The Journal of Media Innovations

Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 4
Transnational over-the-top video distribution
as a business and policy disruptor:
The case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017), 4-25.
DOI: http://dx.doi.org/10.5617/jmi.v4i1.2423
© Emilia Zboralska and Charles H. Davis, 2017
Charles H. Davis
Ryerson University
c5davis@ryerson.ca
INTRODUCTION
Domestic broadcasting industries are considered
vital to national cultural expression and democratic practice, and for that reason they frequently
receive governmental support and protection and
are regulated in the public interest. In Canada, the
television broadcasting system serves as a major
instrument of national policy regarding creation
and distribution of domestic content, with attendant expectations concerning national cultural
expression, cultural sovereignty, and democracy
Emilia Zboralska
Ryerson University
emilia.zboralska@ryerson.ca
ABSTRACT
Digital disruption is often characterized as the
conﬂict between the exponential rate of change
in technology, and the slower-paced, incremental rate of change in law, economy, policy, and
society writ-large (Franklin, 2012). The rapid encroachment of over-the-top (OTT) content distribution raises policy issues concerning jurisdiction,
access, pricing, consolidation of ownership, and
source diversity (Holt, 2014), while undermining many of the traditional policy instruments. In
this paper, we analyze Netﬂix’s strategic expansion and meteoric growth in Canada, and focus
on a landmark event in Canadian broadcasting
policymaking: the Canadian Radio-television and
Telecommunications Commission’s (CRTC) “Let’s
Keywords
media innovation, media policy, political economy, over-the-top
video distribution, broadcasting
Talk TV” hearings of 2013-2014. Through an examination of public documents, we analyze the
ways Netﬂix is considered an opportunity, ally, or
a threat by consumers, broadcasters, independent
producers, and governments. We show that in a
reprioritization of values, many of the principles
that motivated legacy broadcasting policy are being sidelined by a consumerist approach that gives
freer rein to streamed services. However, Neﬂix’s
refusal to provide the Commission with information it was ordered to produce suggests the most
serious disruption is to the notion that online video
distribution can or should be regulated in the public interest.
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 5
The television broadcasting sector is experiencing an unfamiliar pattern of disruption: “big bang”
expansion (Downes & Nunes, 2014) of highly capitalized, rapidly scalable transnational online services which quickly develop large bases among domestic consumers, making domestic incumbents
appear as slow-moving, self-serving rent-seekers
(Cable, 2016). The case of Netﬂix in Canada demonstrates how the Canadian broadcast industry is
being disrupted through “big bang” innovation in
the screen media sector. The U.S.-based Netﬂix has
been operating in Canada only since 2010, but is
estimated to have attracted nearly 50% of Anglophone Canadians as subscribers (MTM, 2016). Our
paper focuses on a recent landmark event in Canadian broadcasting policymaking: the Canadian
Radio-television and Telecommunications Commission’s (CRTC) “Let’s Talk TV” hearings of 2013-
2014. On October 24, 2013 the Canadian broadcast
regulator (CRTC) announced the launch of a yearlong, three-phase review of the Canadian broadcasting system. The policy process, dubbed “Let’s
Talk TV” (LTT), invited stakeholders, including
individual Canadians, to “shape the future” of the
television system so that it “is adaptable for years
to come” (CRTC Notice 2013-563). The need for
(Armstrong, 2010; Grant & Wood, 2004; Le Goﬀ et
al., 2011; Picard et al., 2016).
The “digital shift” in the media and content industries is disruptive, introducing major transformations in consumer behaviour, business models,
and competition, and requiring broadcasters to
develop multi-platform, multi-product profciencies (Doyle, 2015; Naldi, Wikström & Von Rimscha, 2014; Oliver, 2014). Disruption of core technologies “inevitably creates tension for regulatory
institutions” (Downes & Mayo 2015, p. 11), raising
acute policy issues concerning jurisdiction, access,
pricing, consolidation of ownership, and source diversity (Holt, 2014; Simon & Bogdanowicz, 2012).
Disruption causes the legacy regulatory regime to
become “unstuck” in the sense that “the old [policy]
instruments, like existing national mechanisms for
direct support and domestic content regulations,
may no longer work,” while there is lack of a “clear
idea about what to replace them with” (O’Regan &
Goldsmith, 2006, p. 82). Regulatory “unsticking”
exposes the mixture of entitlements and responsibilities constituting the legacy regime, as well
as what Freedman (2015) calls “policy silences,”
pathways that are not considered or discussed
publicly.
the review was framed primarily around the observation that television is “evolving at an incredibly
rapid rate – and Canada’s regulatory system must
change with it” (Blais, 2013b). According to the
regulator, on-demand video streaming has altered
Canadians’ expectations of the traditional broadcasting system, leading to a growing dissatisfaction
with the status quo and a marked need to revise the
current rules regulating the operation of Canadian
television (CRTC 2014-190).
Although at previous Canadian television policy
hearings Netﬂix portrayed itself as complementary
to the traditional Canadian television system, its
recent activity, messages to shareholders, and
venture into original content show that it now has
other plans. Here, we examine the entry of Netﬂix
into a domestic broadcasting system that is already
aﬀected by a political environment favorable to
transitioning away from cultural protectionism
towards deregulation and free market strategies,
with a recent federal governing party that chose
consumer sovereignty as a plank in its 2015 election
platform. Below we discuss Netﬂix’s activities
in Canada, its encounter with the country’s
media regulatory agency, and the responses it
has elicited in the Canadian television industry.
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 6
or can be regulated in the national interest. The
case presented here illustrates how disruption
of regulated media industries involves processes
of “unsticking” of regulatory regimes, exposing
policy silences and showing that transnational
challengers seek rapid expansion among domestic
consumers not just for purposes of revenue growth,
positioning, or branding, but also to provide
leverage in domestic regulatory reform.
INNOVATION, REGULATION, AND DISRUPTION
Digitization aﬀects media industries by driving the
cost of additional copies of media content to zero,
enabling multiple uses and reuses of media content.
It enables interactivity and extensive data collection regarding consumer behavior, provides “location agnostic” advantages to players who can leverage economies of scale and scope, and disrupts and
reconfgures distribution networks. Media, IT, and
telecommunication sectors that were formerly separate are becoming intermingled, leading to a new
business ecosystem in which all segments compete
with all other segments for access to end-users and
consumers (Simon, 2012; Simon & Bogdanovich,
2012).
