Netflix, Paramount File Legal Challenge Over Streaming Act’s News Funding Rule

The Netflix logo in a photo illustration. Thomas Trutschel/Photothek via Getty Images

Netflix, Paramount, and Pluto TV are asking a Canadian court to review Ottawa’s new rule that requires U.S. streaming companies to pay a 5 percent tax on revenues made in the country.

The Canadian Radio-television and Telecommunications Commission (CRTS) ruled June 4 that as part of the Online Streaming Act, American streaming services will be required to pay the tax on all Canadian revenues, with 1.5 percent of the funds going toward local news, starting in the 2024–2025 broadcast year. It has been estimated the tax will bring in $200 million annually.

The Motion Picture Association-Canada, which represents the companies, is fighting the news component of the tax and has filed both a leave to appeal and a judicial review application with the Federal Court of Appeal.

“The CRTC’s decision to require global entertainment streaming services to pay for local news is a discriminatory measure that goes far beyond what Parliament intended, exceeds the CRTC’s authority, and contradicts the goal of creating a modern, flexible framework that recognizes the nature of the services global streamers provide,” Motion Picture Association Canada president Wendy Noss said in a July 4 statement.

“Our members’ streaming services do not produce local news nor are they granted the significant legal privileges and protections enjoyed by Canadian broadcasters in exchange for the responsibility to provide local news.”

The judicial review application, provided to The Epoch Times by the MPA, asks the court to quash the requirement for streaming services to pay 1.5 percent for local news content.

“The decision does not reveal any basis for the CRTC’s conclusion that it is appropriate to require foreign online undertakings to contribute to news production,” the court document said.

“Just as Canadian services are not required to fund local news, neither can foreign streaming services with no rational connection to the production of local news be forced to pay into a local news fund.”

The MPA said global studios and streaming services have paid $6.7 billion annually to create entertainment in Canada, investing more in Canadian production companies than the CBC, Telefilm, or the Canada Media Fund combined.

The CRTC told The Epoch Times in an email that the Online Streaming Act required it to “modernize the Canadian broadcasting framework.” A spokesperson also said the agency would not comment on the lawsuit while it is before the courts.

“The CRTC will continue to balance consulting widely with moving quickly to build the new regulatory framework,” the CRTC said.

Streaming Act Criticized

The CRTC decision has been under heavy scrutiny since it was announced, with many saying Canadian consumers will end up paying more on their monthly bills thanks to the tax.

University of Ottawa law professor Michael Geist previously said consumers will either pay more or have fewer content choices as a result of the tax.

Prime Minister Justin Trudeau has also acknowledged Canadians will likely shoulder the burden of the tax.

“The NDP is claiming that Netflix and other web giants are the ones who will pay these new taxes. The reality is that taxpayers will be the ones to pay those taxes,” he said in the House of Commons in March 2018 when asked about streaming platforms paying higher taxes. “We … promised not to raise taxes for taxpayers who are already paying enough for their digital subscriptions and Internet.”

The Canadian Taxpayer’s Federation (CTF) also questioned the streaming tax,  saying the federal government should be doing everything  it can to make life more affordable.

“That means cutting taxes, not imposing new ones,” said CTF federal director Franco Terrazzano. “Canadians have every reason to worry this new tax will mean higher prices to stream their favourite music, movies, and TV shows.”

Online News Act

The streaming tax comes after the federal government introduced legislation that requires large tech companies to pay Canadian media outlets for news content that is linked on platforms, such as Facebook. It was given royal assent on June 22, 2023.

Following months of threatening to strike back against the Online News Act, Facebook owner Meta began blocking news content for Canadian users because of the act in August 2023. Canadian Facebook users are no longer able to view news links or content from Canadian news publishers and broadcasters.

Google also threatened to block Canadian news content but, in November 2023, it was able to strike a deal with Ottawa.

The federal government agreed to a $100 million annual cap on the payments Google is required to make to media companies. A formula in the draft regulations would have seen the search engine giant pay up to $172 million to news organizations.

Andrew Chen and The Canadian Press contributed to this article.