CRTC: ISPs, Streaming Services Need To Pony Up $s For CanCon

By David Farrell

A new CRTC report, commissioned by Heritage Minister Melanie Joly, suggests telco providers and global online entertainment services should financially contribute to Canadian content creation in order to offset funding declines expected from Canada’s TV and radio sectors.

The expansive document offers a detailed market insights, but after two years of research the authors have wisely opted not to overstep their reach in offering cold assessments of what policy tools the federal government should use to redress the imbalance between regulated and the funregulated media, the latter that sell services without binding commitments to fund Canada’s cultural objectives. Curiously, the report’s authors also overlook the growing belligerence foreign markets such as the EU and Australia are taking in reining in the unfettered power global players such as Facebook and Google have in their markets.

Making clear at the outset that the Canadian content forecast evaluation is more an extrapolation of current trends than a guidebook for future policy, the regulator has provided its elected masters with a well-documented overview of what is and what might be, without offering hardcore advice–an outcome that is both advantageous to policy makers and a source of great frustration to stakeholders seeking a firm guidepost as to what future cultural policy might look like.

Restructured funding strategy

“Sustainable funding supports remain essential to Canadian content but must reflect the new realities of the current and future marketplace without increasing costs for Canadians.

“A key concern in the future will be how to support both the production of content by Canadians and its promotion and discoverability in light of the declining capacity of traditional radio and television services to provide such support. The government has committed to maintaining the current level of funding available through the Canada Media Fund. It will be important, however, to also address current and potential impacts on funding programs such as the “Canada Music Fund or the numerous independent production funds and also play an important role in providing sustainable support for content. Similarly, the CRTC has implemented its own funding supports for conventional television stations and news production, but these are only short-term solutions.

“As can be seen throughout this report, sustainable funding supports are likely to become even more crucial in the future. A longer-term funding strategy should also better reflect the realities of the marketplace. To do so, it should fund online-only or online-first content as well as potential future innovations, place a greater emphasis on supporting the promotion and discoverability of content and be based on equitable contributions from all the industry sectors that benefit directly by providing access to audio and video content.

“A restructured funding strategy should be based on a revised contribution structure that is broad-based, equitable and sustainable in the longer term. It could integrate or at minimum align the existing contributions of the federal government directed to audio and video content. It could also incorporate a portion of the revenues derived from spectrum licensing and auctions, since the demand for spectrum is driven to a large extent by the demand for audio and video content.

“Similarly, there are numerous services in Canada that connect Canadians to content, whether through the Internet or broadcast networks, such as cable or satellite. Demand for these services is almost wholly driven by demand for audio and video content, yet the Canadian market for this content is only supported by BDUs, television programming and radio services. An integrated fund could also be more broadly supported through existing contributions by all broadcasting and broadband connectivity services (BDUs, radio and appropriate telecommunications services), all of which benefit directly from the distribution of audio and/or video content. Such a fund could support content production, promotion and distribution without diminishing support for broadband development in underserved areas. This could potentially be accomplished to a large extent through the reallocation of existing contributions without the need for new costs to consumers.

“For instance, contributions from these connectivity services could be based on a fixed percentage of the revenues of BDU and radio services, as well as “appropriate telecommunications services earning more than a minimum exempted level of revenues. For example, at an estimated level of 1% of revenues, contributions from telecommunications services would be somewhat higher than those expected from existing contribution commitments, contributions from radio services would be somewhat higher than those currently made to Canadian content development and contributions from BDUs would be considerably less than their current requirement to contribute up to 5% of their revenues. With this approach, the burden of supporting content by and for Canadians would be partly reallocated within the system to include appropriate telecommunications services, while continuing support for broadband deployment. This approach recognizes the fact that the vast majority of the demand for telecommunications services and the associated growth in their revenues is driven by video and audio content. It further recognizes that most telecommunications services in Canada are part of highly vertically integrated companies that also include BDUs and often programming services of various types.

“Preliminary analysis suggests that such an integrated fund could potentially be revenue-neutral across the entire system. Given the growth in revenues in certain telecommunications sectors, an integrated fund could also ensure continued support for audio and video content. This would include all beneficiaries of existing funds without the need for additional costs for Canadians, who ultimately fund the contributions of all players. Any potential for retail cost increases would be further mitigated by competition in the connectivity markets.

A backgrounder to The Future of Programing Distribution can be found here, and the report here.

Related reading

CRTC: Internet video, music services must pay up to save Canadian content – The Canadian Press

CRTC calls for levies on internet providers and foreign streaming services – Daniel LeBlanc, Globe & Mail