Netflix and shill: What the Liberals’ big announcement adds up to

The Liberals are exulting over Netflix’s $500-million investment in Canadian content. But are Canadians actually picking up most of the bill?

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Elise Amendola/AP

Canadians paying an extra dollar a month for Netflix is not front-page news. Netflix investing $500 million into original Canadian productions, on the other hand, is worthy of the federal government boasting about it in front of TV cameras.

Last month, the American internet streaming giant recently upped its monthly fees by $1 in Canada for a standard subscription rate. Canadians will soon be paying $11/month for a standard subscription as opposed to $10. As for premium subscribers, those willing to pay a little extra for ultra-high definition 4K content, in addition to the ability to stream on four multiple devices simultaneously, will see their monthly subscription plans increase by $2, to $13.99/month.

The rationale for the price increase was simple. “From time to time, Netflix plans and pricing are adjusted as we add more exclusive TV shows and movies, introduce new product features and improve the overall Netflix experience, to help members find something great to watch even faster,” the company said in a statement at the time.

Customers couldn’t complain too much. After all, Netflix boasted plenty of award-winning original content like House of Cards, Orange Is The New Black and Master of None. And it is still cheaper for Canadians than your regular cable TV package from companies like Bell or Rogers (the latter of which owns Maclean’s).

It’s no wonder Canadians have been quick to join Netflix, or at least borrow the username and password from a paying friend or relative. By mid-2016, the company had 5.2 million paying customers in Canada, according to a report by Solutions Research Group. While Netflix is known for keeping its subscription figures closely guarded, it wouldn’t be a stretch to say the company has continued to grow in subscribers over the last year—even before the goodwill that will come with the government announcing Netflix’s five-year, $500 million investment as part of the Liberals’ revamp of Canadian cultural policy.

It would appear to be a major win-win for both Netflix and Canadians. But a look at the math makes that $500-million promise seem a little less spectacular.

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Here’s some fun with numbers: If Netflix currently has, say, six million Canadian subscribers that are paying an extra dollar each month, the company will generate an extra $72 million a year from that loonie alone. And that’s not factoring in those with premium subscriptions who would pay an extra $2 per month, let alone further price increases that Netflix imposes down the road.

So yes, Netflix will spend $500 million over the next five years on Canadian productions—a number we could grade out to $100 million a year—but more than two-thirds of that annual sum will come out of the bank accounts of Canadian subscribers, courtesy of the price hike.

Ultimately, it’s Netflix’s prerogative if they decide what they charge and how they invest—and the company is looking to increase its revenue given the big-spending ways that have quickly increased the company’s long-term debt plus other financial obligations to more than $20 billion, according to a recent Los Angeles Times report.

It’s worth noting that Netflix has said the $1 price increase and its $500-million investment commitment are unrelated, though a dollar is a dollar. Where the math becomes a problem politically is when Canada’s heritage minister stands on stage at a press conference offering free and glowing advertising for the streaming video giant, making it appear as though the Netflix investment is a cornerstone of the Liberals’ cultural policy.

Then there’s the matter of the Netflix tax, a recommendation from a parliamentary committee that a five-per-cent tax on Canadians using foreign broadband services, often dubbed the “Netflix tax,” be implemented to put those services on the same playing field as Canadian cable companies. But Minister Joly said Thursday the government wouldn’t introduce the unpopular tax idea, the cost of which would have been inevitably downloaded to customers.

All the while, Netflix gets nationwide coverage thanks to the Canadian government, not to mention the continued savings from not having to pay taxes north of the border—and all for an investment the company has previously said is already underway.

“In 2016 alone, we’ve commissioned hundreds of millions of dollars of original programming produced in Canada,” wrote Netflix’s global public policy manager Josh Korn in a letter last year to Minister Joly as part of the Canadian content consultations. “And Netflix has made dozens of commitments in 2016 for Netflix original movies and television series that will be produced in Canada, making it one of the top three locations currently for original productions (along with the US and UK).”

Only now they’re charging an extra dollar to watch it all.