Netflix is attempting to claim that it’s not a video services provider. Netflix submitted the claim to a federal court in Missouri in response to a lawsuit filed by the city of Creve Coeur. In 2007, Missouri passed the Video Services Provider Act, a law allowing counties and other municipalities to collect so-called “franchise fees” from video service providers like cable companies. Those fees can be as high as five percent of video service providers’ total gross revenues.
Since more and more Missourians, like all people, are switching to online subscription-based streaming services like Netflix and Hulu, the state is missing out on a large portion of those franchise fees it relies on. Thus, the Creve Coeur is going after Netflix and Hulu in order to argue that as video services, they must pay those fees so the city can buy those shiny new police cars it’s had its eye on.
In the lawsuit, “video service” is defined as any “provision of video programming provided through wireline facilities located at least in part in the public right-of-way without regard to delivery technology.” To defend themselves, Netflix is arguing that they do not provide video programming, “such programming is specifically excluded from the definition of video service when provided through the public Internet.” Specifically, the big red streaming giant’s argument depends on the fact that their service is available over the public internet:
The Act, and Creve Coeur’s ordinance, state that the definition of video service ‘does not include… any video programming provided solely as part of and via a service that enables users to access content, information, electronic mail, or other services offered over the public Internet.’ This exclusion describes the Netflix Streaming Service exactly.
Nobody would in their right mind argue that Netflix and Hulu aren’t video service providers, but finding loopholes in laws is what corporations do best, after all. A Missouri court will now hear the case to decide whether or not Netflix and Hulu have to fork over up to 5% of their revenue in Creve Coeur on these fees. Without a doubt, other streaming services and the governments of other local municipalities are watching the precedent set by this case carefully. Could fees and taxes be the end of the streaming revolution?