Streaming Businesses Blast Back Against Content, Investment Quotas in Europe

European Union TV Streaming Content Quotas
gary musgrave for Variety

The battle brewing over plans for a single digital market in Europe ratcheted up last week with the unveiling of European Union recommendations for content and investment quotas.

The European Commission, the executive arm of the EU, proposes that video streaming services operating in Europe — including Netflix, Amazon Prime, and HBO — be forced to dedicate at least 20% of their local content offerings to European product, and to invest in some European productions. The proposals are part of a larger effort to create a borderless digital marketplace stretching from Ireland to Greece, a move EU officials insist will benefit consumers.

The quota for European content and the requirement of local investment in countries that demand it are intended to help shore up the industry in Europe to create what EU officials frequently describe as “a level playing field.”

The drive for a single digital market has triggered alarm among industry players on both sides of the Atlantic. Some say the new quota proposals would have little effect or could even backfire in terms of promoting new, homegrown movies and TV shows. To fulfill the 20% quota for European content, on-demand services could simply dust off old European titles and add those to their lineups.

“We appreciate the commission’s objective to have European production flourish. However, the proposed measures won’t actually achieve that,” says Joris Evers, Netflix’s chief spokesman in Europe.

As it stands, Netflix already meets or comes close to the 20% figure, according to various analyses of the company’s offerings in the European countries in which it operates. And both Netflix and Amazon are already plowing money into local content. Netflix has several TV series in production in Europe, including “The Crown,” which is about the British monarchy, and its first original Italian series, “Suburra,” a mob drama set in the seaside town of Ostia, outside Rome.

On Amazon’s list are its first German-language series, “Wanted,” directed by hit-making writer Matthias Schweighoefer, who will also star, and “The Collection,” an English-language drama set in a Parisfashion house.

“Netflix and Amazon’s business model already contemplates luring local subscribers by offering local product as part of the mix,” says Marco Chimenz, president of the European Producers Club and a partner at Cattleya, which is producing “Suburra.” “They are already doing this. They aren’t recalcitrant.”

Stan McCoy of the Motion Pictures Assn. in Europe adds, “The nature of film production today is increasingly an international collaborative exercise, with different nationalities involved on the financial and creative side. That’s become very common.”

Market Measures
20% The EC proposes that one-fifth of content offerings from video streamers be European in origin.
26% The current investment quota for domestic streamers in France could apply to foreign companies operating in the country.

He cites the 2014 film “The Monuments Men,” which was backed by 20th Century Fox, Columbia Pictures, and Studio Babelsberg in Germany, where it was partially shot. Another growing area for Hollywood studios is local-language production in Europe — witness “Head Full of Honey,” a smash hit in Germany co-produced by Warner Bros.

The proposed requirement to invest in content could be especially significant in France, where domestic online video services are obligated to pour 26% of their annual earnings into producing European content. Netflix and Amazon Prime could be forced to do the same in France under the new proposals.

“Our priority is that all VOD/SVOD platforms targeting French audiences are subject to the same rules. This should be true for existing or future platforms based in or outside the EU targeting France,” says a spokesperson for pay-TV service Canal Plus, which is owned by Vivendi.

Still to come: a possible clash between industry players and the EC over cross-border access to broadcasters’ catch-up services, and official rulings on “geo-blocking,” which bans a resident in one EU country from using the pay-TV or on-demand services offered in another. A case now before EU antitrust authorities centers on deals between six Hollywood studios and Britain’s Sky pay-box service that block Europeans outside the U.K. from signing up to Sky.

The EC unveiled its broad campaign to unify the digital market last year. At the campaign’s core is the principle that residents of one EU country should be able to buy and download digital content from any of the other 27 EU nations, and that the same set of rules should apply across the continent.

Just as the EU has torn down most of its internal borders, allowing for passport-less travel between many member states, the EC envisions access to a borderless digital market.

“The bottom line is this: We want to strengthen Europe’s creative industry in the digital age, we want to boost the circulation of European works, and we want to help European cinema to reach a wider audience,” Andrus Ansip, who is leading the EC’s charge, declared in a speech at the Cannes Film Festival.

Objectors warn that abolishing borders and territorial licenses will give rise to bland, homogenized content made to appeal to vast audiences across Europe, at the expense of high-quality, locally flavored, or more daring offerings.

“You have to keep in mind the realities of each [European] market — the uniqueness of each market, the content that works in each market, the languages that are used, how content is consumed,” says Diego Londono, COO of Fox Networks Group for Europe and Africa. “The realities are quite distinct.”

But the plan has raised hackles among industry players, who contend that the so-called Digital Single Market will dismantle the system of territory-by-territory licensing that for decades has been the backbone of their business in Europe, and which remains Hollywood’s biggest overseas market for film- and TV-licensing deals.

What incentive would there be, they argue, for a British pay-TV operator to shell out big bucks for a deal with a Hollywood TV giant — such as the deal Sky struck with CBS for Showtime programming earlier this year — if much of that content can be viewed by Brits on a digital platform elsewhere in Europe? Getting rid of geo-blocking could spell annual producer losses of up to $9.3 billion, according to a study conducted by two London-based consulting firms and commissioned and funded by Hollywood and European industry players.

“Preserving the ability to license rights on an exclusive basis by territory is vital for the financing and for the distribution of European film and TV content,” says Benoit Ginisty, director general of the Intl. Federation of Film Producers Assns. Unfettered access across borders “would deeply undermine the European film and TV sector, to the detriment of audiences in the EU.”

Industry organizations have been meeting with the EC to air their concerns and try to reach a mutually acceptable solution. Although Ansip recently told Variety that some form of territoriality would be preserved, fear within the industry remains strong.

“[The EC] started out without having a clue as to how the film and TV market worked — just with the supposed interests of consumers in mind,” says Riccardo Tozzi, president of the Italian motion-picture association Anica.

Tozzi and others insist that a move toward a more unified digital market should be the result of market forces, not something imposed from above. The reality in Europe, just as in the U.S., is that the digital landscape is shifting so quickly that any regulation threatens to be not so much burdensome as obsolete.

As an example, Fox Networks Group Europe used dedicated Facebook Live pages to showcase the first episode of “Outcast” simultaneously in 61 countries on May 20, prior to its regular broadcast June 3 via pay boxes in Europe and Africa; social media platforms like Facebook lie outside the EC’s proposals.

For a year now, the industry has been hit by anxiety over the EU’s plans for a digital single market. In a fast-evolving world, that’s one thing that doesn’t look likely to change.