Regulating Netflix would be absurd, but logical

19 Apr

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.


Posted by on April 19, 2011 in crtc, internet, netflix


3 responses to “Regulating Netflix would be absurd, but logical

  1. Torontoworker

    April 19, 2011 at 9:35 am

    We risk becoming a North Korea like country (content wise) if we keep going down the road of protecting the big five and use the Can Con flag waving as the protection tool. Can Con was a political tool for the 70’s and that time has come and gone. You can set your clock by AM & FM radio stations now. Oh, half past the hour – time for a Guess Who tune. Five minutes to the top of the hour, oh yeah, Neil Young time. Of course the radio model that upsets the Can Con music industry cart of course – one they have no answer for, is talk/sports radio who don’t have to play along. Is it any surprise that these non music radio stations are owned by the big five? I guess talking about those losers the Toronto Maple Leafs, hour after horrible hour is Can Con. -:)

    The Can Con issue (that Netflix isn’t held hostage to) keeps the myth intact of Can Con Daddy and Mommy protectionism in place. We should be debating Can Con – not Netflix or any other new order delivery model having to bow down to the old world models.

  2. rbn

    April 19, 2011 at 10:33 am

    The ironic part of the whole thing is that I’ve found myself watching a lot more Canadian stuff on Netflix than I ever did on the broadcast networks. The nature of the service lends itself more to trying stuff out (easy to hit stop and find something else if it sucks), and as I’ve already seen much of the American material the CanCon offers something fresh.

    Regulations that produce a deep catalog of stuff that no one ever watches does the industry no good, as it will forever be dependent on subsidies and has little incentive to improve quality. Getting the material we have out in front of Canadians, on the other hand, does a world more good as it produces the ingredients necessary to make the industry self-sufficient.

    Netflix has done a great job at hitting the later objective voluntarily and I’m afraid that shackling them with the old rules will just drive that back. When providers have to hit some ridiculously high quota of material, you end up with a lot of shovelware and people just assume that it’s all poorly produced crap and immediately grab the remote. When you do as Netflix has done and just focus on the better material, however, it cuts down on the noise and makes viewers more willing to give it a chance.

    With that said, I agree that a wholesale reconsideration of the current regime makes sense. In an on-demand world, trying to shove CanCon down people’s throats isn’t going to work as people will just go somewhere else. It may have worked a decade ago as there were a finite number of channels and there would be plenty of timeslots when nothing else was on. Nowadays, however, it’s easy to find something else at any time of the day and those rules just push people away.

  3. Marc Venot

    April 19, 2011 at 1:29 pm

    CanCon soaps are most often weak but we can say the opposite of the local news when they are based on real journalistic inquiry.

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