Netflix and Explain? What a $500 Million Investment Actually Means

Canadian Heritage Minister Melanie Joly announced plans for Netflix to invest a minimum of $500 million into Canadian content late last month, creating the company’s first ever subsidiary outside the U.S. It was dubbed Netflix Canada.

More than a few commenters lashed out at Netflix, panning them by surreptitiously linking recent price increases to the investment and accusing the streaming giant of skirting tax laws. Netflix took to their blog today to outline a few misconceptions regarding the historic announcement.

When it comes to taxes, Netflix wrote that they steadfastly follow laws everywhere they operate, outlining that under Canadian jurisdiction, foreign online services (such as themselves) are not required to collect and remit sales tax. Netflix also made it clear that absolutely no deals regarding taxes have been made, stating that the half a billion dollar deal was made under the Investment Canada Act.

In regards to the recent dollar and two-dollar price increases? That may be just a bit of bad timing, as Netflix said the jump was planned long ago and has nothing to do with investments or commitments.

Netflix also clarified their investment into market development, stating that the $25 million earmarked for those services is not coming out of the $500 million already pledged. That market development money will go towards fostering content brainstorming, not production, meaning more pitch days, recruitment events and spotlights on local culture. This money seems to be destined for smaller Canadian communities and the company placed an emphasis on French-language speakers in Quebec, though it seems all of the $25 million is not guaranteed to Francophones as it was reported earlier to have been.

The streaming platform also took some time to outline exactly what they are, a common confusion to many skeptics out there.

“Some say Netflix got special treatment because the government didn’t force us to meet special content quotas as part of our investment—that’s wrong,” wrote Corie Wright, Netflix’s director of global public policy. “Netflix is an online service, not a broadcaster.”

This is in response to many who brought contractual obligations from regulatory bodies such as the CRTC into arguments. No online media service, whether it be Canadian or international, must adhere to traditional broadcast media regulations such as quotas. That also means those online services are not allowed to enjoy regulatory benefits either. Though this decision was made in 1999, well before widespread internet adoption and could most likely use an update, Netflix agrees with the current stance and believes in consumer-driven open-internet services.

Netflix is quick to say that they invest in Canadian content not for a quota or good press, but for the stories the country produces, both real and fictional alike. Shows like ANNE or Alias Grace that are based on novels from Canadian authors, or even productions made in the country like Hemlock Grove or A Series of Unfortunate Events are a few examples Netflix cites that invoke Canada’s outstanding talent and resources.

When it comes to Netflix’s overall budget, $500 million CAD over five years is really not that much when looking at what their production arm is pumping into other markets. In 2017, the company spent $6 billion USD alone on original content. To break it down further, this year Netflix spent over $100 million on two—yes, two—Jerry Seinfeld specials, as well as the rights to the comedian’s next season of Comedians in Cars Getting Coffee. In comparison, the latest season of HBO’s acclaimed Game of Thrones cost just over $100 million total.

Break down the potential of Netflix’s $500 million Canadian content investment in whatever way possible—10 Seinfeld specials; five Game of Thrones seasons; 25 seasons of Canadian sci-fi thriller Orphan Black—but be sure that Netflix betting on talent from their northern neighbors is a good thing for both content creators and binge-watchers.