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Internet-age aid for Canadian culture

Given Canada’s proximity to the United States, the protection of Canadian culture has long been a highly charged, emotional issue. Cultural protections were a staple of the Canada-U.S. Free Trade Agreement as Canada insisted on excluding culture from the scope of the agreement.

As Canadian policy makers endeavoured to provide a “home team” advantage to Canadian cultural institutions over the past 15 years, disputes over access and ownership of booksellers, magazine publishers, and television services became a common occurrence.

Notwithstanding the great energy devoted to Canadian cultural policy, the effectiveness of protectionist cultural policies remains subject to debate. The exclusion from the Canadian market of ESPN, the U.S. sports cable giant, could arguably be said to have facilitated the emergence of several Canadian sports cable networks including TSN, Rogers Sportsnet, and The Score. Conversely, the exclusion of HBO, the popular U.S. movie and original-programming network, has led only to the Movie Network, whose most popular programming is ironically supplied by HBO, the very service it was meant to replace.

Last week’s column pointed to recent Statistics Canada data that paint a disappointing picture of the economic state of Canadian culture. Canada now sports a nearly $1 billion culture services deficit as hundreds of millions of dollars flow south each year to pay for copyright and trademark royalties.

The deficit is particularly pronounced in the music and broadcasting fields. Foreign sound recording artists generate five times more royalties in Canada than do Canadian artists abroad, while Canadian broadcasters generate a less than 1/10th of the revenue in foreign markets that Canadians spend on foreign broadcasting.

Despite the discouraging situation, many of the fundamental goals of Canadian cultural policy remain relevant today. Actively encouraging and supporting Canadian culture should not be derided as little more than government meddling into the cultural choices of Canadians. Rather, its support reflects the economic reality that many Canadian cultural sectors depend upon some form of public assistance since they are simply unable to leverage the marketplace power of their competitors to the south.

While the culture goals may still resonate, Canadian culture policy leaders such as Canadian Heritage Minister Liza Frulla and Industry Canada Minister David Emerson must face the reality that many of the tools that have formed the core of Canadian cultural policy do not work. The Canadian culture toolkit must therefore be recast for the 21st century by adapting it to emerging technologies and to legal frameworks that render obsolete longstanding policy mechanisms.

I believe that three principles must guide a new Canadian cultural approach. First, policy makers must acknowledge that Canadian content requirements are only marginally effective in promoting Canadian culture. In a music context, Canadian content requirements do result in heavy radio airplay for Canadian sound recording artists, yet those artists only account for 15 per cent of music sales in Canada and they have achieved limited success outside the country.

The failure of content requirements is even more pronounced in the television sector, where attempts to limit access to TV services in order to support local alternatives typically meets with failure. For example, the thriving gray market for satellite television on both sides of the border — Canadians paying for U.S. services such as DirecTV and U.S. residents (or Canadians living in the U.S.) paying for Canadian services such as Bell ExpressVu — suggests that legal roadblocks rarely deter consumers from watching what they want.

Rather than working to shut out competition, Canadian policy makers should recognize the Internet’s great potential as a distributor of cultural content. Although extolling the transformative effect of the Internet ended with the dot-com bust, in recent months the Internet has in fact begun to match the hype of the late 1990s. Popular blogs now enjoy readership that surpasses many major newspapers, while multimedia creators, such as the California pair who created the JibJab animation parody of George Bush and John Kerry that generated millions of downloads and more buzz than most television shows, have discovered that the Internet provides an unparalleled medium to find an audience.

Canadian cultural policy should actively encourage online distribution by developing a funding strategy focused in that direction. The benefits would be felt across the cultural spectrum with increased distribution of Canadian books, music, and films. In fact, the Canadian public broadcaster should be asked to serve as the role model, by using the Web to make CBC content freely available to the taxpayers who paid for its creation in the first place.

Second, policy makers should discard the notion that foreign ownership restrictions provide Canadians with effective protections. The recent challenge to the online entry of is a case in point. While opponents argued that would harm the Canadian book market, it has become clear that the corporate nationality of a bookseller has little to do with the sale of Canadian books. Amazon’s market entry has instead produced a galvanizing effect on the Canadian online book market, benefiting publishers, authors, and consumers alike.

The same is true for the sale of music in Canada. Although Sam the Record Man was once the quintessential Canadian music store, today the leading retailers of music are U.S. (Wal-mart, Costco) and U.K. (HMV) based. The challenges facing the sale of music in Canada — new price pressures from these retail giants, declining catalog sales, and cannibalization from the DVD market— have little to do with the corporate nationality of the retailers themselves.

In fact, services such as provide a remarkable opportunity to promote Canadian culture. According to a recent Wired article, the average book superstore such as Barnes & Noble stocks 130,000 titles. By comparison, more than half of’s sales are generated from books ranked below its top 130,000 sellers. The story concludes “the market for books that are not even sold in the average bookstore is larger than the market for those that are.”

In a Canadian context, many Canadian books no doubt fall below the top 130,000 threshold and thus never even make it onto store shelves. The Internet can change that, resulting in new exposure to Canadian culture and the chance to reverse some of the culture deficit.

Third, Canada must avoid unnecessary protectionist legislation that serves primarily to benefit foreign interests and marketplace incumbents. In recent years, incumbents have used various empty threats to encourage the enactment of self-serving legislation.

The Canadian Recording Industry Association (CRIA) once said fee-based online music services would not enter the Canadian market without increased copyright protections, yet the services still came. Similarly, broadcasters said, unsupported by any evidence, that without the implementation of broadcast flag protections the Canadian market will not support digital television and that U.S. services will not license Canadian access to U.S. digital content.

Rather than falling prey to those threats by implementing harmful legislation, Canadian policy makers would do well to identify new opportunities and to let Canadian creativity and innovation take over.

The Canadian cultural marketplace is dominated by a handful of companies in each sector — five companies control the majority of the radio market, five companies dominate cable and satellite broadcasting, five companies control most of the Canadian newspaper market, and five foreign music labels are responsible for a majority of music sold in Canada.

Canadian cultural policy can inject new competition into the marketplace by rejecting legislative proposals whose primary purpose is to protect the established players. In doing so, policy makers will enable Canadian independent musicians, filmmakers, and authors to find new avenues to market their creativity.

Earlier this month, Canadian musicians brought just that message to the CRTC at hearings focused on the entry of satellite radio into the Canadian market. Despite opposition from CRIA, which urged the Commission to implement new protective technologies before opening the market, the musicians embraced the potential of satellite radio and asked the Commission to let their music be heard.

From to satellite radio, it is clear that something transformative is happening as new technologies are challenging old rules. Canada has an unprecedented opportunity to benefit from these changes, but only if its cultural policy is transformed too.

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