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New programming and investment obligations for VOD and linear audio-visual media service providers!

On 25 January 2019, the Italian Communications Authority (Autorità per le Garanzie nelle Comunicazioni, hereinafter “AGCOM“) published the Resolution 595/18/CONS setting out the new Regulation on programming and investment obligations in favour of European works and works by independent producers (as amended by AGCOM Resolution 24/19/CONS) (hereinafter, “New Regulation“).

The New Regulation – which replaces the previous resolutions concerning the programming and investment quotas, including Resolution 66/09/CONS – was adopted on the basis of the Legislative Decree no. 204/2017, which amended the Consolidated Act on audio-visual media services and empowered AGCOM to set detailed rules applicable to linear and non-linear audio-visual media services providers, as well as to pay-per-view media services providers.

The New Regulation provides for a gradual increase in the programming and investment obligations applying to audio-visual media services providers subject to the Italian jurisdiction, depending on the type of services provided and the type of work to be aired. Note that the application of certain provisions set out in the new Regulation has been postponed from 1 January 2019 to the 1st July 2019 in accordance with Resolution 24/19/CONS and 2019 Budget Law.

On demand audio-visual media services

The New Regulation provides that starting from 1 July 2019 on demand audio-visual media service providers shall be subject to the following programming and investments obligations.

Programming obligations. On demand audiovisual media service providers shall reserve at least 30% of the providers’ catalogue to European works, a sub-quota of which, corresponding to at least 50%, shall be reserved to works of Italian original expression, wherever produced. The percentage shall be calculated on the total amount of hours available within the catalogue on an yearly basis.

Investment obligations. On demand audiovisual media service providers shall reserve at least 20% of their annual net revenues as specifically resulting from the provision of on demand audio-visual contents within their catalogue in Italy to the production, pre-purchase and purchase of European works produced by independent producers, with particular regard to works published within 5 years of their production. A sub-quota, corresponding to at least 50% of the aforementioned quota, shall be reserved to works of Italian original expression, wherever produced. Annual net revenues means revenues strictly related to the typical business of an audio-visual media service in accordance with its authorization as they result from the last approved balance sheet available on 1 January of each relevant year.

Starting from 1 July 2019 similar investment obligations shall apply also to on demand audiovisual media providers subject to the jurisdiction of any Member State of the European Union bearing the editorial responsibility of catalogues addressed to Italian consumers. In this event, the aforementioned percentages shall be calculated on the provider’s annual net revenues resulting from the distribution of its catalogues in Italy.

Moreover, specific rules are set out by the New Regulation so as to ensure visibility to European works included in on demand catalogues. In this regards, on demand audio-visual media service providers shall create a dedicated section on the main access page or a specific category for the research of European works and reserve a quota of its advertising campaigns to European works, regardless of any methods, processes or algorithms used to customize user profiles. In this regard, Annex B to the New Regulation sets out a scoring system to assess whether the on demand audio-visual media service is compliant with these requirements.

Linear audio-visual media services

Programming obligations. Linear audio-visual media services providers shall reserve to each category of works a percentage of their broadcasting time (i.e. the total number of programming hours, less the time spent for news, sport events, television games, advertising, teletext services and teleshopping) as calculated on a yearly basis, as defined in the following table.

Type of Work 01.01.2019 – 31.06.2019 01.07.2019 – 31.12.2019 2020 From 2021
European works > 50% 53% 56% 60%
Recent works (of the last 5 years) > 10% N/A N/A N/A
Works of Italian original expression 1% (within the quota of 10% of the recent works) 1/3 of the quota destined to European works 1/3 of the quota destined to European works 1/3 of the quota destined to European works
Works suitable for minors > 3% > 3% > 3% > 3%
Works for both minors and adult > 10% > 10% > 10% > 10%

The New Regulation further provides that starting form 1 January 2019 a quota corresponding to the 6% of the broadcasting time calculated on a weekly basis shall be reserved to fictional and cinematographic works, fiction, original documentaries or other works having high cultural or scientific content, including the television editions of theatrical works, of Italian original expression, wherever produced, whose beginning or end takes place in the time slot from 6.00 pm to 11.00 pm.

Investment obligations

The table below identifies the investment obligations applying to each category of works for their the production, financing, pre-purchase and purchase, to be calculated on of the broadcaster annual net revenues.

Work 01.01.2019 – 31.06.2019 01.07.2019 – 31.12.2019 2020 From 2021
European works N/A 12.5% 15% 15%
European works by independent producers > 10% Sub-quota of at least 10.4% of the quota reserved to European works Sub-quota of at least 12.5% of the quota reserved to European works Sub-quota of at least 12.5% of the quota reserved to European works
Works of Italian original expression Sub-quota of the quota reserved to European works of independent producers corresponding to 32%, equal to 3.2% of annual net revenues 3.5% (not applicable to linear audiovisual media services providers broadcasting less than 52 cinematographic works on a yearly basis) 4% (not applicable to linear audiovisual media services providers broadcasting less than 52 cinematographic works on a yearly basis) 4.5% (not applicable to linear audiovisual media services providers broadcasting less than 52 cinematographic works on a yearly basis)
Recent works of Italian original expression (of the last 5 years) Within the sub-quota mentioned above, a further sub-quota corresponding to 70% (at least 30% of which is destined to the pre-purchase), equal to 2.24% of annual net revenues N/A N/A N/A

Sanctions

The New Regulation also introduces specific procedures for compliance monitoring and issuing sanctions.

The Legislative Decree no. 204/2017 provides for a significant increase of the sanctions applicable in case of breach of the programing and investment obligations. While the Consolidated Act provided that infringing broadcasters would be punished with a financial sanction ranging between € 10,329 and € 258,228, the Legislative Decree no. 204/2017 provides for a sanction ranging between € 100,000 and € 5 million, or up to 1% of annual turnover, if the value of this percentage exceeds € 5 million. Moreover, depending upon the severity of the violation, AGCOM may also apply the suspension of the activity for a period of 6 months or the revocation of the audiovisual media services authorization.

Please feel free to contact us, Alessandro Ferrari (alessandro.ferrari@dlapiper.com) and Laura Borelli (laura.borelli@dlapiper.com), if you wish to discuss!