• Free Market Foundation

Government meddling in streaming will only hurt consumers

It turns out that the Department of Communications and Digital Technologies (DCD) – and the South African government at large – do not believe in the quality of South African TV series- and movie-producers, nor in the acting chops of local talent.

Instead of trusting in the ever-maturing local market to produce content that can stand toe-to-toe with the best in the world, the DCD, according to its "White Paper on Audio and Audio-visual Content Services Policy Framework", plans to enforce local content quotas (in this case, 30%) on streaming services such as Netflix and Amazon Prime. There appears to be very little remaining in people’s lives that the government does not believe it has a right to interfere with.

Through market research and analysing data, companies like Netflix can see what different countries' audiences respond to more, and adjust their offering accordingly. Surely it should be up to individual consumers how much content from a particular country (or production company) they prefer, and want to see more of? Showmax's many subscribers indicates that there is a demand – and supply – for local content already.

Let us presume that one TV series-producing company in South Africa comes to dominate the market within the next five years. It will fulfil the government-enforced 30% local content requirement. Interventions into markets inevitably lead to artificial distortions: bigger companies have more resources and capital necessary to survive. Smaller players cannot, and are either bought out, or close down. The chance that bigger businesses will survive government interference is much higher than for smaller business.

Politically correct boxes


At a point in the future, will the DCD intervene again, and announce that the 30% quota must be shared equally between ten local companies? Those who have the necessary government-approved composition, and tick the politically correct boxes, will receive the spoils.

Or, consider an alternative – where there is not enough South African content to fill the 30% allotment. The government will feel compelled to fund more production companies, and any government funding comes with requirements. The problem arises that, as a government department gains more arbitrary power in an economic or social sector, the views of those who work there inevitably determine what is 'good' and 'bad.' A minister today may be more reasonable, but a change in government can bring a minister who does not approve of certain content, based on his or her own subjective moral or ideological grounds, and will therefore not fund those companies anymore.

An added problem will be resentment between artists who obtain funding from the state, and those who do not. Artists who do not receive funding – and a part of the 30% – will produce and compete through other means, and will have more freedom. It is inevitable that their content will be better than something with government strings attached. Government-funded artists may come to resent the success enjoyed by others (who can respond better to consumer demands and feedback) and will then in turn push for stricter regulations. The rabbit hole that is government meddling is endless.

The White Paper also broadens the definition of a "broadcasting service" to include online broadcasting services. Therefore, just as you have to pay a licence fee to watch any of the SABC channels (and indeed, if you want to own a TV), you will have to pay a licence fee to consume content from streaming services, even if you are only watching on your laptop or smartphone.

More assistance


The SABC is yet another state-owned enterprise to have approached the government (in reality, the taxpayer) earlier this year for more assistance, in the form of a R1.5 billion bailout. No amount of money will fix the structural problems at the SABC. Indeed, every bailout that it receives serves as a reward for past failures, and is an incentive to dodge the hard decisions necessary to truly turn things around and respond to market forces. The government can implement every conceivable tax on the streaming companies, including licensing, but none of these punishments imposed on successful businesses can save the SABC from itself or the constant interference and mismanagement by the state.

The local content quota and extending the payment of TV licence fees to include streaming services contribute to an environment that is decidedly anti-innovation, and one that will suppress competition between businesses. The only 'competition' will be to see who has the requisite political connections in the DCD.

The proposals contained in the White Paper point to the government's view of policy reform: if there are to be any reforms, those that increase government control will be strongly favoured. And that kind of reform is precisely what South Africa does not need. Reforms of the statist flavour will only increase economic and societal problems. South Africa needs to be set on a path of openness, of competition, of investment and transformative job creation, not the tired path of ever-increasing government meddling that has marked the Zuma and Ramaphosa presidencies.

It wouldn't be a stretch to assume that many people are proudly South African. Unfortunately, it seems that the DCD and government are not. Instead of innovation and an ever-improving standard of quality, they prefer paternalism, protectionism, and the stifling of progress.

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