Goodbye Lupin: AVMS urges European streaming
The 2018 European Audiovisual Directive required international streaming companies run by Netflix to develop local film production. While critical and commercial success ensued, it proved fragile.
Lupin, the revenge-filled story of a shrewd French Robin Hood character, Spanish crime film Money Heist in Spain and Danish political drama Borgen have attracted global audiences on Netflix.
But the thriving European film industry funded by US-based internet platforms now faces a bleak future. Streaming audiences are stagnating and planned productions are shutting down across Europe.
In 2018, the European Commission revised its Audiovisual Media Services Directive (AVMS), requiring 30% of content on streaming services to come from Europe. When countries implemented the directive, they introduced investment obligations and tax incentives to strengthen and protect local film industries.
“Regulation has been a double-edged sword,” says Guy Bisson, media analyst at Ampère Analyse. “The increase in local content production would have happened anyway because it’s competitively attractive. At the same time, when global players push to increase production in Europe, it potentially hurts local broadcasters and streamers.
AVMS breached a key part of Europe’s ambitions to build a digital single market. Until it was imposed, digital businesses could set up shop in any of the 27 EU member countries and follow its rules across the continent. Now they are forced to deal with 27 different local interpretations of the rules.
Politicians viewed the film as an exception to other digital products since it was a key part of national culture – and voters seem to agree. In May 2022, Swiss citizens voted by nearly a two-thirds majority to impose a 30% content quota and demand that 4% of revenues generated in Switzerland be invested in the Swiss film industry.
The Swiss countryside is a good illustration of the pros and cons of regulation. For supporters of the amendment, the Swiss law removes inequalities between broadcasters and international streaming services, forcing broadcasters to reinvest 4%, while streamers had no obligation to reinvest. Opponents claimed the 30% quota and 4% tax were protectionist and assumed they would backfire, raising subscription fees for consumers.
After the imposition of the European AVMS and local tax incentives, multinational broadcasters found it profitable to increase production and meet the local content requirement. Since the streamers had strong distribution networks across borders, these local productions proved popular around the world. In April 2022, Netflix reached the European content quota of 30% in almost all European markets. While other big streaming services like Amazon Prime Video and Disney Plus have yet to meet the Europe-wide 30% requirement, recent data shows their local content is on an upward trajectory.
Instead of investing in quality programming, global broadcasters could have cut non-European titles or engaged in unscripted, low-cost local productions to meet quotas. Instead, Netflix and other streamers have integrated with quality local film and TV producers. Across Europe, local studios have exploded.
This success has encouraged regulators to toughen the rules. A 2021 French decree stipulated that streamers had to redistribute 25% of the income generated by their French operations in the French film industry if they wanted access to films within twelve months of their theatrical release. In addition, one-fifth of the total reinvestment must be devoted to French films released in theaters.
Netflix would prefer less strict conditions. The streaming giant hoped to negotiate a total return of 20% on French production in exchange for access to films within a year of their release and exclusivity on their platform for an additional 12 months. Currently, the global streaming company enjoys perpetual and absolute proprietary rights. French independent producers plead for shared rights after a three-year period of Netflix control.
Overproduction is another challenge. HBO Max has halted production of original European content in many Northern European markets. In Denmark, Netflix halted production in June in response to requests from actors and producers for a pay rise.
Although the 2018 AVMS directive required global streamers to develop local content, it has reached the end of its usefulness. Netflix, Hulu, Disney and others recognize the enormous potential reach of shows produced in Europe. Further regulation would only encourage them to fund cheap unscripted content, not the high quality Lupins, Borgens and Money Heists.
Jan Wenger and Michael Hauser are interns at CEPA. Lauri Kivinen is a non-resident senior fellow at CEPA and former CEO of Finnish broadcaster Yle.