Last week, the ongoing Senate hearings into Bill C-11 featured an appearance from the Canadian Association of Film Distributors and Exporters, who spelled out its expectations for Bill C-11, particularly the contributions from streaming services such as Netflix, Disney+, and Amazon Prime. While much of the Bill C-11 debate has focused on the regulation of user content, the bill’s supposed intent is to bring large streaming services into the Canadian broadcasting system. Fuelled by the government’s dubious claim that the bill could generated a billion dollars per year (even government officials now admit that the number is an estimate based not based on actual data), the Canadian sector came sporting demands wildly out of touch with international standards. Indeed, when compared to European regulation, which is often touted as the global leader, Canada would strongly discourage market entry for streaming services and likely result in reduced libraries of content in order to meet the government and CRTC’s regulatory requirements.
The big number for the Canadian sector is 30 percent: mandated contributions of 30 percent of Canadian revenues to support Canadian content funding and mandated discoverability requirements in which 30 percent of what is recommended or pops up in search is Canadian content. The specific demands numbers from Justin Rebelo:
To support the production of film and television content that promotes diverse and uniquely Canadian stories in both official languages, as well as Indigenous languages, CAFDE recommends that all OTT’s and all licensed broadcast services offered in Canada be mandated to contribute 30% of gross revenues generated from subscription and advertising in Canada towards funding the prebuy, acquisition and production of Canadian content from independent Canadian producers.In addition to incentivizing the production of Canadian content, it is imperative to have cultural policies that ensure such content could be seen and is discoverable on these platforms. We recommend 30% on-air of discoverability whether in carousels and via recommendation engines.
To be clear, no country in the world has anything close to these regulatory requirements. In Europe, most countries have no or very limited financial contribution requirements for Internet streaming services. While France is a notable exception at 20-25 percent, many countries have no requirements, while others have only a few percent of revenues. A list of many of the implementations of the EU’s Audio Visual Media Services Directive, based on work from the excellent European Audiovisual Observatory, can be found at the end of this post (some EU member states are years behind in implementing the directive). Outside the EU, Australia, which is currently considering regulation, has targeted 5 percent, while Switzerland settled at 4 percent.
The undeniable conclusion from the comparative data is that Canadian sector’s financial contributions expectations far exceed global standards for streaming services. There will undoubtedly be consequences for that approach, notably including higher consumer costs or less competition, as services either pass along the additional Canadian operational costs to consumers or avoid the market altogether.
But the out-of-touch approach isn’t limited financial contributions. The discoverability expectations, which feeds into the amount of Canadian content on the services themselves, have enormous implications for Canadians ability to determine what they want to watch. While the government often claims that it won’t interfere with user choice, the reality is that a 30% Cancon requirement – either in display, search or catalogue – will affect what users are able to access on the services.
Once again, no country anywhere has anything comparable. European member states have a 30 percent European catalogue requirement as a result of the directive. In other words, the requirement cuts across all 27 member states, allowing services to draw from content from all countries with a combined population of 447 million in order to meet the threshold. By comparison, a Canadian-only 30% percent requirement would be akin to Poland alone setting a similar requirement. The only way to meet that requirement in Canada will be to cut back on the amount of foreign content offered to consumers since there simply isn’t enough available Canadian content to fill the libraries of the streaming services and offer the myriad of global programming often found on international services. For example, the Canadian Netflix library currently features about 5,500 titles. If the company were required to licence more than 1,500 Canadian films or television shows, it would almost surely cut back on its titles with the Canadian requirement effectively creating a cap on consumer choice. The policy would therefore effectively limit what Canadians can watch.
The irony is that there are unique provisions elsewhere that could be applied in Canada to address cultural policy goals. Some countries have established clear thresholds for when the law applies, something the Canadian government has rejected. Others have specified discoverability measures that do not involve algorithmic regulation, identified ways to support independent film production or encouraged domestic ownership of IP through reversionary rights requirements. These are the kinds of policies that could have been incorporated into Canadian law. Instead, Canadian Heritage Minister Pablo Rodriguez has offered up a bill with few specifics and sparked industry expectations that are inconsistent with global norms. The likely result: real harm for Canadian consumers and marketplace competition.
Sample European Implementations
Austria – 30% European works in catalogues, no financial contribution
Belgium (German) – 30% European works in catalogues, general prominence obligation, may face non-discriminatory financial contribution
Bulgaria – 30% European works in catalogues, prominence obligation of special section and search tool, no financial obligation. Does not apply to services with less than 1% market share
Croatia – 30% European works in catalogues, general prominence obligation, financial contributions: (1) Contribution to the production or purchase of independent Croatian works: 2% of their total annual gross revenue in Croatia for domestic and non-domestic targeted VOD service providers, 5% for broadcasters (2) Contribution for the implementation of the National Programme for the Promotion of Audiovisual Creativity for the production of European works: 2% of their total annual gross revenue for domestic and non-domestic VOD service providers, 0.8% for national broadcasters
Cyprus – 30% European works in catalogues, may face non-discriminatory financial contribution
Denmark – 30% European works in catalogues, 2% of their turnover in Denmark in the form of direct investments in new Danish-language content
Finland – 30% European works in catalogues, general prominence obligation, no financial contribution
Germany – 30% European works in catalogues, general prominence obligation, financial contribution obligation: to be paid to the Federal Film Board for both domestic and non-domestic targeted VOD service providers -> 1.8% of their turnover if less than EUR 20 million; above that, 2.5%.
Greece – 30% European works in catalogues, general prominence obligation, financial contribution obligation for domestic and non-domestic targeted VOD service providers: 1.5% of their turnover related to their activities in Greece, either for the production of European works, or for the purchase of rights to Greek audiovisual works, or to a specific fund of the National Centre for Audiovisual Media and Communication
Hungary – 30% European works in catalogues with at least 10% Hungarian work, general prominence obligation, no financial contribution
Latvia – 30% European works in catalogues, prominence obligation includes tagging or special section and search tool for European works, no financial contribution
Lithuania – 30% European works in catalogues provided at least 1% of market revenues and audience, no financial contribution
Luxembourg – 30% European works in catalogues, general prominence obligation which may be waived where it is impracticable or unjustified in view of the nature or theme of the audiovisual media services. No financial obligation.
Malta – 30% European works in catalogues, general prominence obligation, no financial contribution
Netherlands – 30% European works in catalogues, general prominence obligation, no financial contribution
Poland – 30% European works in catalogues, prominence obligation includes the proper identification of the origin of programmes and promotional material for European works, financial contributions to the Polish Film Institute for national and non-domestic targeted media service providers of 1.5% of their revenues for broadcasters, digital platforms, and VOD service providers.
Portugal – 30% European works in catalogues including 15% of independent European works, general prominence obligation, financial contribution obligation for VOD services providers: annual fee equal of 1% of their relevant income, investment obligation for broadcasters and VOD service providers: a portion of their investment expenditure for those > EUR 200,000 annual revenue or <1% share in the relevant market segment
Sweden – 30% European works in catalogues, general prominence obligation, no financial contribution