Last week’s CRTC decision on group licensing for the major Canadian broadcasters has the creative community in a panic, claiming that it could “mean the devastation of Canadian domestic [television] production.” The decision, which set a uniform spending requirement of 5 percent on programs of national interest (PNI, which includes dramas, documentaries, some children’s programming, and some award shows), means a reduction in spending requirements for some broadcasters. The Writers Guild of Canada fears that the decision could lead to a reduction in spending on PNI of $200 million over five years.
Groups have heaped criticism on CRTC Chair Jean-Pierre Blais, whose term ends next month. The WGC labels him a “Harper appointee”, while Kate Taylor says “he doesn’t leave much of a legacy for himself” and that “his piecemeal approach offers no consistent strategy to address the challenges facing Canadian television production in the Netflix age.”
Blais may have his faults, but claiming that he has not had a strategic vision for the digital age is not one of them. He recognized that the advent of the digital networks, an abundance of consumer choice, and the effective removal of longstanding analog protections for Canadian creators would gradually reduce the relevance of the regulator and leave it with two choices. The first – favoured by the creator groups – was to temporarily prolong the protections by extending Cancon regulations to Internet services and increasing regulatory costs on broadcasters. The second was to jump on the digital bandwagon, gradually removing the safeguards and creating a regulatory environment premised on competition at all levels – creators, broadcasters, and broadcast distributors. Anyone following the CRTC broadcast and telecom decisions in recent years knows that he chose the latter.
The result is a digital regulatory framework designed to enable Canadian creators to compete on a level playing in Canada (net neutrality), encourage the creation of programming that finds international audiences and partnerships (TalkTV), grant consumers greater television choice (skinny basic and pick-and-pay) and more competitive Internet services (wholesale fibre access), ensure universal Internet access (TalkBroadband), maintain deregulation of Internet-based services (new media exemption), facilitate new Canadian Internet entrants (hybrid services), and press broadcasters to reduce their reliance on U.S. programming (simsub). The policies may not universally succeed (and the simsub decision did not go as far as he may have wanted), but there is no doubting the strategy. In fact, despite the expectation that some have for Canadian Heritage Minister Melanie Joly to chart a new path, most of her public comments on digital Cancon are headed in the same direction.
Is 5 percent for PNI too low? At least four things can be said to defend the decision and place the impact into proper perspective. First, the argument that broadcasters needed a lower PNI number to compete with Internet-based services such as Netflix has merit. There are good reasons for not creating a mandatory contributions requirement for Internet video services, but the cost gap between regulated and unregulated services is relevant to the setting of mandated contributions for regulated broadcast services. Further, the decision lends credence to those who regularly whispered that the lobbying campaign for a Netflix tax was never about the money that could be generated from the streaming giant (a five percent tax on Netflix Canadian revenues generates a tiny amount of money given that Canadian TV production is a $2.6 billion industry) but rather about maintaining the contributions for the regulated services. When the licences come up for renewal in five years, the calls for the elimination of any contribution in the face of unregulated competition will be far louder.
Second, the suggestion that the Canadian television industry is – as Kate Taylor’s column states – “left to fend for themselves” ignores the massive public support for Canadian content creation. Given the amount invested annually by Canadian taxpayers, it is simply not credible to claim that Canadian television has been abandoned. The CMPA’s Profile 2016 tells the story with well over a billion dollars contributed from public sources including the public broadcaster, federal and provincial tax credits, and the Canadian Media Fund.
Third, while the industry is clearly not left to fend for itself, the CRTC decision is part of a shift that encourages and rewards success, not just creation. The claim that reduced mandatory PNI will devastate the industry is premised on the notion that Canadian broadcasters will only invest in domestic programming if required to do so. Licensing cheaper foreign programming is understandably attractive, yet the long-term success of broadcasters increasingly depends on controlling original content that can be delivered through multiple channels and markets (particularly if simsub disappears). In other words, the market encourages investment in original programming and the CRTC has sought to establish conditions that promote such investment.
Fourth, critics of the decision are quick to point to higher profile Canadian fictional programming that is said to be at risk, but the CMPA data confirms that private broadcasters are relatively minor players when it comes to the financing of Canadian drama. The report states:
With fiction productions, the largest share of financing came from provincial and federal tax credits; the fiction genre also attracted the most foreign financing among all genres. Children’s and youth productions also derived the largest share of their financing from tax credits, followed by broadcaster licence fees. Distributors also accounted for an important part of the financing picture for the fiction, and children’s and youth genres. In the VAPA and lifestyle and human interest genres, most financing came from broadcaster licence fees.
The CMPA chart below confirms that conclusion with private broadcasters contributing only 9 percent of the financing for fictional programs, less than federal and provincial tax credits, Canadian distributors, foreign financing, and the CMF. Private broadcasters allocate much of their money toward variety and performing arts as well as “lifestyle and human interest” programming, which including magazine style shows.
In other words, financing and the success or failure of Canadian programming such as dramas do not depend upon private broadcaster spending. In fact, the WGC release effectively confirms this since their worst case scenario – $40 million in reduced broadcaster PNI spending per year – represents just a two percent reduction in total financing for the fiction, children’s and documentary genres in Canada at a time when foreign funding from services such as Netflix is on the rise. Hardly the stuff of devastation.