MOTION PICTURE ASSOCIATION EMEA
Brussels, 28 June 2024
RE: MPA reply to Teavituskiri - Audiovisuaalmeedia teenuste direktiivi artikli 13 lõige 2
rakendamine
Dear Ms Alliksaar,
Thank you for your letter inviting us to share our comments and feedback on the possible
introduction of a financial obligation for on-demand services based on Article 13(2) of the
Audiovisual Media Services Directive in the updated Estonian Media Services Act.
The Motion Picture Association serves as the global voice and advocate of the international film,
television and streaming industry. Our members are Walt Disney Studios Pictures, Netflix Studios,
LLC, Paramount Pictures Corporation, Sony Pictures Entertainment Inc., Universal City Studios LLC,
and Warner Bros. Discovery.
MPA members work in every market around the world and therefore are deeply engaged with
both regional and national audiovisual sector communities. However, we are concerned that the
introduction of a very high financial obligation for on-demand media service providers
(hereinafter referred to as “VOD providers”) would constitute a new barrier and restriction to the
freedom to make services available in Estonia. Hence, we wish to address the following issues:
1. There are less intrusive means that can achieve the policy objective and lead to more
sustainable long-term investment.
2. The proposed financial obligation, if introduced, must meet the proportionality and non-
discrimination requirements as prescribed by the AVMSD.
3. Safeguards and flexibility are required in order to be in line with the AVMSD.
4. Additional observations, including OECD Pillar I convention.
1. There are less intrusive means that can achieve the policy objective and lead to more
sustainable long-term investment
A prior impact assessment should be conducted to assess possible inflationary effects and legal
uncertainty stemming from financial obligations
The introduction of a financial obligation of 5% for VOD providers will constitute a new barrier
and restriction to the freedom to provide services in Estonia and might artificially distort the
production sector (see below for more detail). Before potentially introducing such an obligation,
we respectfully submit that the Estonian government should, through a prior impact assessment,
cautiously:
● Assess the inflationary effect of a new financial requirement on the market via an
independent, future-looking and neutral economic impact assessment, particularly at a
time when the wide AV sector is facing material economic challenges.
● Examine the capacity of the market to absorb the possible mandated obligation: the
inflation of costs, the shortage of crews, technicians, and production lots are among the
biggest challenges for producers.
● Assess whether there is a need to introduce such a financial requirement. A new financial
requirement could influence future decisions on inward investment and the sustainable
growth of the AV sector.
In this regard, there are several articles that highlight the potential inflationary effect that
financial obligations would create, stressing that overstimulating local content production can
lead to higher prices, oversaturated markets, and limited distribution opportunities for local
creators. For instance, a specialized article on the topic entitled “Cultural Levies and the EU
Audiovisual Market” has clearly highlighted that where local content production is
overstimulated, “Member states may drive up the prices for local production, while at the same
time oversaturating local markets and providing little avenue for local creators to distribute and
market their works more broadly”1. It also highlights how this can lead to potentially increased
dependency on a smaller number of firms that can absorb higher costs.2 Additionally, the
European Commission’s 2023 Media Industry Outlook identifies increasing costs and a shortage
of specialized workers as principal risk factors for European producers, which would be
exacerbated by this inflationary effect of financial obligations. Furthermore, a study by the
production company Film i Väst3 underscores how production quotas on streamers can deplete
resources and inflate prices, potentially excluding independent work from the market.
A robust production incentive scheme will lead to more sustainable long-term investment
In order to achieve the legislative aim of increasing the Estonian film industry’s share in the growth
of the streaming market, there exist other more proportionate, efficient and less intrusive means
than the introduction of a financial obligation. Production incentives, for example, can encourage
investment, grow a country’s audiovisual sector, and empower consumer choice among a variety
of local, regional, and global content. We believe that making the existing production incentive
scheme in Estonia even more robust will lead to more sustainable long-term investment. Indeed,
it is well documented that production incentives, if well-designed, typically increase investment
in the sector and benefit the AV ecosystem and the wider economy4, as it furthers local skills
development and strengthens the creative capabilities of the local production community.
1 Page 6
2 Page 7 and 48
3 Streaming Giants and Public Film Funding (Film i Väst), 2022. Film i Väst (English: "Film in West") is a film company
founded in Sweden in 1992 by the Älvsborg County Council.
