EUROPEAN COMMISSION

Brussels, 25.5.2016

SWD(2016) 168 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Proposal for a Directive of the European Parliament and of the Council 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

{COM(2016) 287 final}
{SWD(2016) 169 final}

TABLE OF CONTENT

1.Context

2.What is the problem and why is it a problem?

2.1 Conclusions of the ex-post evaluation of the AVMSD under REFIT    

2.2 Description of the problems and their drivers    

2.2.1 Insufficient protection of minors and consumers in video-sharing platforms    

2.2.2 Lack of a level playing field and internal market weaknesses    

2.2.3. Rules on commercial communications no longer fit for purpose    

2.3 What is the EU dimension of the problem?    

2.4 How would the problem evolve, all things being equal?    

3.Why should the EU act?

4.What should be achieved?

5.What are the various options to achieve the objectives and what are their impacts?

5.1 Options addressing the problem of insufficient minors and consumers protection in video-sharing platforms    

5.2 Options addressing the problem of the lack of a level playing field and internal market weaknesses    

5.2.1 Promotion of European works    

5.2.2 Protection of minors in on-demand services    

5.2.3 Country of origin principle    

5.2.4 Independence of Regulators    

5.3 Option addressing the problem of the rules on commercial communications no longer fit for purpose    

5.4 Discarded option: Prominence of content of general interest    

5.5 Impact of the combination of the preferred options    

6.How would actual impacts be evaluated or monitored?

6.1 Monitoring    

6.2 Evaluation    

ANNEXES……………………………………………………………………..………………..…....58

1.Context

The objective of the Audiovisual Media Services Directive (AVMSD) 1 is to create and ensure the proper functioning of a single European market for audiovisual media services, while contributing to the promotion of cultural diversity, providing an adequate level of consumer protection and safeguarding media pluralism.

The AVMSD is based on the 'country of origin principle' ("COO"). Under COO audiovisual media service providers are subject only to the rules of the Member State where they are established. By abiding by these rules they can freely provide services across the EU. As such, the AVMSD has facilitated the cross-border transmission of TV channels and 'Video On-Demand' (VoD) services. The AVMSD sets some minimum harmonization standards, which implies that Member States are free to enact stricter rules at national level. The AVMSD contains some limited exceptions to the operation of of COO.

The AVMSD applies to television broadcasts and on-demand services if all the following conditions are met (i) providers have editorial responsibility, (ii) providers have as their principal business purpose the provision of programmes to inform, entertain or educate the general public; and (iii) these programmes are comparable, in form and content, to television ("TV-like"). 

The AVMSD does not cover activities that are primarily non-economic.

The overall size of the European audiovisual sector in 2014 was around EUR 105.8 million 2 . It is mainly formed by large companies (for more details on the overall impact of AVMSD on SMEs, see ANNEX 3).

The audiovisual media landscape is changing at a rapid pace due to ever increasing convergence between television and services distributed via the Internet. Consumers increasingly access on-demand content via smart/connected TVs and portable devices. Consumers, in particular the young ones, watch videos, including audiovisual content generated by private users ("UGC"), on the Internet. Traditional broadcasting in the EU remains strong in terms of viewership, advertising revenues, and investment in content (around 30% of revenues). However, new business models are emerging. Broadcasters are extending their activities online and new players offering audiovisual content via the Internet (e.g. on-demand service providers and video-sharing platforms) are getting stronger and competing for the same audiences (for more details see ANNEX 6). However, TV broadcasting, on-demand services and video-sharing platforms are subject to different rules and varying levels of consumer protection.

The Digital Single Market (DSM) strategy 3  calls for a modernisation of the AVMSD to reflect market and technological developments. It requires the Commission to consider whether the scope of the AVMSD should be broadened to encompass new services and players currently excluded. In carrying out this review the Commission should bear in mind the objectives of the Directive, namely the protection of minors, consumers and promotion of European works. The overall vision of the DSM strategy is to create an internal market for digital content and services and ensure that Europe is a leader in the global digital economy.

2.What is the problem and why is it a problem?

2.1 Conclusions of the ex-post evaluation of the AVMSD under REFIT 4

The Impact Assessment has been carried out in parallel to the AVMSD ex post evaluation under the Regulatory Fitness and Performance Programme (REFIT) (see ANNEX 4).

The overall conclusion is that the AVMSD objectives are still relevant. If the Directive were repealed the audiovisual internal market would collapse since providers would no longer benefit from the COO, but would be subject to 28 different regimes and jurisdictions. This would increase their costs and undermine their propensity to provide cross border services, particularly into smaller Member States. Consumers would lose out because they would have less choice.

The REFIT evaluation concluded that there is scope for simplification, specifically of the procedures that support the application of the COO principle (i.e. the criteria determining jurisdiction over providers and the derogation and cooperation procedures limiting freedom of reception and retransmission in specific cases). Some other rules are no longer fit to attain these objectives, primarily due to market developments and changes in viewing patterns. In particular, the REFIT evaluation has shown that there is room for improving and updating the rules on commercial communications.

The REFIT evaluation has identified three main sets of problems:

-Insufficient protection of minors and consumers when consuming videos on video-sharing platforms.

-Lack of a level playing field between traditional broadcasting and on-demand services, and internal market weaknesses stemming from the fact that some of the AVMSD rules are not sufficiently precise.

-Rules on commercial communications no longer fit for purpose

It has also emerged from REFIT that there are different accessibility requirements of audiovisual media services for people with disabilities. In December 2015, the Commission adopted a proposal for a European Accessibility Act 5 , which sets accessibility requirements for a wide range of products and services including audiovisual media services. As such, this Impact Assessment will not address the issue of accessibility.

2.2 Description of the problems and their drivers 6

2.2.1 Insufficient protection of minors and consumers in video-sharing platforms

Video-sharing platforms employ tools like Autoplay (switched on by default for all videos in Youtube) which enable direct exposure to potentially harmful content and incitement to hatred 13 . Exposure to harmful content or content inciting to hatred may also be fostered via new technical features such as streaming audiovisual content live on the Internet 14 .

The AVMSD, and its rules on protection of minors and hate speech, do not apply to UGC offered on video-sharing platforms since these platforms often do not control the selection of the content. These platforms are subject to the e-Commerce Directive (ECD) 15 which does not require them as intermediaries to monitor content hosted by them nor to take any other pro-active measure. The ECD, however, requires platforms to remove illegal content if they are notified of such content, for example through a court order. The rationale of this ex-post system called "notice and takedown" lies in the fact that intermediaries cannot in principle technically control the content before it is posted. The e-Commerce Directive is therefore focused on illegal content and does not deal with harmful content.

The main video-sharing platforms do take some pro-active steps to protect minors from such harmful content and consumers from hate speech, but assess content against their own standards, which may differ from those set in the AVMSD.

As a result of this different regulatory treatment consumers and minors are less protected when watching videos on these platforms. For example, the music video "College boy" of the group Indochine, containing graphic images of violent bullying of a school boy, is freely available on YouTube. However, the same video is subject to a watershed on TV in France under the application of the AVMSD 16 . In another case, while YouTube removed a video of a woman being forced by her husband to walk naked in the street 17 for violation of YouTube's Community guidelines, the same video still appears on the website Liveleak.com 18 . By contrast, access to this type of videos is restricted under the AVMSD.

While a number of harmful activities are carried on the Internet, the specificity of video comes from its power to best capture the attention of initially passive users. Thus, seeing violent sexual images, violence or hate speech are online risks that are most likely to be driven by audiovisual images. It must be borne in mind that in 2014, Internet video stood for 64% of total consumer internet traffic. This share is expected to increase up to 80% by 2019 19 . The consumption of videos offered by video-sharing platforms is on the rise 20 . Among minors, video viewing is one of the earliest Internet activities carried out by young children 21 .

In the 2015 public consultation most consumer organisations said that the current rules do not deliver sufficient consumer protection as they do not take into account the increasing importance of video-sharing platforms. Most of the Member States and regulators who called for an extension of the AVMSD rules to video-sharing platforms expressed a similar opinion. This view is also confirmed by ERGA (the European Regulators Group for Audiovisual Media Services) 22 .

The impact of some self-regulatory initiatives in this field has so far been limited in particular in addressing certain types of harmful content, such as gory and violent videos, and hate speech 23 . For example, the initiative You Rate It 24 , the only one providing a rating tool for UGC, has not been taken up by YouTube. When it comes to protection of minors, ERGA 25 acknowledged that self and co-regulation initiatives have an important role to play but said that existing initiatives have to be reinforced. There is no EU-wide code covering these issues. For more information on these initiatives and their limitations see ANNEXES 8 and 18.

Based on available evidence, no consumer protection issues were identified in relation to commercial communications online. In the Public consultation, a consumer organisation and two other stakeholders 26 pointed to a possible lack of transparency as to the advertising nature of certain content on YouTube. This is a matter covered by the Unfair Commercial Practices Directive (UCPD) 27 , which applies to misleading commercial practices. As regards the advertising of tobacco products, the existing prohibition 28 ensures the required consumer protection. In general, self-regulatory advertising codes apply to advertising on all media (including TV, on-demand, print media, radio, and online) 29 . On this basis, Member States' self-regulatory and regulatory bodies are taking ation in this field, whether by issuing guidelines or by decisional practice 30 . As such, there is no need to address this issue in this impact assessment.

2.2.2 Lack of a level playing field and internal market weaknesses

2.2.2.1 Lack of a level playing field

The AVMSD foresees stricter requirements for TV broadcasting than for on-demand audiovisual media services notably in the fields of promotion of European works and protection of minors.

Such a different treatment is no longer justified in view of changing consumer habits. An increasing number of consumers watch video on-demand. In the 28 Member States total on-demand consumer revenues soared from EUR 919 million in 2010 to EUR 2.5 billion in 2014, an increase of 272% and a CAGR in the 5 year period of 28% 31 . In 2014 there were more than 2 563 VoD services in Europe, including catch-up TV services of broadcasters (932 services), branded channels on open platforms 32 (408 services), VoD services providing access to a catalogue of programmes (1 126 services), and news portals (97 services):

Source: IHS

The lighter rules applying to on-demand services undermine protection of minors and cultural diversity and distort competition.

A. Unequal level of contribution to promotion of European works and lack of effectiveness of the rules applying to on-demand services

The AVMSD foresees measures to encourage support to European audiovisual production and distribution. TV broadcasters must reserve a majority of their transmission time for European and/or independent works.

TV broadcasters must, where practicable, reserve a majority proportion of their transmission time to European works and at least 10 % of their transmission time or of their programming budget for European works created by independent producers.

The provisions applying to on-demand services are lighter and more flexible. This results in diverse implementation by Member States (see ANNEX 13) and in video on-demand service providers not contributing significantly to the objective of promoting European works.

The investment of the main TV groups in original programmes in 15 countries amounted to EUR 15.6 billion in 2013 33 , i.e. 24 % of TV broadcasters revenues (EUR 65 billion) 34 . In comparison, on-demand providers made a minimal or even no contribution to the production and the promotion of EU works. They invested EUR 10 million in original content i.e. less than 1% of their total revenues (EUR 1.5 billion) 35 .

As a result, some Member States intend to make on-demand service providers that are not under their jurisdiction contribute financially to European works if they target consumers in their territories. For example, Germany and France intend to apply levies to on-demand services coming from other Member States and targeting German or French audiences 36 . This uncoordinated approach calls into question the operation of the Directive.

Cultural diversity is also undermined by the limited contribution of on-demand services to the promotion of European works objectives.

B. Differing level of protection of minors

The AVMSD foresees that TV broadcasts shall not include seriously harmful programmes (pornography and strong violence) but may include potentially harmful programmes (erotic content and mild violence) provided measures are put in place to prevent children from hearing or seeing them. On-demand service providers are required to take appropriate measures so that minors would not normally hear or see seriously harmful content. No restriction applies to potentially harmful programmes provided in on-demand services.

This difference in treatment is no longer justified since younger consumers watch about half less television than the average consumer 37 . Their average TV viewing in 2014 was 2:03 minutes per day. A key factor is the rapidly growing availability of portable screens like smartphones and tablets used to access on-demand services. In the UK 38 , in 2015, more than four in ten 5-15s (44%) watch on-demand television content, rising to half (51%) of 12-15s. One in five 5-15s (20%) who watch on-demand TV content, watch it daily, with around three in four (73%) watching at least weekly. Much of this is via portable devices.

The above-mentioned different regulatory treatment has led to a competitive disadvantage for TV broadcasting and to a lower level of consumer protection in on-demand services.

A. Complex rules on COO and derogations

The COO principle is the cornerstone of the Directive. It has facilitated the growth and proliferation of audiovisual media providers offering services across borders. At the end of 2013, 5 141 TV channels (no local and windows) were established in the EU. Almost 1 989 of them targeted foreign markets (either EU or extra EU). This share has increased from 28 % in 2009 - year of implementation - to 38 % in 2013 39 . As far as VoD services are concerned, in 2015, on average in Member States, 31 % of the VoD services available are established in another EU country (see Section 2.3) 40 .

A majority of Member States, regulators and industry participating in the 2015 consultation stressed that the COO approach has been effective. It also emerges from the comments made by Member States that there is a continued broad support for the COO principle 41 .

However, the rules underpinning its operation are too complex and difficult to apply. Most Member States and regulators responding to the 2015 Public consultation have experienced problems in determining which Member State has jurisdiction. For example, it can be difficult and time consuming to find in which Member States a satellite up-link is used or to determine the country having jurisdiction when operators have broadcast licenses in more than one Member State. In practice, there have been issues of unclear jurisdiction regarding Greece/UK and Spain/UK. Moreover, in a recent case concerning the restriction of the retransmission of a Russian language channel in Lithuania 42 , the issue as to whether Sweden had jurisdiction over this channel was contentious.

The procedures allowing Member States to exceptionally derogating from the COO are imprecise and uncertain (e.g. they do not specify how the providers' right of defence should be exercised). Different procedures apply to TV broadcasting and on-demand services without there being a justification for such a difference.

In the last years, there has been an increasing number of situations where Member States were reluctant to allow the retransmission of certain broadcasts coming from abroad into their territories and resorted to these procedures. These cases concern several Russian language channels broadcast into Lithuania and Latvia and allegedly containing incitement to hatred. In addition, Sweden considered that certain channels broadcasting from the UK infringed its stricter national rules on alcohol advertising 43 . In other instances, concerns were raised regarding protection of minors 44 .

These ineffective and overly complex procedures pose a threat to the integrity of the internal market and create legal uncertainty and a lack of predictability (see ANNEX 9).

B. No EU requirement on regulatory independence

The independence of audiovisual regulatory bodies is considered to be very relevant for the effective enactment and application of the AVMSD, in particular in the areas of audiovisual commercial communications, jurisdiction and protection of minors and for the preservation of free and pluralistic media. Many respondents to the 2015 public consultation, in particular regulatory authorities, commercial broadcasters as well as NGOs and citizens, mentioned the current problems in relation to the lack of independence of regulatory authorities 45 with a majority of respondents supporting the strengthening of the current rules 46 .

However, the AVMSD does not set any requirement for Member States to have an independent regulatory body. The absence of a formal obligation has contributed to diverse regulatory structures and varying degrees of independence (See Section 5.2.4). Yet, regulatory independence both from political bodies and commercial interests is essential to ensure effective market supervision, proper application of the rules of the Directive and to guarantee media freedom and pluralism.

A captive regulator may treat differently the various players competing on the same market clearly distorting competition. This is why many EU regulatory frameworks in other domains (i.e. telecom, gas, electricity, postal services and personal data protection) mandate regulatory independence (see ANNEX 12). As examples in the audiovisual field, in the context of the Klubrádió case, the company sued the national regulator in Hungary for an economic loss resulting from an alleged unfair treatment which led to a delay in the granting of a license 47 . Liberty Global also lodged a complaint against the Hungarian Media regulator that led to the preliminary ruling by ECJ concluding that the Hungarian Regulator had illegally requested Liberty Global to obtain a license in order to operate in Hungary 48 . The association of commercial broadcasters (ACT) commented on the recent developments in Greece, pointing to the negative impact on the market of a transfer of powers from the Regulator to the Government 49 .

There is also evidence that the independence of audiovisual regulatory authorities has an impact on the providers' willingness to establish in an EU Member State and serve audiences in several Member States 50 .

Moreover, in the audiovisual sector, regulatory authorities lacking independence are not in a position to guarantee media freedom and pluralism. In many countries where independence of national regulatory bodies is weak, challenges to media freedom and pluralism over the last years have been reported 51 . This was the case for Romania in the period from 2007 to 2012, where the Commission identified problems with ensuring media freedoms and with the independence of the audiovisual regulatory body 52 . The same happened in Hungary in 2010, where a number of provisions of a draft law raised concerns related to media pluralism. The Commission 53 , the European Parliament 54 , the OSCE Representative on Freedom of the Media 55 , the Council of Europe 56 and other international bodies and NGOs active in the area of human rights and civil liberties, and Member States have all raised concerns related to both media freedom and the independence of the regulator. The OSCE Representative also recently called for respect of regulator's independence in Latvia following the dismissal of the Regulator chairman 57 .

2.2.3. Rules on commercial communications no longer fit for purpose

The REFIT evaluation confirmed that some of the rules on commercial communications are too rigid in the light of the evolution of the market.

