As a Canadian, I still remembered the fanfare that Netflix got when it entered Canada. But to this date, the available selection still isn’t the same as the American offering, for obvious licensing reasons. I even recall colleagues at a multi-national company making the discovery that their American IP address (from our office in Canada) allowed them to view Netflix films available exclusively to American internet users.
Well four years have passed since Netflix entered Canada, and France was victimized by Netflix’s expansion this past September. And as France wasn’t prepared for the introduction of a foreign-based television streaming service, it wasn’t surprising to see President Francois Hollande raise a red flag shortly after. Hollande, disturbed how Netflix can avoid paying French taxes, said the following in a recommendation to the EU, “Digital companies based outside of Europe must be subject to the same tax treatment as traditional operators because they are broadcasting on the same premises.”
Netflix France, being based in Luxembourg for the moment, has found that very tax loophole that it may need to succeed in France, or at least on the balance sheet. Domestic French broadcasters are required to invest a significant sum of revenue back into local programming, as well as subtitle any foreign language content (with 40% of content needing to be produced in French). But in Luxembourg, there is no requirement to comply with these French laws. However, before France can worry about their local programming content, they’ll need to worry about the fact that a $16 billion audio-visual industry is on the line if Netflix, and other foreign streaming services can make an impact on the French economy.
The issue facing Netflix is that local telecom providers are reluctant to buy in. Netflix was unable to secure a partnership deal with two of France’s largest telecom providers, and had to settle for a deal with Bouygues Telecom, one of the smaller players in France. Add insult to injury to the fact that French-based Canal+ has the first-mover advantage in the streaming category and has been able to both invest into French produced content while striking a deal with HBO at the same time. Mind you, they now have French exclusivity rights to House of Cards.
Culturally, France isn’t the first country on the map who will be willing to embrace American culture and language with open arms. Just look at the numbers, Netflix subscriptions in France haven’t been so high. A month after Netflix’s introduction, they only had 100,000 accounts registered in France. This number does not include cancellations, considering that Netflix offers the first month for no charge and users are free to cancel after. Netflix is hoping for 600,000 active users by the end of December, a number that may not be delivered in time for Christmas.
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