EUROPEAN COMMISSION Brussels, 25.5.2016 SWD(2016) 170 final COMMISSION STAFF WORKING DOCUMENT Ex-post REFIT evaluation of the Audiovisual Media Services Directive 2010/13/EU 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

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Contents 1. Introduction 2. Background 2.1 Situation prior to Directive 2.2 Baseline 2.3 Description of the Directive and of its objectives 3. Evaluation questions 4. Method 5. Implementation state of play (results) 6. Answers to the evaluation questions 6.1 Material scope of application 6.2. Geographical scope 6.3 Country of origin 6.4 Protection of minors 6.5 Ban on hate speech 6.6 Commercial communications 6.7 Promotion of European works 6.8 Independence of regulators and cooperation amongst regulators

6.9 Accessibility for persons with disabilities 6.10 Events of major importance for society and short news reports 6.11 Right of reply 6.12 Self/co-regulatory initiatives in the context of the AVMSD 52 7. Conclusions 56 8. Annexes 57

1.Introduction 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) of the Audiovisual Media Services Directive (hereinafter "AVMSD"). In line with the "Better Regulation" requirements , 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 ” announces that the Commission will examine the functioning of the rules currently in force and will review the AVMSD in 2016 . 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) . 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 entered into force, and 2007 is not covered by this evaluation.

2.Background 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 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 . 2.2 Baseline At the time the last revision was proposed in 2005 , 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 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. 1)Taking full advantage of the internal market for new services

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 ) with often diverging requirements . 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 . 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 . 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. 2)Ensuring minimum harmonisation of rules in support of certain public interests 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. 3)Contributing to cultural diversity 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. 4)Better regulation by reducing unnecessary regulatory burden 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. 5)Facilitating access to information within the internal market 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): TV viewing is still the prevalent mode of consumption of audiovisual content but younger consumers, in particular, increasingly watch content on-demand and online. Audiovisual content is offered as part of a large number of services. Not all such services are in the scope of the AVMSD rules. For example, services hosting audiovisual content in the form of user generated content (UGC) are excluded. Consumers often watch audiovisual content offered in innovative and namely shorter formats (e.g. short video clips), particularly on-demand and more in general online. Between 2013 and 2015, the number of minutes spent on a video online has decreased in 6 Member States. The decrease in those Member States ranged from -5% to -36%.Online advertising is set to overtake TV advertising. There are uneven rules regarding contribution to content financing between broadcasters, on-demand service providers and new online market players. 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 3.Evaluation questions 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: The rules on material and geographical scope of application and on Country Of Origin (COO). (Chapter 6.1, 6.2 and 6.3). Under the specific objectives: Protection of consumers/viewers is pursued mainly by the rules on protection of minors, the ban on incitement to hatred, the rules on commercial communications, the provisions encouraging the use of self and co-regulation, and the right of reply (see sections 6.4; 6.5; 6.6; 6.10; 6.11). Cultural diversity and the promotion of European audiovisual production and distribution are pursued by the rules on promotion of European works (see section 6.7). The promotion of media pluralism, freedom of expression and access to information are pursued by the rule on cooperation amongst Member States in particular via independent regulators, the provision encouraging accessibility of services to persons with a visual or hearing disability, the rules on events of major importance for society and short news reports (see sections 6.8; 6.9; 6.10). 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. 4.Method 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: Stakeholder consultations: oThree public consultations: 2013 Green Paper Public consultation on media convergence ; 2013 Public consultation on independence of audiovisual regulators and 2015 Public consultation on the AVMSD (the synopsis report is in Annex 2); oPolicy discussions with Member States in the framework of the Contact Committee meetings; oDiscussions with regulators within the European Regulators Group for Audiovisual Media Services (ERGA) leading to the adoption by ERGA of specific recommendations on the material and geographical scope of the AVMSD, protection of minors (also based on an "inventory paper") and the independence of regulators ; oStructured dialogues with representatives of the affected industry and consumers (“Media talks ”). Recommendations, reports and policy discussions with other EU institutions, namely the European Parliament , the Council , the European Economic and Social Committee and the Committee of the Regions . Data gathered on the AVMSD costs and benefits via a questionnaire sent to Member States' regulators within ERGA and to industry. Evidence gathered through publicly-tendered studies on alcohol advertising exposure, independence of audiovisual regulators, self- and co-regulation and standardisation. Commission's monitoring of the AVMSD pursuant to Article 33 of the Directive (1st Application report for the years 2009-2010 ; 2nd Application report on the AVMSD for the years 2011-2013; Articles 16 and 17 ). Literature review (e.g. reports of the European Audiovisual Observatory (EAO)) followed by an analysis carried out in-house by the European Commission Directorate General (DG) for Communications Networks, Content and Technology (DG CONNECT) 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. 