Streaming organization, DiMA, has said it is concerned with the 5% tax put on services through the Online Streaming Act.
Earlier this month, the CRTC announced that they would, among other things, be imposing a 5% tax on streaming services. Money received thanks to this 5% tax would then be redirected towards legacy media companies including broadcasters who have been pumping out trash programming that people are increasingly avoiding. The freeloading media companies justified all of this by saying that producing quality content that people want to watch is way too hard to do these days and by legally stealing money from streaming services who have filled that quality content void, that is just “levelling the playing field”.
So, while the CRTC is continuing to fulfill their role as being a poster child of regulatory capture and just doing almost everything the large media company lobbyists orders it to do, a role that has already resulted in at least one justified lawsuit, the implications of this obviously corrupt process isn’t just going to sit in the background somewhere.
One question here is when this international trade obligation violating 5% tax is imposed on streaming services, where is that money going to come from? Well, as we’ve been saying all along (and many others as well), it is the consumers that will ultimately foot that bill. This is both through decrease in choice and higher bills. One of the things I’ve personally think would be a great play by the streamers is to add a separate line that says something along the lines of “Online Streaming Act fee”. Not only would this allow for a high degree of transparency, but it would also highlight exactly who Canadians should blame for this. Heck, maybe even include a little tool tip and a link with the full explanation on top of it all.
While such a move is technically speculation on our part, it is the most likely way we can see streaming services reacting should they choose to stick around in this incredibly hostile environment for doing business. We recently stumbled on a statement by the Digital Media Association (DiMA) which makes some pretty interesting arguments:
“We are deeply concerned with today’s decision to impose a discriminatory tax on music streaming services that are already making significant contributions to Canadian artists and culture.
Streaming is the main source of revenue and engine of growth for music in Canada, benefiting the industry, creators, fans and consumers. And this is effectively a protectionist subsidy for radio.
As Canada’s affordability crisis remains a significant challenge, the government needs to avoid adding to this burden. This is especially true for younger Canadians who are the predominant users of audio streaming services.
Ignoring streaming’s existing support and growth of new Canadian music is massively disappointing, and runs counter to Canada’s wider interests.
We will be carefully reviewing today’s decision with our members in order to plan next steps accordingly.”
There is a lot of references here, but for consumers, the big one is in reference to the affordability crisis. Canadian’s, largely who are younger than the Boomer generation, have been facing this affordability crisis for decades now. Whether that is through the rising cost of housing, higher grocery bills, or higher, well, pretty much everything else, combined with stagnant wages, things considered “normal” decades ago (such as home ownership) has increasingly become little more than a fantasy that people can only dream of achieving. It’s a crisis that the government has largely ignored or taken half measures to solve small elements of this.
Streaming services not only know this is a problem, but also happen to know that many of their customers fall into demographics most likely to be feeling this squeeze. Along with that, the suggestion here is that the organization knows that the only logical move for streaming services who want to stay in the country is to raise those prices. As a result, that is the implication for this reference.
What is also notable in this statement is the use of the phrase “discriminatory”. While some braindead supporters of the Online Streaming Act might take this to mean that it’s just in reference to this being a reference to a tax being imposed on streaming services, the reality is that this is very likely a reference to the fact that the Online Streaming Act is a blatant violation of Canada’s trade obligations. Not only has the Online Streaming Act (among others) have been widely considered an international trade violation, but the US has been issuing a constant drumbeat of warnings and moves, suggesting that they are gearing up for a trade war with Canada (warnings and moves that the Canadian government continues to ignore or downplay). Specifically, this is in reference to the USMCA/CUSMA.
Already, the US has established a dispute panel against Canada. In addition to this, the US has issued not one, not two, not three, but at least four four warnings against Canada, saying that if Canada moves ahead with legislation like this, there will be trade consequences. Additionally, US senators have issued multiple letters to the USTR to continue applying pressure against Canada for these trade violating laws.
What the US is disputing specifically is the fact that things like the Online Streaming Act, the Digital Services Tax, and the Online News Act discriminate against US businesses. At least on the part of the Online Streaming Act, it is a law that conveniently just so happens to target largely US benefits and benefits largely Canadian businesses. The argument here is that Canada can’t implement laws that discriminate against US businesses because of the trade agreement that was signed by the Canadian and US governments.
Supporters of the Online Streaming Act have floated the argument that Canada can utilize a cultural exemption found within the agreement. The problem with this is the poison pill provisions that render those provisions useless because it allows the US to issue tariffs against Canada to recoup the money lost. Since the Online Streaming Act is supposedly set to swipe $200 million from the streaming platforms, that allows the US to respond by slapping $200 million worth of tariffs against Canada.
Now, which sectors or parts of the Canadian economy gets hard really could be anything. It could very well be in the same sector such as through entertainment. Another possibility is targeting politicians who supported the legislation by slapping on tariffs against companies that operate in their ridings. That would set up the possibility of, say, the US slapping a trade tariff on a specific set of companies who sell lumber to the United States (possibly in Quebec for instance) or companies that manufacture car parts (operating somewhere in Ontario for instance). Those in response to the Online Streaming Act. Two totally different industries that have little to do with each other, yet linked due to some interesting political strategies. At any rate, any industry and any company could find themselves in the US crosshairs depending on what strategy the US wishes to employ.
At any rate, the statement by DiMA really only offers further confirmation to the damaging implications of the Online Streaming Act we’ve been believing would happen. We’ve been speculating (along with many others) that the 5% tax is going to get passed on to consumers. The DiMA statement does nothing to really refute that likely outcome. We’ve been also saying all along that this law will end up getting challenged from an international trade front. The DiMA statement seems to confirm that this challenge is coming (or, at the very least, there will be a push to challenge this law through the USMCA/CUSMA). Either way, it’s interesting to see more confirmation about just how spot on we’ve been in our coverage all this time.
