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Netflix co-founder and CEO Reed Hastings. (Hand-out/Netflix Inc.)
Netflix co-founder and CEO Reed Hastings. (Hand-out/Netflix Inc.)

Broadcasters call for CRTC to regulate Netflix service Add to ...

Canada's television industry is banding together to pressure the CRTC into regulating Netflix, as traditional broadcasters face a mounting challenge from the fast-growing online TV and movie service.

It's the strongest sign yet of the Canadian television industry's growing worries in the face of the threat posed by alternative broadcasters.

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Such "over-the-top" services as Netflix are increasingly competing with traditional media businesses, and enjoy what some industry officials contend is an unfair advantage, especially in Canada.

By making its low-cost video content available through the Internet, Netflix is able to operate in a similar fashion as a broadcaster. However, it is not subject to the same regulatory strictures such as costly requirements for spending on Canadian programming.

Cable and satellite companies worry that the availability of cheap alternative TV services could lead customers to cut the cord on their subscriptions. That could erode the subscriber revenues and advertisement dollars the industry depends on.

Those concerns led to the formation, in February, of the "Over the Top Services Working Group," which has grown to include more than 35 executives from the telecommunications, broadcasting, and TV production sectors, as well as union leaders. On April 1, the group sent a letter to the Canadian Radio-television and Telecommunications Commission asking for a "public consultation" to consider changing its approach to new media.

"The objective is really, that from an industry point of view, that we maintain a level playing field within the system - a system that is a very positive and strong element in terms of our Canadian culture, identity and the Canadian economy," André Bureau, the chairman of the board at Astral Media Inc., said during the company's conference call to discuss its second quarter results on Thursday. "…We are trying to make sure that we see the regulator looking at it from the same point of view." (Mr. Bureau has experience in regulatory matters, having served as CRTC chairman from 1983 to 1989.)

BCE Inc., which owns the CTV broadcast network as well as specialty stations such as TSN, confirmed that it also participated in the initiative. Rogers Communications Inc., which owns CITY-TV and specialty stations, also said it was among the group. Both companies declined to comment further. The group is now awaiting a response from the CRTC.

Quebecor Inc., which owns a cable and Internet business as well as the French-language broadcaster TVA, declined to comment.

Netflix Inc. launched its streaming service in Canada last September, allowing viewers to watch video over the Internet for a monthly fee. on computers, tablets, Web-enabled TV sets and televisions connected to certain gaming consoles that can access the Web

But the newly formed group argues that Netflix is behaving more and more like a broadcaster, and should therefore face the same industry rules. Netflix recently announced a multiyear deal with Paramount Pictures for exclusive rights to show the studio's new releases in Canada before any TV channels, and it has begun funding its own original content. Netflix inked an exclusive deal for a new TV series called House of Cards, starring Kevin Spacey.

"Whether it's Netflix, Skype, YouTube or other Internet video providers, an unregulated approach to the Internet is effective for consumers," Netflix spokesman Steve Swasey said in an e-mail.

In 2008, the CRTC looked at the issue of new media, and while it recognized that video delivered over the Internet does qualify as broadcasting, it declined to regulate those new media platforms.

Last month, a House of Commons committee on Canadian Culture submitted a report to parliament recommending that the CRTC re-examine the issue, "to determine whether and how such non-Canadian companies should support Canadian cultural programming."

"We have received a request to look at the new media exemption order," said CRTC spokesperson Denis Carmel. "We have not determined how to deal with this request."

Shaw Communications Inc., the cable satellite and Internet service giant that bought the Global broadcast network last summer along with a slate of profitable specialty channels, was not part of the approach to the CRTC. However, the company has said in the past that it believes Netflix should be regulated, and Shaw's senior vice-president of regulatory affairs Ken Stein said the company supports the move.

"They have to be part of the system," Mr. Stein said in an interview. "We all have obligations ... in terms of local programming, in terms of Canadian content, in terms of contribution to things like the Canadian Media Fund. … We think action has to be taken sooner rather than later."

The push to regulate new media services is not about keeping Netflix or other over-the-top players out of Canada, said Norm Bolen, the president and CEO of the Canadian Media Production Association, who helped to form the group. "It's about ensuring that we continue to have a strong Canadian system that can finance Canadian content." he said in an interview Thursday. "It's one of the few issues that concerns every part of the sector, and is seen as a threat."

Mr. Bolen has hired Alain Gourd to chair the group. Mr. Gourd is a private consultant but was formerly in charge of regulatory affairs at Bell the first time the company owned CTV (it sold down to a minority stake in 2005.)

"My [point of view]is that CRTC regulating Netflix would be offside our [government]directive to encourage more choice and competition," Conservative candidate and former industry minister Tony Clement wrote on Twitter on Thursday.

Other media companies did not immediately respond to requests for comment. However, on his own conference call, the chief executive officer of Corus Entertainment Inc., John Cassaday, sounded markedly less nervous about the threat Netflix poses to the industry.

"We do have a new competitor. We will have many more, I'm sure, in the future," Mr. Cassaday said. "But it's important, I think, to remember that video consumption is not a zero-sum game. We believe that there is virtually an insatiable appetite for consumers to consume more media on a multitude of platforms, and all of the data demonstrates that video consumption is, in fact, growing. So point number one, our belief is that New competitors will prove to be additive to the system as opposed to serving to carve up the pie."

Mr. Cassaday also said he takes comfort in the long-term deals his company has with HBO and Showtime, which come with popular shows such as True Blood and Nurse Jackie. Both have resisted licensing their programs to Netflix - preferring to put their shows online in a closed site accessible only to consumers that subscribe to their TV service.

"[Time Warner chairman and CEO]Jeffrey Bewkes is pretty much on the same page as we are, and that is that he considers his value proposition to be about providing exclusive content to his [cable and satellite]partners … We believe that as an industry we can successfully meet the needs of a changing consumer with the TV Everywhere proposition, and Corus is all-in in making those digital rights available to our distribution partners to ensure that they can continue to compete effectively."

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