Although hundreds of Internet-based video services have emerged since the late 1990s, most of
these services have been marginal or niche players
(Cunningham & Silver, 2013), allowing domestic
broadcasters and cable operators to enjoy a certain bargaining power in architecting delivery platforms (Baccarne et al., 2013; D’Arma, 2010; Evens,
2014; Meisel, 2013). However, the key architects of
the emerging media ecosystem are not these niche
video distributors, nor the domestic providers of
fxed-line or wireless pathways to consumers, but
instead providers of transnational cloud-based
services, which encompass storage, processing,
databases, software, networks, and platforms. According to Noam (2014), advantages of scale and
scope are favouring the emergence of a small global
oligopoly of cloud providers who exercise considerable market power over users and providers of
hardware, software, transmission, and content
inputs. Noam considers that the most likely cloud
providers in the emerging online media ecosystem
will be “tech companies that have morphed into
media, such as Google or Apple, or … hybrid ‘techmedia’ frms such as Netﬂix or Amazon” (p. 688).
Most of the approximately 500 OTT service providers in the world in 2016 serve local markets; the top
fve OTT service providers (Netﬂix, Amazon, Hulu,
Through an examination of publicly available
documents, including flings to the CRTC, letters to
shareholders, leaked e-mails, and other company
texts and communications, we analyze the ways that
Netﬂix is considered to represent an opportunity
or a threat by the various players in the Canadian
television system: consumers, broadcasters,
independent producers, and governments. We
show that many of the principles that motivated
and shaped legacy broadcasting policy in Canada
are being marginalized by a consumerist policy
approach that gives much freer rein to streamed
services than to legacy forms of video distribution.
This places incumbent broadcasters at a relative
disadvantage vis à vis the over-the-top operators
(OTTs), inspiring uncharacteristic expressions of
interest from incumbents in a regulatory regime
they formerly portrayed as burdensome. The
unscripted dénouement of the LTT hearings came
when Netﬂix publicly rejected the Commission’s
jurisdiction over online streamed video services
in Canada and refused to provide the Commission
with the information it was ordered to produce.
This turn of events suggests that the most serious
potential disruption in broadcasting’s digital
transition is to policy itself, by making moot the
assumption that online content distribution should
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 7
HBO, and YouTube) currently represent about half
of the $25 billion in worldwide OTT revenues (Arthofer et al., 2016).
The expansion of players from the computer
industry into new industries radically disrupts existing business models (Kushida, 2015). Downes
& Nunes (2014) call the process of innovation in
which newcomers take advantage of digital and
cloud-based technologies to oﬀer consumers massively better, cheaper and more customized experiences from the moment of market entry big bang
disruption. Highly capitalized transnational OTT
streaming video content providers have defnite
advantages over domestic cable, broadcasting, and
satellite services, whose business model involves
bundling content with distribution. OTT content
providers are able to attract customers away from
domestic distributors on the basis of lower cost,
greater choice, greater convenience, and (thanks
to their huge collections of data on viewing preferences) personalized playlists. They also enjoy deep
pockets, brand recognition, and a favorable regulatory environment (Lee, 2014).
Governments regulated the frst generation of
television, over-the-air broadcasting, justifying
their licensing requirements on the grounds of
public ownership of scarce spectrum frequencies.
During television’s second and third generations
(multichannel satellite, cable, telecom networks,
and digital television), although carriage capacity
increased signifcantly, most governments continued to regulate domestic broadcasting systems by
requiring licenses or notifcation for television distribution (Schweitzer et al., 2014). The fourth generation of television, video streamed over Internet
broadband, provides high resolution, peer and person-to-computer interactivity, asynchronous viewing, multiplatform distribution, and user-generated peer-to-peer content (Noam, 2014), presenting
signifcant challenges to policy regimes, their historical rationales, and regulated incumbents.
Cable (2016) emphasizes the increased incidence of “reformer startups” or fast-moving, wellcapitalized newcomer frms that “operate in the
face or shadow of prohibited regulatory regimes”
(p. 2). These frms rapidly gain traction in the domestic market and grow large customer bases, deterring regulatory intervention and disrupting the
policy regime. Policy disruptions are characterized
by “a change in the material conditions of a market
(either an existing one or a new one), which leads
to an invalidation of existing regulatory expectations, norms, ideas and frameworks, and pressure
to accommodate and eliminate this invalidation”
(Hasselbalch, 2014, p. 23). Two conditions must be
met in order for a policy regime to become disrupted: 1) the innovator must move frst, steering the
market, and its development, and 2) the externalities arising from the innovation must be considered
controversial and enter public and political debate
(Hasselbalch, 2014). Three factors allow an innovator to move before the regulator: novelty (when the
innovation presents something regulators have not
encountered), speed (when it rapidly creates new
markets), and obscurity (when it and its transactions develop and occur outside of the purview of
regulators) (ibid.).
Downes & Mayo (2014) argue that regulatory
inertia in the face of disruptive innovation in the
communications sector stems from: 1) an increasing mismatch between regulations and the reality
that regulated markets are now consistently driven
by innovation, 2) the failure of regulatory bodies to
adapt their rules when regulations made by competing or complementary bodies are altered, and 3)
political forces which must navigate the institutionalized distribution of benefts created by previous
policy regimes. The political dimension of regulatory decisions in the face of disruptive innovation
is increasingly signifcant in situations where the
status quo is justifed in terms of abstract public
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 8
domestic content to the digital sphere, continuing
to focus their eﬀorts on the legacy broadcasting
system, and favoring market forces and consumer
satisfaction as the driver of innovation, rather than
other dimensions of public interest (Freedman,
2015b). On the whole, little eﬀort has been made
to secure new digital shared public spaces, which
could complement, supplement, or perhaps eventually replace those shared televisual spaces historically safeguarded by legacy broadcasting policy
(Freedman, 2010; 2015b). Notably, proposals to
secure and cultivate shared national spaces in the
digital realm are treated as relics of an earlier era.
CULTURAL SOVEREIGNTY AND THE
DOMESTIC POLICY ENVIRONMENT
Canadian broadcasting policy has developed an
uneasy mixture of economic and cultural objectives
to attain a measure of cultural sovereignty in the
context of Canada’s small national market, which is
now dominated by a handful of domestic vertically
and horizontally integrated media and telecommunications conglomerates (Edwardson, 2008;
Winseck, 2008). The 1991 Broadcasting Act (“the
Act”) is the preeminent legislation that governs
broadcasting activities in Canada. The Act provides
that “Canadian broadcasting shall be eﬀectively
owned and controlled by Canadians.” The Canadian broadcasting system, the Act continues, should
“serve to safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada” by encouraging “the development of Canadian
expression” by “displaying Canadian talent in entertainment programming” and by “oﬀering information and analysis concerning Canada and other
countries from a Canadian point of view” (Part 1,
Section 3). According to the Act, the broadcasting
system should be reﬂective of Canada’s multiculturalism, in both “its programming and … employment opportunities” (Part 1, Section 3.1.d.iii). The
Act also stipulates that each broadcasting undertaking must make “predominant use, of Canadian
creative and other resources in the creation and
presentation of programming” (Part 1, Section 3).
