Netflix’s Exclusive Deal For Denmark’s Borgen Could Upset International Sharing Agreements With Broadcasters

Netflix has become so big that it needs to invest in local markets to maintain growth and market share. It just inked a deal with Danish Radio (DR), Denmark’s public broadcaster to fund the development of a 4th season of the smash hit Borgen (The Castle), revived after 7 years. After the Danish premiere, Netflix gets the exclusive rights to distribute the 4th season for 5 years, as well as rights to seasons 1-3. While this might seem like a boon to content creators, the reality is more complicated. In practice, Netflix can cherry pick the best TV series across countries, many of which are produced by public broadcasters and funded by taxpayers. The deal likely disrupts the traditional arrangements among public broadcasters which engage in content bartering or sharing to minimize costs. Instead of contracts with public broadcasters in some 70 countries as DR earlier negotiated for Borgen seasons 1-3, DR only needs to deal with Netflix. The Borgen deal also raises policy questions of about the viability of public broadcasting in a global market for content and demonstrates the challenges (and opportunities) that digitization creates for broadcasters.

Public Broadcasters: The Old Boys Club

British Broadcasting Corporation (BBC), the world’s largest and oldest broadcaster, is the classic model. A charter sets up the broadcaster with oversight by a Ministry of Communication or Culture. The broadcaster is funded by an annual license fee set by the government. Today the mandatory fee is generally applied to broadband subscriptions, increasing the real cost of broadband, a fact not considered in most international comparison (See p. 10 for discussion). The broadcasters also earn revenue from commercial operations. While much content is simply traded amongst public broadcasters, blockbuster shows help the broadcaster earn additional revenue to fund other programming.

Denmark has had success to make award winning series which are popular globally including Matador, TAXA, The Killing (Forbrydelsen), and The Bridge (Broen).Borgenis a gripping political drama about Birgitte Nyborg, Denmark’s first female Prime Minister, a composite of leading Danish female politicians. The idea with Borgen season 4 is that Nyborg transitions to the Foreign Minister. This allows the show to become more international, hire non-Danish actors, and market the content to key countries.

The Nordic public service media companies (Denmark, Sweden, Norway etc.) have distinguished themselves with a brand of cool Nordic drama and formed a group called the Nordic Twelve (N12) to promote their public service missions and content on respective flow channels and streaming services. The initiative was also conceived as a counterbalance to the growing power of Netflix in the region. Now, however, it appears that Denmark is defecting with Borgen.

Netflix: The New Boys Club

From a DVD by mail company, Netflix has transformed itself to a global behemoth through the global reach and quality of broadband networks. It accounts for a staggering one-third of the world’s streaming content and has some 170 million subscribers, more than any cable provider in the world and 8 times more subscribers than Comcast. This size makes Netflix a price maker in the market, an entity with the ability to influence the price it charges as the good it produces does not have perfect substitutes. A price maker within monopolistic competition produces goods that are differentiated in some way from its competitors’ products, notably its unique content.

Danish Radio: Reluctance to share contract details

DR, originally conceived as a platform for Danish culture and politics, has itself come under some criticism for the deal, noting that it has been less than transparent with the Netflix contract, which normally would be subject to freedom of information. The deal has touched the nerve of some in the Danish film industry which note that DR’s TV dramas drain the market for scriptwriters and other talent which DR can access with public funds. DR, they say, offers better salaries, longer contracts, and other conditions. Independent radio/news/print/web media have raised similar concerns as DR competes on these fronts with the added advantage of taxpayer funds. Some suggest that DR should be more respectful of local ecosystems rather than partnering with a global video platform.

A DR spokesperson Andreas Relster noted to me in an email, ”DR has partnered with Netflix because it allows us to make more of the DR content that Danes love and that speaks directly into a Danish reality. With the cooperation, Danes get more public-service television than they would otherwise. At the same time, it benefits the Danish creative environment, and without the collaboration with Netflix, the series could not have been made.”

In its communications with the Danish Parliament, DR has claimed that both private and public funding is needed to secure content which would otherwise not be provided. These arguments seem to undercut the policy premise of the public broadcaster.

Policy Issues

The global market for content has created both challenges and opportunities for public service broadcasters which are chartered to serve cultural, civic, and industrial purposes. It is not clear that these priorities can be easily balanced in an increasingly converged and competitive world for content and serve a local ecosystem, particularly when the broadcaster itself if vying for the limited resources with local, private players.

Will public service broadcasters in the role of subcontractor for global players adapt their content to ensure international impact? Will partnerships with Netflix strengthen or weaken the traditional model of public broadcasters in the sender-controlled media market? The Netflix-DR partnership for Borgen will be an interesting case to follow.

Originally published in Forbes.