4 The production incentive program in Sweden (permanent support from 2022) includes a total of SEK 100 million per
year along with a discount on production costs of 25%. After the programme launched, 37 applications for a total sum
Undue regulatory constraints may disincentivize companies to invest in a country or skew inward
investment in a manner that is not conducive to the organic growth of the market and deters new
AV services from entering the market or restricts the freedom to provide services. In other words,
a new financial obligation may potentially have an opposite effect - it is likely to have a chilling
effect on the inward investment by non-domestic media service providers.
2. The proposed financial obligation, if introduced, must meet the proportionality and non-
discrimination requirements as prescribed by the AVMSD
We understand that the amendment to the Media Services Act foresees three possible models
for a financial obligation: (1) an obligation to pay a contribution fee of 5% of income earned in
Estonia, to be channeled into the production of local audiovisual works; (2) direct investment in
AV projects from Estonian producers equal to 5% income earned in Estonia, or; (3) a combined
model, with a financial obligation of 5% from which VOD providers can deduct direct investments
made to support local audiovisual content.
Note that AVMSD Article 13(2) clarifies that when a Member State decides to introduce financial
contributions for media services, these must respect the principles of proportionality and non-
discrimination. The draft on the intention to develop a bill to amend the Media Services Act
repeatedly focuses on foreign VOD providers and addresses them as the main target of the
proposed financial obligation, referring to addressing the competitive advantage of foreign VOD
providers and stating that a reason for the amendment is to “find ways to tax international
streaming platforms and work towards fair taxation of global digital giants”. We would call for a
fair and proportionate approach, in line with the European framework and the principle of non-
discrimination.
According to settled EU law5, measures affecting the freedom to provide services may only be
justified if they are proportionate in light of their objectives and do not go beyond what is
necessary to attain them. In this regard, the European Commission has indeed reminded the
authorities of a country when imposing financial obligations of the “need to justify appropriately
how the principle of proportionality has been taken into account” when setting a new financial
contribution obligation for media services6.
It is also important to stress that there is no justification as to why the specific rate has been
chosen or its compliance with the two aforementioned principles. The introduction of a 5%
financial obligation for VOD providers would be one of the highest rates in the broader region,
will constitute a new barrier and restriction to the freedom to provide services in Estonia and
might artificially distort the production sector, especially when considering the obligations
introduced or lack thereof for non-domestic providers in similar-sized territories7. Other countries
of over 300 million SEK were received. Finland has in place a 25% cash rebate program, which successfully helped the
AV production during the pandemic.
5 Judgment of the Court of 5 March 2009, UTECA v Administración General del Estado, C-222/07, EU:C:2009:124.
6 See Commission’s TRIS comments on the Danish draft law submitted in 2022 available here.
7 Greece (1.5% investment obligation yet not in force); Slovakia, Slovenia, Bulgaria, Lithuania, Estonia, Luxembourg,
Cyprus, Malta, Hungary (0% financial obligation) - but also larger countries such as Sweden, Ireland, Germany (1,8% -
2.5% levy) and Poland (1.5% levy) are not much higher.
in the region have not implemented a financial obligation under Article 13(2), such as Lithuania,
Sweden, Slovakia, Slovenia, Bulgaria, Cyprus, Malta and Hungary. The implementation of different
obligations in different member states causes fragmentation of capital, which leads to a “tick box”
outcome that results in content lacking full entrepreneurial support.
One of the three possible models suggested for compliance with the financial obligation is the
option paying a contribution of 5% of income, to be channelled into the production of local
audiovisual works through the Estonian Film Institute. We would like to remind the authorities
that in line with Recital 36 of AVMSD, Member States must ensure that non-domestic AV services
that are required to contribute to national film funding schemes can benefit in a non-
discriminatory way from those film funding schemes. The intention to develop a bill to amend the
Media Services Act does not set out how services established in other Member States will access
the funds in order to benefit from the cultural contribution in an equal manner as domestic
services. This could create an advantage for Estonian production companies over media service
providers established in other Member States when applying to benefit from the cultural
contribution fee.