Achieving these policy objectives involves a
“high-end trade oﬀ” wherein “once admitted into
the market, Canadian companies are protected
from competition, especially foreign competition”
(Raboy & Bonin, 2008, p. 61). In return they are
expected to contribute to the goals and objectives
of the Broadcasting Act, including production and
exhibition of unproftable Canadian content. The
benefts (Cable, 2016). Because reformer startups
oﬀer consumers immediate benefts, regulations
that negatively aﬀect these benefts can carry signifcant political cost (ibid.).
Thus, due to their deep pockets and their exponential growth that occurs in the shadow of existing regulatory regimes, reformer startups have
substantively more clout in their interactions with
regulators than the less-capitalized startups of the
past (Cable, 2016). Rational choice theory predicts
that coalitions of opposing interest groups who decide on a common goal are more likely to succeed
in steering regulatory decisions in their collective
favour than groups with dissenting goals. Yet these
coalitions ultimately may have divergent goals.
Cable (2016) evokes regulatory economist Bruce
Yandle’s famous “Bootleggers and Baptists” catchphrase to refer to such a situation in which makers
of illegal alcohol supported religious prohibitionists in order to drive up demand for product only
they could supply. In the present case, transnational providers of online services ally with domestic
consumers in support of consumer sovereignty in
order to deter extension of domestic regulations.
In most jurisdictions, regulatory regimes for
broadcasting have not extended their concerns
about production, distribution, and exhibition of
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 9
Act provides the basis for Canada’s complex broadcasting “policy toolkit” (Grant & Wood, 2004),
which currently consists of the maintenance of a
Canadian national public broadcaster, Canadian
content expenditure and scheduling requirements,
foreign ownership restrictions on broadcasting entities, competition policy, and subsidies and tax incentives. The Act gives the Commission the power
to exempt entities from any and all regulatory requirements if it “is satisfed that compliance with
those requirements will not contribute in a material manner to the implementation of the broadcasting policy” (Part 2, Section 9.4). Since 1999, foreign
and domestic new media in Canada operate under
the Digital Media Exemption Order (DMEO), and
are not required to contribute to the goals ascribed
to the Canadian broadcasting system.
Although some reports submitted to the 2014
“Let’s Talk TV” hearings determined that over-thetop video streaming did not represent an immediate threat to Canadian incumbents, it was thought
that a tipping point could be reached in three to fve
years. The question of how a national media regulatory agency might regulate a transnational video
streaming service, and in whose interest, burst unexpectedly into the open when Netﬂix claimed to
operate outside the jurisdiction of the Broadcasting Act and declined the CRTC’s request to provide
information about subscribers, audiences, and the
Canadian content it distributes.
NETFLIX: FRIEND OF CANADIAN
CONSUMERS
Canada was the frst target of Netﬂix’s international
expansion. After Netﬂix’s 2010 entry into Canada,
its popularity with Canadian consumers grew rapidly. Through its pricing, its advocacy of net neutrality, and its tolerance of Canadian customers using virtual private networks (VPNs) to tap into the
company’s much richer program oﬀerings in the
U.S. market, Netﬂix has positioned itself as more
friendly to Canadian consumers than the incumbent domestic broadcasters. In typical big bang
disruptor fashion (Cable, 2016; Downes & Nunes,
2014; Hasselbalch, 2014), Netﬂix has been able to
oﬀer greater choice, convenience, and aﬀordability
at market entry, rapidly growing its market share in
the face of regulatory uncertainty.
Canadian audiences are highly attracted to imported American drama and comedy, and domestic
broadcasters resist the obligation to produce and
exhibit Canadian content because it is less expensive and more lucrative to import content from
elsewhere. Canadian broadcasters therefore generally treat Canadian content as a burden they must
endure in exchange for the industrial protections
they receive (Grant & Wood, 2004; Le Goﬀ et al.,
2011; Picard et al., 2015). When English-speaking
Canadians watch drama or comedy on television,
it is imported content four times out of fve (CRTC,
2013). Meanwhile, Canadian consumers and critics lament the mediocrity of English-language Canadian television content, especially drama, which
generally has underperformed among Englishspeaking Canadian audiences (Coutanche, Davis &
Zboralska, 2015).
Of all the players in the domestic television
ecosystem, it is the domestic broadcasters that
have developed the most problematic reputation
among consumers, who express their dissatisfaction across a multitude of fora, including interventions submitted to CRTC public consultations and
through less formal channels such as online newspaper comments sections, social media, and blog
posts. Frequently cited complaints include: billing
errors; dissatisfaction with content and the way it
is programmed (i.e. the perception that there is too
much repetition in programming) and sold (i.e. the
way content is bundled and organized across vari
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 10
ous tiers); a belief that broadcasters’ services are
inﬂated in price; and a dissatisfaction with customer care. A recent study found that 51% of Canadian
linear television subscribers contact their providers
for customer service, and that 33% of these individuals do not have their complaints resolved by their
service provider on the frst call (J.D. Power, 2014).
Canadian media scholars have argued that the
CRTC historically has been under regulatory capture by the private sector (Hoskins & McFadyen,
2004; Raboy, 1990; Raboy & Bonin, 2008; Skinner, 2008), or alternatively that Canadian communications policy has existed in a “vacuous netherland,” marked by “the worst of all possible worlds”
where “neither regulated monopoly, meaningful
competition, [n]or regulatory responsibility prevail” (Winseck, 1998, p. 257). Given Canadian rules
against majority foreign ownership of broadcasting and telecommunications entities, Canadians
did not have many alternatives until the arrival of
Internet-based streaming services such as Netﬂix.
Netﬂix has committed itself to providing an excellent user experience, and has identifed consumers’
troubled relationships with domestic incumbents
as an opportunity to exploit:
We are a relief from the complexity and frustration
that embody most MVPD [multichannel video programming distributor] relationships with their customers. We strive to be extremely straightforward.
