The Netflix Inc. application is displayed on an Apple Inc. iPhone in January, 2014.Andrew Harrer/Bloomberg
Netflix Inc. warned Canadian regulators against creating new restrictions that could stifle its ability to gives its customers what they want on Friday, prompting heated exchanges as officials demanded details of the company's footprint in Canada.
The video streaming service got off to a rocky start when it appeared on the final day of an exhaustive two-week hearing into the future of Canadian television, as the Canadian Radio-television and Telecommunications Commission (CRTC) demanded sensitive data on Netflix's revenue, subscriber numbers, viewership and expenditures in the country.
At first, a Netflix representative resisted, seeking guarantees the CRTC would keep such competitive information confidential. Jean-Pierre Blais, the Commission's chairman, reacted angrily, calling an abrupt break in the proceedings and leaving the room. He returned soon after and ordered Netflix to supply the data in confidence. "You are not entitled to special treatment," he said told Corie Wright, Netflix's global public policy director.
The Let's Talk TV hearing has delved into a lengthy list of ideas that could drastically alter Canada's television landscape, with hundreds of millions of dollars potentially at stake. It has focused primarily on proposals to give viewers more choice in paying only for the channels they want, drawing widespread opposition from TV executives.
But the industry is divided on the question of whether the CRTC should regulate online video services, such as Netflix.
Since launching in Canada in 2010, Netflix has operated virtually unregulated under an exemption for "new media."
The company argued that adding restrictions – or requiring it to pay into funds that support Canadian content, as some groups have suggested – would only hamper innovation.
"We've pro-actively licensed Canadian content, not because anybody told us to, but because we thought our members would enjoy it," Ms. Wright said.
She also suggested Netflix helps Canadian shows "find new audiences" outside the country, and can give niche programming a home because it relies on subscriber fees rather than ratings.
But when Ms. Wright gave a particularly vague assurance about handing over data on viewership of Canadian shows, vice-chairman Tom Pentefountas remarked: "That's a heck of an answer for someone who takes, perhaps, hundreds of millions of dollars out of the Canadian economy."
Most of the TV that Canadians watch still comes from traditional cable or satellite subscriptions, but providers of those services see Netflix's growing popularity as a major threat.
According to estimates from Convergence Consulting Group, which researches the television and technology industries, Netflix will take in more than $300-million in revenue from Canadian subscribers in 2014.
"If the commission fails to act swiftly after this proceeding, a service such as Netflix will become … one of the largest broadcasters in this country in the near future," Pierre Dion, president and CEO of Quebecor Inc., told the commission on Sept. 9.
The CRTC, which has an arm's-length relationship with the federal government, also faces political pressure.
In a statement on Friday, Canadian Heritage Minister Shelly Glover reiterated pledges that she "will not allow any new regulations or taxes on Internet video," and "that television channels would be unbundled."
Ms. Glover said she will await a decision, which could take months, and "will determine appropriate government courses of action once the CRTC process is complete."
Some in the industry consider it a foregone conclusion that the CRTC will mandate some sort of "pick-and-pay" system to allow viewers to choose channels one by one above a basic package. But broadcasters and TV providers have warned that unbundling channels could wind up costing most consumers more.
The hearing featured 110
And so far, the CRTC's only promise has been that major changes are coming to the TV industry.
James Bradshaw