netflix app delete by Stock Catalog http://www.quotecatalog.com/ (CC BY 2.0) https://flic.kr/p/H929tx

netflix app delete by Stock Catalog http://www.quotecatalog.com/ (CC BY 2.0) https://flic.kr/p/H929tx

News

The Government’s Internet Regulation Bill: Why Bill C-10 Will Mean a CRTC-Approved Netflix Service, Reduced Consumer Choice, and Less Investment in Canadian Culture

Canadian Heritage Minister Steven Guilbeault tabled his “get money from web giants” Internet regulation bill this morning. As expected, Bill C-10 hands massive new powers to Canada’s telecom and broadcast regulator (the CRTC) to regulate online streaming services, opening the door to mandated Cancon payments, discoverability requirements, and confidential information disclosures all backed by new fining powers. Given that many of the details will be sorted out by the CRTC, the specifics will take years to unfold. In the short term, the bill creates considerable marketplace uncertainty that could lead to reduced spending on Canadian film and television production and delayed entry into Canada of new services. Once the policies are in place, the end result will be CRTC-approved versions of Netflix, Disney+, or Amazon Prime in which the regulator decides how these services promote Canadian content to their subscribers.

As I wrote over the weekend in a preview of the bill, much of the grounding for this legislation is based on fictions. For example, the government says that a key objective is “fair and equitable treatment as between online and traditional broadcasters” and that the current system “perpetuates a regulatory imbalance that puts Canadian broadcasters at a competitive disadvantage.” Yet the reality is that traditional broadcasters enjoy many regulatory advantages such as lucrative simultaneous substitution rules that allow them to replace U.S. commercials with Canadian ones, foreign investment restrictions that limit competition, must-carry regulations that mandate that certain channels be purchased by consumers in even basic cable packages, copyright rules that legalize redistribution of broadcast signals, and protection to keep U.S. giants such as ESPN and HBO out of the market. Those rules create competitive advantages for Canadian broadcasters, but the government nevertheless envisions equal mandated contributions to support Canadian content.

The government also warns that “the support system for Canadian content is at risk” without reform. The data demonstrates that there has been record setting film and television production in recent years, much of it supported by companies such as Netflix. CRTC chair Ian Scott last year said that Netflix is “probably the biggest single contributor to the [Canadian] production sector today.” The overall financing picture shows an industry that has had record amounts of investment in film and television production with the total amount nearly doubling over the past decade. Further, certified Cancon has also grown in recent years, with the top two three years for certified Cancon television production occurring over the past three years. In fact, last year was the biggest year for French language Cancon over the past decade.

Notwithstanding the weak policy foundation, what is the government proposing?

First and foremost, the government is establishing a new class of regulated broadcaster it calls the “online undertaking.” Online undertakings include any services that transmit programs over the Internet in Canada. However, they do not include social media services or user generated content, an important rejection of a recommendation from the BTLR expert panel (other issues such as digital taxation or link licensing are left to future reforms). These new online undertakings will not be licensed, but they will face regulation from the CRTC. The bill leaves many of the specifics to the regulator, subject to a forthcoming policy direction in which the government plans to direct the Commission to prioritize issues such as support for diversity and inclusion as well as revisit what is considered Canadian content.

All of this places the CRTC in an enormously powerful position. Over the coming years, it will determine how Internet streaming companies must financially contribute in Canada (for example, payments into a general fund to support Cancon or a spending percentage of their own revenues) and how they must promote Canadian content on their services. These companies will be required to provide confidential corporate information to the CRTC and will be subject to audit. The CRTC will have new powers to levy fines in case of non-compliance. Notably, the CRTC’s decisions on these conditions of service cannot be appealed to cabinet. Instead, they will require judicial review and extensive litigation.

