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Industry Report: In Media Res

Industry Report: In Media Res

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Comprehensive Review in Bulgaria

Hristo Nihrizov, Partner at Dimitrov, Petrov & Co., reported that the Bulgarian TV and radio markets are dominated by three big, established operators in the country. There are some new international players (e.g., Bloomberg recently launched a new business-oriented channel with a local partner), but Nihrizov noted that these new channels usually face an uphill battle in carving out market share and generally focus instead on niche markets. Overall, though, he pointed to a growing number of channels in the country, “which is good for the consumers.”

In terms of print media, Nihrizov said: “I think we are lagging behind here, with not much in terms of new products. The ownership of the print outlets is constantly discussed as to whether it is independent and objective or not.” He added: “Consumers tend to not trust the media. As an example, I recently read an article that said that only 17% of the consumers believe in the independence of the media, and confidence levels in it are also quite low, with numbers being reported along the lines of 59% of people thinking that all media depends on their publisher’s political and business interests.”

As to the film industry, Nihrizov mentioned that it is growing, with “more and more local productions made and distributed on local TV channels. Furthermore, several movies produced locally have won awards and international competitions; overall the industry is in a much much better place than five years ago.” Nihrizov also pointed to an increasing “interest from foreign studios who are contemplating entering the European market through Bulgaria, such as from Bollywood, Turkey, and even some from the US.” When asked if that is driven by benefits – similar perhaps to the tax credits extended in Hungary (see page 43) – he explained that, “There are some benefits for local productions, but I don’t think that’s the main driver. Rather, I think it has to do with the natural resources of the country: we have beaches, mountains, all four seasons, meaning one can shoot just about anything here.” In addition, he said, “we have some really good studios here, and the workforce is still relatively cheap compared to the rest of Europe, so you end up with a production branded as coming from the EU with less financing for the workforce, and the quality, I think, is great. Also consider that there is a lot of IT input in film production and Bulgaria is one of the top five outsourcing destinations – everything from graphic design and technology components of the productions can be found locally.”

On the legislative front, he said, despite some minor changes in the regulation of state-owned media, overall not much has changed recently. Nihrizov reported that at this point everyone is waiting to see how things will evolve with the pending overhaul of the EU media framework, which, in many parts, dates back to the 90s, which “makes it considerably outdated and not able to cover many updates such as convergence of services and online content, for example.” 

Finally, Nihrizov said, Bulgaria is now working on the Collective Management of Copyrights and Neighboring Rights Act, which will likely come about by the end of the year. On this, he commented: “I am curious how it will change the market of copyrights and production, especially in terms of distributors – it will definitely reframe this part of the business.”

Busy Filming in Hungary

Monika Horvath, Partner at DLA Piper in Budapest, noted that film production is busy everywhere these days, both in Hungary and in Europe as a whole, with the distribution channels increasingly focusing on producing their own content. “And you feel it, because there are a lot more productions coming to Hungary, to the point where it is starting to prove difficult to find venues that are not booked up. This translates into us having a lot of work as we see a lot of big productions – both TV series and movies – across the board.” Horvath gave the example of the Blade Runner remake as an exciting project that will be filmed in Hungary soon, but said: “We also have plenty of television series which are returning and some have even already booked for next season now that they concluded this cycle, so I would say business is good and all are happy.”

Horvath reported that Hungary’s attractiveness as a location is bolstered by a tax credit, which two years ago was increased to 25%. “This really assisted in increasing the attraction of the country,” she explained, “complemented by the fact that the Hungarian government also implemented several legal changes to make sure that the tax credit money is available for production.” Specifically, she said, in January of this year a guarantee was introduced topping up the money available in the central depository fund (normally used to fund the tax credit) on a quarterly basis should there not be enough funding available. “It’s a kind of a state guarantee that we already see working to decrease the risks of production,” she commented.

