Canada

Contributed by Charles Acland (Concordia University, Montreal) and Ira Wagman (Carleton University, Ottawa)

Updated March 2019; see original May 2017 dossier below.

We completed the “Netflix and Streaming Services in Canada: Initial Report” in May 2018. The world of streaming is a fast changing one, even if the regulatory frameworks respond at a glacial pace. This update is meant to cover some of the developments since that initial report, and to point out some of the continuing themes and issues.

One factor is amply evident: Netflix remains at the centre of the Canadian television streaming sector. The Canadian Media Producers Association Report for 2016-17 recorded Netflix’s continued dominance, accounting for 31% of all on-demand services (including SVOD, PPV, and VOD) and a whopping 65% of SVOD services. Netflix revenue for 2016 was $709 million, which represented a 28% increase from their Canadian revenue of $553 million the year before. The entire on-demand market drew in $2.3 billion in revenue.[1]

Netflix has not dramatically increased the titles available, and the company seems to be content with its list of front-of-the-portal originals and comparatively limited catalogue. Canadian competitor Crave continues to offer a deeper archive of shows, with an explicit focus on television and HBO programs. While Canada is a relatively small market for television, by July 2018, Netflix Canada had an estimated 5,500 titles available for streaming. This figure made it Netflix’s third largest catalogue, after Japan with approximately 6,000 and the U.S. still 5,707.[2]

Despite the Canadian Media Fund’s prediction that consumer spending worldwide on on-line content will rise an average of 12.6% each year from 2015 to 2020,[3] there is evidence that the Canadian market for viewers may be close to saturated, as growth has essentially stagnated.[4] This importantly suggests that the rising number of services are competing for the same pool of subscribers and that at some point they can only hope to steal from each other, not just count on cord-cutters and converts from broadcast audiences. Netflix may have been the fastest to establish sector dominance in Canada and in other countries, but the evidence of subscriber saturation means their position may be challenged by newer entrants, especially if desirable properties are licensed by other streaming outlets.

Regulatory timidity with respect to on-line services has produced only piecemeal efforts to build a framework that includes international streaming concerns. The shining example of this was Heritage Canada’s so-called deal, led by Heritage Minister Melanie Joly, with Netflix to extract a commitment and financial contribution to the Canadian film and television production industry. Initially presented as a breakthrough in Canadian regulation of streaming services, the arrangement was not enforceable, had no specific language commitments, had no way to measure the expenses on various kinds of productions, and didn’t specify anything on Canada’s part, though unstated was presumably the continuation of the current non-regulation approach to international streaming services at the federal level. The centerpiece of the commitment was Netflix’s promise to spend $500 million on production in Canada over five years. This spending, though, is not the boom it initially appeared to be, and commentators like copyright scholar Michael Geist, swooning at the immensity of the raw integer, seem to misunderstand the arrangement. Production tax credits have very specific definitions for what qualifies for which type of production. In this Joly deal, there are no details concerning what qualifies as Canadian production spending whatsoever, thus inviting Netflix to engage in creative accounting about how much it spends. More to the point, Canada provides one of the most highly developed film and television production sectors in the world, with attractive financial incentives. Netflix was already partnering with production entities prior to the $500 million commitment, as part of their global efforts to produce original content. Moreover, with the loose structure of the deal, we do not know how much more this sum represents compared to its existing level of spending.

Netflix’s Canadian spending promise is a sizable sum, and a frisson at the possibility of Netflix production boom ran through the film and television sector. Yet, with no transparency nor metrics for reporting, it is conceivable that this is a reduced amount of their planned spending. Their funding plan is part of Netflix’s aggressive international production expenditures. And, after all, the Canadian Media Producers Association Report for 2016-17 documented that Canadian production spending had reached a record high at $8.38 billion, which represented a 24% surge from the previous year and was in large part the result of an increase of foreign shooting, some of which would have included Netflix financing on non-Canadian productions made in Canada.[5] Certainly, a governmental memo on the topic seemed to indicate that Netflix spent more than Bell Media in 2016 on scripted drama, which was $127.8 million.  Again, it is impossible to know which, if any, of the Netflix productions referenced even count as Canadian within the CanCon system that domestic players must adhere to. Netflix most likely clocks Canadian spending in total. In any case, the memo indicates that prior to the deal Joly shepherded, the government understood that Netflix was spending more than $127.8 million on production in Canada. This information is the source of their claim that the new deal represents an increase, except that $127.8 sum is for one year and the $500 million is supposed to be over five years.

