The Department of Communications and Digital Technologies plans to enforce local content quotas and other regulations on streaming services such as Netflix.
The proposal is contained in the department’s white paper on the Audio and Audio-visual Content Services policy framework, which was the subject of public hearings over the last month.
The draft white paper proposes that this be set by the regulator in a graduated manner considering the nature of the service, up to a maximum of 30% of the video catalogue available in South Africa.
However, Netflix has warned that this proposal is not feasible given the nature of the services it provides, coupled with the fundamental differences in the model and structure of global streaming services.
Shola Sanni, Netflix’s director of public policy for sub-Saharan Africa, said that the streaming service is already investing heavily in local content in South Africa and fully intends to continue doing so going forward.
This is not because of a legal obligation, but simply because it makes business sense to do so, she said.
Netflix has instead suggested that rather than imposing a local content quota in proportion to the video catalogue, government’s proposal should be revised to focus on incentivizing content providers to make investments in local content production, which is one of the objectives of any local content obligation.
“There’s also a multiplier effect with any investment: the economic impact of each of our projects in South Africa is several times greater than the actual dollars invested,” she said.
“Between 2016 and 2020, Netflix has invested an estimated R800 million in South African shows, creating more than 1,800 jobs in the process.”
Sanni added that more people watch South African shows outside of the country than in it, with a popular show like Blood and Water receiving 14 million views outside of South Africa.
Netflix has also warned of the other harmful effects that will be introduced through the white paper, including a requirement that it submits financials, subscriber data, and other information to regulators in South Africa.
Sanni said that this will be an administrative burden not only for an already capacity-constrained regulator, but also for online content service providers.
“This is coupled with the need to regulate hundreds or perhaps even thousands of online entertainment services accessible to South African citizens.
“Consumers might be faced with higher costs and fewer choices and fewer providers would also mean less investment in high-quality South African content, and less opportunity for local talent.”
She added that Netflix’s business model is premised on lowering the administrative burden, enabling consumers access unlimited catalogues at low costs and supporting a high degree of consumer choice, all of which may be significantly undermined if it were to be subject to the proposed licensing framework.