Binge Watchdog – How European content quotas will impact the audiovisual services industry

Earlier this November, the European Council adopted the new EU rules for audiovisual media services. This completed the final stage of the legislation process and, among other updates, confirmed the new content quota for online/on-demand media providers. From now on, providers such as Netflix, Amazon Prime and YouTube premium must include 30% European content in their provided catalogues.

Over the last year, music streaming companies such as Spotify and Deezer have urged further EU sanctions against “gate-keeping” multinationals such as Google, Apple and eBay; demanding a more even playing field in the promotion and sale of European apps and products through these platforms. They are not alone as many industry and independent actors in Europe have looked to the EU to improve European competitiveness in the digital economy. This new on-demand content quota comes as part of the EU’s narrative that they are digitally savvy, able to understand new platforms and legislate accordingly to the benefit of Europe’s economy and culture.

So, what exactly does this all mean for viewers? Should we be expecting an influx of Irish, Hungarian and Italian programming? The specifics given by the EU is that the amount of tailored content for each country should be dependent on the proportion of revenues received from their respective countries. In other words, the more subscribers Netflix has from a region, the more content they have to create for it.

With a predicted subscriber base of 453,000 by 2020, Ireland understandably lags behind larger states like Germany, but remains significant enough when compared to states such as Austria or Romania. The UK’s departure from the EU will also tip the scales further in favour of countries with fewer subscribers – making it likely that we’ll be seeing something as Gaeilge in the works before too long, as well as a fair influx of French and German dramas, across the majority of VoD services. There is also the hope that once created, such content will not only be shown in Europe but be shown internationally – after all, it benefits Netflix to expand its catalogues elsewhere, and offer a further variety to audiences in other contents. While not, perhaps, the central aim of EU legislators, this possibility could mean that more European culture permeates the global media, increasing exposure both for the stories told and the local professionals involved in the creative process.

The two big players in VoD content, Netflix and Amazon, have both been predictably critical of the new introduction of this EU quota. As things stand, neither match the expected 30% quota, with Netflix peaking at 19% European-originated titles in Germany and Amazon standing at 27%. The German levels were far higher than the Europe-wide average, but still fall shy of the mark.

Apart from the inconvenience of needing to meet EU targets, both companies are concerned with the current lack of certainty regarding how the new quota will be implemented. Each member state has the option to raise the quota to any point between 30-40%, introduce surcharges to support national production funds, or measure the percentage of content differently – basing it on hours, number of episodes, number of programmes or other metrics.

Given the nature of television production, service providers are keen to have all these details as soon as possible, so they can begin developing the required content. While there is a grace period until September 2020 for this new legislation to be fully integrated, member states also have the prerogative to bring this date forward. Netflix and Amazon are both afraid of being caught out unexpectedly or forced to rush the production process. While the EU has promised to have all aspects of the regulation finalised for the end of 2019, this gives content creators an incredibly tight deadline. As things stand, VoD service providers know they need to make more Euro-centric content, but that’s pretty much all they know for certain.

Some have raised concerns that providers will meet the deadlines by simply reducing the size of their content catalogues in Europe. The number of available programmes and films on European Netflix is already far lower than the approximately 6,000 titles offered to US subscribers. While this may be a solution employed when in dire need, the likelihood of Amazon or Netflix opting for this strategy is decidedly low. The size of content libraries and catalogues is the key distinguisher between many such services – people subscribe based on how much is offered. If any one company elects to reduce content in Europe, they make themselves less competitive in the field and risk losing subscribers to other providers. Amazon and Netflix have both taken clear steps towards the EU subscriber market, themselves already increasing their investment into Euro-centric programmes and films because these stories resonate more, working to grow audience numbers. The new quota, while restrictive, ultimately parallels their own rise in European content over the past few years - both companies have an interest in maintaining large catalogues in Europe and, beyond that, an interest in creating local content.

Besides the intention of stimulating European culture further, the EU has made this decision for economic reasons – the need to create European content raises the demand for European actors, writers, camera-people, and filming locations, to name a few. More investment from Netflix and others could do wonders for an industry which has recently been prone to cutbacks and redundancies in employment and budgets. European national broadcasters expecting exceptions, such as the BBC, have seen reduced audiences over the last decade. RTÉ has seen a reduction of full-time employees at a rate of 5% year-on-year, while at the same time seeing advertising revenues drop by €5.6 million in 2018. As national broadcasters are no longer able to support such large workforces, the field has become saturated with a large number of professionals unable to find work. By ensuring that on-demand services invest to a larger extent, either through direct programme making or national fund investments, the EU is alleviating this issue and reigniting audiovisual production as an industry with employment opportunities. The current €1bn invested by Netflix into European content is set to grow drastically, as will the investments of their competitors.

This hands-on approach to sanctioning the digital economy is an innovative move by the EU. The legislation protects European competition, increases income in the sector and expands the reach of European audiovisual storytelling. But as the EU embarks into these digital undertakings, questions must be raised regarding more traditional audiovisual mediums. As mentioned already, national broadcasters are struggling for funding and relevance across Europe. In the word of RTÉ’s own strategy for 2018-2022: “[The television industry] has become a battleground for technology, telecommunications and platform companies, with more global ownership of Irish media and distribution than ever before.”

The measures enforced by the EU may solve some problems of unemployment or underfunding in the industry, but these issues are symptomatic of something else – the struggle of European media companies in the face of online competition. These content quotas may be an inconvenience to Netflix and others like it, now, but what will be the ultimate consequence? Perhaps the biggest value of local broadcasters and producers is the local content as what distinguishes them. With VoD providers matching this content, the capability to compete with large online multinationals could become even less sustainable for European broadcasters. There are significant positives brought to the audiovisual industry by this legislation, but the emphasis should be on what the EU does next, to tackle the remaining threats to this struggling industry.