20 May 2020

Horror show: why Mexico’s ‘national’ content quota for streaming services should scare everyone

Copying legislation or directives from other countries is not the best way to legislate. Such is the case of a bill, “Bill Initiative reforming and adding various provisions of the Value-Added Tax Law and the Federal Law On Telecommunications, in the scope of Digital Audio-visual Content Services”, presented by Ricardo Monreal, a politician in Mexico’s National Regeneration Movement.

The bill proposes an amendment to the Federal Law of Telecommunications (LFT) in order to impose a valued-added tax to foreign over-the-top service providers (OTTs)—broadcasters offering TV and movie content streamed over the internet—and that OTTs, whether national or foreign, must have at least 30% of national content (national production generated with a majority of Mexican funds and by a Mexican production company) in their catalogues.

This is problematic for several reasons and displays a lack of knowledge in the current development of the audiovisual industry versus the audiovisual industry of the EU.

Problems with national content

The LFT, under section 3, subsection XLVII, defines a national production as “content or video generated by an individual or corporation with a majority of funding of Mexican origin”.

Under the aforementioned definition, all productions made with money coming from foreign OTTs are excluded from national productions.

As such, TV series such as “Club de Cuervos”, “La Casa de las Flores”, and “Monarca”, or films such as “Roma” would not be counted as such, even if said productions were mostly made by Mexican writers, directors, photographers and actors. Said works are made with Mexican intellects and they reflect the so-called national identity, but for the LFT they are “foreign” works because they were financed mostly by a foreign company.

Is the bill really trying to promote national identity or is it following other interests?

To impose on streaming platforms a content quota of 30% of national production follows this global trend that appreciates, promotes and protects local content, but it is ill-conceived. This obligation is not shared by open and paid TV channels which, unlike video platforms, exploit a nation’s resource such as the radio spectrum.

Also, it’s implementing a measure that not even the Federal Law of Cinematography has: under section 19 of said law only 10% of the cinematographic works on exhibition must be national, and regular television and broadcasts that utilise the radio spectrum have a national production quota of 20%, but this only impacts on publicity, meaning that if they comply with the content quota they may increase the percentage of advertising time.

In order to promote national productions, the LFT incentivises this publicity percentage and service providers must display said production quota on their programmes.

Effects of the bill

With the way the bill is proposed, it is highly probable that OTTs such as Prime Video (Amazon) or Netflix will be discouraged from making investments or fund productions for their platform services, as they have been doing for the past few years.

There would be a high risk that investment moves to other countries, causing a direct impact on the industry in Mexico, as well as having negative repercussions in thousands of producers and the so-called ‘above-the-line’ crew and also in the technical staff and all those the ‘below the line’.

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