Streaming providers have revolutionized the television and film industry, offering consumers a wide selection of domestic and international content and giving creators instant access to global markets. However, as streaming services expand into global markets, many governments see their presence as an opportunity to extract revenue and shift it in favor of local incumbents. This is despite ample evidence that local production is already benefiting greatly from increased foreign investment.
Australia is the latest example, following similar efforts in Canada. Australia is currently in the process of finalizing a three-year effort to establish requirements for online streaming platforms, the majority of which will be US suppliers, to fund Australian content. The proposed obligations would likely violate several provisions of the Australia-US Free Trade Agreement (AUSFTA). The effort to extend traditional TV content quotas to the Internet comes after Canada passed similar legislation earlier this year, which will allow U.S. suppliers to engage in one of the most successful industries. It emphasizes the urgent need to push back on trading partners seeking restrictive policies that harm both American workers. US exports over the past century.
Australia moves into online streaming funding obligation
The Australian Government has announced its intention to introduce “requirements for Australian screen content on streaming platforms to ensure continued access to local stories and content” in its 2023 National Cultural Policy, and stated that 7 A November 2023 consultation document from Australia’s Department of Infrastructure, Transport, Regional Development, Communications and the Arts, which stated a goal of “implementing” the new law by 1 May 2023, states that online streaming providers will not be disclosing Australian programming from online streaming providers. Two proposed methods for diverting funds are outlined.
The first method (focusing on spending) would require Australian online streaming providers to put 30% of their budgets into drama for the Australian market, and towards narrowly Australian drama programming. The proportion of mandatory spending on Australian programs depends on the annual number of subscribers to Australian services.
For service providers with 1 million to 1.99 million subscribers, the rate is 10%. For service providers with 2.0-2.99 million subscribers, the rate is 15%. For service providers with 3-3.99 million subscribers, the rate is 20%. For service providers with 4.0-4.99 million subscribers, the rate is 25%. For service providers with more than 5 million subscribers, the tax rate is 30%.
Multiply this percentage by that provider’s total spend on drama for the Australian market to calculate how much a provider needs to spend on Australian drama programming. The majority of services covered by this requirement are from the United States, but it also includes at least one Australian company.
The second approach (focused on revenue) would impose a base 10% contribution requirement (which could be increased to 20% by the regulator) for all streaming providers, regardless of subscriber numbers, based on their Australian revenue. applicable). The amount such providers are required to spend on Australian drama is a fixed percentage of their advertising and subscription revenue, starting at 10% of the floor charge, with an adjustment for supplier spending on sports programming. (This is excluded from sports programming). the basis on which drama expenditures are calculated).
Australia’s proposal could undermine US streaming service suppliers and workers and violate the US-Australia Free Trade Agreement
Australia’s proposed requirements appear to violate several commitments made by both countries in the US-Australia Free Trade Agreement (AUSFTA). Both proposals would discriminate against non-Australian content by requiring US streaming providers to spend a certain percentage of their total spend or revenue on Australian programming. An “Australian program” is defined as a program that is “produced under the creative control of an Australian person” and meets a number of criteria for Australians to be employed in production, direction, acting and writing. There is a need.
Given the strict definition of “Australian programming” that would need to be funded, both the business plans of US streaming services and the US workers involved in content production would be seriously harmed. Streaming services will be required to allocate a portion of their spending to Australian content at the expense of US content and international programming. Content that may involve both US and Australian workers, but is not sufficiently Australian, will not qualify as Australian programming.
The design of mandatory spending proposals would also impede the business practices of U.S. and other foreign providers by interfering with supply and demand in the content market. The proposal would require streaming providers to use funds from their expenditures or revenues to access limited facilities and a limited group of actors, directors, writers and producers in order to qualify as Australian programming. Requiring a certain portion of funding would drive up costs. for their production inputs. Furthermore, imposing arbitrary requirements on the use of limited production inputs (such as the human resources and production capacity available in Australia) is inappropriate given the finite number of workers and production equipment available. It would impede the provider’s ability to perform normal quality controls.
The proposed requirements for promoting and funding Australian programming would be in direct contravention of Article 16.4 of the AUSFTA Electronic Commerce Chapter. This provision, “Non-discriminatory Treatment of Digital Products,” prohibits preferential treatment of digital products based on the country of origin of the “author, performer, producer, developer, or seller.” Australia’s proposed requirements would give preferential treatment to Australian-based content (digital products) based on a number of specifically named factors (author, performer, producer, distributor).
The proposed obligation would be a measure aimed at “achieving a predetermined level or proportion of domestic content” by requiring Australian programming to be funded at a specified level (or proportion). It may also be in violation of Article 11.9 of the AUSFTA Investment Chapter (Performance Requirements), which prohibits this. The proposed mandate would set a “predetermined level of domestic content” using spending as the determining criterion.
The AUSFTA allows the Australian Government to enact content requirements that are inconsistent with these rules, but only because the amount of Australian content on the market is not “readily available to Australian consumers”. Only if it turns out that
In reality, this condition is far from being met. Australian shows are easy to watch, thanks in large part to online streaming providers and their significant investments. According to government agency Screen Australia, $2.34 billion will be spent on drama production in Australia in 2022-2023, of which $1.22 billion will come from overseas providers, which is the five-year average. This reflects a 31% increase from the previous year.
Source: Screen Australia
As the graph above shows, online providers in particular are a major contributor to Australia’s content landscape (labeled ‘Subscription TV and SVOD’ in the graph).
Streaming platforms have a rich supply of Australian content. The Australian Communications and Media Authority reported that five online streaming services (Amazon Prime Video, Disney, Netflix, Paramount+, and Australia’s Stan) host 3,757 Australian programming titles. That’s 10,465 hours for the year ending June 2023. This is a significant increase from the previous year’s 2,345 titles or events, or 7,714 hours. This reflects a notable increase from the 618 titles hosted by the four major streaming platforms in 2020 (Paramount+ began reporting in 2022). The amount of content on these platforms has increased year on year in almost every category, and in Australian drama, the category this proposal targets, the number of hours of content has roughly doubled since 2020 . With such success, there was no basis for coercive action. Intervention in the market will appear to be completely non-existent.
Additionally, overseas streaming providers, particularly those in the United States, play a key role in exporting Australian content to global markets, driving demand for local production. More Australian content is exported to the United States via online streaming platforms than any other jurisdiction.
Australia’s policy follows other US trading partners who have passed funding requirements for online video providers
Australia’s actions come as other governments, such as Canada, are pursuing similar streaming obligations, including conditioning market participation through local content quotas, mandatory revenue-shifting schemes, or algorithmic promotion of local content. Ta.
Australia is one of the United States’ closest trade allies and is a signatory to one of the strongest agreements on trade in audiovisual content. Allowing us to violate this agreement with rules that discriminate against American businesses and American creators is inconsistent with our commitment to the rule of law and the interests that trade agreements are designed to promote. Furthermore, it may lead to policy proliferation. The Australian government itself recognizes this, stating in a February 2022 document on the issue that local content requirements pursued in other countries will lead to a “regulatory gap” and impact streaming suppliers’ long-term investments in Australia. It has been pointed out that there is a possibility of giving While intervention in favor of local production is politically popular in Australia, the United States should oppose measures taken at its own expense.
