Netflix is opening its first Australian HQ
<p>Netflix officially entered the Australian market in 2015, and now reaches <a href="https://www.acma.gov.au/-/media/Research-and-Analysis/Report/pdf/Communications-report-2017-18-pdf.pdf">50% of Australia’s adult population</a>. Despite its remarkable success, Netflix has had no local office and a handful of local staff.</p>
<p>This looks likely to change when Netflix <a href="https://www.theage.com.au/business/companies/netflix-sets-up-australian-outpost-as-streaming-battle-intensifies-20190607-p51vfq.html">opens</a> its Australian headquarters later in the year. The company has hired two senior Sydney-based staffers – a head of publicity for Netflix originals in Australia/New Zealand, and a director of public policy – and is looking for office space to house what is expected to be a team of around 10 employees.</p>
<p>All this suggests Netflix may be inching closer to becoming a “local” media company, with an increased presence in our small but profitable national market. What might this mean for local screen producers?</p>
<p><strong>The context</strong></p>
<p>The streaming revolution has brought with it benefits and risks for different parts of the industry.</p>
<p>On the positive side, Netflix and its local competitor Stan have introduced welcome competition into broadcast and pay-TV markets; provided the production industry with another distribution and funding source; picked up and revived series dumped by broadcasters; addressed underserved viewing communities; contributed to more cosmopolitan popular culture consumption; and provided a global platform for select Australian content.</p>
<p>Yet there are significant policy challenges ahead, especially when it comes to local content. A study of the Netflix Australia catalogue last year by members of our research team found it carries around <a href="http://apo.org.au/node/196611">1% Australian content</a>. Unsurprisingly, Netflix is <a href="https://makeitaustralian.com/">under pressure</a> to increase the number of Australian originals and to increase the number and discoverability of Australian titles in its catalogue.</p>
<p>On the production front, Netflix and Stan are largely responsible for the rapid growth – off a low base – in <a href="https://www.screenaustralia.gov.au/sa/media-centre/news/2018/10-30-drama-report-2017-18-home-grown-expenditure">online drama expenditure</a>, which totalled $53 million in 2017-2018 (for the first time, more than the total spend for kids’ television). However, this needs to be seen in the context of total production expenditure, which has fallen to a six-year low.</p>
<p>Another issue to consider is the government’s <a href="https://www.if.com.au/election-scuppers-government-plan-to-extend-offsets-to-streamers/">recent decision</a> to extend the Post, Digital and Visual Effects and Location Offsets to streamers. Previously available only for broadcast, pay-TV and film producers, these schemes will now extend to Netflix, Amazon Prime and Stan, who can claim a refundable tax offset when producing in Australia.</p>
<p>This will have the knock-on effect of employing local production houses, actors and other businesses and is likely to further increase investment in the online drama category.</p>
<p>So far, the federal government has shown little inclination to follow the European Parliament’s decision last year to <a href="https://variety.com/2018/tv/news/european-content-quota-streaming-service-finalized-end-2019-1203094034/">approve a 30% local (i.e., European) content quota for video streaming services</a>, despite concerted and coordinated advocacy from production industry bodies.</p>
<p>But one thing is for sure – if there is no move to incorporate streamers into the regulatory framework, the disparity between commercial broadcasters’ regulatory burden and that of foreign streamers will grow, strengthening the regularly-put case by broadcasters and pay-TV for deregulation.</p>
<p><strong>On the ground in Australia</strong></p>
<p>This context is important for understanding why Netflix has chosen to establish an official Australian headquarters. Opening foreign branch offices is partly about shoring up a policy presence in jurisdictions that might need on-the-ground sensitivity, which would suggest Netflix expects heightened pressure for regulation to support local content.</p>
<p>Netflix runs most of its operations out of California, but has recently opened a number of overseas production hubs (including Toronto and Madrid), with regional headquarters in Singapore, Amsterdam, São Paulo.</p>
<p>A physical presence in Australia means that key Netflix decision-makers will be more accessible to local producers, policy stakeholders, and government agencies.</p>
<p>It’s too early to track direct correlation effects, but we should note that Netflix’s non-US offices are based in territories where they have commissioned much of their non-US original product, so that is a positive sign for future growth in investment in Australia.</p>
<p>However, it is important to stress that the company’s decision does not come with a promise to establish a <a href="https://media.netflix.com/en/press-releases/netflix-creates-production-hub-in-toronto-leasing-studio-space-at-pinewood-and-cinespace-studios-extending-canadian-efforts">global production hub</a>. Instead, the Sydney office is likely to focus on policy liaison and managing the company’s advertising and PR budgets for Australia and New Zealand.</p>
<p>It will be interesting to see what other kinds of local activities may result. Stan, also based in Sydney, regularly uses its headquarters for premieres, viewing parties and marketing events.</p>
<p><strong>The big picture</strong></p>
<p>Foreign production and distribution interests have long been <a href="https://journals.sagepub.com/doi/abs/10.1177/1329878X1314900103">a significant presence</a> in the Australian television market. And history suggests that establishing local offices tends to<a href="https://www.bloomsbury.com/au/transnational-television-in-europe-9781845119539/"> increase media giants’ responsiveness</a> to foreign audiences and governments.</p>
<p>Time will tell, of course, but Netflix’s move might be the latest stage in the gradual localisation of a global media giant.</p>
<p><em>Written by Ramon Lobato and Stuart Cunningham. Republished with permission of </em><a href="https://theconversation.com/netflix-is-opening-its-first-australian-hq-what-does-this-mean-for-the-local-screen-industry-118903"><em>The Conversation</em></a><em>. </em></p>
