the implementation of a directive remains unaffected.

Another important aim of the legislative proposal - next to consumer protection - is to ensure media pluralism. One means to achieve this is the proper exercise of independent regulatory powers. Therefore the proposal introduces an Article which requires Member States to guarantee the independence of national regulatory authorities, without entailing the obligation for Member States to create such authorities. Such an independent regulatory authority may not be part of a governmental administration and shall also be independent of audiovisual media service providers in order to be able to carry out their work impartially and transparently and thereby to contribute to media pluralism. This proposed obligation to guarantee the independence of national regulatory authorities reinforces the democratic dimension of the proposal.

Secondly, media pluralism will be strengthened through the right of broadcasters to receive “short reporting”. The new provision introduces a rule on the non-discriminatory application of the right to short news reporting for linear services. This aims to guarantee the flow of information across borders and unrestricted access to information.

This proposed right of access is intended to complement provisions on “events of major importance to society” that are reserved for free-to-air TV.

Let me finally make some remarks on the question of jurisdiction. The country of establishment principle is the concrete implementation of the basic economic principles of the Treaty of the European Union: the freedom of establishment and freedom to provide services.

But this principle is equally a necessary condition for the exercise of the basic principle of the Charter of European Rights, respect for the freedom of media and the freedom of speech.

The application of the country of establishment principle contributes to this freedom of speech since it ensures that a service is regulated only in one Member State and that other Member States can not restrict the freedom of reception and retransmission. Therefore it is of fundamental importance not only for the success of new services and business models but also for our democratic and open society.

While the Commission understands the concerns of some Member States with regard to the abusive circumvention of local legislation, we cannot accept arguments aiming at protecting national advertising markets.

After long discussions within the consultation process we came to the conclusion that codification of the Court case law in the amending Directive would be the appropriate solution.

Let me underline the guiding principle of this procedure: I am convinced that the best solution to the problems encountered would be achieved by Member States themselves on a bilateral basis. Therefore, the procedure proposed by the Commission foresees in the first place an attempt for an amicable settlement. Only after a failure of such an attempt, the procedure envisages a notification of the intended measures and finally a Commission decision on these measures.

The Commission’s proposal takes account of the concerns, expressed by some Member States, on the issue of circumvention of national rules. We are of course open to discuss our proposal in order to solve better the existing problems. But we have as well to respect the basic principles of our Treaty as interpreted by the ruling of the European Court of Justice. Therefore two points must be clear in this discussion:

First of all: We cannot include in the Directive a general rule that allows Member States to take action in cases where services are established in another Member State, but offering services only in the first Member State. This would clearly lead to the principle of the country of reception and would restrict not only the business models for new services but also the freedom of speech considerably.

The derogation from the general ‘freedom to provide services’ – like all derogations from a fundamental principle of the Treaty - must be interpreted restrictively and can only be made on the basis of a case by case analysis by reason of objective evidence. A general derogation would clearly go against the Court’s case law.

And second: the sole fact, that a service targets another Member State’s market cannot be considered as such as a valid criterion to restrict the freedoms guaranteed by the Treaty. The European Court of Justice clearly states that the Treaty does not prohibit an undertaking from exercising the freedom to provide a service if it does not offer services in the Member State in which it is established.

Ladies and gentlemen,

As you now we are now in co-decision procedure.

Mrs. Hieronymi, rapporteur for the Cultural Committee of the European Parliament, with whom you will discuss tomorrow, will present her report in the committee in July. Adoption by the Committee is scheduled for October and finally the vote in plenary will take place in December 2006. A political agreement in Council could be reached under the German Presidency (1st half 2007) and second reading could take place under the Portuguese Presidency (2nd half 2007). You see: this is not the end of the discussion.

[1] Warner Bros., Universal Pictures, Sony Pictures, Paramount Pictures, Twentieth Century Fox and MGM

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