Canadian cable and satellite TV network operators have formed an alliance that’s pushing to get Netflix (s NFLX) regulated like a plain old TV network, which would include requirements to spend a significant amount of money on Canadian-produced content. The group sent a letter to Canada’s Radio-television and Telecommunications Commission (CRTC) earlier this month, asking to extend traditional TV regulation to a certain “foreign over-the-top service operating in Canada.”
The alliance consists of 35 executives from private broadcasters and pay TV operators like Rogers, Astral Media and BCE, the operator of the CTV network. Big cable operator Shaw is not part of the group, but is supporting the effort, according to a Globe and Mail report. The paper quotes Shaw SVP of regulatory affairs Ken Stein as saying, “They have to be part of the system.”
Now what would being part of the system mean? If Netflix were regulated like a TV network in Canada, it would have to contribute money to the Canada Media Fund, which receives close to $200 million from cable and satellite TV companies per year. Netflix could also be forced to produce and run a certain amount of Canadian content. Canadian broadcasting law describes these stipulations the following way:
“The Canadian broadcasting system should… encourage the development of Canadian expression by providing a wide range of programming that reflects Canadian attitudes, opinions, ideas, values and artistic creativity, by displaying Canadian talent in entertainment programming and by offering information and analysis concerning Canada and other countries from a Canadian point of view.”
The funny thing about these demands is that private broadcasters have long objected to the idea that similar regulation should apply to online platforms, as Michael Geist pointed out today. For example, Shaw went on the record as saying that there’s no need for Internet regulation just two years ago, saying: “The beauty of the Internet is the power of the customer. The customer should be trusted to make their own Canadian content choices.” Bell (s bce), Telus (s tu) and Astral also argued against applying broadcast regulation to Internet video.
So why the change? It looks like Netflix’s success took broadcasters by surprise. Geist is quoting numerous executives today saying that the Internet is complementary, not competitive. That’s very different from this month’s open letter, which notes that Netflix directly competes on content. “It is buying exclusive rights with studios in the windows of certain linear Canadian programming services,” the letter reads.
Canadian broadcasters may not actually be successful in their attempts to regulate Netflix, but the mere threat could give investors pause — especially given the company could face similar regulation in other countries. The European media market, in particular, is highly regulated, and any attempt to compete with traditional network operators in countries like the U.K., Germany or France could easily lead to similar resistance.