Netflix, the global streaming service, has warned that a royalty payment system, proposed as part of new legislation, could limit the number of local production houses it works with.
Netflix representatives this week reiterated their concerns about the pending Copyright Amendment Bill, saying it may lead to a decline in the number of production houses it gets content from.
The Copyright Amendment Bill and the Performers’ Protection Amendment Bill seek to regulate the entertainment industry and offer protection for performers and the copyright of writers and publishers by, among other things, introducing fair copyright, royalties and use of content.
Netflix is concerned about ownership of the content and the paying of royalties, which is more common in the music business than in the TV industry.
In its submission on the copyright bill in 2021, Netflix said it supported fair remuneration for authors and audiovisual performers. It said while sections of the bill that dealt with royalties for the audiovisual sector might intend to achieve this, “we believe the proposed changes would not only increase legal and economic risks for producers but also diminish opportunities for improving authors’ and performers’ remuneration”.
It added: “Legally mandating compensation for authors and performers via royalties is not the norm — indeed, it is highly unusual in the audiovisual sector. This type of inflexible mechanism would prevent producers of audiovisual works from obtaining the necessary rights to commercialise the work on sustainable and reasonable terms.
“It would also limit the rights of authors and performers to choose from among different means of remuneration. Such a one-size-fits-all approach to remuneration will inhibit growth in the sector and curtail the benefits for the authors and performers that this provision is intended to support.”
Speaking at a Netflix event on Wednesday, Renee Viljoen, manager for global intellectual property and cultural policy at the company, said the Copyright Amendment Bill might result in Netflix not having enough partners to work with because producers would be hard hit.
“Potentially, the pool of producers that we can work with is going to decline. So I think that is the immediate impact that we are very concerned about,” she said.
Viljoen said the royalty scheme was “completely incompatible with our business model”.
“We sell a subscription model and viewers access a wide catalogue of content. We don’t know why [clients] subscribe with us and why they stay subscribed. We assume that it’s because we work with fantastic partners and make great content that appeals to subscribers. If we are forced to pay revenue-based royalties in South Africa, we have a very big compliance question.”
She said under the royalty scheme those involved in the project would have to wait to see if there was revenue — if not, there would not be payment. Many audiovisual projects were not successful, said Viljoen. If production companies had to wait for royalty payments, this could affect their financial viability.
Potentially, the pool of producers that we can work with is going to decline. So I think that is the immediate impact that we are very concerned about
— Renee Viljoen, manager for global intellectual property and cultural policy at Netflix
Nick Cloete, national chair of Animation South Africa, said it might be a challenge for the likes of Netflix to “pay those royalties if they’re required to pay a portion of their revenue that they generate with subscriptions for work that is impossible to attach to revenue”.
“Policymakers think it’s one size fits all and serves the interest of the artists, and they are the ones who are going to be affected.”
Shola Sanni, director for public policy for Sub-Saharan Africa at Netflix, said attention needed to be paid to the copyright bill, because “there is a real need to ensure that it is reflective of our current realities … and done in a way that continues to allow industries to win. And this means flexibility … so we need to see more of that reflected in the current draft.”
Viljoen emphasised that Netflix will not withdraw its investment in South Africa, dispelling rumours that it will do so if the bill is passed in its current form.
The increasing calls from the broadcasting industry, including MultiChoice, for the regulation of the streaming platforms also came under the spotlight.
Sanni said: “There’s a need to understand that online content services are such an opportunity for governments to recognise and make sure that the policy frameworks that are applied to this new sector are reflective of its reality, and not launch a blanket approach [that] has been successful in the case of traditional broadcasting.
“We are not traditional broadcasting … So we need a lot of recognition for the kind of regulation that’s going to show new and future pathways.”
In its socioeconomic impact assessment report, Netflix, which has invested R1.8bn in South Africa since 2016, said that enabling policy frameworks, flexible regulatory mandates and ease of doing business were inextricably bound to the continued growth of the audiovisual sector and streaming services.
“The business of film is one to be taken seriously and the importance of getting right the policy, regulatory and legislative infrastructures that support film and TV cannot be overemphasised,” it said.
The company, which entered South Africa in 2016, said its investment over the past six years had resulted in a R2.5bn contribution towards GDP, and a R2.4bn contribution towards the income of locals. Netflix said it had created 7,000 jobs in the country.
“Beyond the immediate jobs created over the period of production, Netflix’s projects enhance the opportunities and access to future employment, because we raise the profile of local creatives and partners both at home and abroad,” the company said in a statement.
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