There is no better example of this than our no-hassle
online cancellation. Members can leave when they
want and come back when they want. (Netﬂix, 2015a)
Although penetration rates of Internet are high
in Canada, the country ranks low on key indicators
related to Internet quality, value, and download
speed when compared to other OECD countries
(Ookla, 2015a, b, c). Netﬂix has publicly criticized
Canadian ISPs for their cost and quality of service.
In 2012, Netﬂix’s chief content ofcer, Ted Sarandos, commented that “what they’re charging for Internet access in Canada” is “almost a human rights
violation” and that Netﬂix’s performance in the Canadian market would be even better were it not for
the “almost third-world access to the Internet” sold
at bandwidth caps that are prohibitive to streaming (Tencer, 2012). Indeed, scholars have long
recognized that the vertically integrated Canadian
incumbents, with assets in telecommunications,
content creation, traditional television distribution, and Internet distribution, have the capacity to
provide undue preference to themselves by raising
Internet rates, or lowering Internet data caps, and
engaging in unfair trafc management strategies,
rendering the streaming of audiovisual content
from third parties potentially cumbersome and unaﬀordable (Guindon & Dennie, 2010; Middleton,
2011; Quail, 2012; Winseck 2008). Internet pricing
and quality fundamentally aﬀect streaming behaviours (Stewart, 2015), and are thus of paramount
importance to Netﬂix.
Net neutrality has emerged as a politically
charged issue in Canada and abroad, and Netﬂix has conspicuously placed itself on the side of
consumers in this regard. Netﬂix has presented
itself as a champion of net neutrality, giving itself
a positive aura from the perspective of advocates
and consumers. Netﬂix’s advocacy of net neutrality presents a powerful veneer of the greater good
over its own economic interests. Strong net neutrality laws allow Netﬂix to proft from the sale of
its services directly to consumers without having to
make costly investments in network infrastructure.
In 2015, Netﬂix spent 1.32 million dollars (U.S.)
on its lobbying eﬀorts, most of which were aimed
at Internet-related issues (Center for Responsive
Politics, 2016), and U.S. federal records indicate
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 11
that in 2012, Netﬂix formed a political action committee (PAC), permitting it to contribute directly to
federal campaigns (Thier, 2012).
Despite the fact that Netﬂix and consumer interests are currently closely aligned, the limits of
this relationship have yet to be tested. Although
publicly a champion of net neutrality, Netﬂix has,
on multiple occasions, agreed to deals in which its
services become prioritized, eﬀectively undermining its commitment to the principle, including a
multi-year direct trafc access deal with Comcast
in 2014 (Brandom, 2014; Gustin, 2014), and one
with Australian ISPs that sees its content excluded
from data caps (Netﬂix, 2015b). Now that it has
reached its current size, Netﬂix has indicated that
even if net neutrality rules were to weaken under
the current Trump administration, its bottom line
would be materially unaﬀected “because we are
now popular enough with consumers to keep our
relationships with ISPs stable” (Netﬂix as cited in
Dunn, 2017).
Another aspect of Netﬂix’s consumer-friendly
aura, adding weight to the Baptists and Bootleggers
analogy (Cable, 2016), was Netﬂix’s long-time tolerance of customers who surreptitiously bypassed
the rights market in their own territories. In 2015,
an estimated one-third of Anglophone Canadians
used a virtual private network (VPN) to access the
U.S. version of the service, bypassing the Canadian
rights market completely (Kwong, 2015). Canadians were eager to access the U.S. version of the service due to its richer content catalogue at the time.
Netﬂix’s user contract has long contained a
clause that permits it to suspend user access on
the suspicion of territory circumvention (Netflix, 2014c). For years the company did not act on
these provisions, although it faced increasing pressure from rights owners to do so. Indeed, Netﬂix’s
(leaked) contract with Hollywood’s Sony Studios
reveals that it is required to “use … geolocation bypass detection technology” to identify territory circumvention services (WikiLeaks, 2015a). Leaked
private e-mails between Sony executives revealed
their “deep dissatisfaction” with Netﬂix’s inattention to the matter, and the apparent intentionality
of this behaviour, noting that Netﬂix had the incentive to be permissive with VPN usage “since they
are getting paid by subscribers in territories where
Netﬂix does not have the rights to sell our content”
and “have every motivation to continue” given that
increased subscriptions lead to a higher market
valuation (WikiLeaks, 2015b). Canadian rights
holders also objected to Netﬂix’s extended tolerance of rights violations. The senior vice president
of the Canadian vertically integrated communications frm Rogers, David Purdy, allegedly remarked
that VPNs should be made illegal by the Canadian
government in order to maintain a distinct rights
market in Canada (Tencer, 2015). Bell Media president Mary Ann Turcke equated Canadian consumers’ usage of VPNs with stealing, triggering a wave
of consumer and media backlash (Dobby & Bradshaw, 2015). While Netﬂix was being permissive
with its tolerance of VPN-masking behaviour, oldmedia incumbent and Hollywood studio-owned
streaming service, Hulu, had long enforced a stronger, payment-based authentication system, which
had largely eradicated out-of-market access to its
service (Van der Sar, 2014). Netﬂix thus could have
similarly imposed stronger geolocation restrictions
if it had been so inclined at the time. The issue
was therefore not primarily a technological one,
as implied by Netﬂix when it appeared before the
Commission during LTT (CPAC Digital Archives,
2014b).
Rather than enforcing stricter protocols, in
2015, Netﬂix CEO Reed Hastings publicly commented that he hoped Netﬂix would be able to “get
global and have its content be the same all around
the world so there’s no incentive” to use a VPN
(Hopewell, 2015). Just one year later, after Net
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 12
ﬂix’s entry into another 130 territories and Hastings’ declaration that the world was “witnessing
the birth of a global TV network” (Liedtke, 2016),
Netﬂix fnally began enforcing its own longstanding policies on out-of-market access (O’Neil, 2016;
Slater-Robins, 2016). Increased pressure on Netﬂix
to honour its agreements with rights holders is likely behind the change in strategy. Prior to its recent
global expansion, it made economic sense for the
company to tolerate surreptitious access, given that
many paying users were only able to access the service through VPNs when living in areas where the
company was not ofcially a market player (SlaterRobins, 2016). In view of Netﬂix’s recent global
expansion, the risks associated with its permissiveness (i.e. potential legal action by rights holders)
now outweigh the benefts.
In summary, with respect to its public image
and branding, Netﬂix has closely aligned itself with
consumer interests such that many regard it as
an emancipatory and innovative disruptor of the
much-derided Canadian status quo. In the next
section, we analyze “Let’s Talk TV” interventions to
show how OTT is perceived to disrupt the Canadian
broadcasting system.
