The Italian Communications Authority adopts new regulation on programming and investment obligations in European works

The Regulation was adopted following a public consultation launched by the AGCOM on 19 July 2022, through Resolution No. 267/22/CONS.

Below is a summary of the most important changes that the Regulation introduced compared to the previous regime.

Linear audiovisual media service providers (Articles 4 and 5 of the Regulation)

The programming and investment quotas envisaged under Articles 4 and 5 of the Regulation do not differ from those envisaged, respectively, under Articles 53 and 54 of the TUSMA and can be summarized as follows:

Programming Quotas, binding only for linear audiovisual media service providers subject to Italian jurisdiction:

• more than 50% of eligible hours must be reserved to European works;

• 1/3 of the main quota (e., 16.6% of eligible hours) must be reserved to audiovisual works of Italian original expression produced anywhere;

• 2% of the eligible hours must be reserved to programs specifically directed to minors; and

• 10% of the eligible hours must be reserved to programs suitable for minors or for viewing by minors and adults. 

Investment Quotas, binding for all linear audiovisual media service providers, including those authorized in another EU state which made available their service in Italy:

• 5% of the annual net revenues generated in Italy must be reserved to European works produced by independent producers;

• 1/2 of the main quota (e., 6.25% of the annual net revenues generated in Italy) must be reserved to audiovisual works of Italian original expression produced anywhere by independent producers in the last 5 years (sc. recent works); and

• 5% of the annual net revenues generated in Italy must be reserved to Italian cinematographic works produced by independent producers (75% of which to be reserved to recent works).

Specific quotas are provided for the public service provider (RAI).

One interesting change is that previously the costs of promoting and distributing cinematographic works of Italian original expression could be counted as investments, provided that the related agreements included mechanisms for remunerating the producer, including in the form of revenue sharing. Although this was included in the draft submitted for public consultation, the final Regulation does not contain it: the costs of promoting and distributing cinematographic works of Italian original expression can no longer be considered investments.

On-demand audiovisual media service providers (Articles 6 and 7 of the Regulation)

The catalogue and investment quotas envisaged under Articles 6 and 7 of the Regulation do not differ from those envisaged, respectively, under Articles 55 and 56 of the TUSMA and can be summarized as follows.

Catalogue Quota, binding only for on-demand audiovisual media service providers subject to Italian jurisdiction:

• 30% of the catalogue must be reserved to European works produced within the last five years, to be calculated on the number of titles.

• 50% of the main EU quota must be reserved to works of Italian original expression, produced anywhere, in the last five years, by independent producers.

Investment obligations, binding for all on-demand audiovisual media service providers, including those authorized in another EU country which made available their service in Italy:

• a quota of the annual net revenue generated in Italy must be reserved to the production, co-production, purchase or pre-purchase of the rights to European works produced by independent producers, specifically 17% until 31 December 2022; 18% from 1 January 2023; 20% from January 1, 2024;

• 50% of the main EU quota must be reserved to works of Italian original expression, produced anywhere, in the last five years, by independent producers;

• 1/5 of the Italian sub-quota must be reserved to on works of Italian original expression in cinematographic works of Italian original expression, produced anywhere, in the last five years, by independent producers.

One unique factor of the new obligations envisaged by the Regulation is the possibility for an on-demand provider to submit a well-founded and documented request to be granted a higher weighting coefficient for an episode with a duration and production cost similar to those of a feature film. To provide further clarifications, for the purpose of meeting the investment obligation, the elements considered are the number of titles (or the seasons with reference to TV Series) present in a given catalogue. However, pursuant to this new provision where a series has an elevated cost/episode ratio, AGCOM may consider this factor and qualify that episode as a movie (i.e. a title) or attribute it a higher coefficient.

Exemptions and derogations to programming and investment quota obligations (Articles 8 and 9 of the Regulation)

The Regulation also envisages two distinct provisions concerning the possibility for all audiovisual media service providers to request exemptions and derogations to the programming and investment quota obligations.

With reference to exemptions, Article 8 has now expanded its objective scope to include programming obligations (rather than only investment obligations). In particular, an exemption can be requested by audiovisual media service providers with low turnover. The threshold for low turnover has been set at EUR 5 million. Interestingly, however, the Regulation no longer considers “low audience” a parameter to justify a request for an exemption, since, according to AGCOM, “[Turnover] is generally a more reliable indicator of the success of an on-demand media service […] and is also generally a feature that is easier than audience size for service providers to calculate and communicate. On the other hand, it is possible that providers with low audience are also included in the category of media service providers with low turnover.”

With reference to derogations, Article 9 provides that any audiovisual media service provider can apply for either a total or partial derogation to both the programming and investment quotas and sub-quotas, if one of the conditions outline below is met:

• The applicant did not make any profits in the last two years with reference to the audiovisual media services for which the derogation is requested;
• The applicant’s turnover is lower than EUR 10 million with reference to advertising, teleshopping, sponsorship, contracts or agreements with public and private entities, public benefits and pay-TV offers;
• The procurement of European works from independent producers or their acquisition, pre-acquisition, production or co-production is not allowed by the thematic nature of the broadcasting schedule or catalogue;
• Due to the nature or scope for the applicant, compliance with quota obligations is wholly impracticable or unjustified.

In addition, the turnover level allowing an audiovisual media service provider to apply for a derogation has been set at EUR 4 million (previously the derogation was for a market share of less than 1%).

Monitoring procedure and sanctions (Articles 11 and 12 of the Regulation)

The Regulation establishes a recovery procedure that allows audiovisual media service providers that failed to comply with quota obligations (by a maximum of 15%) to recover their shortfalls in later years.

Article 12 of the Regulation outlines the sanctions to which audiovisual media service providers are subject if they fail to comply with the abovementioned quota obligations. Compared to the previous framework, no major amendments have been introduced. Failure to comply with the quota obligations may be sanctioned with an administrative fine ranging from EUR 100,000 to EUR 5,000,000, or up to 1% of annual revenues if that percentage exceeds EUR 5,000,000.