It is interesting, then, to note that in one recent proposal the CRTC continues to recommend individual arrangements with different streaming services.[6] In parallel, the CRTC proposes to ease the requirements of the traditional broadcasting and cable companies to contribute a percentage of their revenue to Canadian production. The regulatory effort to align streaming and legacy broadcasting/cable is drawing the latter closer to the non-contributing status of Netflix, rather than push Netflix to participate financially.

Netflix has made an effort to make Canadian shows more identifiable on its service. Its mobile app includes “Canadian Movies” as one of its genre categories. In another such effort YouTube launched a Canadian channel, Spotlight Canada, which included both French and English-language programmes. Where the Netflix categorizing is exclusively for the Canadian version of the service, YouTube’s effort is more internationally oriented. According to Google, 90% of all views of Canadian YouTube channels takes place abroad, which is apparently the highest percentage of any country.[7] Making Canadian postings more discoverable, thus, expands advertising audiences in other markets. Following suit, the Canadian Media Fund launched its own YouTube channel of Canadian material, Encore+, a few months later.[8]

One of the more significant recent turns has been the appointment of Stéphane Cardin as Director of Regulatory Affairs and Industry Relations at Netflix Canada. This hire was a clear sign that the company understands that the company is going to be brought into the Canadian regulatory structure in some way, or at least a point-person needs to be on-the-ground to argue against such efforts. Cardin is technically the first Netflix employee hired in Canada. And, the choice of a bilingual francophone, with a Montreal-located office, is also not by chance as Quebec is leading the way with a “Netflix tax” that began on 1 January 2019. Soon, though, Quebec was not alone in this decision, and Saskatchewan has followed suit with their own tax.

At the federal level, the CRTC has been calling on the government to bring international streaming services, like Netflix and also music services like Spotify, into the Canadian framework.[9] Especially at issue is the possible contribution to Canadian production.

This update captures the continuing uncertainty in how a long-standing regulatory framework will accommodate this newly popular distribution structure, and there is yet to be any resolution on this front. In order to assist in the tracking of streaming development in Canada, Smriti Bansal (MA Media Studies student, Concordia University) has assembled this timeline that includes key events:

canada timeline.png

Notes

The authors thank Smriti Bansal for expert research assistance in the preparation of this report.

[1] Jordan Pinto, “Production spending surged in 2016/17: CMPA report,” Playback, February 2, 2018.

[2] Daniel Tencer, “Netflix Canada vs. Netflix USA: You can stop envying the Americans now,” HuffPost, July 31, 2018.

[3] Jordan Pinto, “Consumer spending on online video to increase: report,” Playback, July 14, 2017.

[4] Bree Rody-Mantha, “Online video penetration flat: study,” Playback, June 19, 2017.

[5] Jordan Pinto, “Production spending surged in 2016/17: CMPA report,” Playback, February 2, 2018.

[6] Jordan Pinto, “CRTC recommends telecoms contribute to Cancon,” Playback, May 31, 2018.

[7] Regan Reid, “YouTube launches Cancon channel,” Playback, August 1, 2017; The Canadian Press, “YouTube unveils Spotlight Canada channel to put focus on Canadian artists,” CBC, July 31, 2017.

[8] Regan Reid, “CMF unveils its Cancon YouTube channel,” Playback, November 8, 2017.

[9] The Canadian Press, “CRTC Calls On Canada To Regulate Streaming Media, Wherever It’s Located,” Huffington Post, May 31, 2018; Canadian Radio-television and Telecommunications Commission, Harnessing Change: The Future of Programming Distribution in Canada, May 31, 2018.

Original May 2017 dossier

Key takeaways

  • Canada’s proximity to the U.S. led to its status as the first international Netflix market

  • Canadian cable and telecom providers have developed competing services but have faired poorly in competition with Netflix despite more extensive libraries

  • Netflix’s international reach may prove advantageous for helping Canadian produced content be available to wider array of markets.

  • The inability of regulatory bodies to impose the same rules on Netflix as govern other distributors of television and film have been particularly vexing for the established industry.

Market

Note: All currencies are in Canadian dollars (C$1 =$US .73 as of May 2, 2017).

