French fear ‘cultural dumping’ from Netflix’s EU expansion

[Brian Cantoni/Flickr]

Netflix, the US-based Internet streaming TV network, is set to expand its services to an additional six European countries in the autumn. But France fears that its European affiliate, based in the Netherlands, will damage its home-grown audiovisual industry. EURACTIV France reports.

Netflix’s international expansion is becoming an issue for France. On 20 May, the video-on-demand (VoD) provider and leader of the US streaming market announced that it would launch services in six more European countries by the end of 2014.

The service is already available in the UK, Ireland, Denmark, Finland, Norway and Sweden, and plans to launch in Germany, Austria, Switzerland, Belgium, Luxembourg and France.

What originally started off as just a DVD rental service in the US now provides a subscription-based video-streaming service available in about 40 countries and with more than 50 million subscribers.

There are concerns about allowing Netflix into the market in France, where authorities and big players from the audio-visual sector fear that the US company will use the European single market to avoid paying French tax and the financial contribution made by French audiovisual services to the production and rights acquisition of French works.

Distorting competition

Netflix currently operates out of the Netherlands and plans to establish their European headquarters there. This means that it will – for the time being – not pay French tax or other financial contributions.

Under European rules, the VoD provider will be under the jurisdiction of its country of origin – the Netherlands – and not the destination country where the service is actually used.

But French rivals will still have to pay substantially higher French tax and the French financial contribution.

European legislation is underway to clear up taxation issues by 2015 in the EU, but no similar legislation is planned for financial contributions.

“This really is a problem for Europe, because EU legislation on the issue is not suitable,” said Guillaume Prieur, head of international and European affairs at the French Society of Dramatic Authors and Composers (SACD).

Slow European legislation

The SACD focuses on the Audiovisual Media Services Directive, which sets the minimum amount of contributions payable by audiovisual media service providers in the EU.

Article 13 of the directive ensures that VoD services “promote, where practicable and by appropriate means, the production of and access to European works,” which can either be in the form of a “financial contribution to the production and rights acquisition of European works or to the share and/or prominence of European works in the catalogue of programmes offered.”

“But the directive provides for obligations based on the country where the services are emitted, and not the destination country,” said Prieur, adding that “the European Commission seems in no rush to review this.”

“It is a form of cultural dumping: providers like Netflix will set up their headquarters in countries where the laws are more beneficial, to then emit to other European countries,” he continued.

The EU Commission said that the directive will be reviewed in 2015 as part of its REFIT programme which aims to simplify European legislation.

In autumn, the executive will publish its summary of financial contributions as part of its Green Paper on a fully converged audiovisual world.

But with Netflix’s launch on the horizon, Brussels’ slowness to react has disappointed many. “If we do not change the rules faster, countries that have the lowest audiovisual financial demands will prevail over other EU member states,” warned Prieur.

French exception

France is not likely to come out on top. According to an EU Commission report, French financial contributions for the audiovisual sector are much higher than those of its European neighbours.

France and the French-speaking part of Belgium are the only EU member states that put in place a thorough version of the European directive. They imposed both financial obligations and the obligation to promote national works onto VoD providers, when the EU directive only requests one or the other.

In comparison, the Czech Republic leaves it up to the audiovisual provider to decide on contributions.

In seven other EU countries, the VoD providers must participate to promoting European works by sharing and promoting a European catalogue of programmes (Finland, Austria, Cyprus, Germany, Hungary, Lithuania and Spain).

In some countries, the obligations and contributions of providers were weakened. In Slovakia, the only obligation for providers is to report the percentage of European works in their catalogue, while in Estonia, VoD providers just have to include an undefined amount of European works in their catalogue.

Government offensive

The French government is trying to change the rules of the game.At the presentation of its ‘Roadmap for France’s Economic Recovery’ on 10 July, French Minister for the Economy Arnaud Montebourg said that he “asked French audiovisual and digital operators to unite in order to provide alternatives” and “European alliances” to compete with to the “Anglo-Saxon offensive in culture and cinema.”

French Minister for Culture Aurélie Filippetti, said in an interview with the Figaro that she wanted to reduce the timeframes for the broadcasting of films on television after their cinema release from 36 months to 24 months, “but only for services that contribute financially and promote French and European works.”

According to the Green Paper by the EU Commission, Europeans spent over €364 million on films and television series in 2011, a 41.8% increase compared to 2010.

The European demand for video-on-demand (VoD), which is only available in some EU member states, represents somewhere €760 million to €1.6 billion per year.

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