The government’s support for Bill C-11 has often been framed on economic terms with Canadian Heritage Minister Pablo Rodriguez arguing that the bill will “create good jobs for Canadians in the cultural sector”. I’ve long maintained the government’s claims that the bill will generate billions of dollars in new money was massively exaggerated and that a far more likely scenario would be that the bill would simply lead to a reshuffling of existing expenditures.
Using the Access to Information Act, I have now obtained a copy of the government’s internal estimates for the economic and production impact of Bill C-11 (methodology, memorandum, PPT), which confirm many of my suspicions. While the government is pinning its hopes on massive spending from Internet streamers such as Netflix, it admits that even if the bill did not pass it would not affect net new employment in the sector. Moreover, internally the government recognizes the claim that Netflix and foreign streamers don’t contribute to Canadian content is false, as it has identifies a new category of “unofficial Cancon” which would qualify as Cancon under every measure but for the fact that it is owned by companies like Netflix and Disney. And as for the payments from social media companies that the government insists are so essential that it has fought for years to include user content regulation in the bill? The estimated economic benefit represents just one percent of its total projection for Bill C-11 with pure guesswork about what percentage of content on the platforms might require contributions.
Bill C-11 and employment
Let me unpack each of the issues. First, the government’s economic modelling for television production reaches the following conclusion:
Regardless of the status of Bill C-11, FLS [foreign local service production] in Canada is expected to surge to new highs by 2025, led in part by global content boom fuelled by a growing field of streaming platforms. From an economic standpoint, even under a scenario where no action is taken to preserve Canadian television production, FLS activity will blunt any loss of employment on the Canadian content side. However, from a cultural perspective, the two sectors are not interchangeable, and the loss of Canadian-produced television shows will greatly impact the industry.
This conclusion raises both the economic and cultural impact of the bill. From a pure jobs perspective, the government is admitting the bill is largely irrelevant as it anticipates continued robust employment with or without Bill C-11. When Rodriguez talks about creating new jobs, his own department admits that the bill won’t do much to create new jobs.
Bill C-11 Economic Modellin… by michaelgeist
If employment gains are off the table, what of the so-called cultural benefits? Supporters of the bill – including Canadian Heritage officials – argue that it will shift some production from FLS to Canadian content. Their argument is that may not dramatically change the employment situation but it will result in more Canadian stories. Yet this conclusion is also open to question. It is well documented that the Cancon rules often result in productions that bear little relation to Canada and productions with a strong Canadian connection may not qualify.
Further, the government knows that the Internet streamers already produce what amounts to Canadian content:
We assume foreign streamers are already producing shows that would qualify as Canadian content – because they meet CAVCO or CRTC criteria (e.g. nationality of key crew members) – but don’t currently qualify because of foreign ownership. Under existing rules, the copyright holder must be a Canadian, which precludes foreign companies like Netflix from producing their own Cancon in-house. In the latest BCCM model, we estimate such “unofficial Cancon” production represents about $48 million per year. Once foreign streamers are allowed to produce their own shows (which, presumably, Bill C-11 would seek to encourage), this spending would shift toward certified Canadian content.
This paragraph effectively acknowledges that the repeated claims suggesting companies like Netflix or Disney do not contribute Canadian content have been very misleading since the “unofficial Cancon” is largely indistinguishable from certified Cancon with respect to the content and employment role of Canadians.
How will this form of content be treated? The government expects the rules to change so that the “unofficial Cancon” becomes official:
Although we don’t know what regulatory process will be in place to certify such production by foreign entities, we assume these companies will eventually have some way to turn their currently unqualified productions into certified ones once Bill C-11 is implemented (perhaps by sharing the country of origin ownership credit).
In fact, the government also raises another form of currently unrecognized Cancon spending by foreign streamers:
Companies like Netflix have partnered with Canadian producers and broadcasters on productions like Anne With an E with the CBC. While we don’t know the exact ownership arrangement of these type of commercial agreements, this production activity is now captured by CAVCO’s online-first data, which reached almost $159M in 2020.
The government also expects this to count:
as with the ‘unofficial Cancon’ that is being produced by foreign entities, we assume these OTT-funded vehicles would transition into a new class of production under Bill C-11.
