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Canadian Media Production and Music Groups Calls for New Rules for Netflix, Google, ISPs

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Thursday February 13, 2014
Canadians love Internet success stories such as Netflix and Google as recent data indicates that millions now subscribe to the online video service and Google is the undisputed leader in search and online advertising. The changing marketplace may be a boon to consumers, but my weekly technology law column (Toronto Star version, homepage version) notes that it also breeds calls for increased Internet regulation. That is particularly true in the content industry, with the film and music sectors recently calling for rules that would target online video services, Internet providers, and search engines.

The Canadian Media Production Association, which represents independent producers of English films and television shows, recently told a Senate committee that new rules are needed to address the threat posed by popular Internet video services such as Netflix. The CMPA argued that a "level playing field" is needed to ensure that there is "choice, diversity and growth in a more open market place."

Consumers could be forgiven for thinking that the entry of Netflix into Canada has increased choice, diversity, and growth, yet the CMPA wants new rules that would raise costs and impose regulatory requirements on online video providers.

Its recipe for reform includes three specific changes that target Netflix. First, it wants new rules requiring foreign-based content companies to contribute to the creation of new Canadian content. The CMPA has not suggested a formula for contributions nor explained how it would distinguish between online services mandated to contribute and those exempted from such requirements.

Second, it wants to require Netflix to block the use of proxy services that can be used to disguise the geographic location of a user.  Those services - which are popular with privacy advocates since they allow users to safeguard their personal information - can also be used to access the U.S. services that are otherwise unavailable in Canada such as Hulu or the U.S. version of Netflix.

Third, it wants Netflix to levy taxes on all subscriptions, raising broader questions about taxation issues for the myriad of online services that challenge conventional notions of jurisdiction.

The CMPA is not alone in advocating for new Internet-related rules. Music Canada, formerly known as the Canadian Recording Industry Association, has also begun to push for changes that could target Internet providers and search engines.

Late last year, the organization noted the need for website blocking to combat sites that facilitate infringement. Graham Henderson, the Music Canada president, wrote that government support (which now runs into the tens of millions of dollars in Ontario alone) should be accompanied by "judicious and reasonable regulation of the internet. The actions taken by courts in other jurisdictions have very reasonably required ISPs to block websites that are almost entirely dedicated to the theft of intellectual property." Website blocking has proven highly controversial in many countries, with some courts striking down blocking laws on free speech grounds.

The blocking requirements would target Internet service providers, but Music Canada has also identified search results as a problem. In a presentation to the Ontario Standing Committee on Finance and Economic Affairs, Henderson claimed "consumers cannot find legal services on Google," adding that "with government support, maybe we can urge intermediaries to actually do something to help consumers find legitimate sources, because I think they’d like to." Whether that means requiring companies like Google to adjust their search results by eliminating some results or by prioritizing industry-friendly websites is unclear, yet the comments suggest the industry would favour some form of intervention or government pressure.

The Canadian government has to date been reluctant to wade into the Internet regulation debate. Moreover, regulators such as the CRTC have long exempted online services such as Netflix from broadcast-style regulation. Yet as online services continue to reshape the marketplace, the pressure for new rules seems likely to intensify.
Comments (19)add comment

Henderson lied said:

...
From the "Henderson claimed" link:
"Type in: “Carly Rae Jepsen”; pick your song; press “search.” You would have to look to page 7 of the results to find iTunes. Before you get there, you have six and a half pages littered with illegal sites which are constantly being taken down and constantly being put back."

If you actually try typing Carly Rae Jepsen on Google, the first result is her official site, which presumably has iTunes links and other legal sources. The first-page results also include the official YouTube video, which itself has links to buy the MP3 legitimately, and the iTunes link is on the first page as well.
February 13, 2014

schultzter said:

The cost of regulation
I guess Henderson and company expect us all to dig out our 8-track players!

Aren't the regulations & licensing structures we already have the main reason there are so few choices in Canada currently? Look up why Pandora isn't available in Canada (except by VPN proxy of course).
February 13, 2014

Andrew T said:

...
Google biases your search results based on past usage, so if you frequently browse illegal download sites, they very well could take up the first six pages of results. What you see in Google search results can now say as much about you as it does about Google, so it's become a pretty poor data point for this kind of debate.
February 13, 2014

Jason G said:

So they want to take my VPN?
They want to block the use of Unblock-Us and such, but will that include VPN usage as I can just set my router to use VPN 100% of the time and get the same results. If this include VPN blocking how is that not respecting one privacy to tunnel their traffic from prying eye (NSA excluded of course ;p)
February 13, 2014

Tom said:

...
I've probably watched more Canadian content on Netflix over the last few years than I have in all the time before that. Conventional networks tend to put them in time slots where they're up against high-rated US shows so it's rare that they actually get a chance even with the rules as they stand. Netflix, on the other hand, tends to give them equal footing and the on-demand nature of the medium does a lot more to sponsor exploring new content (as if it sucks, you can just stop it and move on - doing the same with live TV means you switch over to the alternatives mid-show so it's safer to stick with what you know you like). The current mechanism of subsidies gets content made, but unless people are actually watching it then there is little point as you create an industry dependent on those subsidies. If you do a better job of getting it in front of people, however, more of them will watch it and you can build a sustainable market that will drive itself.

Services like Netflix are a significant opportunity for international content, as the big US content creators are still stubbornly sticking to the old methods of distribution and licensing material for services like this is messy. As such, much of Netflix's library is older stuff that most people have probably already seen so there is a pretty significant opportunity for any content producers willing to embrace it. If domestic producers offer them fresh content without the strings attached, they have a pretty significant opening to get in front of a growing international audience. Trying to buttress up the old way of doing things is just going to leave our industry in the same second-tier position that it sits right now.
February 13, 2014

David Collier-Brown said:

Counterpressure time!
If our American cousins chose to astroturf in Canada, then we should be pointing out the origins of the "pressure" to our MPs.

