Multichannel Networks in the UAE
Technology, Media & Telecoms Focus
Omer Khan Partner,Corporate Structuring
Nazanin MaghsoudlouSenior Associate,Corporate Structuring
Darya Ghasemzadeh Trainee Lawyer,Arbitration
A Multi-Channel Network (“MCN”) sits between the providers of content and online channels that stream videos. The MCN provides content producers greater access to the channels than they might otherwise have. In return for providing the channel with content, the MCN is entitled to a share of the associated advertising revenues.
The exponential rise in the number and importance of MCNs can be explained by the demographic changes in video viewing habits among younger audiences globally. They are increasingly opting for video streaming on platforms such as YouTube or TikTok as opposed to traditional (over-the-top) OTT and linear TV entertainment. This trend also explains the rise of video content producers who wish to distribute their content on various online channels.
In addition to working with content producers, some of the other activities which may be undertaken by MCNs include:
Handling, selling, and distributing merchandise through live e-commerce;
Optimising the advertising revenue;
Offering partner companies access to celebrity contacts;
Promotion and marketing;
Improving the content producers and influencers by providing them with access to production know-how, editing facilities and video equipment.
MCNs often operate internationally as they work with content producers and online channels to reach target demographic group.
Due to the UAE’s complex licensing framework for media and e-commerce companies, which operate on a cross-border basis, MCNs must be mindful of legal principles applicable to streamers / online channels in the UAE, offer their content to a target audience in the UAE, or engage in live e-commerce with end-users in the UAE.
The general principle governing conduct of business in the UAE by foreign companies is prescribed in the Federal Decree Law No. 32 of 2021 (“Companies Law”). Article 336(1) of the Companies Law states that a foreign company may not conduct any business activity inside the UAE without a licence issued by the competent authority.
Article 336(1) of the Companies Law states that a foreign company may not conduct any business activity inside the UAE without a licence issued by the competent authority.
Article 336(1) does not prescribe a legal explanation of when a foreign company will be deemed to be conducting business activities in the UAE. Nevertheless, local authorities[1] can impose fines and/or other restrictions on foreign entities which, in their opinion breach Article 336(1). In our experience of dealing with local governmental and commercial authorities in the UAE on similar matters, some factors which would be relevant to conclude if a foreign company (MCN in particular) is conducting business activity in the UAE include:
whether the MCN enters into contracts with influencers, streamers or content creators located in the UAE;
whether the content shared by such influencers specifically targets users in the UAE;
whether the content is produced in the UAE; and
whether the MCN has employees who are based in the UAE.
Therefore, MCNs undertaking activities in the UAE should seek legal advice to carefully assess whether a local entity in the UAE is required. If, based on the balance of probabilities, the MCN is advised to incorporate a local entity, there would be additional compliance considerations such as the Value Added Tax and Corporate Tax.
MCNs are increasingly entering the live e-commerce sector where they partner with various brands to sell the partner brand’s products through live-streamers / online channels. Where e-commerce sales are integrated into the live streaming activites, there is an increased likelihood that a local legal presence would be required by the authorities. In this instance, it is also important that the MCN is aware of the restrictions on e-commerce in the UAE including prohibitions on certain categories of goods such as tobacco, alcohol, narcotics and so on.
Where a detailed analysis of various balancing factors, such as those explained above leads to the conclusion that a local legal presence is required by the MCN, then the MCN should additionally consider whether to set-up in the UAE mainland (on-shore) or in one of the economic free-zones in the UAE.
MCNs that operate in the UAE must consider the application of the UAE’s media and advertising laws to the content they curate for a UAE audience.
From a media law licensing perspective, generally, UAE entities require specific licences to carry out online media activities that fall under the scope of the 2018 Electronic Media Regulation Resolution (and related legislation) (together the “E-Media Law”). Examples of E-Media activities include electronic publishing activities, provision of electronic advertisements, or any other activities that the National Media Council (“NMC”) deems appropriate.
Moreover, if the content provided by the MCN falls under the definition of an “Advertisement” according to the NMC’s Advertising Guidelines, (which extends to “any means intended to inform all people about a certain commodity or purpose, whether by presentation or publication in writing, drawing, image, symbol, sound or other means of expression”), the MCN may have to separately assess the suitability of the content against the NMC’s advertising guidelines.
Examples of restrictions imposed on advertisement content in the UAE include: the need to refrain from offending Islamic beliefs; the need to show respect for the government of the UAE; and respect for the culture and heritage of the UAE.
Although the potential for e-commerce in the UAE is real and exciting, nevertheless the cross-border nature of MCNs and the specifics of law vis-a-vie licensing framework applicable to business and media related activities in the UAE mean that MCNs which curate their content to a target audience in the UAE and/or engage influencers / live streamers in the UAE must operate with care and navigate the applicable legal framework with caution.
At Al Tamimi and Company, we have the required capability to assist MCNs navigate regulations that apply to all stages of the conduct of related activities.
[1] The Department of Economic Development and Ministry of Economy
For further information, please contact Nazanin Maghsoudlou.
Published in May 2023
