Structural Changes:

•Telecom become providers of Pay-TV service

Telecommunication companies become authorized to provide pay-TV service (together with landline telephony, mobile telephony and broadband internet access) with no area restriction;

 

•Shares of national content and independent content

Minimum quantity of Brazilian channels and independent channels, in addition to the minimum shares of Brazilian content and independent content in any channel.

The New Paradigm:

 

•From the technological viewpoint

The new law starts to be applied to services of audiovisual content supply by means of the charge of subscriptions, irrespective of the technology used.

 

•From the reach viewpoint

The new regulation is applicable to the supply of audiovisual content on a linear base (thus excluding VOD platforms and other non-linear ones).

 

Relevant Regulatory Issues:

           

•Content Production vs. Service Supply

 

Telecommunication service providers shall not, for the purpose of producing audiovisual content to be disclosed in the pay-TV or free-to air TV :

I – purchase or finance the purchase of rights to explore images of events of Brazilian interest; and

II – engage Brazilian artistic talents of any kind, including rights in works of Brazilian authors.

The restrictions are not applicable when the purchase or engagement is solely intended for production of advertising material.

•Limits to Cross-Ownership

 

• Television Broadcasters, Content Producers and Programmers with headquarters in Brazil shall not hold directly or indirectly, more than 50% of the total voting capital of telecommunication service providers;

• Telecommunication service providers shall not hold more than 30% of the capital of Television Broadcasters, Producers and Programmers with headquarters in Brazil;

(starting 1 year after enactment of the Law)

Note: It is permitted for telecommunication service providers to control producers and programmers with headquarters in Brazil which perform activities solely intended for trading of products and services in the international market.

 

Regulatory Bodies:

•National Telecommunications Agency – ANATEL

Supply and operation of the Pay-TV service (pay-TV operators) shall be regulated and overseen by ANATEL

•National Cinema Agency – ANCINE

The activities of content production, programming and packaging shall be regulated and overseen by ANCINE

Relevant Definitions:

•“Qualified Content”

Content disclosed in any channel, excluding religious or political content, manifestations and sports events, contests, advertising, telesales, infomercials, electronic games, mandatory political advertising, news contents and live-audience shows hosted by a host.

•“Qualified Content Channel”

A  channel with a schedule that, at prime time, discloses mainly audiovisual content classified as “qualified content”.

Brazilian Content Share:

 

In channels of qualified content, at least three hours and thirty minutes (3:30) per week of the contents disclosed at prime time shall be Brazilian and integrate a qualified space, and half of it shall be produced by a Brazilian independent producer.

Note: ANCINE shall establish the prime time of a maximum of 7 hours per day for child programming channels and of 6 hours per day for the other channels

At every three (3) channels of qualified content existing in each package, at least one (1) shall be Brazilian.

Among the Brazilian channels, at least one third (1/3) shall be programmed by a Brazilian independent programmer.

The packager shall be required to fulfill the provisions in the main section until the limit of twelve (12) Brazilian channels of qualified space.

Out of the Brazilian channels of qualified space to be disclosed in the packages, at least two (2) channels shall disclose at least twelve (12) hours per day of Brazilian audiovisual content produced by a Brazilian independent producer, three (3) of which at prime time.

Note: The packagers that offer packages distributed per technologies that enable to distribute, at the most, packages with up to thirty-one (31) channels shall be required to fulfill the share up to the limit of three (3) channels.

Shares: Implementation and term of effectiveness

 

•Implementation

During the first two (2) years of the term of effectiveness of the Law, the shares of channel and the programming shares shall be reduced at the following ratios:

two thirds (2/3) during the first year of the term of effectiveness of the Law;

one third (1/3) during the second year of the term of effectiveness of the Law.

The term of effectiveness starts in 180 days as from publication of the Law.

•Term of Effectiveness:  The term of effectiveness of the programming and channel shares shall expire after twelve (12) years as from enactment of the Law.

Relevant Concepts

 

•Brazilian Producer

A company that produces audiovisual content in compliance with the following conditions, cumulatively:

a) be organized pursuant to the Brazilian law;

b) have its headquarters and management in Brazil;

c) seventy percent (70%) of the total voting capital shall be held, directly or indirectly, by Brazilian citizens born or naturalized for over ten (10) years;

d) the management of the company’s activities and the editorial liability on the contents produced shall be solely incumbent upon Brazilian citizens born or naturalized for over ten (10) years;

•Brazilian Independent Producer

 

A Brazilian producer that fulfills the following requirements, cumulatively:

a) not to be a controlling company, controlled company or associated company of programmers, packages, distributors or concessionaires of radio broadcast services of sounds and images;

b) not to be bound to any instrument that directly or indirectly grants or purports to grant to minority partners, in case they are programmers, packages, distributors of concessionaires of radio broadcast services of sounds and images,  any right of commercial veto or any kind of commercial interference on the contents produced;

c) not to have any exclusivity bond that prevents it from producing or selling the audiovisual contents produced by it to any third parties;

•Brazilian Programmer

A programming company that performs its programming activities in the Brazilian territory and that:

a) is organized pursuant to the Brazilian law;

b) has its headquarters and management in Brazil;

c) seventy percent (70%) of the total voting capital are held, directly or indirectly, by Brazilian citizens born or naturalized for over ten (10) years;

d) its management, editorial liability and selection of the contents of the programming channel is solely incumbent upon Brazilian citizens born or naturalized for over ten (10) years;

•Brazilian Independent Programmer

A Brazilian programmer that fulfills the following requirements, cumulatively:

a) not to be a controlling company, controlled company or associated company of a packager or distributor;

b) not to have any exclusivity bond that prevents it from selling, to any packager, the rights of display or disclosure associated to its programming channels;

Other changes

 

•Taxation – CONDECINE

The provision of services that uses means which effectively or potentially can distribute audiovisual contents starts to be taxed (annual amounts due for each kind/modality of service).

 

•Mandatory presence in Brazil

Programmers and Packagers will have to incorporate companies in Brazil, pursuant to the Brazilian law;

Activity of administrative and editorial control of  programmers or packagers shall be performed  by Brazilian citizens born or naturalized for over 10 years.

•Sectorial Audiovisual Fund – FSA

Increase in the amounts to be allocated to the Fund, to finance Brazilian audiovisual works (including those produced with international co-production) – estimated R$ 400M (US$ 250M)

•Advertising on the Pay-TV

The advertising in each channel shall be limited to 25% of the total time of daily programming.

Expected market changes

 

•More competitiveness among service providers

As from the moment the Telecoms effectively start to compete for subscribers in the large urban centers, the prices will tend to fall and the services to improve;

•The content reaches importance 

What is already a fact all over the world may start to be true in Brazil: content producers and channels gain strength in the negotiations with service providers;

Challenges

 

•Infrastructure

In order for the different providers to actually start to compete among themselves, it will be necessary to make investments in service infrastructure (especially for newcomers). The rate of said investments will determine the rate of changes in the market – it must take up to 05 years;

•New Business Models 

Development of new business models and partnerships among distributors, programmers and producers may lead to a leap in quality and market volume – especially if they use in a smart way the large volume of public investment to be made over the next years.