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Netflix, Amazon in Focus as EU Sets 30% Local Content Quota

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Streaming service providers & video sharing platforms like Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) Prime, Alphabet’s (GOOGL - Free Report) Youtube, Facebook (FB - Free Report) and HBO will now have to ensure that at least 30% of their catalogues consist of Europe-made content.

The European Parliament recently approved new rules for audiovisual media for the European Union (EU) region. The move aims at supporting “the cultural diversity of the European audiovisual sector.”

Apart from the 30% quota, the new rules also ask video-on-demand services to finance Europe-made movies and television productions. This can be done through direct investment or by paying into national funds.

The Rules Doesn’t Bother Netflix & Amazon

The new rules are not expected to have much negative impact on Netflix and Amazon Prime, as these streaming service providers are already investing significantly in promoting regional content.

Netflix, in particular, is well-ahead of its competitors, in this regard. The company’s current content portfolio is almost close to the prescribed EU quota. Further, per Reuters, Netflix plans to invest $1 billion on original Europe-based productions this year, more than double that of last year.

Netflix’s unwavering focus on augmenting local content not only provides it with the impetus to meet the 30% target but also strengthens its competitive position against the likes of HBO and Amazon Prime.
 

 

In Europe, the company produced and streamed original content from Germany, Spain, Italy and Belgium over the last couple of years. In the last reported quarter, Netflix also launched the Danish thriller, The Rain.

This July, the company established a production hub in Madrid, Spain. Moreover 13,000 cast, crew and extras are working on 20 Netflix original productions across the country. Netflix is also investing significantly in licensed and co-produced titles created by Spanish broadcasters and producers.

Building on its success in France, where it now has roughly 3.5 million subscribers, Netflix is doubling its investment to introduce 14 local shows. A Paris office is also in the cards. Further, the inclusion of Netflix into Sky’s pay-TV packages presents significant growth prospect for the company.

Amazon is also investing heavily in regional content in Europe. Under the leadership of Georgia Brown, the company has launched a number of shows like German drama You Are Wanted, Franco-German comedy Deutsch Les Landes and Spanish football documentary Six Dreams.
 

 

Reportedly, Amazon is spending a significant amount of its $4.5 billion original content budget in Europe and has drama productions up and running in France, Germany and the UK. Per Bloomberg, the company will soon have “at least a dozen original series from Europe, up from one in 2014.”

Notably, streaming markets in Germany, Spain, France, Italy, Poland, Turkey and the Netherlands have ample room for growth compared with the maturing U.S. and U.K. markets.

We believe increasing investments in local content will continue to attract new users in these regions. This trend bodes well for both Amazon and Netflix, which currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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