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: Measuring the effectiveness of the AVMSD rules that aim to protect values (e.g. human dignity and the physical, mental and moral development of minors) is by definition a challenging exercise whose results should be interpreted with caution; Despite being prompted in a number of occasions by the Commission, the national regulators and the contractors carrying out publicly tendered studies for this purpose, the industry has been reluctant or unable to deliver precise quantitative data on the compliance costs stemming from the AVMSD; given that legislation in this domain has been in place for a long time, it has been revised twice and codified once, and in some cases national legislation was already in place, it is hard for business to assess what costs and lost revenues stem from the Directive; When the industry did provide data, this was in some cases covered by business confidentiality. When possible, the Commission presented this data in aggregated or anonymised format. When this was not possible, data was taken into account in the evaluation but not provided (this is indicated when applicable); The EU audiovisual sector is primarily made of large companies and data on the specific impact of the AVMSD on SMEs is not available, also in light of the considerations made above. Accordingly, when the evaluation refers to the impact on the AVMSD rules on business, particularly on business competitiveness, this should be intended as referring in most cases to large companies; Some data simply does not exist because stakeholders do not generate or gather it. This is the case, for example, for figures on the number of viewers and on viewing patterns in on-demand audiovisual media services and in other services offering audiovisual content; The evaluation takes into account that the economic and cultural landscape as well as the state of development of the audiovisual media market differ significantly amongst the Member States; Given the multiplicity of the tools used to consult relevant parties, the results obtained are of different nature. While the 2015 Public consultation proposed a number of questions to stakeholders, the discussions within ERGA went more in-depth on some issues, as regulators had a platform for regular and organised discussions; The evaluation takes into account the inherent limitations of the findings of Public consultations. Firstly, as in all surveys, the answers received reflect the views of a sample of relevant stakeholders and not those of the entire population who has a stake in this domain. Secondly, stakeholders' views convey an individual rather than a holistic perspective. 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. 5.Implementation state of play (results) The implementation of the AVMSD by the Member States is monitored by the European Commission on the basis of Article 33 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 . 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 . 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 %) . 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 . 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 ) 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 . On average, 31% of the VoD services available in the Member States are established in another EU country. 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). 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 . 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% . 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. 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 . It must be borne in mind that in 2014, in Europe, Internet video stood for 64% of total consumer internet traffic. This share is expected to increase up to 80% by 2019 . The consumption of videos offered by video-sharing platforms is on the rise . 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 .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. 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 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 and then its update – the RADAR study of 2015 . 6.Answers to the evaluation questions 6.1 Material scope of application The AVMSD applies 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: The Directive applies to programmes "the form and content of which are comparable to the form and content of television broadcasting" which has primarily meant an exclusion of short clips. Audiovisual content is however increasingly offered in innovative (shorter) formats (e.g. short video clips) online. As said above, while the number of videos viewed tends to increase, the time spent on one given video tends to decrease . Most recently, the ECJ clarified that videos that are short in length can qualify as audiovisual media service under the AVMSD (when the content offered competes for the same audience as television broadcasting). A majority of respondents belonging to various stakeholders' categories also affirmed in the 2015 Public consultation that the "TV-like" criterion has become outdated. The Directive does not apply to audiovisual material offered by services whose "principal purpose" is not to provide programmes, to inform, educate or entertain, to the general public. However, services such as newspapers' video sections or social media and messaging apps hosting professional video content are increasingly present on the market. Also, the consumption of online news videos is on the rise - not necessarily on newspapers' websites but also on social media and this often coincides with a fall in audiences for traditional TV bulletins . In 2014, the number of children who read or watched news online almost tripled as compared to 2010 . Most recently, the ECJ clarified that 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, audiovisual content generated by private users i.e. "user generated content" (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. 