South Africa looking at new ‘local content tax’ for Netflix, Disney+ and other platforms

The Department of Communications and Digital Technologies is proposing a host of new measures to boost local audiovisual content production – including a turnover tax for digital platforms.

The proposal is in the department’s draft white paper on Audio and Audiovisual Media Services and Online Content Safety, published for public comment on Monday (31 July).

The white paper contains many high-level policy proposals, ranging from a complete overhaul of South Africa’s licencing regime to more focused points like sports broadcast rights.

One of the key focus points raised in the document is how to get Audio and Audiovisual Content Service (AAVCS) platforms to pay their dues in South Africa.

The proposed policy changes make way for international and digital platforms to be licenced in South Africa, effectively levelling the playing field among various services – from satellite, pay-TV, online and digital terrestrial (after the analogue switch off later this year).

Included in these licence conditions will be a requirement to carry and boost the production of local content.

Until now, licence holders have had to meet certain quotas for carrying local content, typically expressed as a percentage of total broadcasting time.

According to the department, “the high audience and revenue performance of South African drama and music content is evidence that the South Africa content quotas have been successful in stimulating demand for South African content”.

However, while the department wants South African content quotas to remain in place for broadcasting services, the current approach does not work in an AAVCS environment. For instance, services like Netflix and Disney Plus are on-demand services that do not broadcast.

Further, requiring that a certain percentage of local content be included won’t necessarily work with these services.

As such, feedback from various streaming services in compiling the white paper – such as Netflix and Warner Media – have recommended that these groups (and other licence holders) instead contribute a portion of earnings to a fund instead.

In line with this, the white paper notes that the Cultural and Creative Industries Master Plan – approved in September 2022 – recommends imposing a 2% turnover tax on digital platforms to this end.

“The taxes need to be paid directly into a fund dedicated to funding more original South African projects,” it said.

This would apply to traditional broadcasters, on-demand content services, and video-sharing platforms.

“The extent to which large, global content providers who target South African audiences can be regulated effectively is debatable, but updating the legislation is clearly required, and could unlock additional revenue streams, and platforms for local content,” the department said.

The white paper states that the department will explore “various strategies” for AAVCS providers to contribute to South Africa’s production industry.

This includes a range of “financing instruments”, such as the levy on online streaming, video-on-demand and AV distribution platforms, as well as possibly tapping into broadcasters and mobile providers, cinema ticket sales, local content exhibition bonuses and reinvestment taxes.

Netflix, in particular, urged the department to look beyond just financing and levies and focus on the entire value chain of production.

The platform submitted that rather than imposing local content quotas, the white paper should be revised to focus on incentivising content providers to make broad-based investment commitments, which would encourage investment at all levels of the content production value chain.

Read: New licences coming for Netflix, Disney Plus and other streaming services in South Africa