LET’S TALK TV
The CRTC’s review of the Canadian broadcasting
system, “Let’s Talk TV,” invited stakeholders, including individual Canadians, to “shape the future”
of the television system so that it “meets the needs
of Canadians as consumers, creators and citizens”
and “is adaptable for years to come” (CRTC 2013-
563). The hearings had broad scope and examined
programming, distribution and access, and accessibility issues. The Commission warned that the
evidence collected during the LTT process could indicate the need to “remove or adapt some … existing regulations” and that the Commission was not
“interested in satisfying anybody’s sense of entitlement, based on the way things used to be” (Blais,
2013b).
The LTT process demonstrates the signifcant
political tensions that come along with the introduction of disruptive innovation into regulated
markets. By making changes to existing regimes,
regulators are at once at risk of alienating voterconsumers, disturbing the complex set of institutionalized benefts and tradeoﬀs developed in the
previous regime, and inadvertently acting as barriers to innovation with the absence or introduction
of new rules. As Cable (2016) contends, however,
each regulatory process is “its own political economy, and we cannot assume that the benefts of innovation necessarily outweigh” traditional policy
concerns (p. 12).
Although the CRTC is an independent body that
is supposed to operate at arm’s length from the
government, it is not completely insulated from
politics (Salter & Odartey-Wellington, 2008) and
its orientation is certainly aﬀected by the government of the day (Raboy, 1994). The chairperson is
appointed by the federal government. The regulator thus brings its own conceptual lens, which defnes and limits the feld of potential action, and
determines which issues are deemed to be salient
and worthy of attention.
Freedman’s (2010) concept of “policy silence”
is particularly useful for examining the trajectory
of LTT in order to recognize potential alternative
pathways that were not given consideration. According to Freedman (2010), policy scholars must
“dig a little deeper” than the visible spectrum of the
policy process (p. 347). Policy silence refers to the
options that are not considered, to the questions
that are kept oﬀ the policy agenda … and to the
values that are seen as unrealistic or undesirable
by those best able to mobilize their policy-making
power. (Freedman, 2010, p. 355)
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 13
From our analysis of the major LTT documents,
it seems clear that the Commission never intended
to impose any regulatory requirements on Netflix or any other foreign OTTs. Notably, a question
about whether foreign OTT services should be subject to domestic content requirements was absent
from the 80 questions the Commission posed to
stakeholders in the Notice of Consultation (CRTC
2014-190) it issued to launch the fnal, most formal
phase of the LTT process, or in the later working
document (CRTC 2014-190-3), which proposed
various concrete policies for consideration. There
was no question regarding what to do with foreign
OTTs, and no policy options concerning the issue
were put forward for consideration. Although explicit questions about the imposition of cultural obligations on OTTs never made it to the more formal
documents introduced later in the LTT process, the
early “Choicebook” survey, designed for participation from the general public, did feature one question on the topic. The question asked the public
to side with one of two statements, made by two
fctional characters, Jenny and John. John’s statement associated the imposition of Canadian content requirements on OTTs with increased costs:
John “does not think online services should be required to contribute to Canadian-made programming if it is going to increase the price for consumers” (CRTC, 2014b). Although Jenny’s statement
did not mention costs, and expressed only a conviction that OTTs should contribute to the creation of
Canadian jobs and content, the implicit suggestion
that such requirements would automatically result
in increased costs to consumers was reinforced by
John’s statement. The survey thus made the notion of OTT contributions to domestic content
unattractive to survey participants, 67% of whom
agreed with John.
The Commission’s active concern throughout
the policy process was the identifcation and removal of regulatory “barriers” that supposedly
have impeded the Canadian broadcasting system in
“adapting to change” (CRTC 2014-190). The Commission portrayed Netﬂix and other OTTs as ushers
of the change, noting that Canadian consumption
of video is increasingly moving from “scheduled
and packaged programming services to on-demand
and tailored programs” (CRTC 2014-190). According to the Commission, the rise of on-demand
viewing on the Internet has changed viewers’ expectations more generally, and has led to a growing
dissatisfaction with the Canadian traditional system at large (CRTC 2014-190; Blais, 2013b). Using
OTTs as the exemplar, the Commission then proposed the forced unbundling of cable and satellite
program packaging in the linear television realm so
that it more closely resembles the responsiveness
and consumer choice oﬀered by OTTs.
The Commission seems not to have intended to
modify the Digital Media Exemption Order under
which foreign OTTs such as Netﬂix operate. Instead, the Commission sought to showcase Netﬂix
in the LTT hearings as a beacon of innovation and
a model for Canadian incumbents. However, this
approach backfred when Netﬂix refused to provide the Commission with the information needed
to make the case, and the hearings concluded with
Netﬂix’s outright rejection of the Commission’s jurisdiction over its operations in Canada.
In the following sections, we discuss the major
arguments presented by the various stakeholders,
including Netﬂix, on the topic of foreign OTTs in
Canada. Most broadcast industry stakeholders
(other than Netﬂix) perceived the Commission’s
use of Netﬂix as exemplary of a 21st century broadcast model as deeply ﬂawed, and argued against using this model as the basis for making wide-ranging
and substantive changes to the regulation of traditional linear broadcasting.
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 14
STAKEHOLDER POSITIONS
Broadcasting regulatory proceedings such as LTT
often engender stark divisions of opinion among
stakeholder groups. In the case of LTT, major industry stakeholders unanimously agreed that foreign OTTs such as Netﬂix are having a profound
and tangible impact on the Canadian broadcasting system. Most of Canada’s major Anglophone
broadcasters either expressly recommended that
the Commission impose contribution requirements on foreign OTTs such as Netﬂix (Bell, 2014;
CBC, 2014), or argued that if the Commission is
not prepared or able to impose such requirements,
it should similarly refrain from imposing them
on domestic services (Corus 2014; Rogers, 2014;
Shaw, 2014). Only one major (Anglophone) broadcaster (Shaw, 2014), argued against the application of regulatory requirements on foreign OTT
services such as Netﬂix. Canada’s principal trade
associations and guilds representing actors, directors, writers, and independent production frms
(ACTRA, 2014; CMPA, 2014; DGC 2014; WGC,
2014), and the province of Ontario (the epicentre of
Canadian television production), each argued that
Netﬂix and other foreign OTTs should be required
to contribute to the creation of Canadian content.
