On Tuesday, Heritage Minister Steven Guilbeault announced a long-anticipated plan to regulate digital streaming services like Netflix and Spotify, which the government predicts could raise over $800 million per year for the production of Canadian content.
The legislation would update Canada’s Broadcasting Act and give the Canadian Radio-television and Telecommunications Commission (CRTC) more power over what foreign digital media giants show and what they’re required to pay for in the country. But don’t expect anything to change right away. Here’s what you need to know.
New legislation announced Tuesday would update Canada’s Broadcasting Act and give the CRTC more power over what foreign digital media giants show and what they’re required to pay for in the country. But if the legislation passes into law, the CRTC will then have to take time to come up with the rules.
The big change: The act will now apply to online broadcasting: any company—or in media-regulation terms, “undertaking”—that sends programs over the internet. That reverses a longstanding carve-out for foreign digital services, created by a December 1999 CRTC order exempting them from the rules domestic broadcasters must follow, including the ones that require traditional broadcasters to contribute to the production of Canadian content.
That doesn’t mean streaming platforms will immediately have to start paying into the Canada Media Fund. Online undertakings won’t have to get licences like terrestrial broadcasters. Instead, the CRTC will get new powers to require they “make financial contributions to support Canadian music, stories, creators and producers,” according to a Canadian Heritage presentation released Tuesday.
The government estimates requiring online undertakings to pay out at the same rate as domestic firms could add up to $830 million by 2023; Guilbeault’s office clarified to The Logic that the figure is anticipated annually. The regulator will also be able to set “conditions of service” for broadcasters of all sorts, like highlighting or promoting a certain amount of Canadian content. And it’ll be able to ask companies to share more financial and audience information, which it can in turn pass on to the heritage department, Competition Bureau and Statistics Canada.
“We’re not asking these companies to do things that they’re not already doing—they are investing in Canada,” Guilbeault told reporters on Tuesday, describing the new rules as “putting a regulatory framework on how those investments should be made, in light of things we’re already asking from from Canadian broadcasters.” In September 2019, Netflix said it had spent $500 million on production in Canada over two years; the company had pledged that sum over a five-year period as part of a September 2017 agreement with Ottawa. But that amount includes films and shows that don’t meet the CRTC’s Canadian content rules.
Or else: The CRTC will be able to impose fines of up to $500,000 per offence on firms that don’t follow its regulations or orders, and those that don’t turn over requested data. The agency has similar powers in other areas of oversight like telecommunications and spam.
What’s the point?: Consumers are increasingly using on-demand services like Netflix and Spotify or domestic equivalents like Bell Media’s Crave, CBC’s Gem and Vidéotron’s Club Illico, per the presentation. It estimates 62 per cent of Canadian households have a Netflix subscription, for example. Cord-cutting has hurt the revenues of domestic and traditional broadcasters, and since online services don’t have to make production contributions, “the support system for Canadian content is at risk.” The Canadian Media Producers Association (CMPA) estimated $9.32 billion worth of films and TV were made in Canada in the 2018–19 fiscal year. Foreign-location and -service operations—companies from elsewhere shooting, editing and doing special effects here, and keeping the copyright to the work—accounted for $4.86 billion. In November 2019, The Logic reported independent Canadian producers didn’t feel they were benefiting much from the billions that streaming services are spending to build content libraries, and that industry associations were concerned about the platforms’ habit of acquiring worldwide rights to content, which they said cost domestic firms valuable IP.
What comes next: The changes aren’t going to happen overnight. The Act has to pass the House of Commons and the Senate. It then falls to the CRTC to figure out how a lot of these new rules will work in practice. The government says the federal cabinet will direct the regulator to get online broadcasters to make Canadian content contributions, and provide particular support for French-language and Indigenous creators and producers. The CRTC may also be tasked with redefining what “Canadian” means in that context; the current rules for TV and film, for example, generally require that the producer be Canadian, and a majority of the “key creative functions” be performed by Canadian individuals or companies. And it could set up incentives for “broadcasting activities that are culturally desirable,” such as those that support programming from underrepresented groups. The CRTC would have nine months following the directive to “bring online broadcasters into the regulatory fold,” Canadian Heritage officials told reporters on Tuesday.
What’s not included: Social media platforms, or “link taxes.” The government says it’s not bringing services like Facebook and YouTube or their users under the broadcasting laws. An Ottawa-appointed panel set up to advise on the changes had recommended that “media sharing undertakings” have to register with the CRTC under a new classification system and pay levies that would fund news content. Over the summer, Guilbeault repeatedly said he was looking at new measures in France and Australia requiring tech platforms to pay copyright and licensing fees respectively to local publishers. Last month, newspaper lobby News Media Canada called for Ottawa to impose the latter model here, including granting outlets new IP rights over their content and the data generated by users interacting with it and a collective bargaining system for royalties. Facebook said news organizations post content on the platform voluntarily, while Google said publishers get value from the traffic the search engine sends their websites. On Tuesday, Guilbeault said he’d spoken with his counterparts in Australia and France, and that legislation addressing “Facebook and Google and their impact on the Canadian media ecosystem” would come “further down the road.”
But he’s not the finance minister: The Liberals’ September throne speech promised to tackle “corporate tax avoidance by digital giants,” and to “ensure their revenue is shared more fairly with our creators and media,” as well as to “require them to contribute to the creation, production, and distribution of our stories, on screen, in lyrics, in music, and in writing.” Guilbeault’s legislation acts on the content pledges. It falls to Finance Minister Chrystia Freeland to ensure platforms collect and remit sales tax, and impose a possible digital-services tax on their Canadian revenues, in an upcoming bill or budget.
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The platforms’ response: Stéphane Cardin, Netflix’s Canadian director of public policy, said the firm is reviewing the legislation, but is “committed to being a good partner to Canada’s creative community while also investing in local economies.” Andrew Peterson, head of content partnerships at YouTube Canada, said the Google-owned video service is “encouraged by the government recognizing the important distinction between open and closed platforms.” While the changes won’t apply to user-posted content, Canadian Heritage officials told reporters the new rules could capture curated services like YouTube Music or YouTube TV. Amazon, Apple, Disney and Facebook have not yet responded to The Logic’s requests for comment.
The producers’ response: “Given their ability to access domestic audiences and generate significant Canadian revenues, these tech giants must be required to contribute to the production of Canadian programming,” said CMPA CEO Reynolds Mastin. The government’s planned directive to the CRTC on reconsidering Cancon rules includes ensuring they “recognize the importance of Canadian ownership of intellectual property.” The CMPA welcomed that move.
Correction: This story previously misidentified the period over which the government expects its new rules to generate $830 million in Canadian content funding. This story is developing and will be updated. What else should we know about it? Email the reporter at [email protected]