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Regulation of video on demand services following the Sun Video appeal

Nick Pimlott
29/02/2012

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United Kingdom

Regulation of video on demand services following the "Sun Video" appeal

This article first appeared in Entertainment Law Review, 29 Feb 2012.

The recent successful appeal to Ofcom by News Group Newspapers Limited ("News Group") against a determination by ATVOD (the Authority for Video On Demand) that its "Sun Video" service is an on-demand programme service ("ODPS") in accordance with Part 4A of the Communications Act 2003 (the "Act") has set a useful and important precedent which is likely to radically alter how ATVOD interprets the scope of this nascent regulatory regime.

The immediate result of News Group's triumph was the withdrawal by ATVOD of a swathe of similar determinations involving the online video services of other newspaper providers, including The Independent, The Guardian, the Financial Times, The Telegraph and The Sunday Times. Yet Ofcom's decision may have implications that extend far beyond the confines of Fleet Street.

Background

Part 4A of the Act established a new framework for the regulation of ODPSs and was inserted by the Audiovisual Media Services Regulations 2009 (as amended by the Audiovisual Media Services Regulations 2010) (the "AVMS Regulations") to implement the Audiovisual Media Services Directive (2007/65/EC(1)) (the "AVMS Directive"). Under section 368BA of the Act, any provider of an ODPS must make a notification to ATVOD. Each ODPS is currently subject to a regulatory fee, normally £2,900, and its editorial content and advertising must comply with rules enforced by ATVOD and the Advertising Standards Agency respectively. Ofcom designated ATVOD as the appropriate regulatory authority to carry out certain functions under the Act, including making determinations as to what constitutes an ODPS. Any such determination is subject to appeal to Ofcom.

Another function delegated to ATVOD is the production of guidance on how the regime will apply in practice, including the "Guidance on who needs to notify" which can be found on the ATVOD website (atvod.co.uk/rules-and-guidance).  This guidance is merely interpretative as to how ATVOD is likely to apply the criteria for determining what constitutes an ODPS set out in section 368A of the Act. It draws upon the AVMS Directive but does not have legal effect.

Under section 368A of the Act, the criteria for determining whether a service is an ODPS are that

  • its principal purpose is the provision of programmes the form and content of which are comparable to the form and content of programmes normally included in television programme services;
  • access to it is on-demand;
  • there is a person who has editorial responsibility for it;
  • it is made available by that person for use by members of the public; and
  • that person is under the jurisdiction of the United Kingdom for the purposes of the AVMS Directive.

The "Sun Video" appeal centred around the application of the first of these criteria – the principal purpose test.

The appeal

On 25 October 2010, ATVOD wrote to News Group to state its preliminary view that the "Sun Video" section of The Sun's website may be an ODPS. News Group made representations disagreeing with this view on 10 December 2010, following which ATVOD issued its final determination that the "Sun Video" service was an ODPS on 11 February 2011. News Group appealed to Ofcom on 22 March 2011, making detailed submissions.

ATVOD relied as evidence on three videos and some screen shots. It referred to its own guidance and to the criteria in section 368A of the Act, pointing to factors such as the video content being collated in a separate section of the Sun website, the content being similar to the type of programming one might find on television and the fact that, in ATVOD's view, the "Sun Video" section of the website is a video on demand service in its own right and is marketed as such.

News Group argued that (a) the "Sun Video" section of The Sun's website is not a 'service' within the meaning used in section 368A(1) of the Act; and (b) even if it were such a service, it does not have the principal purpose of providing "TV-like" programming.

News Group strongly disagreed that The Sun's online video section was marketed or presented as a VOD service in its own right. It argued that the section was clearly ancillary to the main function of the website – the provision of an online version of The Sun newspaper. ATVOD had found that "the viewer is not invited to consider the content as…ancillary to the online version of the newspaper". News Group countered that "A visitor to each site cannot conceivably be in any doubt that he or she is anywhere other than on a site which is the online version of The Sun", and pointed to the consistent use of The Sun's masthead on every page, the fact that the Video section is one of 14 menu options on the site and the link between each video and a related text-based article.

As to whether the programming on the Sun Video section was comparable to television programming, ATVOD had found it to be so – pointing to how the clips "follow the conventions of TV programmes, with edited opening sequences, on-screen captions, music soundtrack and presenters" and highlighting interviews with pop stars lasting 13 minutes. News Group submitted that the programming was not comparable – even the longer "web chat" interviews with celebrities were "a creature of the internet" and would not be found in a television programme. But it submitted that, in any case, the question of comparability was only relevant if the principal purpose of The Sun's website was to provide audiovisual material, which it was not.

