(This May 19 story removes incorrect reference to Netflix (NASDAQ:NFLX) being subject to French 60 percent quota in paragraph 13)
By Julia Fioretti
BRUSSELS (Reuters) - Online video streaming services such as Netflix and Amazon (NASDAQ:AMZN) Prime will be required to devote at least a fifth of their catalogs to European content under proposals set to be announced next week.
The European Commission is planning an overhaul of the European Union's broadcasting rules to bring in EU-wide minimum quotas in a bid to boost the circulation and funding of European films and television shows.
On-demand services will have to ensure they have at least a 20 percent share of European works in their catalog and ensure their "prominence", according to a draft of the proposed Audiovisual Media Services Directive seen by Reuters.
European films already account for 27 percent of films shown on streaming services, according to a study undertaken for the Commission, and account for 21 percent of films on Netflix.
EU member states will also have the option of requiring streaming services not based in that country but targeting their audience to contribute financially to the production of European works, such as by directly investing in them or by paying into national funds.
Under the current rules member states can only make on-demand services based in their jurisdiction pay into European content.
The Commission wants to avoid forum-shopping whereby companies set up in countries with light financial obligations, such as Luxembourg and the Netherlands.
According to the Commission, TV broadcasters invest around 20 percent of their revenue in European content, whereas the share drops to 1 percent for on-demand providers.
"It is clear that the current film financing system is being challenged by quick changes in production, distribution and consumption, triggered by digital technologies," Guenther Oettinger, the EU's digital Commissioner, said in Cannes on the sidelines of Europe's leading film festival.
Some critics say EU leaders should let the market ensure good quality content. Daniel Dalton, a member of the European Parliament for Britain's ruling Conservative part, condemned "digital protectionism" that would not foster good film-making:
"The European Commission has yet again failed to understand how the digital world works. Subscription services like Netflix and Amazon should consider only one thing when placing content on their platforms: what their viewers want to watch."
Current broadcasting rules require on-demand services to promote the production of and access to European works, without specifying quotas. However, in response to this, over half of the EU's 28 members have introduced national quotas. Traditional broadcasters have to reserve over half of their transmission time to European works.
In France, for example, on-demand services established in the country are already forced to reserve 60 percent of their catalog for European content.
The new proposal will also make video-sharing platforms such as YouTube impose stricter age barriers for minors to protect them from harmful content.
The Commission is set to announce the proposal on May 25 together with a law banning so-called geoblocking, the practice whereby websites treat customers differently depending on their country of residence, either by re-routing them to their home version or banning their access altogether.