Why does it matter so much whether a VOD provider is a Tier 1 service?

The Media Bill is currently at Committee stage in the UK House of Lords and is expected to become law this summer. In only a year from now a number of Video On Demand (VOD) services seen by viewers in Britain will find themselves designated by the UK government as Tier 1 services.

As a result they must comply with new and burdensome VOD content and accessibility codes enforced by Ofcom, the UK media regulator. Some of these services based abroad will have to respond to the challenge of being regulated by Ofcom for the very first time, others will already have experience of complying with Ofcom’s existing and light touch VOD Rules and Guidance.

SMB Consultant Trevor Barnes had extensive experience at Ofcom as the executive in charge of implementing the first system of VOD regulation and has made a detailed analysis of the latest version of the legislation. In this blog he explains why all VOD providers should start preparing now for these important legislative changes to find out if they are likely to be caught by the new British Media Act and what action they need to take in response.

If you are designated a Tier 1 service you will have to ensure all your content (both new and your existing library) complies with the new VOD Standards Code. This VOD Code will be based on the Ofcom Broadcasting Code. The Media Bill stipulates that rules in the new VOD Standards Code must cover protection of under 18s, harm and offence (generally accepted standards), crime and disorder, religion, due impartiality, and fairness and privacy. Tier 1 services will need to set up costly arrangements to deal with complaints from the public and Ofcom investigations in all these areas, retain relevant material, and pay an annual fee to Ofcom.

In addition, Tier 1 services (and all other regulated VOD services) will be subject for the first time to statutory requirements to ensure more and more of their content is accessible to consumers who are deaf or have hearing loss, or blind or have sight loss through subtitling, sign language and audio description. Ofcom will produce a VOD accessibility Code setting out the new rules in this area.

So, taken together the new costs imposed on Tier 1 services will be considerable. This will matter less for the UK public sector broadcasters (ITV, Channel 4 and Channel 5) who will automatically be Tier 1 services and already take measures to ensure their VOD content largely aligns with the Broadcasting Code. But Tier 1 VOD services either regulated for the first time in the UK (because based abroad) or UK-based VOD providers brought within Tier 1 need to plan ahead now.

The starting point will be for all VOD services to keep a sharp eye on the rather untransparent process for deciding which providers will be designated as Tier 1 under secondary legislation. Unlike other UK media legislation which sets out broad principles to define for example who is a broadcaster or who an on on demand programme service, the Media Act will contain no legislative guidelines to delineate Tier 1 services. All we have are non-binding indications, as in the Culture Department’s 2023 Explanatory Notes on the Bill that the new VOD Standards Code is targeted at “the largest, most TV-like” services, or as Ofcom stated in March 2024 at “mainstream, ‘TV-like’ services.”

The Culture Secretary is given very wide discretion to decide who is, and who is not, caught in the Tier 1 net. The Secretary of State (currently Lucy Frazer) however has named some providers specifically, like Netflix, Amazon Prime Video and Disney+, as being future Tier 1 services. This however has distracted attention from all the other VOD providers which could reasonably be described as either “mainstream” or among the “largest”. If you are involved with a VOD service which could be described in this way you are at risk of being designated. So beware…

What constraints are there on your service being designated unreasonably? They are limited. Before the Government can make the regulations designating Tier 1 services, Ofcom must report to the Culture Secretary on the operation of the on-demand market in the UK, including aspects such as audience figures, turnover and size of individual catalogues. In preparing this report, Ofcom is given powers to demand information (including highly sensitive commercial details) from both existing VOD providers AND from services, not currently regulated, which the regulator thinks might merit designation. The Culture Secretary must have regard to that report before either making the Tier 1 secondary legislation, which can be either in the form of a list of Tier 1 services or a description of them.

Almost certainly Ofcom will – and would be wise to – use these powers to ask a wide range of providers for this information in order to produce a credible and useful report. How it will enforce those powers – if necessary – against a possible Tier 1 service with no presence in the UK is unclear. It is interesting that the Media Bill places no duty on Ofcom to publish this report, even though it is a crucial factor in the Culture Secretary’s Tier 1 designation decision. VOD providers should insist that Ofcom does publish this report (albeit in a redacted form because of the commercially sensitive information contained in it) before the designation is made, so they have a reasonable opportunity to query the content.

The second protection is that the Culture Department must publish the proposed Tier 1 list (or Tier 1 description) on a publicly accessible government website before the regulations are made (ie signed into law). No time limit is specified. So in theory they could be published only hours before. After being made, the regulations are subject only to what is known as the negative procedure: they come into effect 40 days after signing unless they are actively voted down. The chance of the regulations being voted down is miniscule (the last time was in the year 2000).

So VOD providers, both based in the UK and abroad, who have audiences in Britain should start preparing now so they can respond to Ofcom and make informed representations to the regulator and government urgently to protect their position as necessary as soon as the proposed Tier 1 list is published.

The person at Ofcom leading on the new VOD regulation is my erstwhile and experienced colleague, Stephen Taylor. Stephen has a background in access services and knows much about them, so in the longer term it is likely that the new VOD accessibility code will receive careful attention. After some initial surprise within the regulator that the Government was going ahead with these new and rather bold Tier 1 proposals, Stephen Taylor and his team are now working hard on the groundwork for this initiative and have published their timetable for the introduction of the new regulations. (See https://www.ofcom.org.uk/__data/assets/pdf_file/0030/278625/Media-Bill-Roadmap.pdf )

The new UK VOD legislation is complex, and VOD providers need to think through how it will work in practice, and the changes they will need to make as a result. If you are a VOD provider and think you may be affected and have any questions please let me or your usual  SMB contact know as soon as possible. We would be very interested to hear your queries and concerns.