Photographer: Daniel Acker/Bloomberg
Netflix Steps Into Quebec Political Fray After Deal With TrudeauBy
Pact with federal government has no sales tax, French content
Top broadcaster leads the charge as government pushes for tax
Netflix Inc. is getting a taste of Canadian identity politics.
Quebec’s political and media establishment is pummeling the American video-streaming company after it pledged to spend C$500 million ($392 million) filming in Canada -- without committing to French-language content. The agreement with the federal government also sparked outrage and a campaign by the nation’s top broadcaster because it didn’t subject Netflix to a sales tax, which the province now wants to enforce on its own.
While a lot of the criticism has focused on unfair competition, the underlying concern is a determination to protect the francophone province’s identity through cultural production, a policy that’s been supported by decades of public funding and regulations. That Canadian Heritage Minister Melanie Joly, a Montreal native who negotiated the deal, had nothing to show for her province got her trounced by local media.
“You just don’t do that here,” said Will Straw, a professor of urban media studies at McGill University in Montreal. “That was a big faux pas on the part of Melanie Joly. That’s what led to the feeling that she had been suckered by Netflix.”
Following the backlash, Netflix took to its corporate blog to defend the five-year agreement, which paves the way for its first permanent production presence outside the U.S. It’s unclear whether the C$500 million is a step up from what the company already spends in Canada, and only part of it will fund Canadian content. Shows such as “Riverdale" and “A Series of Unfortunate Events” are filmed in the Vancouver area, for instance, even though they are fictionally set in the U.S.
Yet the company made a special mention of Quebec, and pledged an extra C$25 million to host “pitching days” and other events to get closer to the province’s film industry.
“We have more work to do when it comes to finding great stories from Quebec told in French,” Corie Wright, the company’s director of global public policy, wrote in the blog post. The company declined to comment further on the issue.
Simon Ross, a spokesman for Joly, the heritage minister, noted that Netflix’s pledge for Canadian content covers both languages.
“Our francophone creators are among the best in the world and we’re convinced they will seize this opportunity,” he said in an email.
Netflix will have 6.2 million users by year-end in Canada, where it’s been since 2010, according to London-based Digital TV Research Ltd. In Quebec, research center Cefrio estimates that a third of connected households have a Netflix subscription, up from 24 percent a year ago. That compares with 19 percent for its local rival, Quebecor Inc.’s Club Illico, and 1 percent for Amazon Prime Video.
As a foreign online service provider, Los Gatos, California-based Netflix eludes various quotas and levies applied to Canadian broadcasters and cable operators that have over the years helped support domestic production. It’s also not required by Canadian law to collect and remit sales taxes, an exemption left untouched by the production agreement.
That didn’t go down well with Canadian media companies that must apply the tax, including on streaming units they set up to compete with Netflix. Leading the charge in Quebec is Pierre Karl Peladeau, the vocal chief executive officer of conglomerate Quebecor -- the dominant telecom company in the province -- and a short-lived leader of the separatist Parti Quebecois.
Peladeau has lambasted the government of Prime Minister Justin Trudeau on social media and touted Quebecor’s contributions to Canadian content through its cable and broadcast units. In a speech to Montreal’s business community last week, he urged the prime minister to accept Quebec’s recent proposal to the federal government to coordinate a sales tax on foreign online goods-and-services providers -- a combined levy of about 15 percent.
But there’s little chance of that happening. The Trudeau government doesn’t want to increase the tax burden on Canadians and isn’t planning to change its approach, Chloe Luciani-Girouard, a spokeswoman for Finance Minister Bill Morneau, said in a Nov. 16 email.
“We will work with them to see how they can best apply the provincial sales tax,” she wrote.
Quebec has a vibrant film and television scene, with celebrities who are barely known outside the province of 8.2 million people and an appetite for local stories that imports from France can’t fulfill. Provincial and federal funding helped nurture directors such as Denis Villeneuve -- the acclaimed director of “Arrival” and “Blade Runner 2049” -- and Jean-Marc Vallée, who made “Dallas Buyers Club.”
Yet Canada hasn’t been any more immune to changing consumer habits than the rest of the world. Movie ticket sales are sluggish, and cable subscribers dropped 3.8 percent last year. That’s been bad news for the Canada Media Fund, a body that finances television production and relies heavily on a levy on revenue from cable, satellite and streaming distributors. The government has said it would increase its own contribution to help make up for the drop.
Netflix, which isn’t required to pay into the fund, is perceived as an interloper that threatens a “cozy relationship” among cable companies, the Media Fund, producers and the channels that broadcast the shows, according to Dwayne Winseck, a professor at Carleton University’s School of Journalism and Communication in Ottawa.
That’s because most of Canada’s biggest channels are owned by telecom empires that also include cable or satellite operators, such as BCE Inc., Rogers Communications Inc. and Quebecor.
“They set the trough, they fill the trough and they eat at the trough,” said Winseck.
Because the Trudeau government shows no intention of budging on Netflix, Quebecor has taken its campaign to its TVA channel, the most-watched in the province, to denounce the “preferential treatment” Netflix is getting. In short clips, employees, actors and producers tap into viewers’ attachment to Quebec’s culture.
“For our francophone television to remain distinct, we simply cannot leave production of Quebec shows to American giants,” they say. “Our stories, our series, our shows, belong to us.”
— With assistance by Lucas Shaw, and Josh Wingrove