Additionally, we found that of the 137 interventions
from individual Anglophone Canadians to the Commission’s fnal phase of the policy process that expressed a defnitive statement either for or against
the issue, all but three were in favour of extending
cultural obligations to Netﬂix and other OTTs.
Three key arguments pertaining to foreign
OTTs recurred regularly in the submissions from
major industry stakeholders (broadcasters, creator
groups, and governments):
1) Industry stakeholders believed that the Canadian government has created an environment that
is more favourable to foreign frms than to Canadian ones: Netﬂix does not pay sales tax in Canada,
incur expenses related to regulatory processes, or
make fnancial contributions toward the funding
of Canadian content. According to one incumbent,
this amounts to a cost advantage of 19-20% (Bell,
2014). In addition, Netﬂix has no regulatory constraints, including no restrictions on sources of
programming, no limits on advertising, no accessibility expenditures for described video or closed
captioning, and does not contribute toward the
infrastructure costs required for service delivery
(Bell, 2014; Corus, 2014; Rogers, 2014). The bottom line is that foreign OTTs beneft fnancially and
strategically from Canada’s regulatory protections
– including Canada’s net neutrality policy – and
undue preference rules, but do not contribute in a
reciprocal manner (CBC, 2014; MTCS, 2014).
2) Stakeholder groups pushed back against the
Commission’s apparent embrace of the “digital
sublime” (Mosco, 2005), or belief in the unqualifed transformational power of the Internet – in
this case, as a new global distribution platform,
and the solution to Canada’s problem of having a
domestic market that is too small to support the
production of expensive content. In a speech to industry delegates prior to the launch of LTT, CRTC
Chairman Jean-Pierre Blais remarked that new
broadband-based technologies and services oﬀer
Canadian creators an “unprecedented opportunity,” “extraordinary possibilities,” and open “doors
to niche markets unimaginable even a decade ago”
(Blais, 2013a).
Stakeholders were skeptical about the value of
these opportunities. One intervention representing Canada’s writers summarized the concern well.
The organization argued that the notion that the
Internet eradicates barriers to the creation and distribution of quality content is mistaken, and leads
to a conviction in neoliberal economics and deregulation, in the belief that the new “perfect markets”
created by the Internet will naturally lead to the
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 15
creation of the best content, which will automatically fnd its ideal audience online, with the fnancial rewards of such content ﬂowing to those who
most deserve them. (WGC, 2014)
Other stakeholders pointed out that the low
barriers to entry in the digital space lead to the erroneous belief that “one can compete in the digital
interactive world with cottage industries” (Corus,
2014, para. 49). Stakeholders called attention to
the diﬀerence in size: While the major Canadian
broadcasters may be large players in the Canadian
industry, transnational digital companies have a
substantial scale advantage that Canadian companies do not (Corus, 2014). The major industry
stakeholders also contended that Netﬂix’s business
model cannot be adopted by broadcasters since
they have many other obligations that Netﬂix does
not have, including obligations to be responsive
to local communities through news and information services, upgrading costs, and investments in
human capital and skills retraining (Bell, 2014b;
CMPA, 2014; Corus, 2014; WGC, 2014). Others
pointed out the curious economics of Netﬂix, noting that it has built its empire with content that
was produced by the legacy broadcasting and flm
systems, which provided the training grounds for
content producers to learn their crafts. Stakeholders were concerned that an OTT model could not
provide the same training grounds for new artists
since Netﬂix does not produce nearly the same
quantity of content, in Canada, that is produced by
the legacy system (Corus, 2014; WGC, 2014).
3) Finally, a recurrent argument pertaining to
Netﬂix relates to its refusal to divulge data about its
audiences, an issue frequently reported by industry
observers (for example, Stilson, 2014). In their submissions, stakeholders (ACTRA, 2014; Bell, 2014a;
DGC, 2014; MTCS, 2014) urged the Commission to
require foreign OTTs to submit annual reports on
their levels of spending on Canadian content, and
their revenues in the Canadian market so industry
and audience developments can be better monitored.
NETFLIX AND THE REGULATORY
SHOWDOWN
Netﬂix’s own written intervention to the LTT process demonstrated a clear understanding of traditional Canadian broadcasting policy goals, and
many of its arguments responded directly to certain key objectives codifed in the Act. Among its
most substantive claims, Netﬂix (2014) maintained
that it serves “diverse communities,” unlike traditional broadcasters who, due to a reliance on advertising, focus primarily on content with mass appeal. Netﬂix further argued that through consumer
demand and market forces alone, it has stimulated
innovation in the delivery of, and access to, programming; that it grows demand for Canadian audiovisual content and expands content production
sources; and that it extends the reach of the public
broadcaster and Canadian content more generally
by disseminating this content to global audiences.
Although Netﬂix did not request to present at
the oral hearing, the Commission invited it to appear. During the oral component, the Commission,
looking for evidence to “support the conclusions
that Netﬂix is advocating – that Internet video providers can support the policy objectives under the
Broadcasting Act … without the need for any additional regulatory action” (CRTC, 2014c), requested
information from Netﬂix to substantiate the claims
made in its written submission. Specifcally, the
regulator was seeking information about the number of Netﬂix’s Canadian subscribers, how Canadian content performs globally, how much Canadian
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 16
content is watched by Canadians, how much of
Netﬂix’s library is Canadian, and how much Netﬂix
spends on Canadian original content (CPAC Digital
Archives, 2014b).
After several requests by the CRTC and a heated
debate, Netﬂix refused to comply. In a letter addressed to the Commission following the hearing,
Netﬂix stated that the Commission’s orders for
the information “are not applicable to Netﬂix under Canadian broadcasting law” (Vlessing, 2014)
and that Netﬂix’s responses are fled “voluntarily”
and do not represent “an acknowledgment of or
attornment to either the jurisdiction of the Commission by Netﬂix, or the substantive application
of Canadian law (including the provisions of the
Broadcasting Act) to Netﬂix” (Netﬂix, 2014d). Following Netﬂix’s refusal to provide the requested
information, the Commission struck its participation from the public record completely, removing
its written submission and even the transcripts of
its oral participation at the hearing from LTT documentation, thereby adding to the accumulation of
policy silences.
