Video streaming services will be required to invest at least 4 percent of income generated in Switzerland into the Swiss film industry. The National Council – Switzerland’s parliament – approved the changes to the Swiss film production and culture law on Thursday. Here, online comparison service moneyland.ch explains what the so-called “Lex Netflix” is and how it may impact the cost of video streaming.
How much money is involved?
The revised film law requires each streaming service provider to invest at least 4 percent of locally-generated revenues into the Swiss movie industry. In total, the move is expected to channel around 30 million Swiss francs of additional financing into the Swiss film industry every year. The money will flow to local Swiss film projects and co-productions, according to parliament.
According to an estimate by moneyland.ch telecom expert Ralf Beyeler, 4 percent of Netflix’s Swiss-generated annual income is around 10 million francs. However, Netflix does not openly publish figures relating to its exact earnings from the Swiss market.
Will streaming become more expensive?
Opponents of the new law believe it may. For example, in the course of a debate, council member Philipp Kutter of the Mitte centrist party expressed concern that a 4 percent requirement is too high and will result in Switzerland as a location becoming more expensive.
What is clear is that any additional costs generated for service providers like Netflix and Amazon in Switzerland will in some shape or form be passed on to local subscribers. Alternatively, streaming providers may simply try to cut their costs.
Whether prices will actually go up, and by how much, is not yet clear. In reply to an inquiry by moneyland.ch, Amazon said that it currently has no changes to announce. Other service providers were not ready to make a clear statement.
Netflix already lobbied against the law in Summer, when it sent a letter to the National Council. The letter stated that Netflix would be forced to pass the additional costs on to its customers without being able to provide equivalent value-added. In other words, Netflix is suggesting that the cost of local productions is higher than their value for customers. Telecom expert Ralf Beyeler sees this as a clear indication that Netflix expects costs to increase. Beyeler believes that Neflix sees little to gain by having to help finance Swiss film productions.
“The cost of video streaming in Switzerland has already gone up in the recent past,” says Beyeler. He expects the prices of streaming subscriptions to continue their upward trend. “For one thing, residents of Switzerland have a lot of purchasing power. Most Swiss consumers simply accept price increases and very rarely terminate contracts when prices go up. By raising prices, streaming services aim to grow their revenues,” explains Beyeler. The expert believes that the actual impact of the “Lex Netflix” on pricing will likely be very small.
The Swiss market is more profitable
Switzerland is a lucrative market for foreign streaming services. Because purchasing power is high, Netflix and other service providers earn disproportionately high revenues from their subscribers. But that is only the case as long as providing their services in Switzerland does not generate abnormally high expenses. That is why these companies have a clear financial interest in producing their content outside of Switzerland. Accordingly, being required to contribute towards Swiss film productions is an inconvenience.
Can we expect to find more Swiss content on streaming services?
Not necessarily. The law gives streaming services the option of paying a levy in place of producing local content. If they choose to go that route, it is unlikely that streaming offers will become any “Swisser” in the foreseeable future.
The new law also dictates that European films must make up 30 percent of all content. But Amazon already clarified in summer that this requirement simply falls in line with an identical requirement in the European Union. Streaming services are already busy implementing that requirement. So the change to the Swiss film law is unlikely to have a noticeable impact on the content of video streaming offers.
What else is changing?
It is possible that streaming services may try to make up for the higher costs by saving on content. That would mean licensing less content for their Swiss offers, resulting in less movies and series being available. Original content from streaming services themselves is not affected because there are no licensing costs involved with offering these movies and series in Switzerland.
In Summer, both Netflix and Amazon warned that excessive local production requirements could distort competition. Amazon told moneyland.ch that the Swiss streaming market could see a decline in the overall product offering.
The real impact on the offers of individual streaming services remains to be seen. Up until now, streaming service providers have not responded to moneyland.ch with concrete statements. In the event that we do see offers trimmed in the future, it is doubtful that streaming companies would outrightly blame the reduction on the new film law.
Is the film law final?
According to the National Council, the draft will be sent to the Council of States for finalization. Unless it is countered by a referendum, the new law will come into effect. Some parties already stated that they would try to force a referendum before the changes were announced. According to an announcement from parliament, the collection of signatures has already begun.
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