The AVMSD contains rules that apply to all audiovisual media services (e.g. on product placement, sponsorship and alcohol advertising). However, it lays down more rules that apply only to TV broadcasting. They set a maximum of 12 minutes of advertising per hour on television (i.e. 20% per hour), define how often TV films, cinematographic works and news programmes can be interrupted by advertisement, and set the minimum duration of teleshopping windows.

Nowadays, the TV broadcasting specific rules are too rigid in a world where viewers are likely to switch to alternative offers, in particular without advertising. For example, in the USA where there are no minutage limitations, viewers overwhelmed with TV advertising, turned to other video offers (e.g. video on-demand) thereby disciplining the behaviour of TV broadcasters, who were forced to decrease the amount of advertising on their channels 58 . In the EU, most broadcasters consider that the lack of flexibility of the 12 minute and insertion rules and the restrictive character of its exceptions prevent them from maximising their revenues around peak periods. The monitoring of advertising in Member States has indeed shown that this rule is regularly breached in a number of Member States.

The rigidity of the rules on product placement and sponsorship has prevented these advertising formats from delivering their full potential in terms of revenues. Some regulators and Member States confirmed that the rules create legal uncertainty for stakeholders, discouraging them to invest in product placement. As a benchmark, in the US, where there is no material regulation of product placement, this format represents almost 5% of the TV ad spend market. In the UK, it represents a share of only 0.1% 59 .

As regards commercial communications for HFSS foods 66 , an evaluation of the Platform for Action on Diet, Physical Activity and Health concluded that stakeholders’ initiatives in the field of marketing and advertising have made good progress. However, their reach could be further strengthened 67 . Marketing of foods and beverages is often a topic of intense discussion during the Platform meetings, and also those of the High Level Group on Nutrition and Physical Activity 68 , with many stakeholders advocating for stricter frameworks (for instance, the High Level Group requested on 28 October 2015 that the WHO Nutrient Profile be used as a basis for dialogue with industry on the issue of food marketing to children). 

2.3 What is the EU dimension of the problem?

2.4 How would the problem evolve, all things being equal?

The market for on-demand and online services will continue to increase and so the potential competitive disadvantage of TV broadcasting and the lower level of consumer protection.

From a static point of view, the TV broadcasting market is still the strongest audiovisual market. In 2013, the linear television revenues in the EU 28 were EUR 83.6 billion 70 . In comparison, the total consumer revenues of VoD and SVoD services amounted to EUR 2.5 billion i.e. 3% of the TV broadcasters' revenues.

However, from a dynamic perspective, the domination of TV broadcast is less obvious. Their growth rate has decreased from an average annual rate of 2.8% from 2009 to 2013, to only 0.3% in 2013 71 . In the meantime, as mentioned in Section 2.2.2.1, the total on demand consumer revenues in the 28 Member States increased by 272 % increase at a compound annual growth rate of 28 %. According to the industry, by 2020, projections suggest that more than 20% of European households will have a specific, paid account with a SVoD provider. As a result of this, the projected turnover of all VoD services in Europe should increase by 15% annually to 2020, reaching EUR 6 billion 72 .

Mobile consumption is deemed to increase in the near future. It is expected that, by the end of 2020, the number of smartphones in Europe will have doubled, reaching 800 million, meaning that more than 70% of mobile subscriptions will be for smartphones 73 . As said above, by 2019 80% of all mobile data traffic worldwide will be from video (compared to 64 % today).

-Consumers, in particular minors, would be increasingly exposed to harmful content and hate speech on video-sharing platforms.

-TV broadcasting would continue to be at an unfair competitive disadvantage to video on-demand services. The differences in regulation would hurt competition and promotion of European works.

3.Why should the EU act?

In the Council Conclusion of 25 November 2014 on European Audiovisual Policy in the Digital Era, the Council invited the Commission to "urgently complete the exercise of the review of the Audiovisual Media Service (AVMS) Directive in the light of the rapid technological and market changes resulting from the digital shift, and on the basis of the outcome of this review submit an appropriate proposal for the revision of this Directive as soon as possible, in respect of the principle of subsidiarity" 74 . 

4.What should be achieved?

The goal of the revision is to address the problems identified in Section 2.2:

5.What are the various options to achieve the objectives and what are their impacts?

The present Impact Assessment includes the description of the options and their impacts in the same Section. For a detailed description of all the options presented below, see ANNEX 20.

The options are grouped according to the problem they intend to address:

In the first group (Section 5.1), the options intend to address the insufficient protection of minors and consumers in video-sharing platforms (Section 2.2.1):

In order to partly address the deficit in consumer protection, both Options, A and B, seek to ensure that the AVMSD rules apply to certain new types of audiovisual content, such as short video-clips and stand-alone video sections embedded in other services.

Option A, in addition, requires Member States to encourage video-sharing platforms without editorial responsibility to adopt self-regulatory measures regarding content harmful to minors and inciting to hatred (See Section 5.1.2).

Options B goes beyond this by imposing on Member States an obligation to ensure that video-sharing platforms put in place appropriate measures with a view to protecting minors from harmful content and all viewers from hate speech. Member States would be encouraged to implement this provision via co-regulation (See Section 5.1.3).

In the second group (Section 5.2), the options intend to address the lack of a level playing field and internal market weaknesses (See Section 2.2.2):

When it comes to the uneven level of contribution to the promotion of European works between TV broadcasting and on-demand services, both Options, A and B, seek to achieve a level playing field. Option A does so by giving more flexibility to both TV broadcasting and on-demand services. Option B seeks a better balance between achieving a level playing field and ensuring cultural diversity. It does so by maintaining the status quo for TV broadcasting but reinforcing the rules for on-demand services (See Section 5.2.1.3).

As regards the differing level of protection of minors, Option A strengthens the requirements related to the protection of minors on on-demand services. It also seeks to improve the level of information made available to consumers as regards the harmful nature of content and to simplify the notion of harmful content (See Section 5.2.2.2).

In order to address the complexities of the rules on COO and derogations, Option A seeks to facilitate the identification of the country having jurisdiction over AVMS providers. This is done, on the one hand, by simplifying the rules that determine jurisdiction and, on the other hand, by ensuring transparency among Member States as to which of them has jurisdiction over each provider. Option A also improves the cooperation mechanisms foreseen in cases of exceptions to the COO. The objective is to render the procedures more effective and therefore preserve the COO principle (See Section 5.2.3.2).

As regards the absence of EU requirement on regulatory independence, Option A seeks to increase the level playing field among providers across the EU by ensuring that all EU regulators are independent. It does so by introducing a legal requirement of independence and a minimum set of features that regulators need to meet (See Section 5.2.4.2).

In the third section (Section 5.3), the option intends to address the problem of the rules on commercial communications no longer fit for purpose (See Section 2.2.3):

Option A (See Section 5.3.2) seeks to address the lack of level playing field caused by the regulatory burden on providers when it comes to audiovisual commercial communication (AVCCs) rules while encouraging the development and improvement of codes of conduct to protect minors from alcohol advertising and from inappropriate AVCCs for HFSS foods.

5.1 Options addressing the problem of insufficient minors and consumers protection in video-sharing platforms

5.1.1 Status quo option

The AVMSD does not apply to UGC in video-sharing platforms (e.g. YouTube). Video-sharing platforms are covered by the ECD, which warrants them limited liability for illegal content under certain conditions.

The AVMSD applies to television broadcasts and on-demand audiovisual media services for which providers have editorial responsibility. To be covered by the Directive:

(i) services must have as their principal purpose the provision of programmes to inform, entertain or educate the general public and

(ii) programmes should be comparable, in form and content, to television ("TV-like").

Most recently, the ECJ has clarified the "TV likeness" and "principal purpose" requirements in the "New Media Online GmbH" case 76 .

Economic outcome

Existing costs: Maintaining the status quo would not entail additional compliance costs 77  or administrative 78 costs.

Outcome on the Internal market: As a result of the ECJ judgment in the "New Media Online GmbH" case, short videos can qualify as "TV like". In addition, according to the Court, the AVMSD applies when the audiovisual media content is in content and form independent of the main service offered by a provider (whether it is messaging, UGC, press articles, etc.). This is the case even when the main service is of a different nature, e.g. text, and is not merely an indissociable complement to that activity, in particular as a result of the links between the audiovisual offer and the offer in text form. As a consequence, more on-demand audiovisual media services (e.g. videos of short duration or self-standing video sections in a newspaper website) will be covered by the Directive. This will enhance legal certainty, the level playing field and consumer protection in the Internal Market. For these reasons, any revision of the AVMSD should include the codification of this judgment 79 .

Outcome on competitiveness: Players being covered by the Directive are at a competitive disadvantage compared to video-sharing platforms because the latter are subject to a lighter regulatory regime (the ECD). This was confirmed in the 2015 public consultation where most respondents from the Member States, regulators, and consumer organisations, as well as around half of public service and commercial broadcasters, flagged that the current framework can lead to the lack of a level playing field.

Social outcome

Consumers and minors are not sufficiently protected in video-sharing platforms.

5.1.2 Option A: Self-regulation for protection of minors and consumers on video-sharing platforms

1) The AVMSD scope would be adapted to cover all audiovisual content under the editorial responsibility of a provider including short video clips placed by providers. This would be achieved by removing the "TV like" requirement. In addition, it would be clarified that the AVMSD would also cover other type of content such as stand-alone video sections in newspapers' websites. This would be achieved by codifying the interpretation of the “principal purpose” criterion in the light of the ECJ recent case-law in the case of "New Media Online GmbH".

2) Member States and the Commission would encourage video-sharing platforms to adopt self-regulatory measures to restrict access to content harmful to minors or inciting to hatred.

Video-sharing platforms would be defined as those that exercise a degree of control, short of editorial responsibility, over the presentation of audiovisual content (including UGC), and whose principal business purpose is the provision of audiovisual services 80 . This degree of control would include automatic means (such as tagging and sequencing a large amount of audiovisual content), including algorithms. This would exclude services such as mere hosting, caching, cloud computing, mere conduit, search engines and business services, which are subject to the ECD.

The notions of content harmful to minors and incitement to hatred would be the same as the ones applying to audiovisual media services under the AVMSD.

The Commission would play a facilitating role in encouraging the development of European codes of conduct by providing examples of measures that could be adopted by video-sharing platforms (these could include some of the examples of on-going initiatives mentioned in ANNEX 8 and 18).

The general provisions on self- and co-regulation (Article 4(7)) would be reinforced by indicating new benchmarks for the effectiveness of existing and new codes.

Economic impacts:

Substantive compliance costs: When it comes to encouraging video-sharing platforms to adopt self-regulatory measures, the impact of this Option should not be significant for the large platforms which have already in place community standards/guidelines (see ANNEX 8) along with some voluntary monitoring and reporting systems 81 not only for illegal but also for harmful content (e.g. self-harm). All large video-sharing platforms apply techniques which employ both software and human element to handle "content moderation". This means that normally users flag content deemed inappropriate. User complaints are then processed by an algorithm prior to sending it to a moderation team for verification.

However, if they decide to respond to the Directive call they would have to adapt their terms and conditions to the AVMSD notions of content harmful to minors and incitement to hatred and put in place more effective tools for restricting access to harmful content (particularly violent videos) and curb hate speech.

Administrative costs: Given the purely self-regulatory nature of this option the costs for the public authorities would be limited. To counter incitement to hatred, some Member States are already encouraging self-regulation 82 .

Impacts on the Internal market: The impact on the Internal market would depend on the effectiveness of the self-regulatory measures and the number of players that would decide to adhere to the codes, including eventually EU codes. The risk is that this option may result in a patchy approach with varying levels of protection across the internal market.

Impacts on competitiveness: The codification of the ECJ recent case-law will ensure that stand-alone video sections of a wider service are covered by the AVMSD. The related impact would be limited as it derives from the application of the recent case law of the ECJ. Similarly, while the removal of the "TV-like" criterion implies a formal change in the AVMSD, the wide interpretation provided by the ECJ already has a similar effect in practice. However, this Option would not provide an effective solution to the concerns regarding the level playing field as purely self-regulatory measures, without a regulatory backstop, have proven insufficient in the past (see Section 2.2.1). In addition, despite the ECD requirement to Member States and the Commission to encourage codes of conduct, despite an initial follow-up – which related primarily to codes of conduct related to trust mark schemes and labels – activities related to the promotion of codes of conduct have since then slowed down.

Impact on SMEs: Self-regulation for video-sharing platforms may entail compliance costs for SMEs but only if they decide to adhere to the codes. The Commission has estimated these costs as ranging between 100 000 (incurred for a pilot tool developed to inform parents and children on the content of user generated video) and EUR 320 000 (incurred by a major Danish ISP to conduct parental control, website, education and information). However, much more developed systems of content moderation may imply significantly higher costs. For example, one third of a large platform total employees deal with content moderation 83 .

Social impacts:

When it comes to encouraging self-regulation for video-sharing platforms, the level of consumer protection would improve on large platforms if they decide to adapt and tighten their self-regulatory tools. In smaller platforms, the level of protection may improve considerably but only if they decide to participate. If the Commission manages to carry out its coordination role effectively, this may improve the present situation whereby there are no codes of conduct at EU level. Impact on fundamental rights: As it would rely on voluntary measures, Option A would not guarantee a contribution to the protection of fundamental rights enshrined in the EU Charter, including children's right to protection and care as is necessary for their well-being (Art. 24).

5.1.3 Option B: An obligation of means imposed on video-sharing platforms for protection of minors and hate speech, implemented through co-regulation

1)The "TV like" requirement would be removed and the ECJ recent case-law in the case of "New Media Online GmbH" would be codified as under Option A.

2) Member States would have to ensure that video-sharing platforms put in place appropriate measures to:

-    Protect minors from harmful content; access to which would have to be restricted;

-    Protect all citizens from content containing incitement to hatred.

Video-sharing platforms would be defined as those that exercise a degree of control, short of editorial responsibility, over the presentation of audiovisual content (including UGC), and whose principal business purpose is the provision of audiovisual services 84 . This degree of control would include automatic means (such as tagging and sequencing a large amount of audiovisual content), including algorithms. This would exclude services such as mere hosting, caching, cloud computing, mere conduit, search engines and business services, which are subject to the ECD.

The notions of content harmful to minors and incitement to hatred would be the same as the ones applying to audiovisual media services under the AVMSD. The terms and conditions of the platforms would have to be brought in line if necessary with these notions and other relevant rules of the Directive.

Member States should not impose on providers any general obligation to monitor content ex ante.

Member States would require video-sharing platforms to develop co-regulation providing mechanisms (e.g. age-verification systems, content description, age rating systems) to achieve these objectives. These mechanisms would have to be chosen by the industry which would be subject to an obligation of means (i.e. to use all reasonable means to achieve the desired results). The AVMSD would not mandate adoption of specific technologies or tools. The terms and conditions of the platforms should contain an appropriate reference to these mechanisms.

This would be a maximum harmonization provision under which Member States shall not be able to impose more detailed or stricter rules on video-sharing platforms.

The Commission and ERGA would facilitate exchanges of best practices on co-regulatory systems across the EU. If considered appropriate, the Commission would facilitate the development of EU codes on which ERGA might be requested to give an opinion.

A complaint mechanism for consumers and minors should also be foreseen at national level in case of non-compliance. Any sanction should be proportionate and take into account as mitigating factor the fact that video sharing platforms lack proper editorial responsibility.

For the specific purpose of this provision, a video-sharing platform would be under the jurisdiction of the Member State in which it, its parent company, one of its subsidiaries or an entity within the same group is established within the meaning of Articles 49 to 55 of the Treaty on the Functioning of the European Union.

Economic impacts

Substantive compliance costs: Large video-sharing platforms, pursuant to their corporate policies, already take steps (see ANNEX 8) to protect minors and all users 85 not only from illegal but also from harmful content (e.g. pornography and self-harm). Filtering and fingerprinting 86 mechanisms are widely used by major video-sharing platforms and they could be used also to comply with the new requirements under Option B without having to incur substantial additional costs. For example, there are several age verification systems on the market, which are widely used online by VoD service providers.

Assessing whether content is harmful is generally more complex than assessing whether it is illegal because the notion of harmful content is broader than that of illegal content. It can however be expected that by putting in place mechanisms to protect minors, platforms would gain in brand power.

No precise indications of the costs to implement this provision can be provided. They would depend on the size of the company and on the specific mechanisms that the company will decide to put in place. These mechanisms are also likely to evolve over time due to technology advancements. The costs incurred at present by the industry to enact measures to protect citizens either according to corporate policies or to other arrangements can be used as a benchmark for possible substantive compliance costs. As indicated above, the costs for putting in place rating mechanisms may range between EUR 100 000 and EUR 320 000. More developed systems of content moderation may entail higher costs.

Administrative costs: If the monitoring of video-sharing platforms is done via a complaint based mechanism, the related administrative costs for all EU regulators have been estimated at EUR 600 000 87 .

If the Member States decide to put in place co-regulatory mechanisms, figures regarding existing self-regulatory mechanism can be taken as a reference to estimate the associated costs for the industry. For example, the self-regulatory systems in place in the majority of Member States on commercial communications are either funded by membership fees or a levy system from the industry and their cost ranges from EUR 250 000 to EUR 1 million 88 .

Impacts on the Internal market: Option B would prevent fragmentation by introducing a maximum harmonization preventing Member States to impose more detailed or stricter rules on video-sharing platforms.