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: Audiovisual content is increasingly offered by players who are not regulated under the AVMSD: as said above, in 2014, around 2 563 Internet-based, OTT and VOD television providers were established in the EU. Video sharing platforms and social media increasingly include in their offers audiovisual material (be it UGC, advertising or original content). These services often fall outside the scope of the AVMSD either because the providers do not control the selection and organisation of the content or because their principal purpose is not to offer audiovisual content. Viewing patterns, including those of children, are changing. While TV viewing is still strong, EU audiences increasingly watch and share audiovisual content online including on social media . Consumer spending on digital video and this trend is related to the increasing popularity of connected TV and the soar in mobile usage . In the UK, the amount of people watching short online clips has almost doubled over the period 2007 to 2014 (21% to 39%, the highest increase being among 35-44s with 28 percentage points increase). The popularity of multi-platform online video services, such as YouTube, as an information source has been evident in recent years – 32% of internet users now cite it as an important (very or fairly) source for information, rising to 46% of 16-24 year olds . In the EU, 92% of Europeans in the 15-24 age group use the Internet on a daily basis (or almost daily), compared with 80% of 25-39 year-olds and 65% of 40-54 year-olds. In 2013, the share of internet users who participated in social networking was 89 % for 16-24 year olds compared with 27 % for 55-74 year olds . 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) . Watching video clips is the second prevalent online activity amongst minors aged 4-17, after listening music and watching films and cartoons . Services such as YouTube are widely popular among children . Connected devices such as mobile phones, tablets and games consoles are increasingly used by minors, often without adult supervision . More than half of YouTube views come from mobile devices . 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 . 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 . In other cases, online versions of newspapers were not deemed to constitute an audiovisual media service . 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 . 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 . In another case, while YouTube removed a video of a woman being forced by her husband to walk naked in the street for violation of YouTube's Community guidelines, the same video still appears on the website Liveleak.com . 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 . 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%) . In the UK, ATVOD found that at least 44 000 primary school children accessed an adult website in one month alone . 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 . Potential exposure to harmful content or content inciting to hatred may also be fostered by new social media features such as live streaming . 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 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: -"Principal purpose", with similar services being considered subject to the AVMSD in some countries but not in others . -"TV-likeness", also being subject to diverging interpretations . 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 and compliance 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 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 . 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)and is without prejudice to the ECD system of limited liability . 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 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 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 . Relevance of the current rules In the 2015 Public consultation on the AVMSD, a majority 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 . 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 . 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. 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 . 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. 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. 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. 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 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 ) 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 . 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 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. 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 . 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 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 (Slovenia and Cyprus ) or the transposition of the rule that services intended exclusively for reception in third countries are not covered by the AVMSD (Finland ). 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 . Similar jurisdiction issues arose in an earlier decision of the Commission regarding notifications of serious infringements of the rules on protection of minors . 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 (e.g. Belgium , Bulgaria and Lithuania ) 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 , 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. 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." Except for one case, the circumvention procedure has not been used in practice . The only case notified to the Commission concerned alcohol advertising in Sweden 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 . 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. Example: In 2015, Lithuania notified to the Commission measures to restrict the retransmission of a Russian language channel, broadcast from Sweden, on the basis of instances of incitement to hatred. This case triggered extensive consultations and written exchanges between the Swedish and the Lithuanian Regulators in order to ascertain which Member States has jurisdiction over the channel. This situation can in part be attributed to the imprecision and complexity of the procedures supporting the COO principle (ANNEX 7). The exchanges mentioned above could be equaled to a workload of 50-100 hours shared by the two regulators. As a benchmark, this case 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 . 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 . In addition, it is coherent with the ECD, including as regards the grounds for derogation from the freedom to provide services . 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 . 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 .

