Angela Merkel’s coalition cabinet has greenlit new regulations concerning video-on-demand (VoD) services in the draft German Film Law (FFG) that would come into effect from the beginning of 2014.

One of the key changes proposed by Bernd Neumann , State Minister for Culture, is to reduce the window for VoD release from nine months to six - in line with the release of films on DVD.

In addition, the obligation to pay a film levy to the German Federal Film Board (FFA) will be extended from VoD services in Germany to include those operating outside of the country.

Competitive disadvantage

Speaking during question time in Berlin’s Bundestag, Neumann said: “There is presently a clear competitive disadvantage for companies with headquarters in Germany compared to those based abroad.

“Until now, the latter don’t have to pay any levy although they are also offering several German feature films.”

This proposal is a central demand of a joint paper on a new FFG by the four trade associations: the distributors VdF; exhibitors HDF; video industry BVV; and the producers gathered in the German Producers Alliance.

The levy anticipated from the video and VoD sectors would total around $19m (€15m) per year.

Favouring digital over physical

Speaking to ScreenDaily, Patrick Knippel, managing director of German VoD service Nowtilus, said that his company supported the proposed change to the FFG’s guidelines which would bring VoD/EST in line with DVD/BD [Blu-Ray Disc].

He said: “Most of the studio titles are released for VoD/EST day-and-date with DVD/BD start.

“Furthermore, some studios are starting to have negative windows, such as Fox which favours a digital product over the physical.

“The levy from VoD operators who make movies available for customers based in Germany is a logical step. It would be the only case for the time being of how VoD exploitation can be a source of finance for theatrical movies.”

Net giants should pay

At the same time, he argued that the new Film Law “should make sure that Google, iTunes, Netflix and the like will also pay this levy, and not only German providers such as Videoload, Maxdome and Media Markt”.

Knippel added that “it should not be a deal breaker for further innovation”, meaning that payment of the film levy should only kick in after a certain revenue threshold has been reached.

Moreover, payment of this levy should in return mean that VoD exploitation can be supported by the FFA.

ISPs should be liable

During the Bundestag question time, Minister Neumann pointed out that the European Commission (EC) had blocked a previous attempt to bring telecommunications companies into the circle of contributors to the FFA.

However, a new initiative has now been launched by France’s CNC and the French Community’s Centre du Cinéma et de l’Audiovisuel in Belgium with the support of a further 18 national film agencies collected within the EFADs (European Film Agency Directors) - including the FFA - to demand that Internet service providers (ISPs) be liable to parafiscal taxes aimed at financing European audiovisual works.

In the letter addressed to EC Commissioners Vassiliou, Kroes and Alumnia and President Barroso, the agencies observe that “an increasing number of audiovisual players do not contribute to financing audiovisual creation, even though they derive substantial added-value and revenues from the publishing or distribution of audiovisual works.”

“Indeed, these new market players [such as ISPs] are not submitted to parafiscal taxation and hardly submitted to - if not exempt from - legal obligation pertaining to promotion of and investment in European creation.”

The letter suggested that, “by potentially opposing a proportionate taxation of ISPs to support European audiovisual creation, the European Commission would hamper the adaptation of audiovisual public support systems to the reality of the digital world.”

Release windows

Alluding to the ongoing preparations of the EC’s Cinema Communication, the letter’s authors argued that the Commission’s stance was “all the more worrying” at a time when it was “also attempting to dramatically change the rules applicable to the assessment of the euro-compatibility of national support schemes to the audiovisual sector and is thereby threatening the sustainability of public support to the audiovisual sector.”

Moreover, the film agencies expressed their concerns about the Commission’s questioning of release windows “on account that they supposedly act as barriers to the circulation of European films and the emergence of innovative business models”.