The FPB’s R1-million licence fee for Netflix is a terrible idea

The FPB recently announced a review of its tariffs and has proposed a new licensing fee for online content distributors.

Under its proposed tariff structure, distributors will be required to pay the FPB an annual fee for every title on their platform.

Netflix’s licence fee would be over R1 million if charged today, while Steam would have to pay at least R3.17 million to distribute games in SA.

Platforms will have to pay the fees even when their content has already been classified in South Africa, the FPB told MyBroadband.

This is a terrible idea.

Big fees

While the need for a board to set localised age restrictions is open to discussion, South Africa is not the only “small entertainment” country to have its own such agency.

What is an issue is how the FPB wants to tax digital distributors for the privilege of “self classifying”. Essentially, Netflix would be able to set its own age restrictions on content, then submit them to the FPB for “verification”.

It is clear the FPB fee structure has little to do with covering the costs of providing classification services – which was revealed in the 2016 budget vote.

The Ministry of Communications told National Treasury the current licensing fee for online content – a flat R795,000 – was introduced “in response to harsh economic conditions”.

Punishing companies

While the FPB’s current flat licence fee is exorbitant, at least it is capped. Companies aren’t punished for offering subscribers a wide selection of content.

If an online distributor which charges a set monthly fee can cull unpopular content from its library without affecting its subscriber numbers, it will decrease the fee it must pay the FPB.

The FPB is effectively telling Netflix, Showmax, and Amazon to have as lean a catalogue as their South African subscribers are willing to stomach.

Forget diversity and choice, the fewer shows you have the less you pay.

Contrast this with the model employed by the British Board of Film Classification (BBFC). It charges an annual licence fee tiered according to how many titles are available on the platform, capped at £4,400 – about R80,000 – per year.

If you have 100 titles or less, you pay nothing.

You then pay a once-off fee per title classified: a £25 submission fee plus £2.91 per minute. You may pay a 10% or 50% higher fee to expedite your rating.

As the FPB wouldn’t actually watch self-classified content, I would argue the per-minute tariff shouldn’t apply to distributors which self-classify.

Take lessons

It is important to note that the UK is a significant market for providers like Netflix and Steam, while South Africa is a drop in the ocean.

This means copying the UK pricing model is not necessarily a good idea.

However, the BBFC’s model does present a guideline for a working system that doesn’t levy a punitive fee on distributors for having large content libraries.

The FPB said it is hoping to receive inputs from the industry to assist it in producing viable and realistic tariffs, so the current plans are not set in stone.

To submit comments – due by 10 November – on the FPB’s Draft Tariffs Review, visit the Gov.za website.

This is an opinion piece.

Now read: What Netflix will get for its R1-million FPB licence fee

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The FPB’s R1-million licence fee for Netflix is a terrible idea