Romania imposes financial contributions on streaming platforms to support national film fund

Deniza Cristian 17/10/2022 | 15:23

Recent changes resulting from the transposition into Romanian law of The EU’s Audiovisual Media Services Directive no. 2018/1808 (AVMS Directive) have a direct impact on streaming platforms operating in Romania, in the form of a levy on revenues, as well as new reporting obligations. Below we describe how these changes will impact the business of such providers.

Written by Andrei Vartires, Senior Associate, Dentons Romania

 

In this respect, the Romanian Parliament recently adopted a new law which brought changes to a few existing regulations, including the Audiovisual Law no. 504/2022, as well as Cinematography Ordinance no. 39/2005.

Included in the changes is an obligation on streaming platforms, also known as video-on-demand providers (VOD providers), to pay a financial contribution on proceeds from local subscriptions and single transactions, along with a set of regulatory obligations. A part of this contribution may be in the form of investments in the local film industry, under certain conditions.

Below we focus on the newly introduced provisions that affect VOD providers, namely (i) imposed financial contributions, (ii) investment options and (iii) regulatory regime.

The authority in charge of implementing these provisions and collecting the financial contribution is the National Center of Cinematography (CNC). The CNC already collects contributions to its fund from other sources, such as cinema operators or cable television distributors.

  1. Imposed financial obligations on VOD providers

Under the AVMS Directive, member states have the option (but not the obligation) to impose a financial contribution on VOD providers.

The Romanian state ultimately opted for the contributions, in the following forms:

  • 4 percent levy on VOD providers on revenues generated in Romania, from subscriptions or single transactions for viewing audiovisual works through data transmission services.
  • 3 percent levy on the price paid by viewers for each audiovisual work downloaded, by way of data transmission services or streaming platforms. This provision existed previously but was amended to expand its applicability.

Both Romanian VOD providers as well as non-Romanian VOD providers offering VOD services in the country are subject to the levies above.

VOD providers are to pay these contributions directly to the CNC, and they come with specific reporting obligations described below.

Although no official statement has yet to be issued, we understand that the CNC has already begun notifying VOD providers of the new financial obligation.

  1. Investment options for VOD providers

VOD providers may opt to directly finance local film productions. Should they choose to do so, they may invest up to 40 percent of the 4 percent levy. Investments in other audiovisual works such as series (TV productions) would not be eligible.

To qualify for the direct investment option, VOD providers must:

  • notify the CNC of their interest in direct investment in a Romanian film production; and
  • have a request from a Romanian film producer for such investment.

With respect to the first condition, the producer making the request needs to be registered in the CNC’s registry. As for the second condition, a notice informing the CNC is sufficient without the need to receive approval from the authority.

Investments are reported to the CNC on a quarterly basis.

Surprisingly, the CNC did not update its secondary norms, which should have provided additional details about how the investment process would be implemented specifically for streaming platforms.

As such, it remains an open question as to how the film fund will treat investments performed by VOD providers from a regulatory perspective, given that the existing norms provide details about the investment process for other categories of contributors to the fund.

  • Reporting obligations

The financial contributions are paid to the CNC using a standard form issued by the authority. The form includes all categories of payers to the authority’s fund along with the option to indicate the amounts allotted for direct investment.

The provisions adopted by the Parliament allow VOD providers to report and pay the relevant financial contribution on a quarterly basis to the CNC.

Nevertheless, in practice, it appears that the CNC currently collects the contributions from VOD providers on a monthly basis, following a legislative error in the provisions, which has yet to be rectified. By applying the current practice of monthly reporting and paying, the CNC may consider implementing a unified approach, whereby all other contributors to the fund are subject to monthly reporting/payments.

With respect to the reporting of amounts for direct financing (point II above), this would be performed on a quarterly basis and entails the submission to the CNC of each (i) contract with a producer or other qualified entity regarding the financing of a production and (ii) proof of payment under such contract.

Conclusion

The transposition of the AVMS Directive into local law is an important step forward for the audiovisual industry in Romania.

Under the existing provisions, both global VOD providers offering their services in Romania as well as local providers have the option to direct part of their amounts due to the CNC to the production of local films, which could provide a significant stimulus for the local audiovisual sector.

Nevertheless, the authority’s activity should be more predictable, thus, CNC should collaborate with all VOD providers in Romania to facilitate direct investments in the local industry, enhancing its capabilities and nurturing its potential for creating high quality content for global audiences. In addition, CNC should issue specific norms, tailored for streaming platforms, which would further encourage them to invest in the local film production by offering additional benefits in this respect.

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Deniza Cristian | 26/10/2022 | 17:53

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