There’s been a lot that has been said about the Online Streaming Act, but one of the stakeholders that continues to be left out are consumers.
One of the things I’ve mentioned off and on throughout the Online Streaming Act (formerly Bill C-11) debate is that the internet has helped create a fundamental shift in how content is made.
Traditionally, with broadcasters and supporting producers, it’s the producers that decide what the audience wants. They produce content that they think audiences like and the audience just gets whatever comes out the other end. It’s a very top down approach.
In the online streaming environment, however, it’s the audience who decides what is good content and what is not. If the audience likes certain kinds of content, that content will get likes and views. If they don’t, they can look elsewhere and it was up to whoever is producing the content to figure out what would be interesting to the audience and adjust their style accordingly. After all, the audience in these environments are very spoiled for choice and can always look elsewhere – a feature not really found on any other medium.
Throughout the last decade plus, those styles of content producing have clashed. Over time, the audience first approach kept winning out. The “Producer knows all” approach gradually didn’t jive with audiences, leaving them with reducing their traditional broadcast consumption to outright cord cutting behaviour, leaving in droves to the audience focused style. This trend has continued to anger legacy producers and broadcasters who lobbied heavily for a law that they feel would reverse this trend.
That law would ultimately be the Online Streaming Act. It does a number of things, but one of those things is to tell the audience that they are choosing the “wrong” content to consume and that it is their content that they should be consuming around the clock instead. So, the Act would get the CRTC to mandate that algorithms force feed government certified “Cancon” in a bid to get those audiences back. In the internet realm, this is a backwards approach because forcing audiences who have long had choice on what to watch will just leave to audiences being upset. Audiences, after all, are not mindless drones consuming whatever just shows up in their feeds. If anything, they are going to complain, manually search for the content they want to consume, or even go so far as to leave the platform. Simply put, online audiences don’t like being dictated to what some “man behind the curtain” demands them to watch.
What you are ultimately doing with the Online Streaming Act is ramming a broadcast square peg into an internet round hole. The broadcast rules simply do not work in the online environment. Everything is on demand and what one person watches is unlikely to be the watching experience for another. It’s fundamentally different from broadcast TV where there is fixed content being aired on the same fixed channels. Consumers could choose, but from a small set of rigid choices. The internet environment is vastly different from the broadcast environment and no amount of torquing the definitions of specific terms is going to change that.
One thing that has been especially notable throughout the debate is how the audience was treated throughout this debate. Online creators and consumer rights organizations like Open Media did press their concerns in this debate. Yet, those concerns were largely met with lawmakers eyes glazing over. Thinking of the audience was largely a foreign concept both to the lawmakers pushing this legislation and the lobbyists that effectively wrote it. Followup questions were so confused, one of them involved asking about how audiences are leaving traditional broadcasters. Online creators rightfully responded by pointing out that it is entirely possible that the broadcasters have misunderstood what their audiences want if that’s happening. The answer, of course, was spot on, but it was largely lost on the lawmakers pushing this law.
The lobbyists, of course, responded to the few questions about what audiences want by going so far as to say that their concerns are the audience concerns. What is in their interests are what is in the interests of audiences. There’s no air gap between their interests and audiences and that’s the end of it. The response is, of course, laughable given how little traditional broadcasters have paid any mind to the interests of consumers. If they were, the audiences wouldn’t be leaving them in droves today, yet that is exactly what is happening. The response from traditional broadcasters is more of a reflection of the ego that the industry, by and large, never dropped. They know best. They know everything. It is up to the audience to “get” them and if they don’t, that is the audience problem, not them.
Now that the legislation has tragically made it as far as it has, we continue to see the audience last approach. As we earlier noted, the CRTC released a decision, picking and choosing which legacy organization gets money and how much of that money is going to get stolen taken from the streaming services. The decision had a lot to say, and as Michael Geist noted, Canadian consumers have been largely left out of the CRTC decision:
Last December, I appeared before the CRTC as part of Bill C-11 hearings, where I emphasized the need for the Commission to pay attention to competition, consumer choice, and affordability. My takeaway from that appearance was that “my intervention met with skepticism from some Commissioners who see their role as guardians of the broadcasting system on behalf of longstanding beneficiaries with little regard for the impact on consumers or the risks to competition.” It turns out that was a pretty good read of the situation as this week’s Bill C-11 streaming ruling acts as if consumers, competition, and affordability are irrelevant issues that are at best someone else’s concern. The result is that Canadians has been largely removed from broadcasting and Internet policy at the regulator, expected to pay up and shut up.
There is still much to decide with Bill C-11 as the CRTC has pushed money out the door without figuring out what a modernized definition of “Canadian content” even means or addressing how to treat the various other contributions from services that includes significant investment, promotion, and discoverability measures. Further, it has treated the streaming services a monolith despite different business models, profit margins, and revenue streams. This has huge implications for competition on Canada, but the CRTC seems either oblivious or perhaps just unconcerned with the market effects of its ruling.