Horvath explained that the Czech Republic has a similar credit, but it has a cap and one needs to register for it – registration that is only valid until the cap is reached. “There is, indeed, a cap in place on Hungarian benefits as well, but that is only a cap on the amount guaranteed, rather than on the credit, and experience has shown so far that the cap of the guaranteed amount, which is HUF 14 billion in 2016 (approximately EUR 45 million) is really set high enough in any case.” Horvath added that there are tax incentives in place in some other markets as well, including the UK, France, and Germany, but – except for Hungary, the Czech Republic, and Slovakia – none really in most CEE markets. She noted that Poland is contemplating a similar plan, but it is unlikely that it will be implemented for at least another year. 

In terms of upcoming legislation, Horvath pointed to a revision in tax legislation that will become effective on July 1, changing the definition of royalty revenues for taxation purposes. She explained: “We had to comply with the OECD guidelines, according to which some of the practices in Hungary are harmful, such as the favorable tax treatment related to licenses fees. The system of them being traditionally discounted to 50% for corporate tax purposes was [determined not to be consistent with] the OECD guidelines and, as a result, the definition of the royalty had to change, and only patents and other industry-type of copyrights would benefit from these discounts.” As a side effect the benefits from an exception to the 2% local tax was also eliminated. “For film productions it means that they cannot benefit from the alternative structures [they] used earlier, like sale of copyright or co-production structures, but I think, or hope, the market will remain competitive irrespective of such changes.”

In-House with a TV Station in Slovakia

Lucia Tandlich said that, in her role as Head of Legal at the Markiza-Slovakia TV station, she has to deal with a wide range of issues, from commercial law, to administrative and civil law, to protections and pre-litigation negotiations (for matters related to trademark infringements, protection of personality and/or reputation, and so on). These are complemented on the production side with copyright issues, which take up much of her time, along with legal matters related to sales, which are also under her control.

Other areas on her “standard agenda” relate mainly to the Law on Broadcasting and Retransmission and the Law on Copyright. The former includes matters such as the protection of minors, protection of personality, neutrality, and objectivity of news, meeting requirements applicable for TV advertising, and following the requirements of the licenses granted by Slovakia’s Media Council. The latter – the Law on Copyright – requires that she to settle all rights with authors, performers, and all people involved the the production phase of the TV broadcasting. Part of this process involves concluding contracts with foreign format owners and the right-holders to the formats produced internally, or acquiring rights to movies for broadcast. Many of these tend to be volume deal contracts. 

Tandlich said that she keeps most of the work in-house, but tends to outsource litigation because “it is really hard to deal with that on a regular basis since many of the cases are spread geographically throughout the country.”

She also reported that the biggest challenge of working as an in-house counsel in a TV station is, “the flexibility of it all, combined with the fact that you are always operating under time pressure. Specifically, if a news item is prepared to go out at 7:00, you tend to get called up at 5:00, or sometimes even a few minutes before going live, and these kinds of hasty decisions, without always knowing all the facts, are not something that lawyers are comfortable with.” The secret, she said, “comes down to simply having a lot of knowledge as to the main potential problematic areas and being able to react at any point.”

Tandlich highlighted several significant changes to Slovakian legislation expected to come into force in the near future in the form of an amendment to the existing Law on Broadcasting and Retransmission “if the proposed changes to the AVMS Directive are adopted by the EU Parliament.” She explained that “most of the changes relate to the advertising part of the business, which are inevitable [as] advertising is the only type of direct income for the private TV broadcaster. Due to the fact that in our territory private broadcasters are not financed by the compulsory fee paid by the households or funded by the state from the budget as in case of public TV, any progressive and not restrictive change in that respect is welcome.” Down the road, she said, she also expects “the adoption of a new law on broadcasting and retransmission, the preparation of which has been declared several times by the local legislator.”

The Revizor Precedent and a Developing Trend in Ukraine

Oleksandr Padalka, Partner of Sayenko Kharenko, reported that one of the biggest developments affecting Ukrainian media is a recent ruling by the commercial court in a dispute between two Ukrainian TV channels. He said the ruling has played an important role in defining and “protecting the rights to media projects (in this case, a reality show in which the show presenter checks the quality of service provided by establishments in the service sector – specifically, of the hotel/restaurant/cafe industry).” Padalka explained that the court’s ruling establishes the criteria for media project copyright protection and specifies the criteria by which ideas that are not copyrightable and the concepts of media projects may be distinguished from the actual form of the work, the rights to which may belong to another person. 