Canada’s media culture has developed in relation to several overriding features. First, Canada’s population of 36 million lives in the second largest country in the world, one that spans six time zones. Geographic vastness and distance between communities are everyday characteristics of Canadian life and thought. Second, most Canadians live in major metropolitan areas, with more than 85% within one-hour drive of the United States. Canadians consist of, for the most part, highly urban peoples with an elevated border consciousness, and they are aware of what it means to live in close proximity to a global economic and cultural superpower. Third, Canada is a settler nation, initially an extension of French and British Empires that is built on the exploitation of natural resources and of indigenous populations, and one that continues to be an active recipient of new immigrants. Debates about multiculturalism and First Peoples rights occupy a prominent place in public discourse. Such discussions feed a variety of ideological positions including laments for national cultural incoherence, celebrations of diverse cultural performance, and critiques of the tacit hierarchies of power that “diversity” can mask.

Concerns about a dispersed, diverse, small population, vulnerable to a proximate economic and cultural giant have resulted in a distinctive on-the-ground reality. Canada has an exceptionally high degree of concentration of media ownership, with four companies constituting a dominant media oligopoly in cable, satellite, broadcasting, and phone operations, namely Rogers, Shaw, Bell, and Videotron, the latter primarily operating in Quebec. Among their various business activities, Rogers, Shaw, and Videotron are all cable providers; Bell offers direct-to-home satellite. Telus is another large entity, but it has focused most completely on the telecommunications business to the exclusion of cable, satellite, and broadcasting. A history of protectionist policy measures has kept these companies almost entirely Canadian owned, and given them control of 72% of Canada’s media economy.

Netflix disrupts most of these characteristics, and its presence has sparked a vociferous public debate that has implications for the future of the very idea of a national broadcasting and cultural system. Among other things, Netflix has drawn attention to the historically poor relations between Canada’s media companies and the audiences they serve. But it is not the first such disruption, and from time to time the system has been threatened by other border-crossing media technologies.

Canada was the first country to get Netflix outside of the United States; it was the company’s first international stop for what would be its rapid global expansion in subsequent years. Netflix announced a move into Canada on July 21, 2010, with operations beginning in September of that year. In explaining the decision to begin international expansion in Canada, Netflix CEO Reed Hastings described the country as “international lite,” which provided a fine example of the insensitivity to local national cultures that has dogged the company ever since.[1]

Cable and satellite providers, who are among the biggest ISPs, saw Netflix’s immanent arrival as direct competition with their services and as an elevation of the threat of cord-cutting, which had been gaining steam for years. There had been, and continues to be, a growing number of households joining the ranks of those opting for internet as a primary source of entertainment options, including television programming, rather than through cable and satellite connections. Cord-cutting has been due in part to the arrival of new streaming services such as Netflix, but it is also a product of the long-simmering distaste of Canadian consumers about the costs of cable service along with the presence of unpopular service agreements and notoriously poor customer service.

It is important to understand that Canada was an early pioneer in “community antenna television” (CATV), the precursor to cable, beginning in the late 1940s in Quebec. This was partly to respond to the distances between communities as well as a demand for receiving US stations. Cable penetration has been among the highest in the world, hitting 70% of households by the mid-1970s. So broad was the integration of cable with television usage, it became one of the foundational features of television broadcasting policy, including signal substitution, community access, channel bundling requirements, and production contributions through such programmes as the Canadian Media Fund.

Netflix, operating outside this system but delivering comparable content, demonstrated what many had presumed would follow as more video content flowed through the internet to consumers, namely, that the days of the centrality of cable and satellite providers in Canadian media culture were numbered. Essentially, an existential threat to cable and satellite services is also an existential threat to existing broadcasting policy and its efforts to carve out a specifically Canadian media space.

The response to Netflix’s initial announcement in 2010 was immediate. Two days hence, at the end of July 2010, Rogers Media announced it would place a cap on data included in its internet packages, reducing maximums from 25 gigabytes to 15.[2] Other ISPs, including three of the largest (Shaw, Videotron, and Bell) took similar actions. This directly targeted Netflix, which relies on the availability of high-speed Internet with substantial data capacities.

