Netflix to commit $500M over 5 years on new Canadian productions: sources

Internet streaming service Netflixwill spend at leasthalf a billion dollars over the next five years to fund original Canadian productions,CBC News has learned.

The funding will officially be announced tomorrow by Heritage Minister MlanieJolyas part of a speech unveilingher vision for Canadian content and cultural industries in the digital world. It comes after months of public consultations, which were held last year.

The move could benefit bothNetflixand the federal government, which has come under pressure to impose a tax on the service that could be used to fund Canadian programming.

Netflixhas lobbied hard to avoid facing the kinds of requirements thattraditional broadcasters in Canada have had to face for years.

Canadian broadcasters, for example, have to fulfil a quota of Canadian content they put on the air.They are also required to spend a percentage of their revenuesto fund "programs of national interest"through contributions to the Canada Media Fund (CMF) a requirement that was decreased to five per cent in a CRTC decision this past May.

Politically, theTrudeaugovernment can now claim a victory for giving a leg up to Canadian producers without imposing a new tax on Canadians or going to battle with members of the industry to convince them to pitch in new money.

Yet, there are several outstanding questions for Canada's cultural producers, who will undoubtedly be keen to hear the specifics of how this money will be spent.

It also raises questions aboutexactly how much new Canadian content this Netflixcommitmentwill generate, beyond what the company would have produced anyway.

CBC Televisionand Netflix are currently working together on a second season ofAnne, based on the Anne of Green Gables novels. The CBCalso collaborated with Netflix to produce the six-part miniseries Alias Grace, based on the Margaret Atwood novel of the same name. It was brought to the screen by Canadian filmmakers Sarah Polley and Mary Harron.

Outside the Canada Media Fund

The money would not be contributed to the Canada Media Fundbut would existoutside the fund. It's not yet clearwho will get to use it to create programming with Netflix.

The CMF gets money from the government of Canada and cable and satellite companies such as Bell Media, Cogeoco, Telus and Vidotron. Producers looking for financing for their projects can apply to the fund for support.

During the Heritage Department's public consultations, Netflixlobbied against being treated like a conventional broadcaster, with all the financial commitments that would entail.

"We've been doing significant investments on our own, and will continue and, honestly, [it]will only grow significantly over the next couple of years," Elizabeth Bradley, vice-president of content atNetflix,told The Canadian Press in 2016. "But regulation is not helping to encourage that for us."

Good deal?

Prof.Pierre Blanger of the University of Ottawa saysNetflixis "getting away with murder."

"It's really a drop in the bucket. One hundred million dollars per year thatNetflixis now committed to is out of the pool of $7 billion thatNetflixis intended to spend over the next year."

That's just 1.42 per centof the company's expected expenditures, said Blanger.Netflixstill doesn't have to tax Canadians for its services, pay any taxes to the government or have to abide by Canadian content quotas.

Rosalie Wyonch, on the other hand, thinks that at first blushit sounds like a good arrangement.

Wyonch, of the C.D. Howe Institute, has done research on cross-border digital content and taxation.

"This sounds like a good middle ground, because now they'll be funding Canadian content, but we aren't imposing so many restrictions and requirements on them that they just choose not to do business in Canada anymore."

She's curious whether other content producers could be encouraged to make similar contributions or whether this will only apply toNetflix.

No Netflixtax

The idea of aNetflixtax first emerged before the last federal election, when Stephen Harper warned that Canadians needed to vote Conservativeor face a tax on the use of the streaming service.

It reared its headagain in June, when the Commons heritage committeerecommended a tax on streaming services, suggesting it could bring in hundreds of millions of dollars that could be given tothe CMF to finance Canadian productions.

Prime Minister JustinTrudeaurejected the idea outright.

"We're not going to be raising taxes on the middle class through an internet broadband tax. That is not an idea we are taking on," he said at the time.

Collaborating with major players like Netflix is in line with commentsthe heritage minister has made previously.

"I think people are telling me that they want the governmentto adapt to how they consume information, how they searchfor content, and that they shouldn't be adapting to how government works,"JolytoldCBC Radio'sMetro Morning in March.