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Europe Seeks Greater Control Over Digital Services

If European regulators get their way, Netflix may soon have to do more than just offer "Unbreakable Kimmy Schmidt" with French subtitles.

European officials proposed on Wednesday a new set of rules that could force Netflix and other video streaming services to carry a minimum amount of local content in individual countries, as well as to help pay for its development. The plan is intended to help level the playing field with national broadcasters, which are already required to fund television shows and other programming in their home countries.

It is part of a broader effort to regulate how the 500 million people in the region can buy, get access to and consume online services like video streaming and messaging applications.

The changes form the building blocks for Europe's broad plan for a single digital market, a strategy that officials say they hope will help bolster the region's sluggish economy. American technology giants are likely to be the most affected at first, since players like Apple, Facebook and Netflix still dominate much of the online world for Europeans.

For Netflix and other streaming services, the proposals, which could go into effect next year at the earliest, might complicate their international expansion plans. Netflix, in particular, has outlined ambitious growth proposals for Europe and beyond, as the American market becomes saturated. The company said last year that it wanted to operate in 200 countries by the end of 2016, though it has faced challenges in signing up users in some markets.

Netflix's objections to the latest European plan are as much about profit as principle. The company already produces content in Europe, such as "Marseille," a show about French politics that is similar to "House of Cards," and the series "Suburra," about organized crime in Italy. The company sees such shows, filmed in the local language, as a fundamental way to attract international viewers.

But Netflix and others do not want Europe to set specific quotas for the amount of content, arguing that doing so would harm consumer choice as many Europeans want to watch American, not local, programming.

"We appreciate the commission's objective to have European production flourish, however, the proposed measures won't actually achieve that," Joris Evers, a Netflix spokesman in Amsterdam, said in a statement.

Netflix and other American technology companies have found themselves at the center of the changing regulatory environment in Europe.

The company, among others, had previously benefited from a European move to change copyright rules to allow customers to temporarily view movies and television shows that they have bought on a digital service, no matter where they are in the 28-nation European Union. Previously, content makers, including Hollywood studios, had staggered movie openings across the region, and film and television licensing rights were typically sold separately in each country.

Europe's latest rule changes are more challenging for Netflix.

European officials on Wednesday said they would give individual countries the power, if they so chose, to force video streaming services to help pay for the production of local content, like movies and television programs.

"The way we watch TV or videos may have changed, but our values don't," Günther H. Oettinger, the European commissioner in charge of the digital economy, said in a statement on Wednesday. "With these new rules, we will uphold media pluralism."

Such rules already exist for traditional broadcasters, like the BBC in Britain and the TF1 Group in France. On average, they pay the equivalent of millions of dollars each year, or roughly 20 percent of their annual revenue in the countries where they operate, to support local content.

European policy makers said that online streaming rivals currently invested only around 1 percent of their annual revenue in local content. Netflix has been able to sidestep existing funding rules, most notably in France, because the company's European headquarters are in the Netherlands.

Streaming services will also be required to ensure that at least 20 percent of their online content is from Europe, and that those movies and television programs are given prominence in their digital catalogs. A report funded by the European Commission recently found that both Netflix and Apple already met this requirement.

The commission's digital plans are subject to the approval of the European Parliament and individual member states, a lengthy process that could lead to significant changes.

Europe's proposals on digital services are only the beginning.

The European Commission said on Wednesday that it would also propose new copyright rules in the fall that could force companies like Google to pay online publishers when using their content, including in its news aggregation service Google News.

Officials also said that they were still reviewing potential new rules to control how so-called online platforms like Facebook and Amazon operate in the 28-member bloc.

European officials said they were looking into making it easier for people to move their digital information between online platforms by the end of the year, giving them greater control over data that companies collected on their daily digital lives.

"I want online platforms and the audiovisual and creative sectors to be powerhouses in the digital economy," said Andrus Ansip, the European Commission vice president in charge of the region's digital single market proposals. "They need the certainty of a modern and fair legal environment: That is what we are providing today."

[Source: By Mark Scott, The New York Times, 25May16]

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