Impacts on competitiveness: The impacts of the codification of the ECJ recent case-law would be limited as explained in Option A. Option B would improve the conditions of competition between TV broadcasting, video on-demand providers and video-sharing platforms. This option lays down flexible and future-proof rules allowing companies scope for innovation and ensuring the continued relevance of the rules over time. Impacts on SMEs: SMEs platforms that do not have already mechanisms in place to moderate harmful content either proactively or upon notification would incur important compliance costs. The others will have to adapt their standard terms and conditions and become more effective. In particular, SMEs may need to make new investments in filtering and fingerprinting technologies which, on the other hand, major companies have already available. Yet, by putting in place mechanisms to protect minors, SMEs could gain in branding power.

Social impacts:

Option B would help overcome some of the limitations of existing industry-led and self-regulatory initiatives (See Section 2.2.1) and meet the AVMSD objective of protecting consumers, including minors. Option B is likely to address the concerns on the level of protection voiced in the 2015 Public consultation by most of those who called for an extension of the rules, i.e. a majority of Member States and regulators who replied to this question, most consumer organisations and approximately half of all broadcasters who replied. These stakeholders want to apply to additional services (including platforms) at least the rules on protection of minors and hate speech which are seen as a basic level of protection online. On the other hand, a small number of Member States, some regulators as well as the Internet, ICT, the press publishing sector, telecom, cable, satellite and advertising industries believe that the AVMSD rules on material scope ensure sufficient consumer protection also in light of the broader EU regulatory framework. Option B will level up the standard of protection from harmful content in video-sharing platforms with the one applicable to on-demand services 89 (See Section 5.2.2). Moreover, it is likely that any improvement of the level of protection for audiovisual content pursuant to Option B will have a positive spillover effect on other types of content (such as text/comments functionalities accompanying video content). Impacts on fundamental rights: Option B would have a direct positive impact on the protection of fundamental rights enshirned in the EU Charter, such as: human dignity (Article 1); right to the physical and mental integrity of persons (Article 3); non-discrimination (Article 21); children's right to protection and care as is necessary for their well-being (Article 24); general consumer protection (Article 38). Given that Option B provides for a regulatory backstop, it would ultimately be up to the Member States (and not to private operators) to assess the legitimacy of possible decisions to restrict access to content in specific cases.

Given that the Member States are bound by the EU Charter of Fundamental rights 90 when implementing EU law, there would be a guarantee that: any limitation to the exercise of freedom of expression and information as enshrined in Article 11 of the Charter is provided by law; respects the essence of this freedom; is proportionate; and only takes place when it is necessary and genuinely meet the objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others. As a consequence, the fundamental right to conduct a business (Article 16 of the Charter) would be respected.

5.1.4 Comparison of options

5.2 Options addressing the problem of the lack of a level playing field and internal market weaknesses

5.2.1 Promotion of European works

Outcome Internal market:

TV broadcasters devote widely the majority of qualifying time to European content. In 2012, European works enjoyed an average of 64.1% of the total qualifying transmission hours 97 .

For on-demand services, as the Directive simply gives examples of how on demand services may promote European works, only 19 Member States have imposed obligations and they have done so in varied ways, i.e. through financial contribution, share and/or prominence in their catalogues, contributing to a high level of fragmentation (see ANNEX 13).

On-demand services also have a greater flexibility and incentives to benefit from the internal market by establishing themselves in a particular country and distribute across Europe 99 . The existence of lower constraints on their editorial policy may have an impact in their choice of establishment, which may reinforce their competitive advantage compared to TV broadcasting services 100 .

The results of the 2015 Public consultation confirm a perceived lack of fair treatment between TV broadcasting and on-demand services: 61% of the contributors who expressed an opinion believe that the current rules are not fair. 4 Member States 101 and 4 national regulators 102 pointed out that the asymmetry in TV broadcasters and on-demand services regulation is unjustified.

In their contributions to the 2015 Public consultation 3 Member States 103 and 5 national regulators 104 supported maintaining the status quo. On the industry side, most on-demand service providers and members of the digital/Internet industry (9 out of 17 contributions) would also prefer to maintain the status quo.

On the contrary, some commercial broadcasters (7 out of 30) called for repealing all current rules on promotion of European works, which would be then only subject to national rules. As for public service broadcasters, the majority (10 out of 16) would favour other options and mainly to reinforce rules on on-demand services.

Substantive compliance costs: Option A would generate no additional costs for TV broadcasters who would be able to decide to move from a share of their broadcasting time to direct investment only if they are able to recoup the costs.

For on-demand services, due to the existing significant differences in national legislation and the variety of implementation measures in force, the monitoring costs for regulators would vary. In the 10 Members States where there are no requirements for on-demand service providers (see ANNEX 13), administrative costs would increase.

Under Option A consumers are not likely to be more exposed to European works than they are today. If TV broadcasters were to choose to invest a proportion of their programming budget in European content, there would be no assurance that it would be shown in peak hours. This would be particularly the case if this proportion is low. For on-demand services, as explained above a choice between a share and prominence of European works in their catalogues is not expected to lead to greater diversity. Impacts on cultural diversity: Given the amount of flexibility given to providers, the impact on access to information and culture (Article 22 of the Charter) would be negligible.

Administrative costs: Regulators may incur additional costs depending on how Member States have implemented the current AVMSD provisions so far. In France, where on-demand services must comply with requirements in terms of share and prominence of EU works, the cost of monitoring these two obligations has been estimated at EUR 2 000 (see ANNEX 16).

Impacts on competitiveness: For on-demand services established in the 15 Members States where there is already either an obligatory share of European works or prominence requirements in place, option B would lead to more level playing field. The flexibility for Members States to impose financial contributions on on-demand service providers located outside their territory would result in a more level playing field between on-demand services competing on the same market. According to many of the contributions to the 2015 Public consultation the strict application of the COO principle and the fragmentation on the transposition of Article 13 may have led to "forum shopping" practices (i.e. on-demand services establishing themselves in Member States with light regulation on promotion of European works). This has in turn created competition distortions and has undermined the effectiveness of the current rules 123 . This is the position of 5 Member States 124 and 1 national regulator 125 ; a few public broadcasters (4); some members of the Cinema, Film and TV industry (5); and the majority of telecom operators and right holders who expressed and opinion (5 out of 9 and 5 out of 7, respectively). Impacts on SMEs: Option B would have a limited impact on small on demand players, including SMEs. As detailed in ANNEX 3, the audiovisual sector is highly concentrated and small on demand service providers would benefit from exemptions.

5.2.1.4 Discarded option: introduction of sub-quotas for non-national European works

82% of the respondents (that is, 104 out of 126 of the contributions across different categories of stakeholders) to the public consultation who expressed an opinion on this issue are interested in watching more content produced in another Member State.

However, there was very limited support to increase diversity by introducing sub-quotas for non-national European works. Indeed out of the 25.8% of respondents from various categories of stakeholders which chose the option to reinforce the rules on the promotion of EU works, only a very marginal part – one Member State, one regulator and two content distributors – supported the introduction of these sub-quotas.

In addition, there is no evidence that the industry would be able to recoup the cost of adapting their offer to the new sub-quotas in the absence of audience 128 . Some Member States have flagged their opposition to this approach 129 . This could even reinforce the existing deficit of competitiveness of TV broadcasters vis-à-vis on demand services.

This option has therefore not been impact assessed.

5.2.1.5 Comparison of options

5.2.2 Protection of minors in on-demand services

Existing costs: Maintaining the status quo would result in no additional administrative or compliance costs for regulatory authorities or media service providers. Existing administrative costs incurred by the regulators in most Member States relate to monitoring and enforcing compliance with these requirements. For TV broadcasting, this is done on the basis of complaints or on a systematic recording of all television programmes 130 . For on-demand services, the majority of regulators do not regularly monitor compliance with the rules. Most of them act on the basis of complaints. Some regulators monitor these rules through spot checks. The cost for reviewing and enforcing the provisions on the protection of minors amounts to approximately up to EUR 800 000 per year per regulator 131 .

Compliance costs for providers (this includes telecom, cable, satellite, broadcasters and on-demand services) can be divided into two categories: i) direct costs, such as the costs of classifying audiovisual content as harmful to minors (i.e. the costs of applying for a rating as well as the time spent managing the process) or of implementing technical control measures and ii) indirect costs e.g. lost revenues which would otherwise be obtained in the absence of classification.

For TV broadcasting, the majority of Member States impose the use of techniques based on the time at which the content is transmitted, i.e. watershed-based restrictions 132 . As regards on-demand services, the majority of Member States require the use of technical measures to ensure that minors will not see or hear harmful material. The use of a PIN access code is one of the most common measures 133 .

Some indirect costs can emerge when classifying content as potentially harmful to minors, as it can narrow the targeted audience and have an impact on the number of transactions and subscriptions (VoD and SVoD) or on the attractiveness of the programmes for advertisers (catch-up TV). In principle, indirect costs for on-demand services could be expected to be lower, because the access to potentially harmful content is not restricted by the AVMSD. However, a majority of Member States have adopted stricter measures and require some form of protection 134 (e.g. PIN codes, content filtering) for potentially harmful content 135 .

Outcome on competitiveness: Because of the different levels of requirements of the AVMSD, TV broadcasting is under more constraints than on-demand services. This situation creates an undue competitive advantage for on-demand services, in particular with respect to Pay TV operators, with which they share similarities.

The results of the public consultation indicate that, with the exception of some telecom operators and on-demand service providers, the majority of the respondents believe that this distinction is no longer relevant, effective or fair. Conversely, a high number of TV commercial broadcasters consider this distinction still relevant. However, some Pay TV operators consider the distinction as no longer relevant.

The changes in viewing patterns, especially of younger generations, highlighted in Section 2.2.2.1 B and the growing convergence between TV broadcasting and on-demand services has led to a situation where minors are less protected online than watching the same content on TV.

The rules on protection of minors applicable to on-demand audiovisual media services would be strengthened by requiring them to restrict access to any kind of "harmful content" (gratuitous violence, pornography erotic and mildly violent content) 136 . The same rule would apply to TV broadacsters.

The most harmful content, such as gratuitous violence and pornography, shall be subject to the strictest measures providing a high degree of control, such as age verification pin codes or even by a "by default" mechanism that would not make this type of content available except when activated by an adult.

In addition Member States would have to ensure that all audiovisual media service providers provide sufficient information to consumers about the possible harmful nature of the content in programmes by means of co-regulatory systems  137 . 

The Commission and ERGA would facilitate exchanges of best practices on co-regulatory systems across the EU. If considered appropriate, the Commission would facilitate the development of EU codes on which ERGA might be requested to give an opinion.

The general provisions on self- and co-regulation (Article 4(7)) would be reinforced by indicating new benchmarks for the effectiveness of the existing and new codes.

Substantive compliance costs: On-demand service providers would need to assess and classify all offered programmes to see whether they fall within the scope of "potentially harmful" programmes. There are on average 5 764 titles available in VoD catalogues 138 . A broadcaster reported a EUR 550 000 cost per year to implement classification and ratings for TV broadcasting and on-demand services, and a on-demand operator a one shot cost of EUR 1.1 million cost for launching from scratch in a new country based on a catalogue of 5 000 titles 139 . There could be also additional compliance costs as regards technical control mechanisms. However, these compliance costs would be mitigated as at national level, Member States already require some form of protection (e.g. PIN codes, content filtering) for seriously harmful content 140 and most of them also for "potentially harmful" content. Programming the most harmful content would be a business decision that TV broadcasters will take if they are able to recoup the underlying investment.

Audiovisual media service providers would have to comply with the new information requirements. The associated costs would be mitigated in those Member States where similar mechanisms, such as age rating, are in place (see ANNEX 14). The studies available provide information on the costs of rating content according to different age groups, but no specific information on the cost of describing the harmful nature of the content. However, age rating costs detailed in the above paragraph can be used as benchmark as, once the content is classified and labelled (as in the majority of the Member States), the additional cost of providing a description of the content is minimal.

Most Member States use rating systems (all except Denmark, Estonia, Italy and Sweden) and in most countries five age groups are defined. Although the age groups may vary, the different classifications are all generally based on similar criteria: presence of discrimination, drugs, imitative behavior, coarse language, nudity, sex, threatening content and violence.

Only in two countries, Finland and the Netherlands, the system is a combination of legally binding age rating and content descriptors indicating different categories of content (violence, sex, anxiety, drug in Finland; violence, fear, sex, discrimination, drug and alcohol abuse, coarse language in Netherlands).

Regulators and media service providers would face administrative costs related to the implementation of the information requirements, via co-regulation, in those Member States where similar mechanisms are not in place. The administrative costs related to the implementation of co-regulation will depend on the approach adopted. In an ambitious scenario, this could imply setting up a system based on the creation of a specific organisation, rules and processes. The PEGI 143 system can give an idea of the administrative costs linked to such an approach at EU level 144 .

Impacts on competitiveness: Harmonising the level of requirements between TV broadcasting, in particular pay TV services 146 , and on demand services will increase the level playing field. In the frame of the data gathering on costs and benefits, pay TV reported high costs for the provision of technical solutions to control the access and provide information on harmful content. Two of them complained about the lower set of restrictions applied to on demand services while both type of services provide similar technical measures to restrict the access to harmful content.

For on-demand services, the extension of the existing requirements to potentially harmful content is likely to have an impact in terms of their revenues in particular in the countries where there are no stricter rules in place. Less content would be accessible to their widest possible audience. On-demand service providers may therefore incur a loss of revenues be it in terms of number of transactions and subscription (VoD and SVoD) or of advertising (catch up TV). Impacts on SMEs: Option A may generate additional costs for SMEs providers.

5.2.2.3 Comparison of options

5.2.3 Country of origin principle

Existing costs: Maintaining the status quo would result in no additional costs. The COO avoids regulatory inefficiencies which would result from subjecting one service to multiple jurisdictions. Media service providers incur low compliance costs as a consequence of being subject to the legislation of the country of establishment only.

However, given the complexity of the current rules, some Regulators have recently been subject to a heavy administrative burden. For example, in a recent Lithuanian case (ANNEX 9), extensive consultations and written exchanges between the Swedish and the Lithuanian regulators took place. Those exchanges could be equaled to a workload of 50-100 hours shared by the two regulators.

The increased use of the complex cooperation procedures 152 has led to costs to regulators and to the Commission. As a benchmark, the Lithuanian case referred to above represented a workload of roughly 400 hours over three months for the case handler, and a total additional workload of approximately 200 hours for supervisors and other Commission services involved 153 . Based on recent experience, it would seem reasonable to reckon the number of cases with up to 5 per year.

Outcome Internal market: In spite of the broad support for the COO principle 154 , Member States acknowledge a need for addressing actual problems in the application of the principle. In particular, they refer to the complexity of the jurisdiction criteria and the ineffectiveness of the cooperation procedures (see ANNEX 9). Maintaining the status quo would mean leaving these application issues unaddressed which would fuel opposition to the COO principle as such. A minority of Member States plead for limited departures to a country of destination principle.

Outcome on competitiveness: The COO principle provides legal certainty by subjecting media service providers in the EU to the legislation of one Member State only. By keeping administrative and compliance costs for providers low and allowing for economies of scale, the COO principle in turn facilitates investment in the media sector 155 . The complexity of jurisdiction rules and derogation procedures can undermine the positive impact of the COO principle on the competitiveness of media service providers.

The COO ensures diversity and has fostered the availability of content by facilitating the cross border provision of audiovisual programmes. This is particularly true in smaller markets where service providers would otherwise not be interested in rolling out their services and incurring the cost of compliance with a specific legislation. In some cases, the number of services provided from other Member States is higher than the number of domestic services 156 .

While the COO might potentially lead to different degrees of consumer protection, consumers have only exceptionally complained about the application of the COO principle 157 . This can be explained by the fact that consumers are protected by the consumer protection rules of the Directive. The Directive moreover foresees cooperation procedures in case services from other Member States infringe common key values (derogation/circumvention procedure - see ANNEX 9). For instance the derogation procedure allows Member States to take measures against incitement to hatred and infringement of the protection of minors rules on TV broadcasting. However, to the extent that the cooperation procedures are ineffective, this could affect the level of protection of consumers, including minors.

5.2.3.2 Option A: Simplifying and improving the jurisdiction rules and the cooperation procedures

Substantive compliance costs: Option A would generate no additional compliance costs.

Impacts on the Internal market: Option A would increase legal certainty and transparency. The alignment of the grounds of derogation would create a more level playing field without restricting free circulation of services across borders. It should be noted that regarding incitement to hatred and protection of minors, the threshold is very high (manifest, serious and grave infringement). Moreover, the Court of Justice has consistently interpreted the notion of "public security" narrowly and strictly 162 . Option A would thus have a positive impact on the functioning of the internal market.

Impacts on competitiveness: Option A would have positive effect on competitiveness, given the increased legal certainty. Impacts on SMEs: Clarification of jurisdiction rules and increased transparency would have a negligible impact on SMEs given that the obligation is imposed on Member States. However, there could be an indirect negative impact on SMEs if Member States decided to increase the level of notification or identification requirements in order to establish jurisdiction.

5.2.3.3 Discarded option: extension of the AVMSD to audiovisual media services established in third countries

In the public consultation, a significant number of Member States and regulators refer to the absence of a level playing field and distortions of competition 163 . This would result from the fact that foreign providers targeting EU audiences are currently not covered by the scope of the AVMSD. It must be borne in mind that Member States are already allowed to apply the provisions of the Directive to foreign providers targeting consumers in their territory. This notwithstanding, the majority of contributors 164 to the public consultation also argued that an extension of the rules on the geographical scope to certain foreign providers is necessary.

