Streaming Giants Lose Round One Of Fight To Avoid Fees

A Missouri township that is attempting to enforce a local ordinance requiring video service providers to pay five percent of their gross revenues in the form of franchise fees has won round one of the legal fight. A federal judge has granted a remand motion from the City of Creve Coeur, sending the case to a state district court. Netflix and Hulu would prefer to appear in federal court where they would argue that local municipalities are unfairly attempting to impose fees on a global digital service. Franchise fees are routinely applied on cable operators, but as viewers change their entertainment habits, towns are looking to subscription-based streamers to raise money for government services. In remanding the case to state court, a U.S. District Court judge refused to exercise jurisdiction under the Class Action Fairness Act, although about 100 municipalities in Missouri have a stake in the outcome. Creve Coeur argued that the doctrine of comity required the federal court back off on state taxation of commercial activity. In arguing against the fees, the streamers pointed to Missouri’s passage in 2007 of the Video Services Providers Act. “Netflix does not provide video programming,” but even if it did, according to briefs filed in the case, such programming is specifically excluded from the definition of video service when provided through the public Internet.