Imposing a Canadian content tax on Netflix is a hotly debated issue. Many have proposed to add a Canadian content tax on Netflix service, that would play a similar role to the 5% of revenues that Canadian broadcast distribution undertakings (BDUs) contribute to the production of Canadian content. But the industry is evolving rapidly as are the perspectives of Canadian consumers on this issue.

To assess the potential benefits of such a tax,  LYA conducted an online survey among 1500 English Canadian respondents (18+) to ask what they would do (if anything) if a 15% to 20% Canadian content tax would be levied on Netflix by the Canadian government. Such a tax corresponds to a monthly added cost of $1.50 to $2.00 or less than $25 per year. Our analysis of the results of the survey indicates that such a measure could likely yield negative impacts for everyone involved including the funding of Canadian productions.

68.5% of all respondents indicated having a Netflix subscription. Among them:

Surprisingly, 37% indicated they would cancel their Netflix subscription. Approximately 13% would reduce their cable or satellite TV subscription and another 13% would altogether cancel their cable or satellite TV subscription. A third would take no action and keep everything as is.

Using this data, we did a quick analysis to that highlights that the loss of contribution to the Canadian Media Fund (owing to the loss of BDU revenues) would be more than twice the added contribution by the Netflix subscribers (after considering the potential loss of Netflix subscribers).

While many Canadian consumers are possibly not fully aware that a portion of what they pay to their BDU service provider goes to the production of Canadian content, imposing such a tax on Netflix could result in a direct price increase that would not go unnoticed.

Thus, in this scenario, everyone loses from a CanCon tax on Netflix : Netflix via a loss of subscribers and revenues, BDUs via a loss of subscribers and revenues and the CMF via a net loss of contribution considering all parties.

While the real life actions of Canadian consumers may not be 100% in line with the answer to our survey, it is very conceivable that such a tax could be met with a negative consumer reaction and negative implications for everyone involved. In other words, be careful what you wish for!

Other avenues may likely be better to foster the growth and international presence of Canadian television content in today’s competitive digital world where price conscious consumers rule.