Australia’s House of Representatives Standing Committee on Communications and the Arts has issued its report on Sculpting a National Cultural Plan (Igniting a post-COVID economy for the arts) which contains a recommendation that streaming service providers should be required to invest at least 20% of local revenue in new Australian content, of which 20% should go towards local children's content and drama:

Recommendation 8 

2.181 The Committee recommends that the Commonwealth Government introduce legislation that requires over-the-top (OTT) media services (streaming and video/subscription video on demand services) to allocate at least 20 per cent of their local revenue on new Australian drama, documentary, children’s content, commissions, co-productions or acquisitions of content.

2.182 The new legislation should also prescribe that OTT services allocate at least 20 per cent of the 20 per cent quota to local children's content and drama.

This is a significant recommendation, with the proposed local investment figure of 20% of local revenues being particularly high relative to the substantially lower percentages we are seeing emerge in other markets - such as in local markets across Europe where tailored investment obligations for service providers offering over-the-top streaming services are being progressively implemented under Article 13 of the Audio-Visual Media Services Directive - and as compared to previous local proposals in Australia. In particular, Australia's 2020 Media Reform Green Paper had asked whether an investment of 5% of local revenues would be appropriate, so a proposal to increase the local content investment requirement to 20% of local revenues would represent a substantial shift in local expectations of service providers. 

Reforms in this space need to be carefully balanced so as to incentivize appropriate levels of investment in the local content industry on a sustainable basis for incumbents and without stifling new market entrants, whose presence can promote competition and diversity in the market.

To properly gauge the practical impact of a 20% local investment requirement, service providers will likely need further details that go beyond the scope of this high level recommendation, including clarification regarding:

  • the definition of relevant local revenues and how they will be determined / assessed; 
  • the scope of an eligible investment (noting that Recommendation 8 indicates at a high level that content, commissions, co-productions or acquisitions of content would count towards the quota);
  • whether any exemptions will apply for new entrants or service providers with local revenues below a certain threshold;
  • what timeframe would be available for service providers to make any required investments;
  • what penalties would apply for failing to make a required investment; and 
  • what alternatives (such as a local levy that can be invested in the local content production industry) may be made available to service providers to the extent that they are unable to directly invest the required amount of local revenue into local content production or acquisitions in the required timeframe - noting that the development of quality content can involve long lead times.

We will be watching this space to see if a more detailed proposal emerges to address some of these key issues that will be of great interest to service providers offering over-the-top streaming services in the Australian market, as well as the local content industry.