Canadian Heritage Minister Pablo Rodriguez and department officials appeared before the Senate Committee on Transport and Communications yesterday on Bill C-11. I posted a Substack of my live tweeting of the Minister’s appearance, which included continued gaslighting on the applicability of the bill to user content and an acknowledgement that it could lead to algorithmic manipulation. After Rodriguez departed, officials took questions for another hour. One of the most notable exchanges involved the express admission that the much-touted estimate that the bill would generate a billion dollars is massively overstated. In fact, department officials now admit that most of that money isn’t new at all. Rather (much as I’ve argued), it is simply a re-allocation of existing expenditures in Canada that is unlikely to result in significant increased economic activity or new jobs.
When Rodriguez appeared before the House committee in June, he was quick to tout claims that “we estimate that this legislation will generate close to $1 billion a year.” It turns out that was misinformation as we now know that the funds are simply shuffling around existing spending, not generating hundreds of millions of new money. The first exchange on this issue came from questions from Senator Marty Klyne and Owen Ripley from Canadian Heritage:
Senator Klyne: Thank you. It has been related that this act will bear $900 million in incrementally new revenue, and I doubt that will come off willingly from shareholders of the online broadcasters’ streaming services and platforms. In that scenario, the revenue is likely to come on the backs of Canadian subscribers, or are there some provisions of policy and regulations that say otherwise?
Mr. Ripley: It relates a little to your previous question to the minister. The bulk of the modelling behind that had those what we will call “expenditure requirements,” so that’s an expectation that streaming services invest a certain amount of money on an annual basis in the production of Canadian programs.
It’s not a “pay all that money into a fund,” for example, which I agree with you would have a direct flow-through effect to consumers. But this starts from a premise that many of these streaming services already have a deep production footprint in Canada. They are producing a variety of programs here, and the bill is fundamentally about saying to them in that production footprint moving forward, we expect a portion of that to be Canadian programs, where you use Canadian creative talent and tell Canadian stories. That relates to the discussion we were having about the definition of what Canadian program will be moving forward.
Senator Klyne: That will be an incremental investment and expense on their part to play in the Canadian sandbox.
Mr. Ripley: No, it will not be all incremental expense. Many of these streaming services are already investing billions of dollars in production. I always characterize it as being about a spectrum of that and challenging them to move a portion of that investment into what is Canadian program once we work through what that new definition will be. It’s about saying, “It’s great that you do so much business here.” Yes, there will continue to be foreign location shooting that happens in Canada, but for big streaming services with a big production footprint in Canada it will also be about challenging them to invest a percentage of their production budget in Canadian programs. That $900 million is not on top of what they are already doing. It’s about shifting the ambition around their production here in Canada.
The second exchange involved committee chair Senator Leo Housakos and led to the admission from Ripley that the vast majority of the spending would still be determined by foreign services such as Netflix:
This is not taking $900 million away from those streaming services and saying the government is now going to use that for alternate purposes. In the modelling, the vast majority of that is expenditure requirements where those companies will continue to have decision-making power over how that is used with the understanding that those investments go into Canadian programs because that’s what this bill is about, making sure that those streaming services are investing in television, film and music that involves Canadian creators and tells Canadian stories. It’s about, as I kind of characterized, shifting the ambition on their investment footprint here in Canada and making sure that an important part of it goes towards those objectives.
While none of this should come as a surprise, the comments highlight how Rodriguez and the government has fostered a false sense of the benefits from Bill C-11, misleading not only MPs but the film and television sector as well. That sector has visions of a billion dollars in new money from the bill, but officials now admit that it won’t be anything near that number as most of the money will still be controlled by the foreign streamers and will only involve a re-allocation of existing expenditures.