The UK Government has published guidance for the broadcasting and video-on-demand sector in the event that the country leaves the European Union (EU) on 29 March 2019 without an agreement on its future relationship with the other 27 countries.
Similar guidance notes have been published for other sectors which will be impacted in a 'no deal' scenario. The government note states this is 'unlikely' to happen.
The main focus of the guidance is on TV channels which use the UK as a base for transmissions to other countries. Under the EU Audiovisual Media Services Directive (AVMSD), channels targeting any part of the EU are subject to jurisdiction of only one EU member country. Many channels and VoD services have therefore set up in the UK and are overseen by Ofcom, the UK communications regulator.
The Government note warns that if the UK leaves the EU with no deal, the AVMSD and the 'country of origin' principle will no longer apply to channels which operate from the UK but are aimed at other EU countries. This means that, in the event of a 'no-deal Brexit', companies will have to negotiate liences for their channels in other EU markets if they want to continue to be regulated under AVMSD.
Another instrument - the Council of Europe Convention on Transfrontier Television (ECTT) will still apply to the UK. Under the ECTT, the 20 EU countries which are signatories will be required to permit freedom of reception to services under UK jurisdiction. Likewise, the UK would have to allow reception of channels operating from other ECTT countries. The seven countries which have not signed or ratified the ECTT are Belgium, Denmark, Greece, Ireland, Luxembourg, the Netherlands and Sweden.
The UK government says that it is committed to 'ensuring continued licence-free reception' of the three Irish public channels (RTE1, RTE2 and TG4) under the Good Friday agreement.
According to a list published by the regulator, there are 1,060 cable and satellite channels currently operating under an Ofcom licence. The list includes multiple services aimed at other parts of the EU operated by groups including A&E, AMC, Discovery, Turner, and Sony. All of the channels operated by Modern Times Group are aimed outside the UK at the Nordic Region.
Although the UK has been negotiating with its EU partners since triggering the process to leave in March 2017, the terms of its departure are still not clear. While the UK government itself sees a 'no deal' Brexit as an unlikely outcome, the series of briefing notes that it has issued are a recongition that organisations that will be affected need to have a plan already in place.
A possible disruption of the UK's thriving economy as a location for TV channels and video-on-demand services targeting the rest of the EU is one of the many unintended consequences of the UK leaving the European Union. The Commercial Broadcasters Association (COBA), a lobby group representing multichannel broadcasters, said in a paper published last year that over 50% of the more than 1,000 channels licensed by Ofcom broadcast to countries other than the UK. These non-domestic channels represented £800 million ($1.05 billion) in annual sales, and provide direct employment for around 1,600 people, COBA estimated.
Reports have suggested that international broadcasters which have set up regional offices in London are being wooed by other EU cities and countries. The Broadcasting Authority of Ireland said last year it had had several enquiries from international media companies, while the Netherlands is seen another possible post-Brexit location. France, Poland and Estonia are also often cited as candidates for post-Brexit relocations.
However, indications are that so far, media companies are adopting a wait and see approach. In May, it emerged that Discovery is to close its playout centre in west London and move its operations to the US. However, a spokesperson for the company said the move was 'nothing to do with Brexit'. Last year, Warner Bros extended a long-term lease for its London offices from 2019.
Even though there are no signs of a wholesale relocation, the need to renegotiate a new licence for the EU27 territories under the AVMSD will be a headache for the companies affected. This could also make for material changes in revenue if local regulations are more stringent than Ofcom's relatively 'light touch' regime.
It should also be noted that even if a no-deal scenario is successfully avoided in March 2019, there will then be a transitional 'implementation period' during which the UK will continue to participate in the Customs Union and the Single Market. This implementation period will end on 31 December 2020 and at that point companies will still need to negotiate a new licence for the EU 27 territories under the AVMSD. So this issue will need to be addressed by the companies within the next two years.
One key part of the licence application is the 'establishment' criteria for the country of origin. In order to be established in an EU 27 state the company must demonstrate its headquarters, editorial decisions and/ or significant workforce are based in the 'establishment' EU state. (It is an inexact formula: for example, there is no clear definition of 'significant part'). Many companies have headquarters, editorial decisions and workforce spread across a number of EU states and so adjusting this spread to meet the establishment criteria may prove a relatively straightforward task. But for those companies who have headquarters, editorial and workforce concentrated in the UK then they will need to re-structure and part-relocate (at least) to establish a base within the EU 27 in order to obtain a fresh EU 27 broadcasting licence and have benefit from the 'country of origin' principle.