By Douglas Barrett
AS BILL C-11 WENDS its stately way though the legislative process, one issue crops up that has seemingly not been batted about before in the context of the new legislation. And it’s a pretty basic one: the definition of a Canadian program.
Both the current Broadcasting Act and Bill C-10 authorized the CRTC to determine by regulation “what constitutes a Canadian program for the purposes of the Act.” In a new approach, Bill C-11 in section 10(1.1) requires that in making such regulations the Commission “shall consider” five specific policy questions. As many as three of those questions, if answered in the affirmative, could require fairly dramatic amendments to the Commission’s decades old treatment of Canadian programs.
Before digging into this, a little bit of background.
There are four (!) main avenues to the certification of a program as Canadian. The first is offered by the Canadian Audio-Visual Certification Office (CAVCO), a bureau within the Department of Canadian Heritage. It operates under rules in the Income Tax Act and its regulations, and is designed primarily to determine a program’s eligibility for the Canadian Film or Video Production Tax Credit (CPTC).
The second is operated by a group within Telefilm Canada that certifies whether a program qualifies as an official treaty co-production with one of the approximately 60 countries with which Canada has this kind of treaty.
The third is offered by the CRTC itself primarily for broadcasters to log their regulatory obligations with respect to Canadian programming.
And the last, also offered by the CRTC, is known as a co-venture and is for programs that meet most of the CRTC guidelines but where production control is shared with a non-Canadian.
Here is the interesting part:
- The CAVCO certification grants the producer access to the CPTC tax credit; the CRTC certification explicitly does not
- The Telefilm co-production certification is accepted by CAVCO for tax credit purposes; the CRTC co-venture certification is not
- The CRTC accepts CAVCO certification for Canadian programs; the reverse is not true
What are the key differences? Both the CAVCO and CRTC main system require that the Canadian producer controls all the creative and financial aspects of the production. But in addition, the CAVCO system requires that:
- the Canadian producer be the first owner of the copyright in the program;
- the distribution rights for Canada be controlled by the producer; and,
- the producer have a meaningful financial interest in the worldwide distribution of the program
Both the Telefilm co-production certification and the CRTC co-venture certification permit shared producer control, but only treaty co-productions are eligible for CPTC Tax Credits. As the entire ethos of treaty co-productions is to permit smaller countries to grow their respective audio-visual sectors, there is no co-production treaty with the United States (and never will be).
These are very important distinctions, especially from the perspective of the independent production community.
Currently, a material portion of the financial support in the system is provided by Canada’s licensed broadcasting distribution undertakings (BDUs). The CRTC regulation for this requires that about 5% of BDU gross revenues must go to funding Canadian programming and 80% of that amount is paid to the Canada Media Fund (CMF).
When we look at the CMF certification requirement, we see that it requires CAVCO certification unless the program is produced “in-house”, presumably by a licensed Canadian broadcaster. So, any producer, and particularly any independent producer, that requires the CPTC tax credits and/or CMF support, must obtain CAVCO certification.
Returning now to Bill C-11’s policy questions to the CRTC. They include: “whether Canadians own copyright in relation to a program, control the exploitation of a program and retain a material and equitable portion of its value.” These are the very differences that currently separate the CAVCO and the CRTC systems, and it might appear obvious that truing up the rules would be an extremely good idea.
Well, that’s one approach, but there are others.
The much-publicized headline of the act is to require foreign online undertakings to make a material contribution to Canadian programming: “each foreign online undertaking shall make the greatest practicable use of Canadian creative and other human resources, and shall contribute in an equitable manner to strongly support the creation, production and presentation of Canadian programming, taking into account the linguistic duality of the market they serve.”
How are they to do this? The first and most obvious approach would be to require the streamers contribute to a fund in the same manner as the BDUs currently contribute to the CMF. This could be a completely new fund established just for online undertakings.
The big question is – OK. But who would have access to the fund? And who would certify the programs that the fund supports?
Well, the streamers’ demand will likely be that the resource of the fund be available directly to them. And, moreover they would want the programs to be certified as Canadian content or a co-venture under the current definition administered by the CRTC.
Why? Those rules do not require that copyright be held by a Canadian, nor that a Canadian have any distribution rights or back end-participation. So, it’s perfectly possible that programs made this way by, say Netflix, could be visibly Canadian, and gain 10 out of 10 content points but with Netflix owning all the rights. They would not qualify for CAVCO certification but would qualify under current CRTC rules. And while they could not get the Canadian Content Tax Credit, they would obtain the benefit of the Production Services Tax Credit.
Is this an appropriate result? I would say not.
Canada’s independent production community should demand all programs supported by any new fund be certified by CAVCO as Canadian content or a treaty co-production, with Canadian producer ownership of the IP, the division of distribution rights and the share of back end locked in as per current rules. All programs would be 10/10 to match the CMF approach. Assuming this fund would be “triggered” by streamers it would put them in roughly the same position as Canadian broadcasters are now in dealing with Canadian productions supported by the CMF.
It might seem strange to imagine that the CRTC would design a funding program that operates under rules administered by a different department, but it has been done before.
In it’s 1994 decision that created what is now the CMF the Commission wrote:
“On the subject of Canadian control, the Commission is concerned that Canadians maintain beneficial ownership in the programs that they produce. Accordingly, the Commission considers that the production fund should not provide funds to foreign controlled productions when considering applications. This would likely be accomplished most effectively by examining relevant contracts and other documents related to a production in order to ensure that Canadians have long term beneficial ownership in projects supported by the production fund.”
Almost 30 years later this fundamental issue is once again on the table. When Bill C-11 is passed and the CRTC takes over, the real question will not be whether the foreign streamers are required to make a contribution to the system, it’s who will ultimately own and control the contribution they make.
Douglas Barrett is an adjunct professor in the Schulich School of Business. He was chair of the board of directors of the Canadian Television Fund from 2004 to 2008.