Despite these results, no significant negative impacts of the current rules could be identified. Leading foreign providers of on-demand services (Netflix, iTunes, Amazon EU Sarl) have set up subsidiaries in the EU. Indeed, only 50 paying VoD services (including different linguistic versions of the same provider) established in the United States target one or more Member States 165 . Given the lack of transparency of the VoD market, the exact market share of these foreign providers is not known. However, at present there seems to be only one important player, i.e. Google Play, with no establishment in the EU 166 . It follows that there is a lack of evidence as to the existence of a real problem.

5.2.3.4 Comparison of the options

5.2.4 Independence of Regulators

-5 national regulatory authorities 171 are not fully separated from ministerial bodies or government.

Outcome on competitiveness: The independence of regulatory authorities both from political bodies and from commercial interests is essential to ensure an objective supervision of markets 189 . A lack of independence can result in an unfair treatment between players competing on the same market and have a negative economic impact on service providers (see Section 2.2.2.2 B).

5.2.4.2 Option A: The AVMSD would require Member States to have an independent regulatory authority and set a number of requirements to support their independence and effectiveness. ERGA coordination and advisory role would be reinforced and embedded in the AVMSD

The AVMSD would set minimum mandatory requirements for regulatory bodies. Such requirements could include: i) independence from third parties; ii) transparent decision-making processes and accountability to relevant stakeholders; iii) open and transparent procedures for the removal of Board Members; iv) knowledge and expertise of human resources; v) financial 192 , operational and decision making autonomy; vi) effective enforcement powers; vii) the possibility only for judicial power to review the NRAs’ decisions.

These are based on the Council of Europe Recommendation (2000)23  193 , a number of studies and reports (see Section 5.2.4.1) and the requirements set by EU law in other legislative frameworks (see ANNEX 12)

The role of ERGA, currently set by a Commission Decision 194 , would be embedded in the AVMSD and include new tasks deriving from the review of the Directive (see Sections 5.1.3, 5.2.2 and 5.2.3). This would not imply the creation of an Agency. Existing financing mechanisms would be maintained.

Substantive compliance costs would not increase.

5.2.4.3 Comparison of options

5.3 Option addressing the problem of the rules on commercial communications no longer fit for purpose

The AVMSD contains rules on commercial communications that apply to all audiovisual media services. These are the rules on the use of sponsorship and product placement and on certain qualitative aspects of commercial communications 202 .

The AVMSD also lays down more detailed rules that apply only to television broadcasting. They set a maximum of 12 minutes of advertising per hour on television (i.e. 20% per hour), define how often TV films, cinematographic works and news programmes can be interrupted by advertisement, set the minimum duration of teleshopping windows and set some requirements on the content of alcohol advertising spots.

Advertising revenues directly contribute to (commercial) TV broadcasters' capacity to invest in audiovisual content. A decrease of TV advertising revenues linked to the limitations imposed by the current regulation will have a negative impact on creative industries and cultural diversity.

For both TV broadcasters and on-demand services, sponsorship rules would be made more flexible by focusing on the principles of editorial independence, transparency (clear indication that the programme has been sponsored) and no sponsorship for banned products such as tobacco. Similarly, product placement would be explicitly allowed and the rules would be relaxed by deleting the "undue prominence" criterion and focusing on the principles of editorial independence, transparency (clear indication that the programme contains product placement) and no product placement for banned products (such as tobacco or medicines on prescription). The prohibition of product placement in children's programmes would remain.

For TV broadcasters, films could be interrupted more often (once for each period of 20 minutes) except for children's programmes for which the current rule would remain. Isolated spots would be allowed.

As regards quantitative limitations for advertising, TV broadcasters would be allowed more flexibility by transforming the 20 % per hour limitation into a daily limitation.

More types of commercial messages would be excluded from the advertising limit (e.g. cross-promotion including announcements for programmes of other broadcasters or other media within the same media group).

As regards qualitative rules, the status quo would remain 209 . Regarding the provisions on AVCCs for alcohol (Article 9(1)e)) and HFSS foods accompanying or included in programmes with a significant children's audience (Article 9(2)), self- and co-regulation would be encouraged, also at EU level if necessary. Member States would be encouraged to ensure that self- and co-regulatory codes are effectively used to reduce the exposure of children to audiovisual commercial communications of alcoholic beverages and of HFSS foods. The Commission and ERGA would facilitate exchanges of best practices on co-regulatory systems across the EU. If considered appropriate, the Commission would facilitate the development of EU codes on which ERGA might be requested to give an opinion.

The general provisions on self- and co-regulation (Article 4(7)) would be reinforced with new benchmarks for the effectiveness of the existing and new codes.

Substantive compliance costs: The incremental costs for TV broadcasting and on-demand service providers of the new provisions would be zero 210 .

11 of the Member States that replied to this question support more flexibility but to various degrees. Some refer in particular to sponsorship and product placement rules 215 . Other call also for a deletion of the 20% limitation 216 .

Impacts on competitiveness: Most broadcasters agree that product placement and sponsorship rules should be clarified and simplified. A simplified set of rules on product placement could result in an increase of approximately 10% to 15% of product placement revenues  217 , or in a 4% increase of total advertising revenues in the EU (i.e. potentially additional revenue of EUR 1.2 million) 218 . Allowing more flexibility in sponsorship rules would allow broadcasters to generate from 15% to 50% of additional sponsorship revenues 219 . This could result in more than EUR 441 million increase of total TV advertising spend in the EU (i.e. around 1.5% of current total TV advertising market value) 220 . It must in any case be noted that it is difficult to foresee whether advertisers would increase their advertising budgets or spend their existing budget differently.

Most broadcasters consider that the insertion rules are no longer relevant or effective. Some argue that because of these rules, schedules are not built around viewers' comfort or advertisers' demand, which is counter-productive. According to the industry, by making the interruption rules more flexible, revenues could increase between 1 and 10 % 221 . The only other estimate available is based on the scenario of abolishing interruption rules. In this case, the overall potential revenue gains could amount to 1.35% of advertising revenues coming from cinematographic works and news programmes. This is however a conservative estimate since the parameters for calculation do not take into account different target groups, time slots etc. 222

If isolated spots were allowed, this would allow for a better optimisation of broadcasters' advertising inventory.

As regards the 20% limitation, the impact of introducing more flexibility would differ depending on the characteristics of each advertising market 223 and on the extent to which Member States would apply the new rules or maintain the status quo in this area. In the most flexible option of transforming the 20% per hour limitation into a daily limitation, broadcasters would be allowed to broadcast as much advertising as they want during peak times i.e. when they can best maximise their revenues (live shows, major events etc.). They could thus optimise their advertising schedules and viewers flow.

A shift to a daily limit could generate between a 2% and 15% increase of revenues 224 . For example, over the last six months of 2015 225 , the gross price of a 30-second advertising spot during prime time on TF1 was EUR 67 330. It is estimated that during important events or programmes, European broadcasters could increase their advertising pressure by a few minutes, from 12 minutes to 14-15 minutes 226 , taking into account European viewers' lesser propensity to stand long advertising breaks. This would mean an increase of around 2,5 minutes of advertising, i.e. 5 more advertising spots of 30 seconds, which, all things being equal, could translate for a channel such as TF1 in an increased revenue of 336 650 EUR i.e. theoretically EUR 122 million annually i.e. 10 % of the turnover of the channel in 2014 227 . However, the potential benefits of more flexibility need to be balanced with the fact that the scarcity of advertising spots, in particular at peak time, has a positive impact on their value. The exact effects on market players will largely depend on the elasticity of demand in each market. By introducing flexibility, broadcasters would be able to take business decisions adapted to the reality of each market in order to balance advertising demand, advertising spot prices and viewers' comfort. However, since an increase of the overall advertising volume might trigger a decrease of the advertising price 228 , it is expected that broadcasters will not unduly increase the advertising pressure.

The impact of excluding cross-promotion from the 20% limitation would depend on each media service provider’s business model. In general, the exclusion would mainly benefit broadcasters who are part of larger integrated media groups.

Most commercial broadcasters advocate more flexible advertising rules. However, a few broadcasters (mainly from the UK) deem that rules should remain in their current form in order to keep the advertising market stable. They are supported by some Member States 229 .

Overall, viewers would be potentially exposed to more advertising during peak time. Due to a relaxation of the interruption rules, there could be more frequent and longer advertising breaks. This may thus affect the integrity of cinematographic works. Several right holders' associations have underlined this in their contributions to the public consultation 233 .

However, market developments have led to an increased amount of offerings to which viewers can easily switch, in particular to advertising-free subscription video-on-demand services. This tendency has been clearly observed in the US market 234 where, despite the fact that there are no limitations as to the amount of advertising, broadcasters recently use self-restraint in fear of losing audiences.

The deletion of a criterion such as "undue prominence" for product placement would expose viewers to more commercial messages in programmes 235 .

This being said, if broadcasters manage to retain the value of advertising spots by marginally increasing their number around value-generating programmes at peak-time, an increase in advertising revenues would increase the capacity of TV broadcasters to invest in audiovisual content. This would have a positive impact on the availability of content for consumers and would be beneficial to EU producers, especially when coupled with requirements on investment in European works, including the 8 000 EU independent producers with positive consequences for employment. Impacts on fundamental rights: Due to an increased capacity to invest in audiovisual content, more flexibility in advertising rules would contribute to reinforcing freedom of expression and information (Article 10 of the Charter). The possibility to broadcast TV advertising with fewer constraints would contribute as well as to the freedom to conduct a business (Article 16).

5.3.3 Comparison of options

5.4 Discarded option: Prominence of content of general interest

The prominence of content of general interest has been identified as an issue in the frame of the public consultation. However, the option of including any related provision in the AVMSD has been discarded at an early stage as no clear consensus on how this issue should be tackled has emerged 236 .

Most recent market and technological developments (new distribution channels, the proliferation of audiovisual content, etc.) have generated calls to reflect on whether rules would be required to facilitate prominence of content of general interest, i.e. ensuring its findability/discoverability.

The provision of general interest content constitutes the core element of the mission of public service broadcasters in Member States 237 . It also has a potential impact on commercial broadcasters operating (partly or fully) under defined general interest objectives such as media pluralism, freedom of speech and cultural diversity.

Beyond the specific aspect of promotion of access to European works 238 , the AVMSD contains no general provision ensuring prominence of content considered by Member States as being of general interest. As far as linear broadcasting services provided via electronic communication networks or services are concerned, some Member States provide e.g. for requirements regarding the order of channel listings.

Article 6(4) of the Access Directive 2002/19/EC merely refers to but does not regulate ("without prejudice") the ability of Member States to impose obligations in relation to the presentational aspect of electronic programme guides (EPGs) 239 and similar listing and navigation facilities. The Access Directive does not mention any particular requirement or limitation in this sense, and in any event applies only to the extent that electronic programme guides display linear broadcasting channels provided via electronic communication networks or services and information about such channels.

Even if not stated by any legal instruments, Member States have the possibility under national legislation to introduce prominence obligations on online service providers. Such interventions are subject to the Treaty, including competition rules, the freedom of establishment and the freedom to provide services.

Currently, some platforms reach commercial agreements with content providers including public service broadcasters concerning the prominence of their content.

The added value of action at EU level would be to set up and harmonise the limits to what the Member States can do in regard of prominence of general interest content 240 .

Such limitation could be conceived along the lines of current limitations for must-carry-obligations under Article 31 of the Universal Service Directive (USD) 241 where MS may only impose "proportionate obligations on undertakings under their jurisdiction, in the interest of legitimate public policy considerations, but such obligations should only be imposed where they are necessary to meet general interest objectives clearly defined by Member States in conformity with Union [Community] law and should be proportionate, transparent and subject to periodical review…" 242  

However, in order to be effective, the inclusion of such provision in the AVMSD would require a major adjustment in terms of its scope 243 . The AVMSD would need to apply beyond television broadcasts and specific on-demand audiovisual media services to encompass players aggregating programmes of different media service providers on interfaces allowing users to search, find, organise and select individual elements of audiovisual content for viewing and/or recording. Such players could include transmission networks, content platforms 244 , service providers, ISPs/software producers and manufacturers. For many of these providers, the only applicable rule of the Directive would be the one on access to general interest content (i.e. device manufacturers). 

Moreover, introducing a provision in the AVMSD would entail that transmission networks, content platforms, service providers or manufacturers would apply the rules of the country where they are established.

In the case of a player established in one Member State rolling out its services in other Member States, the content available in the targeted country would have to abide by the provision on prominence of content of general interest from that country.  In a context where OTT services are developing at a rapid pace and have a great flexibility for establishing themselves in a particular country while distributing services across Europe, the effectiveness of such a provision would be very low. Indeed the notion and the scope of general interest applied in one Member State would be defined according to the standards of another Member State.

Therefore, the AVMSD is not the right legal instrument to deal with this issue.

5.5 Impact of the combination of the preferred options

There are multiple potential combinations of the different options. The combination of the preferred options is deemed to strike the best balance between the need to introduce flexibility with respect to the current level of regulation and ensuring adequate consumer protection:

On the one hand, the industry will benefit from more flexible quantitative rules on commercial communications. The increased efficiency of the country of origin principle and the requirements for the independence of Regulators would improve the business environment in which audiovisual players operate.

On the other hand, consumers will be guaranteed a high level of protection through the limited extension of the AVMSD to video-sharing platforms and the reinforcement of the requirements applicable to on-demand services in terms of the protection of minors. Consumers will also benefit from a greater access to European works in on-demand services.

On the one hand, the set of preferred option comes with simplification and cost savings in the area of commercial communications and for the application of the COO. On the other hand the substantial societal benefits resulting from the increase in consumer protection leads to additional costs:

All options take into account, when appropriate, the need of flexibility for the industry by considering possible implementation via self and/or co-regulation (scope of application, information on harmful content).

Most of the options complement each other. For example, independence of regulators will be of the utmost importance if Members States decide to entrust them with the application of the new rules regarding video-sharing platforms. Also the potential increase in audiovisual media service providers' revenues deriving from the greater flexibility of quantitative rules on advertising will release a potential for an increased contribution to the production of European works.

The combination of options achieves a more level playing field between the different players in the audiovisual media market. This is for instance realized by leveling up certain requirements for on-demand services and video-sharing platforms in relation to the protection of consumer or promotion of European works while providing more flexibility to TV broadcasting services on certain rules on commercial communications.

6.How would actual impacts be evaluated or monitored?

6.1 Monitoring

Monitoring of the implementation will continue to be assured by the European Commission on the basis of:

-Application reports by the Commission, on the Directive as a whole no later than four years after the adoption of the Directive and every three years thereafter;

-Reports on the application of the provisions related to the promotion of European works every 2 years (for TV broadcasting and on-demand services);

-Monitoring of the implementation of the provisions on video-sharing platforms on the basis of an independent study carried out after the transposition;

-Monitoring of the implementation of the provision on content descriptors for protection of minors.

The following list of impact indicators could be used to monitor progress towards meeting the general objectives:

6.2 Evaluation

No later than 10 years after adoption, the Commission shall submit to the European Parliament and the Council an ex post evaluation, accompanied where appropriate by proposals for its review, in order to measure the impact of the Directive and its added value.

The evaluation report will include an assessment of whether the operational objectives of the revised Directive have been reached. A particular focus will be cast on the application of the provision on video sharing platforms; "protection of minors" and MS implementation of the coreguationl and/or self regulation principles. The evaluation report will be made public.

Table of Contents

ANNEX 1 - Procedural information

ANNEX 2 - Stakeholder consultation

ANNEX 3 – Business structure in the audiovisual market

ANNEX 4 – REFIT evaluation

ANNEX 5 – EXECUTIVE SUMMARY of the “Study on the effectiveness of self-and co-regulation in the context of implementing the AVMS Directive” (SMART 2014/0054)

ANNEX 6 - Main developments affecting the EU market for audiovisual media services

ANNEX 7 - Comparative table of services that may be qualified as AVMS – EPRA Survey for 35th EPRA Plenary (31 May – 1 June 2012) updated in 2015 in the ERGA sub-group on material jurisdiction

ANNEX 8 - Extracts of Community guidelines (as of 10/01/2016) of a sample of Internet platforms whose services do not fall within the AVMSD scope and existing interventions by internet platforms to protect consumers from hate speech and minors from harmful content

ANNEX 9 – Details of the provisions and implementation of the country of origin principle

ANNEX 10 - Cost of the country of destination – promotion of European works in the 5 biggest markets for on-demand services

ANNEX 11 – Compliance of National Regulators with INDIREG criteria on independence

ANNEX 12 – Criteria of independence of NRAs

ANNEX 13 – Implementation of the provisions on the promotion of EU works at national level

ANNEX 14 – Implementation of the provisions on the protection of minors at national level (from the 2015 EAO Iris bonus "comparative tables on the protection of minors in audiovisual media services)

ANNEX 15 – Implementation of the provisions on commercial communications at national level

ANNEX 16 – Detailed estimates of some costs related to the promotion of EU works

ANNEX 17 - Second Report on the application of Articles 16 and 17 of Directive 2010/13/EU for the period 2011-2012

ANNEX 18 - European Commission's non-regulatory initiatives on a safer Internet for minors

ANNEX 19 – Calculation of the 20% share of European Works

ANNEX 20 – Detailed description of the options

ANNEX 21 – Glossary (LAST ANNEX)

ANNEX 1 - Procedural information

Lead DG: DG Communications Networks, Content and Technology

Agenda planning: 2015/CNECT/006

Organisation and timing: The IA was carried out between May 2015 and January 2016. The IA draws from evidence gathered prior to and during this period.

