Netflix, Google Face Push to Tax Online Video in Canada

Netflix House of Cards - H 2014

Netflix House of Cards - H 2014

The 'House of Cards' streamer and rival U.S. digital players fear a precedent other foreign markets may follow

As Netflix faces heavy resistance from industry foes while landing in Europe this week, the U.S. video streaming giant suddenly has a friend in Canada.

Canadian prime minister Stephen Harper said on Monday he will "oppose any tax on services like Netflix and YouTube" to support local TV production. Netflix, which launched in Canada in 2010, this week faces calls by local TV producers and broadcasters to be regulated as an online video service during public hearings by the CRTC, the country's TV czar, to wrap Friday.

Netflix will appear at the hearings later this week, but Google, which appeared last week, warned a Canada decision to regulate and tax YouTube may be repeated elsewhere. "If Canada started doing this, it is not difficult to imagine other jurisdictions would follow suit,” Jason Kee, public policy and government relations counsel at Google Canada, told the CRTC hearings.

Netflix and Google are unregulated in Canada, unlike local broadcasters and cable players that contribute a share of their revenues to subsidize local TV production. That's coin for local TV shows like ABC's Motive and BBC America's Orphan Black, which sell into the U.S. and other world markets.

Canadian media giants Rogers Media and Shaw Media recently unveiled plans to launch their own online video portal, Shomi, to compete with Netflix Canada. A third rival, Bell Media, is set to launch its own video streaming service there.

Also this week, the Walt Disney Co. told the CRTC hearings it opposes cable unbundling set for the Canadian market. Susan Fox, Disney's vp government relations, told the TV watchdog that the Disney Channel and ESPN will not prosper in a pick-and-pay regime.

"ESPN’s business model is built upon the widest possible distribution — the sports leagues that control the rights to premier sports events demand as much and the economics of live event and news coverage simply cannot be sustained without the revenue generated from broad distribution," said Fox.

David Purdy, senior vp production management at cable giant Rogers Communications, told the CRTC hearings that the U.S.-based channel will not tolerate a la carte cable packaging in Canada. He warned that U.S. channels may instead exit the regulated Canadian TV market and return by selling popular TV shows to Netflix Canada and other online platforms operating locally.

"We just want to make sure in these negotiations that programming services don't leave. We see A&E, TLC, these are the types of services that could come over the top, or do a deal with Netflix," he added.