Contributions should be fully made to European works
Furthermore, the options proposed also explicitly refer to supporting the production of local
Estonian audiovisual content or works by Estonian producers. In light of this, we would like to flag
the European Commission’s comments which highlight that Article 13(2) AVMSD refers to the
financial support for the production of European works8 and that obligations that relate solely to
national cinematographic films and audiovisual activities or national language works are likely not
consistent with the AVMSD which requires such contributions be to European works. This
requirement may therefore put production companies that are established in Estonia at an
advantage over foreign companies established in other territories as it would be more accessible
for them to carry out European audiovisual productions in the territory of Estonia.9
Therefore, if the government is minded to nonetheless impose a financial obligation, in order for
it to be in line with the purpose of EU legislation, which is to contribute financially to the
production of European audiovisual works, we suggest that this is addressed in the proposed
amendment.
3. Safeguards and flexibility are required in order to being in line with the AVMSD
If a financial obligation would be introduced despite the risks outlined above, we consider that
there are essential measures described below to be taken into account to make any financial
contribution obligation more proportionate and non-discriminatory, which are foreseen in the
AVMSD.
8 Flagged by the European Commission’s in its comments on the Norwegian draft law available here, on the Danish
draft law submitted in 2022 available here and on the Danish draft law of 2023 available here.
9 Flagged by the European Commission’s in its comments on the Dutch draft law of 2022 available here and on the
Danish draft law submitted in 2022 available here.
In addition, if introducing a financial obligation Estonia should recognize in the draft amendment
that not all content types provided by a VOD service provider are relevant in determining the
applicable revenues to be taken into account for the calculation of the obligation. For instance,
we respectfully suggest that revenues attributed to content related to news and sport found in
the respective VOD catalogues are deducted from the obligation base. Furthermore, the amount
of financial contribution should be based on the net revenues taking into account the costs and
the possibility of not being profit-making from year to year, and should allow for the multi-year
(3-5 years) spread of production costs.
Flexibility of model
If the Estonian government chooses to introduce a financial obligation, when considering which
model to implement between the three suggested options, we respectfully submit that option 3,
a combined model with a financial obligation from which VOD providers can deduct direct
investments made to support local audiovisual content, offers the most flexibility for VOD
providers.
Exemptions
We welcome the fact that the intention to develop a bill to amend the Media Services Act
proposes that the existing exemptions for low audience, low turnover, and for services where, by
reason of its theme, it would be unreasonable to apply the obligation also apply to the financial
obligation, in line with Article 13(6) AVMSD. We also welcome that these exemptions are in line
with the European Commission’s guidelines10 in relation to the thresholds: less than €2 million of
revenue for low turnover exemption and audience share below 1 % for low audience exemptions.
Flexibility of any direct investment obligation
If introducing a direct investment obligation, we emphasize the importance of the definition of
“direct investment” encompassing a diverse array of content types eligible for investment under
the financial obligation: all forms of co-productions, content commissioning or
licensing/acquisition among others of films, series and documentaries regardless of which
subcategory the content may otherwise fall under, including e.g. reality, comedy and drama. In
addition, other types of investment such as marketing, theatrical distribution and investments in
training, infrastructure development and localization costs11 should be accounted for as part of
the financial obligation.
This greater flexibility will allow for a more organic growth, more alignment with the business
models and practices of individual media service providers, which may have legitimate business
reasons for engaging in investments in one category over another.
10 EUR-Lex - 52020XC0707(03) - EN - EUR-Lex (europa.eu)
11 i.e. in the event non-domestic services decide to invest in the dubbing and subtitling into and from Icelandic.
4. Additional observations
Contractual freedom is the backbone of the AV ecosystem
We understand that for the purposes of option 2 (direct investment in audiovisual projects of
Estonian film producers), an Estonian film producer is defined as “a private legal entity registered
in Estonia or a self-employed person entered in the business register, whose main activity is the
production of films and who owns or is licensed by the proprietary copyrights of the authors of
the audiovisual works”. As such, investments in local content in which the copyright is fully
acquired by the commissioning party will not qualify as a direct investment under option 2.
In this regard, we would like to stress that the development and the creation of AV works imply
significant risk taking, encompassing the selection of projects and the funding of the development
of the project, which includes securing finance from various investors, including
public/commercial broadcasters, VOD services, distributors of theatrical content and home
entertainment. The cost of one unsuccessful project can have significant consequences for the
Estonian creative community. Therefore, it is often necessary to offset this cost with the successes
of other projects, to ensure a steady flow of investment and sustain the broader ecosystem.
