Canada's Netflix Problem
Canada exempts internet broadcasters like Netflix from rules that Canadian broadcasters have to follow. These exemptions increase Netflix's profits by hundreds of millions, at the direct expense of Canadian programming and culture.
Netflix in Canada: Binge-Watching! Tax Issues! Regulatory Uncertainty!
Canada exempts internet broadcasters like Netflix from regulation. For example, licensed Canadian Broadcasters must spend 30% of their revenue on Canadian programming, but internet broadcasters like Netflix don't have to invest a single red cent in service of Canada's culture. If the regulatory system were fair, Netflix would have had to contribute almost $250 million to Canadian culture by 2020. Their actual obligation is $0.
In September of 2017, former Minister of Canadian Heritage, Mélanie Joly, announced a secret deal that would see Netflix spend $100 million in Canada for five years, but the definition of "Canadian" was purely industrial: a show by American creators, starring American actors, and set in the United States would count as long as it was filmed in Canada. There is no requirement to produce content in French and no requirement to make shows about Canada's Indigenous peoples.
- In 1998, the CRTC created a rule now known as the Digital Media Exemption Order that lets anybody broadcasting online sidestep regulation
- This exemption was renewed as recently as 2015
- As of 2018, Netflix serves more than 50% of Canadian households with an internet connection
- As unlicensed broadcasters take over more of the Canadian market, investments in Canadian programming will continue to decline
- Both the Liberals and the Conservatives have promised not to impose a so-called "Netflix Tax". No such thing is proposed, but this seems to indicate that they aren't willing to take action
The Broadcasting Act defines broadcasting as "any means any transmission of programs, whether or not encrypted, by radio waves or other means of telecommunication for reception by the public by means of broadcasting receiving apparatus." This technologically-neutral definition clearly captures internet broadcasters like Netflix.
Digital Media Exemption Order
The Broadcasting Act requires that Canada's broadcasting regulator, the CRTC, license all broadcasting undertakings, but it also gives the CRTC the power to exempt certain broadcasters from the licensing requirement.
In 1998, the CRTC used this power of exemption to create what is now called the Digital Media Exemption Order. The internet was rapidly gaining popularity, and since gifs and other moving images are technically broadcasting, the CRTC sensibly declared that all online broadcasting would be exempt from regulation.
This exemption is still in place, and it allows internet broadcasters like Netflix to sidestep Canadian programming obligations that their Canadian competitors are forced to comply with.
No such thing exists, nor is it being proposed.
In August of 2015, former Prime Minister Stephen Harper made a much-ridiculed video in which he poses in front of a TV showing the Netflix logo and proclaims that there will be #NoNetflixTax on his watch. The Liberal Party sided with Mr. Harper shortly thereafter.
Canadian content isn't just a broad description, it's a technical term that takes into account whether key figures like writers, performers, and technical crews are Canadian.
Ian Scott is Chair of the Canadian Radio-television and Telecommunications Commission (CRTC), Canada's broadcasting regulator. His Commission is responsible for the Digital Media Exemption Order that lets Netflix off the hook for Canadian content obligations worth hundreds of millions per year.
Minister of Canadian Heritage
Steven Guilbeault succeeded Pablo Rodriguez as Minister of Canadian Heritage in 2019. Minister Guilbeault's mandate includes the CBC and other critical cultural institutions.