By Ahmad Hathout
Foreign streamers are not really serious about pulling investments in Canada if they are required to make a base contribution to Canadian content, claimed the president of the Canadian Association of Broadcasters (CAB) on Thursday.
Over the course of the three-week hearing on whether online platforms should contribute a base financial amount to Canadian content funds, the CRTC has heard from significant foreign entities that such a requirement would either harm their existing partnerships with the Canadian partners or force them to reevaluate their presence in the country.
But the CAB thinks the claims are questionable.
“I have had a sense that part of what has been said here is, ‘hey, these are some nice contributions that we’re making to the Canadian system, it would be a shame if something were to happen to them.’ I’m not sure that sort of equation is one that holds a lot of water,” CAB President Kevin Desjardins said during the second-last day of the hearing.
“I think the investments that they are making in Canada remain investments that they are making in themselves, so the work that’s being done here is being drawn here for a number of reasons that make excellent business sense to them: we’ve got a great dollar from their perspective, there’s tax incentives, there’s all of these sorts of things that are drawing people in,” Desjardins added.
Music streaming service Spotify claimed last week that, if required to make a burdensome base contribution, it will have to “cut expenses, including reduce our resources for editorial, partnership, and promotional programs in Canada; reduce resources currently going back to the music ecosystem; or force us to raise prices for Canadian consumers.”
The Motion Picture Association (Canada) similarly claimed that such a requirement would harm its ability to continue collaborating with Canadian players.
Bell told the commission when it came up that it values partnerships with foreign streamers as a way to bolster the Canadian content ecosystem.
Desjardins, however, did say that he can’t blame streamers if they don’t want to be pulled into a regulated industry such as Canada’s, but that, at the end of the day, it’s about fairness. In other words, if traditional Canadian broadcasters have to make base contributions but not foreign streamers, the Canadian entities are at a great risk of failing.
“If there’s a rationale for regulating us, there’s a rationale for regulating them,” Desjardins said.
The CAB is recommending requiring large, standalone online undertakings that are bringing in more than $50 million to contribute a base amount to Canadian content funds.
How much of their Canadian revenues they should contribute depends on their activities, according to the proposal.
Online entities operating like audiovisual programming undertakings, such as Netflix, Disney Plus or Amazon Prime, should be subject to a base contribution of 20 per cent.
Online audio undertakings like Spotify and Apple Music should be required to make a 4 per cent contribution, similar to Canadian satellite radio and pay audio services.
Finally, those operating like broadcasting distribution undertakings, like virtual BDUs, should be subject to a 5 per cent contribution.
And the latter is where Telus disagrees.
The Vancouver-based telecom said forcing VBDUs to contribute a base will harm that market’s ability to get off the ground in Canada. It is asking for at least a temporary exemption to allow those services to take off.
Telus has a VBDU product called Stream Plus that aggregates streaming services, including Netflix, Apple TV Plus, and Discovery Plus.
The appeal is in its ability to sell the bundle at a cheaper price than if the subscriber purchases each service on its own. There is data to show Canadians who are cord cutters or cord shavers will purchase multiple streaming services separately, so Telus says there is a market for the bundle.
However, if the commission decides to impose a base contribution, Telus is asking that it use a different metric for the calculation: “any contribution imposed on them should be calculated only on the ‘value-add’ or marginal revenues earned by the vBDU.”
“Foreign vBDUs have established themselves in the Canadian market, and now is the time to empower Canadian companies to participate in this market too,” Telus told the commission. “This is an exciting time, and it should be Canadian companies who bring affordability, innovation, and choice to Canada.”
Otherwise, Telus is proposing that an initial contribution of 3 per cent be set for online undertakings with a direct-to-consumer model.
But like its broadcasting peers, Telus said that requirement alone is not enough because traditional BDUs are being strangled by regulatory obligations on them that are not in sync with BDU subscriber losses.
“While subscribership and revenues continue to decline, BDU costs have not,” Telus said. “A 5% contribution is no longer sustainable.”
For a coalition of consumer groups, including the Public Interest Advocacy Centre, Open Media, and the National Pensioners Federation, the CRTC should also be cautious about scaring away foreign online undertakings.
It reasoned that if they are asked to pay too much in an initial contribution and they don’t just leave the market outright, they could just pass the costs down to consumers or cut service options and catalogues. But “giving them too much ‘flexibility’ to reduce base contributions would compromise the Commission’s ability to meet the new mandate set out in the revised Broadcasting Act,” it said.
That also applies to traditional broadcasters as well if regulatory relief isn’t granted to them, the coalition said.
The coalition is recommending that both traditional BDUs and online undertakings contribute 4 per cent of previous year’s Canadian revenues, effectively equalizing contributions. The contribution would apply to entities bringing in $50 million for audiovisual and $25 million for audio-only services.
This would both reduce the financial obligation on tradition BDUs while increasing contributions to the funds, it said.
Screenshot of CAB President Kevin Desjardins.
