The Canadian Public Broadcaster Is Going After Netflix

Facing shrinking ad revenue and a recently released plan to cut 1,500 jobs and several news productions by 2020, Canada’s official public broadcaster, the Canadian Broadcasting Corporation, is looking to profitable streaming video services, namely Netflix, to help foot the bill for Canadian content.

As reported by cartt.ca and the Huffington Post, the CBC is urging to the Canadian Radio and Television Commission—a body overseeing who and what can be transmitted over Canadian airwaves—to review over-the-top streaming services like Netflix earning over $25 million a year in Canada.

It's arguing that those foreign companies should pay into the Canadian Media Fund to help subsidize Canadian content, also known as "CanCon."

The move by CBC has been echoed by other Canadian producers as the rise in cord-cutting Canadians turning to wifi-based services for television content threatens their viewership and very existence as cable first providers. The CMF helps fund local CanCon and encourages online content specifically. It also benefits the programming of CBC and others competing with streaming platforms like Netflix that are looking to get their shows online.

In a Senate committee hearing in June, the Canadian Media Production Association argued that Netflix is sucking millions of dollars in potential broadcast revenue from Canadian markets and should be forced to put some back into the pot. Netflix, they argue, "takes millions of dollars out of Canada every month" and should, "put some of those dollars back into our country to contribute to our system as Canadian broadcasters and distributors must."

Therein lies the potential motivation for CBC: If Netflix has to contribute to the CMF it will not only raise prices for their subscriptions and somewhat drive viewers back to rival sites, it'll increase funding for Canadian productions overall.

At the moment, while Netflix profits and their user base is surging (they’ve enjoyed over $50 million in profits in 2013 and over 4 million subscribers in Canada alone), CBC is struggling to stay afloat, with job cuts and shrinking profits testing the network.

But that's part and parcel of today's cord-cutting trend. In the “Let’s Talk TV” consultation, CRTC points out that users are turning to cheaper content providers on the internet rather than paying for a pricey cable package.

"Many point to Netflix as an affordable, on-demand, commercial free model that should serve as an example for the future," said the Let's Talk TV report.

“While many participants state that they still watch television using a television set fed through either a set-top box or an antenna,” said the CRTC report. “Some have shifted their viewing habits.” And that spells out bad news for CBC, which is on the mandatory cable carriage and is still struggling to maintain viewership.

Those habits are only increasing and reflecting the on-demand age where viewers aren’t beholden to the six o’clock news, or having to wait for the next episode of Matlock. Like any other thriving modern society, Canadians want to watch stuff on their own schedule without the hassle of changing channels and looking for a decent show. Especially when you consider CBC puts out premium content like the little-watched Murdoch Mysteries.

Not to mention, the average basic cable package would still put you back well beyond a Netflix Canada account at $8.99. And that comes with stuff like Orange is the New Black and House of Cards, not a CanCon dominated menu of shows. In the face of forcibly imposed funding to the CMF, Hollywood Reporter says Netflix is positive it will be forced to increase rates for Canadian subscribers due to the what they call an unfair “Netflix tax.”

This isn’t the first time the CRTC was asked to regulate Netflix. In 2011 they turned down the opportunity to oversee Netflix, given that the American streaming site wasn’t a producer of content at the time, which has since changed.

Though the CRTC has yet to infringe on Netflix, if the American-based company continues poaching viewers from traditional Canadian markets, they may begin running into litigious backstops that could curtail their overall success. In Canada, protection of Canadian content and the overall brain drain to American markets, has been federally mandated.

Canada's Broadcasting Act sets out policy objectives aimed at preserving Canadian talent on TV and the “shared experience” of “Canadian identity.” In other words, it tries to stave off complete American cultural invasion, given the influence of the southern neighbor on Canadian culture.

There’s no denying it’s been a bad year for CBC. They lost their signature Hockey Night In Canada broadcasting rights for all Canadian NHL games in Canada on Saturday nights. And the demise of the 61-year-old show meant the loss of blockbuster hockey ad-revenues amounting to a huge portion of the network ad dollars. Whether this move to shake down Netflix and stay within punching distance of an emerging online threat, or the desperate moves of a declining broadcasting power, remains to be seen.

In September the CRTC will hold public hearings to examine the future of television in Canada, something CBC will be monitoring closely. Canada's public broadcaster would also do well to keep an eye on the domestic front, especially since Rogers is rumored to be circling the creation of their own Canadian $100 million version of Netflix. For now CBC can rest assured that their FIFA World Cup broadcast numbers were a major success, but beyond that, question marks surround it indefinitely.