The Government of Ontario’s call for regulation of online video services has generated considerable attention and a government campaign against what it is calling a “Netflix tax.” While the Government of Ontario has tried to back pedal on its request, the newly released CRTC transcript confirms that government officials were warned about the likely public response. Indeed, the following exchange with CRTC Jean-Pierre Blais foreshadowed the reaction:
THE CHAIRPERSON: To put a blunt face on it, you are inviting the CRTC to regulate Google, YouTube and Netflix, aren’t you, and what advice will you be giving your Minister later on today when the potential headline is, “Government of Ontario wants to tax Netflix” or “Government of Ontario wants to regulate the Internet”?
MR. FINNERTY: Well, in fact what we recommend is that new media broadcasting activities be regulated. We did not recommend that the Internet be regulated, but we are very clear in our submission, both our written submission and in today’s presentation, that we believe that new media broadcasting activity should be regulated to support the principles of the Broadcasting Act and to support Ontario’s very important entertainment and creative cluster.
It is worth noting that the Government of Ontario is not alone on this issue. A review of submissions from many cultural groups reveals that “regulating Netflix” is a common theme in the submissions. For example, the Government of Quebec asks the CRTC to investigate the possibility of imposing payments on online video providers:
Le MCC demande au CRTC d’étudier la faisabilité d’imposer aux services payants de programmation par contournement, canadiens et non canadiens, une contribution financière à la programmation canadienne.
The CBC’s recommendation is strikingly similar to the Government of Ontario as it is also supportive of new regulations requiring payments from online video providers:
the Corporation is of the view that over-the-top (OTT) services with annual Canadian revenues over a specific threshold (e.g. $25 million) should be required to contribute to the Canadian Media Fund (CMF) for the production of Canadian programming. These services benefit from other aspects of the Canadian regulatory regime – such as the generally applicable and extremely important protection provided by net neutrality – and they should not expect to enjoy these benefits without taking on the obligations borne by regulated services. 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.
The Directors’ Guild of Canada does not want to wait for any further evidence, arguing the CRTC can regulate now:
Currently, the CRTC exempts online broadcasting activities from licensing and regulation, though surely it is time to revisit this exemption. There is no need to wait for a finding that over-the-top (OTT) broadcasting is having a profound negative effect on the regulated sector to bring OTT providers into the fold of the Act. As section 3(1)(e) of the Act states, “each element of the Canadian broadcasting system shall contribute in an appropriate manner to the creation and presentation of Canadian programming”. It is time OTT providers, both foreign and domestic, were making such a contribution.
The Canadian Media Production Association adopts a similar position:
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.
ACTRA is also onside with regulation:
As a result of the New Media Exemption Order, online or OTT broadcasters have no regulatory obligations to contribute toward realizing Canada’s broadcasting policy objectives as established by the Act. As noted above, our position is that the Commission should revoke the Exemption Order for online BDUs and require them to begin contributing to the independent production funds that help fuel Canadian content creation.
While the government has removed any doubt about the possibility of a “Netflix tax” under its watch, the CRTC is expected to hear from many groups that will nevertheless seek new regulation and payments.