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Netflix Forces French Biz to Try to Modernize Digital Landscape

The launch of Netflix has prompted French industryites and lawmakers to think harder about solutions to modernize the country’s digital landscape. So it’s no coincidence that the annual Rencontres Cinematographiques de Dijon, a three-day confab hosted by ARP (the guild of authors, directors and producers) from Oct. 16-18, will debate long-gestating yet pressing issues, such as piracy, tax regulations, investment quotas and the sacrosanct window release schedule.

A couple of years ago, Francois Hollande’s government appointed Pierre Lescure to lead a vast industry mission to amend Hadopi, the anti-piracy law implemented by former president Nicolas Sarkozy. But since releasing his report in May, nothing has been done with regards to piracy.

While Hadopi hasn’t been scrapped, its one sanction, which suspended offenders’ Internet subscriptions after three warnings, was removed in July.

“Piracy is (thriving) in France, and the fact that the government has not been punishing it more severely for the last two years is definitely feeding the beast,” says Vincent Grimond, president and co-founder of Wild Bunch, which owns FilmoTV, France’s first SVOD service.

Meanwhile, local VOD outfits have been plagued by the proliferation of Popcorn Time, a free, open-source app available for Windows, Mac and Linux, that lets users stream the latest movies in high resolution. It has been deemed illegal pretty much everywhere in the world, including France, and has had to move its servers a couple of times.

“Popcorn Time is a business killer for everyone involved in VOD,” Grimond says. “It’s got a terrific catalog, subtitles in nearly every language, and it’s untraceable.”

The strict window release schedule is another obstacle to fighting piracy in France. Movies can’t get on VOD services earlier than four to six months after the theatrical release, and have to wait 36 months to roll on SVOD. Discussions to bring the SVOD window down to 22 months have stalled due to the fierce opposition of exhibitors and TV groups such as Canal Plus that invest in films and are therefore entitled to a window of exclusivity 10 months after the theatrical release.

“These VOD windows are the Guantanamo of movies,” says Pascal Rogard, managing director of  the Society of Authors, Composers and Directors. Rogard says he has submitted to the government a proposal to allow Canal Plus to show movies six months after their theatrical rollout. In exchange, Canal Plus would greenlight the distribution of movies on VOD before the current four-to-six-month time period.

Grimond says the real problem of the current window release schedule is the “one-size-fits-all” mandate that goes with it. “In the U.S., where the schedule of releases is negotiated contractually between the distributors and the exhibitors, the outcome remains similar to ours, but the system is flexible enough to allow for some highly successful experiments, such as the recent day-and-date release of ‘Snowpiercer’ by TWC-Radius.”

Meanwhile, with Netflix on everyone’s radar, French players have been lobbying the government and the European Commission to give the U.S. service the same tax rate and investment quotas as local VOD platforms in order to create a more even playing field.

The battle has been half-won: Starting next year, all VOD services distributing content in France will have to pay the same value-added tax of 19.6% on VOD sales regardless of where they’re based.

But Netflix, which is headquartered in Luxembourg, is still not obligated to invest 15% of its revenues in European films and 12% in French ones as every local service with annual revenues exceeding €10 million ($12.6 million) does.

However, the real issue is not just to have Netflix buy more French content, says Florence Gastaud, managing director of ARP. “ISP platforms today have tremendous power, and we need to make sure groups like Bouygues and Orange, which will soon start distributing Netflix, will reference properly French content on the service and maximize its exposure.”

Chris Libertelli, Netflix’s head of global public policy, will be on hand at the confab to discuss open networks and network neutrality, a subject that will undoubtedly heat up the debate.

As Gastaud points out: “The digital space is still a no-man’s land when it comes to regulations.”

The question is: for how long?

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