There was some support for the legality of this infringement on the principle of net neutrality, which has been an unassailable position for telecommunication, one that built on the history of “common carriage” and its codification in successive broadcasting acts. The Canadian Radio-Television and Telecommunication Commission (CRTC) had earlier permitted Bell to charge smaller ISPs that use their infrastructure differential rates scaled to the amount of bandwidth they used. Where these smaller service providers used unlimited data as a selling feature to compete with the larger competitors – Bell, Shaw, Rogers, and Videotron – they now found this to be more expensive. The CRTC has since backed away from this position due to a number of challenges, and has become a stronger supporter of net neutrality rules.

The defensive moves of the Canadian media corporations did not dampen enthusiasm for the American service. When Netflix was available in September 2010, the take-up was significant, with reports that it secured 1 million subscribers in the first 6 months. Estimates suggest that between 30-40 percent of downstream traffic in peak viewing hours soon belonged to Netflix.

Canadians are avid consumers of media, especially American media. Awareness of Netflix was exceptionally high in the years prior to their launch in 2010. The timeline is such that Netflix arrived in Canada as a streaming service and did not build on its mail-based DVD rental system, which was responsible for establishing brand recognition in the United States. Canadians were generally aware of that service of Netflix, but were never able to subscribe to it. In Canada, Ottawa-based Zip.ca was the primary mail-order DVD rental business, but it was unable to convert to a streaming service, and closed in August 2014. Netflix DVD rental continues to be active in the US, and indeed, it is a reliably profitable wing on which Netflix counts for the overall profitability of the company. The absence of this service in Canada, and elsewhere, is one feature that makes the US Netflix distinctive from their international operations.

It took several years before Canadian efforts tried to challenge the market dominance of Netflix. Shomi, a joint venture between cable and telecom corporations Shaw Media and Rogers Media, was launched at the end of 2014 (though available only to their cable or satellite subscribers until 2015), a full 4 years after Netflix was able to establish a considerable subscriber base. Despite a deep catalogue and contracts for high quality content, Shomi was not able to compete with the Netflix brand. Shomi lasted only two years, and shut down on November 30, 2016.

The prospect of even more high-profile competition from American streaming may have pushed the struggling Shomi to give up the ghost. The very next day after it ceased operations, on December 1, 2016, Amazon Prime, with its high profile original productions, though with a relatively small library, was made available to Canadians.

Bell Media, another large Canadian telecommunication company, launched its service in December 2014, first called Project Latte, but finally called CraveTV. It began at a discounted $4/month, or roughly the price of a latte (hence the initial name). Like Shomi, it was available exclusively to those who were already their cable or satellite subscribers, until 2016.

Google, Inc., opened YouTube Movies in Canada with 3000 titles in 2011, so there are some alternatives to Netflix.[3] But overall, the situation is that there is little other streaming competition to Netflix in Canada; CraveTV has only a small market share, and there is no YouTube Red and no Hulu. Film streaming services, such as Mubi and Sundance Now, have only recently begun operating in the Canadian market.

Before we move to discuss the key regulatory matters, consider that Canada, which is an affluent country with one of the most active internet using population, has historically had one of the slowest networks among advanced industrial countries. In 2010, a study from Harvard University’s Berkman Center for Internet and Society found Canada to be among the countries with the slowest and most expensive internet services, ranking it 19 out of 30 advanced industrial countries. Though vehemently rejected as flawed by the CRTC, the study confirmed the experience of many Canadians who felt beholden to the offerings of a concentrated media elite. Regardless, infrastructural determinants limit the expansion, use, and competition among streaming services, and indeed, the desirability of such services. Most recognizably Netflix has been a driving force in the improvement of the system.

Regulation

Media culture, industry, and policy have been designed to work with Canadian particularities and resolve the contradictions evident in these determining aspects. The Canadian broadcasting and telecommunication system is the product of a national framework, regulated at the federal level for all regions and populations. The arm’s-length regulatory body is the CRTC. Broadcasting and telecommunication operates in a hybrid structure in which public and private media services are supposed to complement one another. Despite persistent neo-liberal calls for more private control and less governmental intervention, Canadians expect and are accustomed to considerable State involvement in the shaping of broadcasting and telecommunication.

The Canadian broadcasting system had taken cable as a front-line regulatory framework. The current moves to deliver television and other content outside of that framework – via any OTT (over-the-top) or SVOD (subscription video-on-demand) services – undermine the existing structure.

