Vancouver discussions on Canada's $500-million Netflix deal, including what it could mean for B.C. film

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      The Canadian government's $500-million deal with Netflix has aroused everything from curiosity and excitement to confusion and controversy.

      To recap, the deal was announced on September 28 by Canadian Heritage Minister Mélanie Joly.

      When Joly appeared at the Vancouver International Film Festival on October 5, she discussed some elements of the deal as she discussed her efforts to help bring Canadian policies in sync with how people are currently consuming information and content.

      "We need to protect our culture, we need to promote our sector, and we need to make sure we have also good recognition here at home by Canadians but also across the world," she said. "On the international leadership side, we need to be a pioneer in making sure that there's a space online for national content and Canadian voices, making sure that we have our space while we know that there are great players developing great content."

      She added that a major consideration when developing policies is "the need to make sure we have our space while we know that south of the border is the biggest creator of content in the entire world".

      Consequently, she said her department believes that foreign platforms can be worthwhile partners in ensuring Canadian voices are heard both domestically and internationally.

      In discussions with Netflix, Joly said the company wanted to invest in Canada to support Canadian talent and would do so by opening Canadian production house, their first outside the U.S.

      "Under the Canada Investment Act, I, as minister, have to approve an investment that is coming from a foreign company, and so the Canada production house of Netflix as being foreign-controlled still needs to be approved," Joly said. "The approval is based on the fact that it is a net benefit to Canadians so it's a net benefit to Canadian writers, producers, filmmakers."

      Canadian Heritage Minister Mélanie Jolie with Vancouver International Film Festival executive director Jacqueline Dupuis
      Craig Takeuchi

      Although Joly added that Netflix will pay their income tax here and there aren't any tax exemptions, reports have since stated that critics of the deal have focused on the government's decision not to impose a sales tax on the streaming service. The National Assembly of Quebec voted in October to tax all foreign online businesses, including Amazon and eBay, by early 2018.

      Netflix global public policy director Corie Wright had responded to these concerns in an October 10 blog post on the company website.

      "We have not made any deals about taxes," Wright stated. "Our investment was approved under the Investment Canada Act. No tax deals were part of the approval to launch our new Canadian presence. Netflix follows tax laws everywhere we operate. Under Canadian law, foreign online services like Netflix aren’t required to collect and remit sales tax."

      Jolie explained that her department will monitor the investment and that if conditions are not followed, there are enforceable clauses.

      Netflix, Joly noted, has already made several coproductions in Canada, such as Alias Grace and Anne of Green Gables, which CBC holds the rights to but Netflix distributes internationally.

      "I think it's great news because really will help scale up production budgets, which is so difficult to do only within our own market," she said.

      Clarifying the deal

      Meanwhile at the 2017 Mediacon Summit held at the Pan Pacific Hotel on November 9, a panel discussed the future of the Canadian television and content industry—with a particular focus on the Netflix deal.

      Canadian Media Producers Association's Reynolds Mastin explained his understanding of the Netflix deal, based on what he's been told by Netflix and the minister's office.

      "The deal is intended to be a vehicle to secure firm investment in Canada and the reason why it's framed that way is because it comes under the Investment Canada review act," he said. "It is not something that was a substitute or intended to be a substitute for regulating Netflix or for taxing Netflix."

      He said the deal required several commitments, including spending $100 million per year in Canada for next five years, plus an additional $25 million on emerging-talent development.

      He added the deal also does not contain any mandated independent production requirements or French-language requirements, the latter which has become a major point of contention in Quebec.

      Netflix's Wright had also addressed this issue in the October 10 blog post.

      "We have more work to do when it comes to finding great stories from Quebec told in French," Wright stated. "That is why on top of the half a billion CAD investment, we made a commitment to invest CAD $25 million dollars in market development activities over five years. Netflix will use that additional investment to host pitch days, recruitment events, and support local cultural events to ensure Netflix Canada reaches vibrant Canadian production communities, including the French-language community in Quebec."

      While Joly had previously stated that original Canadian content means anything that hasn't been commercially shown in Canada, Mastin further clarified the terms of Canadian content in the deal.

      "What the agreement does not do is it doesn't mandate a certain level of quantity of so-called Canadian content, partly because in order to hit a 10 out of 10 production for that threshold, Netflix would have to partner with a Canadian broadcaster or distributor on every show it does here, which it sometimes does do," he said.  

      A production house in Canada

      Mastin also clarified confusion about the requirement that Netflix Canada must open a production house in Canada, which could potentially be merely a legal entity rather than a bricks-and-mortar presence.

      "Under this agreement, there is a requirement that Netflix have a permanent federally incorporated presence in Canada," he said. "That doesn't necessarily mean that Netflix is actually opening a studio or an office in this country."

      He said that while the details haven't been worked out yet, "we have urged Netflix to strongly consider having a true permanent physical Canadian presence in this country but no commitment has been made to do that as of yet."

      Netflix's Wright had stated in the October 10 blog post that many details are still being worked out.

      "We understand that people are curious and eager for immediate details about what comes next," Wright wrote. "But remember: our commitment marks a long term investment in Canada—not just a next week, next month, or next year investment. That means that now that we’ve been given the green light to establish a local production presence, we have some planning and hard work to do before we can make any additional official announcements."

      Creative BC vice-president Robert Wong
      Craig Takeuchi

      Potential for B.C.

      If Netflix does decide to open a physical office in Canada, the next question would be where would it be located?

      When the Georgia Straight interviewed panelist Creative BC vice-president Robert Wong and asked how Netflix could benefit if it chose Vancouver, he noted that it could potentially boost domestic productions levels and that the company would be able to access the well-established industry that exists here.

      "If this leads to an opportunity of establishing a production office here, then there is that opportunity where independent producers may be able to create their own IP [intellectual property] and then essentially license it to Netflix," he said. "How Netflix could benefit, of course, would be that they could tap into the high level of independent producers that we have here that are producing really great content…. They could really get in at a development stage and really work with the independent producers."

      Advocates for B.C. screen industries have long advised that bolstering the domestic industry would prevent the province from becoming susceptible to the boom-and-bust nature of the service industry, which is susceptible to numerous factors such as fluctuations in the U.S. dollar exchange rate or increased competition from other jurisdictions.

      Wong also pointed out that Canada is Netflix's second largest VOD market and one of their top production centres as well. Numerous Netflix productions have been filmed or are currently filming in Vancouver and B.C., including Lost in Space, Game Over Man!, A Series of Unfortunate Events, Altered Carbon, Haters Back Off, Dirk Gently's Holistic Detective Agency, and Travelers.

      "We should still have cautious optimism about the deal," Wong said. "We don't know how it's going to play out at the end."

      The Georgia Straight has submitted an interview request to Netflix and will post further details as they become available.

      You can follow Craig Takeuchi on Twitter at @cinecraig or on Facebook