Netflix has warned that the South African government’s plan to impose a strict 30% local content quota on streaming video services will likely backfire.
Shola Sanni, the director of public policy for Sub-Saharan Africa at Netflix said that such quotas would likely force the video streaming service it to reduce the size of its library in South Africa.
The alternative is that on-demand content providers would resort to churning out large quantities of low-budget local content to make up their quotas.
Netflix said its business model would always incentivise it to choose quality over quantity. Therefore it would choose to reduce the size of its content catalogue in South Africa before pumping out low-quality local productions.
The South African Netflix content catalogue has expanded substantially since it officially became available in the country on 6 January 2016.
A recent analysis from Comparitech showed that Netflix subscriptions in South Africa offer some of the best value for money in the world compared to other countries.
Using data gathered from JustWatch and uNoGS, the number of movies and TV shows available on Netflix in a specific country were divided by the prices advertised for that country on the Netflix website.
This showed that South Africa consistently ranked as one of the top 10 countries in the world for the most cost-effective Netflix subscription.
Local content quotas would change this.
“Less content in an age of increased consumer choice would make Netflix’s service offering less appealing to consumers and would have the opposite effect of reducing local production and decreasing the availability of South African stories and voices,” said Sanni.
Government’s plan to set a 30% local content quota on video streaming platforms was proposed in the Draft White Paper on Audio and Audiovisual Content Service Policy Framework.
The white paper was authored by the Department of Communications and Digital Technologies (DCDT), which has described the quotas as a crucial point of the proposed legislation.
DCDT chief director of broadcasting policy Collin Mashile pointed to the Netflix-produced show Queen Sono as the potential positive impact of this proposed change.
However, Netflix said that the unintended consequences of a strict quota would likely result in the opposite effect.
“Rather than promoting South African content and production, content quotas will likely lead to harm, which would result in a regulatory regime that is counterproductive to what it is setting out to do,” said Sanni.
“It is necessary to ensure that policy interventions do not unintentionally undermine the industry potential by failing to focus on encouraging the production of high-quality content that can appeal to local and international audiences.”
Netflix explained that if global video streaming players are forced to spread their local content production budgets too thin in an effort to hit an artificial quota, it will result in a quantity-over-quality problem.
This would harm the reputation of South African content around the world.
Sanni said that Netflix began working with South African creators and distributors when it launched in the country in 2016.
Its aim is to bring high-quality series and films that showcase the best of South Africa’s creativity and talent to a global audience.
“We’ve invested in 60+ licensed titles, and commissioned multiple Netflix Original South African series, such as Queen Sono, How To Ruin Christmas: The Wedding, and Blood & Water,” said Sanni.
Based on data that was current as of July 2020, Netflix found that for every one view originating from South Africa of a locally-produced show or movie, there were 26 views from outside the country.
This ratio was even higher for titles like Blood and Water, Queen Sono, Seriously Single, and Shadow.
As at December 2020, Netflix reported that there were over 70 South African films and television series available on Netflix.
Instead of using a blunt regulatory instrument like a flat quota on local content, Netflix said that government should incentivise investment in South African movies and shows.
Sanni explained that while South Africa seems to be looking to the EU’s local content regulations as a guide, government does not appear to be considering important context.
“The EU 30% local content quota, for example, is fulfilled by content from across Europe as a whole — serving 450 million people — rather than local content of only one Member State,” she stated.
Another important factor is that the European Union heavily incentivises investment into local content together with its local content quota.
A great deal of local content is produced using government funding and support in the EU, stated Sanni.
Just in Germany, the total funding provided by various film bodies amounts to more than €350 million per year.
France, which has the most highly subsidised film industry in Europe, provided a total investment into theatrical film productions of around €1 billion.
“There is an established connection between the level of funding and resources that governments provide to support the local production sector and the industry’s ability to increase local content creation,” Sanni stated.
“Introduction of a local content quota in South Africa would need to be matched by infusion of requisite funding and resources by the government to help provide the wherewithal that industry would need to implement the mandate.”
Sanni said that Netflix believes that it may not be necessary to adopt this kind of approach — which carries significant fiscal and resourcing pressure for government and industry alike without any kind of guarantee that it will succeed.
Instead, Netflix proposed that the DCDT adopt a voluntary, broad-based investment commitment that would apply to all players in the ecosystem.
This commitment would be designed to ensure that all key actors are making a meaningful contribution to the local content production ecosystem.
It would also not be narrowly focused on local content only, but extend to every aspect of the industry value chain where support is needed.
Netflix highlighted that between 2016 and 2020 it:
- Invested over R800 million in South African titles
- Created over 1,800 jobs for cast and crew to-date
- Is partnering with South Africa Tourism to promote cultural affinity with South African content and heritage amongst its 200+ million viewers
- Helped local titles like Blood & Water succeed globally – it recorded 14 million views outside of South Africa.
Netflix said that between 2017 and 2021 it invested over R1.5 billion in South Africa, covering its spend on licensed and original content, and also it international productions made in South Africa.