Streamers tell CRTC to “take pause” before regulating CanCon contributions

Streaming platforms are saying it is too early to be discussing contribution requirements at this stage of the new regulatory framework’s development given that the CRTC is still revising the definition for Canadian and Indigenous content, among other things. They argue the CRTC’s proposal predetermines what the rest of the framework is going to look like and is too narrow for their diverse business models. With many saying they would prefer a broader requirement that would take intangible contributions into account and give them the right to choose from a variety of contribution options. In a series of comments submitted to the commission, major streaming platforms aired their concerns with the CRTC’s proposal to set a base contribution requirement for online undertakings. Step one of its three-step process to establish a modernized contribution framework following the recently passed Online Streaming Act. The consultation for step one, with comments deadline due last week, focuses on which undertakings the new framework should apply to once established, the base amount of contributions online undertakings would initially be required to make before the rest of the framework is established, and which funds could be the recipients of those base contributions. “We appreciate that rewriting the broadcasting regulatory regime is a monumental task. However, the various issues that need to be considered are all intertwined concepts that cannot be neatly compartmentalized,” wrote Motion Picture Association-Canada (MPA-Canada), representing the major studios of companies including Walt Disney Co., Netflix Inc., Paramount Global, Sony Group Corp., Comcast Corp.'s Universal, and Warner Bros. Discovery, Inc. The group expressed concern with the regulator’s three-step process to establish the framework, stating that it is premature of them to consider an initial base contribution requirement before addressing the framework’s general objectives. The commission has said that issue will be addressed in step two. “Online undertakings are being asked whether they are willing to make financial contributions to production funds and Canadian programs without knowing how they will be comprised,” said MPA-Canada. According to the CRTC’s notice, the initial base contributions are proposed to go to specified funds that support Canadian artists and programming. Online undertakings argue if limited to specified funds, it could steer their investments away from those that could also be considered contributions, like direct payments to Canadian productions, training, and marketing, as well as discoverability features. “A base contribution may discourage direct investments of the sort the Commission intends to encourage,” wrote Apple Inc. The company urged the CRTC to recognize both tangible and intangible contributions already being made by online undertakings and consider a framework that would allow them to determine how to allocate their overall contributions. “Establishing an initial base contribution that would continue after the contribution regime has been established prejudges this question.” Spotify AB shared this sentiment. “We believe the commission is moving too quickly to impose base contributions without holistically considering the broader ecosystem of meaningful contributions to the Canadian broadcasting system made by online undertakings overall.” “A pre-emptive base contribution cannot accurately take into account, and would likely lead to a reduction of, the current benefits (monetary and otherwise) invested by Spotify,” the company added. Amazon.com Inc. noted that a lack of public information about the expenditures of online undertakings in Canada puts cracks in the foundation of the commission’s regulations. “There is no record and therefore, no concepts, categories, or basic language to begin to discuss and distinguish between accepted and excluded contributions,” the company wrote, encouraging the CRTC to “take pause before regulating.” “Collection and analysis of data on the contributions made by the industry to date should be seen as an essential step in an evidence-led approach to the development of a new contribution framework.” Beyond concerns with how “contribution” could be interpreted, a lack of clear definitions makes the context of regulation even muddier, said the streamers. According to the CRTC’s notice, questions relating to the definitions of Canadian and Indigenous content will be addressed in a separate proceeding. Meanwhile, according to the government’s draft policy directions, the commission is to revise how it defines Canadian programs. Given that these definitions will be reviewed later, “affected parties will not know until after this consultation what programming the contribution requirements being debated in this consultation will support,” argued Apple. “How a ‘Canadian program’ will be defined is a core foundational issue, as it is the basis of virtually all proposed contribution and discoverability requirements,” wrote MPA-Canada. They added, “given these unknowns, it is premature to consider an initial base contribution requirement at this stage, as it is putting the proverbial cart before the horse.” Meta Platforms Inc. also expressed concerns about the “lack of definitional certainty” when it comes to the meaning of a social media service. The company argued that although the government has stated the Online Streaming Act will not regulate user-generated content, “there remains a lack of clear direction” that it is out of the regulatory scope. Meta asked the CRTC to exclude social media platforms, even if a portion of the content on them are programs subject to regulation, because programming and editorial control are not the primary purpose of the service. Bringing online undertakings into the regulatory fold is not as simple as copying existing obligations over from traditional broadcasters, said Apple and Netflix, especially as existing regulations will be subject to review during step two. “Requiring foreign online undertakings to take on the same contribution requirements as traditional broadcasters does not recognize the fundamental differences between the two, as required under the Act,” wrote MPA-Canada. Spotify, Apple, and Amazon say this is especially true for music streaming services, which, as Apple stated in its intervention, operate in a market with “razor-thin” profit margins. “Music subscription streaming services by and large are generally not profitable (or, if profitable, barely so) and operate in a fiercely competitive market that is very different from the government-regulated access to finite spectrum in which traditional radio players exist,” wrote Spotify. If the base contribution requirement is imposed, streamers urged the CRTC to ensure fairness by allowing foreign broadcasters to access the funds that they could be contributing to. "Non-Canadian online undertakings might be required to contribute to funds (albeit on an initial basis) from which they cannot benefit,” wrote Apple. “At a minimum, the fund rules need to be revisited so there is equitable access by Canadian and non-Canadian broadcasting undertakings, including their ownership groups, or else non-Canadian online undertakings will effectively be required to subsidize the production of content that can only be shown on Canadian broadcasting undertakings.” – By Phalen Tynes-MacDonald at pcreed@thewirereport.ca and editing by Jenna Cocullo at jcoccullo@thewirereport.ca.

Streamers tell CRTC to “take pause” before regulating CanCon contributions

News | July 18, 2023

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Streamers tell CRTC to “take pause” before regulating CanCon contributions

News | July 18, 2023

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