EU countries could be next for regulator-Netflix conflict

When CRTC Chairman Jean-Pierre Blais faced off against Netflix Inc. in September, his ordering of the U.S.-based streaming service to give the CRTC information it had previously refused to provide added fuel to a debate about whether the CRTC can — or whether it should — regulate online video services. That debate, which saw everyone from Prime Minister Stephen Harper to Quebecor Inc. and Google Inc. wade in during the CRTC’s Let’s Talk TV hearing, has cooled off somewhat, for the moment at least, after the CRTC decided to exclude Google Inc.'s and Netflix’ input from the process. The question of how to regulate a TV system in the face of competition from large American companies might feel uniquely Canadian, but it's being asked in other countries, too. Regulators in the European Union are “all leery of relinquishing complete regulatory authority over these entities,” Dwayne Winseck, professor of journalism and communications at Carleton University, said in a phone interview. “There’s a lot of interaction at the international level, and particularly the transatlantic level, between the U.S., Canada and the EU around regulatory matters,” he added. “So they’re all very well appraised of one another, and not many of them, as far as I know, are kind of flying off in their own particular direction that looks completely wonky from what the transatlantic trends are.” Like Canada, regulators in the U.S. and the EU have different rules for the traditional television-broadcast distribution system and for online streaming services like Netflix. The regulatory frameworks in each market are different, said Dan Cryan, research director of digital media for research company IHS in the U.S. “What the sense of jurisdiction is depends a bit on the market,” he said in a phone interview. There hasn’t “been a huge amount of attention” on regulating online services in the U.S., with the Federal Communications Commission (FCC) using a “soft touch” for any online service, “to the point that it may not even be, strictly speaking, jurisdiction,” Cryan said. In the EU, regulation is stronger. The EU-wide Audiovisual Media Services Directive, which regulates OTT players like Netflix as well as traditional TV providers, stipules that that “on-demand audiovisual media services will promote the production of and access to European works,” which can be accomplished though measures including “financial contributions to the production and rights acquisition of European works or by ensuring a share and/or prominence of European works in the catalogue of programmes.” The website notes that EU countries have “taken very diverse approaches ranging from very extensive and detailed measures to a mere reference to the general obligation to promote European works in their national legislation.” The directive doesn’t impose any specific tools. According to a document put out by the European Commission in July, a number of countries require providers to “reserve a share of European works in their catalogue” that ranges from 10 to 60 per cent of the catalogue. Cyprus, Hungary, Lithuania, Malta and Slovakia have made this a standalone obligation, while in France, Croatia, Czech Republic, Italy, Poland, Romania, Slovenia and Spain have “other joint or alternative obligations.” Those include promotional tools. In Poland, for example, services have to indicate the country of origin of a program, allow users to search for European programs and offer “information and materials promoting European programs.” France requires that promotional material be placed on the home or front web page of an online streaming service and include trailers or visuals. Several countries require video-on-demand service providers to make financial contributions for the creation of European content. That includes Croatia, Spain, the French Community of Belgium and France, which have financial obligations on top of other requirements, such as shares in the programming library. Countries such as Italy, Slovenia, the Czech Republic and Estonia allow such operators to choose between financial obligation or other measures. Tom Evens, a senior researcher at Ghent University in Belgium, said in a phone interview that “the most important issue which is going on in most European countries to what extent can we force these often global platforms to support our local cultural economy?” He noted that Netflix has only recently entered those markets. In the first two weeks in France, it gained 100,000 subscribers, according to French newspaper Le Figaro. Netflix has been reluctant to publicize subscriber numbers outside the U.S.; the number of subscribers it has in Canada was among the information ordered by the CRTC that it refused to provide. Now that it operates in Europe, Netflix will have to provide those figures in countries like France, Evens said. He said if a regulatory body decides it can regulate Netflix, “then it should be legally possible to enforce Netflix to give their data,” and added that “we already have a lot of OTT platforms who already disclose their information to the regulator here in Belgium. And there hasn’t been any conflict in that respect.” He said the only such conflict he is aware of is in Canada. “These issues might come up very quickly. If Netflix has a strategy not to disclose its customer information, than France and Belgium might face a similar problem,” he said. Michael Inouye, a U.S.-based senior analyst at ABI Research, said in a phone interview that, at the moment, France poses the biggest regulatory barriers to Netflix. In addition to regulations imposed as part of the EU-wide media directive, France has a tax on video-on-demand services and minimums on how long those services have to wait, up to three years, to play movies after their theatrical release. Netflix based its headquarters for its French operations in Luxemburg, “so I don’t believe they are paying the full tax that you would be paying if you were based in France,” Inouye said. In response to the CRTC’s questions in September, Netflix did provide some information about its compliance with European regulations. It said Netflix has not agreed to pay the French Ministry of Culture’s video-on-demand tax, and “has not communicated with the Government of Netherlands about such a tax” in that country either. It also said its French service “respects the release windows for theatrically released films.” In a question regarding whether “France’s Council of State recommended government oversight over the algorithm used by Netflix to present services and movies to assure the cultural Ministry that French content will be appropriately positioned on the opening page,” Netflix said that it has “not communicated with the French Government about such a recommendation.” It also said it hasn’t communicated with the Dutch government about the its “requirements for discoverability” and “requirements for appropriate access to Dutch and European content.” Inouye said that regulators will likely adopt a “wait-and-see approach,” similar to the CRTC’s decision not to take Netflix to court right away. “They’ll put up a stink, maybe at first, and say, ‘We would like this to happen.’ And of course Netflix will work with them, work with the local governments and regulators as well, but I think a big part of it is just to see how it plays out. How much … will Netflix invest in local content and European content, and how disruptive is it to the other platforms out there?” As the TV system evolves, regulators will have to deal with OTT services eventually, Cryan said, adding that in an environment where services like Netlix, Hulu Plus and Amazon Prime are consumed “in a way that is very similar to traditional TV,” it’s “highly likely” that on a global level “services like that are going to come under an increasing quantity of regulatory scrutiny.” “Does that mean it will result in more regulation?” he asked. “That is a slightly different question, because it depends on the political will to regulate within individual countries and markets.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

EU countries could be next for regulator-Netflix conflict

Broadcast | October 15, 2014

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EU countries could be next for regulator-Netflix conflict

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