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 . 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, certain concepts and rating systems for both broadcast and on-demand services are not harmonised at EU level. 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. 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 . 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 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 , 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: The minimum level of protection provided by broadcasting and on-demand services across the Union. The 2007 revision in particular brought harmonisation (and hence legal certainty) in a context where there were dissimilar rules on protection of minors in place for on-demand services in a large number of Member States . The respect of the subsidiarity principle in warranting flexibility to Member States to tailor national laws to cultural and historical specificities and to certain national challenges.

Efficiency It is difficult to draw clear conclusions on the cost-benefit ratio of the rules, given that 1) costs may vary depending on the level of protection required by national laws; 2) clear and comparable data on the costs incurred by the providers are lacking and 3) as mentioned in section 4 under Limitations-Robustness of findings, qualitative elements are very prominent in the assessment of the impact of rules on consumer protection. Moreover, it is possible to identify scope for cost-efficiency also when looking not only at legal obligations but also at the possibility to leverage self and co-regulation arrangements. The rule strictly restricts minors' access to any kind of harmful content and compliance costs for broadcasters did not increase since the last revision in 2007, as those providers were already subject to this rule. In on-demand services, the level of protection is lower than on TV broadcasting. This lower standard is no longer justified since younger consumers watch about half less television than the average consumer . Lower requirement does not imply lower costs as on-demand services have in any case incurred costs to implement technical solutions to control access and ensure transparency regarding seriously harmful content across a high volume of diverse devices (e.g. tablets, smartphones or HDMI keys, which usually require ad hoc development and investments). Against this backdrop, the rule applied to on-demand services has been less cost-efficient than the rule applied to TV broadcasting services. In addition, the differential regulatory treatment between on-demand services and traditional broadcasting under the AVMSD, may give the former a competitive advantage, in particular vis-à-vis Pay TV services, with which they share similarities . Finally, as indicated by media service providers in the 2015 Public consultation and in the ERGA questionnaire, being subject to the AVMSD rules 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 . Coherence The provisions of the AVMS Directive on protection of minors are coherent with other EU-level initiatives aiming at ensuring a level of protection of children in media services, in particular the Recommendation 2006/952/EC of the European Parliament and of the Council of 20 December 2006 on the protection of minors and human dignity, the Communication- European Strategy for a Better Internet for Children of 2012, and the self-regulatory initiative "CEO coalition to make the Internet a better place for kids". The AVMSD rules on protection of minors are also compatible with the UN Convention on the Rights of the Child (UNCRC) that was ratified by all the EU Member States. The AVMSD rules area also coherent and complement self-regulatory initiatives such as codes of conduct on minors' protection at national level in 9 Member States or other self-regulatory systems in 12 Member States. 6.5 Ban on hate speech Article 6 AVMSD requires Member States to "ensure by appropriate means that audiovisual content provided by media service providers under their jurisdiction do not contain any incitement to hatred based on race, sex, religion or nationality". Relevance The AVMSD rules are relevant to the purposes of protecting consumers and human dignity. Those respondents (4 Member States and industry representatives) to the 2015 Public consultation who specifically expressed an opinion on the matter confirmed the continued relevance of the rules. However, 4 Member States indicated that the list of grounds under which hate speech is banned in Article 6 is excessively limited . In light of the public consultation and in the absence of any significant implementation issues, the rule on hate speech seems relevant. Effectiveness

