Proposed changes to Broadcasting Act could raise $800M from streamers

Online platforms like Netflix and Spotify may end up spending more than $800 million on Canadian content over the next three years under a series of policy changes the federal government has proposed in a new bill Tuesday.

The proposed changes to the Broadcasting Act are meant to ensure online streaming platforms experiencing booming revenues face the same regulations as traditional broadcasters, which have seen profits decline in recent years.

"A separate system for online broadcasters simply doesn't work. This outdated regulatory framework is not only unfair for our Canadian businesses. It threatens Canadian jobs and it undermines our ability to tell our own Canadian story," said Heritage Minister Steven Guilbeault at an Ottawa press conference.

"The government believes that everyone who benefits from the system should contribute to it fairly."

Guilbeault's proposed changes centre on creating a new category within the Broadcasting Act for "online undertakings" that will apply to streamers and broadcasters transmitting programs over the internet.

The changes involve giving new powers to the Canadian Radio-television and Telecommunications Commission, an arm's-length regulator of the broadcast industry.

Those powers could include the ability to force online steaming platforms to make Canadian content more discoverable and to make financial contributions to support Canadian music, stories, creators and producers.

A technical document provided by the government estimates those contributions could reach as much as $830 million by 2023.

The bill will also allow the CRTC to levy monetary penalties for non-compliance, broadcasting when prohibited from doing so or failing to submit information required.

Critics have long complained that tech giants caught violating the law are often fined paltry amounts that don't act as a deterrent because they are a mere fraction of the business's revenues.

Guilbeault did not offer an estimate of how steep penalties could be, but said that he intends to get proposed changes implemented quickly, if they are approved by the House of Commons and Senate.

"We are going as fast as we can," he said.

"We haven't reformed the Broadcasting Act since 1991, so it takes time to do it properly, but we don't want to take too much time because we know that there's an emergency to act quickly."

The changes come after years of growing calls from industry players and advocates for foreign tech giants to be regulated in the same manner as Canadian companies.

The push for change was spurred by the increasing numbers of Canadians turning away from traditional broadcasters in favour of streaming platforms like Netflix, Spotify, Amazon Prime and Crave for video and music.

The government's technical note said online video services have grown their revenues by 90 per year over the last two years, while Netflix has made its way into 62 per cent of Canadian households.

Netflix said in an emailed statement to The Canadian Press that it is "reviewing the legislation and remain committed to being a good partner to Canada’s creative community while also investing in local economies.”

Netflix reported revenues of $780 million revenue in Canada in the first nine months of the 2019 fiscal year, while the CRTC said the traditional television sector saw its revenues decline on average by 1.8 per cent per year between 2014 and 2018.

On top of facing revenue declines, traditional broadcasters have also had to comply with government demands to support Canadian music and storytelling, but the streaming giants have largely been free of such requirements.

The government will now turn its attention to bridging that gap.

The government's technical document said it could ask the CRTC to decide which online broadcasters should be regulated, but Guilbeault stressed that user generated content, news content and video games will not fall under the policy.

The CRTC may also be tasked with determining the merits of giving additional regulatory credits to those producing content that is "culturally desirable, but otherwise less likely to be produced, such as supporting Indigenous Peoples, French-language creators and racialized and ethno-cultural communities.”

The note said the CRTC may also be ordered to look into what qualifies as Canadian content and whether that definition takes into account tax credits or intellectual property.

Even regulatory tools that would provide fair and transparent remuneration for musical artists could be analyzed, the document said.

Guilbeault teased that further regulations could be coming soon to deal with tech giants like Facebook, Google and Apple, which have had tremendous impacts on the revenue of media companies and disrupted advertising.

"We are working on other elements of changes of modernization to the Canadian ecosystems, but these elements will come further down the road."

This report by The Canadian Press was first published November 3, 2020.