ABC deal with Netflix angers rivals

The ABC has partnered with Netflix on the second season of paranormal drama,Glitch, in a bid to defray costs.

Patrick Brammall and Emma Booth in the new paranormal TV series Glitch.

Television executives and politicians have slammed the ABC for using taxpayer funds to further Netflix’s aggressive global expansion by co-producing a TV series with the streaming giant.

The ABC has partnered with Netflix on the second season of paranormal drama, Glitch, in a bid to defray the costs as part of new managing director Michelle Guthrie’s efficiency drive. It announced it had commenced work on the series last year, but only recently brought Netflix on board.

It is understood the structure sees the taxpayer fund around 60 per cent of the production costs, via the ABC and Film Victoria, and this could be higher if applicable rebates are included.

Netflix funds about 15 per cent in exchange for global subscription video-on-demand rights.

Sources said the new Glitch series would cost just over $1 million an episode to produce and would be branded as a “Netflix Original” in other markets.

The news comes as Netflix faces criticism from media companies and politicians for taking eyeballs away from traditional broadcasters, while not paying tax or employing anybody in ­Australia.

“It doesn’t seem right that public funding is effectively being used to subsidise foreign multi­national companies who don’t even pay tax,” Seven West Media chief executiv e Tim Worner told The Australian. “Meanwhile Aust­ralian owned companies like Seven can’t even apply for Screen Australia (public) funding.”

Glitch’s remaining production costs are funded by US studio NBCUniversal in exchange for the offshore linear distribution rights for platforms including television and DVDs. The ABC can reap a commercial return from the NBC distribution deal, contingent on sales volumes, but Netflix will not offer any potential revenue upside for the public broadcaster.

Netflix must wait 12 months from Glitch’s ABC launch to stream the program in Australia but can show it in other markets as each episode is televised by the public broadcaster.

An ABC spokesman said the deal delivered a “better outcome” for Australian audiences.

“As a result of Netflix’s involvement, there is more money being invested in Glitch to fully ­realise the creative aspiration of series 2,” said the spokesman.

“The contribution from the ABC is lower, making the taxpayer dollar go further.

“Importantly, we also get to export great Australian drama to many countries around the world.”

Powerful crossbencher Senator Nick Xenophon said the deal may see the taxpayer dollar go further but it also looked as though it would help drive Netflix’s profits even further around the world.

“The question is was this a good deal on a commercial basis and the jury is still out on that,” he said. “Last time I checked Netflix had zero employees in Australia. There is a great irony in the ABC doing a deal with a company domiciled in a tax haven when Four Corners itself did a massive expose on companies using tax havens.”

Nine chief executive Hugh Marks said Netflix was accessing taxpayer dollars via the ABC and Film Victoria so it could claim it had co-produced an Australian original series in Glitch for a ­relatively small price. “It’s just another example of how the current system favours multinational media companies,” he said.

“Our industry is one currently pressured by unreasonable and uncompetitive taxes favouring offshore players who don’t contribute anything substantial to our national narrative and creative community.”

Nine owns half of local digital streaming service Stan, which is a competitor to Netflix.

Foxtel chief executive Peter Tonagh said: “While it’s good to see Netflix offering some support for Australian productions, the real test of their commitment will come when they directly invest in supporting new Australian stories and incremental work for Australian cast and crew”.

The ABC’s shift to a new programming funding model under Ms Guthrie comes as a Senate committee examining the Turnbull government’s media reform bill prepares to deliver its report today.

The Senate Environment and Communications Legislation Committee is examining a proposal to repeal the population reach rule and the two-out-of-three cross-media ownership law. Advances in technology have rendered current laws governing the $13 billion sector largely obsolete. Australians have flocked to digital entertainment offerings.