The local content quota fight that nobody is winning

The federal government’s consultation paper on local content obligations for streaming services, released in April 2022, proposes a 20 per cent expenditure requirement on Australian content. The figure applies to qualifying Australian revenue. By the Department’s own modelling, that would extract roughly $120 million per year from Netflix, Stan, Disney+, Paramount+, and the smaller platforms combined.

The number sounds substantial. The detail is less clear.

What the proposal actually says

The 20 per cent requirement is an expenditure floor, not a programming quota. A platform would not be required to carry a set number of Australian titles. It would be required to spend 20 per cent of its local revenue on content that qualifies as Australian under existing Screen Australia definitions: Australian producers, key creative roles held by Australian citizens or residents, principal photography in Australia.

The consultation paper gives platforms discretion over how they meet the floor. Spending on original commissions, acquisitions of completed Australian films, and co-productions with Australian partners would all count. Pre-existing catalogue titles would not.

This is the flexibility the streamers asked for. Netflix’s submission to the earlier inquiry, filed in September 2021, specifically argued against prescriptive genre quotas and in favour of expenditure-based obligations. Lockhart, then Netflix’s head of public policy in the Asia-Pacific region, described the expenditure model as “the least distortionary mechanism.”

The streamer positions

Netflix supports the principle of local spending but disputes the rate. Its public submission suggests 10 to 12 per cent as a baseline, with credits for spending above a threshold in prior years. The company points to its existing Australian slate (Clickbait, Heartbreak High, Boy Swallows Universe in development) as evidence that market incentives already produce local commissioning without a mandate.

Stan, which is majority-owned by Nine Entertainment, argues that it should receive partial credit for Nine’s existing free-to-air local content obligations. Morrison, Stan’s chief content officer, told a Senate committee in February that applying the same rate to a domestic streamer and a multinational creates “an asymmetry that penalises the local player.”

Disney+ has said the least in public. Its submission is a six-page document that supports the consultation process and commits to continued investment in the Asia-Pacific region without specifying a dollar figure or an acceptable rate.

What the independent sector wants

Screen Producers Australia (SPA) and the Australian Directors’ Guild (ADG) have both submitted responses that welcome the quota in principle and criticise it in practice. Their core objection is structural: an expenditure floor lets platforms count internal productions staffed by their own employees against the obligation, with no requirement to commission from independent Australian producers.

Kelly, the SPA chief executive, put it directly at the May industry forum: “A quota that Netflix can satisfy by spending on its own shows, crewed by its own people, developed in its own offices, is not a local content obligation. It is an accounting exercise.”

The independent sector wants two things the current proposal does not offer. First, a sub-quota requiring a percentage of the expenditure to flow through independent production companies. Second, a terms-of-trade framework that guarantees Australian producers retain some IP rights when selling to platforms, rather than the full-buyout model that Netflix and Disney+ currently impose as standard.

Neither provision appears in the consultation paper.

The ACMA question

The Australian Communications and Media Authority would administer and enforce the quota under the proposed framework. ACMA currently oversees local content requirements for free-to-air broadcasters and subscription television under the Broadcasting Services Act. Extending its remit to streaming platforms requires legislative amendment, which the government has flagged for the second half of 2022.

ACMA’s capacity to monitor compliance is untested in this context. Free-to-air quotas are audited against published schedules. Streaming platforms do not publish schedules. Verifying that a platform has met a 20 per cent expenditure floor would require access to revenue data and production cost breakdowns that the platforms currently treat as commercially sensitive.

The gap between policy and outcome

The consultation closes in July. The legislation, if it proceeds, is unlikely to take effect before mid-2023. In the interval, the platforms will continue to commission Australian content at whatever rate the market supports, which for Netflix is currently between $80 million and $100 million per year, and for Stan and Disney+ is substantially less.

The 20 per cent floor may raise total spending. It will not, on its own, change who receives that spending or on what terms. The independent sector knows this. The streamers know this. The policy paper, to its credit, does not pretend otherwise. It simply leaves the structural questions for a later stage, which is another way of saying it leaves them for someone else.