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Netflix: “Entertainment Tax Hurts Creative Communities”

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In a keynote address at Mobile World Congress in Barcelona, ​​Netflix co-CEO Greg Peters spoke about the streaming company’s massive investment in creative content and how an “entertainment tax” on the company and its competitors could Harm creative industries, as well as broadband providers and consumers.

The content of the speech is as follows:

“Netflix is ​​a company that forges partnerships with creators, Internet service providers, device manufacturers, and more. Many are represented in this room. Without these partnerships, we would not be able to provide entertainment to our members, We also don’t exist as a business. So it’s in that spirit of collaboration that I’m here today.

Simply put; I believe there is a clear and direct symbiosis between a thriving creative industry and a thriving internet ecosystem. Why? Because consumers want great movies, TV shows, and games—they’re willing to pay for high-quality Internet to enjoy the content they love.

I know some of you here today are concerned that this consumer demand will lead to unsustainable traffic growth. These concerns are not new; I recall having similar conversations with our partners and regulators in Europe a decade ago. However, the past decade has shown, and telco leaders have recently reiterated, that growing Internet usage is a huge opportunity – reflecting growing demand for the services we all provide.

Of course, increasing usage requires investment. For our part, Netflix has invested over $60 billion in content alone over the past five years. This equates to approximately 50% of our total revenue. This is our role in creating a virtuous flywheel: better, more diverse content, leading to more people willing to pay for better broadband service.

But we’re in the entertainment business, so rather than tell you, let’s have some fun and see the variety and quality of shows and movies that our investments make possible.

Like consumers, creators of the content you just saw can choose to work with us or with one of our many competitors. It wasn’t just competitive terms and flexible deals that we attracted them to Netflix, important though those are. More importantly, we support their artistic vision and provide them with the tools and methods to bring this vision to life at the highest possible quality.

That’s why we’ve invested in ten state-of-the-art soundstages and other production infrastructure at our European Production Center in Madrid. That’s why we invest in technological innovations such as the world’s first cloud-based remote editing system. Connected physical editing studios are strategically located alongside these soundstages.

This allows creators like Alex Pina to money robbery, leave the set Berlin – the latest show in the franchise – directly into the editing suite, where he can process footage in high resolution, with low latency, collaborating in real time with editors from all over the world, thanks to our special purpose for this.

That’s why we also recently acquired Scanline, an award-winning studio that has been innovating in visual effects for years.Now they’re hard at work developing new cutting-edge technologies to incorporate into our shows and films – like a new innovation called “Volume Capture” used in our hit films gray man. This enables creators to digitally capture actors’ performances in high resolution in 3D, giving filmmakers enormous creative freedom and flexibility to tell their stories like never before.

As we deepen our relationships with local creative communities, we are also investing more in the next generation of talent, including through our $100 million Creative Equity Fund. As part of this, we are working with over 80 organizations on 100 projects in 35 countries, including Cinémathèque in France, BAFTA in the UK and Academia del Cinema in Italy. This does not include the EUR 1.5 billion we will contribute to European cultural taxation and investment obligations over the next three years.

Of course, our partnerships and investments also extend beyond our content and talent development to the underlying network that connects our members with the stories they love. We are the business partner of more than 160 Telcos and ISPs around the world – many of which bundle Netflix directly into their consumer products. Consumers love these joint products, which just shows that we can create value through collaboration.

We’ve spent over $1 billion on Open Connect, our own content distribution network, which is provided free to ISPs. This includes 18,000 servers, with Netflix content distributed in 6,000 locations in 175 countries. So when our members press play, instead of streaming a movie or TV show from the other side of the world, it’s streaming from around the corner – improving efficiency for operators while ensuring high-quality, Lag-free experience.

Most importantly, we developed encoding techniques to reduce file size and optimize bandwidth usage while maintaining high video quality for consumers. From 2015 to 2020, we have been able to halve the bitrate. In addition, the telecommunications industry has been able to realize significant efficiency gains in its own networks.

Some partners are concerned about rising traffic costs. We heard these concerns a decade ago too, but let’s see what actually happened.

Consistent with forecasts, traffic has been growing at an annual rate of around 30%. As it turns out, the Internet is popular. ISPs have effectively managed this increased consumer usage while their costs have remained stable. The regulator has also highlighted this point, saying infrastructure costs are not sensitive to traffic and that rising consumption will be offset by efficiency gains.

One of the reasons the Internet is so popular is that consumers have the freedom to choose what they want to watch, when they want to watch it. We’re harnessing the power of the internet to break down barriers between storytellers and fans around the world.

Fewer hurdles means more global hits like squid game. With 1.6 billion hours watched in its first month, the South Korean drama unexpectedly became Netflix’s biggest TV show ever. And it’s not just a title.Today, more than 60% of members watch K-content on Netflix—such as we are all dead, Extraordinary Lawyer Wu and Physics: 100.

Not just Korea. We’ve seen global hits also come from Europe. lupine from France, paper house and the elite from Spain, crown from England, troll from Norway and All Quiet on the Western Front from Germany.

As more and more broadcasters move from linear to streaming, we need a system that encourages more investment in such popular shows, whether they are on Netflix, France Television, Globo, Telecinco, BBC, Disney+ or Viaplay .

Some of our ISP partners have proposed taxing entertainment companies to subsidize their network infrastructure.as commissioner breton said [on February 27th]This should not be a binary choice between “Big Telecom” and entertainment companies.

Because such a tax would have the adverse effect of reducing investment in content – hurting creative communities, hurting the appeal of high-priced broadband packages, and ultimately hurting consumers. The ISP claims that these taxes only apply to Netflix. But that will inevitably change over time as broadcasters move from linear to streaming.

[…] In the US and UK, Netflix accounts for less than 10% of total TV time. In Brazil, Mexico and Poland, the figure is less than 4%. In contrast, traditional local broadcasters account for more than half of all TV time. For example, sports programs take up a significant amount of television viewing time.

As broadcasters continue to move from linear to streaming, they too will start to generate significant internet traffic — even more than today’s streaming, based on current audience reach and size. The broadband customers driving this increased usage have paid for the growth of the network through subscription fees. Requiring entertainment companies — including streaming and broadcasters — to pay more would mean that ISPs are effectively charging twice for the same infrastructure.

As consumer group BEUC points out, “there is no indication that these taxes will be passed on to consumers in the form of lower prices or better infrastructure”. It is worth noting that our operating margin is significantly lower than that of BT or Deutsche Telekom. So we could easily argue that the network operators should compensate the entertainment companies for our content costs – just like what happened with the old pay TV model.

However, we don’t intend to do that. A better approach, I think, is for entertainment companies and operators to focus on what we each do best — creating a rising tide that lifts all boats.

For Netflix, this means continuing to invest in and improve the quality and variety of stories we offer. About ten years ago, we started our original programming strategy. Building Lifetime Entertainment in just ten years is a huge challenge.

While we’ve had our missteps, we’ve managed to create an extensive roster of many great series and movies to suit every mood and taste.best reality with sell sunset and too hot to handle, hit TV series etc. Wednesday, high water mark from Poland, Chestnut from Denmark, Alice in Borderlands Award-winning films from Japan such as don’t look up and my octopus teacher, and popular movies likeelectronic adam plan, The Glass Onion: The Mystery of Wilderness Action and sea ​​beast.

Over the next decade, we’ll see increased competition for people’s attention and time. The road ahead will be a steep climb. But if we continue to focus on entertaining consumers, I believe the results will be worth it for all of us. “

Peters first introduced a new Netflix documentary about the Tour de France.

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