The EU’s game-changing Audiovisual Media Services Directive, which is expected to prompt new rules of engagement between producers and streaming giants, is finally in various stages of implementation across Europe.
The new rules — for which the formal deadline was September 2020, but there is some leeway — will involve investment obligations and in some countries, setting out terms of trade for streamers.
What remains unclear, however, is how long it will take for the European TV and film production ecosystem to feel the so-called “Brussels Effect.” And how much AVMS will impact different member states that are applying the directive differently.
At its core the directive simply states that streamers must offer a 30% quota of European content to European subscribers. But on top of that, EU countries are introducing nationally tailored legislation to make streamers directly re-invest a percentage of their revenues in each European country where they operate. And some countries — such as France and Italy — are in the process of enshrining into law new rules that will also force Netflix, Amazon Prime, Disney Plus and other streaming services to invest locally through independent producers and ensure that producers will retain a portion of the rights.
Last October a group of more than 500 prominent European producers and directors, including Pedro Almodóvar (pictured), Agnieszka Holland and Pawel Pawlikowski signed an open letter demanding new rules of engagement with global streamers who are clearly the big winners amid the pandemic.
In the missive, launched by the Paris-based European Producers Club (EPC), which represents top independent film and TV drama producers across Europe, the filmmakers said new rules were needed to counter the increased leverage of streamers, who tend to use a Hollywood studio business model under which they get all or most rights in return for full financing. The European business model is instead based on a co-production system that leaves indie producers with plenty of back end and gives them more creative control.
“We call on imposing an investment obligation of at least 25% of the turnover of these platforms, with at least 80% reserved for independent production companies, and a majority for local language production, to be allocated into European films and TV series,” the letter stated.
Cut to four months later and France — which is leading the way — has indeed approved a firm legislative framework under which the government will force streamers to invest up to 25% of their local revenues in French-language content. More importantly, 66% of the investment made by Netflix and other platforms to produce French TV series will have to be done through independent producers to whom rights will revert within 36 months. On the film side, streamers in France must channel 75% of their investments through indie producers who will get their rights back after 18 months.
In France, streaming giants will also have to invest in feature films required to play in movie theaters before dropping on their platforms, “something they haven’t done so far,” notes EPC general manager Alexandra Lebret.
The French law transposing the AVMS directive is being reviewed by the country’s media regulator prior to final approval but has been notified to the EU. So even though there is some margin for tweaks, there really “is no way of changing it,” says Lebret. France is expected to fully enshrine its new rules of engagement with streamers into law by July.
All told at least 14 European countries are in the midst of transposing the EU directive amid intense negotiations with streamers at different levels.
The first to do so was Portugal, which in October set a 1% so-called “Netflix tax” on streamers that will go to fund Portuguese national film fund ICA. Separately, streamers will have to invest up to 4% of their local revenues on Portuguese content.
Similar AVMS-related directives, involving small investment quotas in local-language content, under 6%, are being drafted by parliaments in other European territories including The Netherlands, Denmark, Croatia and Poland.
“For some countries the game changer is that they did not have any investment obligations [in local-language content] and now they are creating that,” says Lebret. While for others, like France, Italy, and Germany, “the big change will come not with the investment obligations but in the way they are implemented,” she adds.
Below is an overview of the state of AVMS implementation in several key EU territories.
ITALY
In Italy, where the government recently fell, the draft law is still awaiting approval in parliament. Meanwhile, top level negotiations with the streamers have been held in close contact with France. The idea is to impose similar investment and production quotas. The plan is for an investment quota amounting to 25% of revenues, 50% of which to be invested in Italian-language content.
In Italy, 100% of the investment is expected to go through independent producers and rules of engagement are high on the agenda.
“Producers can’t just be getting a producers’ fee in exchange for what they do, says Giancarlo Leone, head of Italy’s TV producers’ association APA, who is the chief negotiator.
Another key issue in Italy is whether Netflix and other streamers will be allowed to continue to tap into the county’s generous tax rebates for production when they work with local producers who are saying: What are you giving me back in exchange for the tax credit? What rights will I be able to hold on to that are of a comparable value? says an insider. Significantly, Italy is the only country in Europe where Netflix has joined the country’s motion picture association (ANICA), a move that has raised eyebrows in other European countries, but may help move things along.
GERMANY
In Germany, implementation of the EU’s AVMS directive is spread across different pieces of legislation. While the German government has already passed a 30% European content quota, the country’s politicians and producers are lagging behind in terms of their negotiations on further investment quotas and fair remuneration rules and watching France and Italy very closely. A key stumbling block in passing the second step of the directive is the definition of “independent producer,” as many production companies are owned by broadcasters. But the German production community is very passionate about what’s at stake.
SPAIN
In Spain, the government has drafted a law setting the investment quota at around 5% of a streamer’s local revenues. A portion of that will have to be invested through independent producers. Of that amount either 1% or 1.5% would go for feature films.
“In Spain the government want to keep Netflix happy, because obviously they are bringing so much business,” says producer Alvaro Longoria, head of Morena Films. He adds that “the Netflix effect in Spain has been very, very positive” and notes that at the end of the day Netflix already produces much more content in Spain than the obligation would require. “It’s not a question of changing the way they do things, because they are doing it already. It’s a question of regulating, so that everybody knows what the rules are,” he adds.
