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geobloqueo-streaming-europa by portal gda (CC BY-NC-SA 2.0) https://flic.kr/p/2bs6taB

Columns

Flawed Arguments and Inappropriate Analogies: Why Netflix Taxes and Cancon Requirements Should be Rejected

CBC President Catherine Tait recently sparked a firestorm with comments to an industry conference that likened Netflix, the popular online video service, to the British Raj in India and French in Africa, warning about “imperialism and the damage that it can do to local communities.” The comments were rightly criticized as shockingly inappropriate, as if any video service can be reasonably compared to the subjugation of millions.

My Hill Times op-ed notes that some in the Canadian creator community rushed to defend Tait, however, viewing the comments as a strong assertion for Netflix regulation, the creation of a “level playing field”, and the need for all stakeholders to contribute to the broadcast system. Supporters of Netflix taxes and content requirements – who were joined in the Hill Times last week by Sheila Copps – present a vision of Canadian content at risk without regulatory intervention, leading to the loss of Canada’s “authorial voice” from film and television production.

Industry leaders promised that regulation will come, yet a closer examination of the arguments for Netflix taxes and Cancon requirements reveal that they are based on five deeply flawed premises.

First, there is no existential crisis for Canadian content film and television production. According to the most recent numbers from the Canadian Media Producers Association, the total annual value of the Canadian film and television production sector exceeds $8-billion, its largest amount ever. Spending on Canadian content production has hit an all-time high at $3.3-billion.

In fact, the sector has experienced a huge increase in foreign investment in Canadian production. Before Netflix began investing in original content in 2013, total foreign investment (including foreign location and service production, Canadian theatrical production, and Canadian television) was $2.2-billion. That number has since more than doubled to nearly $4.7-billion.

Second, Cancon regulations are a poor proxy for Canada’s “authorial voice”. The not-so-secret reality of the Canadian system is that Canadian authors are often missing entirely from productions. Films and shows based on Canadian fiction do not count toward meeting the necessary points for Cancon accreditation and even Canadian screenplay writers are not a mandatory requirement.

Unlike many other countries, which adopt flexible standards to determine domestic content, Canada’s rigid approach means that generic police or courtroom dramas may qualify as Canadian content while the television adaptation of Margaret Atwood’s Handmaid’s Tale does not. Moreover, co-production agreements with dozens of countries ensure that many productions qualify for Canadian support despite limited Canadian participation.

Third, if the playing field lacks balance, it is the regulated sector – not Netflix – that is the prime beneficiary. The broadcasting and broadcast distribution sectors receive a wide range of regulatory benefits, making their mandated contributions effectively a quid pro quo for policies such as simultaneous substitution rules, which allow Canadian broadcasters to replace foreign signals and advertising with their own, and copyright retransmission rules, which allow for the retransmission of signals without infringing copyright.

Unlike Netflix, the regulated sector also benefits from must-carry regulations, which mandate the inclusion of many Canadian channels on basic cable and satellite packages; market protection, which has shielded Canadian broadcasters from foreign competition such as HBO or ESPN for decades; and eligibility for Canadian funding programs and tax credits, for which many foreign services are frequently ineligible.

Fourth, notwithstanding the oft-heard insistence that everyone must contribute the system – Canadian Heritage Minister Pablo Rodriguez has declared “there is no free ride” –contributions to the system stem from an era of scarcity, in which broadcasting featured limited channels using public spectrum with licences granted to a handful of companies. It was that privileged access that led to contributions, not mere participation in the Canadian market.

That is why broadcasters must feature Canadian programming, but movie theatres do not. Or why broadcast distributors contribute a percentage of revenues to support Cancon, but book stores face no such requirement. Indeed, mandated contributions to an economic sector is the exception, not the rule: Canada does not require McDonald’s to contribute a portion of its revenues to support Canadian farmers or Nike to sell a certain percentage of Canadian-made shoes. In an era of abundance in which Internet streaming does not rely on scarce spectrum, the justification for a mandated contributions falls apart.

Fifth, Canadian content is already readily available and easily “discoverable” on the Netflix service. Alongside “official” Cancon, there are programs filmed in Canada, starring Canadian actors, or featuring Canadian stories. Some might argue that only official Cancon counts. Regardless of how it is measured, however, the reality is that Netflix already has a sizeable Canadian library, giving subscribers the option to watch hundreds of hours of Canadian content with little more than a simple search for “Canada.”

Cancon support remains an important ingredient in a vibrant Canadian cultural sector. Yet support such as grants, tax benefits, and other measures should come from general revenues as a matter of public policy, not through cross-subsidization models grounded in flawed arguments and inappropriate analogies.

3 Comments

  1. Kelly Manning says:

    I remember Shaw cable dropping NASA TV, even though there was no Canadian Content equivalent. Thank goodness for the Internet and Video Streaming.

    Print copyright used to be divided up geographically, with attempts to ban the import of cheaper foreign editions of works.

    The economy of scale of the USA English Language TV market is quite influential here in Canada. If you watch French Language Media, such as TV5, SRC, TVA, … you often get a very different viewpoint on events such as the war in the Falklands / Malouines. By the time I got to the bottom of my SRC referred to islands as the Malouines I had learned a lot about what happened to the displaced Acadians. European French coverage of the war in the Balkans had a much different air than English North American coverage, as though it was something really important happening next door.

  2. Dear Dr Geist:

    Here are 2 items I haven’t seen addressed before.

    1) Can Con requirements and “all participants must contribute to Canadian Culture” is a back-door attempt to outright ban foreign for-pay streaming sites. Even the strongest content xenophobes know that a direct and explicit outright ban on foreign for-pay streaming sites would trigger a wide public backlash.

    Instead the content xenophobes are attempting an indirect and implicit ban on foreign for-pay streaming sites. Here’s their strategy…
    * Turn the web into a heavily regulated “TV 2.0”
    * Require protracted extensive hearings to obtain a “Canadian Internet Broadcasting Licence” to stream to Canadians
    * Require a specific percentage of Can Con as a condition of that licence
    * Require production facilities in Canada employing Canadians

    99% of foreign streaming websites can’t meet this red tape, and would be barred. The Can Con producers would say… “gosh darn golly gee willikers… what a co-incidence”.

    2) Regarding the fact that the legacy media regulates the CRTC (YES!).
    * In the early 1990’s Mme Francoise Bertrand was president and CEO of Tele Quebec
    * She was appointed as CRTC chair in 1996
    * She immediately showed what kind of a Can Con Control Freak she was… http://www.efc.ca/pages/media/ottawa-sun.18nov96.html
    * During her tenure as head of the CRTC, the CRTC unilaterally decided in May 1999 that they could control the web https://crtc.gc.ca/eng/archive/1999/pb99-197.htm and require Can Con etc
    * Mme Bertrand now sits on the board of Quebecor, which owns TVA Films and TVA Productions, both of which would stand to gain financially as a result of Can Con quotas on the web

    How is this even legal???

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