Netflix has warned a royalty payment system for video streaming services in South Africa, as proposed in drafted copyright laws, could damage the local filmmaking industry.
Sunday Times reports the video streaming giant reiterated its concerns about the Copyright Amendment Bill at a Netflix event this past week.
The Bill aims to promote the economic interests of creators whose works are increasingly being shared with audiences through newer technologies such as streaming.
But the proposed legislation has been criticised heavily by various industry stakeholders, including Netflix, who submitted its official comment on the planned legislation in 2021.
It raised multiple concerns about the proposed amendments — including strict registration and reporting requirements for production houses, changes in the authorship of audiovisual works, and giving a government minister the power to prescribe contractual terms in rights agreements.
Regarding the provisions for royalty payments in particular, Netflix said it would limit the ability of producers, authors and performers to choose from amongst different types of remuneration — such as up-front lump sum payments.
“A legal obligation to pay royalties will require producers to take on broader economic and legal burdens, which will limit investment and opportunities for producers, leading to lower overall remuneration for authors and performers,” said Netflix.
Speaking during this past week’s event, Netflix’s Global manager for intellectual property and cultural policy, Renee Viljoen, warned that a royalty payment system was completely incompatible with Netflix’s business model.
“We sell a subscription model, and viewers access a wide catalogue of content. We don’t know why [customers] subscribe with us and why they stay subscribed,” Viljoen said.
In other words, Netflix doesn’t know exactly what content on its platform drives new subscriptions and what encourages subscriber retention, so it invests broadly to appeal to as wide an audience as possible.
“We assume that it’s because we work with fantastic partners and make great content that appeals to subscribers,” she said.
“If we are forced to pay revenue-based royalties in South Africa, we have a very big compliance question.”
Viljoen explained that a royalty system would have financial repercussions for production companies, who would have to wait and see if their movie or TV show performed well before getting paid for it, limiting their ability to create content.
Netflix director for public policy in Sub-Saharan Africa, Shola Sanni, also emphasised that online content services should not be subjected to the exact same regulation as traditional broadcasting.
“There’s a need to understand that online content services are such an opportunity for governments to recognise and make sure that the policy frameworks that are applied to this new sector are reflective of its reality,” Sanni said.
Animation South Africa national chair Nick Cloete said it could prove challenging for Netflix to pay royalties from a portion of its subscription revenue, as it is impossible to attach the works directly to the revenue.
Viljoen said that Netflix would not withdraw its investment from South Africa, even if the Bill were to be passed in its current form.
Netflix has offered over 170 South African movies, series, and documentaries on its platform since 2016.
Major productions among these include Blood and Water, My Octopus Teacher, and Queen Sono.
According to Netflix’s Socio-Economic Impact Assessment report for South Africa, the company spent R1.8 billion on local content between 2016 and 2022.
The streamer estimated this investment had resulted in a R2.5-billion contribution to South Africa’s GDP, R2.4 billion income for locals, and R605 million in taxes being paid into the country’s coffers.
The company also reckons that over 7,000 jobs were created by Netflix productions in South Africa over the past seven years.
One Piece’s filming in Cape Town contributed around 1,000 of these, while Netflix also spent roughly R897 million on local services suppliers.
The table below summarises Netflix’s estimated GDP, tax, and job creation contributions in South Africa between 2016 and 2022.