FAIL! by John Pasden (CC BY-NC 2.0) https://flic.kr/p/7w4eB3

FAIL! by John Pasden (CC BY-NC 2.0) https://flic.kr/p/7w4eB3

News

The Bill C-10 Effect: Why Canadian Consumers Face a Future of Cancon Surcharges and Blocked Services

Canadian Heritage Minister Steven Guilbeault has frequently claimed that his legislative goal in Bill C-10 is to “get money from web giants”. As last week’s post on a Canadian Heritage departmental memo highlighted, Bill C-10 targets far more than just “web giants” as the bill adopts a far broader regulatory approach that targets podcast apps such as Stitcher and Pocket Casts, audiobook services such as Audible, home workout apps, pornographic sites, sports streaming services such as MLB.TV and DAZN, niche video services such as Britbox, and even broadcaster websites such as the BBC.

The effect of significant new regulatory costs on these services is likely to spark one of two responses: some services will simply pass along the costs to consumers in the form of new Cancon surcharges, while others will likely block the Canadian market altogether. The Cancon surcharges, when combined with the new sales taxes on digital services that take effect later this year, could lead to the costs of digital services skyrocketing by nearly 50 per cent in Canada. If that happens, Guilbeault will be getting money from consumers, not the web giants.

The application of sales taxes has already been confirmed and will take effect at the federal level starting in July. For consumers in Ontario, that means the cost of services such as Netflix, Disney+, DAZN, and Spotify will all increase by 13 percent. But that increase is small when compared to the potential Cancon surcharges that could run as high as 30 percent for some services should Bill C-10 become law. Given that the tax would apply on top of the surcharge, the combined consumer cost increase could hit 47 percent.

Regulatory surcharges are not uncommon in Canada. For years, wireless companies included a network system access fee. Today, Rogers maintains a Government Regulatory Recovery Fee, which it attributes to a wide range of regulatory costs. Satellite radio services such as SiriusXM feature a Music Royalty and Regulatory Fee. The same is likely to occur under Bill C-10. For months, creator lobbying groups have been arguing for mandated Canadian content spending of 30% of revenues for streaming services. For example, the Writers Guild of Canada told the BTLR:

CPE for large, English-language broadcast groups is currently 30% of their revenues, which was based on their historical spending levels on Canadian programming. Such a level provides a prima facie starting point for application to OTTs operating in Canada, while taking into account the fact that such amounts currently include news and some sports programming for traditional broadcasters while OTTs typically do not produce such programming now

Unifor argued for the same approach:

Assign digital media broadcasters that produce and deliver original programming, a 30 per cent Canadian Programming Expenditure requirement, as a share of annual revenue, per year.

That spending could come in the form of mandated payments to funding agencies such as the Canada Media Fund (for example, Bell recommended a 20 percent mandated contribution to the CMF for large streaming services) or from the diversion of spending toward Canadian-specific content. Either way, the government estimates that $830 million in new money will enter the system annually. Liberal MP Julie Dabrusin told the House of Commons earlier this year that figure is based on requiring online services to contribute at a similar rate as traditional broadcasters (ie. 30% of Canadian revenues). Assuming those services pass along the costs to consumers – the services are not simply going to eat the costs – Canadians could see their bills skyrocket as digital services in Canada would become among the most expensive in the world.

The higher costs for streaming services that continue to operate in Canada is only part of the story. While companies such as Netflix are likely to stay engaged in the Canadian market, a myriad of smaller streaming services may not. Molotov, Spuul, Kocowa, and Crunchyroll may not be household names, but they are among the hundreds of streaming services that have emerged in recent years to serve a global audience via the Internet. Unless the CRTC provides specific exemptions for these niche services, many are likely to forego the Canadian market entirely, given all the new regulatory costs and the implausibility of meeting Canadian-content requirements.

The end result will be less competition in Canada, with multicultural markets especially hard hit by what will amount to a Canadian regulatory firewall. Streaming companies may instead choose to license their content to existing Canadian providers, so as to avoid dealing with the CRTC. The new regulations will be a boon to companies like Bell, whose Crave streaming service already promotes exclusive access to foreign content from services such as HBO and Showtime, which it makes available at a premium to subscribers.

