Netherlands draft law creates investment obligations for domestic audiovisual products

On 18 July 2022, the Dutch government submitted a bill to parliament, which introduces an obligation for major video-on-demand services to invest a percentage of their relevant turnover generated in the Netherlands into Dutch audiovisual products. (See this December 2020 Law-Now article on the concept proposal of this investment obligation). The current proposed law contains several major amendments from the original concept, and certain requirements are also further elaborated.

Video-on-demand services

The bill imposes an investment obligation for video-on-demand (VOD) services. This includes the following: "SVOD" (subscription video on demand) used for services with a subscription, "TVOD" (transactional video on demand) for services with individual transactions, and "AVOD" (advertising video on demand) for services with media offerings framed by advertising messages.

The investment obligation also applies to VOD services based in another EU member state but targeting audiences in the Netherlands.

Requirements

Under the investment obligation, VOD services are required to invest 4.5% of the relevant turnover into Dutch cultural products. However, an exemption applies if the relevant turnover is lower than EUR 30 million per financial year. The relevant turnover refers only to Dutch turnover, after deduction of the turnover tax (VAT), generated from advertising, sponsoring, product placement, subscriptions and turnover from user transactions.

Notably, the exemption threshold of EUR 30 million is only used to determine whether a VOD service falls under the investment obligation. Once the investment obligation applies, the investment rate of 4.5% must be calculated on the entire relevant turnover.

VOD services must inform the Dutch Media Authority before 1 July each year on the previous financial year's composition, amount of relevant turnover, and the implementation of the investment.

Dutch audiovisual productions

A Dutch audiovisual production is defined as a documentary film, documentary series, drama series or feature film, which meets at least two of the following conditions:

• the original screenplay is predominantly written in the Dutch language;
• the main characters express themselves predominantly in the Dutch language;
• the screenplay is based on an original literary work in the Dutch language;
• the main theme is related to Dutch culture, history, society or politics.

An international co-production in the English language can also qualify if it is based on an original screenplay in the Dutch language or on a Dutch novel. This is also stated in the explanatory memorandum.

The draft legislation allows for the following types of investments:

• investment in Dutch productions or co-productions;
• acquisition of an exploitation licence in the case of an unfinished Dutch production;
• the acquisition of an operating licence for a Dutch production no older than four years at the time of acquisition.

Exemptions

The Dutch Media Authority may exempt VOD services from the investment obligation if, given the nature or subject matter of the media service concerned, application of the obligation would be impracticable or unjustified. Factors that may play a role in an exemption include the nature and size of the target group of the VOD service (e.g. an audience that is extremely specific and limited) or the specific economic circumstances of the provider, which may be the case for a start-up VOD service. The use of innovative formats, such as hybrid or experimental forms of Dutch cultural audiovisual productions, can also be grounds for a partial exemption.

Conclusion

As number of substantial changes have been made to the current bill in comparison with the original draft proposal. The investment obligation will only be applicable for VOD services and no longer applies to television and cinema, the investment percentage will be 4.5% instead of 6% and the exemption threshold will be EUR 30 million instead of EUR 1 million. Currently, the bill is being debated in parliament. We will monitor developments and provide an update as soon as the bill is finalised.

For more information on how this bill could affect your Netherlands-based audiovisual company or production, contact your CMS client partner or local CMS experts: