By Ahmad Hathout
OTTAWA – A representative from music and podcast streaming service Spotify told the CRTC Wednesday that the platform hopes the idea that online streamers should make a base financial contribution to Canadian content doesn’t spread to other jurisdictions.
“You are the only country in the world that is looking at those contributions, at least at this stage, and we actually hope that this is not going to spread to other countries because we will be in real difficulty,” Olivia Regnier, senior director of public policy for Spotify, told the commission.
“Now, we understand the situation, we understand the rationale — we are just explaining on our side the best of what we are doing, how committed we are to the market, to the creators, what we are trying to bring to the market, but it is a bit of an exceptional situation.”
The CRTC is weighing whether to require online platforms to implement a mandatory financial contribution toward Canadian content funds, which would be a percentage of their Canadian revenues from the prior year. The commission is gathering perspectives during the current three-week hearing on the matter.
Beyond a required financial contribution, the commission is also looking at other flexible and intangible ways the platforms can contribute to the Canadian content ecosystem to fulfill the platforms’ newly imposed obligations, which are expected to take effect after the CRTC’s three-phase implementation of the Online Streaming Act concludes.
Like other foreign streamers, Spotify said it has made significant contributions to Canada, and that imposing a base contribution before the commission has defined “critical elements of the broadcast policy” would risk “overlooking” those contributions to the country. The CRTC said it plans to revisit how it defines Canadian content, including its current points system, under the new Broadcasting Act in a later phase.
Spotify also urged the CRTC to consider the royalty payments it pays back to Canadian artists when it thinks about contribution requirements and to also consider the “delicate economics of the music streaming business model,” which it said involves significant spending and negative margins with the hope of recouping costs in the long term.
“Additional costs could require us 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,” Regnier said.
Before the hearing, the CRTC set a $10-million threshold at which online streamers will need to register with the commission for possible future regulation and monitoring of the market.
While the commission explicitly excluded from regulation users of those platforms, it did include podcast platforms, including Spotify – which critics have said will have a negative trickle-down effect on the podcasts on the platform.
Earlier in the hearing, trade group Motion Picture Association (Canada) similarly said such a base contribution would add such a burden on its members that it would harm the work it says it is already doing in the country.
But Corus, in calling that argument “trite,” said earlier Wednesday those streamer partnerships with Canadian entities don’t address an inherent imbalance in the regulatory requirements incumbent on the traditional Canadian broadcasters.
It argued that the online platforms have tremendous scale in global markets and take advantage of favourable tax incentives, a good exchange rate and good labour – on top of not having to pay to into Canadian content funds like it does.
Corus is suggesting that online streamers not affiliated licenced broadcasters and exceeding $50 million in annual gross revenues should be subject to a base requirement at the initial stage, which it said in the initial stage should be 20 per cent for online video programmers, 4 per cent for online audio programmers, and 5 per cent for online distributors.
A significant portion of that contribution should go to support local news production, Corus argued, which is expensive to produce. Both Rogers and Cogeco testified to that on Tuesday. The overarching theme conveyed by the three companies is the need to level the playing field with the foreign streamers.
Corus is pressing for 25 per cent of all initial base contributions be allocated to the Independent Local News Fund in its current form, which aligns with its philosophy that the CRTC should focus right now on existing structures as opposed to fund creation. If the commission wants to expand to vertically integrated local TV stations, discretionary services and/or radio stations, then a higher proportion should be allocated, it pitched.
On Wednesday, Canadian Heritage announced that Google has agreed to contribute $100 million per year, with ongoing adjustments for inflation, to host Canadian news links on its platforms as part of its obligations under the Online News Act.
Before the start of the hearing, the CRTC said it has taken a preliminary view that the pure-play media company should have some of its regulatory obligations temporarily reduced, including its repayment of suspended amounts owing during the pandemic and to lower spending amounts to programs of national interest. The commission accepted Corus’s explanation that it is in dire financial straits.
Screenshot of Olivia Regnier, senior director of public policy for Spotify.