The decision deserves criticism on those grounds alone, but the most unforgivable aspect of the decision is how presentations or submissions from individuals are ignored and never referenced. The CRTC says it wants to hear from Canadians, but then proceeds to ignore everything they have to say. It says it received over 360 submissions and heard from 120 witness, but the only views that count are those from formal stakeholders, described as the “parties.” The hundreds of individual submissions and the many individual presentations are not cited or addressed. The Parliamentary and committee processes may be imperfect, but committee reports take the time to engage with what they have heard, regardless of the source. Indeed, I recall the 2019 copyright review by the Industry Committee making a point of citing each of its witnesses in the final report.
That the CRTC sees no problem with ignoring the views of the public who navigate a challenging process to participate cuts to the very legitimacy of its decision making. The word “consumer” does not appear even once in the decision. The costs associated with its decision are not considered, the competition impact is not considered, and the views that the Commission heard from the public are not considered. The CRTC once said it wanted to place Canadians at the centre of the broadcasting system. With this decision, Canadians have been removed not only from the centre, but this CRTC has removed them entirely other than leaving them to ultimately foot the bill. The Commission’s new mantra to Canadians is clear: pay up and shut up.
I would go further about the decision and say that the decision also highlights how the CRTC is not only following the marching orders from the government, but also the lobbyists pushing this legislation as well. What the lobbyists asked for in the process is what the lobbyists ended up by in large getting. For instance, creators argued that if money is being taken from the online ecosystem, then they should have access to that funding as well. The CRTC’s response ultimately was to tell creators to pound sand. There’s nothing in the distributed money for creators who happened to pick the internet as their medium. It’s going to legacy organizations and media companies. Some might argue that the CMF set money aside for such endeavours, but the amount is insultingly low and the rules to get it bars pretty much all creators from accessing it.
Still, Geist is absolutely right when he says consumers will have to foot the bill in all of this. For premium streaming services, Canadians often pay a subscription fee. Since the money has to come from somewhere, those fees will invariably go up. Of course, this assumes that the streaming services will try and stick around. As we noted on several occasions, there is an appetite among numerous streamers to simply pull up stakes and leave the country rather than pay millions for the privilege of operating in the country.
There is little doubt that this would have additional negative consequences for Canadian consumers. Fewer streaming services operating in the country means fewer choices for consumers. This is just basic math at this point – and simple math at that. That math is basically as simple as 12 – 6 = 6. In this regard, consumers are paying a heavy price by seeing their favourite streaming services suddenly become unavailable. While some might just hop onto a VPN service and continue to enjoy the service they want to enjoy, I don’t think this should be a necessary step to use a service that would otherwise happily operate freely in this country. This, of course, goes well beyond the negative impact of algorithmic manipulation that the CRTC is gunning for (which would have serious negative repercussions on consumers as well).
It isn’t just me that has long speculated that market exits would be the outcome of the Online Streaming Act. Peter Menzies also warned of these likely repercussions of the Online Streaming Act as well:
You might well wonder why companies such as Netflix, Spotify, and Apple should have to fund broadcast news reporters—including those employed by Bell and Rogers—as none of them produces news. No doubt the executives of those and other companies are pondering the same and calculating the global cost of compliance with such a demand. Because, as Canadians learned from the debacle of the Online News Act, “the world is watching” and whatever demands global companies concede to in one country could very well be replicated in others.
So, if they agree to fund news in Canada, why wouldn’t the U.S. expect them to do the same there? Or, hey, India? And how much would that cost?
If you were an executive at Spotify—a company whose highest net profit ever was 5 percent—and you were being asked to cough up that same amount in Canada, what would you do? Stay and pay or pack your bags?
The bad news is that, as with Spotify, streamers such as Netflix (net profit margin 18 percent) are going to have to find the 5 percent from somewhere. The apparent options are to a) reduce current investment in Canadian film and television; b) increase subscription costs to consumers, c) lay people off/reduce overhead, or d) leave the country. The CRTC decision is rather cleverly constructed to avoid the nuclear option of d)—at least until after the election—by promising in the future to perhaps give credits for money already being spent on production. And maybe a more workable definition of Canadian content. Maybe.
Nevertheless, as a source within the industry told me:
“I’m renewing my VPN subscriptions because I don’t see why Netflix, Amazon, Disney, et al. would continue operating in Canada.”
Neither do I.
Personally, I don’t see absolutely every streaming service leaving the country. There’s a good chance that top players like Netflix and Spotify are going to stick around as they raise their rates. Other players like Disney+, Crunchy Roll, and Britbox, however, are services I can easily see leaving. Some already have already put one foot out the door even and just waiting for the right moment to pull the trigger.
So, the negative impact on consumers is basically a double-whammy. It’ll come in the form of less choice and higher prices.
It’s what makes the lack of mentioning the interests of consumers all the more stark in the CRTC decision in the first place. They are the ones that are going to get hit hard in all of this, yet their concerns and interests don’t even get a mention in the process. It makes it all the more apparent who the CRTC works for – not you.
The CRTC is like a tailor who is going to make you a suit without taking any of your measurements or asking what material you want.