Mr Woodward, who took over his ministerial brief in May's cabinet reshuffle, tore into the European Commission's new audiovisual media services directive, which plans to extend regulation from traditional broadcasting to new media services such as mobile and internet.
"We are really negative about it," he added, speaking at a Westminster Media Forum seminar. "The more I look at it, the more I'm convinced it's really a bad idea. In lots of ways it represents a very good example of where the EU goes wrong.
He said the planned legislation - a review of the 1989 Television Without Frontiers directive - would increase regulation on businesses that was "not desirable nor practical".
Companies providing media services could relocate to outside the EU to escape bureaucracy, he warned.
The rules appeared to cover personal blogs, charity websites and online games, Mr Woodward said, and would force them to appoint compliance officers as they attempted to stay within the proposed EU rules.
"If the commission is wrong, the very things that are leading to this growth in creative industries, all of these people are inhibited by a whole new burst of regulation and a whole new burst of compliance," he added. "The speed they can grow is inhibited."
In a separate interview, Ms Reding said that video blogs would not be affected by the planned changes. "The proposal aims to cover audiovisual media services, and I stress media," she told a hearing in the European Parliament reported by Reuters. "It will cover services under the editorial responsibility of media services providers, the principal purpose of which is the provision of programmes with moving images, with or without sound, to inform, entertain or educate," she added.
Mr Woodward compared the directive with the "expensive and wasteful" Common Agricultural Policy, which had proved impossible to reform since it was introduced in 1957.
