EU proposal could require Netflix, Amazon Prime to produce local content

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Illustration via Max Fleishman (Licensed)

When in Rome, Netflix as the Romans do.
Netflix may soon need to invest in more French films and Spanish telenovelas instead of just offering Unbreakable Kimmy Schmidt if it wants to stay in Europe. 

The European Commission released a draft proposal Wednesday that would require on-demand services like Netflix and Amazon Prime Video to offer at least 20 percent local content and invest in European productions. The local content requirement isn't likely to faze the streaming services. A European Commission study found that European titles account for 21 percent of the content on Netflix and 27 percent of the content on other streaming services.

But what may pose a challenge for Netflix and other streaming services is that under the draft proposal any EU member state can ask streaming services to invest in local productions. 

"We appreciate the Commission's objective to have European production flourish, however the proposed measures won't actually achieve that," said Netflix in a statement released Wednesday. 

"Netflix can at the moment cherry pick the best of international television."

Netflix noted in the statement that it has committed "hundreds of millions of euros" to investing in European productions. The company has several partnerships with European broadcasters such as the BBC and made several acquisitions at the Cannes Film Festival. Netflix series are in the works in Spain, Italy, and Germany, and the company said it was actively looking for other projects. 

Marseille, the Netflix-only French television show starring Gérard Depardieu debuted on the streaming service earlier this month and is the first Netflix original created in Europe. The political thriller has been met with critical acclaim and is drawing comparisons to House of Cards. The Crown, which tells the story of a young Queen Elizabeth II and Prince Phillip, will be released in November. 

But according to legislators, the online video services aren't contributing nearly as much to fostering European culture as they could be.

"The way we watch TV or videos may have changed, but our values don't. With these new rules, we will uphold media pluralism, the independence of audiovisual regulators and will make sure incitement to hatred will have no room on video-sharing platforms. We also want to ensure a level-playing field, responsible behaviour, trust and fairness in the online platforms environment... today's Communication sets out our vision for that," said Günther H. Oettinger, commissioner for the Digital Economy and Society in a statement. 

According to the European Commission, streaming services invest less than 1 percent of their revenues to local content, compared to 20 percent offered up by European TV broadcasters. Local content would also need to be featured more heavily on the viewer's screens. 

Dan Cryan, senior director of broadband media at London-based IHS Technology, said that the goal of the draft rule is to level the playing field between the streaming services and TV broadcasters by requiring the former to produce more original European content, not just any European content. 

"Netflix can at the moment cherry pick the best of international television," Cryan told the Daily Dot. He said this puts European TV broadcasters at a major disadvantage: Netflix in Europe, as is the case domestically, often beats local television to the punch when offering premium television. The first run of Better Call Saul in the United Kingdom, for example, is available on Netflix but not on local television. 

"The television business, broadly understood, remains a highly local business and subject to local regulation in a lot of countries," said Cryan. For example, European TV broadcasters are required to dedicate half of their viewing time to local works in addition to spending 20 percent of their revenue on original content. 

"Audiences tend to like local content. Netflix—when it launches in a major market—makes a point of acquiring rights to key local assets. But this is less true inevitably in markets which are less of a strategic priority," said Cryan. 

In the case of "less strategic" markets, Netflix offers an "international" catalog that consists mainly of titles from the U.S. and U.K. In short, content that plays well with a global audience. When Netflix launched in 130 countries earlier this year, it shifted from tailoring its offerings to local viewers to satisfying its newly global audience with a crowd-pleasing, Hollywood-centric catalog. 

"If you're going to launch everywhere, there's not much data you need," Netflix Chief Product Officer Neil Hunt told Bloomberg back in January. 

Cryan cautioned that there was still plenty of "ambiguity" left in the draft rule. It's unclear how Amazon would change under the rule; the company offers streaming video for rent and purchase, in addition to a separate, smaller catalog of streaming video offerings under Amazon Prime. It's also unknown whether local content requirements will apply to all of Europe, or on a per-country basis. For example, will we soon be seeing Netflix Original series produced in Latvia?  

Cryan said that if Netflix can achieve the 20 percent revenue requirement from one or two countries, that would be a very different scenario than if it was required to commit 20 percent of revenue to each EU member country.

"British television scales very well on an international level, and Scandinavian horror, or Nordic noir, is a genre on its own. But can we say the same for Latvia?" said Cryan. 

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