Netflix seeks to reassure Canadian media producers

The chief content officer for Netflix says his company is not concerned about the CRTC's fact-finding exercise investigating so-called over-the-top (OTT) services such as Netflix.

"Regulating the Internet has not been very politically popular anywhere in the world," said Ted Sarandos, "and it doesn't work very well, except for maybe China and North Korea."

Sarandos made the comment to reporters after a session on the Netflix Effect in Canada held at the Banff World Media Festival. The OTT issue has been a dominant one at the festival this year. Earlier in the week, the chair of the Canadian Radio-television and Telecommunications Commission raised the question of whether such services - which do not face the same requirements as broadcasters - should in fact be governed by regulation, or even legislation.

"It's something that's moving very fast and I don't want to deal with it when it's too late," Konrad von Finckenstein said on Monday. "Maybe it's not even [the CRTC's to deal with] Maybe it is something that has to be done by legislation or whatever. But I want to understand it. I want to [find out]what the hell is going on here."

The CRTC put out a formal call for input on the matter late last month. The deadline for filing comments is June 27.

The issue is of concern to broadcasters and cable providers - who are calling for a level playing field - and the media production community, which has access to mandated funding from traditional content providers, but not from services such as Netflix.

During the Banff session on Wednesday, Canadian Media Production Association president Norm Bolen said that Canadian producers recognize the new opportunities Netflix offers, but he asked Sarandos why OTT providers should be exempt from the rules governing their Canadian competitors.

"It's clear that online broadcasters like Netflix - and there will be many more - play in the same arena as regulated Canadian players," Bolen said.

"They compete with those players for programming and customers, they will earn hundreds of millions of dollars annually in this country running their businesses. Why shouldn't over-the-top services like Netflix … be mandated to make a contribution to the creation of original Canadian content just like all the other players?"

Sarandos argues that Netflix is contributing by entering lucrative licensing deals for that Canadian content, pointing out that about 10 per cent of the content that streams on Netflix in this country is Canadian.

"I think your readers don't understand that we license Canadian content in Canada for Canadians at very high prices," he told The Globe and Mail. "There's no free add-on. We don't get Canada for free, no matter how much I spend in the U.S. There's no global economies of scale in that way."

When asked whether Netflix would be open to participating in some way in the creation of Canadian content, he said "I'm not opposing it. I'm not involved in the creation of content at all. So I don't know why we would uniquely create Canadian content."

Since Netflix launched in Canada last September, offering unlimited access to its library for $7.99 a month, it has signed up some 800,000 subscribers and expects to reach the million mark this summer.

But the cable providers' fear of so-called cord-cutting (people cancelling their cable subscriptions in light of other options) has not materialized, said Sarandos, whose company positions itself as a complementary service to traditional content providers, as opposed to a replacement.

"If Netflix subscribers were the most likely to cut cable, then cable should be breathing a big sigh of relief because nobody appears to be doing it," he told the audience.

One of the reasons Netflix has such a strong presence at Banff this year, Sarandos said, is to "demystify" the service for the industry. "We want people here to understand that what we're doing is a net positive for the overall ecosystem," he said.

When asked if he was surprised by the negative reception Netflix has received in Canada (during the discussion, the company was lightheartedly referred to as both the devil incarnate and one of the four horsemen of the apocalypse), Sarandos said no.

"Remember a couple of years ago, the studios said the same thing," he told The Globe. "Now we're their biggest customers and they love us."