Better late than never: The government finally moves on streaming content quotas

Nobody is going to accuse the government of being precipitous when it comes to its communications industry policy.

Two-and-a-half years after announcing a content quota for the streaming companies, the government has … announced a content quota for the streaming companies.

The July 2024 launch date promised in Arts Minister Tony Burke’s Revive strategy is long gone, but later this week, possibly as early as tomorrow, we will finally see legislation tabled in Parliament.

Over the last half century, Australia’s screen production sector has been through a series of booms and busts. The Ozploitation era of the mid 1970s to mid 1980s – fuelled by (overly) generous tax breaks for filmmakers, which brought us giant hits like Crocodile Dundee and misses like giant crocodile movie Dark Age – gave way to a downturn, until the early years of streaming created a new TV production boom. That one stalled more than five years ago when the streamers slowed down and local drama stopped rating.

Ozploitation is back, baby!

This new legislation will likely see hundreds of millions more dollars poured into the local sector. Most likely more than $300m.

Quite how the system will work is as yet unclear. All we have to go on so far is this short announcement from Burke and communications minister Anika Wells.

It would appear that streamers will be given the choice between investing more than 10% of their local expenditure on commissioning  Australian content, or 7.5% of their local revenue.

Presumably this is designed to capture revenue currently leaking out of Australia. For instance, while in the most recent available numbers, Netflix Australia wrote revenue of nearly $1.2bn, the global parent company recharged that amount, creating a taxable profit number of zero.

Under this new law, Netflix alone would be obliged to spend up to $100m on creating local content.

In turn this new activity will create taxable local activity including GST and payroll tax.

How local the content will really be remains to be seen. If the rules are similar to those followed by funding body Screen Australia, then movies and TV shows made here will count as local, even if the subject matter is decidedly unAustralian. Think Elvis, The Matrix and The Great Gatsby.

Australia’s free-to-air companies will probably not like the decision. They’ve always had content quotas. A decade ago, Seven proprietor Kerry Stokes called for a level playing field, although that was before thinking through the implications.

The coming boom in the production sector will drive up costs for the free-to-air players, as staff pay, facilities and equipment hire all become more expensive. That’s not just bad news for Seven, Nine and Ten, but the ABC and SBS too.

And ironically, there will be no level playing field anyway. The free-to-air companies successfully lobbied to kill their children’s content quotas (and any hope of the next generation developing habits as broadcast TV watchers). Among the genres the government says the streamers will be asked to create content for is, indeed, children. The quote in Burke’s announcement is “new local drama, children’s, documentary, arts and educational programs”.

But the FTA networks have also by the looks of it had a win — absent from the announcement is one key genre: sports. In other words, if the streamers go up against the local players for sports rights that wouldn’t count towards this new quota.

Another fascinating question is whether the world’s biggest streaming player, Youtube, will be covered by the legislation. Streamers will need more than 1m local subscribers to be covered. If that means paid subscribers, Youtube might dodge the legislation. And because Youtube shares 55% of ad revenue on monetised accounts with creators (for long form, short form is 45%), it’s possible it already ticks the 7.5% of overall revenue box.

In terms of good policy engineering, at least Youtube should be covered. It sends most of its multi-billion dollar advertising revenue offshore, but that should be caught as a content expenditure under the legislation.

Also relevant is the fact that in other markets such as the UK and US, Youtube is increasingly being used as a platform by local broadcasters.

With Youtube already threatening legal action over the legislation to ban under-16s from having accounts, this creates another potential litigation flash point. However, while the platforms will be keen not to roll over on legislation that sets global precedents, like the News Media Bargaining Code, this is not a first. Four years ago France introduced legislation mandating that streamers spend 25% of their revenue on local content.

From the Australian production sector, the message is likely to be: Better late than never.