The fallout from Bill C-10 for freedom of expression and the regulation of user generated content has rightly garnered considerable attention given the unprecedented regulatory scope of the bill. From a consumer perspective, the bill will lead to services either passing along hundreds of millions in fees through regulatory surcharges or blocked foreign services that licence their content to domestic Internet streaming services, who will increasingly become indistinguishable from cable television.

25 Comments

  1. It’s pretty clear that Bill C 10 means the CRTC will stand for Crush Resistance to Trudeau’s Cronies.

    • Fortinbras says:

      As usual, Michael Geist mischaracterizes the facts in his campaign against Bill C-10 and promoting Internet exceptionalism. The Canadian Heritage deputy minister’s memo of 8 December 2021 does not indicate that the Bill targets a broad range of Internet websites. As the deputy minister says clearly in her memo, as amended by Bill C-10, services that do not contribute materially to the implementation of the Broadcasting Act should not be regulated and the Act would not apply to social media services. Furthermore, she admits, whether the Act as amended by the Bill would apply to specific types of services, and if so whether those services would be subject to regulatory requirements, is “speculative”.

      To assert that potential new “Cancon surcharges, when combined with the new sales taxes on digital services that take effect later this year, could lead to the costs of digital services skyrocketing by nearly 50 per cent in Canada”, as Michael Geist does, is fallacious and scare-mongering. (Consumers in Quebec and Saskatchewan have already been paying provincial sales taxes since 2019.) Bill C-10 proposes that “each broadcasting undertaking shall contribute to the implementation of the objectives of the broadcasting policy set out in this subsection in a manner that is appropriate in consideration of the nature of the services provided by the undertaking.” It is therefore very unlikely that the Internet giants operating here would be required to spend 30% of their gross revenues earned in Canada on Canadian programs. Even if they were, this would represent a small percentage of their total operating costs and consequent subscriber fees. What is more, in all likelihood, such giants would find the necessary financing within their existing programming budgets. In 2019, Netflix claimed to have spent over $500 million in Canada over two years, and committed to continuing at this rate, so it should not be too difficult for the company to reach a reasonable level of spending on certified Canadian production once the Bill comes into effect. (https://playbackonline.ca/2019/09/26/netflix-says-it-has-spent-500m-in-canada-in-two-years/) The same is true of Amazon Prime (soon to own MGM) and Disney. The smaller services would be exempted from regulation…

      • David Mackey says:

        One of the challenges of the Internet is the use of anonymity to hide intention. Using the name of a fictional character from Shakespeare’s Hamlet doesn’t provide enough credibility to judge intent of an opinion on the Internet or the competency to have such an opinion. Maybe if there was more transparency on the author, the quality of your opinion might make more sense.

      • one of the challenges the person has above is saying anyhting meaningful to a human beng that makes one ounze of sense that doesnt require a fucking law degree

  2. This is the real goal of the Bill. Put up a regulatory barrier to entry and operate in the Canadian market, such that foreign competitors find it to burdensome to enter.

    • YUP AND CONSIDERING THE MILLIONS IN UNREAL ENGINE FREEBIES THAT NOW ARE WASTED CAUSE OF 2 ISSUES
      C-10 AND ITS REGUALTION COSTS
      AND JUNE 1ST YOUTUBE PUTTING ADS ON CONTENT AND NOT PAYING FOR IT( SLAVE LABOUR)

  3. This used to bother me, but now I welcome anything that can block American culture from seeping up here

    • Then you can always turn the channel. That’s what choices are all about.

    • And considering that we have three or four Star Trek series – depending on the vagaries of scheduling for both live action and animation, and of animation production pipelines – now being made in large part by Canadians in Canada…? We’re in the process of effectively annexing that bit of cultural real estate right now. I’m not sure I want to torpedo that process.

