CRTC Hearings: Netflix Calls for a System that Recognizes its Existing Contributions

Streaming service, Netflix, has also made an appearance before the CRTC. Here’s some of what they had to say.

We’re continuing our series on what was said at the CRTC hearings – a series that has been relatively unprecedented in the media landscape. Today, we are highlighting what Netflix had to say before the regulator tasked with enforcing this.

One of the themes that are coming out of the CRTC hearings is that online streamers are either calling for a system that recognizes the contributions they already make to the Canadian ecosystem or actively contemplating exiting the Canadian marketplace altogether in response to this particular point of contention.

We’ve already heard from Google who called for an implementation that supports the digital ecosystem. Spotify, for their part, openly contemplated the idea that they might leave Canada altogether should the regulator not rule favourably. Paramount went so far as to question the financial viability of its operations should an unfavourable ruling happen at the CRTC.

Netflix also made an appearance before the CRTC and they built on the theme of how the CRTC should recognize the existing contributions streamers make when demanding financial contributions to the system. These comments can be found in the CRTC transcript of the hearings.

During the hearings, Netflix made the following remarks:

7164 We’re proud to be part of the Canadian audiovisual industry and we’ve been working with local producers on Canadian programs for over a decade. In the last five years alone we’ve spent over $5 billion on productions in this country that have been shared with our members locally and around the world. To put that in perspective, that’s $2.7 million that we’ve invested in this country every single day for the last five years. That’s money going into the hands of Canadian creators, crews and local businesses.

This is, once again, a direct response to the many lobbyists who went running to lawmakers and the CRTC with tall tales of streamers extracting enormous wealth from the Canadian ecosystem while contrihbuting nothing in return. These comments represent yet another pushback from those wild and unsubstantiated claims. Numerous streamers have responded to those claims with a collective, “uh, actually, here are the facts…”

From there, Netflix further stated this:

7197 As we’ve consistently said, Netflix supports the government’s objective to create a new and modernized broadcasting framework and we’re grateful for the opportunity to engage in this process. We believe it must entail meaningful structural change.

7198 We’re opposed to outcomes that would have us simply subsidize the existing framework, while restricting our ability to continue to invest directly in Canadian stories. That’s why we believe that imposing a mandatory initial base contribution would be inconsistent with the principles of flexibility and adaptability, nor would it recognize our longstanding and significant contributions to the system here in Canada.

7199 There are many ways to achieve the objectives of the Broadcasting Act, and we are enthusiastic about continuing to do our part. In fact, we want to work with you the Commission on defining the rules for an overall contribution framework that will allow us to contribute to Canada in a way that makes sense for our business, for the thousands of Canadians involved in the creative ecosystem that we work with, and most importantly, for Canadian audiences.

So, once again, building on the theme of, “Hey, we’re perfectly happy with contributing to the Canadian creative ecosystem. We already do that. We just want the investments we already make count towards what would otherwise be our obligations.”

To offer an example, let’s say a streamer already has a presence in Canada and has roughly $10 million in investments towards the production of Canadian content. I would be surprised is anyone is really objecting to this. So, the CRTC comes in and says, “OK, after looking into the situation of your platform, we determine that you have to contribute $12 million.” What the streamers are basically saying is, “well, since we already contribute $10 million, we’ll top up our contributions and give $2 million.”

What the corporate lobbyists are saying is that this is not acceptable. They are arguing that the platform must contribute that $12 million up front before they can invest in productions that they wish to invest in. So, the total bill would be $22 million for that streaming platform should they want to continue maintaining their existing investments. Understandably, the streaming platform would respond, “Uh, we don’t have that kind of financial capital. If that’s the cost of doing business in Canada, then we are out.”

That is ultimately what is being argued over. The vertically integrated cultural monopolies in Canada want all the money that the platforms are investing into their own productions be redirected to their bank accounts instead. Then, the monopolies respond by saying, “You are free to continue operating in Canada, but you have to pay me first just to have the privilege of operating in this country.”

One of the questions the CRTC asked is how they could track the contributions the platforms make:

7208 We’ve already had some of the other online streamers appear before us and, by and large, they’re asking for some of the same flexibility, if you will. Paramount would like us to count some of the partnerships that they have in terms of programming acquisitions and carriage deals, and Spotify would like to consider the payments that they make to rights collectives.

7209 There has been talk of promotional activities and discoverability activities, and I think in your brief you talk about counting local conferences and festivals and media interviews.

7210 The point is that there are many different kinds of activities that the online streamers are engaging in in Canada.

7211 To this point in the hearing we’ve heard a lot of discussion about how an initial base contribution could be administered through a fund and that’s easy. Contributions to a fund, arguably, are easily identifiable and accounted for.

7212 When we talk about all of these kinds of activities that you’re engaging in already in the Canadian market, that’s not easy to measure now, and if we look at the principle of fairness across the system and the fact that we have a lot of public policy goals as a Commission to achieve and that maybe some of these activities are not necessarily targeting some of those public policy goals.

7213 So I ask you: How can we overcome this challenge? We have all of these things that you think the Commission should consider as part of the contribution, and yet, they’re not easily comparable, they’re not easily measured, they’re not easily tracked. How do you propose that the Commission overcome this challenge and target the public policy goals that we have?

Netflix responded by saying that a reporting mechanism can be put in place:

7224 MR. GARFIELD: I’ll just add two things, which is your question is right on point with a query that other governments have raised with us. And the framework of aligning the investment requirements with your policy objectives makes perfect sense.

7225 There are accountability mechanisms that can be put in place, as Stéphane noted, a reporting requirement so you can keep track and delineating which areas are most important for the sustainability and long‑term strength of the ecosystem I think is perfectly appropriate. That happens in other places as well.

7226 For example, Brazil is going through the process of developing an undertaking right now and they’re adopting that exact approach where they’re recognizing the existing spend and also cabinet it and putting a framework around it that’s consistent with some of the policy objectives of the country. And so I think that makes perfect sense in this context.

7227 The second thing is just to ‑‑ is to reaffirm the importance of being flexible in that context. If you develop a system that has ‑‑ that limits the areas or the funds to which those resources are directed, then in some respects you’re creating a zero sum game where you may have to move away from the relationships, partnerships that we built over time and we certainly don’t want to do that.

7228 We’ve ‑‑ those relationships are not simply transactional; they’re actually real long‑term relationships that we’re building and we want to be able to sustain them.

Netflix also pointed out that they already promote Canadian content. They reiterated their long standing argument that if it is made in Canada, then it should be counted as Canadian content. This is something that the Canadian cultural elite has pushed back on, saying that the copyright should also be owned in Canada, so Canadian productions that were produced by non-Canadians shouldn’t count even if Canadians were involved in the production of said content.

The real worry here is that the CRTC is not even really considering entertaining the idea that existing contributions should count towards the obligations that streamers would be expected to pay. This has led to very real fears that many online streaming companies would simply exit the Canadian market altogether rather than paying the exceedingly steep extortion payments.

Either way, Netflix made their case at the CRTC, contributing to the wider discussion. Whether the CRTC is even remotely interested in listening remains to be seen. If not, then Canada will find itself increasingly left out of the digital revolution as companies pack up and head for the exits.

Drew Wilson on Twitter: @icecube85 and Facebook.

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