Regulatory interventions artificially imposing IP ownership limitations would distort content
development policies. Entities making high investment risks (and potentially fully financing a
project) in the production of content should be able to expect the required rights to recoup those
investments in return. Having contractual freedom means producers and commissioning entities
can negotiate the sharing of rights based on the financing model which best suits a particular
project. Restricting the eligibility of certain local projects or investments in local content based on
the rights allocation would result in certain projects being at risk of not being made at all.
The MPA strongly encourages the Estonian government to respect contractual freedom which
allows each work to have its own tailor-made partnership between the investors and the
producers under a “risk and reward” model. Any indirect intervention that undermines
contractual freedom would distort the market and investments in AV content and consequently
have a negative impact on the sustainability and competitiveness of the Estonian AV ecosystem.
Other
In addition to the elements that have already been mentioned, Estonia should also take into
account other components that would enhance the audiovisual sector's prospects within the
potential constraints of financial obligations:
● Allow for a phase-in to provide for market adjustments.
● Allow for corporate group wide investments and pooling (e.g., if both a linear and a
streaming service must invest, consider allowing them to pool).
Estonia should also consider the compatibility of the proposed financial obligation with Pillar One
of the OECD agreement on a two-pillar solution to address the tax challenges arising from the
digitalisation of the economy, agreed in October 2021. While the document on the intention to
develop a bill to amend the Media Services Act considers that a financial obligation under the
AVMSD cannot be treated as a prohibited digital services tax if it is imposed in the same way for
Estonian and foreign companies, this is not yet certain. Note for example that in March 2024, the
Ministry of Culture in Norway announced that they will not be introducing a co-financing
obligation at the moment, as “any future introduction of the co-financing obligation must await
the process in the OECD/G20's Inclusive Framework on Base Erosion and Profit Shifting.”12 This is
also particularly relevant considering the stated reason for the proposed amendment of the
Media Services Act, which is to “find ways to tax international streaming platforms and work
towards fair taxation of global digital giants.” Therefore, we would strongly caution against any
introduction of measures until the Framework is in place to ensure that the measure complies
with it.
The presence of higher financial obligations on media service providers does not necessarily
guarantee superior outcomes in terms of content investment. In light of this, we would
respectfully request the government to first reconsider other means to achieve the objective of
promoting the production of European audiovisual works through less intrusive means which
would not restrict the freedom to provide services (please see section above on production
incentives).
If the government remains determined to enforce a financial requirement, it should do it
according to the principles of proportionality, non-discrimination and taking into account the level
of investment introduced in similar sized countries.
Against this backdrop, we are at your disposal to discuss all points in greater detail.
Yours sincerely,
Stanford McCoy
PRESIDENT & MANAGING DIRECTOR MPA EMEA
M +32 471 51 56 57
E
[email protected]
12 Endringer i kringkastingsloven mv. (gjennomføring av endringsdirektiv til direktiv om audiovisuelle medietjenester
mv.) og samtykke til godkjenning av EØS-komiteens beslutning nr. 337/2022 om innlemmelse i EØS-avtalen av direktiv
(EU) 2018/1808, Prop. 66 LS (2023–2024)
Saatja: Smith, Rebecca <
[email protected]>
Saaja: Karlo Funk, Koronakis, Alexandros, Grela, Raquel, Siiri Pelisaar, KUM min
Teema: RE: Notification letter (Audiovisual Media Services Directive)
Dear Mr Funk,
Thank you for the opportunity to provide comments on Estonia’s intention to apply Article 13(2) of the EU Audiovisual Media Services Directive. Please find attached MPA’s comments for your consideration.
We remain at your disposal should you have any questions.
Best Regards,
Rebecca Smith
REBECCA SMITH
Policy Counsel
Motion Picture Association EMEA
+32 475 52 19 98 (mobile)
+32 (0)2 778 27 06 (office)
[email protected] <mailto:
[email protected]>
Moving Pictures. Moving Audiences. Moving Forward.
