And why CPE should be reduced for traditional media companies
GATINEAU – Saying online content platforms have radically altered the Canadian broadcasting system is as undeniable as it is now cliché. Netflix itself, has an estimated six million subscribers in Canada, an amount greater than half of all cable TV subscriptions here.
With Amazon Prime growing and the arrival of other online services in the future (BritBox arrived this week and CBS All Access is coming), the Canadian system needs to evolve with this new reality in mind, several have told the CRTC in second phase interventions on its study of distribution models of the future consultation. (This is the study requested by the federal government as the beginning of its process to update the Telecom and Broadcasting Acts.)
According to Bell Canada, it’s simply untenable to think over-the-top (OTT) providers don’t compete head to head with traditional broadcasters and broadcast distributors. If the system’s goal is to maintain a vibrant domestic sector which airs the best content at home and internationally, the company says, then current policies and legislative and regulatory frameworks need to be modified to achieve it.
“In our view, this means shifting to a lighter regulatory regime for regulated players while imposing obligations to contribute to Canadian content on currently unregulated players.” – Bell Canada
“In our view, this means shifting to a lighter regulatory regime for regulated players while imposing obligations to contribute to Canadian content on currently unregulated players,” the company writes in its February 13 phase 2 intervention.
“This will involve striking the right balance between protecting and supporting valued traditional broadcasting institutions, such as local television and local news (with additional resources); relaxing regulations to allow domestic players the flexibility to compete in a changing marketplace; and requiring large, well-established OTT players to contribute to our broadcasting ecosystem,” adds Bell.
Telus agrees that the Canadian broadcasting sector needs a lighter regulatory touch and that all content aggregators – broadcasters, distributors and over the top providers – should be put on a level playing field. It calls for changes to a number of broadcast regulations, including mandatory distribution and an end to what it says is double taxation of video on demand. The communications firm also says content aggregators, like Telus, should have the flexibility to create programming without quota requirements or ensuring the program is Canadian.
An important piece of a new broadcasting sector should see cultural and industrial policies separated. The company acknowledges that cultural goals are important but says they “are better left in the hands of our public institutions, who should receive concomitant increases in government funding to enable them to fulfill this important role.”
On this latter point, it adds that perhaps the mandate of CBC/Radio-Canada should be expanded to fulfill more cultural policy goals – and altered so it doesn’t compete with private broadcasters.
If a vibrant production and distribution sector is to remain a central element of the Canadian system, then there needs to be a new regulatory bargain, argues Corus Entertainment. The company says the federal government must provide domestic players with the tools to compete for program rights, viewers and subscribers against international behemoths like a combined Disney-Fox and CBS-Viacom and of course Netflix.
“To survive, it will be absolutely necessary for Canadian media companies to achieve greater scale.” – Corus Entertainment
“To survive, it will be absolutely necessary for Canadian media companies to achieve greater scale,” states Corus. This means domestic firms will need to consolidate. The company also notes that the diversity in ownership in the system needs to be abandoned because measuring diversity by market is no longer tenable in a multi-platform landscape.
Independent broadcasters, on the other hand, believe that there are existing policies and regulations that need to remain in place. Pelmorex, for example, argues that must carry is critical for essential information services. It acknowledges that there are benefits to broadcasters from the various digital platforms, but adds mandatory carriage on the conventional system is still a must.
“While the designation requires significant investments to maintain, it also provides the stability needed to expand to deliver essential services on all platforms. Ensuring these regulations remain consistent going forward will allow us to continue to meet these demands and to expand our content offerings on digital platforms,” says Pelmorex.
Channel Zero argues diversity in ownership must remain a key tenet of Canada’s future broadcasting system – and independent broadcasters are a critical component of that diversity. It notes several independents serve ethnic communities, the smallest TV markets, and offer niche programming.
“In serving audiences that would not otherwise be served, independent broadcasters bring value to Canadians, and make the broadcasting system more competitive. We innovate, we challenge, we bring choice and variety. We are a key part of the system,” the company writes. “In developing new policy, maintaining diversity must be a key objective.” (For a deeper look at one independent broadcaster ideas for our system, please read OUTtv’s Brad Danks series here, here and here.)
FACEBOOK ALSO WEIGHED in on the CRTC’s consultation noting that it believes the growth of online video content (user generated or others) “depends on a flexible regulatory framework that allows for innovation and experimentation. Such an approach will assist in ensuring a vibrant and varied online services market for audio and video content in Canada.”
The social media giant notes while it can’t provide too much insight on distribution models of the future, studies have shown online distribution leads to greater overall volumes on content consumption.
According to a 2017 study of Australia, India, Japan, South Korea and Thailand from PwC cited by Facebook, people are spending more time consuming traditional and digital content, almost entirely due to the Internet.
“In Australia, for instance, people spend an average of 9.7 hours a day consuming content, up from six hours a day four years ago, with almost half of this time being spent on the Internet.” – Facebook
“In Australia, for instance, people spend an average of 9.7 hours a day consuming content, up from six hours a day four years ago, with almost half of this time being spent on the Internet. Similarly, growth in time spent consuming content on the Internet ranges from 5 to 11 percent annually across Thailand, India and South Korea,” writes the company.
One of the hardest questions to answer as the government looks to modernize the domestic broadcasting sector is how to fund Canadian content (we’ll talk about the challenging puzzle that is discoverability later). The current system is no longer working with broadcast distributor contributions declining. Some submissions say a good first step would be to require contributions from online TV providers.
This would mean amending the Digital Media Exemption Order (DMEO) by phasing in a Canadian programming expenditure (CPE) from foreign and domestic OTT companies with revenues of greater than $100 million starting at 17% in 2018, rising to 20% by 2022, reads Bell’s submission. This would be matched by a 2.5% reduction in BDU CPE contributions over the next four years to 20%, it adds.
Pelmorex offered another option with respect to the advertising tax deductions.
“As the majority of advertising spending in Canada is now directed to digital media, such a measure would increase advertising spending with Canadian media outlets. The additional revenue could be reinvested in additional Canadian content production.”
The CRTC is to report back to the government on distribution models of the future by June.