DISRUPTION, CONSUMER SOVEREIGNTY,
AND ELECTORAL POLITICS
Despite the lack of concrete (and requested) evidence from the major foreign OTT provider of professional screen programming in Canada on how
it contributes to the goals of the Broadcasting Act
without any formal regulatory requirements to do
so, and with reasons for concern provided by other
industry stakeholders regarding OTT distribution
of video content, the Commission concluded that
“licensing digital media broadcasting undertakings
is generally not necessary to achieve the broadcasting policy objectives set out in the Act” (CRTC
2015-86). Notably, the Commission opted not to
initiate a separate review of the Digital Media Exemption Order, as was suggested by some industry interveners (Bell, 2014; OMTCS, 2014; WGC,
2014) who requested a review in order to be able
to derive a more complete picture of the over-thetop environment and its eﬀects on the Canadian industry. It similarly decided not to institute annual
requirements for non-Canadian broadcaster afliated OTTs, such as Netﬂix, to disclose information
regarding their Canadian business operations and
expenditures, as was also suggested by other industry interveners in order to restore overall transparency in the broadcasting system (ACTRA, 2014;
Bell, 2014; DGC, 2014). This would have required
the Commission to strongly assert its jurisdiction
over non-Canadian broadcaster afliated OTTs.
These overlooked potential policy pathways could
have been part of a larger initiative to design a cultural policy toolkit for the digital age.
Further evidence that the Commission regarded
Netﬂix as an exemplar to be emulated by incumbents can be seen in its decision to incentivize the
adoption of an open OTT model. The Commission created a new “hybrid” category of service
(CRTC 2015-86) that exempts previously regulated
video-on-demand platforms based in traditional
delivery systems (cable, satellite, IPTV) from all
Canadian content requirements and restrictions,
provided that broadcasters make the same pay service available online to all Canadians on an OTT
video-on-demand platform. In an eﬀort to encourage incumbents to move into the online space, the
Commission initially proposed that incumbent
broadcasters be able to count their expenditures
on Canadian content placed online as part of their
required spending on Canadian programs (CRTC
2014-190-3), but ultimately decided not to implement this measure. Without any Canadian content
requirements in the online space, and now linked
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 17
video-on-demand services on traditional television, the Commission’s decisions assume that incumbents will voluntarily produce or acquire Canadian content for online distribution.
In its desire to align the linear environment with
the more ﬂexible OTT space, the LTT process concluded with the regulator requiring the unbundling
of cable and satellite channels by December 2016
(CRTC 2015-96). While maintaining requirements
that broadcasters spend a set portion of revenues
on Canadian content, the Commission eliminated
all requirements for exhibition of Canadian content
from television except in the prime time evening
hours. These changes, taken together, are expected
to aﬀect the quantity of Canadian content that is
commissioned, and the range of available choices,
with spending on domestic Canadian content over
the next four years forecast to decline to one-third
of what it is today (Nordicity & Miller, 2015). The
forced unbundling of channels is expected to reduce content diversity since special interest channels that could never survive in the small Canadian
marketplace on their own are currently sold in bundles with other, more successful channels. Without
this bundling, the channels are unlikely to achieve
the audience share necessary to thrive in the Canadian domestic market. It is in this sense that the
regulator has demonstrated a rupture from some
of the public good values and goals related to cultural sovereignty that it previously sought to secure
in the legacy broadcasting space. In its reprioritization of values, consumer concerns – the desire for
convenience and more control, for example – have
been given top billing.
It is important to mention also that the timing
of the Commission’s major television policy review
coincided with an upcoming federal election. The
party then in power, the Conservative Party, selected a consumerist platform for this election. At the
start of CRTC Chairman Blais’ appointment, the
Minister of Heritage sent a letter to the new appointee expressing his belief that the Commission could
do a better job of addressing consumer issues, by,
among other things, ensuring that consumers have
access to “more” and “aﬀordable” programming
choices across all distribution platforms, including the Internet (Moore, 2012). The Minister also
expressed his hope that the Commission “regulate
broadcasting undertakings only to the extent necessary” (ibid; emphasis added).
In the 2013 Speech from the Throne, the federal government announced (long before any LTT
decisions were made by the CRTC) that in order to
protect “everyday Canadians,” it intended to “require channels to be unbundled” (ibid.). Shortly
thereafter, the Commission received an Order-inCouncil requiring it to submit a report about how
consumer access to programming on a per-channel
(unbundled) basis “can be maximized in a manner
that most appropriately furthers the implementation of the broadcasting policy for Canada” (Orderin-Council 2013-1167).
There were thus clear political expectations
that the Commission conduct the LTT hearings in
a manner consistent with the consumerist orientation endorsed by the federal conservatives. While
the LTT hearings were still ongoing, and before the
Commission took any decisions, the (Conservative)
Minister of Heritage publicly commented that the
federal government would “not allow any moves to
impose new regulations and taxes on Internet video” (Bradshaw, 2014a). Although the CRTC publicly
made assurances about the fairness of the hearing
(ibid.), the independence of the Commission from
government became a topic of debate amongst industry observers and news organizations (see for
example O’Brien, 2014; Winseck, 2014). During
the federal election, and to much public ridicule
(including several YouTube parody videos, as well
as a substantial Twitter backlash), then Prime Minister Stephen Harper launched a campaign video
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 18
in which he is shown sitting in front of a television
screen with the Netﬂix logo prominently displayed,
assuring voters that only his political party could be
trusted not to impose a “Netﬂix tax” and to “focus
on the needs of Canadian consumers, and to keep
your taxes low” (Harper, 2015).
Regardless of how direct an inﬂuence the federal election and the government’s stated hopes had
on the CRTC, it is clear that the regulator was operating under prevailing assumptions that certain
policy pathways were to be favoured over others.
CONCLUSION: REGULATE OR CHILL
According to a popular theme, digital disruption
arises from a collision between exponential rates
of technological change and slower-paced or incremental rates of change in law, economy, policy, and
society (Franklin, 2012). Broadcasting policy, in
particular, is often portrayed as being reactive and
more sensitive to the welfare of incumbent broadcasters than to the welfare of citizens or consumers. The “near-glacial pace” of regulatory change
in democratic systems is attributed to its intrinsic
features including its public character, deliberative
nature, and inclusivity (Downes & Mayo, 2015, p.
23).
The “digital revolution,” and the “tornado” of
digital disruption that accompanies it, are being
framed by many as not merely unstoppable, but
also as intrinsically good (Morley, 2006; Mosco,
2005). Thus, in many countries the rationale for
regulatory intervention in broadcasting has shifted
from spectrum scarcity to the interests of “citizenconsumers” who seek a greater range of choices
from domestic broadcasters (Freedman, 2015a;
Freedman, 2015b; Lunt & Livingstone, 2011).
Our examination has revealed the complexity of Netﬂix’s presence in Canada, and how it has
been able to capture such a substantial share of the
Canadian market in such a short period of time.
