Foreign streamers say base contribution will make collaborations more difficult
By Ahmad Hathout
Foreign and standalone online streamers that make $25 million or more will be required to contribute five per cent of their previous year’s Canadian revenues into the system, an amount the CRTC said Tuesday would draw $200 million per year into supporting Canadian content.
The regulator said it is prioritizing certain categories of content to the receive funds, including the expensive-to-produce local news on radio and television, and content catering to French-language, indigenous and minority communities.
Of the five per cent, two per cent will go toward the Canada Media Fund [CMF] and/or direct toward certified Canadian content; 1.5 per cent will go toward the Independent Local News Fund; 0.5 per cent to the Black Screen Office Fund, the Canadian Independent Screen Fund for BPOC creators, and/or the Broadcasting Accessibility Fund; 0.5 per cent to the Certified Independent Production Funds supporting OLMC producers and producers from diverse communities; and 0.5 per cent to the Indigenous Screen Office Fund.
For audio platforms, two per cent will go toward FACTOR and Musicaction; 1.5 per cent to a new temporary fund supporting local news production by commercial radio station outside of Montreal, Toronto, Vancouver, Calgary, Edmonton and Ottawa-Gatineau; 0.5 per cent to the Canadian Starmaker Fund and Fonds RadioStar; 0.5 per cent to the Community Radio Fund of Canada; 0.35 per cent to direct expenditures targeting the development of Canadian and indigenous content and/or a variety of selected funds; and 0.15 per cent to the Indigenous Music Office and a new fund to support indigenous music.
Local news funding had been a major talking point during the proceeding, with broadcasters pointing to the difficulty in financing it. The proof is in the layoffs that have swept Bell, Rogers and Corus last year.
The Canadian Association of Broadcasters (CAB), which pitched itself as best positioned to manage the temporary news fund, will have until July 4 to prepare a plan to administer said fund. The CRTC said this fund should be operational in the 2024-2025 broadcast year, which begins September 1.
“In this plan, the CAB must demonstrate that it has the capacity to administer this fund, indicate the date it expects the fund to be operational, and provide details of the fund, including governance, eligibility criteria, accountability measures, reporting requirements, and the funding allocation method,” the CRTC said in its decision.
“The plan should also provide details on the proposed outreach initiatives that the CAB intends to implement to promote the fund’s accessibility to all commercial radio stations outside of the designated markets, including stations serving ethnocultural and Indigenous communities,” the regulator added. “The Commission will launch a public consultation to seek comments on the CAB’s submitted plan.”
CRTC officials noted Tuesday that this base contribution mandate is a first step toward getting online platforms to contribute their fair share, with one official specifically outlining that traditional broadcasters have contributed far more than the five per cent they have already been plowing into the system for years. (Television broadcasters see a contribution range of five to 45 per cent.)
As such, the CRTC heeded traditional broadcaster calls not to levy a base contribution on online platforms that are affiliated with them at this stage, but said it will “fine-tune” contributions of all broadcasters, including those affiliates.
“Foreign online streamers have benefited immensely from their presence in the Canadian marketplace for more than a decade without any obligation to support our domestic broadcasting system,” the CAB said in a statement welcoming the decision. “The contributions the Commission has set out for foreign streamers begin to rebalance the obligations between all players who benefit from their access to Canadian audiences and advertisers.”
The CAB added that the regulator must take action to “reduce the burden that traditional broadcasters” and to “act with urgency in having these critical new funds flow as soon as possible.”
The large broadcasters have been calling for more immediate flexibility, including either reducing their rigid contribution to certain Canadian content or allowing them to shift money to programs as they see fit.
Rogers, which proposed a two per cent base levy for certain-sized foreign streamers, similarly said in a separate statement that the decision was just an “important first step,” and that it looks forward to “working with the Commission to take the more urgent action of increasing regulatory and financial flexibility to ensure that Canadian broadcasting companies can innovate to serve Canadians and compete in today’s dynamic and global communications environment.”
The CAB was joined by Bell, CBC, Corus, and Cogeco in asking for a 20 per cent base contribution level for audio-visual online undertaking, five per cent for a virtual one and four per cent for an online audio undertaking. Telus requested a reduction in the base contribution level, from five per cent to three per cent for both traditional and online undertakings. (Telus did not respond to a request for comment.)
