1
Introduction
Since it was introduced in Canada on September 22, 2010, Netflix has grown to the point where
it now is present in almost half of Canadian households. In a 2017 filing with the CRTC, Corus
Entertainment Inc. used data from Numeris to demonstrate that, by Fall 2016,
1
in primetime
viewing by Canadians 25-54, Netflix exceeded the time spent with CTV, Global, or CBC.
2
And, in
Fall 2017, Solutions Research Group found that English-speaking Canadians ranked Netflix as
one of their top five TV brands.
3
Along with that commercial success has come a series of debates about how Netflix should be
treated in relation to the Canadian broadcasting/programming services against which it
competes – not only other streaming services,
4
but also conventional TV broadcasting, specialty
and pay television, and the distribution platforms that deliver those services.
By the time the 2015 Canadian federal election was held, Netflix had become an issue, with the
then-Conservative government proclaiming “no Netflix tax”, and, in the 2015 campaign, the
other two major parties also promising not to tax the U.S. streaming service. Since the 2015
election, the new Liberal government has maintained that Conservative policy.
Yet the rallying cry for a tax-free Netflix has been subject to a number of interpretations and
justifications. Some have argued that it should be interpreted as meaning that Netflix should
not have to pay into program production funds to support Canadian producers.
5
Others have
argued that it means that Netflix should not – or could not – be required to pay federal or
provincial sales taxes. And, most recently, Canada’s Prime Minister, Justin Trudeau, stated that
the Conservative policy has been maintained because the current Liberal government “doesn’t
want to hurt Canadian taxpayers”.
6
The purpose of this discussion paper is not to argue, per se, with the decisions not to levy
program spending requirements or sales taxes on Netflix. Rather, our purpose is twofold:
1. First, to attempt to quantify Netflix’s size in Canada (in terms of subscribers and
revenues), and to provide more detail on who subscribes to the service, by age, by
language, by income, and by province; and
2. Second, to discuss Netflix in public policy terms – not only whether the different
treatment for Netflix is fair to Netflix’s Canadian competitors, but also (and perhaps even
more important) the fact that Netflix is an indicator of a rapidly-changing television
system, for which a very different regulatory approach will be required in the future.
1
As will be outlined later in this discussion paper, by the end of 2016, Netflix was being received in about
6.4 million Canadian households.
2
Corus Entertainment Inc., Phase I Comments, December 1, 2017, in response to Broadcasting Notice of
Consultation CRTC 2017-359.
3
Greg O’Brien, “Primetime online: Canadian Netflix users now watching more than 90 minutes a day”,
Cartt.ca, January 10, 2018.
4
Streaming services are often also called “over-the-top” or OTT services.
5
Netflix has not been required to pay into production funds or spend a regulated level of revenues on
Canadian content. However, in September 2017, the Minister of Canadian Heritage announced that
Netflix had agreed to spend $500 million over the next five years on Canadian production. A number of
industry participants have criticized that agreement for a lack of specific details, and because it allows
Netflix to spend a lower percentage on Canadian production than is required of Canadian broadcasters.
6
Morgan Lowrie (Canadian Press), “Trudeau stands by decision not to include tax on foreign online
businesses in federal budget”, Toronto Star, March 1, 2018 [accessed at www.thestar.com].