Even if they were all trained seals, they're trained seals that can talk, and do so in caucus.
February 13, 2014

That guy said:

ASCAP and Music Labels Colluded To Screw Pandora
http://www.techdirt.com/articl...dora.shtml

Trusting media industry groups to look out for Canadians?
February 13, 2014

Brad said:

...
@Tom: I entirely agree with the underlying point of your comment - there should absolutely be new opportunity for Content creation with the various digital platforms, but the licenses Netflix et al pay out for Canadian content are *extremely* low.

I think many / most producer members of the CMPA (disclosure: I'm one) would agree with you that distributed on-line content *should* be the wave of the future, except that in Canada revenue from all the EST/VOD platforms combined is currently a tiny fraction of what you can get from a single traditional broadcast sale (which is also decreasing but remains an exponentially larger number).

The last time I had a sales agent talk to Netflix it would have actually cost us *more* money to deliver a film to Netflix than we would get back in a multi-year license. And of course having your material on Netflix ruins even the long shot chance of getting a broadcast license... so you're paying money to guarantee there's no revenue on your title. At least with iTunes you can hope to make money off the long tail since there's per viewer revenue.

As US studios start to pull their material from Netflix as their initial licenses expire, and they transition to an original programming model - it makes their business model make more sense (to me) but moves them away from being a real competitor to regular broadcast... at least for anything other than one or two large scale predominantly American shows.
February 13, 2014

Angry Canerdian said:

Seems more appropriate than ever
[bitching intensifies]
February 13, 2014

Ole Juul said:

...
First I'd like to point out that the first W in WWW stands for world. Second, the suggestion to block the use of proxy services has to go. As long as that's on the table, there is no reason to even consider the discussion of anything else.
February 14, 2014

Danux said:

Choose
Frankly, if I have to choose between a regulated net or perpetuating Ye Olde Media Works, I'd be OK with the old media industry dieing off. Other more competent people will step up to fill the void, and they'll be capable of using a free internet to earn their way.
February 14, 2014

Jeff said:

...
Ever heard of net neutrality?? It seems to me that the Government's apprehension to step in at this time is the right move. The CMPA is a lobbying group looking for a cash grab at the cost of the Canadian public's freedom of choice. Canadian content doesn't need to be force fed to us. If Canadian media content cannot stand on its own two feet then it isn't truly viable in any business sense. Forcing media providers to include Canadian content or contribute to its production is just as bad as the government bailouts witnessed in the US in recent years. The banks weren't running a sound business and should have been allowed to fail like any other business would have. Canadian media content should be treated no differently, if the public is interested in Canadian content they'll consume it and it will be viable for production companies to continue delivering it. Just because it gets funded and produced doesn't mean it's going to be successful, for that to occur the consumer must be attracted to it naturally. Have we not learn't anything from SOCAN and the CRTC over the years? The restrictions and regulations created by these groups are a large part of the reason it took so long for us to get a taste of HBO. Do we really need to place more restrictions on the media we CHOOSE to consume??
February 14, 2014

end user said:

...
Why is it that few commercial entities can control what millions of regular people and cannot do. When a few corporations use their money to lobby law changes that affect 34 million of us we are not longer a democracy.
February 14, 2014

Deprived Canadian said:

These guys are shooting themselves in the foot
Music Canada and the greedy copyright mafia, will not even allow Google, Pandora, Spotify etc in this country because of their outrageous requirements. So Canadians will use proxy's to listen to where its available. Time these greedy theives realized that the music industry would be more profitable, if Canadians were simple allowed to buy and listen to what they want legally.
February 14, 2014

Chris c. said:

Music Canada and the CMPA show us yet again how disconnected the industry is for its customer base
Mr. Henderson's arguments are the same old tired arguments of an industry who hasn't been able to reinvent itself and wants to keep its fat revenues coming in no matter the merit of the products they are trying to push.

I sincerely hope those in power can see though this sham and let the new industries that have taken hold precisely because that's what consumers demand, thrive.

Since when did was it our government's mandate to enact welfare upon these corporate giants and their well paid lobbies, and act against the wishes of the population? Do these lobbies really think we are that dumb not to be able to see though their Spiel?

My advice to 'Music Canada' and the CMPA: You need to go back to Business 101 and learn this fundamental concept again: the Customer is ALWAYS right. Forget it and you might as well close up shop.
February 15, 2014

Napalm said:

Money for nothing
Looks like they want some money for nothing. Business as usual.
February 15, 2014

Carl said:

...
Can't compete? No problem! Regulate and screw the public!
I suggest the CMPA startup "CanFlix" and put their content up. Unlike cable and broadcast everyone is on an equal footing on the internet and merit has its own rewards.
What are they afraid of EH?
February 18, 2014

Paul Q said:

...
I used buy hundreds of CD's per year. Then I downloaded. Now I stream from sources such as Soundcloud where the music is posted by artists and labels. I make my purchases based upon what I find there from the artists themselves. The CMPA can take a hike.

I also canceled cable in favour of Netflix. If pushed to pay more because of special Canadian regulation I will just end up spending more time on my ereader.
February 25, 2014

John said:

I don't get it
The same crappy Canadian movies and tv shows are on the US version of Netflix anyway, so if I don't watch them here why watch the on the Canadian version, I'm just more likely to cancel netflix completely.
March 03, 2014

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