Draft versions of the directive have had the UK media industry and government up in arms over potentially crippling regulations relating to new media, broadcasting and advertising.

The proposals threatened to restrict ad breaks in films broadcast on TV to one every 45 minutes, and in children's programming to one every 30 minutes - and only if the show exceeded 30 minutes in length.

"It looks as though [the European] parliament has supported a more logical and sensible approach than we might have faced," said a senior source at a major UK broadcaster.

"That will better enable commercial broadcasters to continue to invest in original UK programming."

Product placement will be allowed at the discretion of individual EU member countries.

However, it will be heavily restricted - banned from news, current affairs, children's and documentaries - and broadcasters will have to inform viewers every 20 minutes if there is product placement in a programme.

The scope of the directive has also narrowed so that online companies, such as video-sharing websites like YouTube, will remain unregulated in the short term.

However, media that are considered "TV-like" - directly comparable to a TV broadcast - will be regulated, as will video-on-demand services.

"When we came out of the [European parliament] culture committee last month, I worried if we would have a sustainable new media industry in Europe," said Syed Kamall, Conservative MEP for London.

"The vote today seems to show that cool heads have prevailed."

Mr Kamall added that the "country of origin" principle - under which governments can only regulate broadcasts that originate in their country - had been "reinforced".

A number of states, such as Sweden, wanted countries to have the right to regulate broadcasts from anywhere in the EU. But the EU parliament voted that a member state could circumvent the principle only in the case of fraud and abuse.

However, the Broadband Stakeholders Group, which represents organisations from the telecoms, advertising, broadcasting, internet and mobile sectors, said the vote has created "uncertainty and confusion" for the industry.

"The parliament has done much to improve the draft directive by limiting the scope, but the weak text on country of origin undermines this progress," said Antony Walker, the chief executive of the BSG.

"Watering down this principle has left the door open for member states to re-interpret the rules and could fragment the internal market. We are now looking to the European commission to address these issues when it amends the proposals in the new year."

The commission will issue a second draft of the directive early next year.