Why it issues: Cities throughout the US have waged a authorized battle for years to get streaming companies like Netflix and Hulu to pay native governments the identical charges cable corporations do. The newest case in that combat has reached the Ohio Supreme Court docket and will value the streaming corporations thousands and thousands.
Over 2,000 US cities have introduced a federal class-action lawsuit in opposition to Netflix and Hulu, arguing they need to pay franchise charges to metropolis governments. As a part of the go well with, the Ohio Supreme Court docket is at the moment deciding whether or not to outline the 2 corporations as “video service suppliers” on the request of the town of Maple Heights.
Below a 2007 regulation, cable corporations outlined as “video service suppliers” should pay 5 p.c of their gross income to every Ohio metropolis by which they function. Comparable legal guidelines exist throughout the US. One case in Georgia final yr threatened to value Netflix $5 million.
Netflix and Hulu argue these charges ought to solely apply to entities that lay down cables for companies like cable and Web. Neither firm runs or controls any cables.
“The statute may be very clear. That is about those that dig. They need to pay,” mentioned Ohio Deputy Solicitor Normal Mathura Sridharan. “If they do not dig, they do not pay. And I believe that’s the core precept that animates this whole case.”
Nonetheless, Maple Heights legal professional Justin Hawal argues that Netflix and Hulu ought to pay as a result of twine slicing is taking enterprise away from the cable corporations that do pay, successfully lowering metropolis revenues. Regardless of not laying their very own cables, Netflix and Hulu compete with cable corporations by providing a lot of the identical content material and producing their very own.
Ohio Supreme Court docket Justice Jennifer Brunner identified that the case singles out Netflix and Hulu with out mentioning related corporations like Roku, Apple, and YouTube. All three produce content material for his or her streaming companies.
Netflix legal professional Gregory Garre argued that making use of the franchise charge regulation to streaming companies may doubtlessly embrace anybody who streams their very own content material on-line. He mentioned that might imply faculties, church buildings, or courts.
A Misplaced Angeles choose granted Netflix and Hulu a victory in opposition to a California metropolis this week over the identical challenge. A most important level within the streaming companies’ profitable argument is that franchise charges utilized to them also needs to apply to HBO, Disney, and Amazon, which the case did not embrace.
Comparable instances have occurred in Texas, Nevada, Arkansas, Tennessee, Indiana, and elsewhere. The primary courtroom to rule in opposition to Netflix and Hulu was in Missouri. Large streaming corporations look like an apparent supply of extra income for municipalities, but when pressured to pay, they might go these prices to subscribers.
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