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160390_8368503_updates.jpgThe Netflix logo is seen during a Netflix event in Berlin, March 1, 2017. AFP/John Macdougall/Files

OTTAWA: Netflix will spend Can$500 million (US$400 million) over the next five years to make original films and television shows in Canada, the company and Heritage Minister Melanie Joly announced Thursday.

This amounts to about five percent of the video streaming service's estimated total US$7 billion production budget for 2018.

As part of a deal with Ottawa, Netflix will open its first production company outside of the United States in this country, while avoiding minimum Canadian content regulations and paying into a government arts fund.

It agreed also to highlight Canadian-made content in both English and French on its global platform.

"It is important for us to see and hear stories that reflect back to us who we are as we are learning about our place in the world," Joly said in a speech.

"I hope this (deal) will be a model followed by other countries in the world," she later told reporters.

Ottawa had been under pressure by Canadian broadcasters to impose a tax on Netflix, akin to fees paid by broadcasters, that could be used to fund Canadian programming.

Canadian broadcasters also must fulfil a quota of Canadian content on air, which streaming services are not required to match.

Facebook, Netflix, Spotify, YouTube, and other online firms reach Canadians directly, outside of Canada's regulated broadcast system.

Most of their content is produced outside of Canada.

The government's deal with Netflix under the Investment Act allows it to claim a victory for Canadian content while also avoiding imposing new regulations on Internet companies.

Couch potato trends

According to the Canadian Radio-television and Telecommunications Commission (CRTC), there were about 11 million households in this country hooked up to cable or satellite television in 2016.

But their numbers are dwindling, with an estimated 200,000 or two percent of television subscribers per year cutting the cord, said an April report titled "The Battle for the North American Couch Potato."

The trend started in 2012 ? two years after Netflix began offering streaming services in Canada ? and is expected to accelerate over the coming years, said the Convergence Research Group, which authored the study.

Netflix, which government sources say has about five million subscribers in Canada, had lobbied against being treated like a traditional broadcaster.

Prime Minister Justin Trudeau rejected a so-called "Netflix tax" in the 2015 election that swept his Liberals to power.

Joly cited already high rates paid by Canadians for broadband Internet access in her decision not to add a new tax on streaming services.

"Our government won't increase the cost of these services to Canadians by imposing a new tax," Joly said.

Netflix chief content officer Ted Sarandos said investments like this one would give Canadian producers and creators more access to financing, business partners and ways to connect with audiences around the world.

"Fans around the world are already falling in love with Netflix originals produced in Canada," he said. "Today's announcement affirms there's more to come as Netflix launches Netflix Canada, our permanent production presence in Canada."

The company has already co-produced a handful of Canadian television series with public broadcaster CBC and others, including Anne, based on the novel Anne of Green Gables, and Canadian author Margaret Atwood's Alias Grace.

As part of a swath of new cultural policies, Joly also announced new "cultural trade missions" abroad to help Canadian creators break into new markets.

Ottawa will seek to expand international co-production treaties to grow production budgets and attract financing partners, she said.

As well, parliament will be asked to review Canada's Copyright Act, as well as update the Broadcasting Act and Telecommunications Act for the digital age.


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