Europe’s Streaming Showdown Is Coming to a Head

A velvet-gloved showdown brewing between European governments and U.S. streamers is set to reshape the European Union’s production landscape and could reverberate beyond Brussels in years to come.

Just as streaming giants score legions of new subscribers globally due to the coronavirus — and gain unprecedented leverage around the world — legislators and producers across Europe are joining forces to push Netflix, the EU’s top OTT player, as well as Amazon Prime Video, Disney Plus and other major streamers, to engage in a new set of rules they see as crucial to preserving Europe’s economic and cultural ecosystem.

At the heart of the standoff is the EU’s Audiovisual Media Services Directive, approved by Brussels in November 2018, which demands more local content from the SVOD giants.

Under the directive, streamers must offer a 30% quota of European content to European subscribers starting in 2021. On top of that, EU countries can introduce nationally tailored legislation to make streamers directly reinvest a percentage of their revenues within each European territory where they operate. Currently, parliaments in key countries across Europe — notably France, Italy and Germany — are scrambling to meet the January 2021 deadline.

Core to the inevitable clash, however, is that while American producers can negotiate a premium fee with streamers and Hollywood studios, when Netflix and other streamers commission originals in Europe, they allegedly pay local prices for global shows, “with no additional upside in case of success, no transparency [on how well these originals have done] and no rights left,” according to Katharina Hiersemenzel, senior vice president of public policy for German powerhouse Constantin Film.

Hiersemenzel happens to be Netflix’s former director of global public policy, who left in June to join the “Resident Evil” producer. She points out that European producers feel they should get “concrete insight” on viewing figures for their shows and receive “a proportionate and fair participation” when certain viewing milestones are reached. Netflix is notorious for withholding from producers detailed information on views.

Not surprisingly, the government of France, known for fiercely defending its culture and industry, is spearheading the European effort, with President Emmanuel Macron personally involved and said by several sources to be applying pressure on Netflix and other streamers to sit down and negotiate with France’s venerable National Film Board (CNC) and other associations to agree on rules of engagement that are acceptable for everyone.

“This transposition [into law] of the directive and new obligations for [streaming] platforms will be decisive for the legacy of Macron’s mandate,” says prominent French producer Marc Missonnier (“8 Women”), a key negotiator in France’s upcoming legislation, expected this month.

France is asking that between 20%-25% of a streamer’s local revenues from subscriptions be invested in European product and 85% spent on French-language content, the bulk of which must be commissioned to independent French producers, who’d be able to get some upside.

“The dialogue is open and constructive. Of course, we don’t agree on everything, but there is a positive dialogue,” says a Netflix spokesperson, who commented only on French negotiations. “We want to continue to invest significantly in France, and we want to be a long-term partner for the entire French creative community and to make a positive impact.”

An Amazon spokesperson said the company has “engaged with producer bodies … to discuss Prime Video’s future investments in France.”

Across Europe, there is also the matter of whether Netflix and other U.S. streamers should be allowed to benefit from the vast reservoir of European soft money that spans from regional funds to national tax rebates.

In Italy, the key negotiator is Giancarlo Leone, who heads Italian TV producers’ association APA and is proposing to set the investment quota for streamers at 20% of revenue, with a lower rate permitted “if the rules of engagement are regulated.”   

A key point on the table is that to tap into Italy’s generous tax rebates, streamers would have to commission content from local producers who get to hold on to the IP and are “adequately remunerated.” Another clause is that SVOD rights must revert back to Italian producers after no more than five years, and they are allowed to sell off pay and linear TV rights after only a year.

As 2021 comes into view, discussion is slowly turning to how exactly the standoff is going to play out. Tim Westcott, a senior analyst at London-based consultancy Omdia, notes that the streamers generally don’t like to be told what to do. “If they were obliged by law to never keep worldwide rights,” he warns, “there’s a risk they wouldn’t do as many deals with European producers” above what they will be legally required to do.

If that rule prevails, “they would just look elsewhere for work-for-hire producers,” Westcott adds.

That might be true, but the Brussels Effect is that from January 2021 on, in order to grow and evolve in the EU — an essential subscriber base — the streamers will have no choice but to come to the table.

Elsa Keslassy contributed to this report. 

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