SVOD and Protectionism

The Dutch Culture Council recently asked legislators to require SVOD services operating in the country to maintain libraries with at least 15% Dutch content and apply a 2-5% tax on all revenue derived from foreign content streamed in the country. It’s a protectionist move both to nurture the Dutch film/TV industry in a competitive global market and to protect Dutch culture from the overwhelming pop culture influence of Hollywood. It’s also increasingly common around the world.

Local content quotas have long existed in television. Now that governments are wrapping their head around online streaming – and especially amid the surge of nationalist populism – clampdowns are coming.

The EU Parliament voted last year on a mandate that 30% of content on VOD platforms be European (FYI: Netflix’s library in Europe is already ~20% European). National governments are layering national quotas over that. Italy raised its local content quota on TV (which is supposed to include SVOD) to 60%. France already has a 60% quota on TV and is pressuring VOD platforms to substantially increase quotas as well, with Netflix CEO Reed Hastings committing to increase the company’s French content production by 40% in 2018.

In China, 70% of content on SVODs must be Chinese (hence why Netflix doesn’t operate there and instead signed a distribution deal with Baidu-owned iQiyi).

The net effect is a limitation on the amount of international content made available to subscribers in these countries and an increase in local content that doesn’t meet the bar for quality those platforms otherwise require. But the concerns are legitimate. The dynamic of online streaming platforms is a hits business. As Netflix and Amazon Prime Video expand globally, their hit shows become the hit shows across every geography. And the resources these SVOD platforms have to invest in their own content dwarfs that of local studios; even Rupert Murdoch felt 21st Century Fox wasn’t big enough to compete on its own. Local content quotas (and potentially streaming taxes) help nurture the local media industry to produce local hits (and sometimes global hits), which is important economically and culturally.

I wonder, however, how feasible content quotas are outside censorship-heavy states like China. How do you define regulated streaming content vs. content that’s just part of the broader internet (like Youtube videos)? What about SVOD services whose entire niche is to share a certain culture’s content with people abroad, like BritBox – a 250,000-subscriber service entirely dedicated to British TV shows and classic British films? If they’re restricted enough, won’t Europeans just use VPNs to access content that Netflix subscribers get in the US?

(This post is an abstract from today’s MediaDeals¬†newsletter.)