OTT competition a signal that CRTC should scrap Cancon distribution regs: Shaw

Competition from over-the-top services has made the CRTC's Canadian content regulations “ineffectual” and distributors should no longer be obligated to subsidize Canadian programming, Shaw Communications Inc. says. In a submission for the CRTC’s fact-finding consultation on over-the-top services, Shaw’s senior vice-president for regulatory affairs, Jean Brazeau, wrote that contributions to the Canada Media Fund should be phased out, subsidies through the Local Programming Improvement Fund (LPIF) scrapped, and the commission's value-for-signal regime eliminated. Brazeau noted that broadcasters are burdened by must-carry obligations to contribute to the creation and presentation of Canadian programming and requirements to subsidize programming through exhibition and expenditure requirements. “In Shaw’s view, now is the time to ask whether this aging regulatory model of subsidies and obligations in exchange for increasingly ineffectual protections remains useful,” he wrote. “Is it reasonable to ask BDUs to invest billions of dollars building the broadband infrastructure for a digital broadcasting system and digital economy, and to contribute millions of dollars annually to Canadian programming when unregulated OTT services are reaching Canadians using those same networks and operating as direct competitors, but with no parallel obligations? “Similarly, can licensed Canadian programming services really be expected to re-invest large portions of their annual revenues into the production of Canadian programming when services like Netflix have no such obligations and yet compete for the very same programming, audiences and subscribers?” Brazeau added that Canada’s “walled garden” system—where the impact of non-Canadian services on the domestic market is controlled in exchange for contributions from those within the system— is “no longer sustainable in a borderless digital environment.” Subsidies are no longer warranted when competing over-the-top services don’t face the same obligations, Brazeau wrote. Shaw submitted its comments for the CRTC's consultation on the role of over-the-top content services in the Canadian broadcasting system. The deadline for comments closed Tuesday. In a joint submission, the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA), the Association des producteurs de films et de television du Québec (APFTQ), the Canadian Media Production Association (CMPA), the Directors Guild of Canada and the Writers Guild of Canada warned about the impact that over-the-top services could have on Canadian broadcasting. But the cultural groups expressed a different take on how to address the issue. “The growth of OTT services in no way justifies any reductions to the contributions which licensed Canadian broadcasters currently make to support Canadian programming; instead, it is now time for the Commission to ensure that these new OTT players in the system also contribute in an appropriate manner to the creation and presentation of Canadian programming, as required by the Act,” the joint submission said. ACTRA could not be reached for comment Wednesday and the CMPA declined an interview request. In its submission, Netflix Inc. wrote that its impact on Canadian broadcasting is overstated and that it remains only complementary to the broadcast system. The company wrote that it is not a content producer, does not rely on new products, and does not enjoy the privileges that regulated broadcasters do. “The imposition of additional regulatory obligations, in particular a financial contribution to a fund to support new-release Canadian content, would be inconsistent with the complementary nature of Netflix’s service, and would make that service more expensive …” Netflix’s submission to the CRTC said. “ince Netflix’s service is not based on new release offerings, and as Netflix cannot access funding for new release Canadian content, an obligation to contribute to such funds would amount to Netflix effectively subsidizing, among other recipients, vertically-integrated broadcast licensees …” Netflix said its Canadian content is comparable to what licensed video-on-demand providers carry, and that its Canadian programming now represents approximately 10 per cent of its offerings. The cultural groups contested that figure, citing a appended study conducted by consultant Paul Gratton and funded by the Ontario Media Development Corporation that said only 2.3 per cent of Netflix’s content is Canadian. Shaw also called for an exemption for all video-on-demand (VOD) and subscription video-on-demand (SVOD) services from licensing or regulation, since they compete most directly with over-the-top providers—a point that was echoed by Rogers Communications Inc. Rogers wrote that pay television services only offer a fraction of what Netflix does because its video-on-demand service is restricted to offering an extension of its linear service. “The rate by which Canadians decide to substitute BDU services with OTT services will largely depend on how quickly BDUs close that gap,” Rogers wrote. “If we are not allowed to use our VOD service to match the offerings of SVOD-based OTT services, it is only logical that consumers will access the programming they want in the unregulated online space.” Over-the-top services do not face Cancon requirements, genre restrictions or advertising limits, Rogers wrote, saying that “competitive parity” through the elimination of packaging restrictions on library feature film and television programming for licensed operators would allow it to compete. Netflix argued that a level playing field already exists through the CRTC's exemption order for new media services. “Broadcasters had chosen not to enter the online market despite having had no competition in this area for several years prior to Netflix’s entry,” the company wrote. mburgess@thewirereport.ca

OTT competition a signal that CRTC should scrap Cancon distribution regs: Shaw

Broadcast | July 6, 2011

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