Netflix And Amazon Hit With Film And TV Tax In Europe

Netflix and Amazon could be forced to fund TV and film production in European countries under proposals announced by the European Commission Wednesday.

The updated Audiovisual Media Services Directive, which was announced by Andrus Ansip, vice president for the Digital Single Market on the European Commission, will force all streaming services to ensure that, for customers in the EU, at least 20 percent of the content available was produced in Europe and such content must be displayed prominently to viewers.

“The revised directive creates a more level playing field in the promotion of European works by obliging on-demand services to reserve at least 20 percent share for European works in their catalogs and to ensure adequate prominence of such works,” the rule states.

The new rules will replace the patchwork of rules across the continent currently in place. Different member states impose various rules on streaming services, with quotas for homegrown content ranging from 10 percent to 60 percent.

This is unlikely to be much of a problem for services like Netflix, however, as a European Commission survey revealed that European films already account for 27 percent of films shown on streaming services and 21 percent of films on Netflix. Research by Ampere Analysis suggests that in some countries, Netflix could face problems if the European Commission mandates that content needs to originate in a specific country rather than from Europe as a whole.

A bigger problem for Netflix and Amazon, however, could be a tax placed on them by EU countries to help produce more homegrown content. “Member states may require providers of on-demand audiovisual media services under their jurisdiction to contribute financially to the production of European works, including via direct investment in content and contributions to national funds.”

The "contributions" will be based on the amount of money each service earns in that particular country, but these taxes will not be imposed on all streaming services. “In order to ensure that obligations on promotion of European works do not undermine market development and to allow for the entry of new players in the market, companies with no significant presence on the market should not be subject to such requirements,” the directive states.

Netflix will be hardest hit by any financial contributions as it operates in all 28 European Union member states. Amazon’s Prime video streaming service will be not be as severely affected, as it only operates in Germany, Austria and the U.K. Both Netflix and Amazon have yet to comment on the proposals.

The Computer and Communications Industry Association, of which both Amazon and Netflix are members, said the new rules could stifle growth rather than accelerate it. “The EU online video market, while flourishing, is not yet mature, and the commission should be careful not to hinder its growth,” CCIA European vice president James Waterworth said in an emailed statement. "Rules requiring video-on-demand providers to contribute to national funds in potentially 28 member states are undermining the Digital Single Market. Cultural quotas are outdated and unnecessary — video-on-demand providers are already investing heavily into European local content.”

The commission says the directive is designed to create “a more level playing field in the promotion of European works by obliging on-demand services to reserve at least 20 percent share for European works in their catalogs and to ensure adequate prominence of such works.”

The commission’s report says the directive needs to be updated to reflect a rapidly changing media landscape, where “consumers increasingly access on-demand content via smart/connected TVs and portable devices.”