Commentary

You Want Outrage? Try A Tax On Netflix!

I’m pretty sure that years from now, we’ll all look back and say: “Yep, that’s where it all started. The nation has never been the same.”
But this is a movement that may not be stopped even with public demonstrations.

It’s true. The San Jose Mercury Newsreports that cities throughout California are eyeing a new tax on streaming video subscriptions, effectively taking some of the money consumers saved by cutting the cord and putting it into their grimy municipal mitts. Although this story comes from a mainstream newspaper that traces its roots back to 1851, it appears to be mainly accurate.

Netflix, in an example of reflexive branding, quickly dubbed it a “Netflix tax” and called it a “dangerous precedent.” But compared to everything else in the news last week? Get in line.

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The paper suggests a 10% video tax, which would raise the typical Netflix bill from $9.99 to $10.99. Going above $10 has sometimes been seen as the high-bar barrier consumers seem to have set up. I don’t think so.

But for the typical cord cutter (at least what I envision as the typical cord cutter), Netflix is just one pay service among many, so potentially, consumers will have to look at the tax and multiply it to pay for Hulu, Amazon, CBS All Access, MLB and so on.

By the way, a subscriber who gets an OTT service and cable would still be paying the tax on the cable bill, too. Statistics say 67% of Netflix users still have cable, in case you’re wondering.

The tax appears possible under many cities’ utility taxing authority the way cable subscriptions are, and at least 45 California cities are said to be considering it.

I find this tax so un-repulsive I can’t really summon up a bunch of outrage over it. But you can be sure consumers will.

In Pasadena, where this tax goes into effect Jan. 1, there’s been some interesting second thoughts as the city faces a bit of a dilemma: How can they tell who’s getting an OTT service?

“Of course, anyone who has the slightest involvement in OTT video knows that the methods SVOD services would mostly likely have to use to confirm residency – IP addresses and profile information – can be bypassed by a motivated consumer.” wrote Fierce Cable’s managing editor, Samantha Bookman, who I somewhat suspect is a motivated consumer, or at least could teach Pasadena homeowners some tricks they may not know.

Chicago already charges a Netflix tax--9% there--though a lawsuit has been filed to stop it. Lawyers say Chicago discriminates because it doesn’t tax people who buy or rent DVDs or pursue other types of entertainment that could be covered under the city’s Amusement Tax.

The city thinks the tax could bring in $12 million a year, which can be applied to pay down the ridiculous $24 billion debt the city is trying to erase. Chicago tech companies screamed last year when the city applied this tax to cloud computing services, then amended it so that start ups less than five years old with less than $25 million in annual revenue were exempt.

pj@mediapost.com

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