The effectiveness of Article 6 could be affected by the divergence of national rules. However, to date, there have been a limited number of cross-border cases regarding hate speech on TV broadcasting . For on-demand services, it is hard to draw conclusions as not all Member States collect quantitative data in this domain. Where data has been collected, no cases of cross-border relevance were reported . In this light, it can be concluded that the AVMSD rules have been effective, and that the divergence of national rules did not substantially affect the effectiveness of the Directive given that there were no cross-border cases. EU added value In 5 Member States , the grounds for prohibiting hate speech match precisely those of Article 6, i.e. hate speech only on grounds of race, sex, religion or nationality. In the other 23 Member States, further grounds are foreseen. In particular, most Member States prohibit also hate speech based on sexual orientation and disability . The EU added value of the rule lies in the provision of a minimum guarantee against incitement to hatred based on race, sex, religion or nationality. It also provides the grounds for the EU to act. In addition, the derogation procedure, an important corollary of the COO principle (see section 6.3) that allows Member States to temporarily restrict the freedom of reception, builds on the grounds for prohibition of incitement to hatred as harmonised via Article 6. Efficiency The costs of monitoring hate speech in AVMSD essentially stems from the application of national law. The AVMSD as such does not imply any additional administrative or compliance cost while delivering the minimum guarantee mentioned above. Coherence The AVMSD rules are coherent with a number of international instruments including the Charter of the United Nations (Article 51), the Convention for the Protection of Human Rights and Fundamental Freedoms, the Additional Protocol to the Convention on Cybercrime, concerning the criminalisation of acts of a racist and xenophobic nature committed through computer systems. Article 6 is however not fully coherent with Article 21 of the EU Charter of Fundamental rights, which prohibits discrimination under broader set of grounds that those for which hate speech is prohibited in audiovisual media services. Article 6 is neither fully coherent with the grounds laid down in the Framework Decision on combating hate crime 2009/913/JHA on combatting certain forms and expressions of racism and xenophobia by means of criminal law. 6.6 Commercial communications The AVMSD contains rules applying to all audiovisual media services. These concern sponsorship and product placement as well as alcohol and tobacco advertising. The AVMSD also lays down detailed rules applying only to television broadcasting. These set a maximum of 12 minutes of advertising per hour for traditional broadcasting (so-called "12-minutes rule"), define how often TV films, cinematographic works and news programmes can be interrupted by advertisement and set the minimum duration of teleshopping windows . Relevance of the current rules The rules on audiovisual commercial communications contribute to the overarching AVMSD objectives of supporting the internal market and ensuring consumer protection. The relevance of the AVMSD rules restricting advertising for alcohol and fatty foods (qualitative rules) remains unquestioned by all stakeholders. However, in the frame of the 2015 Public consultation the majority of TV broadcasters questionned the AVMSD quantitative rules (e.g. the 12 minutes/hour cap on advertising) and other rules such as those on product placement, sponsorship and self-promotion. It also appears that in recent years, quantitative rules appear to be less relevant due to media convergence with users watching content on TV as well as mobile devices. In addition, viewers are more 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.