Canada has provided ideal conditions within which
Netﬂix can thrive, disrupt, and induce regulatory
policy to become unstuck. The regulator’s commitment to a greater reliance on market forces, and
its overall prioritization of consumer choice, have
made Netﬂix’s entry and continued presence an
easy one. Netﬂix and OTTs have furthermore provided a way for the Commission to legitimize its
application of wider deregulatory measures to the
Canadian linear television system. The Commission appears to have used the seeming inevitability
of the changes related to technological disruption,
and the unsubstantiated claim that OTTs contribute to the goals of the Broadcasting Act through
market forces alone, to ease regulatory requirements. Policy silences (Freedman, 2010), notably
the lack of consideration of alternative measures to
deal with OTTs, have supported the hands-oﬀ approach to streaming services, and failed to consider
the development of shared, non-commercial, digital public spaces.
Although Netﬂix received the majority of public attention due to its ostentatious rejection of the
Commission’s jurisdiction, Google also ran afoul of
the Commission’s requests for the company to provide evidence to substantiate claims it made during LTT about how it contributes to the goals of the
Broadcasting Act (CRTC, 2014d). Unlike Netﬂix,
Google did not publicly reject the Commission’s jurisdiction, noting “we stand by the submissions we
made in this process and believe we made a positive
contribution to the discussion” (Google spokesperson, as quoted in Bradshaw, 2014b). However, the
result was the same – the Commission was forced
to make its decisions without complete information, “based on the remaining evidence on the re
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 19
cord” (CRTC, 2014d). The Commission then similarly struck Google’s submitted documents from
the LTT public record.
While the Canadian government has thus far
refrained from extending sales tax and cultural obligations to the online space, other jurisdictions are
exploring alternative policy pathways and attempting to assert themselves in this direction: Australia
is moving forward with the extension of sales tax to
foreign streaming services (Pash, 2015); the French
government is considering several initiatives; and
the City of Chicago recently extended its amusement tax to apply to streaming services and introduced a new cloud tax targeting leased computerbased services such as Amazon Web Services (Hinz,
2015; Pletz, 2015). The question of how successfully these measures can be implemented is unclear.
From a strictly consumer standpoint, these measures are unwelcome. Chicago-based subscribers
to popular OTT services have already fled a lawsuit
to challenge the city’s extension of the amusement
tax to streaming services, arguing that the city does
not have the authority to implement such an initiative (Pletz, 2015). The city has also delayed the
implementation of its cloud tax more than once, allegedly due to criticism from consumers and tech
businesses alike (Hinz, 2015). Netﬂix has stated
that, for its part, it plans to comply with Chicago’s
new sales tax by “adding it to the cost we charge
subscribers” (Anne Marie Squeo, Netﬂix spokesperson, as quoted in Farivar, 2015). Netﬂix and
other OTTs might therefore be more accepting of
strictly tax-related initiatives, rather than cultural
ones, since the former do not aﬀect their spending,
strategic operations, or creative and business decisions, and can be put into eﬀect without additional
costs to the companies themselves by ofoading
the extra charges onto subscribers. Netﬂix, in particular, is also in such a strong market position that
consumer behaviors would likely be unaﬀected by
an added tax, and the negative aura associated with
such a move would primarily be centered on the jurisdiction that imposed the tax, rather than Netﬂix
itself.
Some participants in the LTT hearings argued
that disruption through policy is a greater immediate threat to the Canadian broadcasting industry
than economic disruption (Miller, 2014). In countries without high levels of broadband connectivity, Netﬂix and other streaming services do not
represent an immediate threat (Strangelove, 2015).
But in countries in which the business model of
incumbents emphasizes providing broadband connectivity bundled with access to licensed imported
content, the threat is more tangible, especially in
countries such as Canada where the audiovisual
regime is an elaborately designed mixture of entitlements and responsibilities. Netﬂix’s public
rejection of the Commission’s jurisdiction adds
an important new layer of complexity to domestic
broadcasting’s digital shift. The arrival of large, unregulated transnational video distributors makes it
unclear how or whether legacy audiovisual policy
goals concerning national, regional, and cultural
representation can be implemented, measured, or
enforced. These issues are intertwined with larger
questions surrounding the future cultivation of
informed citizenries and functional democracies
through civic discourse and shared national experiences.
In fact, the LTT hearing can be considered to
be a preview of the impending tensions in the media sector between transnational corporations and
domestic governments’ mandates to ensure media
development in the public interest, making the
idea of cultural sovereignty seem very quaint indeed. Regulated incumbents will not fail to point
out the asymmetry of policy regimes that impose
obligations on one set of players and not the other.
When they do not provide audience, market, and
expenditure data to regulators, streaming services
Zboralska and Davis, The Case of Netﬂix in Canada
The Journal of Media Innovations 4.1 (2017) 20
such as Netﬂix, which are both “everywhere and
nowhere,” introduce policy silence in the form of
strategic opacity in previously transparent sectors.
The relative sovereignty of national markets is undermined, as it is no longer clear where and how
people are watching domestic content.
It is urgent to reconstruct the “policy toolkit” for
21st century mediated cultural policy in a way that
ensures that all relevant policy pathways are considered. Under the lead of a new Liberal government in Canada, the country has recently launched
an expansive review of cultural policy, the results
of which will not be known for some time. Any
substantive reconstruction of the policy toolkit
must involve reconsidering the predominant role
attributed to legacy broadcasting in ensuring cultural expression, upgrading the responsibilities
and resources attributed to public service media,
and eliminating uncertainty about jurisdiction
over digital space in national territory. It is crucial
that such a reconstruction recognize the signifcant
power held by “reformer” startups like Netﬂix, and
consider novel approaches, including cooperation
amongst regulatory agencies, to induce compliance
of transnational players. The longer that regulatory
agencies wait to act, the more difcult and turbulent the implementation of new policies will be.
ACKNOWLEDGEMENTS
Earlier versions of this paper were presented at the
International Symposium on Media Innovations
in Brussels (June 2015), the Canadian Communications Association annual conference in Ottawa
(June 2015), the annual conference of the International Association for Communication and Media
Research (IAMCR, Montreal, August 2015), and
the Technology Policy Research Conference (Arlington, Virginia, September 2015). We are grateful to Roslyn Layton (Aalborg University) for useful
comments on an earlier draft. Research reported
here was supported in part by a grant from the
Social Sciences and Humanities Research Council (SSHRC) on “Creating Digital Opportunities,”
which is gratefully acknowledged.
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