Senate Hearings on Bill C-11 – A Look at the Ninth Hearing (Second Segment)

The special coverage of the Bill C-11 Senate hearings is continuing. We look at the second segment of hearing nine.

We are concluding the first half of this weeks hearings with segment two of hearing nine.

For those of you are curious about our coverage of previous hearings, here are the older ones:

Hearing 1 – Privacy Commissioner and Global Affairs/Justice Department
Hearing 2 – Digital rights organizations and lobby groups (1)
Hearing 3 – Lobby groups (2) and platforms (1)
Hearing 4 – Lobby groups (3) and lobby groups (4)
Hearing 5 – Lobby groups (5) and lobby groups (6)
Hearing 6 – Music Canada / platforms (2) and lobby groups (7)
Hearing 7 – Scholars/researhers and digital first creators (1)
Hearing 8 – Digital first creators / lobby groups (8)

The first segment in this hearing was definitely the first mixed hearing we’ve seen so far. It featured both a digital first creator and a Bill C-11 supporting lobbyist. Because of that, it had a different dynamic. Interestingly enough, when it started, the lobbyist in question was basically saying how Bill C-11 doesn’t regulate user generated content and we shouldn’t be worried about it. By the end of it, he wound up admitting that if clarity is needed to ensure that user generated content is out, then he has no problem with that. This marks the second time we’ve seen a breakthrough moment because that is the big thing being asked by digital first creators.

So, that leads us to this hearing. The link to the video we are watching is here. We obviously won’t beat an official transcript or the recording, but we are happy to provide a nice thorough summary and analysis of what was said. So, with that, let’s jump in on this hearing.

Opening Remarks

Stéphane Cardin of Netflix opened with his remarks. He says that Netflix continues to invest and grow their footprint across Canada. Last fall, he notes, Netflix opened its first corporate office in Toronto and hired their first local content executives. They have since travelled across the country and engaged with creators in over 400 meetings to find the next great Canadian stories that they will share with the world. He says that he is happy to say that they are in active development of several shows.

From there, he says that they are working with several animation studios and will continue to work on several titles every year. Many of Canada’s top VFX studios have worked their magic on their series and films and last November, they have acquired ScanVFX with over 600 employees in Vancouver and Montreal. That same month, they have launched their own line of mobile games including some from several game developers in this country. All of these investments means Canada remains one of their top production countries globally. Since 2017, they have invested more than $3.5 billion in Canada for films and series that have launched on Netflix. This includes their own productions, numerous licensing agreements with Canadian independent producers and broadcasters and many more acquisitions of classics and new films in both English and French. Each of these models contribute to the system.

From there, he goes on to talk about how Canada was featured in 30 films, attracting tourists, and other projects that promote Canada. He also other talks about several projects in Canada and their collaborations.

After that, he notes Bill C-11 offers a flexible view of how individual services contribute and tailors definitions to online undertakings. He says the right approach is to modernize the definition of Canadian content. He says that under the current condition of what qualifies as Canadian content, titles that are produced solely by Netflix do not qualify even when the totality or key creative roles are held by Canadians. He says that platforms such as theirs provide an unparalleled opportunity to provide global audiences Canadian stories. He says that quality stories (lists several examples) no longer have borders. He also says he supports amendments made by the MPA.

Then, he spoke about how there were key objectives when the government went about creating this bill. Those objectives include affordability and Canadian choice. He called for a balanced approach that acknowledges the contributors of each player in the system.

Wendy Noss of the Motion Picture Association – Canada then opened with her remarks. She says she supports the thinking of the heart of Bill C-11. That is modernizing broadcast policy to create a flexible framework that would allow streaming services to play to their strengths. She says that she offers three recommendations. This includes ensuring a flexible broadcast policy, supporting draft language that avoids unintended consequences, and clarifying the policy on discoverability.

She then focuses on flexibility of Bill C-11. In part, she called for greater consumer choice.

After that, she noted that legacy policies that were designed to prescribe what was available to viewers were plausible as a means of achieving economic goals in the past when distribution platform choices were limited. Achieving those same goals require a new approach that recognizes how each player invests and contributes. She says that flexibility will help creatives and forward looking policy is needed for consumer friendliness in response to both domestic and international culture.

