An American in Paris

AMERICAN internet giants such as Google and Amazon are the target of much criticism in Europe these days, accused of avoiding taxes, invading privacy and competing unfairly with local firms. The latest transatlantic tech firm to ruffle feathers is Netflix, a fast-growing company that offers streaming video on demand (SVOD) over the internet and which has already got conventional broadcasters and pay-TV companies worried back home in America.

Netflix has been signing up viewers in Britain, Ireland, the Netherlands and the Nordic countries; and next week it starts invading the continental heartland, beginning with France. Television companies, telecoms firms and other on-demand video providers fear for their customer bases and profits.

Canal+, a French pay-TV firm that launched its own SVOD service three years ago, called CanalPlay, is rustling up new programmes and adding other features to get viewers to stay. Sky Deutschland, a German pay-TV firm, has slashed the monthly charge for its SVOD service, Snap, to €3.99 ($5.16)—it had previously cost up to €9.90. Maxdome, a video on demand (VOD) subsidiary of ProSiebenSat.1, another German media firm, has just bought a job lot of popular American series.

At first sight, Europe seems a tougher market than America for Netflix to crack. Americans generally pay $70-80 a month to a cable company to watch television; so Netflix, at $8-9, must seem a mere bagatelle by comparison. European viewers can often choose from a wealth of high-quality programmes, free or fairly cheap, from public and private broadcasters, many of which provide streaming “catch-up” viewing at no extra cost. Rodolphe Belmer, a Canal+ executive, says it will be hard for Netflix to beat the choice of 8,000 films and TV shows that CanalPlay offers.

Yet in Britain, where competition from the BBC and others is especially stiff, Netflix has signed up more than 10% of households since opening there in 2012, reports BARB, an audience-measurer. Drama serials like “House of Cards” and “Breaking Bad” have proved a strong draw. Although Netflix has sold the French rights to “House of Cards” to Canal+, it will produce a Gallic remake of the political thriller, called “Marseille”. Its service is expected to start at €7.99 a month, the same as CanalPlay’s basic version.

French viewers may not be able to receive Netflix via their cable-TV service, as some British subscribers can, so its French rivals hope this will deter some potential subscribers. However, in Britain, Netflix promotes its service as something to watch mainly on video-game consoles, computers and mobile devices; and many new TV sets can receive streaming video straight off a household’s Wi-Fi router. Michael Nathanson of Moffett Nathanson, a research firm, says Netflix has repeatedly disproved the industry’s conventional wisdom on what works, and he is confident that it can do so again.

In gadget-loving Germany, there should be few technical obstacles to signing up Netflix subscribers, says Thies Haase of Veed Analytics, which studies the video industry. However, the proliferation of local SVOD providers, and their price cuts, mean that Netflix will have to spend heavily on programmes, especially German-made ones, to get noticed. Netflix struggled in Brazil, for example, against competition from local broadcasters’ big-budget soaps.

The need to produce shows that resonate with local culture will be especially important if consumers see Netflix as a potential replacement for their main television provider. But if they regard it as more of a complementary service, it may be easier to win them over with dubbed and subtitled American shows.

Since it will be pumping programmes out of a European headquarters in Amsterdam, Netflix will avoid both the levy that French broadcasters and distributors pay to subsidise local productions, and limitations on the share of foreign-made shows. So it is being decried as a threat to France’s cherished exception culturelle, the principle that cultural goods should be protected from the supposed evils of the free market. Just as France has become the biggest market for McDonald’s after America, the same could be true for Netflix.