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The quota question

By Andrew Dickens 26-05-2016

On paper it looks a drastic measure: a European Commission (EC) quota for Netflix and other streaming services, forcing them to dedicate at least 20% of their libraries to European content.

The EC has confirmed it is pressing ahead with the proposals under its Audiovisual Media Services directive, as well as new measures in plans to create a digital single market.

But it’s easy to get carried away by the restrictive and repressive connotations conjured up by a word like ‘quota.’ So in reality, how is this all going to play out?

Firstly, it’s unlikely any of this news will have a great affect on US streaming giants Netflix or Amazon, which already have sprawling libraries containing many European shows.

Netflix's UK original The Crown

Netflix’s UK original The Crown

Richard Cooper, senior principal analyst at IHS Screen Digest, told me that Netflix already has “upwards of 15% of European-based content” on its UK service, which is set to release its first original series – period drama The Crown – on November 4. “It will be a very small step for Netflix to ensure that every European Union market in which it is present contains a wealth of EU-based content,” he said.

Hence it will be more of a tinkering job rather than a case of overhauling an entire library of original commissions and acquisitions, which are both allowed to make up the 20%. And not long after the EC’s announcement, Netflix, which has been pumping billions of dollars into European productions already, including French original Marseille, made its thoughts clear. “We appreciate the Commission’s objective to have European production flourish, however, the proposed measures won’t actually achieve that,” a spokesman said.

The irony is that it will be other VoD players attempting to launch in Europe that will be hit the hardest – the likes of Hulu, for example, should rumours of its revived interest in overseas markets materialize, and HBO, which today extended its overseas SVoD presence.

“All this becomes a new barrier to entry for international services,” says Cooper, one of a string of commentators that have weighed into the debate.

That’s not to say there aren’t ways to get around these quotas. For instance, we could see US streaming services teaming up with existing European VoD players or linear broadcasters in order to tap into their libraries (Hulu was once close to a UK launch together with ITV).

Meanwhile, expect other non-EU VoD providers keen for a piece of the market to load their line-ups with lesser-watched and cheaper European content in order to keep costs down and get over the 20% hurdle. Either way, this will increase competition for European content on some level, potentially offering a boost to producers and distributors.

Benoît Magimel and Gérard Depardieu in Marseille

Benoît Magimel and Gérard Depardieu in Marseille

But while the quotas may not affect Netflix directly in the short term, the Californian giant will have to keep a close eye on how the local OTT competition reacts.

For some time, European services have been trying to differentiate themselves with libraries full of local content, tapping into the fact that Netflix is limited in its ability to cater to audiences in 190 countries as of January. So perhaps there has never been a better time for local SVoD players to go for its jugular?

Add in the fact that last month the value of Netflix’s shares fell by more than 9% in after-hours trading when the company predicted slower global subscriber growth, there could be added incentive here for local players to up their game.

Indeed, smaller European nations can take heart from the battle currently taking place in Germany, where the likes of ProSiebenSat.1’s Maxdome began bulking up its library before Netflix could make a dent in the market. According to Ampere Analysis, Maxdome’s library is 70% German-language content. Netflix can roll out all the German originals it wants, but it will be hard pressed to compete with that in the long run.

Over in the UK, those behind the BBC’s proposed rival to Netflix, supposedly dubbed ‘Britflix’, will be keeping a close eye on proceedings. The project is understood to be a collaboration between the UK pubcaster and commercial rival ITV and is in the early stages of development. Of course, there would be no problem here in meeting the EC’s regulations.

There will be change ahead but just exactly how monumental this will be is up for debate at the moment. First, the proposals have to be greenlit by the European Parliament and Council – and as anti-EU campaigners in the UK will tell you, this could be a complex and long undertaking.

today's correspondent

Andrew Dickens Senior reporter
Dickens, Andrew PERSP

Andrew Dickens is a senior reporter at C21 Media, covering the international television business for and contributing to C21 International, C21Kids and Drama Quarterly magazines.

Prior to joining the company in 2013, Andrew was a senior reporter at the Cambridge News, one of the biggest regional daily papers in the East of England. While there, he won awards at both regional and national level. He has previously freelanced for the Metro newspaper and Sky News.