In October 2015, the Commission published an inception impact assessment 246 .

The IA has been prepared by Unit G.1 "Converging Media and Content" of the European Commission, DG Communications Networks, Content and Technology. It was carried out in close cooperation with other Commission DGs in the context of the Inter-Service Steering Group on the AVMSD evaluation and review convened by the General Secretariat of the European Commission. The following DGs participated to the Steering group: DG CNECT, DG COMP, DG JUST, DG GROW, DG TRADE, DG EAC, DG SANCO, DG RTD, DG NEAR together with the Secretariat-General and the Legal Service.

Five meetings [possibly to be completed] took place respectively on 12 March, 20 May, 25 November 2015, 14 January and 15 April 2016.

1.Consultation of the Regulatory Scrutiny Board.

2.Evidence used. The Commission gathered qualitative and quantitative evidence from various sources. The following elements constituted the evidence base:

1.    Commercial communications

2.    European works

3.    Protection of minors

4.    The country of origin principle

The reference period for the quantitative questions was 2010 to 2014, inclusive.

The survey gathered a total of 107 replies with 40 coming from commercial broadcasters (38 %), 20 public broadcasters (19 %), 18 VoD providers (17 %), 12 from national associations focusing on the protection of minors (12 %), 10 from national associations representing independent producers (10 %), 4 from consumer association (4 %). One association representing broadcasters and one representing sales houses also participated. The stakeholders who replied are established in 19 Member States.

3.External expertise. The Commission drew from external expertise in particular in the context of the studies mentioned above.

4.Consultation strategy/process and stakeholders consulted.

The Commission has engaged extensively with all relevant stakeholders in a view of assessing the state of the audiovisual media market, and to determine how to improve conditions for establishing a Digital Single Market. Stakeholders were consulted in the following occasions:

The consultation strategy followed a participatory and circular approach and strived for triangulation. In the consultation process public events were combined with more targeted consultations to achieve the required breadth and depth of stakeholder inputs.

While the 2013 public consultations were of a broader nature, the questions in the 2015 Public consultation were more focused on possible changes to the AVMSD. However, all main options were considered, in order to enable the Commission to either confirm or contradict previous findings. The questions took into account concerns or views expressed in previous occasions as well as the state of the art in the market and in viewing patterns.

A circular approach was followed as much as possible. For example, meetings of the Contact Committee, ERGA and Media talks with stakeholders were held ahead of the launch of the Public consultation. After the Public consultation deadline, the Contact Committee discussed the Public consultation in two occasions. The data gathered from the sources above were analysed respectively: in house, by external contractors, and in cooperation with other Commission DGs.

Moreover, stakeholders were consulted in multiple occasions by different parties, for example, by the Commission via the Public consultation, by relevant national regulators via the ERGA questionnaire and by external contractors in the context of the studies. This circular approach enabled a satisfactory triangulation of data, i.e. its reliability has been confirmed via findings coming from other sources. Also, whenever the same stakeholder provided information in different contexts, the Commission compared these pieces of information so as to assure their coherence and reliability.

ANNEX 2 - Stakeholder consultation

SYNOPSIS REPORT

Report on the Contributions to the Public Consultation on Directive 2010/13/EU on Audiovisual Media Services (AVMSD) - A media framework for the 21st century

06 July-30 September 2015

The Public Consultation 280 on Directive 2010/13/EU on Audiovisual Media Services 281 (AVMSD) - A media framework for the 21st century, took place from 06/07/2015 to 30/09/2015.

The public consultation is part of the evaluation of the AVMSD under the Regulatory Fitness and Performance Programme (REFIT) of the Commission's Better Regulation Framework. Its objective was to gather evidence and views on the functioning of the AVMSD on policy options for its revision, announced in 2016 by the EU Digital Single Market strategy.

The AVMSD has paved the way towards a single European market for audiovisual media services. It has harmonised the audiovisual rules of the Member States and facilitated the provision of audiovisual media services across the EU on the basis of the country of origin principle.

Since 2007, when the regulatory framework was revised for the last time, the audiovisual media landscape has changed significantly due to media convergence. The review of the AVMSD is featured in the Commission Work Programme for 2015, as part of the Regulatory Fitness and Performance Programme (REFIT). In its Communication on a Digital Single Market Strategy for Europe 282 , the Commission announced that the AVMSD would be revised in 2016. The Commission identified the following issues to be considered in the evaluation and review of the AVMSD:

II.    EXECUTIVE SUMMARY

1. Main conclusions from the summary and analysis of contributions in each of the consultation sections (including potential distinction(s) among stakeholder groups)

The main elements that have been observed overall, across stakeholders' categories when it comes to Policy options for the future:

2. Summary analysis of trends identified across different consultation sections (including potential distinction(s) among stakeholder groups and potential linkage between answers across topics).

Some general trends were observed in the replies received. There is a call from a fair share of representatives of the broadcasting sector to ensure a level playing field either by regulating new services and/or warranting more flexibility of existing rules. Consumer organisations' call for strengthening the AVMSD rules aimed at protecting viewers, particularly vulnerable ones. The internet, telecom and ICT industries call for refraining from new regulation, in order to preserve innovation. The content industry calls for strengthening the rules aimed at promoting European works, across all audiovisual media services.

III.    OVERVIEW OF RESPONDENTS TO THE PUBLIC CONSULTATION

The Public consultation drew a total of 438 replies. 376 replies were given by organisations whereas 62 replies were given by individuals.

The central governments of BG, CZ, CY, HR, HU and MT did not participate to the Public consultation.

Breakdown of respondents per stakeholder category 283  

Breakdown of respondents per country

Not all respondents replied to all questions. In particular, the sections of the PC dedicated to Events of major importance for society; Short news reports; and Right of reply gathered a considerably lower number of replies than the other sections of the PC.

IV.    Consultation topics

While a majority of stakeholders across sector consider the rules still relevant, a majority of them consider the rules not to be fair. Stakeholders are split when it comes to the effectiveness of the rules.

As regards options for the future, 5 Member States and 1 regulator support maintaining the status quo. 2 MS and 5 regulators support the adoption of guidance at EU level. 1 MS calls for amending the ECD.

13 MS and 9 regulators (11 if we include also EFTA regulators) call for extending the scope of application of the AVMSD to new type of services (services that are not "TV-like" and/or services that are not under the editorial responsibility of a provider).

Public service and commercial broadcasters overall call for removing the "TV-like" requirement. A fair share of them calls for extending the scope of application beyond services that are under the editorial responsibility of a provider. The others call for maintaining the status quo.

Internet companies, cable, satellite, telecoms, press and publishing sector, advertisers and one NGO promoting fundamental rights call for maintaining the status quo.

Consumer organisations advocate for an extension of the AVMSD scope beyond "TV-like" and services under the editorial responsibility of a provider.

The views of citizens are equally split amongst those calling for maintaining the status quo and those calling for an extension of the scope of application of the rules.

Main conclusion: The option of extending the scope of application of the AVMSD is the one that proportionately gathered the largest share of support from stakeholders. There is however no unitary pattern as to what an extension would entail. Some parts of the industry are particularly vocal in calling for maintaining the status quo.

Concerning the geographical scope of the AVMSD, views are split. Even though most of the stakeholders consider the current regulation still relevant, its effectiveness and fairness are debated.

5 Member States and 5 regulators are in favour of maintaining the status quo. 9 Member States and 12 regulators support an extension of the geographical scope to third country providers targeting EU audiences, underlining the importance of creating a level playing field. Of those in favour of an extension, 4 Member States and 8 regulators support linking the extension of the geographical scope to providers' significant market presence in the EU.

Public Service Broadcasters are mainly open to consider an extension of the geographical scope to taken into account today's digital and online environment. Commercial broadcasters are equally open to an extension but only if the Commission has evidence of problems with the current approach.

The majority of advertising companies supports maintaining the status quo. According to them, an extension of the geographical scope would be difficult to enforce.

NGOs and consumer organisations raised concerns regarding a perceived lack of level playing field resulting from the current approach. At the same time, a few organisations pinpointed to the fact that an extension of the geographical scope would increase the legal burdens and multiply the regulatory requirements, negatively affecting the EU audiovisual market. A number of ICT, Digital and Internet companies support maintaining the status quo because they reckon that changes in the geographical scope will potentially pose threats to media pluralism and innovation, making the European market less attractive and less competitive.

The satellite industry supports maintaining the status quo and points out that the Directive already applies to third-country service providers using a satellite uplink situated in or appertaining to a Member State. As a result, they claim that the AVMSD covers a very wide scope of European and non-European channels.

Main conclusion: The majority of respondents across stakeholders' categories favour the need for possible changes of the geographical scope but there is no consensus as to how to go about an extension.

Although the majority of respondents across stakeholders' categories consider that the existing rules are still relevant, their effectiveness and fairness is very much debated.

Among Member States, none is in favour of maintaining the status quo while 7 regulators support this option. 8 Member States and 2 regulators are in favour of more flexibility in general while some others (7 Member States and 5 regulators) would like to reinforce rules to protect vulnerable viewers, especially in the areas of alcohol and fatty foods. 10 Member States and 6 regulators also favour other options, going in different directions (either keeping some of the current rules while clarifying and simplifying other provisions, or introducing rules on signal integrity, or further extending some of the current rules to on-demand services or other online services).

Public service broadcasters mainly favour another option, with some calling for simplification and clarification, for the extension of the rules on audiovisual commercial communications to other players and for rules on signal integrity. Commercial broadcasters are mainly calling for more flexibility, especially on the quantitative advertising rules (12-minute advertising limitation, interruption rule, rule on isolated spots) and on sponsorship and product placement rules. Yet, a few broadcasters would prefer maintaining the status quo.

Advertisers favour either the status quo or more flexibility while the food and drink industry favours the status quo, especially on alcohol advertising and fatty food advertising. They consider that the current framework, complemented by self- and co-regulation, functions properly. Consumer organisations (representing viewers and the public health sector) favour tighter rules to protect vulnerable consumers, in particular on alcohol and fatty food advertising (e.g. via watersheds, stricter rules on product placement and sponsorship for these products or even a possible ban). Internet, telecoms and cable operators call for maintaining the status quo or for more flexibility in general. Among citizens, the views are varied and are also almost equally split between the different options.

Main conclusion: No clear consensus emerged amongst respondents across stakeholders categories when it comes to the preferred policy option on commercial communications. The respondents' views are almost equally split between the four options. However, those options are not necessarily mutually exclusive and could be combined to a certain extent.

3.1 General viewers' protection under the AVMSD

As regards protection of minors and the current distinction between the rules applicable broadcasting and on-demand, views are split. 8 Member States consider that the distinction between broadcasting and on-demand content provision is not anymore relevant, effective and fair. 6 Member States have expressed the view that it is still relevant. The majority of Regulators (10) consider these rules to be no longer relevant. 7 Regulators believe that these rules are still relevant.

When it comes to the question of the effectiveness of the AVMSD in protecting children, the majority of Member States (7) and Regulators (8) who replied consider that the AVMSD has not been effective in protecting minors.

9 MS and 12 regulators did not provide an opinion on the AVMSD rules on incitement to hatred. 2 MS consider the AVMSD rules on incitement to hatred still relevant, effective and fair. 4 MS consider that further grounds for prohibition of incitement to hatred should be introduced in the Directive. The following are mentioned: incitation to violence; sexual orientation; religion; marital status; political beliefs; language; state of health; disability; physical or genetic characteristic; social status; nationality; gender. 1 MS also calls for aligning those grounds to Article 9 of the EU Charter of Fundamental rights. 4 MS consider that the rules for suspension under Article 3 should be reviewed in order to strengthen the protection from content inciting to hatred. 1 MS suggested that a revision of the directive should give consumers the right to know who the ultimate beneficiaries of audiovisual media services are i.e. who is trying to influence their decisions.

2 regulators believe that hate speech should be dealt with on all platforms. 1 regulator calls for aligning the grounds to Article 9 of the EU Charter of Fundamental rights. Another regulator opposes modifications to the AVMSD while another one suggests introducing transparency as regards the beneficiaries of audiovisual media services.

Most industry stakeholders (public service and commercial broadcasters, telecom operators, VOD providers, Internet and ICT) and consumer organisations did not express an opinion regarding the existing rules on incitement to hatred.

3.2 Protection of minors

No Member States and only 1 Regulator are in favour of maintaining the status quo. 4 Member States and 10 regulators favour more self- and co-regulation. 7 MS and 14 Regulators are in favour of more harmonisation, although their comments to do follow a unitary pattern (they refer to either harmonisation of classification, or common definitions/clarifications of key-concepts). 8 Member States and 9 Regulators call for removing the distinction between linear and on-demand services (levelling up). 6 Member States and 6 regulators call for extending the AVMSD rules on protection of minors to other online content.

A limited number of Member States and 7 regulators also favour other options or a combination of various options. They however follow different directions. They refer to: ensuring a higher level protection of minors when it comes to their exposure to pornographic, racist or anti-Semitic content; matching the regulation for linear and non-linear services by levelling up the rules; and continue working with industry to encourage self-regulation for other platforms; applying the rules on protection of minors to all audiovisual media services including those not under editorial responsibility by means of graduated protection; removing the distinction between broadcast and on-demand services and allow a more graduated approach to potentially harmful content.

Commercial broadcasters mainly favour self and co-regulatory measures (8) and the extension of the scope of the AVMSD (7). Amongst Public Service Broadcasters, some (8) favour self and co-regulatory measures, others (7) call for extending the scope of the AVMSD, or (7 ) suggest (standalone or combined) other options.

Internet companies, Telecoms, VoD mainly advocate for maintaining the status quo or favour complementing the AVMSD with self- and co-regulatory measures.

Consumer organisations (representing minors) favour further harmonisation and call for an extension of the AVMSD to Internet platforms.

Views expressed by citizens vary and equally split among the options with no clear trend.

Main conclusion: No clear consensus emerged amongst respondents across stakeholders categories when it comes to the preferred policy option on protection of minors.

4. Promoting European audiovisual content

Some Member States (4) and regulators (6) support maintaining the status quo. They all agree that current regulation for the promotion of EU works is sufficient and should not be amended. Other Member States (7) and National regulators (6) call for introducing more flexibility for Member States and service providers in their choice or implementation of the measures on the promotion of European works to adapt to their respective markets. Several Member States (6) and a few National regulators (3) call for reinforcing existing rules. Most of them support, in particular, strengthening regulation on non-linear services by clarifying and harmonizing provisions under Article 13 in order to avoid distortions of competition among players. Finally, some Member States (5) and National regulators (3) suggest other options. Some of them favour more flexibility in regulation while others call for reinforcing current rules and exploring solutions focused on the supply side.

Public service broadcasters generally back other options, namely to adapt rules for on-demand services to reflect recent changes in the audiovisual market. Some commercial broadcasters call for more flexibility while other favour repealing the rules as they believe the current market of European works is already successful.

The digital/Internet industry and VOD operators support maintaining the status quo. On the contrary, the Cinema, Film and TV industry primarily favours reinforcing the existing rules and some call for the imposition of financial contribution on on-demand services.

Telecom operators call in general for more flexibility and support measures based more on marked dynamics rather than on quota systems. The majority of right holders support reinforcing the rules and most of them believe measures mentioned on Article 13 should be made mandatory.

Views expressed by citizens are also split among the options with no clear trend.

Main conclusion: There is no clear consensus amongst respondents across stakeholders' categories as regards policy options on promotion of European works.

5. Strengthening the single market

The majority of respondents across stakeholders' categories consider that the current approach is still relevant, but there are doubts about its effectiveness (in particular as regards the functioning of the cooperation procedures) and fairness.

12 Member States and 15 Regulators support maintaining the country of origin principle accompanied by stronger cooperation practices and/or simplified jurisdiction criteria. A further 4 Member States express principled support for the country of origin principle. 5 Member States and 5 Regulators ask for moving to a different approach whereby providers would have to comply with some rules (e.g. on protection of European works) of the countries where they deliver their services. 4 Member States and 4 Regulators favour other options.

Public services broadcasters mainly call for maintaining the country of origin principle together with strengthening existing cooperation practices/revising the rules on cooperation and derogation mechanisms. To a lesser extent they ask for additional safeguards to avoid undermining the effectiveness of national rules. Commercial broadcasters mostly call for maintaining the status quo, while showing some support for stronger cooperation practices/mechanisms and simplified jurisdiction criteria. The satellite industry supports the country of origin principle and calls for strengthening existing cooperation practices/revising the rules on cooperation and derogation mechanisms.

Advertisers favour maintaining the status quo and, to a lesser extent, ask for strengthening existing cooperation practises. Internet, telecoms and cable operators mainly call for maintaining the status quo or other options. Consumer organisations (representing viewers and the public health sector) mostly argue for (limited) departures from the country of origin principle towards a country of destination principle. Citizens mainly favour maintaining the status quo together with revising the rules on cooperation and derogation mechanisms and simplifying the jurisdiction rules.