The regulator also explicitly exempted from the mandated five per cent contribution revenues obtained from user-generated content, which includes subscription and advertising placed on that content.
This is relevant in more cases than just here. In April, Google asked the Federal Court of Appeal to review whether the CRTC is offside of the new Broadcasting Act rules by not explicitly exempting advertising revenue on user-generated content when it comes to calculating how much broadcasters and streamers must pay for the CRTC’s operations.
Google argues that it must make that clear in the fee regulations to be in compliance with the new law and the policy direction for that law, which state that user-generated content must be exempt from regulation.
The CRTC makes this exemption while still studying how to define “social media service,” from which it will continue to collect data. In its first decision of what is now a years-long process, the CRTC said it would be requiring social media services over a $10 million threshold to register with the regulator for market study purposes.
“These concepts continue to evolve as the Commission examines social media services and their role in the Canadian broadcasting system,” the CRTC said in Tuesday’s decision.
Other exempted revenue sources for the base contribution are those from audiobook services, podcast services or video game services and those services exempt from needing a licence.
Foreign streamers appearing before the CRTC argued that they shouldn’t have to contribute to news production because they are not in that business.
The CRTC appeared to take a comparative approach throughout the reasoning for its base contribution decision. In determining that foreign contributions should fund local news, the CRTC said not all traditional broadcasters that currently pay into funds are able to benefit from them; the prime example being traditional broadcasters contributing to, but not being able to draw from, the ILNF.
That said, the CRTC said it will be launching “in the near future” a “focused review of the ILNF to consider the allocation method and other elements of the fund, along with the eligibility of certain independent broadcasters to access the fund.”
While some foreign streamers have argued they should be able to draw on money from funds to which they contribute, a CRTC official said Tuesday the current mandate is for entities in most need. That said, the official said there is nothing stopping foreign platforms from working with entities that draw from the funds.
The CMF, CBC, Friends of Canadian Broadcasting, and the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA), and the Coalition for the Diversity of Cultural Expressions all supported the decision. The Canadian Media Producers Association called it a “watershed moment.”
While trade union Unifor supported the decision, it said it remains concerned that some of the vertically-integrated news outlets “will not receive adequate support from this new funding,” which it said it hopes will be resolved in subsequent proceedings.
“This decision is a win for Indigenous and Canadian creators, as well as the many domestic and international streaming services that are now formally part of the Canadian broadcasting ecosystem,” Valerie Creighton, president and CEO of the CMF, said in a press release. “Streamers have often stated that they believe in the importance of investing in our stories and bringing those stories to the world. Today’s decision provides a framework to ensure these investments serve the interests of creators and audiences alike.”
On the other hand, foreign streamers had been warning the CRTC during the initial phase of the regulator’s multi-part proceeding to implement the new Broadcasting Act – amended by bill C-11 to bring online streamers under its ambit – that levying a base contribution would put at risk existing partnerships these streamers have with Canadian talent on co-productions inside the country.
A spokesperson for Amazon, which operates the popular Prime Video streaming service, told Cartt this may be a costly decision.
“We are disappointed by today’s decision and concerned by the negative impact it will have on Canadian consumers,” the spokesperson said. “We are assessing the decision in full, but this onerous and inflexible financial levy will be harmful to consumer choice.”
The Motion Picture Association — Canada, which represents the interests of streaming services including Disney+, Netflix, Hayu, Paramount+, and PlutoTV, said in a press release that global studios and streaming services have spent over $6.7 billion annually producing content in Canada for local and international communities, which it said will be harder because of Tuesday’s decision.
“We are disappointed in today’s decision that reinforces a decades-old regulatory approach designed for cable companies,” Wendy Noss, president of the Motion Picture Association – Canada, said in that release. “Today’s discriminatory decision will make it harder for global streamers to collaborate directly with Canadian creatives and invest in world-class storytelling made in Canada for audiences here and around the world.
“We hope the next stages of the process will consider the full scope of benefits that global streaming services bring to Canada, modernize the definition of a Canadian program, and lead to a new flexible approach that will deliver more value to Canadian creative workers and consumers.”
