Mélanie Joly, Minister of Canadian Heritage, speaks with media after her discussion at the VIFF Industry Exchange Day in Vancouver on Thursday. Ms. Joly has been travelling the country for more than a week promoting the federal government’s deal with Netflix. Although it falls under the Investment Canada Act, Ms. Joly signed it because it is related to the cultural sector.BEN NELMS/The Canadian Press
There is a saying at Netflix Inc. that the company makes "content for people, not quotas."
This core philosophy has placed the streaming service in direct conflict with major parts of Canada's cultural industries, which have worked for decades with strict rules and regulations that include quotas for Canadian content. In short order, Netflix's promised $500-million investment has exposed a culture clash in the country's creative community.
"It's unfortunate that the government doesn't hold all broadcasters and distributors to the same rules when they are working in Canada," said David Sparrow, national president of the Alliance of Canadian Cinema, Television and Radio Artists, which represents 23,000 people working in film, television and digital media.
"In Canada, we have created regulations and rules by which companies are allowed to access our Canadian people and marketplace. Netflix and the other over-the-top services are not necessarily contributing to that content creation," he added.
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Other online players are more positive, stating Ottawa is looking to the future with the deal with Netflix and, eventually, other digital platforms.
"This was a bold and courageous move in building partnership between government and private enterprise," said Shahrzad Rafati, the founder and chief executive of Vancouver-based BroadbandTV. "Digital is undeniably the future, and whether the government engages with platforms like Netflix or not, they will garner eyeballs and be successful."
Netflix has largely remained silent since its deal with the federal government was announced on Sept. 28. The company is still incorporating a production house in Canada and is waiting to firm up production deals before announcing how it will spend the new money, sources close to the company said.
However, it is clear Netflix wants to continue operating outside the federal broadcasting regime. In a presentation to the CRTC in 2014, Netflix proudly pointed out it was not a "traditional broadcaster" but an "online video service."
"Regulating Internet content appears unnecessary," Corie Wright, director of global public policy for Netflix, said at the time. "In today's competitive environment, reliance on market forces is the best way to support the future success of Canadian television."
In a statement on Friday, Ms. Wright said Netflix wants to reassure the Canadian television industry it is setting up shop in the country because of its "amazing talent and amazing stories."
"All streaming services – foreign and domestic – are exempt from quotas that apply to traditional broadcasters," she said. "People choose what they want to watch on our service, so we have to invest in the best content from around the world."
Canadian Heritage Minister Mélanie Joly has been travelling the country for more than a week promoting the deal. Although it falls under the Investment Canada Act, Ms. Joly signed it because it is related to the cultural sector.
At every stop, Ms. Joly has portrayed the agreement as a key moment in the history of Canadian culture, with Ottawa and a new digital player joining forces to boost the production of domestic television series and movies.
"I am convinced that we presented a very forward-thinking plan, something that is very new and that, of course, is dealing with a sector facing a lot of disruption," she said in Vancouver on Thursday.
However, she has struggled at times to sell the agreement, particularly in Quebec, where it has been widely decried because Netflix is refusing to earmark a specific amount for French-language productions in the province.
Ottawa has also faced attacks for refusing to impose sales taxes on Netflix subscriptions in Canada, with artists and companies complaining that gives the firm a leg-up over Canadian-based rivals.
Dave Forget, director of policy at the Directors Guild of Canada, said there are still unanswered questions over how Netflix's production house will spend its $500-million.
"When we've talked to the government, they have been clear the money is intended to be over and above whatever Netflix is already doing [in Canada]," he said. "That's happy news. What's left to do is to have more scrutiny and understand exactly what we're talking about."
Under the agreement with the federal government, Netflix will spend an average of $100-million a year on original productions in Canada over the next five years and a total of $25-million to develop French-language content.