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Regulating Netflix would be absurd, but logical

There’s been some noise from the expected suspects lately about regulating Netflix in Canada. On the face of it, the idea seems absurd.

There’s been some noise from the expected suspects lately about regulating Netflix in Canada. Phone and cable companies have now been joined by a group of broadcasters and creator groups in calling for Canadian content rules to be applied to the online movie service.

On the face of it, the idea seems absurd. Netflix is an internet-based service which, in this day and age where national barriers have been blurred online, would seem to be exempt from such trivialities. The fact that it’s Netflix’s biggest competitors – companies who still rely on old business models – making the call is also disingenuous. They’re clearly only looking to slow down a company that is becoming a big threat to them. Coupled with usage-based internet billing, it looks like Canada’s big ISPs/broadcasters are doing everything in their power to stop Netflix.

Michael Geist had a nice post the other day summarizing how quickly the phone and cable guys have flip-fopped on the issue of so-called “over the top” internet services stealing their lunch. Similarly, Jesse Brown also did a good job at pointing out how silly the idea of regulating Netflix for CanCon might be.

But is it really that silly? I thought so at first, but after giving it some more consideration, I’m not sure it’s that simple. Regulating a website/service such as YouTube for Canadian content rules might be crazy, given that tons of Canadians create and upload content every day, but Netflix is more of a straight-up, one-way content delivery provider.

If we start with the premise that our television channels, such as Global, CTV and City, are required to devote a certain percentage of their programming to Canadian-produced stuff, it’s hard to see how Netflix is really that different. It is, in effect, just another broadcast channel – it’s just delivered over an internet connection rather than via satellite or cable (I know, it’s the same wire, but let’s not get complicated).

In this sense, it’s not unreasonable to require Netflix to share that percentage requirement. (Offhand, I’m not positive what the current levels are, but Wikipedia says it’s 60% of yearly programming and 50% of prime-time). Specialty channels – and it could be easily argued that Netflix qualifies as such – have lower quotas. Requiring that 20% to 30% of Netflix’s content be Canadian is therefore probably not that crazy and I’d be surprised if the company itself objected on principle. Such a move would, after all, promote Canadian movies, which I suspect is content Netflix could acquire quite cheaply. The rights to the likes of Porky’s and Foolproof are probably not all that expensive.

Where things get muddy, though, is in how that Canadian content gets created. Aside from the air-time requirements, broadcasters are also required to pay a percentage of revenues to funding the creation of programs. Each of the bigger companies have generally pumped millions of dollars a year into bodies such as the Canadian Television Fund, now the Canada Media Fund, which in turn go to producing great thespian programs, such as Trailer Park Boys, which in turn usually get crappy ratings compared to their U.S. brethren.

Canadian movies have their own various sources of subsidies, but as far as I know, that doesn’t include the Canada Media Fund. That makes the Netflix situation even muddier. If the service only offers movies, shouldn’t it be exempt from paying into the Canada Media Fund? But if it offers television shows too, as it does, there’s a case for including it.

Given the vitriol that existed last year during the fee-for-carriage dispute, where broadcasters tried to get cable and satellite providers to compensate them for their signals, the objections to Netflix are likely really based around the funding requirements. The ISPs and broadcasters, which are ironically one and the same now, don’t really want Netflix to be regulated as much as they want themselves to be un-regulated. In other words – they don’t want to pay all those millions into a fund that creates stuff nobody wants to see. Suggesting that Netflix be subject to the same regulations as broadcasters is merely a way to open up this issue again.

The CRTC, after reviewing in 2009 the issue of whether it should regulate broadcasting on the internet, decided it won’t until at least 2014, whereupon the matter will be re-examined. As is usually the case when it comes to new technology, regulators have opted not to touch it for fear of hurting its development. Netflix, YouTube and others are clearly services people want so they should be left to prosper, for now.

But where there’s smoke, there’s fire. As I said above, it just feels silly to regulate Netflix despite the fact that it’s logically fair to do so. That seems to point to the problem being the Canadian content requirements themselves. Perhaps rather than arguing about whether CanCon rules should be applied to new media, it might be more worthwhile to debate whether the requirements should still exist in the first place.

Peter Nowak is an award-winning journalist and author of the best-selling book Sex, Bombs and Burgers. He has been a staff writer for the CBC, National Post and New Zealand Herald, while his work has appeared in the Boston Globe, South China Morning Post, Sydney Morning Herald and the Globe and Mail, among others. His personal blog can be found at