In little more than a decade, streamers have shaken the TV industry to its core, laid waste to cinema sector windows, blurred the lines between film and television and rewritten the business relations between independent producers and commissioners. In many cases, SVODs have introduced American-style work-for-hire conditions that Europeans despise.
Governments could surely sense that something transformational was afoot, but it’s taken them longer to decide which part of the problem should be addressed through regulation.
“Are streaming services more like broadcasters, or are they more like video rental stores?” asks Amanda Lotz, professor of media studies at Queensland University of Technology.
It’s a tough question to answer when streamers are now behemoths that are simultaneously producers, commissioners, distributors, exporters, bundlers, festivals and e-commerce shop windows.
Government responses in different parts of the world have reflected local political and bureaucratic traditions, and elicited varying degrees of greed and paranoia. Some regimes have approached online video in terms of cultural identity, while others have chosen to harness streaming as an arm of industrial policy (employment creation, spectrum rationing, taxation and licensing).
Still others have looked, horrified, at the challenges to patriarchal government that come with almost unlimited choice, disintermediation and the allure of foreign branding. Their analysis of the regulation of video streaming is commingled with a preference for shackling social media and fake news.
In India, the first moves have thrown up an alphabet soup of acronyms and abbreviations for new regulatory (and self-regulatory) bodies. How many will be remembered — or relevant — in a couple years is hard to know.
In Australia, after years of stasis, there has been a recent rush to push back against global giants, who are told they need to respect, or at least pay for, local input. The government previously tussled with Google and Facebook in the news sector, but there isn’t yet a unified industry position on streaming.
And in Europe, the old Television Without Frontiers regime — the former bedrock for regulation for the audio- visual sector — is being replaced with a spruced-up Audiovisual Media Services Directive. It comes complete with familiar clauses that satisfy some countries’ sense of “cultural exception.”
As such, the battle lines have been drawn, and first blows have been struck. In some jurisdictions, these have been parried, but nowhere does it seem that the skirmish is even close to being resolved.
Setting the Blueprint for a Fair Fight
Netflix will once again be MIA at the Cannes Film Festival, but don’t rule out a Croisette comeback in the near future. Across Europe, Netflix, Amazon and Disney are becoming more ingrained in the local fabric of film and TV. But as they start to shake up the ecosystem and reap the rewards of more subscribers in the European Union’s 27 countries — where their business is booming — the European Commission is forcing these giants to play by new rules.
Among several pieces of EU legislation set to impact streamers, the most significant is the Audiovisual Media Services Directive, which is in various stages of implementation across Europe. It involves investment obligations in most countries and, in some, will set out terms of trade for streamers when they engage with European producers, who welcome the work but object to the Hollywood work-for-hire model.
“The new directive has made the playing field more level between VOD services and television channels,” says Laura Sboarina, a senior media analyst for regulatory research firm Cullen Intl. She notes that Europe had rules in place regarding investment quotas for broadcasters, and these are now being extended to streamers.
At its core, the AVMS Directive simply states that streamers must offer a 30% quota of European content to European subscribers. On top of that, it allows EU countries to introduce nationally tailored legislation to make streamers directly reinvest a percentage of their revenues in each European country where they operate and also regulate their business models in individual territories.
France — known for fiercely defending its culture and industry — is where implementation of the AVMS Directive could have the greatest impact.
The French government has just issued a decree that sets an investment obligation oscillating between 20%-25% of revenue from streamers’ French operations.
“France has the most ambitious plan so far,” says Paris-based producer Alexandra Lebret, managing director of the European Producers Club lobby group.
The glaring absence of Netflix at Cannes — due to the festival’s rule that all films in competition have to be theatrically released in France — is just the tip of the iceberg when it comes to the drive by France’s powerful exhibitors for a strict windowing policy that, while separate, is still related to the country’s overarching regulatory effort.
The National Film Board and French film and TV orgs have been going back and forth over new rules under which streamers won’t just have to reinvest a portion of their annual revenue in local films and TV series, but will also share rights with independent producers.
Streamers, including Netflix, have been consulted throughout the process and will now need to reach an agreement with industry orgs and broadcasting authorities.
“It’s been an 18-month process, and we’re now in the home stretch,” says a Netflix representative who asked to remain anonymous. Amazon, Disney and Apple did not comment for this story.
