THE BLOG
12/20/2017 16:55 EST | Updated 12/20/2017 16:56 EST

Minister Joly Got It Right With Netflix: Let The Market Shape Canadian Content

The move recognized that market incentives are the best way to ensure Canadians get the cultural products they want.

In September 2016, Heritage Minister Melanie Joly launched a review of the federal government's cultural policies with the laudable goal of making them "better suited to today's digital reality."

The result, released a year later, was rather short of a revolution, including such predictable boilerplate policies such as more taxpayers subsidies for cultural corporate welfare — also known as the Canada Media Fund (CMF) — and more tax dollars to help promote Canadian content abroad. There would even be a new Creative Industries Council, creatively created to help the creative industry counsel the government on creativity.

Mark Blinch / Reuters
Minister of Canadian Heritage Melanie Joly.

One aspect of her announcement, however, dominated the headlines, and marked a refreshing departure from decades of government meddling in cultural affairs: a commitment from Netflix, the California-based streaming video service, to invest at least $500 million in Canada over the next five years.

It's hard to think of another heritage minister in history that could boast of securing such a sizable commitment — made voluntarily — by a foreign company to invest in Canadian culture. Amazingly, the Netflix move recognized that market incentives are the best way to ensure Canadians get the cultural products they want. It was, in short, a sensible, realistic, consumer-focused approach that recognized how much the world has changed.

Naturally, fans of government-subsidized culture were outraged.

What upsets them most is that Joly refuses to force Netflix to help bankroll the cultural handouts upon which they rely.

First, they complained that, as a foreign company with no physical presence in Canada, Netflix does not have to collect GST/HST. The reason has nothing to do with a special exemption for Netflix, but is merely a recognition of the difficulty of trying to enforce GST/HST on a foreign business providing a digital product. Short of blocking Netflix in Canada altogether (how do you suppose that would go over with Canadians?) it is hard to compel any company in another country, where the Canada Revenue Agency has no jurisdiction, to collect and pay Canadian taxes.

But sales taxes are not the real concern of subsidy-dependent industry groups and their allies. What upsets them most is that Joly refuses to force Netflix to help bankroll the cultural handouts upon which they rely. For example, the major cable companies in Canada — including Rogers, Bell, Shaw and Videotron — are required to pony up the majority of CMF's funding (taxpayers pay for most of the rest directly). Applicants (including the cable companies and the CBC) can then seek funding from this pool for projects that tick all the right government-approved boxes.

Bloomberg via Getty Images

Before the advent of the internet, arguments for government-directed cultural content at least had a leg to stand on: with a finite number of TV channels, and no obvious way for consumers to pay directly for the content they wanted, the idea of interventions to ensure diversity and Canadian presence carried some weight.

But in 2017, when Canadians now have both easy access to unlimited cultural options and ways to pay for them directly, these arguments collapse. Rather than force companies like Netflix to participate in antiquated endeavours like the CMF to produce bureaucrat-approved content, Joly should go even further and level the playing field for Canadian companies competing with Netflix by getting rid of the CMF altogether, and let Canadian consumers decide what content gets made.

Minister Joly deserves credit for recognizing that the Netflix model, where the consumer is king, is the future.

The bleating from the subsidized-culture industry is no different than Bombardier pleading the special nature of airplanes: rhetorical cover for the fact that, absent forced taxpayer help, their products cannot survive in the marketplace. There is no longer any compelling reason for Canadians to be forced to pay for cultural content that they don't want to watch, any more than they should be forced to pay for other people's groceries, hockey tickets or cars. Minister Joly deserves credit for recognizing that the Netflix model, where the consumer is king, is the future.

For too long, self-appointed champions of Canadian culture have subsisted on handouts from Canadian taxpayers, allowing them to ignore the preferences of their would-be audiences. No longer. In most industries, the ability to make a living depends on giving consumers what they want. It's well past time our cultural industries learned to do the same.

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