Noah Segal of the Canadian Association of Film Distributors and Exporters then opened with his remarks. He calls for Bill C-11 to be put through without delay. He says the industry is in crisis and that Canadian consumer choices will soon be controlled by players in the United States. Then, he says that we can’t afford to dither over specifics that can be handled after the bill is passed.

Justin Rebelo, also of the Canadian Association of Film Distributors and Exporters continued on. He called for the quick passage of Bill C-11. He calls for regulations to stay consistent with previous regulations. He says he recommends that 30% of Canadian content be featured through recommendation engines. (he then ran out of time)

Questions to the Witnesses

Senator Leo Housakos comments that he keeps hearing the need to protect Canadian culture. He doesn’t believe we are back in the 1980’s when we were just a small little nation worried about being overtaken by American’s. He says he believes Canada’s sectors are strong. Canada’s sectors compete in a global environment. We have succeeded in a wide range of areas partly because we have been partnering up. Because of digital and streaming, we have a whole new world opened up to our artists and cultural community. He notes that consumer choice was touched on in opening remarks. So, his question is if other countries enact legislation similar to C-11 in an effort to close off their borders to competition, what would happen to Canada’s culture vise-a-vise job creation and revenue, etc.?

Segal responded that he thinks Senator Housakos is confused between investment and profitability. Global streaming is sweeping across the sector and is entirely successful. What they are saying is that we’ll make the investments and we’ll keep all the profitability and rights for ever and ever. Sure, Canadian’s might get a paycheck now, but they will have no ancillary rights. It’s like Canadians selling lumber and buying back the products at twice the price. Nobody is trying to put up borders to streamers (Germany would beg to differ). If Canada gets this bill right, then Canadian viewership would go from 5% to 9% of the North American market. Other countries are doing the same thing and they are succeeding with it (Bill C-11 is a global first, actually).

After that, he says that Netflix is taking all the profits away from Canadian programs. He says that he wants the profitability of Canadian shows like Schitt’s Creek to be retained by Canadian’s. That’s it (if only Bill C-11 was only about that). He says the global market is not a fair playing field. American corporations are huge and you have to sell your soul to them.

Senator Housakos commented that, for the record, the UK has explicitly chosen not to impose any investment obligations on global streamers. Segal tried to argue with Senator Housakos. Part of the point of this discussion is to talk about taking profits away from one group to give them to another group that isn’t profitable.

Cardin commented that just to address the example, the rights of Schitt’s Creek are owned by an independent production company. He said it did super well on the CBC. When it was brought to the world, even CBC executives admit that this helped with the success with that show in subsequent seasons not just in Canada, but around the globe. In the process, they lost the rights to Schitt’s Creek and it’s with another production service. He thinks that is an example of how it’s a win-win for everyone not just with Canadian broadcasters, but also streaming services as well. Then, he thanked Segal for bringing up the example (masterfully handled, sir.)

On a larger perspective, Cardin continued, for them, independent producers and broadcasters remain an important partners. There’s no world in which Netflix is going to own every show that they make in Canada. In fact, the majority of shows on their service are licensed, not owned. However, they are complimentary to Canadian broadcasters and Canadian funding. Their mandate is to bring Canadian stories to the rest of the world. In that respect, they are not looking to supplant, but to augment the current system.

He further responded to Michael MacMillan of the previous segment that, in their view, it is legitimate that if they are telling Canadian stories, employing Canadian creators, but that they happen to own the copyright, that should still be classified as Canadian content just like if they are a broadcaster or affiliate production company or an independent producer (the fact that he did all of that in such a short period of time with such a calm demeanour was impressive.)

Senator Julie Miville-Dechene said that she did some calculations prior to the hearing on the Netflix platform. She figured that there is some one dozen works that are qualified as French Canadian and some 40 that are identified as Canadian. She said she did that by clicking on the individual squares and it took a lot of time to find those works. Beyond discoverability which seems kind of average, she likes to know, for those works, how many Canadians and Quebec viewers versus how many are watching it in Canada. Does he have any figures on that? Also, it seems to be quite minimal for the moment from her perspective because she knows that platforms like his are hat Quebeckers consume. Netflix has a lot of subscriptions for a largely anglophone platform. This compared to how many people who are subscribed to on television.

For her, she doesn’t see that discoverability. There’s no banners or anything that allowed her to see this Canadian content. So, what percentage of that small quantity is being watched compared to everything else that is represented.

