Marking 20 years
of bold journalism,
reader supported.
Mediacheck
Science + Tech

Canada's Cold Climate for Netflix's Cousins

Three reasons why US Net services are slow to migrate north.

Michael Geist 5 Oct 2010TheTyee.ca

Michael Geist, whose column on digital policy and law runs every Tuesday on The Tyee, holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at [email protected] or online at www.michaelgeist.ca.

image atom
Freezing out online services customers want.

Netflix, the popular online movie rental service, launched in Canada last month, providing consumers with the option to download an unlimited number of movies and television shows for a flat monthly fee. While the Netflix debut was marred by an ill-advised public relations stunt that involved actors masquerading as excited consumers, the long delays in migrating the service north once again raised questions over why popular online services rarely view Canada as a priority destination.

Canada's legal framework makes for a convenient explanation, but the reality is that subtle legal differences are rarely the primary rationale for business and marketing decisions. Moreover, Canadian privacy, e-commerce and intellectual property laws are compliant with international standards and recent surveys have found that business executives view Canadian protections as better than those in the United States.

As the Canadian government readies its national digital economy strategy, identifying the real reasons behind delayed entry into the Canadian market is a crucial piece of the puzzle.

Three obstacles

At least three explanations come to mind.

Topping the list is the fact that Canada's geographical advantage is lost in the online world. In the physical world (i.e. retail stores and services), Canada's close proximity to the U.S., common language and similar culture, long made it the obvious choice for U.S. businesses thinking of expanding beyond their domestic market.

The online world diminishes those advantages. Establishing an online presence is as easy to do in Britain or Japan as it is in Canada and the size of those markets is considerably larger. Canada remains on the to-do list of many companies, but the small market size makes it less attractive than bigger markets in an environment where physical barriers are largely eliminated.

Canada's broadband market is a second key factor given the widespread use of bandwidth caps. The caps, which are far more restrictive than comparable caps in the U.S., create a significant hidden cost for consumers anxious to use online services that require considerable bandwidth.

For example, Netflix advises consumers that the average HD movie consumes two gigabytes of bandwidth per hour. Monthly bandwidth is capped at 15 gigabytes with the Rogers Lite service, with an additional charge of $4.00 for each additional gigabyte. While there are other, more expensive options that offer more bandwidth, a Canadian consumer could easily use their entire monthly bandwidth allocation by watching one movie per week. By comparison, Comcast, the leading U.S. cable Internet provider, has a monthly cap of 250 gigabytes (Rogers does not offer any comparable package).

A third factor appears to be licencing requirements, which are particularly complex and costly in Canada. Online video services may be disappointed to find that popular content has already been licenced for Internet distribution on an exclusive basis by large Canadian broadcasters, effectively shutting out Internet upstarts.

Further, the licencing costs for available content is often prohibitively expensive when compared to the U.S. market. For example, Pandora, a popular online music service in the U.S., notes that recent licencing demands for online streaming services run as high as 45 per cent of gross revenues. That places Canadian licencing costs far above those found in the U.S. and Britain, forcing many providers to look for more cost-competitive markets. For a service like Pandora, the costs mean that the Canadian market is a non-starter.

How to open things up

Attracting new online services -- as well as nurturing homegrown alternatives -- depends upon a multitude of factors. Making legislative changes may appear at first blush to be an easy fix, but a more competitive broadband and licensing market would likely to do far more to bring popular services streaming north of the border.  [Tyee]

Read more: Science + Tech

  • Share:

Facts matter. Get The Tyee's in-depth journalism delivered to your inbox for free

Tyee Commenting Guidelines

Comments that violate guidelines risk being deleted, and violations may result in a temporary or permanent user ban. Maintain the spirit of good conversation to stay in the discussion.
*Please note The Tyee is not a forum for spreading misinformation about COVID-19, denying its existence or minimizing its risk to public health.

Do:

  • Be thoughtful about how your words may affect the communities you are addressing. Language matters
  • Challenge arguments, not commenters
  • Flag trolls and guideline violations
  • Treat all with respect and curiosity, learn from differences of opinion
  • Verify facts, debunk rumours, point out logical fallacies
  • Add context and background
  • Note typos and reporting blind spots
  • Stay on topic

Do not:

  • Use sexist, classist, racist, homophobic or transphobic language
  • Ridicule, misgender, bully, threaten, name call, troll or wish harm on others
  • Personally attack authors or contributors
  • Spread misinformation or perpetuate conspiracies
  • Libel, defame or publish falsehoods
  • Attempt to guess other commenters’ real-life identities
  • Post links without providing context

LATEST STORIES

The Barometer

Do You Think Naheed Nenshi Will Win the Alberta NDP Leadership Race?

Take this week's poll