Ofcom's decision

Ofcom upheld the appeal and set aside ATVOD's determination. Central to its reasoning was the view that ATVOD had misapplied the statutory criteria by focussing too much on the Sun Video section of The Sun's website and not looking enough at the website as a whole. In Ofcom's opinion, the Video section of The Sun's website was (both at the time of the determination and the appeal) not a service with the principal purpose of providing audiovisual material and therefore not an ODPS.

In addressing the key definition in section 368A(1)(a) of the Act – that an ODPS is a service  with the principal purpose of providing programmes comparable to television programmes - Ofcom did not agree with News Group's assertion that the question of whether the "Sun Video" section was a "service" should be assessed separately to the "principle purpose" of what is provided. However, it found in News Group's favour via different reasoning. Ofcom stated that the elements of the definition to be assessed were (a) the "principal purpose" part; and (b) the "comparability" part. However, both Ofcom and ATVOD agreed that - since Ofcom had concluded that "Sun Video" did not have the relevant "principal purpose" - it was unnecessary for it to analyse the "comparability" element in order to conclude that the service was not an ODPS.

In establishing that the service did not have the requisite "principal purpose", Ofcom cited several recitals of the AVMS Directive, including Recital 24, which articulates a key aspect of the new regime – that of meeting users' reasonable expectations of regulatory protection:

"It is characteristic of on-demand audiovisual media services…that they compete for the same audience as television broadcasts, and the nature and the means of access to the service would lead the user reasonably to expect regulatory protection"

Recital 22 makes clear that audiovisual elements which are "ancillary" to a non-audiovisual service should not be covered by the new regulations and Recital 28 states that the scope of the AVMS Directive "should not cover electronic versions of newspapers and magazines". Ofcom stated that these recitals should be read together to conclude that "a service whose principal purpose is the provision of the electronic version of a newspaper, an ancillary part of which is the provision of some audiovisual material, is not an ODPS". However, Ofcom was careful to add that this does not mean that a service providing material linked to a newspaper of magazine will always be excluded from the scope of the Act, but rather that newspapers and magazines are an example of a category of service which may include audiovisual material that is ancillary. A newspaper or magazine provider could provide an on demand service – even on the same website as its main publication – which is a service with the required principal purpose and therefore an ODPS. That, however, was not the case in this appeal.

Looking at the characteristics of The Sun's website and its Video section, Ofcom pointed to a number of factors which indicated that the service did not meet the "principal purpose" test, including the generally limited duration of the material, the significant linking between the videos and substantial written articles and the limited independence of the videos when viewed without the accompanying articles.

Ofcom also made reference to ATVOD's own notification guidance and recommended that ATVOD consider developing it in the light of this appeal Decision. It set out some specific examples of characteristics of a service that did have the principal purpose of providing audiovisual material, in order to assist in future interpretation and with a revision of ATVOD's guidance. The main aspects of these characteristics may be summarised as follows:

- the service having its own homepage;

- the videos being catalogued and accessed on a separate section of the website to any written articles;

- the service being styled like a television channel;

- the duration of the videos being generally longer than "bite sized" clips or extracts from longer programmes;

- there being little or no linkage between the videos and other content;

- where the service provides written and audiovisual material, there being significantly more audiovisual material than written and the written material being brief or introductory to the audiovisual material;

- the videos generally not being intended to be ancillary to, or enhance, a non-audiovisual service.

Ofcom's approach to applying the "principal purpose" test clearly differs from that taken by ATVOD previously and, whilst it has left ATVOD with no choice but to withdraw its other determinations against newspapers, it must also alter how it applies this part of the criteria under the Act to any online service which offers non-audiovisual content as well as video.

The future regulatory landscape

As might be expected with the arrival of any newly established regulatory body whose functions include introducing red tape and fees to a previously uninhibited marketplace, ATVOD has been the subject of considerable criticism from providers of online video services. In January 2012, no sooner than he had returned from the new year break did ATVOD chief executive Peter Johnson find himself defending the regulation of VOD services against the claim that it is preventing small businesses from competing with their larger, better funded rivals (2). Mr. Johnson pointed out that ATVOD has been flexible in reducing its £2,900 per annum fee to as low as £150 for businesses that show they would struggle to afford the higher fee. ATVOD now plans to launch a public consultation in early 2012 on the fees that will apply for the year starting 1 April 2011.

The unpopularity of ATVOD's activities has put the spotlight on its interpretation of the scope of Part 4A of the Act and many digital media business are hoping that the Sun Video appeal is the first in a line of precedents through which Ofcom will narrow the reach of what they see as an overly  enthusiastic new regulator that is keen to expand its reach.

