Netflix is enormously popular in Canada with millions using the online video service. While the Canadian version of Netflix has improved the scope of available titles since it launched, there are still differences with the U.S. service, leading some subscribers to use virtual private networks to mask their address and access U.S. Netflix. Are those subscribers “stealing” something? The Globe and Mail’s Simon Houpt apparently thinks so.
This weekend he wrote a column titled Even the Content Creators are Stealing Content, which focused on content creators who unapologetically download television shows or use virtual private networks to access U.S. Netflix from Canada. Accessing the U.S. Netflix service is common in many countries including Canada (see stories on Australia, New Zealand, and the U.K.). Houpt argues that accessing the U.S. Netflix from Canada deprives creators of their fair share of earnings and make the creation of future shows less likely:
Paying for the Canadian service means your money goes to whoever holds the Canadian rights for the shows on Netflix. If you’re watching the U.S. service, the rights holders – that is, those who pay the creators to make the shows you’re actually watching – aren’t getting their fair share. That means they’re less likely to help get the next round of shows or movies green-lighted, making it harder for artists to get their projects off the ground.
Yet while the legal issues associated with accessing U.S. Netflix may be in a legal grey zone, the argument that creators are not paid seems wrong.
First, Netflix spends billions each year licensing content in bulk so that it can be viewed an unlimited number of times. Unlike songs played on a radio or television programs aired in syndication, the Netflix model does not pay based on views or the number of times aired. The company notes:
Our licensing is all time-based, so that we might pay, for example, $200,000 for a 4 year exclusive subscription video-on-demand (SVOD) license for a given title. At the time of renewal, we evaluate how much the title has been viewed as well as member rating feedback to determine how much we are willing to pay. How many similar titles we have is also a consideration.
In other words, there are no additional payments to rights holders regardless of how many times a title is viewed during the licence period. In fact, a Canadian viewing a title on the U.S. Netflix would simply add to the number of views and potentially increase Netflix’s willingness to pay when the licence expires.
Second, many of Netflix’s most popular titles (House of Cards, Orange is the New Black) are licensed worldwide and which geographic service is used to access the title is irrelevant. There is growing overlap between the two services (popular shows such as Breaking Bad and Lost are similarly available on both services), so whether the U.S. or Canadian service is used, much of the content is the same.
It is possible that there are rights holders that have licensed their shows to Netflix in the U.S. and to different companies in Canada (where they also license to Netflix in Canada there is no difference in which service is used to view the show). In such circumstances, it can be argued that accessing the show through the U.S. Netflix would deprive the Canadian licensee of an opportunity to commercialize their licence (though Canada is without an obvious competitive alternative). Yet those instances involve questions of which intermediary is paid, not whether the rights holder that created the original work is compensated.
If Houpt’s concern is that rights holders get their fair share so that new projects can get off the ground, what matters is not which intermediary is paid, but rather whether the viewer is ultimately paying for access to the program so that the creator is paid. The availability of Netflix has reportedly been linked to a decrease in unauthorized, unpaid access by Canadians, suggesting that more people are paying for content. The characterization of copyright infringement as “stealing” often seems inappropriate given that theft involves the loss of the object, which does not occur with an extra copy or viewing. Even if the term is expanded to include a loss of revenue for the creator, that still does not apply in this case. Accessing U.S. Netflix may sit in a legal grey zone, but the concerns associated with ensuring that the original creators or rights holders are paid by those that view their content seems unfounded.