Moreover, television advertising in the EU has been shrinking in 2013 as compared to 2012 , while the total size of online advertising market in the EU in 2013 increased by 11.6% compared to 2012. The Internet is likely to become the main advertising platform within the next two years, given its rapid development (+8,4% vs. 2012) and its market share in 2013 (27,4%) . In Europe, online display advertising is the most dynamic form of advertising with video ads accounting for 16% of online advertising . In 2013, advertising on TV broadcasting represented 33% of TV broadcasters' revenues . While those revenues increased by a 1.3% CAGR for the period 2009-2013, TV broadcasters experienced a decrease of 0.5 % in 2013. In the meantime, the total size of the online advertising market in the EU in 2013 has increased by 11.6% compared to 2012. Online is the second medium in Europe for ad spends, just behind TV advertising, though it surpassed TV advertising in 2014 in a number of Member States . However, within the total advertising market the share of advertising revenue for on-demand services covered by the AVMSD remains modest. For example free-to-view UK online TV services such as ITV Player and All 4 generated just GBP 240 million in advertising in 2014, equivalent to 5.6% of the total TV advertising and sponsorship market in the UK. In France, the revenues from advertising on catch-up TV services amounted to EUR 80 million in 2014 which represents 0.7% of the revenues generated by French TV broadcasters in 2013 . However, to fully grasp the potential of this market, audiovisual services that are outside the scope of the AVMSD should be taken into account. According to the European Audiovisual Observatory, online video advertising revenues are expected to grow up to EUR 4.1 billion by 2018 with a market share of almost 60% for Facebook and YouTube. Advertising in those services is however not subject to the AVMSD rules. Effectiveness The effectiveness of the quantitative rules on the free circulation of services within the internal market is hampered by the fragmentation and gold plating of national rules. Firstly, for sponsorship announcements and product placement, national interpretations diverge on the notion of "potential undue promotional character" and of "undue prominence" . Also, it is particularly complex to distinguish self-promotion from advertising when calculating the 12-minute limitation which also creates divergence between national laws. When it comes to the 12-minute limitation , at present, 13 Member States have stricter rules though those rules apply in most cases (10 Member States) to public service broadcasters' channels. The ceiling of the 12-minutes rule was regularly exceeded in a number of Member States. This is primarily due to divergent national interpretations of various notions as mentioned above . Consumers still have concerns about excessive advertising on TV . As to the effectiveness of qualitative rules, 24 Member States have adopted stricter rules for alcohol advertising (involving channels, advertised products or time slots) . 2 Member States prohibit alcohol advertising on TV channels, while 22 others limit/ban specific content in the advertising (e.g. no advertising for spirits), channels (e.g. no alcohol advertising on public service broadcasting) or timeslots (period of the day during which no alcohol advertising can be broadcast). The Commission's publicly procured study on minors' exposure to alcohol advertising shows that on average, during one year (2013), a child in the EU saw 200 alcohol impacts and an adult over 450 on television. A number of consumer organisations in favour of volume restrictions highlight in the 2015 Public consultation that when specific protection measures are in place in an adequate form, they can have a beneficial impact. For example, in the Netherlands, where alcohol advertising cannot be broadcast between 06:00 and 21:00, the average number of impacts for alcohol advertising seen by minors aged 4-14 during peak hour was lower than those in Germany, the UK or the Czech Republic which do not apply watersheds. However, one pitfall of such scheduling limitations may be a shift of alcohol advertising just after peak time, at a time when minors, although less numerous, are still watching television quite massively. As the study on minors' exposure to alcohol advertising showed, when the time is not well adapted, minors may be exposed quite heavily to alcohol advertising just after the watershed . Moreover, the analysis of a sample of commercial communications revealed that advertising frequently associates alcohol with sociability and depict drinking with humorous tone. However, although the study showed that 25% of the analysed advertisements could contain one of the elements described in the AVMSD, the study also highlighted that the advertisements were focused on associations that are possible to create within a few seconds (for example by portraying drinking among young, trendy people) but without creating causal links between the product and its effects, to which the AVMSD refers. As regards on-demand and online services, preventive measures have been put in place by the industry, although minors have the perception to have been exposed to alcohol advertising. In the 2015 Public consultation, consumer organisations pointed to the blurring lines between broadcast and on-demand services; to the voluntary character of some rules and the lengthy procedures to review complaints in self-regulation arrangements; the focus on restricting the content of alcohol advertising rather than on restricting the volume of advertisement ; the links between alcohol advertising and sponsorship in sport events. Stakeholders in different industries also ascribe the ineffectiveness of the rules to the fragmentation due to divergent national legislations. Moreover, as also affirmed by 6 Member States, 4 regulators and by most broadcasters in the 2015 Public consultation, some of the AVMSD rules do not ensure a level playing field in times of media convergence and in light of the shift of advertising revenues online. Media services compete for the same advertising market but are not all subject to the same regulatory constraints (some because they are on-demand services subject to lighter AVMSD rules than broadcasting, others because they are not regulated by the AVMSD). The consequences of this differential treatment are even more remarkable when millennials are targeted .

