NFLX, DIS, PSKY: Amount Streaming Companies Need to Spend on ‘Canadian Content’ Triples

Canada’s broadcast regulator has tripled the amount that U.S. streaming companies need to spend on developing Canadian content.

Previously, companies such as Netflix (NFLX), Walt Disney (DIS) and Paramount Skydance (PSKY) were required to allocate 5% of the revenue they generate in Canada towards developing Canadian movies and television shows. Now, the Canadian Radio-television and Telecommunications Commission (CRTC) has tripled that amount to 15% of the streaming companies’ Canadian revenue.

The increase is being applied under Canada’s “Online Streaming Act,” that is meant to ensure that a portion of the money U.S. entertainment companies generate from Canadian subscriptions goes back into Canada’s domestic movie and TV production.

Trade Irritant

While Canadian regulators and lawmakers say the amount being charged to U.S. streaming companies such as Netflix is fair and reasonable, the Online Streaming Act has become a trade irritant for the administration of U.S. President Donald Trump.

The Trump administration has vowed to include the Online Streaming Act and charges to streaming companies in a review this summer of the trade agreement between the U.S. and Canada. A piece of legislation working its way through Congress in Washington, D.C. is looking into whether the Canadian charges discriminate against or burden American companies.

Comparing Streaming Stocks

Let’s look at the stocks of NFLX, DIS and PSKY. As one can see in the chart below, Netflix and Disney each carry Strong Buy recommendations while Paramount Skydance has a Moderate Sell rating. Each stock has potential upside based on analysts’ consensus price targets.