Main conclusion: Regarding the set of questions on strengthening the internal market, there is strong support for maintaining the country of origin principle across various stakeholders categories.

6. Strengthening media freedom and pluralism, access to information and accessibility to content for people with disabilities

6.1 Independence of regulators

Most of those who replied to this question considered that the current provisions of the Directive are relevant and fair but not effective. Consequently, the majority of respondents across stakeholders' categories supported the reinforcement of the AVMSD rules on independence of the audiovisual regulatory bodies. Those respondents favored either laying down an obligation to ensure the independence of audiovisual regulatory bodies or providing for a set of criteria that regulators need to meet to ensure their independence. The latter option gathered a slightly larger support.

5 Member States and 6 regulators considered that the provisions in the Directive are relevant, effective and fair, while 6 Member States and 7 regulators pointed out that Article 30 AVMSD is not effective. A majority of public service broadcasters considered that the rules are relevant, effective and fair. A large majority of commercial broadcasters considers that the rules of the Directive are relevant but only a small minority of them considers that they are relevant, effective and fair.

4 Member States and 6 regulators called for maintaining the status quo. 6 Member States and 9 regulators from 6 Member States supported the option to impose an obligation on the independence of regulatory authorities. 6 Member States and 9 regulatory authorities from 7 Member States supported laying down minimum mandatory requirements for regulatory authorities. 2 Member States and 1 regulator supported other options.

Most public service broadcasters called for maintaining the status quo. Most commercial broadcasters called for strengthening of the current rules (by laying down in the AVMSD an obligation of the independence of regulatory authorities (9) and laying down criteria of independence (13)).  

VOD operator, digital and Internet companies generally called for maintaining the status quo, although some called for strengthening the rules. Cinema, film and TV producers, consumer organisations and NGO promoting fundamental rights mostly called for strengthening the current rules. Most of the citizens who replied to this question favoured reinforcing the rules.

Main conclusions: The majority of respondents across stakeholders' categories supported the reinforcement of the AVMSD rules on independence of the audiovisual regulatory bodies.

6.2 Must Carry/Findability (Prominence of content of general interest)

A large majority of Member States (20) and regulators (15) who replied called for maintaining the status quo. 4 Member States and 9 regulators call for introducing a provision on prominence of content of general interest in the AVMSD.

Public service broadcasters advocate for including a rule on discoverability of content of general interest in the AVMSD. Commercial broadcasters mainly call for a broader coverage of "content of public interest" than provided by public service broadcasters. Telecom providers generally call for maintaining the status quo and oppose new rules on findability at EU or at national level.

The Internet sector calls for maintaining the status quo, stressing that Internet platforms are not gatekeepers and that users retain control over the content they access. The press calls for ensuring a level playing field - for instance by ensuring non-discrimination on platforms - via an intervention outside the AVMSD. Amongst citizens, views vary.

Main conclusions: As regards findability, the option of maintaining the status quo is the one that proportionately gathered the largest share of support from stakeholders, followed by the one of introducing findability rules in the AVMSD. The remaining options received a fair share of support from stakeholders. Those options are however not necessarily mutually exclusive and could be combined.

A majority of respondents across stakeholders' categories expressed the view that the current rules are effective in providing fair access to audiovisual content to persons with hearing and vision disabilities.

As regards options for the way forward, while the Member States were split as regards maintaining the status quo (6) or laying down in the AVMSD requirements for accessibility (6), the majority of regulators who replied (6) called for laying down in the AVMSD requirements for accessibility. 2 regulators favoured maintaining the status quo. 1 Member State and 7 regulators called for self-/co-regulatory measures in this field.

Public service broadcasters and commercial broadcasters called for maintaining the status quo. Disability and consumer organisations, as well as the ICT and Internet industry called for harmonising accessibility requirements at the EU level.

Main conclusions: Most respondents across stakeholders' categories opted for maintaining the status quo, while around a quarter of respondents called for strengthening the rules.

An overwhelming majority of respondents across stakeholders' categories consider that the current rules are still relevant, effective and fair.

As regards the way forward, a majority of Member States (7) and regulators (18) who replied call for maintaining the status quo.

Whereas a slight majority of the public service broadcasters (11) who replied supports maintaining the status quo, 7 of them chose other option.

A majority of those commercial broadcasters, cable operators and VOD operators supports maintaining the status quo. A minority share of the industry calls for abolishing the system of lists. Others call for simplifying the notification procedure. Some others call for requiring the Member States to draw up lists.

A number of health-related NGOs and national agencies calls for addressing problems related to alcohol advertising, as the AVMSD allows sport events listed as "of major importance" to be sponsored by alcohol producers.

Main conclusions: A majority of respondents across stakeholders' categories call for maintaining the status quo as regards events of major importance for society.

A majority of respondents across stakeholders' categories find the current rules to be relevant, effective and fair.

A majority of the Member States (11) and regulators (12) who replied called for maintaining the status quo.

Public broadcasters (8) were mainly in favour of the status quo. A majority of the commercial broadcasters (20) who replied to this question called for maintaining the status quo. Some commercial broadcasters however call for removing the current rules.

Whereas the Internet, telecoms and cable operators primarily did not take a position on this issues, those who replied called for maintaining the status quo.

Those stakeholders supporting other option called for either: extending the rules to on-demand audiovisual media services; harmonising the rules at EU level; or clarifying certain aspects of the existing rules.

Main conclusions: A majority of respondents across stakeholders' categories call for maintaining the status quo as regards short news reports.

6.6 Right of reply

The majority of respondents across stakeholders' categories consider that the current rules are still relevant, effective and fair.

8 Member States and 9 regulators (11 regulators, if EFTA countries are considered) are in favour of maintaining the status quo. 2 Member States and 6 Regulators called for extending the scope of the rules to on-demand audiovisual media services and online intermediaries.

Whereas a slight majority of Public service broadcasters called for maintaining the status quo, a number of them are in favour of extending the scope of the rules to non-linear services, in line with Council of Europe Recommendation (2004)161 on the right of reply in the new media environment. A large majority of commercial broadcasters call for maintaining the status quo.

Telecom operators, cinema, print and publishers stakeholders are in favour of maintaining the status quo. 

Whereas a majority of NGOs called for maintaining the status quo, a few of them advocated for an extension of the right of reply to on-demand audiovisual media services. Citizens mainly favour maintaining the status quo, although a few of them indicate difficulties with pursuing complaints.

Main conclusions: A majority of respondents across stakeholders' categories call for maintaining the status quo as regards the right of reply.

ANNEX 3 – Business structure in the audiovisual market

ANNEX 4 – REFIT evaluation

Purpose of the evaluation

This Staff Working Document (SWD) provides the results of the ex post evaluation under the Regulatory Fitness and Performance Programme (REFIT) 286 of the Audiovisual Media Services Directive (hereinafter "AVMSD").

In line with the "Better Regulation" requirements 287 , the evaluation assesses the effectiveness, efficiency, relevance, coherence and EU added-value of the AVMSD, and pinpoints areas where there is potential for simplification, without undermining the objectives of the Directive.

The Commission Communication “A Digital Single Market Strategy for Europe 288 ” announces that the Commission will examine the functioning of the rules currently in force and will review the AVMSD in 2016 289 .

Pursuant to this commitment, this evaluation has been carried out in parallel to the Impact Assessment on policy options for the future of the AVMSD. The conclusions of this evaluation will – where relevant – feed into that Impact Assessment.

This evaluation also provides the necessary evidence base for meeting the reporting obligations set out in Article 33 of the AVMSD and Articles 16 and 17 (Reports on the promotion of European Works)  290 .

Scope of the evaluation

The evaluation focuses on the objectives, domains and measures set out in the AVMSD. National transposition measures are not part of the scope of this evaluation.

This evaluation covers the period from December 2007, when the Directive resulting from the last revision entered into force (requiring the Member States to transpose the rules at national level by December 2009), to December 2015. The period between 1989, when the Television without Frontiers Directive 291 entered into force, and 2007 is not covered by this evaluation.

2.1 Situation prior to Directive

The EU regulatory framework in this domain is in place since 1989 and was originally only applicable to broadcast services. The rationale behind the adoption of a regulatory framework for television broadcasting services at EU level served two primary and interconnected objectives:

(1) Facilitate the free movement of television broadcasting services within the internal market;

(2) Ensure the protection of fundamental public interest objectives, through minimum harmonisation of existing regulations.

In addition, the regulatory framework contributed to the fulfilment of wider complementary cultural, social, and economic aims while contributing to the protection of fundamental rights and pluralism.

The regulatory framework was amended twice (respectively in 1997 292 and 2007) to adapt to technological and market developments. The Directive currently in force is the result of the 2007 revision and its subsequent codification in 2010.

The last review of the regulatory framework in 2007 aimed to modernise and simplify the rules for broadcasting services and introduce minimum rules for on-demand audiovisual media services. The Commission aimed at adopting future-proof rules, as it expected that the revised Directive would regulate the internal market for broadcasting and other audiovisual media services approximately over the years 2009-2016 293 .

2.2 Baseline

At the time the last revision was proposed in 2005 294 , the Commission observed that the 1997 Directive had been overtaken by technological and market developments and had to some extent become outdated. This was reflected in the Impact Assessment 295 accompanying the 2005 legislative proposal.

In 1989, non-national satellite commercial television was in its infancy and ICT-based fixed-line methods of service provision were not ready for the market. In 13 of the new Member States (following the 1994 and 2004 enlargements) there were no commercial channels available nationally. By 1997, trans-frontier satellite commercial television was a common phenomenon and terrestrial commercial television held a greater share of viewing than public service broadcasters in most Member States. In 2005, trans-frontier satellite commercial television had become as popular as or even more popular than local terrestrial broadcasting (with cable systems re-transmitting both).

This evolution was accompanied by exponential changes in channel capacity, increased market penetration of multichannel homes and an increasing number of platforms. Cable and satellite television multiplied the number of available pan-European channels. This enhanced the choice available to consumers, including children. Children increasingly controlled their own viewing with risks of harm, as age verification procedures and filtering were in place only in a minority of channels and households.

In light of these developments, the revision of the Directive aimed at the following objectives.

Removing obstacles to free movement of audiovisual media services in the internal market

In 2005, 23 out of 25 Member States had in force national laws applicable to on-demand services for a number of AVMSD domains (particularly advertising and protection of minors 296 ) with often diverging requirements 297 . This had potentially negative impacts on the internal market and on business competitiveness. The Commission considered that laying down minimum rules for these services at EU level would have provided legal certainty and allowed businesses to benefit from the AVMSD Country Of Origin (COO) principle 298 . According to COO, which already applied to broadcasting services since the regulatory framework was first in force, audiovisual media service providers have to abide only by the rules of the Member State with jurisdiction over them but can operate in all Member States. This does not prevent Member States from establishing higher standards at national level. However, a receiving Member State with stricter rules than those laid down by the AVMSD cannot restrict the reception of services from another Member State on the basis of those stricter rules. Exceptions apply in specific circumstances defined in the AVMSD.

Other services, such as video-sharing platforms that did not exercise editorial responsibility over the content or websites where the audiovisual content was secondary to the main service, were deliberately left out of the scope of application of the AVMSD rules. The objective was to enable Internet services to further develop in the EU.

Level playing field for audiovisual media service providers

The Commission observed that on-demand audiovisual media services were offering identical or similar content as traditional television without being subject to the same regulatory treatment 299 . According to the 2005 Impact Assessment, maintaining the status quo would have aggravated unjustifiable differences in the regulatory treatment between the various forms of distribution of identical or similar content based on the delivery modes. At the same time, on-demand services were deemed to deserve lighter touch regulation than broadcasting services as users enjoy a higher degree of choice and control over the content and of the time of viewing than on traditional TV.

It was deemed necessary to regulate on-demand audiovisual media services at EU level for clearly defined public interest domains including protection of minors, human dignity and safeguard of essential public interests in the area of commercial communications.

As the promotion of European works was considered essential to contribute to cultural diversity it was deemed necessary to adopt EU rules in this domain for on-demand services.

New advertising techniques created opportunities for commercial communications in broadcasting services, enabling them to better compete with on-demand services. Product placement had the potential to generate substantial additional resources for providers. The regulatory framework had to be aligned to this new context, namely via more flexibility with respect to the rules for broadcasting services. This called for allowing (in certain circumstances) product placement and introducing more flexibility to the quantitative rules.

In the field of broadcasting services, the Commission identified a problem in the absence of EU-level rules guaranteeing access to short extracts of events of high interest to the public. Actual or potential uncoordinated national rules were putting the internal market at risk.

In addition to the above considerations, the 2007 revision aimed at maintaining the general and specific objectives of the regulatory framework related to the internal market as well as cultural and social goals which were deemed to be still valid for the future.

Since the 2007 revision, there have been significant changes in the market and viewing patterns (Annex 3 provides the detailed figures and sources):

2.3 Description of the Directive and of its objectives

The AVMSD pursues the general objective to create an internal market for audiovisual media services guaranteeing free circulation of services, a level playing field and conditions of fair competition whilst ensuring at the same time a high level of protection of objectives of general interest, inter alia the protection of minors and human dignity as well as promoting the rights of persons with disabilities.

The AVMSD also pursues a number of specific objectives: protect consumers/viewers including human dignity and the physical, mental and moral development of minors; ensure cultural diversity by promoting European audiovisual production and distribution; promote media pluralism, freedom of expression and information; and foster business competitiveness.

As mentioned in section 2.1, the Directive is based on the Country Of Origin principle (COO)

As the AVMSD has a bearing on the market as well as on values and citizens' rights, it provides minimum harmonisation rules. It does not impinge on the competence of Member States to define stricter requirements according to national circumstances and traditions (e.g. rules regarding content harmful to minors).

Intervention logic – 2007 revision

Pursuant to the Commission Better Regulation Framework, the AVMSD has been evaluated against the following criteria: relevance, EU added value, effectiveness, efficiency and coherence. The evaluation addresses specifically the following questions:

Relevance: In a converging media environment, to what extent have the AVMSD rules proved relevant to the needs of the EU audiovisual market and to consumers/viewers?

Effectiveness: To what extent have the general and specific objectives of the AVMSD been met? If not, what factors hindered their achievement?

EU added value: What is the additional value resulting from the AVMSD, compared to what could be achieved by MS at national and/or regional level? To what extent do the issues addressed by the AVMSD require action at EU level?

Efficiency: Did the AVMSD deliver good value for money, including for SMEs? Could the general and specific objectives have been achieved at a lower cost? Is there scope for streamlining and/or simplifying the procedures laid down in the AVMSD?

Coherence: How well does the AVMSD work together with other EU regulatory and policy initiatives? To what extent does the AVMSD take into account potential interactions or conflicts with other EU initiatives?

The questions listed above are answered throughout the report.

This evaluation covers the Directive in its entirety. It is structured around the main domains harmonised by the AVMSD, as each domain pursues one or more AVMSD objectives.

The link with the general and specific objectives is as follows:

Under the general objective:

Under the specific objectives:

The system of graduated regulation pursues the overall objective of fostering business competitiveness with a lighter touch regulation for on-demand services and stricter and more detailed rules for broadcast services on grounds that the user has more control and choice in on-demand services. The system applies to the rules on protection of minors, commercial communications, promotion of European works, right to information (short news reports and events of major importance for society) and right of reply. This matter is therefore considered across a number of sections: 6.4, 6.6, 6.7, 6.10, 6.11.

Under each "domain subchapter", the five evaluation criteria are being assessed, thereby allowing for a granular analysis and for drawing – if appropriate - different conclusions for each different AVMSD domains.

The REFIT evaluation has been carried out on the basis of data collected from different sources. A more detailed insight is provided in Annex 1.

The evaluation took place between March and December 2015 and drew from the following main data sources:

Time-wise, the data gathering was characterised by continuity. The Commission acknowledged the need to assess the state of play in terms of market and societal developments in 2012, following the 1st AVMSD Application report for the years 2009-2010. The Commission started stakeholder consultations in the Contact Committee, in ERGA and via the "Media talks". Two Public consultations were launched in 2013 (see above) and a third, more targeted one, in 2015. The reporting obligations according to the Directive also were the opportunity to gather data and information on the state of implementation over time. The Commission’s questionnaires in this context were drafted taking into account the main needs that could be identified at that stage in terms of data.

Method-wise, the data gathering followed a participatory and circular approach and strived for triangulation. While the 2013 public consultations were of a broader nature, the questions in the 2015 Public consultation were more focused on possible changes to the AVMSD. However, all main options were considered, in order to enable the Commission to either confirm or contradict previous findings. The questions took into account concerns or views expressed in previous occasions as well as the state of the art in the market and in viewing patterns.

The questions in the ERGA questionnaire were developed by a Task force of Member States' audiovisual regulators and focused on the practical aspects of the AVMSD application. Regulators took into account the difficulty to measure the costs and benefits of the AVMSD in certain fields.

The data provided by the EAO were tailored to the needs of this evaluation and were delivered pursuant to an evaluation-specific contract with the Commission.

A circular approach was followed as much as possible. For example, meetings of the Contact Committee, ERGA and Media talks with stakeholders were held ahead of the launch of the Public consultation. After the Public consultation deadline, the Contact Committee discussed the Public consultation in two occasions. The data gathered from the sources above were analysed respectively: in house, by external contractors, and in cooperation with other Commission DGs.