EU added value The AVMSD rules on commercial communications harmonise some concepts (for example, the definition of advertising spots) and introduce minimum rules. This facilitated the circulation of audiovisual media services across the Union. For example, product placement used to be forbidden in the Television Without Frontiers Directive and was liberalised in the revision of the AVMSD in 2007. As a result, product placement is now allowed in all Member States within the limitations of the current Directive and with only limited stricter rules. This brought legal certainty as to the possibility for programmes which include product placement to circulate across the EU. This confirms the EU added value of the rules. Efficiency As regards quantitative rules, while they generated administrative costs for regulators (up to EUR 1.2 million per year for one regulatory authority as regards all audiovisual commercial communication-related activities and overall up to EUR 1 million for all EU regulators as regards the quantitative rules very specifically) and compliance costs for broadcasters , their effectiveness appeared to be sub-optimal. While an objective of the last reform was to liberalise product placement, previously not allowed, the current AVMSD restrictions for product placement have not allowed this advertising format to unleash its full potential in terms of revenues. Some regulators and Member States confirmed that the rules have led to legal uncertainty for stakeholders, discouraging them to invest in product placement. As a benchmark, in the US market, 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% . If product placement rules were simpler, product placement revenues could see a 10%-15% increase . Indeed, most broadcasters, in their replies to the 2015 Public consultation, agreed that product placement rules should be clarified and simplified. As regards the hourly limitation, most broadcasters consider that the scarce flexibility of the 12-minutes rule and its exceptions prevent them from maximising revenues around peak periods . As mentioned above, this limitation is regularly overpassed. According to a large commercial broadcaster, further liberalisation of insertion rules holds a potential of up to 6‐8% additional revenue (rough estimate). Most members of the association of television and radio sales houses estimate that more relaxed rules would generate a 1%-10% revenues increase. A large UK commercial broadcaster estimates a total loss of £3.3million in one year on their main channel as a consequence of the rules. As regards sponsorship, more flexible rules could result in an increase in revenues up from 15% to 50%, according to some members of the audiovisual advertising sales houses (EGTA). Most broadcasters, in their replies to the 2015 Public consultation, agreed that sponsorship rules should be clarified and simplified. It can thus be concluded that quantitative rules do not have a positive cost-benefit ratio. Costs stemming from some quantitative rules could be lower if rules were simpler or more flexible. Also, at a moment where online advertising is overtaking TV advertising as the preferred media for advertisers, TV broadcasters are subject to stricter rules. In their replies to the 2015 Public consultation, advertisers, some broadcasters and several Member States claimed there is no level playing field between TV broadcasters and other media services, and in particular between TV broadcasters and on-demand service providers. This is even more relevant in those fields where these services compete for the same advertising market, i.e. when it comes to attracting the attention of millennials. On the other hand, a few broadcasters, mainly from the UK, see the benefits of the status quo. When it comes to qualitative rules, the costs have not been raised as an issue in the Public consultation mostly because the protection of the most vulnerable consumers cannot be questioned. Coherence There is a general coherence amongst existing EU rules in the field of audiovisual commercial communications. If an online service does not fall under the definition of an on-demand audiovisual media service under the AVMSD, it will be regulated under the ECD as an information society service. Outside the domains covered by the AVMSD that regulate specific aspects of unfair commercial practices, the Unfair Commercial practices Directive (UCPD) applies. The AVMSD is complementary to the ECD and the UCPD. The AVMSD is also in complementarity with the numerous self- and co-regulatory initiatives in the field of advertising at Member States and EU level. Most of these initiatives build on the AVMSD but also go beyond its remit (e.g. they address online marketing beyond audiovisual commercial communications).