This has a precipitous effect on Canadian content. Broadcasters and cable companies are mandated to participate in producing, airing, and promoting Canadian content. The SVOD services are not. This is most egregiously the case for Netflix, which has by far the largest subscriber base for such a streaming service. Canadian streaming services, like CraveTV, are also not bound by Canadian content rules, but they do collect sales tax and pay income tax, unlike Netflix.

Richard Stursberg, a former CBC and Telefilm CEO, has argued that Netflix is operating as a distributor in Canada in much the same way as a cable or satellite company, which means it should be paying a levy of 5 percent on revenues. But should we understand Netflix as a broadcaster, then required contributions to Canadian production amount to 30 percent of revenue, not to mention the application of various CanCon (Canadian content) requirements for broadcasters.[4] Netflix has been estimated to be taking $300 million in tax-free revenue from Canadian subscribers without meaningful contribution to the development of Canadian media culture.[5] It’s no surprise that some commentators have responded with headlines like “It’s time to be honest: Netflix is parasitic.”[6]

And yet, the non-regulation of Netflix has not truly resulted in a groundswell of popular interest in bringing them into the fold, especially when people understand that at the end of the day they will be paying more for their subscriptions. On the contrary, at times, we have seen media concerns use Netflix as a rationale for the relaxing of content requirements, and the CRTC has shown some signs that it is willing to comply. For instance, as a result of extensive consultations about the future of television in 2014, the CRTC reduced daytime Canadian content requirements from 55 percent to zero.

The federal government is undertaking a major investigation of its “cultural policy toolkit,” with a report planned for the end of 2017. Among the proposals are those aimed at services that operate outside of the current policy framework, with discussions about forcing companies like Netflix to pay sales taxes or to encourage them to contribute to funds that support media production. Current Canadian tax law is such that only entities with a physical address in Canada have to comply, so without a Canadian office, Netflix is not obliged to pay the national harmonized sales tax (HST). Some provinces – especially Ontario (a centre for domestic film and television production) – have been particularly aggressive in calling for remedies. Estimates have shown that had Netflix been collecting and paying HST, as every business enterprise in the country does, it would have been between $62.4 to $90.5 million annually.

The freedom from regulation enjoyed by Netflix pained the big Canadian media corporations. Seen as an unfair market advantage, cable and satellite companies, production outfits, and union executives formed the “Over the Top Services Working Group,” in February 2011, to lobby the CRTC for a public consultation process about the impact of new alternative forms of media delivery.[7] For its part Netflix presented its offerings as simply the way of the future, saying they were not broadcasters and were no different from any number of other web-based video platforms, which themselves were not regulated. For instance, Steve Swasey of Netflix declared, “Whether it’s Netflix, Skype, YouTube or other Internet video providers, an unregulated approach to the Internet is effective for consumers.”[8] By the fall of 2011, the CRTC had reexamined the issue of OTT services, and had reasserted its non-regulation position. It claimed that evidence of a harmful market effect due to Netflix and the like was “inconclusive.”[9] Having argued that, they went on to prohibit distribution that was preferential to a media company’s own infrastructure, such that television content could not be exclusive to their own on-line or phone subscribers, a stance directed to the actions of the big Canadian media companies.[10]

This did not hamper Canadian media corporation’s efforts to whittle away at net neutrality. Both Shomi and CraveTV began as exclusive offerings to existing cable and satellite subscribers. Though each intended, and did, offer them to all shortly afterward, this initial limitation drew the ire of the Public Interest Advocacy Centre and Consumers’ Association of Canada (PIAC-CAC), who complained to the CRTC that this contravened rules against such preferential links between content and delivery platforms. Bell Media, on their part, commented that PIAC-CAC were against “Canadian creativity and investment with an innovative product,”[11] ironically a line similar to that taken by Netflix against the Canadian media corporations.

The threat of OTT enterprises operating outside the existing regulatory structure, though, provided the big media concerns an opportunity to cry vulnerability, to call for a relaxing of regulation, and to validate ownership concentration. George Cope, BCE executive, which owns Bell, put it plainly “The Canadian system needs companies with the scale to compete against foreign content companies like Netflix, Apple, Google, and, as of last week, Amazon.”[12]

It is interesting to consider that discussions of Netflix occur during the reign of “consumer-friendly” CRTC commissioner Jean-Pierre Blais, who has been behind a dramatic transformation of the regulator into a popular force through efforts like requiring “pick-and-pay” cable channels, anti-spam laws, loosening of mobile phone contracts, backing net neutrality, and encouraging $25 “skinny” cable television packages. Additionally, Canadian commitment to net neutrality, supported by the current Heritage Minister Mélanie Joly and a recent Supreme Court decision, runs against some of the currents elsewhere, especially in the U.S.