In the particular dispute, Padalka explained, “the claimant asserted that he was the owner of the intellectual property rights to the Revizor audiovisual work and the scenario of the Revizor TV show literary work. During September 2014 the respondent broadcast a TV show named Inspector Freimut, using the same idea. Moreover, the host of both Revizor and Inspector Freimut was the same person (Mrs. Olga Freimut).” According to Padalka, “the claimant argued that the Inspector Freimut TV show was created by unlawfully adapting both the audiovisual work and the master scenario of Revizor, and thus infringed the claimant’s copyright. The claimant also provided the court with a list of the parts of the works used in the Inspector Freimut show.” The responded relied on the rationale that the idea used for the Revizor show was not new. “Furthermore, [the respondent] asserted that ideas or concepts are not subject to copyright protection. Also, the respondent argued that the TV show could not be regarded as a derivative work from both the audiovisual work and the master scenario,” Padelko explained. 

In ruling in favor of the claimant the court prohibited any further broadcasting of the Inspector Freimut show, and awarded the claimant about UAH 1 million (a little over EUR 35,400) in statutory damages for copyright infringement. Padalka explained the ruling: “The court commissioned an expert investigation in the course of which episodes of both the Revizor show and the master scenario were compared with the episodes of the Inspector Freimut show. Having conducted the comparative analysis, the expert concluded that a number of copyrightable elements of the Revizor show (including the public image of the show’s host, the pattern of the inspection, the intrigue of both shows, and the criteria and outcome of the inspections) were used in the Inspector Freimut show. The court also held that the elements of internal form (the composition of the work, its structure, and its artistic images) and external form (the language, vocabulary, style of speech, etc.) of the literary work constitute its copyrightable elements.”

The implications are considerable, according to Padalka, as the decision “defines the approach to drafting and the list of documents that could ensure a further protection of copyright in media projects (in particular, if a well-known show presenter of a well-known TV show moves from one channel to another).” The criteria employed by the court are also important, he explained, as they will likely act as “a potential basis for distinguishing between ideas and concepts and the use of the form of the copyrighted work (its elements),” which “would definitely have an impact on future court practice in similar disputes.”

In terms of legislative updates, Padalka said that the market is keen to see “long-awaited” amendments to the Ukrainian copyright law. “The amendments should introduce a local takedown notice procedure,” he explained, “which should provide valuable support to media owners in protecting their IP rights on the Internet.” As to the status of the amendments, “there is no doubt that it will happen soon,” Padelka said, explaining that “media owners are the first who push the amendments forward, given also that these amendments are part of a broader package aimed at state support for cinematography in Ukraine.”

Finally, Padalka explained, it seems like Ukrainian legislature will continue to limit the penetration (or retransmission) of content produced in Russia into Ukraine, as “a pro-Ukrainian trend dominates in media.” At the end of 2015, he said, amendments to Ukrainian media laws entered into force which “concern, among other things, the prohibition against Russian legal entities and individuals incorporating and participating in Ukrainian media companies.” Furthermore, on June 16, 2016, the Ukrainian Parliament “introduced minimum quotas for Ukrainian language songs on the radio.” The initial quota is set at 25% of the total volume of songs, according to Padalka, but during the next two years it will increase to 35% (with a 5% increase per year). One positive effect of these developments is that “such limitations drive Ukrainian media to create their own content. This positively effects development of the local content production industry.”

We thank the following for sharing their opinions and analysis for this report:

  • Hristo Nihrizov; Partner; Dimitrov, Petrov & Co. Law Firm
  • Lucia Tandlich; Head of Legal; Markiza - Slovakia, 
  • Monika Horvath; Partner; DLA Piper 
  • Oleksandr Padalka; Partner; Sayenko Kharenko

This article was originally published in Issue 3.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.