Netflix and Disney ask Canadian Court of Appeals to stop tax bill on streaming revenue

Netflix, Walt Disney, and other US streaming companies have asked the Canadian court to cancel the authorities' plan to force them to bear 5% of sales within Canada in order to fund locally broadcast news and other domestic content.

The Canadian Film Association (Motion Picture Association - Canada) stated that the order issued by the Canadian Radio-Television and Telecommunications Commission (Canadian Radio-Television and Telecommunications Commission) last month exceeds the authority of broadcasting regulators and does not recognize the billions of dollars each company spends in Canada every year.

Wendy Noth, president of our association, stated, “The streaming services of our members do not produce local news, and they are not granted the important legal privileges and protections enjoyed by Canadian broadcasters in exchange for their responsibility to provide local news.” The association represents Netflix, Walt Disney, Warner Bros. Discovery, Paramount Global, etc.

Streaming distribution companies and industry watchers warned that this tax could lead to fee increases for millions of Canadian subscribers, and there were also voices pointing out the possibility that streaming distribution companies might reconsider business development in Canada.

A CRTC spokeswoman declined to comment and said the matter was up to the courts. Last month, CRTC Chairman Vicky Eatride stated that the mandatory contributions were to address concerns that “certain types of content, such as local news, may not be created or distributed.” It is said that it is intended to address concerns that “or, market principles alone will not be enough to cover it, and it will be difficult to use it.”

CRTC previously anticipated that this payment would begin in the 2024-25 broadcast year starting 9/1, and that 0.2 billion Canadian dollars (equivalent to 0.1 billion 47 million US dollars) per year would contribute to the broadcast system.

In filing with the Canadian Federal Court of Appeals, streaming broadcasters and film company lawyers have stated that regulators have not revealed “any grounds” as to why foreign streaming broadcasters must contribute to local television and radio news program production.

The lawyers stated in the submitted documents that the broadcasting regulator “concluded that 'it is necessary to increase support for news production' without any basis.” “Requiring foreign online operators to fund news production is inappropriate in light of the nature of services provided by foreign online operators.

The Canadian Association says the broadcasting regulator “acted unreasonably” and is calling for the intervention of the appellate court.

Michael Geist, an internet law professor at the University of Ottawa, said that the streaming broadcaster's objection is that there is no “reasonable connection” between the service and Canadian news broadcasts, and that it will be imposed on foreign streaming broadcasters even though it is not imposed on competitors based in Canada such as BCE's Crave.

Geist argued that the regulator's initial decision “depended heavily on the desired outcome and had little evidence or analysis,” and added that he expected further appeals.