Netflix on why it isn't paying the South African Film and Publication Board licensing fee: 'We don't have to pay those fees'.

Netflix, on why it isn't paying the licensing fees for its content made available in South Africa to consumers as required by the South African Film and Publication Board (FPB), has a quite blunt response: "We don't have to".

Netflix says the global video streaming giant doesn't believe that it has to pay South Africa's FPB anything.

Netflix that has so far refused to register with the FPB since it launched in South Africa and across Africa in January 2016, "owes" the FPB more than R1.59 million in unpaid licensing fees.

The FPB screens and provides an age restriction and parental guidance system to content as part of its content classification system.

MultiChoice for its DStv satellite pay-TV service including DStv BoxOffice, and Apple iTunes are paying their FPB licensing fees.

So are the subscription video-on-demand (SVOD) services like Naspers' Showmax and PCCW Global's ONTAPtv.com.

The South African Film and Publication Board recently released a draft review of its licensing fee tariff scale for online distributors in South Africa, suggesting adjustments that will end up costing Netflix even more to have its content be available in South Africa.

The South African government is furthermore hell-bent on "regulating" global online video services like Netflix and YouTube.

The department of communications will shortly release a draft Audio-Visual and Digital Content Policy for SA in parliament for public comment.

Other African nations likewise want Netflix as a global video golden goose to pay up in terms of license fees or be gone.

The Kenya Film Classification Board (KFCB) for instance has threatened to ban Netflix over its refusal to be "properly licensed" in Kenya and called Netflix "a threat to moral values and national security" in the East African nation.

On Wednesday Netflix spoke to South Africa media and answered questions from the press at its first Netflix House SA media event in Cape Town and TVwithThinus asked Netflix why it isn't paying the FPB licensing fee as required.

"We're an over-the-top (OTT) service, we're not a broadcaster; we're not licensed spectrum, or granted specific wavelengths to broadcast on," said Yann Lafargue, manager for technology and corporate communications at Netflix for the Europe, Middle East and Africa (EMEA) region.

"We're also not linear television where we have obligations to have certain content, with regulations and content quotas. We're omnipresent, so basically it's a different ball-game - and we don't have to pay those fees."

Yann Lafargue said "some of them argue that we should, and we are in contact with them. We do believe that we do not have to do that. And that's the same case in many countries in the world where they have content regulation and there's questions about ratings, or censorship."

"There's always a wish from a regulator to try to get power from things like video streaming services, and we're trying to move away from that because we do think that the content matters and we try not to censor content in general."

"If we have to pay a fee and its legally binding, we always respect the laws of a country where we operate. Right now, we don't have to."

"To be fair, the amount we should pay isn't necessarily big, but it's the question of why pay something if you don't have to?"

"We will rather invest the money in a local Netflix original show or content, like a Trevor Noah stand-up show rather than just put money where we don't have to."

'We don't want a cumbersome system'
When TVwithThinus asked if Netflix doesn't believe that something like the South African Film and Publications Board should set local parental and age restrictions for films and content that's suitable for South Africa's unique socio-demographic and cultural circumstances, Yann Lafargue said Netflix self-regulates.

"In some cases where there's something different we will have a discussion with the ratings board, and in some countries they are stricter than others. Like in Singapore for instance, or South Korea, they are very stringent."

"You can have a 12 [parental guidance] for something and then it's going to be 18 for that somewhere else. We're trying to make sure that we're empowering customers based on the country."

"There's no point in us forcing something down your throat if we think we're not ready. So we're open to discussion," said Yann Lafargue.

"What we don't want is to have - imagine, we have thousands of titles on Netflix - is to have a cumbersome system where you have to give them the content, and they need to watch it and decide whatever, and to then be consistent. It's complicated."

"It's a bit messy so we're trying to do things by ourselves. But what we're doing in some markets is we're trying to show them, and ask 'For those shows, what would be the ratings?' And we try to self-right ourselves to close the discrepancy."

"So we're trying to understand, and to be a good company and good corporate citizen in general."

"If someone thinks that if there's violence or nudity, automatically it needs to be [age restricted] above 16 we'll do it, we have no issue with that," said Yann Lafargue.

"We want the freedom to regulate ourselves. When there's layers of complexities it's never good; it's just slowing the technology; everything."

"Imagine if you have that [process of screening] and then you need to wait 6 months because they don't have the capacity or the bandwidth to watch all the content of 650 shows - not even talking about the licensed shows we have there, then you become again a second-ranked citizen because of your own regulator. And then there's again the issue of piracy."   

Netflix reveals the top 5 most watched shows on Netflix in South Africa; says it's open to do and take local South African stories to a global audience in the near future.

