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Arts Netflix deal doesn’t solve real cultural issues

As the fury over a sweetheart deal for Netflix rages, one thing it has exposed is how unwilling the Liberals are to address the hard issues affecting Canadian cultural policies – apparently as unwilling as their Conservative predecessors.

When Quebec vowed this week to go it alone in an attempt to get Netflix to collect provincial sales tax, Prime Minister Justin Trudeau repeated his commitment to let the American streaming service continue to escape the GST – because to do otherwise would raise taxes on the middle class. That kind of populist if nonsensical position – if middle-class Canadians chose to buy new services, why should we not pay existing taxes on them? – was the hallmark of Stephen Harper's refusal to engage on the issue.

Another tricky question that Minister of Canadian Heritage Mélanie Joly never even raises in the 38-page report, titled Creative Canada, is that of foreign ownership. Canada has a series of laws and policies that prevent foreign control in a wide range of cultural activities from broadcasting television programming to selling books and distributing movies. (Canada is not alone in thinking like this; many countries, including the United States, have traditionally kept foreigners from buying their broadcasting networks.)

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The notion has always been that Canadian control promotes Canadian content, although the relationship is not always that direct and depends more on a producers' economic interests than patriotism: Foreign-owned companies can make money publishing Canadian books, for example, while the business model for Canadian broadcasters relies heavily on U.S. shows.

Still, the scandalous Netflix deal does support one argument often made in favour of national ownership: It's easier to get Canadian companies to play by Canadian rules. (Apparently in exchange for escaping any taxes, Netflix made a commitment to spend $500-million in production in Canada over five years, a sum that seems to represent what it would have been spending already and can include U.S. productions that are merely shooting in Canada.)

In both broadcasting and the book industry (an area to which a report 18 months in the making devotes only one paragraph), there are a series of simmering scenarios where the issue of Canadian control may come to the boil at any moment.

The case of broadcasting is the more obvious one: Canadian private broadcasters such as CTV and Global are regulated by a series of interlocking responsibilities (such as providing Canadian content) and protections (such as being allowed to drop their ads into competing U.S. signals). The requirement that they be majority-Canadian-owned means they don't have to compete directly with American broadcasters. Without it, Canadians would simply have been watching ABC North or CBS Canada since the early days of TV.

But, as Netflix does an end-run around Canada's so-called walled garden and CBS itself launches its All Access streaming service in Canada next year, the question becomes how can you hold the broadcasters to the responsibilities if you can't protect their market? The CBS launch will devalue the territorial rights Canadian broadcasters have negotiated for CBS programs and challenge the usefulness of simultaneous substitution, the right of Canadian broadcasters to drop their ads into the U.S. signals when they broadcast the same shows.

So, as broadcasting consolidates in the face of streaming, will government let Canadian broadcasters go looking for foreign deals and foreign capital? (In the United States, under pressure from a consolidating industry, the Federal Communications Commission has been relaxing its ownership requirements in recent years.)

Meanwhile, in publishing, the horse has already bolted: As journalist Elaine Dewar pointed out in her recent book, The Handover, successive federal governments conveniently ignored their own rules to allow the sale of McClelland and Stewart to the University of Toronto and the foreign-owned Random House of Canada before eventually allowing the venerable Canadian publishing house to be transferred to what is now Penguin Random House Canada. If, God forbid, House of Anansi runs into trouble, could it also be sold to PRHC?

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National ownership requirements can depress the prices that cultural industries can ask for their businesses. What would happen if Chapters/Indigo CEO Heather Reisman decided she's had enough of competing with the border-hopping Amazon and petitions government to sell her stake in the retailer to a foreign company? Canadian book publishers (whatever the nationality of their owners) may not like the power that Chapters/Indigo wields, but they do like the way Reisman promotes Canadian books. Would Barnes and Noble get it?

When faced with dilemmas such as these, governments tend simply to cut ad hoc deals, considering cultural industries as industries first and foremost, working to protect jobs rather than to nurture Canadian books, TV programming or movies. That seems to have been the mindset behind the Netflix deal, which makes no distinction between U.S. service productions that offer good jobs to local crews and Canadian productions that actually employ local creative talent to write and direct Canadian programs. If those are all the smarts Joly brings to deal-making, you have to wonder what bargains she'll drive when Canadian creative industries go looking for foreign investors or Canadian cultural businesses come up for sale.

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