6.7 Promotion of European works TV broadcasters must, where practicable, reserve to European works a majority of their transmission time and at least 10 % of their transmission time or of their programming budget for European works created by producers who are independent of broadcasters. On-demand services providers, where practicable, must promote the production of and access to European works. However, the Directive gives examples of how this can be done in practice, leaving the choice of measures to Member States. The examples mentioned in the Directive are: i) financial contribution to the production and rights acquisition of European works; ii) a share in the catalogues and/or ii) prominence of European works in the catalogues. Member States have chosen very different ways for implementation ranging from relatively loose requirements to a complex set of obligations sometimes combining all three mentioned examples (see Effectiveness sub-section). Relevance of the current rules The AVMSD rules on promotion of European works are still relevant in light of the rapid growth of the on-demand and the Internet industry which boosts availability and opens up new ways of accessing content . However, in the 2015 Public consultation on the AVMSD, some media and entertainment services, telecom operators, commercial broadcaster and operators from the digital and internet related industry while acknowledging the relevance of the rules, expressed the opinion that it should be primarily the demand by the audiences, rather than legal obligations, that should guide commercial broadcasters (as opposed to public service broadcasters who have to fulfil a public service mandate) when taking decisions on content offerings. Effectiveness For TV broadcasting, the First and Second Report on the application of rules on promotion of European works confirm that the majority of service providers comfortably fill the required quota for European works and independent works. Compliance with the AVMSD rules resulted in driving up the proportion of European works that were transmitted. In 2007, European works stood for 62.4 % of TV broadcasting service transmission time .In 2011 and 2012 the average transmission time dedicated to European works by all reported channels was 64.1% . As regards quotas for independent productions, the EU-average proportion by all reported channels in all Member States was 33.1% in 2011 and 34.1% in 2012 while the EU-average compliance rates amounted to 80% for 2011 and 82% for 2012 . As mentioned above, the current rules for TV broadcasters have resulted in European citizens being exposed to European works, on average 64.1 % of the average transmission time. This was particularly important in a context where viewer hours for European works have declined (down from 74 % in 2007 to 69 % in 2010). For on-demand services, the effectiveness of the AVMSD rules on promotion of European works is reduced by a number of factors: -The AVMSD does not impose clearly defined obligations on the promotion of European works in on–demand services. This has led to significantly diverging approaches and thus fragmentation in the level of obligations imposed across Member States . Annex 4 provides an overview of the diverse national approaches adopted. Fragmentation and lack of data regarding shares of European works in on-demand catalogues (14 Member States do not require providers to share these figures) hampers the circulation of services across the Union. It also created gaps in the supply and promotion of European content on those services.

-Whereas in some Member States on-demand services are required to either fill a mandatory share or give prominence to European works in their catalogues , on-demand providers' investments in content production are lower than those of broadcasters and on-demand catalogues may contain a lower share of European works than broadcasters' programmes do . -Some VoD service providers are established in one Member State but mainly target a different Member State because they often choose to establish themselves in countries with the most favourable regulatory treatment ("forum shopping"). Thus on-demand providers do not contribute to the promotion obligations (particularly investment in creative production and distribution) in the Member States they target, when different from their country of establishment. This is the case for Be-Fr, FR and IT. The differences in the rule applied to TV broadcasting and on-demand services have led to an unequal level of contribution to promotion of European works. The investment of the main TV groups in original programmes in 15 countries amounted to EUR 15.6 billion in 2013, i.e. 24% of TV broadcasters revenues (EUR 85 billion) while 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) . In light of the above, it can be concluded that the rules on the promotion of European works for TV broadcasting s