Bill C-11 detailed methodology by michaelgeist
The bottom line from the government’s analysis is that the amount of television production in Canada is unlikely to change due to Bill C-11. Moreover, Netflix is not simply going to cut a big cheque to fund someone else’s content. Instead, some of the shift toward more Canadian production will involve reclassifying productions that are today not viewed as Cancon to meet the contribution requirements.
The CRTC and Social Media
It is notable that much of this will not be decided by the government, but rather by the CRTC. This points to real outcome of Bill C-11: years of hearings at the CRTC and potential follow-on litigation as stakeholders battle over what counts as Cancon, what counts as a contribution, what counts as discoverability, and what form of contribution will be required. While the questions about what counts as Cancon or a Cancon contribution will spark heated debates, so too will the contribution itself, likely to be expressed as a percentage of Canadian revenues. The government expects streaming services such as Netflix to contribute 30% of their Canadian revenues, a percentage that I believe would be the highest in the world.
Meanwhile, the inclusion of social media is going to be controversial for reasons that extend beyond the regulation of user content. The government has emphasized that “platforms are in”, but internally it is clear it has little idea what that will actually mean. The estimate seeks to limit contributions to “professional content”, but officials admit that they don’t know what actually means on the platforms. In fact, the only social media platform included in the estimate is Youtube, suggesting that they don’t know what to do with services like TikTok or Instagram. All of these undefined terms will also be the subject of lengthy hearings, as will the government’s assumption that only Youtube qualifies for these payments.
Whatever the amount of professional content, the contribution itself is pegged at 5% of revenues, creating an expected net benefit is $10M in contributions, which is just one percent of the government’s overall expectation for Bill C-11. That contribution could come in many different ways, including existing support by Youtube for Canadian creators, meaning the financial piece might be small, but the regulation of user content will remain. Yet that one percent has effectively delayed the bill by years and turned it into one of the most contentious pieces of legislation of the Trudeau era. That the social media contribution is practically a rounding error in comparison to the larger bill reinforces the fears that the power to regulate user content is the bigger motivation behind its inclusion in Bill C-11.
I’ve posted the underlying documents here – including the assumptions document, a memo on the issue, and a powerpoint presentation. This information should have been made available during consideration of the bill, which would have facilitated a more honest debate about the state of the market, the impact of the bill, and the enormous amount of guesswork that will be left for the CRTC to sort out.
Bill C-11 Economic Impact PPT by michaelgeist
Here are my problems with this report.
It says online broadcasters would spend $1.03 B per year on Cancon if Bill C11 passes. It also says, in 2025 spending on Cancon will be $3.67 B if Bill C11 passes and $3.11 B if it does not pass. That is a $560 M difference, not $1.03 B.
It doesn’t provide what the total spending (Cancon + non-Cancon) would be with and without Bill C11. Another way of looking at it is the report doesn’t indicate how much non-Cancon spending would shift to Cancon.
It doesn’t provide an estimate of the implementation costs for the streaming companies, the CRTC and the government. It also doesn’t indicate what the ongoing costs will be including the cost to get a program certified as Cancon.
It doesn’t estimate the cost to consumers both in terms of dollars and choice.
It doesn’t indicate if Bill C11 will create a barrier to entering the Canadian market that some streaming services may not want to climb. I note, Peacock has worldwide expansion plans, but has decided not to enter the Canadian market. Instead it will sell its content to Bell, Rogers and Corus.
Pingback: Bill C-11 Debate: Canadian Government Knew Streamers Already Paid Their Fair Share
Bill C-11, also known as the Digital Charter Implementation Act, was introduced in the Canadian Parliament in November 2020. The proposed legislation seeks to modernize Canada’s privacy laws and provide better protection for personal information online, as well as to promote Canadian content in the digital world.
