Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN) prospects in Europe could be in jeopardy as regulators in the region continue to advocate for the airing of more local content. According to media reports, the European Commission plans to implement new regulations that will require the two to dedicate 20% of their catalogs to European films.
US companies currently dominate the video on demand business in Europe, which means they will be the most affected with the new proposal. Amazon.com, Inc. (NASDAQ:AMZN) and Netflix, Inc. (NASDAQ:NFLX) could experience some form of disruption given that they are only starting to expand their wings in the region.
Given that the two are currently struggling with increasing content costs, being forced to pay more attention to local content could significantly affect their margins. Regulators are however remaining firm on having the new proposal implemented, as one of the ways of increasing investment in the region’s television and film industry, at the expense of Netflix and Amazon shareholders.
Unlike traditional broadcasters who invest up to 20% of their turnover on new productions, streaming services invest a mere 1%. Given the growing popularity of video on demand, regulators fear that a lack of investment in local content could significantly derail the region’s TV and film industry.
Netflix has already taken a swipe at the new 20% quota proposal saying that it could distort the market. The streaming giant is especially concerned that it could force operators to opt for cheaper titles.
“Rigid numerical quotas risk suffocating the market for on-demand audiovisual media services,” Netflix in a statement.
Netflix is also concerned that the new rules will make it impossible for many players to attain a sustainable business model. Given that the new regulations will not apply to small and micro enterprises the big players may feel singled out.
The European Commission is also proposing a range of other measures some of which will require websites like YouTube to introduce age barriers on content. Age barriers rules will however not apply to Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN) among other video on demand services.
The new rules could be announced as early as next week as part of an effort that seeks to create a single pan-EU market for digital services.