The general sense is that it would be undesirable, if not impossible, to mandate Netflix to adhere to Canadian content requirements. This view often translates into an idea that there is no option but to leave internet services unregulated. But it is worth noting that, in terms of regulatory mandates, SVOD contributions to Canadian production do not have to be in the form of content minimums, but could be direct contributions to production. The Centre for Policy Alternatives, a left-leaning Canadian advocacy group, points to the Canadian Revenue Agency for failing to adequately bring Netflix into the Canadian tax structure, documenting other countries, including South Korea, Australia, Norway, and New Zealand, that have found a way to tax “intangibles” on-line.[13]

Viewing habits

Although Netflix is now available on a range of devices, from computers to tablet and mobile phone applications, an underappreciated element to the story of its popularity is the presence of SVOD services on televisions. The increase in Netflix’s popularity, in other words, came in part when it was “bundled” with applications that run on televisions and streaming devices like Apple TV, Chomecast, and Roku. If we consider that Apple TV was only made available in Canada in 2015, and that Roku and Chromecast came afterwards, we could say that Netflix was more bound to computer monitors than television sets in Canada than it was elsewhere during the first five years of its operations in Canada. More recently, the expanding sale of “smartTVs” has helped return Netflix and other OTT services to the living-room.

Internet Pricing and Availability

Two aspects are in play when one talks about pricing: the actual subscription fee for the streaming service and the efforts to apply differential fees for internet access dependent upon the amount of data used.

SVOD and other streaming services were central to this discussion, as attempts by Canadian media companies to offer access to their own streaming services with “zero ratings” (i.e., Canadians could stream them without it counting against their monthly data caps) was seen as giving “unlawful preference.” Bell previously charged $5 a month for an app that allowed users to stream up to 10 hours of programming with no impact on their monthly wireless data caps. Videotron’s “Unlimited Music” service is the latest problem case to emerge.

Netflix was first priced at about $8/month, though with a remarkably small catalogue for Canadian subscribers. The US iteration of the service offered an estimated nine times more movies and eleven times more television shows.[14] Yet, as has proven to be the case, the fact that Netflix has systematically offered less choice and fewer viewing options than other outlets – even in the US – has not impeded its adoption. The brand recognition, original content, and convenience were enough to override the obvious deficiencies in its offerings. CraveTV competes as a discount version of video streaming. As of February 1, 2016, it raised its monthly fee from $4 to $6, still cheaper than what Shomi was at $9 and Netflix between $8 and $12.[15]

When Shomi was closed, Rogers started offering its cable its cable subscribers varying levels of free Netflix service to new and existing customers, a sign that streaming was being treated as a perk for their other services. This matches Rogers’ plans, which has long offered free subscriptions to other services, like Spotify, as further incentives to “bundle” services like home internet service, phone, and cable.

Content

Many Canadian Netflix subscribers began to look for alternatives, upon realizing the service’s rather limited catalogue. Rather than surrendering their Netflix accounts, and opting for more local sources of audio-visual plenitude (e.g. the DVD rental outfit hobbling along just around the corner), copyright circumvention became a familiar trend. With minimal technological skill, subscribers could set up a VPN (virtual private network) to make it appear that they were physically located in the US, and in this way gain access to the deeper US catalogue. Indeed, articles in Canadian newspapers not-so-obliquely encouraged such practices by telling Canadians about these services, a fascinating reminder of the brief period a few decades ago in which “grey market” satellite dishes circulated in Canada offering access to US channels that were unavailable in the national market (like HBO or ESPN). In these cases, a mainstream and privileged Canadian class bought into the idea that copyright crime is victimless and thought nothing of operating outside the nationally-bounded contracts that Netflix had entered into for the catalogue of titles on offer. Neither did Netflix, it turned out, who did not discourage this behavior; after all, they still were receiving the same subscription fee. A few years ago, executives from legacy media companies accused Netflix of encouraging the activity, and Netflix now claims it has cracked down on this practice. This supposedly better American catalogue was, and is still, less complete than the most run-of-the-mill DVD rental stores of the past.

