Canadian Media Companies Seek to Regulate Netflix18 Apr, 2011 By: Erik Gruenwedel
A growing number of Canadian television and cable operators are calling for that country’s government to begin regulating so-called “over-the-top” broadcasters (notably Netflix) that deliver entertainment content via the Internet.
Following Netflix’s launch last September of a streaming service, a growing number of the country’s cable and telecommunications operators became concerned the Los Gatos, Calif.-based online disc rental company’s $7.99 (Canadian) monthly streaming service would unfairly undercut their pay-TV subscription operations.
Earlier this year a consortium of multichannel operator executives, dubbed the “Over the Top Services Working Group,” formed and on April 1 sent a letter to the Canadian Radio-television and Telecommunications Commission seeking input as to whether Netflix (and others) circumvented rules and restrictions applied to traditional broadcasters.
In an April 14 analysts call, André Bureau, chairman of Montreal-based Astral Media Inc. and member of the working group, denied the intent was to single out Netflix in particular, but rather the rapid expansion of new media.
But as Netflix bankrolls original content and recently expanded its streaming portfolio to include exclusive access to Paramount Pictures’ theatrical releases in Canada, the country’s broadcasters contend Netflix itself is becoming a traditional broadcaster, albeit with reduced regulatory scrutiny.
“The objective is really, that from an industry point of view, that we maintain a level playing field within the system — a system that is a very positive and strong element in terms of our Canadian culture, identity and the Canadian economy,” Bureau said. “We are trying to make sure that we see the regulator looking at it from the same point of view.”
Netflix CEO Reed Hastings, in analyst presentations, has reiterated support for unfettered and unregulated access to the Internet for consumers and commercial interests. Hastings also has voiced concern regarding efforts by Canadian and U.S. cable and telecommunication operators imposing data caps on consumers and exploring options that include charging by the gigabyte.
Richard Greenfield, analyst with BTIG Research in New York, said the growing influence of Netflix as media aggregator and content licensee has brought into question the current status of the distribution food chain. Greenfield said proliferation of content apps for tablet computers and connected TVs are rapidly calling into question the relevance of transactional VOD episodic TV and full-season releases on packaged media.
“Netflix, in essence, is just another window to monetize content. Tthe question for the vast majority of content owners is really when to sell to it, not whether to sell to Netflix in the first place,” Greenfield wrote in an April 13 post.
The analyst contends the first two seasons of popular TV shows should not be made available to Netflix or similar service such as Amazon Video. Doing so, Greenfield said, would encourage consumers to abandon pay-TV channels and wait for cheaper access via Netflix. Instead, the analyst said media companies should narrow license agreements to programming with limited syndication potential and shows that are no longer on air.
“Why not sell a show like 'Fringe' or 'Parenthood' to Netflix, particularly if Netflix is willing to pay a high fee (as it tries to offer an increasing amount of 'fresh' content),” Greenfield wrote. “While 'Glee' [which Fox recently licensed to Netflix] generates a ton of buzz, it was not a massive syndication success — with total domestic syndication dollars [before Netflix] may not even exceed [$1 million per episode], including barter sales.”
Regardless, John Cassaday, CEO of Canada-based content distributor Corus Entertainment Inc., downplayed Netflix as a threat, saying the service was just another competitor in Canada.
“It’s important to remember that video consumption is not a zero-sum game,” Cassaday said in a separate analyst call, as reported by The Globe and Mail. “We believe that there is virtually an insatiable appetite for consumers to consume more media on a multitude of platforms, and all of the data demonstrates that video consumption is, in fact, growing.”
Netflix reports first-quarter results April 25.