How Netflix, Amazon may be forced to make more Australian programs

The federal government is considering forcing streaming giants Netflix, Paramount and Amazon to spend up to 20 per cent of the money they make locally on new Australian programs, but investment in sports or buying local films or programs will not count towards any new quotas.

Streamers will be heavily incentivised to create Australian children’s programs and documentaries under a newly formed national cultural policy, which is being used as a way to ensure local stories continue to be produced.

The federal government may impose local content quotas on streaming services by mid-2024.Credit: Paul Rovere

The government believes its scheme could deliver between $132 million and $528 million in annual local content investment by 2026, based on predictions from Ampere Analysis that are dependent on the regulatory model it ultimately chooses.

A confidential stakeholder consultation paper obtained by The Sydney Morning Herald and The Age shows the government is actively considering five ways to make global streaming giants create local programs, including a model that requires streaming services to dedicate 20 per cent of annual gross subscription revenue to Australian drama, documentaries and children’s programs.

It is also considering proposals with content obligations of between 5 per cent and 11 per cent, all of which include incentives to encourage production in “at-risk genres”: children’s content and documentaries. However, the models do not count investment in sports and mostly ignore the acquisition of existing local programs or films as ways to meet the requirements of the scheme.

Streaming giants have so far operated without regulation in Australia (unlike the commercial free-to-air broadcasters and Foxtel), meaning they are under no obligation to produce or even carry Australian content. While they do invest in local programs and in some cases have spent millions on sports rights deals, they are not required to do so by law. By contrast, the European Union requires 30 per cent of titles in the large streamers’ libraries to be from European countries.

The government says the new scheme will apply only to streaming services that meet certain financial thresholds and create drama, documentary, or children’s programs (not sport or news). The thresholds being considered are $100 million in gross annual subscription revenue or at least one million Australian subscribers (figures which will likely encompass services including Netflix, Disney+, Paramount+, Amazon Prime Video, Stan and Binge).

Entities that also have a broadcast licence, such as Nine Entertainment (which owns streaming service Stan and this masthead), Channel 10 (whose parent company runs Paramount+) and Foxtel (the owner of Binge), will be able to count commissioned content towards both of its requirements. The government argues the move will encourage more joint productions between television networks and streamers.

The models being considered by the government largely target the maintenance of, or increased investment in the children and documentary genres, with per-dollar multipliers included for shows created within these categories. The government is mulling different minimum spending requirements – between 5 per cent and 20 per cent of annual gross subscriber revenue – as well as a points-based system, requiring each service to hit 125 points each year (one point per hour).

A fifth model proposes an expansion of the existing drama expenditure scheme (which regulates Foxtel) to streaming companies that meet the threshold.

But every scheme proposed discounts investment in sports content, meaning Paramount’s $200 million acquisition of the A-League and W-League rights, and Nine and Stan’s $100 million investment in rugby union make no difference to the government.

Four of the five models also discount the acquisition of content, meaning films such as Run Rabbit Run, original seasons of Heartbreak High or Amazon’s recent purchase of Neighbours would not be counted as contributions (the Australian Communications and Media Authority said $81 million was spent by streamers on sport and acquisitions last year). This could ultimately affect how much money is spent by streamers on sports or popular local programs and films.

The government’s paper was based on industry roundtable discussions with all parts of the sector, but it is already generating fierce opposition in streaming and broadcasting circles behind closed doors. Quotas are widely supported by the production sector, which argues they are essential to guarantee a sustainable level of investment in Australian screen stories, but they are opposed by the television networks and streamers that believe the scheme will put pressure on the sector and drive up the cost of production.

Nine chief executive Mike Sneesby said in February he might have to take production offshore if the government introduced rules that would mandate global platforms such as Netflix and Amazon Prime Video to spend a certain amount of money on local content. “You get squeezed on cost, and you get squeezed down the pecking order in the great Australian projects that you can get access to. The unintended consequence of that is squeezing out local players,” he said.

The government will continue to consult stakeholders over the next couple of weeks and plans put the regulatory scheme into effect by mid-2024. The government was approached for comment.

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