CRTC Already Jacking Up Online Streaming Act Fees

The terrible Online Streaming Act has been deeply problematic and the CRTC slapping on an additional 10% fee isn’t helping.

The slow and deeply problematic CRTC process of implementing the Online Streaming Act is continuing to chug along. According to lobbyists and the government, implementing this new law was going to be a simple process. Just have a quick consultation and implement the necessary processes. The CRTC was so bold about this whole thing, one of the arguments was that they don’t need to hire additional staff to actually move forward with this. After all, they are only regulating the internet, how hard could that be? No, I’m not exaggerating, lobbyists and the government really were that stupid.

Well, to the surprise of no one paying attention, the concept of regulating the internet as if it’s just another TV channel proved to be a much more difficult process for the CRTC. In response, the CRTC realized that they had a huge mess on their hands and wound up clearing their schedule all the way up to… 2024. Yes, that is now a long time ago, but even that was ballooning the schedule like crazy, turning a consultation process that was supposed to last a couple of months while they juggle everything else at the same time into a multiyear long process with all other business being on the receiving end of the regulator kicking the can down the road (sucks to be the companies hoping to make changes to their broadcast licenses). After all, the act itself passed in the middle of 2023.

As things carried on, even that extended and more dedicated timeline proved to be insufficient. So, the CRTC cleared their schedule a second time and pushed the deadline clear into 2027. So, at minimum, the schedule alone went form a couple of months to, at minimum, a 4 year process just to try to sort everything out.

Of course, even that is being optimistic because it’s hard to say that the CRTC is really sorting anything out at all. In addition to the multiple extensions for deadlines which is already pissing off their lobbyists pals (because they darn well expect their free money yesterday, darn it!). As us experts had long predicted, the process is fraught with problems including being on the receiving end of litigation and trade threats from the US for being an obvious violation of CUSMA/USMCA.

For the litigation side of things, the CRTC has already been sued at least six times now. The complaints range widely, but one thing is for sure, it will mean even longer delays in the process regardless of the outcomes.

As for the trade retaliation, that has been happening for quite some time with the latest development being that the Online Streaming Act being challenged in the Trade Estimates report as well as being the subject of a challenge in a bill being tabled. This over top of the fact that it is a major point of contention in the up and coming CUSMA/USMCA trade talks.

For as much as lobbyists love to accuse experts like us of being “shills for Big Tech” – even going so far as to demand politically motivated “investigations” against people like us for daring to criticize what was known as Bill C-11 at the time of the demand – it turns out that we were correct the whole time. Shocking, I know.

The only reason why so many of the long warned about consequences have not come to fruition is because the regulator has a massive mess on their hands. As we are seeing today, that mess is only going to get bigger.

Throughout the legislative process, the position of the government said that the free money that must be forked over to the mainstream media companies is set at a 5% “base contribution” (AKA stealing). In other words, at minimum, 5% of all revenues must be forked over to these companies because they personally feel entitled to that money that was made by someone else. This rate was being pushed back in 2024 and was something that we’ve always known as the initial ransom to stay in Canada.

Apparently, despite the lack of implementation, apparently, the rates are already going up. From the CRTC:

The CPE requirement for online streaming services will be 15%, which includes their 5% base contribution requirement established in Broadcasting Regulatory Policy 2024-121-1.

Now, keep in mind that the original 5% fees is already the subject of the first court challenge – not to mention the fact that news organizations are suddenly being thrown into the list of beneficiaries of that free money pool being the subject of lawsuit number two. If the 5% fees is enough to spark lawsuits, I can only imagine what 15% of revenues would spark.