Moreover, stakeholders were consulted in multiple occasions by different parties, for example, by the Commission via the Public consultation, by relevant national regulators via the ERGA questionnaire and by external contractors in the context of the studies. This circular approach enabled a satisfactory triangulation of data, i.e. its reliability has been confirmed via findings coming from other sources. Also, whenever the same stakeholder provided information in different contexts, the Commission compared these pieces of information so as to assure their coherence and reliability.

The evaluation process was assisted by a Steering Group composed of the representatives of selected Directorates General (DGs) including DG CNECT, DG COMP, DG JUST, DG GROW, DG TRADE, DG EAC, DG SANCO, DG RTD, DG NEAR together with the Secretariat-General and the Legal Service.

The Steering Group steered and monitored the progress of the exercise, ensuring the necessary quality, impartiality and usefulness of the evaluation. Being composed of members from different functions and having the necessary mix of knowledge and experience, the Steering Group brought together a range of different perspectives and provided the necessary input, in particular where the evaluation touched different policy areas.

Limitations – robustness of findings

The data collection and analysis carried out has a number of intrinsic limitations, whose impact was mitigated to a maximum possible extent:

Based on the elements above, this evaluation has been carried out on the basis of the best available data. Whenever reliable quantitative data is lacking, this is indicated as appropriate and possibly counter balanced with qualitative data and considerations.

The implementation of the AVMSD by the Member States is monitored by the European Commission on the basis of Article 33 320 of the Directive. Article 33 AVMSD requires the Member States to report to the Commission and the Commission to report to Parliament and Council on the state of play of the Directive every three years at the latest.

Current state of play

Following the last revision, the Member States were required to transpose the AVMSD at national level by 2009. Whereas to date all Member States have notified full transposition measures, issues of protracted implementation did occur. By the end of 2011, full transposition was notified to the Commission only from 20 Member States 321 .

In 2005, the EU audiovisual market was rapidly changing, also due to the development of the Internet. In 2004, Internet penetration had stabilized at about 65% by household, with mobile phone penetration at about 85%. In 2005, the EU enjoyed better domestic broadband penetration than the United States, with wider 3G deployment.

This evolution, together with the demand for premium content and the continuous search for new sources of revenue, had enabled the development of IPTV and other Internet-based methods of delivery. The need for new revenues was one of the sources of the emergence of triple-play: the convergence of broadband, telephony, and video. However, in 2005, there were still obstacles to IPTV growth, such as a lack of consumer awareness and acceptance of IPTV as a viable alternative to incumbent channels of delivery and the strong market position and economies of scale of the incumbents. As a result, in 2005, audiovisual revenues linked to the development of Internet were still limited.

As already mentioned, in 2005, transfrontier satellite commercial television was as popular as or even more popular than local terrestrial broadcasting (with cable systems re-transmitting both). This evolution was accompanied by exponential change in channel capacity, especially via digital cable and satellite, increased market penetration of multichannel homes (using sports and feature film premium content), and an increasing number of platforms. Consumer choice increased. Cable and satellite television multiplied the number of pan-European channels available.

Video on Demand (VoD) was making inroads into the audiovisual market, whether delivered by cable, fibre or Digital Subscriber Line (DSL). However, in 2005, VoD still generated limited revenues (ca. US 60 million). As regards advertising markets in 2005, television and the Internet were gaining ground, both within Europe and on a global scale.

In 2014, the overall size of the European audiovisual sector was around EUR 105.8 million 322 . This implies an increase of 0.9% as compared to 2010. This increase primarily comes from on-demand audiovisual media services, whereas physical video registered a significant decrease.

The EU audiovisual sector mainly comprises large companies which account for an absolute majority (more than half) of the workforce in 10 of these. For example, large enterprises in France employed upwards of 7 out of 10 people (71.5 %) within the programming and broadcasting activities workforce in 2010, while the share of large enterprises in the total workforce peaked at 78.5 % in Germany. Upwards of 80 % of the value added generated in Spain, Poland, Italy, France, Romania and the United Kingdom was attributed to large enterprises, their share of sectoral value added peaking in the United Kingdom (90.8 %) 323 .

By contrast, in the relatively small EU Member States of Estonia, Lithuania, Luxembourg and Slovenia, small and medium-sized enterprises (SMEs) employed the whole of the programming and broadcasting activities workforce in 2010. In those Member States it was, however, more common to find that the majority of the workforce was engaged by large enterprises 324 .

As already remarked, in light of the composition of the EU audiovisual market and the lack of data regarding specifically SMEs, references to the impact on the AVMSD rules on business, and particularly on business competitiveness, contained in this evaluation should be intended as concerning in most cases large companies.

At the end of 2013, 5 141 TV channels (excluding local channels and windows 325 ) were established in the EU. Almost 1989 of them (about 38% of the total established channels) targeted foreign markets (either EU or extra EU). This share has increased from 28% in 2009 - year of implementation - to 38% in 2013 326 . On average, 31% of the VoD services available in the Member States are established in another EU country 327 .

The market for on-demand and online services is on the rise. In 2014, there were more than 2 563 VoD services in Europe, including catch-up TV services offered by broadcasters (932 services), branded channels on open platforms (408 services), VoD services providing access to a catalogue of programs (1 126 services) and news portals (97 services) 328 .

From a static viewpoint, the TV broadcasting market is still the strongest part of the audiovisual market.

In 2013, revenues from linear television in the EU28 were EUR 83.6 bn. In comparison, total consumer revenues of VoD services amounted to EUR 2.5 bn i.e. 3% of the TV broadcasters' revenues. However, from a dynamic perspective, the domination of TV broadcast is less obvious. Their growth rate has decreased from an average annual rate of 2.8% from 2009 to 2013, to only 0.3% in 2013 329 .

In the EU28, total on-demand consumer revenues soared from EUR 919 million in 2010 to EUR 2.5 billion in 2014, an increase of 272% and a compound annual growth rate (CAGR) in the 5 year period of 28% 330 .

As regards television viewing time, the observed trend of stability between 2012 and 2014 (between 03:44 and 03:43) may hide an effective decrease in viewing time for live TV to the benefit of catch up services 331 . It should be noted that television audience measurement increasingly goes beyond the tracking of live viewing to include time-shifted viewing. In most countries, viewing is tracked during 6 or 7 days after the live transmission.

As regards viewing time online and on-demand, mobile consumption is projected to increase in the near future. The number of smartphones in Europe is expected to double by 2020, reaching 800 million. This will mean that more than 70% of mobile subscriptions will be for smartphones 332 . It must be borne in mind that in 2014, Internet video stood for 64% of total consumer internet traffic. This share is expected to increase up to 80% by 2019 333 . The consumption of videos offered by video-sharing platforms is on the rise 334 .

According to the industry, by 2020, projections suggest that more than 20% of European households will have a specific, paid account with a SVoD provider. As a result of this, the projected turnover of all VoD services in Europe should increase by 15% annually to 2020, reaching EUR 6 billion 335 .When looking at online video advertising revenue, it is expected to grow in Europe by more than 75% between 2015 and 2018 up to EUR 4.1 bn with Google and Facebook representing 50 % of the market 336 . 

The 1st Application report for the years 2009-2010 concluded that the AVMSD had overall struck the right balance amongst the objectives pursued and well served the interests of citizens and businesses. The report nonetheless 1) flagged issues around consumer protection (particularly protection of minors) in audiovisual commercial communications and 2) called for assessing whether the AVMSD still attains its consumer protection objectives in a converging media world.

The 2nd Application report for the years 2011-2013 is published as Annex 7 of this evaluation report. The report demonstrates the AVMSD's effectiveness in ensuring the development and free circulation of audiovisual media services in the EU. The report however flags the following issues: 1) complexities in determining jurisdiction and for applying procedures limiting freedom of reception and retransmission in specific case; 2) diversity in the approaches undertaken by Member States to promote European works on VoD services, putting the effectiveness of the procedures supporting the COO principle to the test in this specific field; and 3) concerns around the application of rules for certain types of commercial communications.

In the field of promotion of European works in broadcasting services, Member States shall provide the Commission every 2 years a report on the application of this Article 16 and Article 17 – promotion of European works in broadcasting services. The Member States have up to now complied with this reporting obligation. The Commission shall inform the other Member States and the European Parliament of the reports, which shall be accompanied, where appropriate, by an opinion. The latest of these Commission reports is published as an Annex to this evaluation report (Annex 8). This report shows that the provisions of Articles 16 and 17 AVMSD have been overall correctly implemented by Member States. The current rules on promotion of European works have led to strong shares of transmission of European works, independent productions and recent independent productions. The 64.1% average of European works achieved in 2011 and 2012, well above the obligatory majority proportion set out in Article 16, reflects a generally sound application of this provision throughout the EU. Member States also met comfortably the requirement regarding the share of independent productions set down in Article 17. With 33.1% in 2011 and 34.1% in 2012 the average of independent productions was significantly above the required 10% laid down by Article 17. At the same time, the share of independent productions differs significantly among Member States. The EU average share of recent independent productions was 60.6% in 2011 and 61.1% in 2012.

However, the report also shows some shortcomings. It identifies the main reasons for non-compliance reported by Member States. An often repeated argument was the difficulty for small and specialized channels to comply with the obligatory shares. Additionally, monitoring methods of compliance vary greatly among Member States and not all Member States have put in place verification systems of the data provided by broadcasters.

On promotion of European works in on-demand services, Member States were required to report to the Commission no later than 19 December 2011, and every 4 years thereafter, on the implementation of Article 13(1) – measures to promote European works in on-demand services. Member States have up to now complied with this flexible provision, while considering that there is a general lack of data regarding shares of European works in on-demand catalogues. Also on the basis of this information the Commission shall report to the European Parliament and to the Council. In addition to this report, the Commission more recently proactively analysed and reported 337 on the diverse approaches taken across the Member States on promotion of European works in on-demand services.

Although the AVMSD does not impose an obligation regarding the independence of audiovisual regulatory bodies, the Commission regularly monitored the state of play as regards the independence of national regulatory bodies, through independent studies - first the INDIREG study of 2011 338 and then its update – the RADAR study of 2015 339 .

6.1 Material scope of application

The AVMSD applies 340 to television broadcasts and to on-demand audiovisual media services for which providers have editorial responsibility. To be covered by the Directive:

(i)  services must have as their principal purpose the provision of programmes to inform, entertain or educate the general public; and

(ii) programmes should be comparable, in form and content, to television ("TV-like"). 

Relevance of the current rules

The rules defining the AVMSD's scope of application are overall relevant. The 2007 revision brought new on-demand audiovisual media services into the AVMSD scope and as such aligned the Directive to the market developments emerging at that time. In the 2015 Public consultation, a majority of respondents belonging to various stakeholders' categories stated that the rules are still relevant. However, some aspects of the definition of “audiovisual media services", which were relevant during the first years of application of the Directive after the 2007 revision, are no longer fully relevant in light of recent market and legal developments:

In light of this, the rules defining the AVMSD's scope of application are overall relevant, although most recent developments call for further reflection.

Effectiveness

The inclusion in the scope of on-demand services along with traditional broadcasting services in the context of the 2007 revision provided a minimum level of consumer protection on these services. In this light, the AVMSD rules on material scope have proven to be effective in an environment where consumption of TV content was primarily taking place on traditional TV or via on-demand services.

Furthermore, by excluding from the application of the rules audiovisual material that is: i) merely incidental to other type of content; and ii) that is not under the editorial responsibility of a provider, the Directive (also in conjunction with the EU eCommerce Directive) contributed to avoid overregulation of online services. This fulfilled the objective to foster the online market and unlock the potential of convergence of different types of media content.

However, the most recent developments in the market, technology and viewing patterns put into question the effectiveness of the rules on material scope to ensure a level playing field and an appropriate level of viewers' protection.

Specifically, the following developments led to a perceived uneven playing field and a lack of consumer protection:

When it comes to minors, video viewing is one of the earliest Internet activities carried out by young children. For example in the UK children aged 12-15 spend more time online than watching television (17.2 vs. 15.7 hours per week) 356 . Watching video clips is the second prevalent online activity amongst minors aged 4-17, after listening music and watching films and cartoons 357 . Services such as YouTube are widely popular among children 358 . Connected devices such as mobile phones, tablets and games consoles are increasingly used by minors, often without adult supervision 359 . More than half of YouTube views come from mobile devices 360 .

In all Member States, young viewers watch on average 50% less television than the average viewer. The difference between time spent by the general audience and by young viewers has increased over 2011-2014 361 .

A majority of Member States, regulators, consumer organisations and a fair share of broadcasters who replied to the 2015 Public consultation, cite these developments when underlining that the rules on material scope do not ensure a level playing field for audiovisual media services. On the other hand, a small number of MS, some regulators as well as the Internet, ICT, the press publishing sector, telecom, cable, satellite and advertising industries believe that the AVMSD rules have fostered the free circulation of audiovisual media services within the EU, created a level playing field and opportunities for new entrants to reach the consumers.

As to the effectiveness of the rules on consumer protection, there are a number of concerns:

When it comes to audiovisual media content under the editorial responsibility of a service provider, there are gaps in the level of protection guaranteed across the EU. Some Member States have excluded from the scope of application of the AVMSD some programmes due to their short duration and editing style 362 . In other cases, online versions of newspapers were not deemed to constitute an audiovisual media service 363 .

As regards services without the editorial responsibility of the UGC, which is not subject to the AVMSD rules, despite initiatives being undertaken, there are concerns regarding the protection of minors, incitement to hatred and the protection of viewers on advertising.  

The EU has undertaken a number of non-regulatory initiatives (e.g. self-regulation and funding) to protect minors online (see Annex 9 for more details). Moreover, the largest video-sharing platforms use software and human intervention with a view to protecting viewers from hate speech and protection of minors from harmful content. However, the criteria for content deemed "inappropriate" (a term most commonly used by video-sharing platforms) are defined by the platforms themselves, in their terms of service/Community guidelines 364 . Examples of initiatives that are being undertaken include:

1.Moderation of content already posted on the platforms based on flagging by the users. Users flag content, which is deemed inappropriate according to the terms of service; an algorithm sorts out the complaints prior to sending to a moderation team for verification; if deemed inappropriate, the content is removed.

2.Age verification. For example, to access certain YouTube paid content, users need to authenticate themselves. This requires them to have an active user account, declaring to be 13+.

3.Video fingerprinting technologies, identifying and preventing the same or similar content from being re-uploaded;

4.Systems allowing the users to give feedback on the content.

5.Parental controls offered by the platforms or devices.

While today some video-sharing platforms on a voluntary basis take steps to protect minors, they verify content against their own standards, which may differ from those set in the AVMSD.

For example, the music video "College boy" of the group Indochine, containing graphic images of violent bullying of a school boy, is freely available on YouTube. However, the same video is subject to a watershed in France in application of the AVMSD 365 . In another case, while YouTube removed a video of a woman being forced by her husband to walk naked in the street 366 for violation of YouTube's Community guidelines, the same video still appears on the website Liveleak.com 367 .

In this context, chances that minors are exposed to harmful content exist.

Children identify video-sharing platforms as mostly linked with violent, pornographic and other harmful content risks 368 . Among the children who link risks to specific platforms, 32% mention video-sharing sites such as YouTube, followed by other websites (29%), social networking sites (13%) and games (10%) 369 .

In the UK, ATVOD 370 found that at least 44 000 primary school children accessed an adult website in one month alone 371 . ATVOD has found that 23 of the top 25 adult websites visited by UK internet users provide instant, free and unrestricted access to hardcore pornographic videos.

Video-sharing platforms employ tools like Autoplay which enable direct exposure to potentially harmful content 372 . Potential exposure to harmful content or content inciting to hatred may also be fostered by new social media features such as live streaming 373 .

A majority of Member States, regulators, consumer organisations as well as a fair share of public service and commercial broadcasters who replied to the 2015 Public consultation and the ERGA recommendations on material scope 374 cite these developments when underlining that the rules on material scope do not ensure a sufficient level of consumer protection. On the other hand, a small number of Member States, some regulators as well as the Internet, ICT, the press publishing sector, telecom, cable, satellite and advertising industries believe that the AVMSD rules guarantee a satisfactory level of consumer protection.

In conclusion, whereas the AVMSD rules on material scope have proven to be effective over the first years from the revision, their effectiveness has by now diminished in light of the most recent developments in the market and viewing patterns.

Impacts on the Internal market:

There is fragmentation in the internal market due to diverging interpretations by Member States as to what is an on-demand service. The Member States have leeway in interpreting the definitions and this may lead to different results also in light of market developments. Diverging interpretations at national level concern specifically the following criteria:

The lack of uniform interpretation of the rules on material scope across the EU is also perceived by most regulators and broadcasters as well as by a number of Member States as shown in the 2015 Public consultation. This fragmentation has led to shortcomings in the level of legal certainty and coherence across the Union, prompting a Member State to seek clarification from the ECJ on some aspects of the AVMSD scope of application criteria in the New Media Online case, mentioned above.

EU added value

The 2007 revision has contributed to increase the level of harmonisation in a context of diverging national legislation applicable to on-demand audiovisual media services. However, as highlighted in the 2nd Application report on the AVMSD, the EU added value of the rules on material scope is reduced by complexities around the application of the AVMSD definitions to on-demand services (see the Effectiveness sub-section). As a conclusion, the EU added value of the rules lays in the harmonisation they provided, although some problems were observed with the interpretation of the definitions of the services falling within the material scope of the Directive.

