One of the obvious legal challenges against the Online Streaming Act is moving forward in the Canadian courts.
By the time Bill C-11 received royal assent, court challenges against the now called Online Streaming Act seemed like not a matter of “if”, but “when”. Indeed, throughout the debates, one thing that was particularly obvious was the eventual court challenges against this legislation turned law. Many experts warned about this multiple times, but like all other sound advice given during the debates, that advice was ignored as the cult-like supporters of the legislation rammed the legislation through with minimal changes.
Indeed, the Online Streaming Act has long been highly vulnerable to court challenges. There’s the fact that it’ll arbitrarily increase costs to consumers, the fact that it ghettoizes free speech (which is highly unconstitutional), there’s the fact that the law targets American businesses specifically thanks to its framing (which makes it highly vulnerable to trade challenges from the US), and so on. Again, the government was warned of these consequences, but the response for government was to jam their fingers in their ears and shout “LA LA LA I CAN’T HEAR YOU!!!”
One of the things that still sometimes confuse people is the fact that many of the warned consequences haven’t taken place yet. This is because there is yet another process following the legislative stages of this bill turned law. That has to do with the fact that the legislation needs to be implemented by the regulator in charge of this mess, the CRTC. Currently, it is going through a multi-year long consultation process to discuss how best to implement this law (which basically involves pretending to be open to feedback from all Canadians while carrying out the marching order of corporate lobbyists operating in Canada).
One of those marching orders demanded by those lobbyists is that online streaming platforms like Netflix must fork over millions to news organizations. This isn’t exactly a new demand since it was pushed during the Senate debates while this was still a bill. Their completely delusional argument was that this is just a piece of the legislative puzzle to “level the playing field”. The problem was that this legislation did no such thing. It props up legacy media companies while punishing newer platforms for being better at attracting audiences. If anything, it makes the playing field completely lopsided in favour of the legacy media companies thanks to the fact that money generated by streaming platforms get siphoned off by the legacy media companies who didn’t have to go through the work of earning that revenue in the first place. For lobbyists, the vision of “fairness” was that legacy media companies simply make money forever no matter what and it’s up to other companies to foot the bill. This is regardless of how many Canadian’s are turned away from the legacy medias terrible content.
While an argument can be made that platforms like Facebook and Google affect the news business (this as it relates to the Online News Act which has its own huge set of problems), the same can’t be said for Netflix and Apple in relationship with the likes of the legacy media. Yet, part way through the process, the push was on to swipe cash from the streaming platforms and deposit that cash into news operations. Why is it problematic? Simply put, platforms like Netflix and Amazon don’t produce news content, so why should they be expected to foot the bills for legacy news companies when they aren’t even in the same business? It makes precisely zero sense, but it was a last minute interpretation by lobbyists and government. This is one of the many reasons why this legislation’s implementation never made any legal sense.
So, it came as little surprise when the lawsuits started flying. In May of last year, Google filed the first lawsuit, arguing quite rightly that revenues generated from user generated content shouldn’t be considered when considering the fees Google must hand over to legacy media companies. Legacy media companies responded by arguing that they are far more important than those stupid losers on YouTube creating content, so they have every right to go full five finger discount on those kids money. After all, they are nothing more than “cat videos” anyway and in no way should that be considered art in the first place. Therefore, they are not important enough to earn money from advertisers like they have in the past. Yeah, they really are that asinine.
In early July of last year, the Motion Picture Association filed a second lawsuit, arguing that streaming platforms shouldn’t be legally forced to foot the bills of news broadcasters – an industry they have nothing to do with. Despite the incessant whining from lobbyists arguing that the MPA has no right to take away their free money gravy train and demanded that the lawsuit be dismissed, the courts apparently rejected motions to dismiss and allowed the case to move forward in December. This despite the crying from lobbyists who keep claiming how unfair it all was that they had to work for money instead of ordering platforms to just give them all their money for free.
So, here we are today to discuss the lawsuit in which the lobbyists are demanding that legacy media companies have every right to freeload off of the platforms. From iPhone Canada:
Apple, Amazon, Spotify, Netflix and other global streaming platforms are challenging a federal order that would force them to contribute millions toward Canadian content and local news production.
The case, which will be heard by the Federal Court of Appeal in Toronto, focuses on a 2024 decision by the Canadian Radio-television and Telecommunications Commission (CRTC). That order requires major online platforms to pay 5% of their annual Canadian revenues into funds that support domestic programming—including 1.5% earmarked for local journalism.
The streamers argue the CRTC is overreaching, according to a report by the Globe and Mail. In court documents, Spotify likened the payment to an unauthorized tax, while Apple and Amazon called the rules unfair for targeting foreign-owned services with over $25 million in Canadian revenue. They also took issue with paying more than local radio broadcasters, who only contribute 0.5%.
The Motion Picture Association – Canada, which represents companies such as Netflix, Paramount, Disney+, and Warner Bros. Discovery, is contesting the portion of the order tied to news funding. It says the CRTC failed to explain why streamers with no role in journalism should be responsible for propping up local broadcasters.
A temporary halt to the payments was granted by the court in December, after companies argued that they wouldn’t be able to recover the funds if the ruling was later struck down.
The arguments by the legacy media companies continues to be just as nonsensical as ever. The claims included the idea that because there has been market disruption thanks to the internet, legacy media companies are losing revenues due to a loss of their monopoly. Therefore, the news corporations are entitled to free money from platforms because contributions to the arts means contributions to the news sector. No that doesn’t make any sense, but that is at least one of the arguments they are making.
While that argument might fly in a political setting, a court is much less of a legal setting. It relies on caselaw and facts. This is why I’ve been long arguing that while passage of the legislation really sucks for Canadian innovation, it faces a much more steep uphill battle in the courts because you need more than just a “gut feeling” and “vibes” to have your legislation endorsed by the courts. The best case scenario is that the legacy media companies drew a judge who is more willing to fall on politics rather than the rule of law in order for there to be a ruling in favour of the legacy media. Even then, that just makes it all completely vulnerable to an obvious appeal.
Either way, the logical gap between the creative industry and the news sector is going to continue to be legally problematic for the lobbyists working on behalf of the legacy media companies. It would be surprising if the requirement for the likes of Netflix to pay news outlets in free money were to stand.
Hope we court challenge on Bill C11’s free speech chilling relatively soon, and or atleast effort to have courts say Canadian user content has to be exempt. Feels icky it’s been big streaming thus far.
I’m hopeful as well. Not a whole lot can be done until the CRTC renders a decision on things, though. Even the big platforms had to wait until the funding decision came down before challenging it on the funding side of the bill (at the very least, Google is trying to protect the revenues of creators through their own lawsuit by requesting that revenues by user generated content be exempt). Still, I can’t imagine creators being happy about the prospect of their content being forcibly downranked to force government certified “Cancon” down users throat. So, I can only imagine that it’s only a matter of time before this aspect gets challenged in the courts. I suspect that the earliest time we can see a challenge is when the CRTC makes a decision on the Cancon rules, though I wouldn’t know for sure what the most convenient point to challenge this would be. It’s all very time consuming just to get to the litigation stages, though.