Photographer: Daniel Acker/Bloomberg

Canada Taps Netflix in Overhaul of TV Policy for Online Era

Updated on
  • Minister signals no new tax for online streaming services
  • Government to review Broadcasting Act, Telecommunications Act

The Canadian government pledged not to tax television-streaming services after receiving a commitment from Netflix Inc. to create a Canadian division and invest in the country.

Heritage Minister Melanie Joly announced the agreement Thursday during a lunchtime speech in Ottawa. It’s part of a widespread reform of Canadian cultural policy that includes a review of broadcasting laws and direct government funding to support domestic productions.

As part of the announcement, Netflix will spend C$500 million ($401 million) on original productions in Canada over the next five years, in both French and English. The company has previously said it commissioned “hundreds of millions” of dollars of Canada-produced programming in 2016 alone. The company will spend $6 billion on programming this year, and said it has $15.7 billion in streaming content obligations in its July financial statement.

Canada didn’t immediately publish the terms of its agreement, but Joly’s speech included a pledge not to tax TV, movie, radio and other entertainment services online.

“Broadband coverage is uneven across the country, we pay some of the highest rates in the world,” the minister said, according to prepared remarks. “Our government won’t increase the cost of these services to Canadians by imposing a new tax.”

It’s unclear whether the C$500 million must be spent on productions directed by or featuring Canadians, or if it would apply to shows Netflix is producing in Canada simply because the country is a cheap place to shoot. U.S. shows such as CBS’s “Star Trek: Discovery” or legal drama “Suits” film in Toronto but aren’t necessarily considered Canadian content.

Netflix introduced its streaming service to Canada, first expansion outside the U.S., in 2010. Netflix has since signed up more than 52 million subscribers outside the U.S., more customers than it has at home.

To sign up more users in foreign markets, Netflix is producing original programming all over the world, including series in Brazil, Mexico, Japan, France and Italy. Netflix commissioned its first Canadian production in 2014. 

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Joly pledged support for net neutrality and said Canada will “continue to champion the Internet as a progressive force and an open space without barriers.” She also pledged more money for the Canadian Media Fund to counter declining private-sector cable revenue, though didn’t specify how much. Canada will also review two laws, the Broadcasting Act and Telecommunications Act, with further details due this fall.

The minister announced C$125 million over five years to drive exports of cultural productions, and will push for a continued cultural exemption during North American Free Trade Agreement talks. She also called on the Canadian Radio-television and Telecommunications Commission “to set out the issues we see as important for the regulator in fulfilling its mandate,” saying the agency will still have a “critical role” to play.

Joly also announced that Facebook Inc. would partner with Toronto’s Ryerson University to create a digital news incubator after the government asked the company to “do more” as a news aggregator.

— With assistance by Gerrit De Vynck, and Lucas Shaw

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