Joly says Canada leading international ‘conversation’ on OTT

Heritage Minister Mélanie Joly says Canada is leading the charge in pushing for the presence of “cultural diversity,” or domestic content, on foreign digital platforms like the over-the-top (OTT) service provided by Netflix Inc. — despite other countries already having regulations and tax structures in place. “As a government, the most important thing we want to do is make sure we can continue to support and promote our national content and this is exactly what I’m saying at the international level and this is exactly the concern of other states. And that’s why we’ll be leading this conversation,” Joly told reporters Thursday afternoon, following an on-stage appearance answering questions from Canadian Media Producers Association (CMPA) president Reynolds Mastin at the Prime Time in Ottawa conference. When asked if she was actively collaborating with her international counterparts to push for regulations requiring local content contributions from foreign digital platforms, Joly said that “we want to lead a conversation when it comes to how to support Canadian content — well, cultural diversity, in general — and at the same time, promote a healthy democracy. And I’m seeing a great response from my counterparts from around the world.” In mid-December, Joly travelled to Europe, participating in a United Nations Educational, Scientific and Cultural Organization (UNESCO) session on the protection and promotion of the diversity of cultural expression in Paris, and holding meetings in Berlin, Germany, and Brussels, Belgium. “These discussions allow us to strengthen our relationships with key international partners. It is also a great opportunity to learn from different perspectives on the role of arts and culture as a driver for innovation and economic growth. I am glad to have met with passionate people who have the future of arts and culture at heart — especially in the context of a digital shift that knows no borders,” Joly said in a December press release. While in Paris, Joly also announced a $100,000 Canadian contribution to UNESCO’s International Fund for Cultural Diversity, which was created to “to finance projects and initiatives that promote international cooperation in the cultural sector,” a separate press release said. Continuing her mission, Joly was among the Canadian ministers in attendance at the World Economic Forum in Davos, Switzerland, last month and Joly said she will participate in a meeting of ministers of culture from G7 countries in Florence, Italy, in March. Despite Netflix rolling out overseas after its entrance into the Canadian market, other countries have already made strides in imposing regulations on the service and other foreign digital platforms, which hail mostly from the United States. In 2010, before Netflix launched in its member states, the European Union adopted the Audiovisual Media Services Directive, which included a requirement that on-demand services provide “where practicable and by appropriate means, the production of and access to European works. Such promotion could relate, inter alia, to the financial contribution made by such services to the production and rights acquisition of European works or to the share and/or prominence of European works in the catalogue of programmes offered by the on-demand audiovisual media service.” Last year, the directive underwent a review and proposed amendments to the legislation, still to be approved by the EU, include provisions that “Member States shall ensure that providers of on-demand audiovisual media services under their jurisdiction secure at least a 20% share of European works in their catalogue and ensure prominence of these works” and that members “may require providers of on-demand audiovisual media services under their jurisdiction to contribute financially to the production of European works, including via direct investment in content and contributions to national funds.” Joly said she’s had the chance to discuss these issues with her counterparts. “We’re studying what they’re doing and we’re studying what France is doing and what Germany is doing,” Joly said Thursday. “Meanwhile, we decided to have an approach of discussing with digital platforms and we think that this discussion must continue. Meanwhile, we also think we need to discuss with countries together about this issue. That’s why I went to UNESCO, that’s why I went to the World Economic Forum, that’s why we’re going to the G7.” The biggest players in the EU, France and Germany, do have different perspectives when approaching the issue, according to Pierre Nantel, the NDP’s heritage critic, who accompanied Joly on her December trip to Europe. Though things are in flux due to an upcoming election, Nantel said in a phone interview that France was the most engaged in and proactive on the issue. According to an Agence France-Presse story when Netflix launched in France in 2014, the American company was facing stringent regulations, including an obligation to provide 60 per cent European content and 40 per cent French content in its catalogue. French rules also require a 36-month window between films leaving theatres and being available on digital platforms. Netflix’s European operations are headquartered in the Netherlands, meaning it isn’t subject to French regulations. However, it did briefly have an office in Paris, which shut down last year, according to media reports. A 2016 report in Variety said that despite the move, the company is still paying the value-added-tax of 19.6 per cent required on video-on-demand sales in the country. “The French are most active on this and they’re probably very happy to see Canada not making noise,” Nantel said. “Minister Joly did not announce any measures. She just said, ‘we are paying attention to the problem,’ which is true.” And while they have a stable government, Germany was less proactive on regulations ensuring cultural diversity, according to Nantel. “The Germans are in the strongest position in Europe, but they are not as intensely touched by Netflix as we are” in Canada, Nantel said, as a much smaller percentage of its population is said to subscribe than the 50 per cent estimated in Canada, and “since they have a lot of domestic production that is made in Germany.” In its letter to shareholders marking the end of the fourth fiscal quarter of 2016, Netflix highlighted its international successes, saying that 47 per cent of its subscriber base comes from outside of the U.S. “We continue to invest in local programming to complement our content offering and as a means to introduce new members to our global library,” the Jan. 18 letter said. “We are focusing on local content that travels pan-regionally or across multiple territories, such as Japanese anime and Turkish dramas.” In a Jan. 18 call with analysts, Netflix chief content officer Ted Sarandos also highlighted local language productions in areas such as France, Mexico and Brazil. “And we love that we are working with local storytellers, local producers to make that content, and even more importantly, making it available around the world has been a huge differentiator for us,” Sarandos said, according to a transcript. As Netflix has been undergoing that expansion, “countries are increasingly acknowledging that Netflix is essentially an alternative form of television,” Dan Cryan, California-based senior director of broadband media at research company IHS, said in a phone interview. While Netflix hasn’t traditionally been regulated in the same way as TV, that’s changing, he added. “The regulatory framework is moving to understand not only Netflixes, but other services of that type, as being a form of television and therefore potentially should be subjected to similar rules,” he said, noting “that debate in Canada has actually been going on for longer than it has in a number of other regions, not the least of which is because Canada was early on the Netflix international rollout.” Former Heritage Minister Shelly Glover ruled out new regulations on Internet-based TV services in 2014 and former prime minister Stephen Harper also said during the 2015 general election campaign that the Conservative party wouldn’t implement a Netflix tax. Joly reiterated Thursday that she “said many times there would be no Netflix tax. I said also we would be willing to discuss with digital platforms, and that’s exactly what we’re doing.” She added: “I think that there are many over-the-top services and many businesses are looking into going to the over-the-top services. Technology will be changing, key players will also be evolving and we need to develop a public policy that is in line with this evolution.” Canada is involved in work by the Organization for Economic Co-operation and Development (OECD) and the G20 on taxation of foreign digital services. Countries such as New Zealand, Australia, South Africa, Brazil, EU members, South Korea and various American states and individual cities have already moved forward on a tax scheme. Researcher John Anderson, who authored a report for the Canadian Centre for Policy Alternatives last summer on subjecting Netflix to sales tax, noted in a phone interview that Australia and New Zealand both have conservative governments and that it’s not a “radical left-wing plot” to have these companies remit tax. “Canada is now behind other countries,” he said, adding that while he agreed it was a good thing to be collaborating internationally and having these discussions with other countries “in the long run,” right now, we should be moving quickly, just to catch up. “We should do things right now which are essential to preserve and promote Canadian culture,” Anderson said. “And if the world takes another tack and comes up with some other, better solution in the future, wonderful.” — With reporting by Charelle Evelyn at cevelyn@thewirereport.ca and reporting and editing by Anja Karadeglija at akarad@thewirereport.ca

Joly says Canada leading international ‘conversation’ on OTT

News | 02/06/2017 5:03 pm EST

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