      And that’s before we get into all the other legal, commercial, cultural and political considerations laid out by Prof. Geist, Sue Gardner, etc..

      • YOU MEAN TREK THAT NO ONE WANTS TO WATCH ANYMORE , DONT MAKE ME LAUGH ITS GARBAGE UTTER CRAP GARBAGE

        • Bell Media/CTV’s sitting right there, proving you wrong about “no one wants to watch anymore” by making money off of cable-casting and streaming the various Trek series. Also, we have multiple soundstages in Toronto, animation shops in Vancouver and Toronto with lots of artists keeping busy. Also proving you wrong.

          But this is a distraction from Prof. Geist’s main discussion points.

          • excep tthey arent i bought dvdrs and blu rays years ago and am nto watching any streaming service i have hundreds of legaly bought stuff and i use th eunreal engine now to make up my own stuff some on youtube and some not

            they created me and now they try and make it so i dont share with you.

    • THE VAGENESS OF THIS MIGHT ALSO HAVE YOU UNDERSTAND THAT THE TOOLS YOU ARE USING ARE AMERICAN AND COULD FALL UNDER SAME SHIT IF THEY PUSHED AT YOU.

      AND WHAT IF YOUR SUBBED TO A CHANNEL IN USA YOU LIKE
      WHAT IF ITS A TUTORIAL MAKER THAT IS NOT CANADIAN….
      YA SEE THE ISSUES THEY NEVER EVEN THINK OF.
      I NOW HAVE MOVED ALL MY UNREAL ENGINE CINEMATICS TO UNLISTED
      AND WILL PUSH TO PRIVATE WHEN C-10 PASSES
      ADD THE INSULT THAT JUNE 1ST YOUTUBE WILL BEGIN PUTTING ADS AND NOT PAYING ME ON MY CONTENT CAUSE IM NOT YET MONETIZED

      YOUTUBE DIES THAT DAY AS ALL THAT REMAINS IS SLAVE LABOUR

      I AM NOT A FUCKING SLAVE

  4. Copie Rong says:

    I agree with Lorne, on the tragic blocking of American culture seepage. That said, people will find a way to get what they want, and I won’t tell them what they can’t see. People already get around the Netflix geoblocking in the article with American creditcards. Plus there are always alternatives if you look.

    These companies now use the money you pay them to lobby our government to force you to give them even more money. Now that’s American culture! So try to stop paying them. Cancel some channels, or cut the cord entirely. List what you subscribe to, axe the services you don’t use, and try a quick search for free alternatives to what you do use. There are even people who live without copyright limiting their lives. You can save money, improve the nation’s efficiency, make a political statement with media you support, and enjoy what you want to see versus what media companies show you.

  5. I think that you are underestimating the price increase. If the streaming services are required to spend 30% of their revenue on Cancon, and any cancon surcharge is included in the services revenue, then the surcharge would need to be 43% for the service to recover the 30% that they are required to spend on cancon. After HST (in Ontario) this would work out to a 62% increase.

    • HERE IS YUOTUBES SOLUTION THAT KILLS SMALL NEW CREATORS
      JUNE 1ST THEY WILL BE PUTTING ADS ON YOUR CONTENT AND NOT PAYING YOU FOR IT AND THUS THEY CAN GIVE THAT MONEY TO JERKS THAT NEVER EARNED IT
      IM PULLING MY CONTENT AND REMVING YUOTUBES ABILITY TO MAKE A BUCK FROM MY WORK WITHOUT CUTTING ME IN ON IT.

  6. We’re Canadian and we love taxes, that’s why we elected socialists. C’mon Justin – is this the best you can do?

  7. David E. Nelson says:

    It’s quite simple. This bill is just Canadian broadcasters’ attempt to become the absolute exclusive carriers in Canada of *all* American-produced movie and television content, which accounts for over 95 percent of their combined annual income.

