Netflix: Sacre vache! French resistance from the vestibuleurs de consommation

Analysis Netflix has so far skipped neatly over all the French hurdles that have tripped up many lesser foreign invaders in what has become a minefield of bureaucracy and xenophobia, especially for US multinationals.

To some extent, Netflix has turned its French resistance to its advantage, gaining valuable publicity on the back of it during a well-organised marketing campaign ahead of its mid-September launch there.

It has succeeded in negotiating terms with the leading broadband providers except Free, after all had initially declined to come on board. Bouygues Telecom was first to fall in line, offering the service from early this month. SFR then announced availability on its hybrid Android box combining DTT with Google TV as well as general OTT access. But the key move was an agreement with Orange to offer the video streaming service on its set tops from November, providing access to 10 million broadband subscribers.

These negotiations were described as tough by Orange chief executive Stephane Richard and involved Netflix conceding slightly better terms than to equivalent operators elsewhere.

Typically, Netflix offers around 10 per cent of its revenues to ISPs for distributing its service, but in France the average amount is at least 25 per cent and sometimes as much as a third. While the exact terms of its agreement with Orange were not disclosed, it is a fair bet it was somewhere between these figures. It is notable that Free’s parent Iliad has stated that accepting the terms Netflix had put on the table did not make commercial sense, but then it does not have the clout Orange has.

So with the main broadband players on board and concessions with the French film and content production industry agreed, it looked at last as if Netflix had a clear ride in France. But then consumer organisation CLCV (Consommation, logement et cadre de vie), announced it was suing Netflix on three counts, which came as a surprise in so far that it had earlier welcomed its entry on competition grounds.

It is well known that the French pay TV industry has been controlled by a few powerful players which have levied higher subscription charges than neighbouring countries, particularly for basic packages. This led CLCV to endorse Netflix’s entry as “entirely positive for the consumer”, expressing the hope that its subscription VoD service would stimulate competition and reduce prices in pay TV.

Against this background it looks like the CLCV’s litigation is based on pedantic adherence to the letter of consumer law.

CLCV’s first complaint is over a clause in which Netflix reserves the right to modify the terms of its contract without notifying customers. This, CLCV argues, contravenes the French law that companies must notify customers of any changes and give them the option to opt out without penalty in that event.

CLCV's second complaint is that Netflix doesn't guarantee the quality of service, which the group says means consumers cannot negotiate compensation or refunds if they are not satisfied. The argument here is that consumers have no yardstick upon which to base their complaint.

Finally CLCV highlights how some links of the pre-contractual in-formation and conditions of use, relating mainly to information about gift subscriptions, copyright and intellectual property, are written in English or link to English pages, rather than being translated into French. This last complaint is a typical Gallic refrain, but one which Netflix can easily fix with the aid of Google Translate and a quick read through by one of its local legal staff. The first complaint is reasonable enough and again easily fixed.

The second complaint cannot be so directly addressed because there is no agreed yardstick for video QoS beyond bit rate, which is largely in the gift of the ISP. This has been a bone of contention between Netflix and ISPs elsewhere, especially in its home US market, where the likes of Verizon and AT&T had been accused of “standing on the hose”.

This was of course denied and the actual issue boiled down to the interconnect between the CDNs Netflix was using and the ISP access networks.