University law professor, Michael Geist, is noting that the problem of the tripling of costs is only the beginning:

The press has described the change as a tripling of the cost, and in headline terms the jump from 5% to 15% is just that. However, the characterization misses what makes the additional spending so significant: the new money is not a levy but a spending requirement that mandates that the large streamers direct at least 30% of their expenditure to what the Commission calls “enhanced partnerships.” These productions exclude much of the existing spending by companies such as Netflix since they require that a Canadian hold the majority of the copyright. Further, any shortfall below 30% is allocated to the Canada Media Fund. The CRTC is also requiring that 30% of expenditures be allocated to French-language programming, half of which is original first-run content sourced from those same partnerships. This means that a sizable portion of the tens of millions the streamers already spend on film and television production in Canada does not qualify under the new regulatory requirements.

The Commission has also added discoverability and metadata obligations in a companion decision. Streamers will be expected to make Canadian and Indigenous content visible to audiences who are not searching for it, with specific commitments to be set out in later conditions of service, and to participate in building the metadata standards needed to identify and track that content. The Commission acknowledges that international promotion supports discoverability and that it already forms a significant part of the large streamers’ budgets, but it declined to credit the spending on the theory that doing so would risk diluting expenditures on the development and production of Canadian programming. The result is that the activity most likely to bring Canadian work to global audiences, the very outcome the Act claims to want, earns no credit at all.

As Geist notes, the Motion Picture Association, an organization that has already sued over this law once, has come out swinging against this decision:

“The Motion Picture Association strongly condemns the CRTC’s decision to impose unprecedented, unnecessary, and discriminatory investment obligations on American streaming services operating in Canada. This burdensome framework unfairly targets global streamers with requirements that directly violate Canada’s obligations under the United States-Mexico-Canada Agreement (USMCA). The decision also undermines the open, market-based system that has helped fuel investment, job creation, and creative partnerships across North America. American studios and streaming services are already the top foreign investors in Canada’s film and TV ecosystem – delivering content to Canadian audiences and sharing Canadian stories with the world. This decision triples the cost of doing business in Canada and will spark even more inflation in the market, making further investment and innovation less attractive. For years, the MPA has consistently made clear that Canada’s Online Streaming Act is an unfair trade practice. We urge the Canadian government to reconsider this approach.”

Geist also notes that the government appears to be a little hesitant on this whole thing. He also noted just how high these rates are compared to the rest of the world:

The government’s response was more curious, with Culture Minister Marc Miller saying only that the government is reviewing the changes and assessing their impacts, a striking posture for a decision that is the direct product of his own government’s legislation and policy direction, and one that arrives barely a month after Miller publicly criticized the CRTC for moving too slowly on the very same file. A government that wanted the regulator to act faster, and now treats the result as something to study from a distance, has the look of a government preparing to distance itself from what it set in motion.

The government has consistently framed these obligations as consistent with international practice, but a comparison with other jurisdictions suggests that Canada’s regulatory framework will create one of the costliest regimes. France imposes the most onerous requirements in the world, with an investment obligation of 20% of French revenue, rising to 25% for services that offer films within a year of theatrical release, on top of a levy of roughly 5% to the national film agency. But the contributions are far lower elsewhere, with most of Europe setting requirements from as little as 0.5% up to the 6% range in Spain. In fact, a Belgian proposed increase toward 9.5% by 2027 has drawn a Netflix challenge at the country’s constitutional court. Canada’s 15% is therefore well above the European norm and with tight restrictions on how the money may be spent, the streamers are left with less control over their own spending than almost anywhere else.

One can hope that this is finally the tipping point for the Canadian government to realize that none of this is worth it. The CRTC is already racking up lawsuits in court, the US government continues to bludgeon Canada over the head over this trade barrier, and things are only looking to get worse from here. Rescinding this monstrosity is Canada’s only real viable off ramp at this stage and content creators are hoping that the Canadian government takes that off ramp before their livelihoods also put in jeopardy thanks to the government manipulation of the algorithms to prop up legacy companies. We are already several years into the process and, unlike the Online News Act (which is a huge train wreck at this point in time), the government can still pump the brakes on this before the bulk of the damage appears.

Drew Wilson on Mastodon, Bluesky and Facebook.