Regulation

Media regulation and the metaverse

Games and social networks evolving into metaverses need to consider a regulatory landscape that is also evolving – and that may place these networks in different regulatory categories as functionalities and content are added.

Where a metaverse includes live content and streaming, on-demand video catalogues or enables users to upload videos of their own, providers may fall within the purview of media regulation with which game companies and social networks have not traditionally been concerned.

One of the core pieces of regulation, the EU Audiovisual Media Services Directive (AVMSD), was updated in 2018 with national implementations still ongoing, but there is also room for Member States to regulate on top of the harmonised rules – a domain in which Germany, in particular, has been very active.

Tread lightly

When dealing with any form of audiovisual content, providers should tread lightly. Video functionalities are tempting within any service – and metaverses are no exception. Newzoo reports that 72% of consumers are interested in watching TV and films in-game worlds.

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Source: Newzoo Trend Report 2021 - Intro to the Metaverse report

Whether enabling users to upload videos and share them with others or creating video libraries for users to access and watch movies, opening a service to media content may unintentionally create a regulated service.

Regulation directly affects the provision of the service. Under the AVMSD, video-sharing platform services are required to implement appropriate measures against content unsuitable for minors as well as certain categories of harmful and criminal content. Providers of on-demand audiovisual media services must secure a 30% share of European works in their catalogues and ensure prominence of those works. Media service providers, in general, have transparency obligations with regard to commercial communications: European regulation prohibits, in particular, any surreptitious forms of advertising. The AVMSD also includes restrictions as to products and services that may be advertised.

Live content is at the heart of traditional media regulation with broadcasting licences as a prerequisite for the operation of TV and radio stations. While older generations may reminisce about pirate radios operated from offshore platforms, the uncharted territories of metaverses may now – inadvertently – be the new home for illegal broadcasting.

Licence requirements?

Whether online streams require a licence differs depending on the jurisdiction. In most countries, there’s no need to worry. If online-only streams are subject to licensing requirements, this is limited to rare cases: for example, if the service also appears within a regulated electronic programme guide. However, countries such as Germany are known to apply a broad definition of broadcasting. Despite recent changes, operating a virtual “TV station” within a metaverse – or simply streaming on a regular basis – may already be considered a licensable service.

The German implementation of the AVMSD also came with a set of new regulations for online services. In particular, Germany’s Interstate Media Treaty introduced regulations for media intermediaries, media platforms and user interfaces. Despite their name, these services are not limited to news and other journalistic offers.

Media intermediaries are online services that aggregate, select and present – exclusively or among others – third-party journalistic and editorial offers without packaging them into an overall new offer. A broad range of services that convey access to content falls within the definition, including search engines, social networks and news aggregators. Due to their open nature, metaverses may also be subject to regulation.

Where a service within a metaverse bundles certain content such as broadcasting and journalistic online offers into an overall offer, this is considered a media platform under German law. Common examples of media platforms are over-the-top TV platforms and cable TV networks. While a metaverse may provide users access to a media platform of its own, it may also function as a user interface for other media platforms. Regulation may apply in particular where a provider enables users to watch TV content or integrates external streaming services.

Properly classifying a service or even part of a service in these categories can be a challenge, and providers should keep an eye on media regulation as they add functionalities and different types of their own, or third-party content, so they do not inadvertently cross into a differently regulated category.

Germany's NetzDG

One example of this risk can also be seen in relation to Germany’s trail-blazing Network Enforcement Act or NetzDG. The law inspired similar legislation around the world, such as France’s Loi contre les contenus haineux sur internet, known as Loi Avia, and is often seen as a model for anti-fake news legislation including Singapore’s Protection from Online Falsehoods and Manipulation Act and Malaysia’s Anti-Fake News Act. At its core, it requires that providers implement reporting functionalities for criminal content under German law. Content deemed obviously illegal must be taken down by the provider within 24 hours. Recent amendments also require providers to install a complaints procedure where users may request to have content unblocked or reinstated.

Why does this matter specifically for metaverses? Germany's Network Enforcement Act applies to social networks with the exception of platforms designed to disseminate specific content, meaning that conventional games are out of scope. By opening metaverses to other content types, providers may, however, become subject to these provisions. As Newzoo notes, user-generated content (UGC) spaces require:

... strong safety and content moderation processes in place."

European harmonisation?

If this patchwork of rules seems complicated, there may be hope for metaverse providers: the Digital Services Act, currently in draft stage, is set to harmonise regulation for dealing with UGC across the EU to a greater extent. However, it will also bring new requirements, especially for larger services. The provisions are exhaustive and also adopt ideas from national legislations: notice and takedown mechanisms as well as complaint-handling mechanisms will then be required for all services that fall within the scope.

Authors

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Felix Hilgert, LL.M. Partner, Maître en Droit, Germany felix.hilgert@osborneclarke.com +49 221 5108 4434

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Philipp Sümmermann, LL.M. Associate, Maître en Droit, Germany philipp.suemmermann@osborneclarke.com +49 221 5108 4504