Since the introduction of Netflix to the Canadian market in September 2010, online television distribution, known as “Over the Top” (OTT) services, have expanded rapidly at a rate of over 25% per year in Canada, becoming one of the main distribution systems for home entertainment. However a 2012 article by Michael Rimock in the Canadian Journal of Law and Technology points out that since OTTs fit under the CRTC’s new media exemption for internet-based content, they are not subject to regulation the way broadcasters are, despite their increasing presence.
A 2012 CRTC report acknowledged the growth of OTT services, but recommended that Canadian broadcasters respond by moving aggressively into the OTT space rather than creating a new regulatory category for internet media. Rogers and Shaw attempted this in the past few years with their OTT service Shomi, which has since failed, but Bell’s CraveTV continues to grow.
At the end of 2016, Netflix and Amazon Prime announced that they were expanding their service into virtually every country in the world, with Netflix in 190 countries and Amazon Prime in 200. With OTT services now becoming truly global in scope, how will Netflix and Amazon simultaneously deal with the media regulations of every government in the world and how can Canadian content producers and distributors continue to compete?
A recent article by Brian Barrett, a senior writer at Wired and former Editor in Chief at Gawker Media answers the first question with two words: original content. If OTT services invest in creating their own shows, a significant amount of work around licensing the rights to stream movies and shows by other producers eventually gets cut out as more and more content is added directly by the provider. A previous example is Comcast’s purchase of NBC in 2009 where a major broadcaster bought a major content producer to gain greater control of the media supply chain.
Over the past 5 years Netflix and Amazon have done just this, growing their library of original TV shows and movies. Bell has begun to produce its own shows through CraveTV, signalling an adoption of this model in Canada. The effect of a distributor owning its own content is that it makes licensing unnecessary, as a single entity now owns the rights to the content in perpetuity and therefore can distribute them without need for a license. This saves time and money and simplifies the supply chain of delivering content but it also signals a major shift that concerns media creators and distributors around the world.
If more and more content that people want to consume is produced by OTT distributors, then the ability of Canadian media companies to get licences for in-demand shows becomes far more difficult and will cut them out of the supply chain. Bell currently has licences for HBO and Showtime, two popular US content producers, but both have their own small OTT services, HBOgo and Showtime Anytime. The first is currently available in Canada with a licence through the Movie Network (a subsidiary of Bell), the second is currently only accessible in the US. If the big OTT’s gamble on content creation pays off, these content creators may try to grow their own OTT presence globally rather than keep selling licences.
While it is clear that Canadian distributors need to focus on content creation, it is also important that this content be marketable outside Canada. The federal government has affirmed a commitment to move from “focusing on growing the domestic market” to “capturing a greater share of global markets” in a recently commissioned Heritage Canada consultation report titled “Canadian Culture in a Digital World”. Heritage Minister Mélanie Joly told the Globe and Mail in 2016 that the biggest challenge for content producers is “finding better ways to export the material on digital platforms around the world”. The article noted such a review of CanCon rules is a major upheaval not seen in 25 years.
The move to global OTT services signals an increase in demand for high-quality content and a reduction in the barriers to distributing content to other markets. Canada is well positioned to profit from this change, if it allows it creators and distributors the freedom to create shows that are compelling to global audience, not just a Canadian one.
Roger Angus is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School.