CBC Vancouver - Wanderin'-The-Corridors by kris krüg (CC-BY-SA 2.0), https://flic.kr/p/2jXse

CBC Vancouver - Wanderin'-The-Corridors by kris krüg (CC-BY-SA 2.0), https://flic.kr/p/2jXse


Forget a Netflix Tax: How The Digital CanCon Review Can Shake Up the Status Quo

Canadian Heritage Minister Mélanie Joly’s digital CanCon consultation is likely to spark calls from the cultural establishment for new levies and taxes to fund the creation of domestic content. The Internet will be the primary target with demands for a Netflix tax along with legislative reforms that would open the door to additional fees on Internet providers.

Yet an unimaginative approach that seeks to regulate the Internet imposes costs that would make Internet access less affordable and create a regulatory environment that runs counter to fundamental principles of freedom of speech and access to information. Joly should reject efforts to recycle stale policies and instead embrace the opportunity to shake up Canadian cultural policy.

My weekly technology law column (Toronto Star version, homepage version) argues that the starting point should be a shift in funding for Canadian content creation. The current model, which relies heavily on mandatory contributions from the Canadian broadcasting community, is in decline as revenues from the sector slowly shrink (the Canadian Radio-television and Telecommunications Commission recently reported that conventional television revenues declined by 2.4 per cent in 2015).

With the broadcasting sector struggling to compete against unregulated Internet services, Joly should drop mandatory contributions altogether. In their place, support for the content industries could come from four sources: federal granting programs funded through general tax revenues, benefits packages from industry mergers, allocations from spectrum licensing, and targeted tax credits that benefit Canadian producers. The change would provide more stable funding for production and marketing, while leaving broadcasters more competitive.

Online services should remain unregulated and free from mandatory contributions, but should be subject to general sales taxes. Levying GST or HST on Canadian online video services such as Shomi or CraveTV while leaving Netflix tax-free creates a tax revenue shortfall and places domestic services at a disadvantage compared to their foreign counterparts.

Canadian broadcasting and telecommunications law must also keep pace with the changing digital environment. Rules that grant the CRTC the power to determine which channels may operate in Canada should be repealed. Instead, the Commission should concentrate on consumer protection and marketplace competition.

The consumer protection issues include regulations maintaining maximum consumer choice through pick-and-pay models, truth in advertising on communications services, and guaranteed Internet access for all Canadians.

Competition encompasses an even broader range of issues including enforceable net neutrality rules to ensure that creators and consumers benefit from neutral network service without unfair preferences, safeguards against vertically integrated media giants unfairly favouring their own content, and the possibility of structural separation for companies that own significant content and carriage businesses.

As for Canada’s public broadcaster, one of the most contentious issues in recent years has been the CBC’s emphasis on digital delivery of news content. Reconciling the need for the CBC to remain relevant by embracing digital delivery with the financial impact on private sector news services could be addressed by requiring the public broadcaster to adopt an ad-free approach to its online news presence. That would ensure that it reaches digital audiences but does not directly compete with the private sector for advertising dollars. The private news services could also benefit from a change to allow tax deductions for advertising on Canadian websites.

While these changes would dramatically shift the legal and regulatory environment for Canadian culture, Joly’s initiative needs an even bigger goal to capture the public’s imagination. That could include requiring the CBC to open its content for public reuse (the government is opening its national parks, why not its national content?) or embarking on a comprehensive digitization initiative that provides the foundation for a national digital library.

Joly has encouraged Canadians to think big about Canadian cultural policy. It now falls to the government to reject the regulatory models of the past by embracing a future-focused strategy that emphasizes competition, consumer access, and the export and promotion of Canadian content for a global audience.


  1. make the CBC an IP provider.
    not PPV byte-by-byte buys.

    not that artisies can manage anyway… (or lunitic conservatives)

    • How about they make good show and the money will flow? I doubt game of thrones and walking dead need financial support.
      Why would the country finance a tv show that few will watch? A country has no requirements to make their own.

  2. Patrick McKenna says:

    Without legislation Networks will not create product only buy and air inexpensive “Reality” or American shows.
    Try to find Canadian content in prime time…
    CanCon is a must!

    • Cancon hurts networks more then helps them now maybe one thing they should look at is any tv series filmed in Canada is Cancon.

  3. Old thinking! both of you (commenters).

    Listen; there was a time when shows in prime time commanded a buck or two in revenue per viewer. There was also a time when people were content to pay $50 to $100 a month for cable. That time is past. It may never have made sense, but the people in Canada are held hostages to so many pricing deficiencies.

    There was a time when media could make millions of dollars for rich people who contribute nothing … either to Canadian Culture or to Canadian life. There was a time when global media put billions of dollars in the pockets of rich people who contribute nothing to Global Culture.

    Copyright was good them. But Copyright is a balance. We need to refactor our expectations for media. We need to focus on how money can be paid to those who create it. We no longer need Curators or Channels or dead weight.

    Suddenly I realize I’m off on a tangent. But my point is: the amount of money required for good Canadian Content _pales_ in comparison to what we’ve paid in the past. We don’t need to pay gigantic old organizations to then own and profit on our content; we simple need to pay good people a living wage to create it.

    Is that so radical a statement? Really?

  4. Dominique says:

    Most probably there will be calls again by the now dead CRIA to force anyone posting anything on the internet to have a license to do so if that person lives in Canada. And of course the license will be expensive.

  5. Pingback: Just say no to the Bell-MTS takeover | Angelus Novus

  6. If content can’t pay for itself, Canadian or otherwise, it should not be created on the taxpayers’ backs.


  8. Peter Piper says:

    I’d love further explanation of some of these suggestions: “federal granting programs funded through general tax revenues, benefits packages from industry mergers, allocations from spectrum licensing, and targeted tax credits that benefit Canadian producers. The change would provide more stable funding for production and marketing, while leaving broadcasters more competitive.”

    Federal granting programs funded through general tax revenues: The money has to come from somewhere, right? What federal expenses to you propose should be cut to pay for this funding? With all due respect Michael, simply suggesting increasing government funding without pitching any increased revenue source seems like a bit of a lazy suggestion. The same goes for “targeted tax credits that benefit Canadian producers.” I mean, that already exists, doesn’t it? But if we increase those tax breaks for producers, that means less general tax revenue at the same time you’re suggesting increasing funding from general taxes. I’m also not sure funding from general tax revenue would provide more stable funding, since those funding incentives could easily be decreased year to year by governments without the public noticing.

    I concede that you do suggest (quite rightly) that Netflix should be subject to the HST (etc) but without knowing figures, I can’t imagine there’s a huge amount of money to be gained there… not enough to nearly make up for even a fraction of the financial benefits of cancon rules. Maybe I’m wrong on this one though.

    Benefits packages from industry mergers: I don’t know what you mean by this. Could you elaborate please?

    Allocations from spectrum licensing: Elaboration would be great on this as well.


  9. I think Mr. Gilbert has begun to articulate a forward looking approach that could work reasonably well in this great, vast country of ours. Canadians are abandoning old media because alternatives finally exist. Governments should adapt need by subsidizing (to a greater extent) the creators of content – not the curators. For too long, creative Canadians in the arts have achieved success outside Canada, in part, because of limited support from this old oligopoly. We can achieve better results by cutting out the middle- man!