In the short term, this bill creates considerable uncertainty that could lead to reduced investment in Canadian film and television production and less consumer choice as potential new streaming entrants avoid the Canadian market until there is greater clarity on the cost of doing business. Canada is set to become a highly regulated market for Internet streaming services and the uncertainty regarding those costs are sure to have an impact. The regulatory process will take years to unfold with a call for public comment, a lengthy hearing, the initial decision, applications to review and vary the decision, judicial reviews, and potential judicial appeals. If any of the appeals are successful, the CRTC would be required to re-examine its decision and the process starts anew.

This lengthy process could have a major impact on investment decisions. For example, if you’re a large Internet streaming company that is already investing $100 million per year in film and television production in Canada, you might delay some of that spending until there is greater clarity on what “counts” for the purposes of meeting your new regulatory requirements. New entrants may also delay entering into the Canadian market given the prospect of significant new spending requirements and regulatory intervention into confidential business information. Canada was once a highly attractive market for new services, but this bill may cause new entrants to rethink their plans.

From the Canadian consumers’ perspective, this decision will ultimately lead to a more expensive CRTC-approved Netflix service. The increased cost side is obvious: someone is going to pay for fees that are projected to run into hundreds of millions of dollars and the safe bet is that it is going to be Canadian consumers. The resulting service will be a CRTC-approved version of Netflix in which the regulator will require services to promote Canadian content directly to their subscribers. This policy raises net neutrality concerns given that the regulator will intervene in the display of content on Internet services.

The creation of a CRTC-approved Netflix seeks to solve a problem that does not exist. The truth is that “discovering” Canadian content on Netflix only requires typing Canada into the search box. That immediately generates a Canadian Movies and TV section that features many shows and movies. Typing “Canadian” generates tabs for Canadian TV Shows, Canadian Movies, and Critically-acclaimed Canadian Movies, Canadian TV Comedies, and much more. For years, the Canadian cultural sector has claimed that Canadians want access to Canadian programming. If true, that provides Internet streaming services with all the incentive they need to ensure that they offer Canadian programming and that it is easy to find. With no long term commitment and plenty of competition, subscribers will leave if they do not find programming that appeals to them. If the culture sector is right, their success in Canada is directly linked to offering Canadian programming and ensuring that their subscribers are able to find it. In this scenario, it is not regulation that drives access to Canadian content but rather subscriber demand.

Yet this market-based approach – premised on the vision that Canadians can create great content that will be funded, distributed, and available to subscribers who want it – is being replaced by a regulated model in which success depends upon intervention from the government and the CRTC. That new approach will cause harm in the short term, increase consumer costs in the long term, and leave behind a market that perpetuates unfortunate perceptions of Canadian content as a weaker product reliant on government mandated support.

24 Comments

  1. They have done this for decades claiming we want Canadian content, and we don’t. Canadian content is a weaker product reliant on government mandated support and always will be.

  2. Pingback: New Canadian Content Rules Could Mean Pricier Netflix, Less Choice, Critics Sayon November 4, 2020 at 00:43 | GKM Media

  3. Pingback: ● NEWS ● #MichaelGeist #CRTC #DRM #copyright ☞ The Government’s Int… | Dr. Roy Schestowitz (罗伊)

  4. If a product can’t compete, then it should be allowed to pass into history. And that includes the CRTC and its inane ramblings. Open the market, and let the chips fall where they may.

    And in the interest of full disclosure, I don’t watch the American streaming services, or any of the mainstream Canadian media because it is garbage being sustained by the CRTC and its minions.

  5. Pingback: New Canadian Content Rules Could Mean Pricier Netflix, Less Choice, Critics Say - Tickle News

  6. I wonder what Canadian content the CRTC will order Britbox, Crunchyroll, and the NFL to carry?

    Will the CRTC try and order the makers of streaming devices (Roku, Amazon, Apple and Google) to make sure Canadian content is featured in the UI recommendations or in the search and voice search results for searches made from the UI?