    • AND TO FUCK DISABLED PEOPLE LIKE ME THAT WERE GETTING TONS A UNREAL ENGINE FREEBIES AND MAKING COOL STUFF PEOPLE LIKED TO SEE MORE OF….NOW YOU WONT AND IF THERE EVER IS ANOTHER PANDEMIC SCREW ALL OF YOU , I WONT ENTERTAIN YOU , I WONT BE ABLE TO AFFORD REGULATION

      ADD TO THIS THAT HUNE 1ST YOUTUBE WILL BE PUTTING ADS ON ALL CANADIANS WORKS AND NOT PAYIONG US FOR THEM UNLESS THEY ARE MONETIZED.THIS IS THE LAST NAIL IN COFFIN TO CAUSE LESS GROWTH….AND IM DONE TRYING….SCREW YUOTUBE AND THE CANADIAN GOVT

  8. Pingback: ● NEWS ● #MichaelGeist #Canada ☞ The Bill C-10 Effect: Why Canadian… | Dr. Roy Schestowitz (罗伊)

  9. David Mackey says:

    Canadian culture is important and it needs to be supported, but the existing outdated Canadian regulatory system assumes a radically different communication system than what exists today.

    We need modern regulation for a modern communication system … based on the Internet.

    Unfortunately, I’m not sure any of the Canadian political parties understand that yet. They all seem happy to just play political games.

    • THE SYSTEM WAS WORKING , YOU OBVIOUSLY DONT SEE ALL THE REST OF US IN BACKGROUND DOING REALLY COOL SHIT AND GETTIGN NO WHERE , WHILE THESE LAWS PUSH US TO GIVE UP AND SIT ON EITHER WELFARE OR IM MY CASE ON DISABILITY AND NOT SHARE MY CREATIONS.

      REGULATING ME AND ALLOWING YOUTUBE TO PUT ADS ON MY WORKS AND NOT PAY ME WILL NOT HELP ME THE CANADIAN HOBBY CREATOR

  10. JUNE 1ST YOUTUBE WILL BEGIN PUTTING ADS ON MY NON MONETIZED VIDEOS THAT ALSO INCLUDE PRE PRODUCTION TESTS OF THINGS I MIGHT MAKE INTOA FULL BLOW CINEMATIC FEATURE…AND not PAYING US.THIS I BELEIVE IS STEP ONE OF HOW THEY WILL THEN GIVE THAT CASH TO JERKS THAT DONT DESERVE IT NOR DO I SUPPORT …SO I HAVE MOVED ALL CINEMATIC HOBBY STUFFS AND THESE THINGS I DO TO UNLISTED AND WILL PUSH TO PRIVATE ALL OF THEM
    THIS WAY YOUTUBE WONT GET MOREM THEN AN AD VIEW FROM ME SEEING IT.

    AD BLOCKERS ARE NOW A MUST , AND THE SECOND BILL C-10 BECOMES LAW ILL JUST SHUT DOWN ALL THE REST FO THE CHANNEL AND REMOVE IT. I WONT BE PARTY TO A COMMUNIST SYSTEM.

  11. HERE IS AN EXMAPLE OF A STARGATE FAN PROJECT I HAD BE WORKING ON
    https://youtu.be/Q7HP0X8zAkM
    ITS UNLISTED NOW AND THE PREVIOUS ONE HAD SEVERAL HUNDRED VIEWS AND I HAVE OTHER PROJECTS ON GO….NO LONGER GOING TO BE PUBLIC

    YOU ALL LOSE PEOPLE LIKE ME FOR LAWS LIKE C-10 AND YOUTUBE PUTTING ADS ON MY SHIT WITHOUT COMPENSATING ME ( THAT MIGHT HELP BUY BETTER HARDWARE FOR EXAMPLE)

  12. Under Bill C 10 will shows like Umbrella Academy, Star Trek and The Boys qualify as Canadian content because they are made in Canada or will they still be treated as foreign content?

    Will the cost of foreign (ie – US, Europe) streaming rights for Canadian content, like Vikings, count as qualified Canadian spending or will only Canadian streaming rights be included in the 30% of revenue requirement?

    Until these questions are answered it will be impossible to calculate any potential surcharge.

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