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

 

“Unofficial Cancon”

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