According to an article in Buzzfeed, Canada’s Netflix catalogue has just over 3400 titles, significantly less than the over 5000 titles available on the American version of the site. As a point of comparison, Shomi began with 14,000 titles, promising 30% Canadian content (mostly from CBC). As such, it had a potentially distinctive brand. It boasted deals to carry movie and television content from Fox, Warner, Starz, CBS, and Disney, and had forged a distribution deal with Entertainment One, which is one of the biggest media distributors in the world and a Canadian company, though most of its assets are not Canadian.

CraveTV planned to provide access to 10,000 titles, with an exclusive deal for the entire HBO back catalogue. In a curious decision, CraveTV opted for an almost exclusive focus on television content. CraveTV has been the platform for the release of a few Canadian programs, most notably the film version of Corner Gas. CraveTV is also the platform for Letterkenny, a popular television show adapted from a web series, and What Would Sal Do, a comedy that was scheduled to air on the Super Channel cable network before it filed for creditor protection.

Netflix has made limited efforts at Canadian production. One of its earliest was the re-boot of Trailer Park Boys in 2014, six years after it wrapped up on conventional television. More significantly, Netflix has been a vehicle for Canadian distribution abroad, with new television programming like Frontier and Between signing deals to be shown on their international services. Frontier, for instance, is available on CraveTV domestically, but streams globally on Netflix, and Anne With an E airs on CBC in Canada, and began streaming a few weeks later internationally on Netflix, to be followed eventually with a domestic Netflix streaming. Netflix is now operating like a “one-stop” venue for international distribution for Canadian production entities, making access to potentially 190 markets relatively simple. It remains to be seen whether or not this is especially advantageous; often, distribution deals with different territories has proven to be more lucrative than bundled deals for many territories.

Consumers and Press Reaction

One of the striking features of the public discourse about Netflix and new streaming services has been the effective decline of nationalist rhetoric that surfaces irregularly with respect to new media concerns. While Canada has long championed its own radio and television systems, and supports the publishing, magazine, film, and television industries, there has been little political or public will to extend those supports to new entrants such as Netflix. Attempts to get new media firms to contribute to independent production funds have been framed in the mainstream press as “Netflix taxes,” which would be unpopular with subscribers. The most vociferous calls for “balanced regulations” in support of Canadian talent have come from creative unions.

Behind the usual stories of its success (such as cost, convenience, and appealing titles), Netflix’s popularity in Canada represents something unprecedented: a legal experience of domestic televisual entertainment that is free of regulation: Canadian content requirements, simultaneous substitution rules, “Canadian editions,” etc. It is equally important to note that Netflix’s world-wide release strategy for its original content offsets longstanding complaints from Canadians about the time-lag between content available to Americans (and talked about in press and entertainment news shows) and when it is available in Canada, if ever. Curiously, the last decades have seen a broader orchestration of global releasing strategies across media concerns, so there has been more simultaneity in the availability of prominent media works. Nonetheless, the perception of a disparity continues to be evoked.

After a series of public consultations in 2014, entitled “Let’s Talk TV,” the CRTC mandated a number of changes to the broadcasting policy framework, including the introduction of $25 “skinny basic” cable packages with a minimal number of channels, as well as “pick-and-pay” offerings, all of which are intended to provide more choices for cable and satellite subscribers.  The Commission also put an end to costly cable cancellation charges and forced cable companies to provide clearer service agreements for consumers. In another major change, the ruling allowed Canadians watching the NFL Super Bowl to view American commercials on American stations, contrary to previous years when those commercials would be replaced by Canadian ads. Together such moves were attempts to stanch cord-cutting and to redress decades of consumer grievances against broadcasters for a range of unpopular practices.

An interesting note about the “Let’s Talk TV” hearings was Netflix’s effective unwillingness to provide any information to the CRTC. During a recent set of hearings representatives from the company were publicly confronted by the regulator who demanded various kinds of information about the number of Canadians subscribed to the service, the size of its catalogue, its investments in Canadian productions, and other issues. The company flatly refused to provide information, and the CRTC subsequently struck their testimony from the public record claiming that its decisions will be based on “the remaining evidence on record.”

Subscriber Estimates

One year after availability, a CRTC commissioned report showed that 10% of Canadian adults had subscriptions to Netflix.[16] By the end of the second year, 17% of Canadian homes had subscribed, meaning about 2.5 million households.[17] One estimate claims the company now has 5.2 million subscribers, which means Netflix is in 40 percent of Canada’s 13 million households.