Efficiency

The last revision of the AVMSD brought additional administrative 377 and compliance 378 costs due to the inclusion of on-demand services in the scope of application. Those costs are indicated in the Efficiency sub-sections in sections 6.4; 6.5; 6.6; 6.7, that focus on specific AVMSD domains.

For both broadcasters and on-demand audiovisual media services, EU-level harmonisation and the application of the COO principle ensure legal certainty and thus cost savings (see section 6.3 on COO).

As indicated by three media service providers in the 2015 Public consultation and in the ERGA questionnaire, being subject to the AVMSD rules in particular on protection of minors may give a competitive advantage to operators. Being identified as family-friendly contributes to the positive branding of an operator. This was confirmed by the British Board of Film Classification (BBFC) which reported that 86% of parents in the UK would encourage or make sure that their children watch online channels with clear age ratings 379 .

At the same time, the current exclusion of services offering audiovisual content has the potential to put those who are currently in the scope (both broadcast and on-demand services) at a competitive disadvantage. This was corroborated by the contributions of a significant number of stakeholders across sectors in the context of the 2015 Public consultation on the AVMSD.

Coherence

The AVMSD qualifies as lex specialis vis-à-vis the e-Commerce Directive (ECD) 380 and is without prejudice to the ECD system of limited liability 381 . The AVMSD rules defining the scope of application for on-demand audiovisual media services are hence coherent with the ECD, including the rules limiting liability for illegal activities for information society services acting as intermediaries 382 set out in the ECD. The ECD and AVMSD adopt a similar approach. According to both Directives, operators are not required to abide by rules regarding information and/or content over which they have no control – provided that the conditions set out in the law are met.

6.2. Geographical scope

The AVMDS applies 383 to audiovisual media services transmitted by service providers under the jurisdiction of a Member State. The AVMSD lays down specific criteria to determine whether a service falls under a Member State's jurisdiction. These criteria take into account, for instance, where the place of the head office is located, where editorial decisions are taken or where a significant part of the workforce operates. As a subsidiary jurisdiction criterion, the AVMSD refers to the Member State where a satellite up-link is situated or where satellite capacity is used. If an audiovisual media service provider falls under the jurisdiction of a third country, the AVMSD and its rules do not apply. Member States remain free to take whatever measures they deem appropriate with regard to audiovisual media services which do not fall within the AVMSD geographical scope, provided these measures comply with Union law and the international obligations of the Union 384 .

Relevance of the current rules

In the 2015 Public consultation on the AVMSD, a majority 385 of respondents belonging to different categories of stakeholders groups flagged that the relevance of the AVMSD rules on geographical scope has been put to the test by technology and market developments. Those respondents argue that the Internet allows services to target viewers in the EU without having an establishment in the Union and thus to bypass EU regulation. 

These concerns notwithstanding, the number of services targeting the EU from third countries is currently very small. According to the EAO, about 50 paying VoD services (this number includes different linguistic versions of the same service) established in the United States target one or more Member States 386 . In addition, most leading foreign providers of on-demand services (Netflix, iTunes, Amazon) have all set up subsidiaries in the EU and are therefore subject to the AVMSD. This confirms that the AVMSD rules are still relevant.

In light of the above, the current rules defining the geographical scope continue to be relevant.

Effectiveness

In the 2015 Public consultation, a majority of respondents belonging to various categories (in particular Member States, regulators, Public service broadcasters and consumer organisations) highlighted that, due to the exclusion of foreign providers, the current rules on geographical scope do not ensure a level playing field and are not sufficiently effective in terms of consumer protection 387 . On the other hand, ICT, digital, Internet companies and satellite operators who replied to the 2015 Public consultation do not see issues regarding the effectiveness of the AVMSD rules on geographical scope.

In the context of the 2nd Application report on the AVMSD, two Member States reported cases where on-demand services provided from outside the EU offered adult content without the necessary safeguards for protecting minors 388 . Also, given that an important satellite operator is established on its territory, one Member State reported several issues about incitement to hatred and respect of human dignity with channels from third countries since 2012. However, given that these channels use a satellite up-link/satellite capacity in a Member State, they would be covered by the AVMSD.

The Internet undoubtedly makes it easier to deliver audiovisual content at global scale. The number and geographical spread of providers targeting EU viewers without being established in the EU may therefore grow over time 389 . However, the currently very small number of services targeting the EU from third countries does not suggest the existence of a problem regarding the effectiveness of the current rules. In view of the size of the problems reported, seeking to address them by changing the geographical scope would be disproportionate. In this regard it should be noted that, already under the current rules, Member States, if they so wish, can apply their national rules to providers established abroad.

In light of the above, it can be concluded that the AVMSD rules on geographical scope are still effective in ensuring a level playing field and sufficient consumer protection.

EU added value

The AVMSD rules on geographical scope have proven their worth as gate-keeper of the internal market to determine what audiovisual media services fall within the jurisdiction of an EU Member State and as such can benefit from the COO principle. This was confirmed by a majority of contributors to the 2015 Public consultation, across various stakeholder groups, who acknowledged the benefits of the rules on geographical scope for the internal market.

Efficiency

The costs of enforcing legislation on operators who have no EU establishment and do not even use a satellite up-link/capacity in the EU would be high, while most of the relevant players are already established in the EU. Imposing on all Member States the obligation to enforce the AVMSD rules to players whose impact on the market has so far not been significant is likely to result in a negative cost-benefit ratio. If foreign providers were to be required to register/appoint a representative, this obligation would have to be monitored and enforced. If the registration/appointment of a representative were to turn out not to be sufficiently effective and real (e.g. a letterbox company), the rules would have to be enforced in a third country which could be complex. Firstly, by analogy to international cooperation in the field of competition, enforcement by the Commission in a third country may require bilateral international agreements ("dedicated agreements") or AVSMD provisions included in general agreements (e.g. Trade Agreements). However, this is likely to be complicated as providers located in the US constitute the major part of the market share of foreign providers targeting the EU. Secondly, any decision from a regulator imposing a fine or seeking a change in the behaviour of a service provider would be difficult to enforce as there would normally be no assets in the EU. In case a foreign provider targets more than one Member State, the need for coordination between regulators so as to avoid conflicts of jurisdiction would trigger further administrative costs. This is in particular the case when considering that the current rules allow Member States, if they so wish, to apply their national rules to providers established abroad.

In conclusion, and although quantitative data is not available, it can be reasonably assumed that the rules have been cost-efficient from the elements outlined above.

Coherence

As highlighted by a number of contributors to the 2015 Public consultation on the AVMSD, the rules on the geographical scope – in their essential role to promote the smooth functioning of the internal market – are part of the logic of completing the Digital Single Market.

This confirms that the current AVMSD rules on geographical scope are coherent with other EU initiatives and activities. This includes the ECD.

It should be noted, however, that the EU General Data Protection Regulation on which a political agreement was reached in December 2015 and which will most likely come into application in 2018, will apply to the processing of personal data of data subjects residing in the EU by controllers not established in the EU. The underlying logic is that Union data protection rules should still apply in relation to data of EU residents, even if data is processed outside the Union. Some contributors to the 2015 Public consultation on the AVMSD mentioned that a similar logic, according to which consumer protection is ensured whenever the consumer is targeted regardless of geographical location of the service, would be best-suited to the AVMSD. However, given the very small numbers of providers of audiovisual media services targeting one or more Member States without being established in the EU, the situation differs from the field of data protection.

6.3 Country of origin

According to the COO principle, a provider under the jurisdiction of a Member State must only comply with the rules of that Member State, while being able to provide its services in any other Member States. 390

Member States may restrict the reception and the retransmission of services freely circulating within the EU only in limited cases and following the procedure laid down in the AVMSD. 391 For broadcasting, restrictions are limited to cases of incitement to hatred and infringement of the rules on protection of minors. For on-demand services, restriction grounds include the protection of public health and public security. The relevant procedure includes a first cooperation phase where the Member State concerned contacts the transmitting Member State to try to reach an amicable settlement.

Member States may adopt stricter or more detailed rules in any of the fields coordinated by the AVMSD. However, a receiving Member State with higher standard levels cannot restrict the reception of services from another Member State which complies with the AVMSD requirements as transposed in the national law of the Member State of jurisdiction. If a Member State has chosen to do so and encounters issues with a television broadcast mostly or wholly directed towards its territory, it can use the circumvention procedure. 392 That procedure entitles the receiving Member States to adopt appropriate measures against the broadcaster concerned provided, among other things, that the broadcaster in question has established itself in the Member State of jurisdiction in order to avoid stricter rules which would otherwise be applicable to it.

Relevance of the current rules

The 2nd AVMSD Application report 393 and the majority of respondents to the 2015 Public consultation from all participating stakeholders' categories show that the COO principle is of continued relevance. The COO principle is critical for the internal market as it provides legal certainty and fosters investments, media pluralism and availability of content.

EffectivenessAt the end of 2013, 5141 TV channels (no local and windows 394 ) were established in the EU. Almost 1989 of them (about 38% of the total established channels) targeted foreign markets (either EU or extra EU). This share has increased from 28% in 2009 - year of implementation - to 38% in 2013 395 . As far as VoD services are concerned, in the Member States, on average 31 % of the VoD services available, are established in another EU country.

The above mentioned figures show that the COO principle has accompanied the increase in the cross border provision of audiovisual media services. . It has also had a positive impact on cultural diversity and on the availability of content 396 in particular in smaller markets According to the industry, in the 10 smallest markets (by population), 75% or more of services are available via non-domestic licenses supported by the COO principle 397 . This was confirmed by an overwhelming majority of respondents from all stakeholder categories in the 2015 Public consultation.

The effects of the COO principle derive from the attribution of jurisdiction to one Member State only which thereby avoids regulatory inefficiencies resulting from subjecting one service to multiple jurisdictions. This limits the costs borne by service providers to one country. This also may facilitate investment in the media sector 398 . This was confirmed by the majority of respondents across various categories (majority of Member States, public service broadcasters, commercial broadcasters, satellite operators and representatives of the internet industry) in the 2015 Public consultation.

However, some problems in the application of jurisdiction criteria and of the derogation/ circumvention procedures have contributed to reducing the effectiveness of the COO principle. This recently prompted the Commission to provide to Member States clarifications 399 regarding the application of the derogation and circumvention procedures.

Some Member States have indeed experienced problems in the transposition into national law of the jurisdiction criteria. Issues related, for instance, to the subsidiary jurisdiction criteria based on using a satellite up-link/satellite capacity in a Member State or the transposition of the rule that services intended exclusively for reception in third countries are not covered by the AVMSD. The application of the jurisdiction criteria revealed uncertainties and disagreements between Member States on jurisdiction over a Russian language channel in the context of the application of the derogation procedure 400 . Similar jurisdiction issues arose in an earlier decision of the Commission regarding notifications of serious infringements of the rules on protection of minors 401 . In the 2015 Public consultation, the difficulty to identify the service providers was quoted as source of problems related to the application of jurisdiction criteria.

Regarding the derogation procedure, certain Member States experienced difficulties in the transposition into national law of permissible derogations from the freedom of reception and retransmission regarding the substance and/or the procedure. There have also been problems regarding the application of the derogation procedure, notably in the cases of alleged hate speech on Russian language channels retransmitted in Latvia and Lithuania 402 , with concerns on the respect of procedural requirements. The absence of an urgency derogation mechanism for TV broadcasts, as opposed to the urgency procedure in place for on-demand services has been raised in the 2015 Public consultation. A Presidency discussion paper prepared by the Latvian Presidency underlines that, unlike for on-demand services, the AVMSD does not allow for a quick reaction in emergency situations for television broadcasting. 403 According to the outcome of the Education, Youth, Culture and Sport the meeting on 18/19 May 2015, "the procedure to be followed by member states when they are the target of unacceptable content coming from another member state should be streamlined and accelerated, in particular in certain cases of services of non-EU origin licensed in one member state yet targeting the audience of another member state. Effective cooperation among audiovisual regulatory authorities is crucial in this respect." 404

Except for one case, the circumvention procedure has not been used in practice 405 . The only case notified to the Commission concerned alcohol advertising in Sweden 406 and is mentioned in the 2nd Application report on the AVMSD. The case highlighted certain procedural problems.

The effectiveness of the COO principle is linked to the degree of harmonisation between national laws. Particularly for rules on the promotion of European works (section 6.7), there are significant divergences in national transpositions. The concerns of 3 Member States to ensure that service providers active on given national markets contribute their fair share to the support of local cultural production are also reflected in the levy schemes adopted (but not applied to date) in Germany and France which subject certain foreign VoD providers targeting their respective markets to a levy obligation. Both Member States have notified their schemes as state aid to the Commission. The Commission's assessment is ongoing 407 .

EU added value

The EU added-value of the COO principle was confirmed by a majority of stakeholders from various categories (and specifically an overwhelming majority of Member States and industry players) in the 2015 Public consultation. According to most stakeholders, the main advantage of COO principle lies in the legal certainty it provides as it requires providers to abide by the legislation of the country of establishment only. This in turn facilitates investment in the media sector and fosters diversity and consumer choice as well as media pluralism.

Efficiency

The rules underpinning the operation of the COO principle are too complex and result in a difficult application of the Directive and hence an unnecessary administrative burden. This view was confirmed by many respondents to the 2015 Public consultation, who, for example, see scope for rendering the cooperation and circumvention procedures simpler and less time-consuming.

In light of the above, it can be concluded that the application of the COO principle could benefit from simplified and more precise rule and procedures.

Coherence

The COO principle is coherent with the internal market logic of the EU treaties as it ensures the free provision of audiovisual media services across the EU. It is equally coherent with the EU Digital Single market initiatives 409 . In addition, it is coherent with the ECD, including as regards the grounds for derogation from the freedom to provide services 410 .

6.4 Protection of minors

The AVMSD requires Member States to ensure that audiovisual media services do not contain any incitement to hatred based on race, sex, religion or nationality. On protection of minors, TV broadcasts shall not include seriously harmful programmes (pornography and strong violence) but may include potentially harmful programmes (erotic content and mild violence) if children will not normally hear or see them 411 .

For on-demand, service providers are required to take appropriate measures so that minors would not normally hear or see seriously harmful content. There are no restrictions for potentially harmful content 412 .

Relevance of the current rules

The existing framework does not match the most recent developments in the market and in children's viewing patters that were highlighted in the Effectiveness sub-section under section 6.1 on Material scope 413 . In light of this, the AVMSD rules, while being relevant during the first years of application of the Directive, seem no longer fully relevant in light of the increasing exposure of minors to audiovisual media content online, whether covered by the AVMSD (but subject to a lower level of protection) or outside its scope.

Moreover, when it comes to on-demand audiovisual media services, the majority of Member States have adopted stricter measures than those required by the AVMSD (see Annex 5). This puts to the test the relevance of the AVMSD rules on protection of minors in on-demand audiovisual media services. 4 Member States forbid seriously impairing content on VoD services (while the AVMSD only requires restrictions). 16 Member States mandate varying forms of protection (e.g. PIN codes, content filtering) for content for which the AVMSD does not require restrictions (i.e. content which is likely to impair the development of minors). VOD providers have flagged this issue in the 2015 Public consultation.

As also highlighted in the ERGA report on protection of minors 414 , certain concepts and rating systems for both broadcast and on-demand services are not harmonised at EU level 415 . This is the case for: the age threshold for a person to be considered a "minor"; while for "content likely to impair" there are similarities across the Member States, the concept of "content likely to seriously impair" is not even translated in formal definitions in the Member States and is assessed on a case-by-case basis; content categories (e.g. violence; sex; offensive language) are not harmonised at EU level; although labelling and rating content are widespread, there are different classification systems for audiovisual products at national level 416 .

In the 2015 Public consultation, stakeholders (both Member States and industry) affirmed that minimum harmonisation and flexibility on protection of minors should be maintained as it ensures that national sensitivities towards harmful content can be taken into account.

Effectiveness

Clear-cut conclusions on the effectiveness of the Directive's rules on protection of minors applicable to on-demand services are difficult to draw as most Member States do not proactively monitor compliance but act primarily upon complaints and only few of them carry out on-the-spot checks 417 .

Whereas in the 2015 Public consultation a fair share of respondents from various stakeholder categories (with the exclusion of consumer organisations) declared the rules to be effective, there are indications that the AVMSD has not been entirely effective when it comes to protection of minors in on-demand services.

Firstly, developments in the market and viewing patterns diminish the effectiveness of the rules on protection of minors, as highlighted in section 6.1 under material scope.

A majority of Member States, regulators and unanimously by consumer organisations in the 2015 Public consultation 418 stated that the AVMSD rules are not effective in protecting minors because they do not apply to all online content, including video-sharing platforms.

A deficit of effectiveness of the rules may also occur due to the lighter regulatory treatment given to on-demand services, as expressed by most Member States, regulators, Public service and commercial broadcasters in the 2015 Public consultation and by ERGA in its recommendations on protection of minors. Those stakeholders believe that by not requiring sufficient protection in on-demand services 419 , the AVMSD is ineffective.

An additional factor that might reduce the effectiveness of the Directive is, as already mentioned, the fact that most Member States do not proactively monitor compliance with the rules. As a consequence, the Member States may not be aware of or disregard relevant developments that may inform future policies.

EU added value

The EU added-value of the rules primarily lies in:

Efficiency