Regulation of streaming services back on the agenda in Brazil with new draft of 2017 bill

In Brazil, debates on the regulation of streaming have returned to center stage this week with the submission of an opinion report on Bill No. 8,889/2017 by its rapporteur. A new draft proposal for the bill was also attached to the report and has been included in the agenda of the Brazilian House of Representatives for voting later this week.

The new draft represents yet another chapter in an extensive and complex debate on the regulation of video-on-demand (VoD) services in the country, especially after pay-TV providers (Serviço de Acesso Condicionado – SeAC) pointed out discrepancies in the regulatory burden faced by the two service models, as well as the resulting competition imbalances.

While SeAC providers are subject to the rules of Provisional Measure No. 2,228-1/2001 and Law No. 12,485/2011 (SeAC Law), Brazilian Telecommunications Agency (ANATEL) regulations (as SeAC is a telecommunications service), and the National Cinema Agency (ANCINE), VoD providers are currently not covered by specific regulations in Brazil.

Recognizing the market imbalances, ANATEL recently approved the temporarily suspension of the regulatory obligations applicable to SeAC providers until the Agency concludes the review of the relevant regulations. However, if Bill No. 8,889/2017 is converted into law, it will establish a specific regulatory framework for audiovisual streaming services, which would largely mitigate the existing regulatory asymmetry.

The new version of the bill addresses several points that have been discussed within the sector, including the requirement for service providers to register with ANCINE. It also sets limits on obligations provided for in other related bills, such as the rates and calculation base for the National Film Industry Development Contribution Tax (CONDECINE). Key aspects of the new draft bill are outlined below:

Scope

In addition to video-on-demand (VoD) providers, the bill’s rules also cover  OTT television services providers and audiovisual sharing content platforms, meaning both streaming platforms and platforms focused on sharing the content created and made available by users will be subject to its provisions.

The bill also sets out duties and obligations for manufacturers of ‘electronic devices that allow for the enjoyment of audiovisual streaming services’ – in other words, manufacturers of equipment such as TV boxes, decoders and receivers.

ANCINE as a competent authority and accreditation obligations

The bill indicates ANCINE as the competent authority for regulating and supervising activities related to audiovisual streaming services, which, as stated, includes VoD providers, television internet apps and platforms for sharing audiovisual content.

Service providers would be subject to a simplified accreditation process by ANCINE and a series of legal and regulatory obligations, which includes submitting periodic reports detailing supply, audiovisual content consumption and revenues.

Note that providers operating outside Brazil and whose services target Brazilian consumers must have a permanent legal representative in Brazil, mirroring the current requirements for foreign entities offering TV/media channels in Brazil.

CONDECINE payments

As per the bill, the provision of audiovisual streaming services would be a taxable event in relation to CONDECINE. The tax would be calculated based on the provider’s annual gross revenue from providing the audiovisual streaming service, including advertising revenue. If a provider offers more than one type of audiovisual streaming service, CONDECINE will be calculated separately for each service.

The tax will be subject to progressive rates, ranging from 0% for providers with revenues of up to BRL 4.8 million to 4% for providers with revenues equal to or greater than BRL 96 million. The bill also provides for the possibility of deductions of up to 70%, provided that the deducted sum is reinvested in audiovisual productions, with priority given to Brazilian productions.

Brazilian content quota

As a means of promoting local audiovisual production, the bill establishes quotas for Brazilian titles in the catalogs of streaming platforms, which can reach up to 10% of the catalog. However, providers will be exempt from the quotas if they make at least 700 local titles available on their respective platforms. Additionally, Brazilian titles must be prominently displayed on the platform’s home screen, search engines, and recommendation systems.

Exhibition window

As a further measure to protect the Brazilian audiovisual sector, the new draft bill stipulates that audiovisual productions shown in cinemas may only be included on streaming platforms nine weeks after their release in Brazil.

Ratings and parental supervision mechanisms

In accordance with Brazil’s Child and Adolescent Statute (ECA) and the recently approved ECA Digital (covering internet-related protections for minors), the bill determines that providers must inform consumers of the rating classification of all works available on their platforms. They must also offer mechanisms to block access to certain content based on its classification.

Making public content available

The text establishes that providers must continuously and free of charge make available public audiovisual content that is part of a government communication and public services platform. The rules governing the amount and frequency of this content will be defined in future regulations, however, the bill stipulates that such content will not be counted toward the provider’s Brazilian audiovisual content quota.

Penalties

Streaming providers that fail to comply with the obligations will be subject to penalties ranging from official warnings and fines to the cancellation of their accreditation with ANCINE, making it impossible to provide services in Brazil.

The bill also proposes removing Article 5 from the SeAC Law, which currently prohibits vertical integration between audiovisual production, programming and distribution companies that provide SeAC. This is based precisely on ensuring pay-TV operators are subject to equal competitive conditions to streaming platforms, which are permitted to vertically integrate their activities.

As a substitute for Article 5, the bill proposes including a provision that assigns ANATEL and ANCINE the responsibility of assessing (within the extent of their competencies) the competitive risks and impacts on consumers arising from mergers, acquisitions or exclusivity contracts. If they identify potential harm to free competition or the diversity of supply, the agencies must forward their analysis to the Brazilian Competition Authority (CADE) and/or the Brazilian Congress.

Although the related Bills No. 9,700/2018, No. 1,403/2022 and No. 483/2022 were attached to Bill No. 8,889/2017, Bill No. 2,331/2022 (already approved in the Senate and awaiting inclusion in the agenda of the Culture Commission of the Brazilian House of Representatives) is not, despite earlier reports that the two bills would be processed together to avoid conflicting provisions. This scenario suggests that new political negotiations may be necessary to determine which of the bills will ultimately prevail and be enacted into law.

By proposing a comprehensive regulatory framework, the new version of Bill No. 8,889/2017 seeks to correct longstanding disparities between the regulation of traditional content distribution models and digital streaming platforms. Although the proposed draft reflects a certain level of progress on debates within the sector, uncertainty remains regarding the bill’s analysis by the House of Representatives, as it appears that will be processed in parallel with Bill No. 2,331/2022.

For more information on legislative and regulatory developments for the audiovisual sector in Brazil, please contact Mattos Filho’s Entertainment practice area.