Cardin commented that there is a lot of components to her question, so he’ll try to take them on one by one. First, according to their internal statistics, in terms of Canadian production that are certified, there are over 300 in English and in French, the statistic the Senator gave for francophone production in his opinion is under-estimated. Among other things, they have acquired more than 25 feature films from Quebec that are always available. In a few weeks, they also added another dozen series.

Senator Miville-Dechene said that she put in French Canadian and used his algorithm to find these productions.

Cardin responded that in terms of options that are available to discover for those films and series, there is, obviously, the search engine first of all. Also, they have several thematic collections. So, if you go into your menu, under series or under movies, you can go and see what the collections are in Canada for either category. She is talking about figures. Once again, their role is to take stories from here and to bring them to the rest of the world and, obviously, to bring foreign stories to Canada.

He says to have some success, series like Squid Games or others, people have become accustomed to content in other languages. So, it works both ways.

Senator Miville-Dechene asked if he has any figures on Quebec.

Cardin responded that, generally speaking, 90% of productions are from abroad. Also, demographically, that holds up. It confirms exportability and visibility of this content. If he takes a specific example, he cites a French title, in the first 28 days that it was up on Netflix, it was seen by 21 million people around the world.

Senator Miville-Dechene responded that this is fantastic, but that wasn’t her question. How many in Canada and in Quebec are watching Canadian productions?

Cardin responded that he doesn’t have that exact figure, but he can tell her that it represents about 10% of the audience on the platform such as it is now.

Senator Rene Cormier said that he would like to hear Cardin and Noss talk about intellectual property. He understands that this includes copyright and several other aspects. So, they were talking about revenue sharing earlier. He wants to know who hods the intellectual property rights of the projects that are carried out here in Canada.

Cardin responded that they don’t have a single model. AS he explained earlier, there are productions, the majority which are done in cooperation of independent producers, and they are the ones who hold the intellectual property rights. So, he’s answering that from a global perspective. There are other productions that they, themselves, hold the rights to, and all of this is an issue that is connected to the financing and funding model – who took the risks to develop the production and paid for the various stages of development. So, in some cases, when they funded everything, they, themselves, hold the rights. In other cases, where the funding was, perhaps, shared with other partners – public funds or other private funders – with the producers (cut off)

Senator Cormier said that if what Cardin is saying is that the author who wrote the original loses their copyright or intellectual property rights?

Cardin responded that he was talking about the copyright on the production. In terms of remuneration of artists involved in the productions, well, there are collective agreements that apply and they, of course, follow all of the collective agreements that are in effect.

Senator Cormier responded that he finds it troubling that they keep the intellectual property of Canadian production, but he understands his model.

Senator Cormier then turned to Noss to talk about 3.1 (f).

Noss responded that it related to 3.1 (f) and f.1. She mentions that global streamers have a different business model because they are not just making content in Canada.

Senator Paula Simons decided to look at the proposed amendments to section 10.1.1.

Ross discussed market forces, consumer interests, and consumer choice being three key factors that the CRTC should consider in telecommunications.

Senator Fabian Manning asked about cancon and what examples of content don’t count based simply on who holds the IP.

Ross noted that a number of witnesses have already come forward suggesting that the definitions have been set in stone long ago and cannot be changed. She responded by saying that this is not true. She noted that Canadian producers already have the benefit of owning the IP as a means for public funds and other benefits. However, when you are talking about global companies that are bringing content in from all over the world, there needs to be a more expansive approach for 2022 rather than being mired in a 1970’s approach. She cites Washington Black as an example where the only thing stopping it from being considered Canadian is the fact that Disney owns the IP. She also cites Turning Red, and situational examples.

Senator Manning noted that, at the end of the day, the CRTC makes the final decision. So, what is the number one priority for them for either witnesses?

Ross responded retaining Section 3.1 (f) and flexibility with regards to Canadian streamers and flexible definitions that recognize Canadian stories as well as amendments in Section 5 that puts into perspective consumer choice in the CRTC decision making.

Cardin said that if he had to choose just one, it would be the issue of copyright ownership.

Senator Karen Sorensen commented that they’ve been told on multiple occasions that no other country is doing anything like this. So, she was wondering how Segal said that other countries are doing the same thing, so if he could elaborate on the similarities of other countries are doing with Bill C-11.

