By Howard Law, author of MediaPolicy.ca and Canada vs. California: How Ottawa took on Netflix and the streaming giants (Lorimer, 2024)
This week’s announcement by Culture Minister Marc Miller that the federal government is striking down the CRTC’s ruling on streamer contributions to Canadian content is perhaps more shocking in its timing than its substance.
After all, Prime Minister Mark Carney’s government has an appetite for jettisoning government policy that he considers unwanted baggage. Recall the climb down from the Digital Services Tax, the carbon tax, and the suite of Trudeau-era environmental policies.
Miller will be sending the CRTC a new policy direction, to replace the previous minister’s 2023 instructions, on how to implement the Online Streaming Act. At the very least, expect a strong de-emphasis on streamer contributions to Canadian programming.
In the same announcement, Miller committed $600 million in federal funds to take up the slack left by streamer dollars that were earmarked for media subsidy funds or direct investments in Canadian programming. To whom that $600M might be disbursed, and over what period of time, is something we will discover when the government itself has figured it out.
Heritage officials were making phone calls on the morning of the Miller announcement to a host of content-making and broadcasting companies who are eager to know if they are getting a slice of the $600 million. These are the same people who spent the last 10 years lobbying for the Online Streaming Act, appearing before parliamentary committees, and making submissions to the CRTC on how it ought to be implemented. So you would expect them to be staggered by the Carney government’s volte face. The ensuing press releases were alternatively positive, cautiously neutral, or critical of the government’s move. The Montreal-based Coalition for the Diversity of Cultural Expressions pointed out the elephant in the room: Could anyone confidently expect that replacing streamer contributions with taxpayer money will survive the first budget of a Conservative government?
The hasty timing and the back-of-a-napkin dollar figure in the Miller announcement carried the strong whiff of a government panicking and caving once again to White House trade pressure on anything related to American Big Tech. When the news came out that Carney had a private meeting with Netflix CEO Ted Sarandos last week in New York, one could only surmise that Sarandos chose the occasion to threaten a theatrical announcement of a subscription price hike designed to put the Carney government back on its heels. A week later Carney told Politico “this is not the time to make Canadians pay another $50.”
If the government’s big pivot wasn’t so obviously succumbing to circumstances, one could find some high-minded policy wisdom in it.
Federal support for cultural production and distribution has always combined regulatory charges on private companies with direct government subsidies. The Canada Media Fund and the Canada Music Fund are both co-funded this way. On a grander scale, the CBC is (70 per cent) publicly funded, but regulatory charges on Canadian cable companies support news funds like the Independent Local News Fund. Similarly, the Online News Act commands licensing payments be paid by Google to Canadian news outlets: some would describe that as industry cross-subsidy.
The federal government’s announcement last April that it will expand journalism labour tax credits to television and radio is a recent example of leaning into public funding, not private cross subsidies.
But no one thinks that Carney scrapping the streamer contributions in favour of public subsidy was a thoughtful realignment of cultural policy. Instead, Carney himself made sure that Canadians understood that it was an affordability move, explicitly adopting the contentious “no Netflix tax” argument (for which he ought to be crediting former Prime Minister Stephen Harper).
Having so expediently embraced Opposition Leader Pierre Poilievre’s “Netflix tax” narrative, Carney has now put himself on a slippery slope of credibility when it comes to defending what may be left of the Online Streaming Act.
And what is left of the Online Streaming Act and its implementation? The CRTC was poised to deliver a companion ruling on audio streaming. It was also set to move on to the final Phase III of its deliberations in which Netflix and the other Hollywood streamers were expected to set out their discoverability schemes. Additionally, there is a long list of pending regulatory issues that are now parked like stalled cars on an expressway until the commission responds to the new government policy direction.
This cultural train wreck was a long time coming.
It was probably not an accident that the Trudeau government did not move forward with the Online Streaming Act until the 2018 CUSMA renewal with the Trump administration was ratified.
The 2020 pre-legislation report from the government’s advisory committee did not recommend that Netflix or the other video streamers be assessed for cash contributions to the Canada Media Fund or news funds, recommending only direct programming investments known as Canadian Programming Expenditures (CPE). However, the government’s 2023 policy direction to the CRTC left the door open to both cash contributions and direct investments.
The CRTC walked through that door on June 4, 2024 when it issued its ruling requiring audio and audio visual streamers to contribute five per cent of annual Canadian revenues in cash to an array of different media funds. The five per cent is worth $200 million in annual cash contributions and the streamers immediately appealed the charges to the Federal Court.
The “five per cent” was arguably an aggressive number for a cash contribution as opposed to the long expected direct CPE investments (the latter delivered in last month’s CRTC ruling that “tripled” the streamers’ combined cash and investment contributions).
The CRTC justified the five per cent figure by citing a similar levy on Canadian cable television companies that feeds into the Canada Media Fund and various other subsidy programs. But that five per cent was a legacy rate that had been baked into cable operators’ subscription rates for nearly fifty years. And the CRTC’s 5-per-cent levy on audio streamers scaled much higher than Canadian radio broadcasters making 1/2 per cent cash contributions.
At the time of the CRTC’s June 2024 ruling, there was a Democrat in the White House. Six months later, after the US elections, we found ourselves in a trade maelstrom of Donald Trump’s making. The streamers saw an ally in Trump and the blood was in the water. Backed by the White House, Netflix is now fighting CPE-style direct investments around the world, in France, Germany and Australia, to name just a few countries travelling the same path as Canada.
Without being taken into the prime minister’s confidence, one hopes there is a plan to salvage the Online Streaming Act. It’s entirely possible that quantum of streamer contributions to Canadian programming will be directly bargained at the CUSMA table, not unlike the 2018 CUSMA agreement in which the less pressing issues of Super Bowl ads and television shopping services were resolved. If direct negotiations is the plan, the government’s overturning of the CRTC’s latest ruling buys time, even if it appears to be part of a strategy for bargaining from a position of weakness.
Elbows up, this isn’t. I can think of another anatomical metaphor, but that would be unkind.
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