By Brad Danks
Many of us are former Blackberry owners and have probably heard of former Co-CEO of BlackBerry, Jim Balsillie. More recently you may have learned even more about him through Glenn Howerton’s outstanding portrayal of him in the Canadian Content film, “Blackberry.” Apparently Balsillie called the performance “brilliant” although he said it was, in his view, 5% true and 95% fictional. However, you probably did not know that Balsillie has something important to say that is relevant to the current debate on the definition of Canadian Content.
Balsillie is now the Chairman of the Council of Canadian Innovators. This group is actively involved in promoting innovative policies across Canadian industries, primarily in the technology space. On January 13, he published an article in the National Post, “An outdated myth about business investing may be hurting the Canadian economy.” The article is spot on to the issues confronting the CRTC and our industry in determining the definition of Canadian Content.
In his article, Balsillie reviews a litany of reports commissioned by the Government on the problems facing the Canadian economy. He then sums them up by saying this:
“Over the past 40 years, the global economy has undergone a rapid, unprecedented shift from a traditional tangible asset production economy to a knowledge-based, intangible assets economy. The wealth effects and power of intellectual property (IP) such as patents, copyright and trade secrets, and now data assets, permeate virtually every sector of the global economy.”
This is 100 per cent true now in the entertainment business. While IP has always been important, both the rise of global streaming platforms and the increasing importance of data now makes content ownership more important than ever.
In the article, Balsillie reviews numerous Canadian policies across several industries and concludes that they all prioritize stimulating manufacturing over IP. He concludes that the policy advisors “seem not to understand how the zone of competition has foundationally changed in the modern economy, namely from competing on production costs via scale to competing via owning IP and controlling data that have marginal production costs at or near zero.”
Essentially Balsillie’s remarks go to the core of the debate in Canada around Canadian Content. The current Canadian Content definition goes back more than 40 years and was specifically designed as a hybrid policy –one part industrial and one part cultural. The industrial part requires ownership of the intellectual property by Canadians and spending in Canada. It puts Canadians into the control position on the productions, helping them learn how to develop, produce and distribute IP. The cultural part is the constituent elements of the content, namely the key creative talent and the expressive value of the underlying property. That expressive value part has, so far, not been a requirement but is more of a hoped-for outcome.
The current debate really centres around which part of the hybrid policy is more important in this era. Many of the critics of the current definition, including some former policy makers and prominent academics, argue that the important part of the definition is to expand and redefine the cultural component. They also argue we should emphasize the manufacturing, “spend in Canada” component and not concern ourselves with the ownership issues. Instead, they want to focus on ensuring the content is more culturally relevant and topically Canadian – so long as it is manufactured in Canada. Balsillie’s analysis suggests this would be a mistake.
The problem, according to Balsillie, is that this view is short-sighted in the current economy. He says, “In the traditional production-based economy, business investments — such as in new machinery and advanced equipment — enabled companies to lower costs and/or produce higher quality products for a ready market. Production inputs such as capital equipment, material inputs and labour were available in competitive markets. In this type of economy, business investments in new equipment or machinery yielded enhancements in product cost or quality, which enabled a company to grow its revenue and profits. If business investment was lagging, the government would increase incentives by lowering interest rates, providing tax breaks or depreciating the national currency.
But these principles don’t apply to today’s knowledge-based economy because its nature and structure are different. IP and data are not inputs available in the market — they are protected, intangible assets. Productivity gains in this economy don’t come from buying value-added technology from others, they come from generating, and crucially owning, valuable IP that generates new and high-margin revenues.”
This is why we need to stimulate the creation of more IP owned by Canadians. In fact, some believe that we have already passed peak production in terms of dollars in the past few years. The new technological changes may lower the need for location shooting and increase the use of special effects and the rapid introduction of machine learning in all areas will bring production costs down.
We can and should debate the definition of Canadian Content. However, the importance of IP ownership for the future of the Canadian industry cannot be underestimated. Ownership needs to be the core principle of any policy. As Balsillie says, “You cannot commercialize ideas you don’t own. Canada has a dismal record of IP ownership because our policy and traditional business community failed for decades to understand the changing nature of the economy.”
Let’s not make the mistake of discounting the importance of IP ownership now that we understand the changing nature of the economy.
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