Segal responded that France has laws about ensuring that films must be played within a certain time window before streaming services can rebroadcast that film after that. Streamers also have a certain number of French content in their catalogue as well as a certain number of content that is new French content. He claims that streamers are saying that the American content is at risk, but they are not at risk because it’s still available. They are just saying that a certain portion of French content be available. The UK said that a certain percentage has to be brought back into the Canadian economy. He understands what YouTubers are saying, let’s inject a certain amount of money into the economy.

Senator Sorensen noted that Netflix has endorsed the MPA submission. She notes that it opposed the interference of online undertakings. So, would Cardin be opposed to a Canadian content tab on the Netflix home page. She also touched on the Artist Act.

Cardin responded that when we are talking about promotion, to look at promotion in a holistic way. He understands the concerns around discoverability, but one must take into consideration the enormous efforts off service to promote Canadian stories. He cites a project known as the Netflix neighbourhood project. He also mentions panels and other projects. So, he says, it would be a mistake to only look at discoverability in a very narrow way at discoverability on service.

Cardin then also noted the problem with forcing results for algorithms. He commented that someone who is only interested in Canadian romantic comedy would not be interested in getting a Canadian horror film.

Senator Sorensen responded that she understands that, but something like a Canadian content tab wouldn’t necessarily do that.

Cardin responded that they have things like collections and rows and drop down menus.

Senator Marty Klyne moved back to what Senator Simons was speaking about earlier about 10.1.1 and asked for a written statement on that front in the interest of time. He then went to algorithms where the MPA called for the CRTC to not intrude on platforms use of algorithms. He says that he doesn’t understand why they need to do that when the platforms need to demonstrate results that is in alignment with the aims and objectives of the bill. So, what section affords the CRTC the latitude to micro-manage the algorithms used by online companies on their platforms. He noted that this could be answered in writing. He then said to Segal about the response is to those criticisms toward (a program I didn’t quite catch the name of, but I think it’s a funding program). He noted he didn’t understand the pre-buy content or specifically the intent of that was. He notes that Netflix cannot benefit from the current CRTC regulatory rules as well as ownership rules. He also asked for that in writing.

With that, the hearing adjourned.

Concluding Thoughts

So, overall, not necessarily a hearing that has a lot of content related specifically to area’s we’ve been focused in on for the last while. there was certainly quite the knockout punch early on by Cardin regarding the copyright holder of Schitt’s Creek of all shows. So, if you wanted excitement, you got it with that.

I think it’s a very safe bet that while creators on platforms like YouTube have an incredibly strong case for why the system that is in place now needs to be treated differently, platforms like Netflix do have a steeper hill to climb to try and convince lawmakers that, hey, they operate differently, they are a different way of doing business, maybe there needs to be a different approach. The problem for a platform like Netflix is that it’s not like it’s necessarily a super open platform where anyone can upload content and have an equal shot at fame as, say, a multi-million dollar production.

Clearly, Netflix, with help from the MPA, tried to make that case anyway by saying how they invest so much money and take on a lot of risk to not only create these products, but also license Canadian made content and even helping producers in Canada reach a wider audience. While focusing on algorithms and saying interfering in that could result in a worsening user experience, they also have to contend with the fact that they are a walled garden more akin to a more traditional broadcaster. That’s not to say they do operate like a traditional broadcaster, but they are not exactly like a platform like YouTube, either.

What is interesting is leaning on calling for the CRTC to consider user choice in factoring in decisions for their regulations. That does, in one angle, tie into the example Cardin did give about being forced to recommend a Canadian horror movie to someone who is only interested in Canadian romance comedy shows. If a user sifted through the whole section already, would it make more sense, in the absence of choice, to recommend a non-Canadian romance comedy to that user over a Canadian product that is not in line with that users taste? In that sense, that is not that unreasonable.

As for Segal, that guy clearly went into this swinging with his massive, ‘everybody panic’ statements about how Canadian culture and Canadian production is dying. In response, the guy got fact-checked into oblivion and really got run over by not only Cardin, but Senator Housakos in the process. You could really feel that verbal impact through the screen. With so much time soaked up by the MPA and Netflix, there was no real opportunity to pick up the pieces and try a new approach. I think it’s safe to say that just about everything went wrong for him throughout the hearing.

Overall, though, if you are looking for content with regards to user rights and digital first creators, this segment isn’t completely devoid of such things, but is certainly much thinner on the quantity than a number of previous segments.

Drew Wilson on Twitter: @icecube85 and Facebook.

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