In May 2015, Solutions Research Group Consultants determined that Apple TV was in about one million Canadian homes. Shaw enjoyed 1.9 million cable and 1.9 internet subscribers, and Rogers showed 1.9 million cable and 2 million internet. With 2.6 million satellite subscriptions, Bell was the largest. At the time, Netflix had 4 million Canadian households on board.[18] On a smaller scale, Club Illico, offered through Videotron in Quebec, started in 2013 and a year later had 111,000 subscribers.[19]

Netflix’s market strength has been borne out by more recent data. An extensive phone survey found that 48 percent of Canadian Anglophones subscribed to Netflix. In terms of age differentiation, 67 percent of millennials subscribed, 55 percent of Gen Xers (35-49), 37 percent of Boomers (50-64), and 20 percent of those 65 and over. Subscription to all services available totaled 51 percent, with 80 percent of those going to Netflix only and another 13 percent with Netflix as well as another service. Of that 13 percent, 6 percent went to CraveTV and 7 percent to Shomi. In this survey, 4 percent had Shomi and 3 percent had CraveTV as their only streaming subscription.

Local Netflix Office

Netflix has no physical presence in Canada, which allows them to skirt the tax requirements that apply to other streaming and media operations and to avoid regulatory oversight.

Notes:

The authors thank Ashley McAskill for expert research assistance in the preparation of this report.

[1] John Lorinc, “Reed Hastings The Netflix CEO brings video streaming to Canada, shaking up the cable industry,” The Globe and Mail, September 25, 2010, F2.

[2] Iain Marlow, “Consumers cry foul over Rogers move,” The Globe and Mail, July 27, 2010, B5; Susan Krashinsky, “Netflix confronting Canadian challenges,” The Globe and Mail, January 12, 2011, B7.

[3] Omar El Akkad, “Google enters Canada’s online video fight,” The Globe and Mail, September 1, 2011, B4.

[4] Kate Taylor, “The Netflix chill,” The Globe and Mail, November 5, 2015, R8.

[5] Barrie McKenna, “CRTC’s Blais can’t win against the likes of Google, Netflix,” The Globe and Mail, September 29, 2014, B1.

[6] Simon Houpt, “It’s time to be honest: Netflix is parasitic,” The Globe and Mail, October 4, 2014, R6.

[7] Susan Krashinsky, “Broadcasters call for CRTC to regulate Netflix service,” The Globe and Mail, April 15, 2011, B1.

[8] Ibid.

[9] Susan Krashinsky, “Netflix gets pass on being regulated—for now,” The Globe and Mail, October 6, 2011, B5.

[10] Ibid.

[11] Christine Dobby, “Consumer group challenges Shomi, CraveTV at CRTC,” The Globe and Mail, February 7, 2015, B4.

[12] Simon Houpt, “Bell: Just another carrot dangler,” The Globe and Mail, September 14, 2012, B5.

[13] Regan Reid, “OTTs should pay up: report.” Some policy shifts have tried to adapt to on-line culture. For example, the Canadian Audio-Visual Certification Office (CAVCO), which makes the determination of whether or not a production is Canadian and hence can qualify for various tax incentives, redefined its guidelines so that “shown in Canada” could include distribution through streaming and on-line services. Jordon Pinto, “Online-only projects eligible for CAVCO tax credits,” Playback, March 8, 2017. Retrieved from http://playbackonline.ca/2017/03/08/online-only-projects-now-eligible-for-tax-credits/.

[14] Susan Krashinsky, “Netflix confronting Canadian challenges.”

[15] Christine Dobby, “BCE raises price of CraveTV,” The Globe and Mail, December 8, 2015, B3.

[16] Sean Silcoff, “CRTC picture of Canada’s Netflix boom,” The Globe and Mail, September 5, 2012, B3.

[17] Steve Ladurantaye, “Netflix’s growing popularity poses challenge for CRTC,” The Globe and Mail, September 23, 2013, B3.

[18] Shane Dingman, “Apple TV gets some CanCon,” The Globe and Mail, May 6, 2015, B4.

[19] James Bradshaw, “Quebecor blasts CRTC’s ‘regulatory straitjacket’,” The Globe and Mail, September 10, 2014, B3.