AGCOM’s Regulation on Secondary Rights

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On February 3 2011 the Italian Communications Authority (AGCOM) issued a new regulation on the use of secondary rights acquired by media service providers. Annex A to Resolution 30/11/CSP – known as the Secondary Rights Regulation – sets criteria for the maximum duration of the use of such rights.

The Secondary Rights Regulation came into force on March 6 2011 – that is, 15 days after its publication in the Official Journal. It was adopted pursuant to Article 44(5) of Legislative Decree 177/2005, known as the Audiovisual Media Services Code (the AVMS Code). With the aim of supporting independent producers, the AVMS Code states that where a broadcaster acquires the transmission rights for audiovisual content created by an independent producer, AGCOM limits the duration of these so-called ‘secondary rights’.

Before the amendment introduced by the Romani Decree (Legislative Decree 44/2010), this issue was covered by a regulation attached to AGCOM Resolution 60/09/CSP; this has now been replaced by the Secondary Rights Regulation.

The need to foster and support independent production is generally recognised in EU law on audiovisual media services. The EU Audiovisual Media Services Directive (2010/13/EC) (the AVMS Directive), which replaced the EU Television without Frontiers Directive (89/552/EEC), states that:

a commitment, where practicable, to a certain proportion of broadcasts for independent productions, created by producers who are independent of broadcasters, will stimulate new sources of television production, especially the creation of small and medium-sized enterprises. It will offer new opportunities and marketing outlets to creative talents, to cultural professions and to employees in the cultural field.” (Recital 68)

The AVMS directive addresses the question of defining ‘producers who are independent of broadcasters’, stating that EU member states should take appropriate account of criteria such as:

  • the ownership of the production company;
  • the quantity of programming supplied to each broadcaster; and
  • the ownership of secondary rights (Recital 71).

The AVMS Directive thus confirms the provision introduced by Recital 31 of EU Directive on Television Broadcasting Activities (97/36/EC), which amended the Television without Frontiers Directive.

Pursuant to the AVMS Code, ‘independent producers’ are European producers of audiovisual content which:

  • are not controlled by or affiliated to broadcasters; and
  • have not sold 90% or more of the content that they produce to the same broadcaster over a three-year period (Article 2(1)(p)).

The Secondary Rights Regulation defines ‘primary rights’ as the rights for the transmission of audiovisual content in Italy on electronic communication networks. The parties that trade such rights may also determine their duration (Article (1)(1)(i)). ‘Secondary rights’ are defined as rights other than primary rights, as well as the rights for transmission of audiovisual content abroad (Article 1(1)(j)).

The Secondary Rights Regulation prohibits agreements which seek to categorise all rights for the exploitation of an audiovisual work on all platforms as primary rights, as this might reduce the scope and value of secondary rights.

The Secondary Rights Regulation applies to two forms of production:

  • A ‘co-production’ is an audiovisual work which is co-produced by a broadcaster and an independent producer, provided that the latter’s contribution represents at least 10% of the total cost (Article 3(2)). Thus, in some circumstances the required contribution from an independent producer is reduced – it was previously set at 15% or more of the total project development cost or 8% of the total project creation cost;
  • A ‘production predominantly funded by a broadcaster’ is an audiovisual work which is created by an independent producer and mainly funded by a broadcaster, provided that the independent producer performs certain activities listed in the Secondary Rights Regulation and bears at least 5% of the total cost (Article 3(5) – the previous regulation referred to this percentage as the total project development cost). The activities which the independent producer must perform include:
    • choosing the subject;
    • assigning or commissioning the development of the screenplay;
    • researching or assessing possible filming locations; and
    • choosing the main members of the cast and technical crew, including actors and the director.

Thus, in order for secondary rights to be assigned, the independent producer must have a financial as well as artistic input; playing an executive production role is insufficient to secure secondary rights established by the Secondary Rights Regulation.

The Secondary Rights Regulation stipulates a single quota for the independent producer’s contribution to the phases of development and creation of the audiovisual work. A percentage of secondary rights is assigned to an independent producer in proportion to its financial contribution to the work’s development and creation.

Moreover, the Secondary Rights Regulation retains two key terms: pre-emption and licence. ‘Pre-emption’ refers to an arrangement whereby the audiovisual work is created by an independent producer and the rights therein are acquired by a broadcaster before the work is completed. This differs from licensing, whereby the work is licensed to a broadcaster after its completion. The Secondary Rights Regulation usefully distinguishes these activities, which it does not cover.

AGCOM welcomed the proposal to remove the definition of ‘format’ in the previous regulation. The definition derives not from the Copyright Law (633/1941), but from a statement by the Italian Society of Authors and Editors. AGCOM considers that as there is no consensus on the correct definition, this issue should be determined by the parties in question, although it retains the reference to ‘format’ in the Secondary Rights Regulation in order to include it within its field of application.

For co-productions, the rights in the audiovisual work may not be licensed to the broadcaster for longer than:

  • five years for films, fictional and cultural works, and musical, sports and entertainment programmes;
  • three years for documentaries; and
  • seven years for cartoons.

For productions that are predominantly funded by a broadcaster, the time limits on these rights are one year longer than the above.

Parties can agree to apply shorter periods if they wish (Article 4(8)). The periods in question run from the first use of the primary rights – that is, the first transmission of the audiovisual work (Article 4(1)).

If the broadcaster does not exploit one or more of the rights in the works within two years of the delivery of the audiovisual work, the rights can be used according to the terms contractually agreed between the parties (Article 4(7)).

Each media service provider must adopt a self-regulation procedure, which must be communicated to AGCOM, in order to ensure that commercial relations with independent producers comply with principles of fairness and non-discrimination (Article 44(5) of the AVMS Code and Article 5 of the regulation). Moreover, individual rights should be traded autonomously, allowing holders to maximise them.

AGCOM will verify compliance with the regulation on the part of communications operators. If operators violate its provisions, AGCOM may fine them between €10,329 and €258,228, drawing on the provisions applicable in the event of a violation of Article 44 of the AVMS Code under Article 51(2)(d).

Self-regulation has proved successful in other jurisdictions, such as the United Kingdom, where the Communications Act 2003 mandated the Office of Communications to oversee the introduction and implementation of suitable codes of practice for transactions between broadcasters and independent producers. New codes have since been implemented in the United Kingdom that allow for greater transparency in dealings between broadcasters and independent producers.

The Secondary Rights Regulation states that agreements which were signed before the Romani Decree became effective remain subject to the previous regulatory framework, thereby providing certainty with regard to the applicable provisions.

Any aspect of secondary rights that is not governed by the Secondary Rights Regulation is subject to the agreement between the parties, in keeping with the self-regulatory approach endorsed by AGCOM.

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