In terms of exclusivity, Netflix is aiming to invest 20% of its revenue in French content and obtain a 12-month window between a film’s theatrical release and its streaming debut, instead of France’s current 36-month window. But the new decree requires streamers to invest at least 25% in local content to access that 12-month window. French producers are demanding that Netflix commit to investing more money in movies made for theatrical than the current 4% of its turnover it is willing to shell out.
The Netflix rep notes the streamer is already part of France’s creative ecosystem and plans to continue as such: “At the same time, we must find a balance between our obligations on the one hand and our business model and DNA on the other — which means that we can’t transform completely and start doing mostly theatrically released movies, when we’ve always been mainly focused on our subscribers.”
Says a producer involved in the negotiations: “Netflix has a lot of preconceived ideas about films, but we’re hoping that as more movies roll out on their platform, they will see the benefits of ramping up their investment, espe- cially with films that will get a marketing boost from their premieres in Cannes.”
TV producers, ultimately, will be most affected by the AVMS Directive in France.
Until now, Netflix has owned global rights, in perpetuity, on most hit French shows it has financed. Going forward, under AVMS rules, when streaming giants work with France’s independent producers, the duration of their exclusive rights could be limited to 36 months, which could discourage streamers from pumping big money into high-end shows.
Isabelle Degeorges, head of “Lupin” producer Gaumont Television, says, “Netflix gave Gaumont the resources to make this ambitious series with the scope we had envisioned and to give it a strong French DNA.” She underlines that “it would have been a different series if we had had multiple partners involved.”
In Italy, which is looking closely at France, no agreement has been reached after months of negotiations. The government is expected to unilaterally enact legislation in July that will impose an investment quota of between 12.5%-20% of the streamers’ local revenues.
One of the key legal clauses for which Italian producers are lobbying is to be the only ones who can initiate development by buying rights — in the process trying to block streamers from being able to acquire rights to Italian IP and negotiating deals directly with local actors, writers and directors.
Another significant issue in Italy is foreign streamers reaping the benefits of the country’s generous 30% tax rebates for production, which they get through the local producers they work with, without leaving their partners a proportionally fair piece of the upside.
“By my count, I spent 2.3 million euros [$2.7 million] between 2015 and 2019 to develop products that for the moment have not been made,” says producer Rosario Rinaldo, head of Rome-based indie Cross Prods., owned by Germany’s Beta Film, which is producing Amazon Prime Video’s Italian gender-identity TV series “Prisma.”
“Going forward, will I recoup my investment with the rights that I hold on to?” he wonders. Not with the way things currently stand with the streamers, he points out.
That said, Rinaldo is happy to work with Amazon, and is optimistic that dialogue and rules of engagement will improve.
“We are very involved in the AVMS negotiation table in Italy, and we are taking a very constructive approach,” says a Netflix rep in Italy where the streamer is set to launch several original films — including Paolo Sorrentino’s “The Hand of God” — out of the Venice Film Festival.
Dialogue in Germany, however, isn’t so idyllic. “Why should streamers be subjected to the same terms of trade as linear broad- casters?” a German Netflix rep says to Variety.
Meanwhile, in Spain, the so-called Netflix effect “has been very positive,” according to producer Álvaro Longoria, a former EPC chief, who notes that Netflix produces more content in the country than any obligation requires.
Nonetheless, Spanish producers are hoping the country will soon enshrine the AVMS into law and make the landscape more sustainable for linear broadcasters.
For streamers, many European countries “are just not big enough; the algorithm would never choose to make a movie in Polish or in Lithuanian,” argues Longoria. Now it won’t have a choice, and for Brussels, that’s essential.
AUSTRALIA AND INDIA
Diverse Desires to Dominate Digital Video
Australia is the Asia-Pacific territory with the most developed plans to bring video-streaming companies into a regulatory orbit. The emphasis is all about local content spending.
Consultation documents have been circulating for close to a year, and industry reactions were formally submitted in May. A new regulatory system could be in place by as early as January if a voluntary system for reporting investment in local content reveals failings by the streamers — or, more likely, if it is replaced by a mandatory system.
The present urgency follows nearly a decade of discussions that started with theoretical talk about media convergence. Now, suddenly, the OTT future has arrived, and industry and regulators are scrambling to adjust.
