This is part two of a three-part feature. Please read part one here.
By Doug Barrett, adjunct professor in the Arts, Media & Entertainment MBA program at the Schulich School of Business
In my last piece, I suggested that the critical definition of Canadian Content was that set out in the Income Tax Act and Regulations and administered by the Canadian Audio-Visual Certification Office (CAVCO) and asked why the ongoing debate focused instead on the definition used by the CRTC.
In this piece, I’d like to look a little closer at the CAVCO role. In my next piece, I will consider the appropriate CRTC role.
Over many years the CRTC has developed multiple strategies to encourage or require spending on Canadian programming. For example, commencing in the early 90s, the Commission demanded that broadcasting distribution undertakings (BDUs) contribute about 5 per cent of their gross revenues to production funds, 80 per cent of which went to what is now called the Canada Media Fund (CMF), and the remaining 20 per cent to a fund of the BDUs choice. The Commission then developed a regulatory framework for those BDU funds and as of today some 16 Certified Independent Production Funds (CIPFs) have been created.
The CMF also receives financial support from the Department of Canadian Heritage under the provisions of a Contribution Agreement that requires supported projects to be CAVCO certified, 10 out of 10 and shot and set in Canada. The interesting aspect of the Contribution Agreement is that it binds the CMF to apply that rule not just to projects supported by taxpayer money but also to projects supported by BDU money. The agreement treats all the resources of the Fund as having a public purpose, whatever the source of those funds.
In another initiative, the Commission requires that a percentage of the gross revenues of Canadian broadcasters be spent on Programs of National Interest, again imprinting monies spent on such programs with a public purpose. While there is no formal certification requirement for Programs of National Interest as a practical matter all (or virtually all) of these programs require the support of both the Canadian Content tax credits and the CMF. As a result therefore, they need the CAVCO certification, instead of that of the CRTC.
Returning to the Certified Independent Production Funds, while the regulatory regime established by the Commission permits supported programs to be CRTC certified, the same practical financial realities that apply to Programs of National Interest ensure that programs supported by Certified Independent Production Funds are overwhelmingly CAVCO certified.
There is also an irony here. The 80 per cent percent of BDU contributions flowing to the CMF have a public purpose that requires 10 out of 10 CAVCO certification, while the 20 per cent flowing to the Certified Independent Production Funds are somehow able to avail themselves 6 out of 10 CRTC certification. Does this mean the 20 per cent of BDU contributions have any less a public purpose than the 80 per cent? I suggest not. There is no good policy reason for making such a distinction.
But let us turn to the recent CRTC hearings on the financial contributions which are to be required of the streamers. Much attention was paid by intervenors on which funding organizations, existing or new, should receive support. Each intervenor articulated a policy rationale in support of its respective position. Essentially, each of these pleas argued that the contributions should support an important public purpose.
If the monies that will shortly start flowing from the streamers to the CMF and/or other funding organizations – monies that support Programs of National Interest – have the same underlying public purpose character, why should there be a double standard on the Canadian content certification front? Should not all public purpose funds be subject to the same certification criteria?
Where am I leading with this? In my view it is critical for the CRTC to follow the embedded system by formally requiring that all public purpose funding go to CAVCO certified projects. This would apply to any new funding coming from the streamers, and any existing funding going from the BDUs to the Certified Independent Production Funds. Not to put too fine a point on it, what I am suggesting is that the CRTC require the CAVCO certification standards, rather than its own, be used in all its subsidy and content regulation going forward.
As I will discuss in my next piece, this approach presents an opportunity to fulfill a particular provision of the Online Streaming Act which suggests somewhat less onerous requirements be imposed on foreign streamers than on their Canadian counterparts. While this provision opens the door to make a “two track” option available to foreign streamers in making their Canadian programming, I believe this can be accomplished without any reduction in the production of properly certified Canadian programming.
And while we are on the CAVCO certification standards, the 6 out of 10 rules used by both CAVCO and the CRTC were first developed in the 70s at a time when Canada had a much more limited creative, financial and production capacity. Today it is a behemoth in each of these areas. Given that fact why would now not be a good time to consider a minimum requirement of 8 out of 10 points instead of 6? Similarly, is it time to require that a production have both a Canadian writer and director rather than one or the other? Achieving these adjustments would require changing only two words in s.1106(3) of the Income Tax Regulations. A “six” would become an “eight” and an “or” would become and “and.”
Lest this will be seen as disruptive, I would note that the 2022 edition of Profile published by the CMPA and others indicates (Exhibit 3-11) that fully 90 per cent of CAVCO certified Canadian production already achieve 8, 9 and 10 points. This is not new news. Roughly the same breakdown has been stable for at least a decade. What this says to me is that public purpose funding is already and overwhelmingly using the CAVCO certification standards rather than those of the CRTC.
If my recommendation has value, the debate on the CRTC’s definition of Canadian content needs to be cast in a different light.
I’ll discuss that next.
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