Netflix has revealed the most watched shows in South Africa and the type of programming that South African Netflix subscribers simply can't get enough of.

Netflix spoke to South Africa media and answered questions from the press at its first Netflix House SA media event in a lux high street Fresnaye mansion in Cape Town this week to showcase and preview it's existing and upcoming content and to hear from the press what they need.

Netflix's roundtable session with the press in South Africa sent a strong and clear signal to the media and the country's TV industry that Netflix  - with its big billboard at the OR Tambo airport in Johannesburg - has arrived in full force and means business in its push into Africa, starting from the continent's southern most nation.

Netflix for the first time revealed the shows that are most watched on Netflix in South Africa, with South African subscribers who are actually very informed and clued up as to what is available on Netflix and watching it.

Yenia Zaba, the Netflix manager for media relations for Europe and Africa, said South Africans love action programming that feature strongly in Netflix South Africa's top 5 list.

"It's a lot of action stuff - Mindhunter - it was just released. Narcos is very big here in South Africa; Star Trek: Discovery is very big here and the Marvel shows [Iron Fist, The Defenders] are indeed very big here, as well as Designated Survivor and Shooter".

"Today, compared to a year and a half ago when we launched in South Africa, the Netflix catalogue of titles has tripled in size and we're literally adding shows on a daily basis".

Since Netflix launched, Netflix has been able to gather more and more viewing data and we've been observing certain behavioural data.

"We know that you're in South Africa for instance and we know what you watch. We don't know if you're male or female, your age - none of that."

"But we have observed certain things. The first thing that happens when we launched Netflix in a certain country was binge watching. It's a very basic one, but it couldn't happen before."

"Binge racing on the other hand is when you finish an entire season within the first 24 hours of launching that season."

"And obviously early adopters are the first ones to do that and we think that South Africa is eventually going to be way up there when it comes to binge racing. South Africans are absolutely crazy about Stranger Things."


Netflix open to SA productions in future
Netflix said it will very likely do content production deals in the future with South African producers.

"We have a pretty strong content team that is travelling to every country to talk to local producers. I do know that we're talking to South African producers."

"We want stories. It doesn't matter where they come from, we just want really good stories. Sometimes the stories are co-productions, sometimes they're in several languages."

"We're very lucky that we have 190 countries to put your local story all the way out there. If we produce something, it's never going to be meant just for that one country because it's not worth it for us. We want to tell global stories," says Yenia Zaba.

"Good stories can come from wherever," says Yann Lafargue, manager for technology and corporate communications at Netflix for the Europe, Middle East and Africa (EMEA) region.

"We're not designing a show for just a local audience. The Crown for instance - the BBC couldn't have done it. Just because the economics doesn't make sense. There's not enough Brits to watch that show."

"But when you have 1 in 9 million people which is about 3 million people - 3 million eyeballs are enough people. So you can make a certain show that will be compelling because there's 10 000 people in South Africa that like Dynasty, and another 15 000 in South Korea."

"So you get those clusters of audiences everywhere in the world, and together we get the scale to tell those stories."

"So we can do different television - in terms of format, in terms of story telling, in terms of everything. And we can give a global audience to local stories."

"People like to work with Netflix because we're not cheap and we also working with the best technology".

Since it launched in January 2016, Netflix is facing an ever-growing market segment of subscription pay-TV offerings, all vying for the rands in the wallets of South African consumers that go to discretionary spending on entertainment.

Besides traditional satellite pay-TV services like MultiChoice's DStv and China's StarSat, subscription video-on-demand (SVOD) services like Naspers' Showmax, Amazon Prime Video, DEOD, ONTAPtv.com and Kwesé Play have mushroomed and are all trying to entice South African consumers with their video content offerings.

Netflix: We're not in competition with MultiChoice's DStv says the global video streaming giant as it signals a bigger push into the South African market.

Netflix says it's not in competition with MultiChoice's DStv in South Africa and Africa and that any service offering compelling content to viewers as TV moves into the future, will continue thrive.

Netflix spoke to South Africa media and answered questions from the press at its first Netflix House SA media event in a lux high street Fresnaye mansion in Cape Town this week to showcase and preview it's existing and upcoming content and to hear from the press what they need - something it said it will be doing regularly from now on.

Netflix that has rapidly gained subscribers in South Africa, is making steady inroads as a brand since it launched in South Africa and across Africa in January 2016, where, besides traditional satellite pay-TV services DStv and China's StarSat, services like Naspers' Showmax, Amazon Prime Video, DEOD, ONTAPtv.com and Kwesé Play have made their appearance in a market segment of subscription video-on-demand (SVOD) services that has quickly become crowded.