There are a number of errors in Michael Geist’s rendition of what the government documents say. As is often the case, he mixes up related concepts and reworks them to convey the message he wishes to promote…
Take the following statement, for example: “internally the government recognizes the claim that Netflix and foreign streamers don’t contribute to Canadian content is false, as it has identifies (sic) a new category of “unofficial Cancon” which would qualify as Cancon under every measure but for the fact that it is owned by companies like Netflix and Disney.” In fact, BCCM says, “In the latest BCCM model, we estimate that ‘unofficial Cancon’ production [such as the Netflix/CBC production Anne with an E] represents about $48 million per year.” BCCM also says that Foreign Location and Service (FLS) production amounted to $534 million in 2020. So, this means that “unofficial Cancon” production is estimated to have been less than 9% of FLS production in 2020. That sounds about right. BCCM is not saying that all FLS production is Canadian oontent or potentially Canadian content. It is saying that SOME FLS production could be recognized as Canadian content – if the certification rules change. Will the eligible copyright holder rules change and, if so, in what ways? Will the points system change and, if so, in what ways? At this point, we don’t know. Any new category of “unofficial Cancon” depends on both copyright holder rules and the points system.
We do know that the US web giants, like the US studios, jealously seek to retain world rights to any production they are involved in and are furiously lobbying to maintain this practice. We also know that they are very reluctant to place their productions in the hands of non-US writers, directors and lead actors (above-the-line talent). They are open to delegating many other positions to “locals”, if the tax advantages, production costs, locations, and below-the-line talent are attractive. This is why The Handmaid’s Tale, based on a Canadian novel, was shot in Canada under American production control with American screenwriters, directors and principal actors (playing Canadian characters). Margaret Atwood had only a salutary advisory role to play in the television production. The Handmaid’s Tale would not have qualified as a Canadian production even if its copyright had been held by a Canadian company, and rightly so. It was a US (Hulu) audiovisual interpretation of a Canadian literary work.
Michael Geist quotes one of the documents as saying, “From an economic standpoint, even under a scenario where no action is taken to preserve Canadian television production, FLS activity will blunt any loss of employment on the Canadian content side.” No matter what the document says, this is not an “economic” standpoint, this is an aggregate “employment” numbers standpoint that ignores the nature of the employment in question. Unskilled or semi-skilled jobs in television production are not the same as creative jobs involving writers, directors and lead actors. These are the key positions that determine the nature of audiovisual content. The current Canadian audiovisual points system acknowledges this by assigning points to these creative positions, while at the same time recognizing the contribution of less skilled positions by requiring that 75% of total production expenditures be made on Canadian elements.
Growth of FLS production activity will not blunt the loss of employment on the Canadian content side – unless there is growth in Canadian content production. This will not happen in the context of the current definition of Canadian content certification rules. It will only happen if there is a shift in the composition of the Hollywood studios and web giants spending in favour of certified Canadian content. This will come about if these studios and web giants are directed by the CRTC to contribute to Canadian content, and/or there is a change in the certification rules that induces them to play by those rules. Bill C-11 encourages the CRTC to make changes in both of these areas.
Michael Geist says, “It is well documented that the Cancon rules often result in productions that bear little relation to Canada and productions with a strong Canadian connection may not qualify.” If he knew something about Canadian television production, he would know that the vast majority of those productions that meet Cancon rules are directly related to Canada. Gotta Love Trump is the exception. Productions with a strong Canadian connection qualify if they satisfy the points requirements – which 90% of runaway Hollywood productions filmed in Canada do not. See my comment on his March 20, 2022 blog – https://www.michaelgeist.ca/2022/03/bill-c-11s-foundational-faults-part-five-how-is-gotta-love-trump-cancon-but-amazons-toronto-maple-leafs-series-isnt/#comment-162928
The PCH documents postulate that a significant part of any potential increase in the production of certified Canadian production will result from a transfer of some volume of FLS production. The total amount will depend on how the CRTC manages the change in rules. One cannot expect the government to delegate authority over broadcasting to the CRTC, as it has done up to now, and, at the same time, determine what rules the CRTC will adopt in exercising its delegated authority. At best, the government can provide a range of estimates base on what the CRTC, an independent agency, might do.
So the States wanting to hold onto rights is wrong but ant other country wanting to is fine.
The Canadian program certification rules make no distinction between US and any other potential non-Canadian rights holder. The distinction is immaterial; they are all treated in the same way. There is no doubt that a Canadian rights holder is more likely to play by the rules set out by the Canadian government and its agencies than a foreign company.
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