    • Jason Riddell says:

      I can see it being like broadcast tele where the “foreign” entity is NOT ALLOWED to be offered to Canadians and BELL and “friends” will offer a “version” of it with Canadian content and 1/4 the interesting content and charge WAY MORE for it like HBO and “game of thrones”

  7. Michael Geist has written yet another polemic based on fictitious scenarios and flawed reasoning. Bill C-10 provides some new powers to the CRTC, but they are subject to oversight by Canadian Heritage in the form of policy directives, among other things. The information from Internet giants operating in Canada to be generated by the new measures, if implemented, will be subject to the same confidentiality requirements as those now in place. Any new legislation creates uncertainty in the short term as details are sorted out. The best way to avoid “marketplace uncertainty” is to leave everything as it is, which is what the advocates of Internet exceptionalism, such as Michael Geist, favour.

    Michael Geist’s supposed preview of the bill (November 1) consistently misconstrues facts and argument in a desperate attempt to discredit the new legislation. The Internet based video-on-demand television services, such as Netflix, are completely unregulated and enjoy an enormous competitive advantage over their regulated Canadian equivalents. Contrary to what Michael Geist asserts, US giants such as HBO, Disney and AMC are very much present on Canadian television screens. The “record setting” level of television production within Canadian borders that Michael Geist carries on about is entirely attributable to runaway US production, including that of Netflix. It has largely nothing to do with the production of identifiably Canadian programs. The level of English-language Canadian television production is roughly the same as it was in 2011-12. The modest rise in the level of French-language Canadian television production is attributable to greater contributions from public broadcaster licence fees and other public sources of financing.

    The obligations related to the provision of information to be placed on Internet streaming companies will be no different than those currently in place for regulated Canadian broadcasters and will be subject to the same confidentiality rules with regard to public disclosure. The new regime proposed by Bill C-10 will not introduce any more uncertainty than would any other government legislation proposing reform in an important sector of economic activity. The multinational giants are accustomed to working in foreign jurisdictions. As a spokesperson for Netflix said calmly yesterday, “Nous avons un rôle à jouer pour soutenir l’avenir du cinéma et de la télévision créés au Canada. Nous examinerons le projet de loi et nous continuerons d’être un bon partenaire pour les créateurs canadiens et l’économie locale.” (Le Devoir, 20.11.04, p.B2) If Netflix is already doing all that it says it is doing in Canada, not much adaptation may be necessary.

    The Canadian government’s approach to broadcasting aims to protect Canadian national identity and cultural sovereignty by correcting market failures (partly generated by the enormous economies of scale available to US companies) and integrating the web giants into the Canadian broadcasting system. The new approach will have no effect until it is put in place. When this is accomplished, the Canadian broadcasting system will offer more and better viewing choices with ultimate viewing decisions left to Canadian consumers.

    • Thank you Mr. Mouthpiece for the media conglomerates. Rather than wade through your PR marketing piece, I will be recommending everyone to get a VPN to bypass Canadian internet manipulations. Thank you and have a nice day.

    • Concerned Canadian says:

      Wow, that’s a stick in ones craw if I’ve ever seen it.., This obviously wasn’t written by a Canadian consumer.
      Dear Prince Fortinbras,
      We are all tired of being manipulated by a media oligopoly that is trying to protect a broken business model instead of innovating and competing in the digital age. Go crawl back under the stone age rock you came from and tell your army to go home. We’re not buying what you’re selling… (as was well demonstrated by the demise of Shomi and flatline of Crave subs)

      Oh, and next time, do have the decency to sign your real name to your work so we know which company is paying for this 2-bit astro-turfing… you are not Norwegian royalty, and Shakespeare would be rolling in his grave if he read this PR nonsense.
      Bill C-10 does not help Canadians, it only helps Bell/Rogers/Shaw/Telus shareholders at our expense.

    • What are these market failures you claim this legislation will address? I don’t see any except for the failure of Bell, Rogers and Corus to try and compete in the changing marketplace instead of whining to the government.

      There has never been as much choice and variety in the marketplace as there is now. Competition has brought better content, highly specialized services aimed at niche markets, more foreign language content, much better access for non-english speakers because of dubbing and sub-titles, and many more ways to view content.

      While this innovation has been going on, Canadian media organizations have acted like deer caught in the headlights of an 18 wheeler, hoping to be saved by the government. I say to the driver of the 18 wheeler “put the hammer down”.