From: Karlo Funk <
[email protected]>
Sent: Friday, June 7, 2024 3:05 PM
To: Smith, Rebecca <
[email protected]>
Cc: Koronakis, Alexandros <
[email protected]>; Grela, Raquel <
[email protected]>; Siiri Pelisaar <
[email protected]>
Subject: RE: Request for invitation to provide feedback on intention to develop a bill to amend Media Services Act - MPA
Dear Rebecca Smith, I was just about to send the official notification.I’m attaching here the letter in English and the draft law proposal , not the actual draft law which has not been prepared yet, in Estonian only unfortunately.You <http://unfortunately.You> will receive the same letter through the offic
Dear Rebecca Smith,
I was just about to send the official notification.
I’m attaching here the letter in English and the draft law proposal , not the actual draft law which has not been prepared yet, in Estonian only unfortunately.
You will receive the same letter through the official channel by the end of next week.
Best regards,
Karlo Funk
audiovisuaal- ja digikultuuri nõunik
Kunstide osakond
Kultuuriministeerium
[email protected] <mailto:
[email protected]>
+372 5648 5966
Suur-Karja 23 │ 15076 Tallinn │ Eesti
From: Smith, Rebecca <
[email protected] <mailto:
[email protected]> >
Sent: Friday, June 7, 2024 3:26 PM
To: Karlo Funk <
[email protected] <mailto:
[email protected]> >
Cc: Koronakis, Alexandros <
[email protected] <mailto:
[email protected]> >; Grela, Raquel <
[email protected] <mailto:
[email protected]> >
Subject: Request for invitation to provide feedback on intention to develop a bill to amend Media Services Act - MPA
Dear Mr Funk,
My name is Rebecca Smith, I am contacting you on behalf of the Motion Picture Association (MPA), which represents the interests of the six major international producers and distributors of films, home entertainment and TV programmes. Our members are Walt Disney Studios Motion Pictures, Netflix Studios, Paramount Pictures Corporation, Sony Pictures Entertainment Inc, Universal City Studios LLC, and Warner Bros. Entertainment Inc.
I am getting in touch with regards to the invitation sent to stakeholders recently, including some of our members, to provide feedback on the intention to draft a draft law for the amendment of the Media Services Act. We recently sent an email to the general Ministry of Culture email address asking if it would be possible to receive an invitation to provide feedback (please see below). We are still awaiting a response, but also wanted to get in touch with you directly as the contact person for the invitation.
We would be very interested in providing written feedback on the intention to develop a bill on behalf of our members and would therefore like to ask if it might be possible to receive an invitation to provide feedback?
We would also be happy to discuss this further via a phone/video call if you would like, please do just let me know.
Many thanks in advance.
Best Regards,
Rebecca Smith
REBECCA SMITH
Policy Counsel
Motion Picture Association EMEA
+32 475 52 19 98 (mobile)
+32 (0)2 778 27 06 (office)
[email protected] <mailto:
[email protected]>
Moving Pictures. Moving Audiences. Moving Forward.
From: Smith, Rebecca
Sent: Wednesday, June 5, 2024 5:17 PM
To:
[email protected] <mailto:
[email protected]>
Cc: Koronakis, Alexandros <
[email protected] <mailto:
[email protected]> >; Grela, Raquel <
[email protected] <mailto:
[email protected]> >
Subject: Request for invitation to provide feedback on intention to develop a bill to amend Media Services Act - MPA
Dear Sir/Madam,
My name is Rebecca Smith, I am contacting you on behalf of the Motion Picture Association (MPA), which represents the interests of the six major international producers and distributors of films, home entertainment and TV programmes. Our members are Walt Disney Studios Motion Pictures, Netflix Studios, Paramount Pictures Corporation, Sony Pictures Entertainment Inc, Universal City Studios LLC, and Warner Bros. Entertainment Inc.
Some of our members have made us aware that the Ministry of Culture has recently sent an invitation to stakeholders to provide feedback on a draft bill to amend the Media Services Act, with a deadline for feedback of June 18. We would be very interested in providing our feedback on the bill on behalf of our members, and would like to ask if it would be possible to receive an invitation to provide feedback?
Many thanks for your consideration, and looking forward to hearing from you.
Best Regards,
Rebecca Smith
REBECCA SMITH
Policy Counsel
Motion Picture Association EMEA
+32 475 52 19 98 (mobile)
+32 (0)2 778 27 06 (office)
[email protected] <mailto:
[email protected]>
Moving Pictures. Moving Audiences. Moving Forward.
________________________________
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