How will Netflix and Disney+ fare with a content quota in Australia?
The Australian government announced plans this week to require international subscription video on demand (SVoD) services to invest back into local Scripted production in the country. While there are no details yet of how these quotas will be applied, early reports suggest 20% of either revenue or catalogue composition would be required to be re-invested back into local content. Though this legislation, known as the 'Revive' policy, marks an Australian first for imposing such regulation on international streamers, local pay TV operators such as Foxtel are already required to allocate 10% of drama expenditure on local content, while local free-to-air (FTA) broadcasters such as ABC and Seven must ensure that 55% of their output is of Australian origin.
At time of writing, Netflix and Disney+, which generate the most revenue among the international streaming services in Australia, both invested more than enough in original Australian content in 2022 to hit any content investment quotas. However, they are less well positioned currently in terms of a content catalogue quota.
This move is the latest in a number of initiatives whereby countries require international streaming services to invest back into the local market. For example, the European Commission in 2021 passed legislation which required streaming services operating within the EU to have at least 30% of their catalogue made up of European content. Other countries, such as France, have opted for a slightly different approach, with 25% of revenue derived from France to be spent on local content.
Disney+ and Netflix spent US$230m in 2022 on Australian content, according to Ampere’s Markets – Content data, with Netflix titles such as The Stranger and Heartbreak High proving successful investments according to Ampere’s content popularity metric. Netflix will hit a proposed 20% revenue quota, spending US$208m on Australian content in 2022 representing a 31% share of its revenue. While Disney+ only spent 10% of its revenue on local content in 2022, this is set to increase to 27% in 2023, thereby exceeding the proposed quota.
If the new legislation does impose a quota on international streamers' content catalogues, this could lead to those platforms licensing high volumes of low cost, older local content, or lowering the volume of international content on their services, which could potentially devalue streamers' offerings in Australia. By contrast, if it is investment into new production that the government of Australia is most concerned about, then the likes of Netflix and Disney+ will likely not be worried, as they are on track to exceed those quotas.
However, as SVoD services mature, they are expected to shift their focus more towards maximising profit rather than merely growing their subscriber base. In that scenario, investment in local content could still decrease, and hence a quota of some description may be important in keeping the global SVoD players investing in international production.
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