Netflix Sets Its Own Rules

Is new Netflix deal the Trojan horse inside the gates of Canadian media?

Courtesy Netflix


Last week, the Minister of Canadian Heritage, unveiled her long-awaited cultural industries policy titled Creative Canada. While there are some good bits in the announcement, such as top up money for the publicly administered Canada Media Fund, it fell short of the coherent strategy that was anticipated. Unfortunately, there are some very troubling parts to the announcement. In particular, the federal government will continue to allow the American streaming giant Netflix to set its own rules, contribute little to the cultural ecosystem, and provide a service free of sales tax. This is patently unfair.

The deal made good headlines but it was questionable news for our cultural industry. In lieu of being regulated and taxed like all other Canadian broadcasting services, Netflix pledged to invest $500 million over the next five years in Canada. That got a lot of people excited even if it wasn’t clear what it actually meant. Was this new money being spent by Netflix? Would it be spent on Canadian productions or on American shows filmed in Canada? Would Netflix control the copyright or would Canadian producers be the owners?

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Courtesy Netflix


The lack of information is no surprise as Netflix is notoriously secretive about its business. When the company appeared before the Canadian Radio-television and Telecommunications Commission at the Let’s Talk TV hearings Netflix refused to provide the most basic of information on the number of its Canadian subscribers and revenues. For all we know its $500 million commitment may be the value of Netflix’ forgone taxes after operating in Canada free of any obligations for all these years.

In order to be granted a license by the C.R.T.C. broadcasters are obligated to fulfill mandatory conditions. For example, a broadcaster must commit a minimum percentage of its prime time schedule to Canadian content. It is required to spend some of its revenue on certified Canadian programs; a percentage of which must be on programs of national interest such as children’s, documentary and drama. Additional obligations include providing closed-captioning, described video, ensuring diversity, and filing annual reports on their business operations. Netflix has none of these obligations because, inexplicably, it is not required to be licensed as a broadcaster.

If the $500 million dollar commitment is the best that the federal government can settle for then it should not be administered by Netflix.

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Any public benefits wrung out of internet-based streaming services should be administered by an independent body guided by the public interest. That’s how the successful Canada Media Fund works. It distributes about $360 million annually to independent producers, guided by broad government policy objectives such as ensuring linguistic and regional diversity, and ensuring the creation of programs of national interest. The CMF is funded, in part, by mandatory contributions from cable and satellite providers. This arrangement ensures that independent producers maintain a measure of control over their own work and share in the rewards as well as the risk. Netflix has so much market power that it can dictate terms of trade and make life very difficult for Canadian producers.

Canada’s cultural policy should not be dictated by the internet giants of California. I fear that this Netflix deal is the Trojan horse already inside the gates. The Minister’s announcement, unfortunately, reinforces a precedent that could substantially diminish Canadian control of our cultural industry in the not-too-distant future.

For another response to the Creative Canada policy, read Barri Cohen’s take.

This article previously appeared on The Georgia Straight and was reprinted with the author’s permission.