“Digital technologies have fractured business models and rendered many of our regulatory structures obsolete,” said Paul Fletcher, the federal government’s arts minister, in November as he launched a discussion paper. “With declining revenues, rising costs and an outdated regulatory framework, the capacity of Australia’s media sector to provide Australian programming, local content and public interest journalism is being challenged.”
Terrestrial broadcasters have experienced collapsing viewership and advertising numbers, which have resulted in large financial losses and forced some channels into mergers and takeovers. The leading pay TV operator, Foxtel, is also scrambling to adjust — most notably by potentially cannibalizing itself and launching streaming alternatives.
Meanwhile, the Australian public has been so enamored of streaming that long before Netflix’s official launch Down Under, it’s believed that millions of households had taken out illicit cross-border subscriptions. Now Netflix claims 6 million legal subscribers Manoj Bajpayee stars in Amazon Prime’s “The Family Man.”
in a population of 26 million. And launched only in 2019, Disney Plus is poised to soon overtake local incumbent Stan to become the No. 2 platform.
“We’ve had intervention because the English language is both a benefit and a curse for the purposes of screen content. We’ve always been the recipients of the American and British content,” explains Matthew Deaner, CEO of lobby group Screen Producers Australia.
Many see current arrangements as unduly holding back traditional media companies and allowing the streamers free rein to import content.
Australia’s commercial free-to-air broadcasters must give 55% of their airtime between 6 a.m. and midnight daily to local content. Stan also is subject to local content requirements. Meanwhile, the international streamers have no current obligation to buy or produce Australian programming.
Fletcher’s green paper suggestions call for those streaming platforms with more than 500,000 subscribers or AU$50 million ($37.9 million) of Australian revenue to invest 20% of their income in local content.
The producers’ and directors’ guilds and SPA have thrown their weight behind the proposals while offering tweaks of their own. Netflix has objected to mandatory regulation. Stan wants new regulations to apply to others but not itself, because it is part of a conglomerate that also owns a free-to-air broadcaster.
Netflix claims the proposed regulation is being drawn up as if Australia were still terra nullius and the company weren’t already investing in the territory. The streamer says it out- spent Australia’s commercial broadcasters in adult and kids drama, dishing out AU$111 mil- lion ($84.1 million) in the 2020 financial year, compared with the broadcasters’ combined AU$89.7 million, according to data from the government’s Australian Communications and Media Authority.
Netflix isn’t the only one against mandatory rules.
Queensland University’s Amanda Lotz describes three reasons that regulation could backfire: It could put off international companies, it could force the international heavy-weights to compete with Stan for local content and it could spark an increase of production in Australia, but not necessarily of content that is culturally Australian.
“[There is] disingenuousness on the part of the Australian government in terms of whether this is policy about Australian stories, as a lot of this reform legislation has trumpeted, or whether it’s actually about industry [subsidies],” says Lotz, who notes that the hunt for subsidies has annexed the cultural realm, and few productions can happen without them.
Australia’s politicians and guilds say they have one eye on the French and Canadian regulatory systems, in which culture and subsidy culture are intertwined. That means it is odds-on that Australia will hem the streaming sector with spending rules.
But more regulations imposed on streamers can do little to change Australia’s English-language conundrum. While American shows encroach on the country’s cultural identity, they also fuel Australia’s booming export-driven production sector.
In India, where the arrival of mobile broadband and streaming has created hundreds of millions of new video consumers, there’s a different language battle — one of abbreviations and acronyms — as government and industry lock horns.
The country boasts one of the world’s liveliest streaming ecosystems, with the major international plat- forms (Netflix, Amazon, Facebook) active and competing against a wealth of locals (ALTBalaji, Zee5) and those with multinational ownership (including market leader Disney Plus Hotstar and SonyLIV).
Seeing threats to its authority everywhere, the national government views this competition as unhealthy, vulgar and potentially dangerous.
The Online Curated Content Providers, operating under the aegis of the Internet and Mobile Assn. of India, devised a self-regulatory code in September. But the government’s Ministry of Information and Broadcasting took charge of the hitherto unregulated streaming sector in November and refused to ratify the code, saying that it failed to specify what kinds of content should be prohibited, and that the self-regulatory advisory panel wasn’t independent.
In February, the streamers announced an upgraded “implementation tool kit.” But the MIB ignored it and introduced its own Intermediary Guidelines and Digital Media Ethics Code instead.