When the global video streaming service was specifically asked if it's acquiring and licensing TV rights to keep it away from MultiChoice's satellite pay-TV service DStv, Netflix said that it's not acquiring show titles to stop DStv from having access to it.

"In terms of competition, we think there's room for everyone.  For us, competition is anything that's entertainment. So there's room for everyone. We're not saying that DStv shouldn't be around," Netflix told the media.

"In the United Kingdom there's always talk about the BBC and will the BBC end up dying because of Netflix? No. Because they offer something different. DStv has sports. There's always different things in every market and what Netflix is trying to do is to give people more."

Yann Lafargue, manager for technology and corporate communications at Netflix for the Europe, Middle East and Africa (EMEA) region, said that "On demand viewing is just the future of entertainment".

"Competition is healthy. Nobody has the monopoly on great stories. The companies like HBO, Amazon - those who create compelling stories that people like to watch and enjoy - they're going to survive; they're going to thrive."

"The thing that is the key is the exclusivity. If we all have the same content and you can watch the same type of content everywhere - why would you subscribe to some services specifically?" said Yann Lafargue.

"It's because it's a kind of signature show. So HBO has Game of Thrones for instance. So you want to sign up for Netflix because you want to watch Stranger Things or Narcos. And we're going to have more and more of those big hits to keep you entertained and captivated and to give you a reason to subscribe to Netflix."

He said "we know we have much more titles than the competition, but it's not about volume. For us it's not like DVDs on a shelf".

"We're trying to show around 300 shows from your algorithm on your interface. And when you start looking at something, then you will start seeing more suggestions because you like Robert DeNiro shows or something like that."

"Star Trek: Discovery, Designated Survivor - those shows are available here in South Africa on Netflix but not in the United States. So there is this misconception sometimes that it's always better elsewhere, the grass is greener somewhere else, and it's not the case necessarily."

Since last month subscribers of Kwesé Play can currently subscribe through that service to Netflix and be billed in rand by having the Netflix subscription added onto the Kwesé Play account but Yann Lafargue says all South Africans will eventually be able to pay in rand and not dollar.

"It's going to come. It's just a question of making sure that all the modes of payment - credit card, debit card and Paypal - everything could be shifted to rand. As Netflix grows and localises and create partnerships we do see that currency integration".

"What we see in some markets is that when you're new, people don't necessarily trust you. When you're a new brand, people wonder can I enter my credit card details on your website - is it safe?"

"So what's happening is that if you already have your internet service provider or you mobile phone contract, you go 'Okay I don't pay Netflix directly but my monthly bill just adds a line and I pay my local service provider', then it's easier and it removes friction."

"So that's the type of deals and partnerships we're trying to do."

"But pretty soon - perhaps coming in a month or so - we will have a shift to that."


Netflix on piracy and password sharing
Regarding piracy of content Yenia Zaba, the Netflix manager for media relations for Europe and Africa, says "we're not going to physically fight against piracy, we know it's out there, but piracy exists mainly because of two reasons."

"Piracy is there because content isn't accessible in another way, and B, it's not affordable."

"We don't have numbers for South Africa, but in many countries where piracy was really big - the Nordics, Australia - piracy dropped by 30% thanks to Netflix," says Yann Lafargue. "When you make it easy and the quality [of how people can watch it] is better, people move away from piracy."

"And also the frustration when you feel like a second-rung citizen - that was the case in South Africa, that was the case in France, or Germany, where you had to wait 2 years to get a TV show to become available to you, and you really want to watch it because on social media you hear about this great show - you're going to find a way to watch it."

"Netflix gives you a show, it's in South Africa, it's in France, it's in Finland, it's in South Korea, it's in the United States at the same time. So there's no incentive to do it [piracy]. And we also have 30 days for free."

In terms of password sharing between people, Yann Lafargue says "as long as it remains within the family circle I think it's fine. If you have a $7.99 plan, there's only one person who can watch at the same time."

"So if you give it to 10 of your friends, it's good, but if one of them is watching, you will be locked out of your own account. You won't be able to watch for what you're paying, so why would you do that?"

"It's fine if you want to show a piece of content to someone, but at the end of the day it's self-regulating."

"It's good also in new markets, so it's fine I guess in South Africa if you're at a coffee shop and you're telling your friend about these great documentaries that you've seen, or these amazing movies and go 'Oh, it's on Netflix, have a look, watch it'. And maybe they think I should get it as well. So it's kind of good because it's free advertising."

"We don't really have a strong stance against it, it's self-regulating by itself at the same time. And as long as it remains within a family, it's more or less okay."

"Also its more often teenagers. But when they first start working and get their first income, they often go 'I want my own account' and can afford it."