How will Netflix and Disney+ comply with Australia's new content quota?

The Australian government announced plans this week to require international subscription video on.demand services to invest back into local scripted production in the country, with early reports suggesting that 20% of revenue (or potentially catalogue composition) would be required. This legislation, known as the “Revive” policy, marks an Australian first for imposing such regulation on international streamers. Local broadcasters such as Foxtel are already required to allocate 10% of drama expenditure on local content, while local free-to-air operators such as Seven must spend 55% on local content.

According to Ampere Analysis’ latest report, Netflix and Disney+, which generate the most revenue among the international streaming services in Australia, both invested more than enough in original Australian content in 2022 to hit any content investment quotas. However, they are less well positioned currently in terms of a content catalogue quota.

This move is the latest in a number of initiatives whereby countries require international streaming services to invest back into the local market. For example, the European Commission in 2021 passed legislation which required streaming services operating within the EU to have at least 30% of their catalogue made up of European content. Other countries, such as France, have opted for a slightly different approach, with 25% of revenue derived from France to be spent on local content.

Disney+ and Netflix spent AUD420 million (US$295 million) in 2022 on Australian content, according to Ampere’s Markets – Content data, with Netflix titles such as “The Stranger” and “Heartbreak High” proving successful investments, according to Ampere’s content popularity metric. From an overall a revenue from these two services of almost AUD1.3 billion (US$900 million) in 2022, this represents a spend of 32% of revenue on local original content, well above the 20% quota the new bill could impose. Netflix spent AUD364 million (US$256 million) on Australian content in 2022, representing a 39% share of its revenue. While Disney+ only spent 15% of its revenue on local content in 2022, this is set to increase to 25%, or AUD124 million (US$87 million) in 2023, thereby exceeding the proposed quota.

However, looking at the percentage of Australian content within SVOD services' catalogues, there is more work to be done should the quota be applied to this metric. Unsurprisingly, local SVOD services such as Foxtel Now and Stan have the highest share of local content in their catalogues. However, Netflix in Australia has around 4% of its catalogue made up of local content, with Disney+ making up just 0.2%. Both would need considerable investment to reach as high as 20%.

“If the new legislation does impose a quota on international streamers' content catalogues, this could lead to those platforms licensing high volumes of low cost, older local content, or lowering the volume of international content on their services, which could potentially devalue streamers' offerings in Australia. By contrast, if it is investment into new production that the government of Australia is most concerned about, then the likes of Netflix and Disney+ will likely not be worried, as they are on track to exceed those quotas,”  said Rory Gooderick, Analyst at Ampere Analysis and the author of the report.

“However, as SVOD services mature, they are expected to shift their focus more towards maximising profit rather than merely growing their subscriber base. In that scenario, investment in local content could still decrease, and hence a quota of some description may be important in keeping the global SVOD players investing in international production,”  Gooderick concluded.