The MIB’s code appears draconian. It forbids content that’s prohibited by any law, disrespects the sovereignty and integrity of India, promotes terrorism or any other form of violence against the state, is detrimental to India’s friendly relations with foreign countries and endangers national security.
Given the fractious nature of Indian politics, the nation’s tangled history with neighboring countries and the elevated position of religious sensibilities in society, the scope for transgression in applying the code seems huge.
Even before the code took effect, Amazon Prime had to grovelingly edit series “Tandav” over its portrayal of a Hindu character by a Muslim actor. The company also came close to being involved in a state court case after a local authority took offense at its depiction of Sri Lankan history in “The Family Man.”
The code came into effect on May 26 but hasn’t yet been strictly implemented. Adding to the confusion, the Indian Broadcasting Foundation, a private industry body, previously governed only television channels but now also monitors streamers, and has set up its own self-regulatory function, the Digital Media Content Regulatory Council.
The MIB says it still wants self-regulation to come first (but hasn’t said which body it will recognize) and that its code is a backstop. At the same time, the MIB has asked the industry bodies to provide proof of compliance.
Given that the federal government simultaneously is using tough top-down tactics to bring the social media sector under its heel, the prospects for further uncertainty, lawsuits and centralized oversight of the streaming sector seem strong.
Inside South Korea’s ‘Service Stability Law’
Other parts of Asia show interest in regulating foreign streaming companies mostly for reasons of taxation, licensing or extracting some other form of payment. In South Korea, where Netflix is the leading platform and expects to invest close to $500 million in content this year, local internet service providers are lobbying for streamers to pay “network fees.”
While the legal basis for such fees is questioned in some quarters (after all, the internet service providers that deliver the internet to homes and businesses also charge consumers), the providers continue to lobby government. In 2020, South Korea passed a “service stability law” that recognizes some of what the ISPs want.
Ironically, the move comes at a time when South Korean streamers are trying to go global with the support of the government. If similar fee obligations were imposed on the firms’ overseas operations, that might prevent them from ever getting beyond launch. But telcos elsewhere in Asia, notably Indonesia, are now lobbying for their own version of South Korea’s service stability legislation.
A Very English Quandary
The European Union’s Audiovisual Media Services Directive has the dubious distinction of being among the last pieces of European legislation to be enshrined into U.K. law.
The directive was implemented by the EU back in 2018, and member states had a two-year grace period to implement it via their own domestic legislation. Although the majority of member states missed the September 2020 deadline, the U.K. didn’t — despite the fact that just four months later, on Jan. 31, 2021, the Brexit transition period came to a close, ending any need to enact EU legislation domestically.
Still, only time will tell whether enacting the AVMS domestically will have much of an impact on what is already a booming industry in the U.K. Certainly, the directive’s requirement that streamers offer a 30% quota of European content to local sub- scribers feels unnecessary considering how much homegrown content is produced, from “The Crown” to “Killing Eve.” More so given that many big-budget American productions with a U.K. element can also count toward the quota.
As such, perhaps it’s unsurprising that the U.K. declined to implement an optional AVMS levy compelling streamers to reinvest a percentage of their revenues in the European countries in which they operate.
When it comes to streamers, the Digital, Culture, Media and Sport Committee appears to be less concerned about production than about eyeballs. To ensure a balanced ecosystem, the DCMS Committee recently recommended making streamers share their viewing data and ensuring that television manufacturers — some of whom feature a “Netflix” button on remote controls — are “aware of the importance of prominence of [public service broadcaster] content” so that SVOD providers aren’t given an unfair advantage. There is also chatter about making PSBs more prominent in the SVOD sections of electronic program guides.
A recent inquiry from the DCMS Committee concluded that domestic broadcasters were being “let down” by current legislation, which was allowing streaming giants such as Netflix, Amazon Prime and Disney Plus to wield “undue influence” over consumers’ ability to access PSBs.
Which is perhaps why Oliver Dowden, Britain’s secretary of state for digital, culture, media and sport, recently announced, via an op-ed in The Times, that he plans imminently to consult on legislative changes regarding the “future of broadcasting, and how we can make it fit for the 21st century.” These will include “stringent content and audience protection standards” for streamers, similar to those linear broadcasters are obligated to uphold, and ensuring PSBs have enough prominence on digital platforms.