Netflix recently announced they will begin paying into the Canadian media marketplace by investing in Canadian content. While Netflix paying into the Canadian creative ecosystem helps, you cannot tax your way to a successful marketplace. Neither companies nor the government can fix this problem; the solution must come from Canadian citizens and the desire to not only support Canadian artists, but retain Canadian creatives who search for opportunity in America.
The story that rarely gets reported is the brain drain of creative talent flowing into the United States. Part of it is due to increased salary, but the rest is simply the opportunity to speak and be heard. At Blade, we are champions of the media ecosystem and the relationship between brands and their communities, and this is a fantastic example of the ecosystem model struggling towards success.
The relationship between creators and consumers must be energized, otherwise we’re throwing money in a hole.
Net Neutrality and Creator Rights
Canadian film and TV is big business, we all pay for it, and we support our artists and creators through taxes. The film and TV industry in Canada is valued at approximately $20.4 billion and accounts for 130,000 jobs. Each Canadian pays a portion of their tax dollars to support the creation of Canadian content and Canadian broadcasting, to the tune of around $70 per person per year. Canadians also pay into what’s called the Canadian Media Fund – CMF- which is a not-for-profit corporation that spend money creating and supporting Canadian shows such as Orphan Black, Killjoys, and Kim’s Convenience.
The most important aspect about streaming services in Canada is that 1997 CRTC decides not going to regulate the internet. This has parallels with the current debate about Net Neutrality in the United States and abroad. Proponents for Net Neutrality believe everything the internet should be treated the same and speeds cannot be throttled and certain content can’t be charged more than others, with Netflix being a central component of this argument.
This obviously creates a problem in a world where the vast majority of internet bandwidth in the future will be the consumption of video content.
While this is an ongoing debate in the culture and press, we should start to think about how this would work as a relationship between ISPs and their consumers, but also ISPs in different countries and different laws. Like between America and Canada, and how content is bought and paid for. Should it be good for the consumer if it comes at disproportionate cost of the creator, or artist?
In short, net neutrality and online streaming complicates how creators get paid and retain rights.
Related Article: Netflix Rewards Brand Community During Price Increase
How Netflix Fits Into the Canadian Marketplace
Netflix is what’s known as an “Over-The-Top” service, or OTT service. They are categorized as an American business trying to invest in Canada, similar to how companies that film in Canada get tax breaks on both the federal and provincial level (studios pay 40 cents on the dollar for shooting in Ontario after tax breaks and incentives.)
In 2016, Netflix made $620 million from Canadians, but Netflix did not pay into the Canadian media marketplace. For that year they paid no corporate taxes, HST payments, or contribute to the CMF as other companies are required to do. It has been argued that this is one of the main reasons Canadian-based streaming services like Shomi and Crave cannot compete; both are required to pay all the fees and taxes while also competing with a foreign juggernaut.
Here’s an illustrative example: in 1999 the CRTC made a decision in regards to Canadian Content (CanCon) that resulted in our networks no longer being required to have a set amount of Canadian content. According to David Sparrow, President of ACTRA, “this resulted in 12 Canadian prime-time drama shows going down to 2 because of no set requirements.” When no rules are set, Canadian content suffers.
Netflix recently announced they will pay taxes in Canada. The promise is that Netflix will spend a minimum of $500-million (Canadian) over five years on the production and distribution of Canadian movies and TV shows. The Liberal Party rejected the proposal to impose a “Netflix tax,” stating that they were elected on a promise not to increase the tax burden on the middle class which means this $500 million commitment is less of a tax and more of a guarantee to Federal Heritage Minister Mélanie Joly to assist with her Federal cultural reforms.
“The leveling of the playing field, so that everyone … contributes to the ecosystem is key,” said CBC president Herbert Lacroix said. “We’re too small in this world to be doing this by ourselves.”You can't tax your way to a successful creative marketplace. Click To Tweet
What Needs to Happen
Creative content on TV and film is one of Canada’s leading industries, but its future depends on Canadians patronizing homegrown talent and, if necessary, demanding better from the content creators. This is how ecosystems thrive: participation on both sides.
It’s imperative that Canadians see Canadian content as integral to national identity.