Two previous appeals against ATVOD determinations were made to Ofcom in 2011 but those were of little wider significance to the digital media industry and in each case, Ofcom ruled in ATVOD's favour. Those cases involved ‘adult’ websites Demand Adult and Climax 3 (both operated by Playboy TV). In both appeals, Playboy TV argued that its hardcore pornographic, "R18" rated content was strictly prohibited from appearing on television and could not therefore be said to be comparable to content that is "normally included in television programme services". This was a weak argument and Ofcom dismissed it on the basis that the content was clearly comparable to "adult sex" programming on premium television channels and that the hardcore nature of the programming was simply a matter of degree.

On 18th January 2012, Ofcom published a Decision upholding ATVOD's determinations in respect of the VOD services on Virgin Media's cable network of three Viacom companies: Nickelodeon UK Limited, The Paramount Partnership and MTV Networks Europe. The appellants did not dispute that the VOD services were ODPSs, but rather that under section 368A(1)(c) of the Act, they had editorial responsibility for the services. They had each agreed in contracts with Virgin Media that they would have editorial responsibility, but having duly notified Ofcom as required by the Act, they later sought to withdraw their notifications and claim that Virgin Media had editorial responsibility in practice, in addition to 'making the services available to the public' in accordance with section 368A(1)(d).

Under section 368A(4) of the Act, editorial responsibility is clarified as being where a person has general control (a) over what programmes are offered to users and (b) over the manner in which the programmes are organised.  They need not have control over the content of individual programmes or over the distribution or broadcast of them. Ofcom agreed with ATVOD's view that, in the absence of compelling evidence to the contrary, there was no reason to contradict the clear contractual allocation of editorial responsibility to the Viacom companies, even though some aspects of general control over the selection and arrangement of the programming were fulfilled by Virgin Media.

Following the Sun Video and Viacom appeals, all eyes are now likely to be on the pending appeal decisions in relation to BBC Worldwide's online video services "BBCW on Mediaset" (available in Italy) and its YouTube channels for Top Gear and BBC Food.

In the "BBCW on Mediaset" appeal, BBC Worldwide has submitted a number of grounds to contest ATVOD's determination, including that the programme is not a discrete service, that BBC Worldwide does not have editorial responsibility for the service in practice (regardless of what is written in its contract with Mediaset) and that there is a risk of double regulation, since Mediaset is notifying its entire VOD service to the Italian VOD regulator. In making its decision in respect of the editorial responsibility question Ofcom could take a similar approach to that taken in the Viacom appeals, but it will need to consider different facts and whether BBCW's evidence of the control exercised in practice is more compelling than that submitted by Viacom.  

In the BBC Food YouTube and Top Year Youtube appeals, the focus is more on the length of the clips included in the service (mostly only a few minutes) and their comparability to television programming. BBC Worldwide has conducted research showing that, over a four day period, only 3.2% of the programmes on the five main UK television channels were less than ten minutes in duration. In its determination, ATVOD found this evidence to show that such content does indeed have a significant presence on broadcast television. In considering this appeal, Ofcom will therefore need to address the comparability test, which was not analysed in detail in previous appeals, and thus perhaps provide another useful precedent in interpreting the new framework.

It remains to be seen how Ofcom's reasoning in the "Sun Video" decision will affect ATVOD's approach to making its determinations as to what constitutes an ODPS, but it will certainly set the scene for the BBC Worldwide appeals, since it will need to show a consistent interpretation of section 368A(1)(a), which now seems likely to be narrower than previously applied.

Conclusion

The digital media industry will now be watching ATVOD with anticipation in the hope that its wings will start to flap less strongly and perhaps be further clipped by Ofcom as a consequence of forthcoming appeals.  One thing is certain, however: by emphasising the importance of looking at each online service with a wider lens and taking into account the entire range of audiovisual and non-audiovisual content that the site may offer, Ofcom has asked ATVOD to broaden its mind in applying the Act and thereby to narrow its remit. Newspaper and magazine providers are breathing a sigh of relief – though Ofcom has made it clear that they must still tread carefully to avoid falling into the scope of the regulations in future. The "Sun Video" precedent will also assist other media service providers whose video offerings are ancillary to other products and it has clarified the "principal purpose" test in a manner that significantly reins in ATVOD's reach. No doubt this will increase the volume of dissenting industry voices at ATVOD's quarterly industry forum and during the consultation on its regulatory fee structure early in 2012.

Nick Pimlott is a Partner in Fieldfisher’s Competition and EU Regulatory Group 

David Lewis is an Associate in Fieldfisher's Technology and Outsourcing Group


(1)  Since the AVMS Regulations came into force, the AVMS Directive has been consolidated with other Directives into Directive 2010/13/EU.

(2)  See article here.

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