    • You do know this will means thousands of Canadians will be out of work.

    • It’s astounding to consider that M. Geist spreads this nonsense while pocketing a very large cheque each week as a professor at a public university. (In addition to monetizing his work in other ways – at the same time as he argues that Canadian creators should not be paid for the use of their work in school and university classrooms: their labour, unlike that of the school janitor, and of Mr Geist and others teaching that work, shoud be free!) I guess there is no obligation that tenured faculty actually tell the truth. It’s shameful, it’s a Trumpian scam (Geist would fit in quite well at Trump U. it seems).

      • ROFLOL George… I love how you are still making these same 3 year old comments, STILL, all while the economy is collapsing. If your pet issue is finally fixed, I would love you to go outside and tell all the newly dejected unemployed about it. What a clown.

  8. Pingback: November 4, 2020 – The Friendly News Brief

  9. Tuy nhiên, cách tiếp cận dựa trên thị trường này – dựa trên tầm nhìn rằng người Canada có thể tạo ra nội dung tuyệt vời sẽ được tài trợ, phân phối và có sẵn cho những người đăng ký muốn nó – đang được thay thế bằng một mô hình có quy định trong đó thành công phụ thuộc vào sự can thiệp của chính phủ và CRTC. Cách tiếp cận mới đó sẽ gây hại trong ngắn hạn, làm tăng chi phí tiêu dùng trong dài hạn và để lại hậu quả là một thị trường tồn tại những nhận thức đáng tiếc về nội dung của Canada như một sản phẩm yếu hơn dựa vào sự hỗ trợ bắt buộc của chính phủ.

  10. Pingback: Overhauling the Broadcasting Act: be careful what you wish for – brioux.tv

  11. If you really believe that he Canadian broadcast system will offer more and better viewing because of these regulations then you must also believe that the cheque is in the mail.

    Regulations cost money and the companies that have to pay the costs will try to recover the costs through some combination of higher fees and cost savings – likely by reducing the size of the catalogue. That means consumers will pay more and get less.

    No one is arguing internet exceptionalism. We are arguing that regulations are not needed because there are no technical limits to the number of competitors as there is with TV and that the cultural sovereignty issue is a red-herring.

    The “Hide the Americans are coming” routine is tired and old. Canada’s national identity and cultural sovereignty have survived quite nicely despite Canadians watching American movies and TV shows for over 100 years. It also sends a terrible message – that Canadian culture is so weak that it will be overwhelmed by those evil Americans unless we spend a lot of money on shows that most people don’t watch.

    • Quite well put. What it aptly demonstrates is when you have enabled an industry for decades via government protectionism, to the point it will lobby to sabotage practically everyone just to keep that protectionism going. It’s an entitled position when you never have to compete.

  12. Pingback: News of the Week; November 4, 2020 – Communications Law at Allard Hall

  13. Pingback: The Government’s Internet Regulation Bill Why Bill C-10 Will Mean a CRTC-Approved Netflix Service Reduced Consumer Choice and Less Investment in Canadian Culture. - singularity.so

  14. Oh, that was interesting, I didn’t know about it

  15. Scott Johnston says:

    So, I was in Toronto a while ago and they were filming a scene on Front St. for “The Queens Gambit”. Clearly, Netflix is trying to have Canadian content in their productions. How will this affect the CRTC’s rulings and if it goes the way of other CRTC mandates, Netflix will again reduce cancon efforts, increase pricing and severely narrow the already narrow selection of product to be compliant. The CRTC is right up there with heritage building preservation groups where they try to save a shell of an old square plain eyesore building that will never be what it once was. The Canadian Content appears to be doing quite well of late so the CRTC should at least not break was is not broken and hopefully just keep the cancon growth happening without taking away entertainment sources.

  16. Pingback: Trudeau government introduces bill to force online media companies to push liberal content – Living in Anglo-America

Leave a Reply

Your email address will not be published. Required fields are marked *

*

*