Netflix in Canada: From Conquering to Responding
Next year will mark Netflix’s tenth anniversary in Canada, and its presence has had the effect of a bomb on the country’s audiovisual landscape. Return on the consequences of its arrival and the efforts that followed suit.
Founded in 1997, Reed Hastings’s company quickly recorded explosive growth. Initially nothing more than a DVD rental service, Netflix imposed itself as the most important online platform for viewing films and series. More than 20 years later, it tops the 2018–2019 ranking of fastest-growing U.S. brands according to Brand Finance, a global consulting firm that evaluates brands.
Part of this growth is attributable to the internationalization strategy deployed by Netflix in 2010, with Canada squarely in the initial spotlight.
Entering a market
Canada’s online content landscape was practically unoccupied when the giant decided to lay claim to it.
The major players that dominated the media landscape at the time—namely Bell, Corus, Quebecor and Rogers—as well as public broadcaster CBC/Radio-Canada all offered ‘traditional’ television services, with the exception the Crown corporation which had just launched its French-language TOU.TV web-based platform.
In as little as three quarters, Netflix successfully converted 830,000 Canadians according to La Revue des médias. Five years later, it already counted 41% of the Canadian population among its subscribers (CRTC 2016, based on a survey conducted in fall 2015 by MTM). This popularity can be explained in part by the linguistic and geographical proximity shared by American and Canadian viewers.
However, the penetration of Canada’s French-language market was initially more timid, namely because of the lack of French-language content: only 3% of French-speaking Canadians subscribed to the service in 2011.
The snowball effect
Netflix’s arrival also provoked changes in Canadians’ media consumption habits. Over-the-top services gained ground over traditional television services such as cable or satellite TV. The revenues generated by these services decreased by 5% and stood at $6.9 billion, whereas those of over-the-top services increased by 21.3% to reach $2,4 billion, according to the CRTC’s Communications Monitoring Report for 2017. The mere 3% of French-speaking Canadians who initially used this new service has now grown to 45% who subscribe to services of this type, as demonstrated by the survey conducted by MTM in April and May 2018.
Unsurprisingly, Canadians aged below 30 are the ones who most quickly adopted this mode of consumption: 45% of them cancelled their cable subscription or never subscribed to a cable service, according to GlobalWebIndex. That percentage decreases with age.
In addition to seeing their shares of revenue decrease to the profit of Netflix, Canadian market players were worried about the survival of Canadian culture and deplored that the U.S. company was not required to pay taxes and income taxes on its products or to financially contribute to the production of local content.
Faced with all of these repercussions, the players associated with the broadcasting sector got together during the series of Let’s Talk TV public hearings organized and held by the CRTC in 2013 and 2014. Among those players were not only YouTube, Disney, Netflix, Google and CBC/Radio-Canada, but also consumer advocacy groups, creator representatives, producers and other institutional members.
Many decisions have been made following this process, but none to date have dealt with regulating Netflix.
During this same period, Canada’s main media players, i.e., Bell, Rogers, Corus, Videotron and CBC/Radio-Canada, rolled up their sleeves to offer platform-based online television services.
Thus, Videotron proposed Club Illico as early as 2013. For its part, Bell launched Crave TV in 2014, followed by Alt TV in 2017, where content is distributed through the web (and, therefore, no receiver is required). Also in 2014, TOU.TV followed suit with a pay version of its offer, i.e., the Extra package. The public broadcaster also reached agreements with other French-language channels—including Groupe V, Bell Media, TV5 Québec Canada and the National Film Board—for the purpose of broadcasting its contents through them.
Corus Entertainment, owned by J.R. Shaw, for its part chose not to emphasize a single video-on-demand service but instead proposed HGTV, Slice and Food Network series on other digital platforms such as cable, satellite and the video-on-demand channels of IPTV providers.
Two recent initiatives also emerged. After the launch of Shomi, in 2014, in collaboration with Shaw—and its disappearance in 2016—,Rogers launched Ignite in 2018.
CBC Gem was also announced in December 2018. It’s a platform that is similar to the TOU.TV platform and the intention is to offer 4,000 hours of free live and on-demand programming.
Also, most of the different channels in the country now offer an online content catalogue.
Despite all of these initiatives, the latest GlobalWebIndex survey shows that Netflix rules among all of the over-the-top television services used to watch video content. Thus, it is the choice of 59.2% of respondents, followed by 10.4% for Crave TV, 4.9% for Club Illico and 4.4% for TOU.TV Extra.
The efforts deployed by Canadian players have nevertheless not all been in vain. A December 2018 report on cord-cutting reveals that about three quarters of all Canadian households still use traditional television services such as cable or satellite TV.
Once again according to GlobalWebIndex, on a global scale, Canada holds the ninth rank when it comes to linear television consumption, particularly among French-speaking consumers.
Netflix’s operation charm
Over all of these years, Netflix has continued to improve its platform, namely by doubling its offer of original fiction series as early as 2016 in addition to proposing French dubbed versions of its shows upon release, thereby competing directly against French-language media groups that had been initially spared to a certain extent.
It’s in September 2017 that the Canadian government unveiled its cultural policy, including an agreement with the American giant. Among other things, Netflix committed to creating a production company in Canada and investing $500 million over five years to produce Canadian shows or series and $25 million to develop the French-language market. Taxes, income taxes and royalties were, however, not covered in that agreement.
Since then, Netflix has met with several producers to develop Canadian content and has supported certain initiatives, including the creation of a hub dedicated to production in Toronto and the funding of a screenwriting development program with the National School of Humour in Montreal. In 2018, the production of Canadian content was valued at $3.04 billion compared to $4.77 billion for foreign productions, according to the Profile 2018: Economic report on the screen-based media production industry in Canada.
Reed Hastings’s company nevertheless increased its rates at the end of 2018 to fund the production of television series and films, so it claimed.
Netflix’s Canadian empire could indeed be threatened by the upcoming arrival of giants like Disney and Apple who will be entering the streaming content market, not to mention the competition of Canadian players who will this time around be better prepared to counter these newest invaders.