Netflix used its third quarter earnings report to criticize the European Union over a new content quota for streaming services.
The EU, writes Netflix CEO Reed Hastings in the report, is “currently rewriting its audio visual rules” that will demand streaming services like Netflix “devote a minimum of 30 percent of their catalog to European works.” Netflix’s report acknowledged that catering to a specific audience encouraged more regional original programming for international audiences, but suggested that enforcing quotas on a streaming service could have unwanted negative effects.
“We’d prefer to focus on making our service great for our members, which would include producing local content, rather than on satisfying quotas, but we anticipate that a regional content quota which approximates the region’s share of our global membership will only marginally reduce member satisfaction,” the report reads. “Nonetheless, quotas, regardless of market size, can negatively impact both the customer experience and creativity. We believe a more effective way for a country to support strong local content is to directly incentivize local content creators, independent of distribution channel.”
Netflix does already boast an extensive catalog of international content. Hastings and Ted Sarandos, Netflix’s chief content officer, have spoken at length in the past about developing original series and films for an audience outside of North America. The Financial Times reported in April that Netflix had plans to “double its production spend in Europe,” spending approximately “$1 billion this year, [and] producing 100 programs in 16 countries.”
“What’s in the back and front of my mind is sharing the world’s best content, whether that’s Japanese anime, Turkish telenovelas, the film noir of the Nordics,” Hastings told the Financial Times. “I’ve never been very Hollywood-centric.”
There’s extra incentives for Netflix to invest in international content. Nearly 79 million of Netflix’s total 137 million subscribers are international, according to the company’s earnings. Devoting space to that rapidly growing audience (up from 72 million last quarter) isn’t just something that will appease the EU — it’s smart business.
“We also continue to expand our international originals, with projects spanning India, Mexico, Spain, Italy, Germany, Brazil, France, Turkey and throughout the Middle East to just name a few,” the earnings report reads. “In India, our hit series Sacred Games was followed up by Ghoul in late August. La Casa de las Flores, our latest Mexican original, has become a big hit.”
Hastings has also previously said the company is interested in developing more Bollywood titles out of India and original anime in Japan.