GATINEAU – Among the 2,704 official filings to the CRTC for its Let’s Talk TV formal policy review coming in September is an 11-page warning from over-the-top video behemoth Netflix which said, essentially: Don’t slap any new regs on us, thanks.
While the CBC, Canadian Media Producers Association and others want the CRTC to tap Netflix’s Canadian revenue for contributions to Canadian content, the U.S.-based online video provider says the Commission has no right, and besides, it already has a ton of Canadian content, produces some things here and is merely complementary to the regulated system.
The CBC, however, says it’s time for the OTT players to start paying for some Cancon, too, that the CRTC require “over-the-top (OTT) services with annual Canadian revenues over a specific threshold (e.g. $ 25 million) to contribute to the Canadian Media Fund (CMF),” it said in its submission. “Given that video-on-demand (VOD) services pay 5% of revenues to support Canadian programming, this would appear to be an appropriate contribution level for unregulated OTT services.”
“We submit that the New Media Exemption Order… should be amended by adding a Canadian program funding obligation.” – CMPA
“We submit that it is now appropriate to extend Canadian programming funding obligations to other broadcasting services which, to this point, have been exempt from such obligations but which have increased in their importance and impact. Specifically, we submit that the New Media Exemption Order (“NMEO”), which encompasses most if not all of the newer and emerging broadcasting services – including broadcasters’ online content portals, TV Everywhere offerings and OTT SVOD services like the forthcoming Rogers ‘ShowMi’ service and Netflix – should be amended by adding a Canadian program funding obligation,” adds the CMPA in its submission.
At Netflix’s recently-announced new price of $9/month, and with an estimated six million subs in Canada, says the CMPA, that gives it nearly $650 million-a-year “from operating its broadcasting business in Canada. There is therefore no denying that, regardless of whether it siphons subscribers from licensed BDUs or simply supplements subscribers’ television viewing, Netflix has found a profitable business model for its Canadian operations, and the magnitude of its operation in Canada has made it a significant player not just in the OTT space but in the context of the entire Canadian broadcasting system.”
Netflix says in its submission its success gives Canadians more choice and has extended the reach of the Canadian content in its library, globally, and that the Commission’s new media exemption should remain as it has fostered diversity, content experimentation, creation and innovation.
“LIKE OTHER MEDIA, TELEVISION IS GOING ONLINE AND CANADIAN CONTENT IS THRIVING ON THE INTERNET – REGULATING NEW MEDIA WOULD IMPOSE UNNECESSARY COSTS AND INHIBIT INNOVATION, DIVERSITY AND CONSUMER CHOICE,” reads the Netflix submission (its emphasis).
If people are cord cutting or trimming to go to Netflix, that isn’t the fault of Netflix. “To the extent that Canadian consumers are considering ‘cord trimming’, it would appear that price increases for BDU services are a significant (perhaps determinative) factor,” it said.
When it comes to requiring the company to fund Cancon, that’s a non-starter, says the Netflix submission. Why should it pay into a fund which it can not access to make its content, and for which its contributions would only make the Canadian vertically integrated players stronger? “The reflexive application of regulation ill-suited to new technologies and industries is not only unnecessary, in many circumstances it can result in unintended and unwelcome consequences,” it said. “This is particularly true in a tightly consolidated media market, like Canada, where encumbering new entrants and technologies with legacy regulation would further cement the market power of incumbents and subvert the goal of increasing the diversity of content and content production sources available to Canadian viewers, as well as the distribution of Canadian content globally.”
As well, and of course, “Netflix, as a foreign entity, has no such access and cannot benefit from the CMF in a similar fashion. For Netflix, a contribution to the CMF would therefore amount to subsidizing productions made primarily for Bell, Rogers, Shaw/Corus and Videotron, who would acquire exclusive online streaming rights in addition to broadcast rights.”
“The imposition of a ‘Netflix Tax’ or ‘OTT Tax’ may make it more difficult for Netflix to offer access to this content at the same affordable rate.” – Netflix
Finally, “the imposition of a ‘Netflix Tax’ or ‘OTT Tax’ may make it more difficult for Netflix to offer access to this content at the same affordable rate,” reads the submission. “An obligation via the CMF would see new media cross-subsidizing old media.” (Ed note: The very idea of a PR campaign centred around a term like a “Netflix Tax” looks to be a very sticky problem on the face of it.)
The company also added that it has plenty of Cancon already in its library such as Caillou, Murdoch Mysteries, Bomb Girls, Arthur, various NFB titles, and Trailer Park Boys but it doesn’t track its ongoing levels of Canadian content. “(T)he library is constantly growing and evolving and the proportion of certifiable Canadian content available at any given time is highly changeable and not always readily identifiable,” its submission reads. The company also noted that original show Hemlock Grove, a U.S. production, was shot on Canadian locations and that it dubs content in French for the Quebec market, in Quebec.
Additionally, the company explained regulating content online, available internationally anywhere at any time, is near impossible anymore. “The evolution of the Internet to accommodate streaming video, and of TV sets to connect directly to the Internet, is making it increasingly difficult to control, limit or manage, in any meaningful way, access to foreign audiovisual content and services,” it said.
And besides, the CRTC should busy itself with the big vertically integrated Canadian companies and what they might be capable of.
“Vertically integrated companies also have the means and the technological capacity to engage in anticompetitive behaviour vis-a-vis OTT services – whether through UBB, the imposition of low usage caps (including exemptions for their own ‘Mobile TV’ product ), or otherwise,” reads the Netflix document.
“Given the state of concentration in Canada, the CRTC should be vigilant in applying its Internet Traffic Management Practices framework, and safeguards against undue discrimination or preference, under the Telecommunications Act with a view to ensuring competition and innovation in online audiovisual distribution in Canada.”
Original artwork by Canadian artist Paul Lachine, Chatham, Ont.
