Senate Hearings on Bill C-11 – A Look at the Third Hearing

We are continuing with our ongoing coverage of the Senate hearings of Bill C-11. This is the first hearing on day two.

We are taking you inside the Senate hearings. Day one had two meetings.

The first hearing consisted of the Privacy Commissioner making a number of recommendations to better protect the privacy of Canadian citizens should this bill pass. His main objective was to de-identify users so that the CRTC and platforms can’t use the data collected to identify individual Canadian users. In the process, there was an acknowledgement that user generated content was going to be regulated.

The second part consisted of Global Affairs and the Justice department demonstrating that they really don’t know much about what is going on and assumed the Senate will just take their initial word at face value (they were wrong if they thought this would be the case).

The second hearing contained digital rights advocates making a number of recommendations and offering plenty of insights. One was a suggestion that a banner be placed for Canadian content while leaving the rest of the recommendations and algorithms untouched.

Conversely, the second segment consisted of industry witnesses making dubious claims about a decline in their industry, making numerous Chicken Little claims in the process. While they did take objection to a non-digital segment of the bill, no one was able to make the case that the bill was even the right approach to whatever ills they were failing to articulate in the hearing. The second segment, understandably, left Senators confused and puzzled as to what problem was actually being solved in the first place (something the witnesses were unable to really answer).

So, that was day one of the hearings. Of course, there was a second day worth of hearings. We take you inside that hearing to summarize what went on. A video of this hearing has been posted so you too can see what we saw. As usual, we’ll offer our note that although we are summarizing things, nothing is going to beat the live recording or full transcript. With that, let’s dive straight into the hearing.

Opening Remarks

Troy Reeb of Corus Entertainment began his opening statement. He says that broadcast radio is on the verge of collapse and that makes Bill C-11 urgent. He says that television no longer enjoys the audience it once had and that the television Canadians enjoy the most are foreign streamers. Reed says that he supports Bill c-11 because it gets foreign streamers into the same regulations they are in.

After that, he says he wants to address criticisms of Bill C-11. One was that Canadian and foreign broadcasters operate in different markets. He says that this cannot be further from the truth as Facebook and Google take the lions share of ad revenue. He says that Amazon and Netflix are taking away their audience. Further, he says that US broadcasters are taking their services directly to Canadians themselves, circumventing broadcasters.

He then says that Bill C-11 isn’t perfect, but Senators would be hard pressed to find a better bill. Reed says that this bill is great and now is not the time to go back to the drawing board.

After that, he says that another criticism of Bill C-11 is that there is regulatory overreach. He says that this is unfounded. He claims that this bill is about future proofing the Broadcasting Act for streamers that act like broadcasters.

Pierre Karl Péladeau of Quebecor then has his opening statement. He says that he shares largely the same perspective as Reeb. He notes that there has been a lot of competition from the CBC and that the arrival of Netflix along with Facebook and Google only added to the competition they are facing. Because of the emergence of this competition, he says that this will mean less money for broadcasters to fund Canadian content.

He says that if the competition continues, then traditional broadcasters will be forced to rely more heavily on foreign actors. As a result, Canadian’s will be deprived of their cultural sovereignty. He then says that Bill c-11 must take into consideration all broadcasting undertakings like the previous version of the bill (Bill C-10 in the last government). He concludes that this sounds like an exaggeration but this situation is a ‘matter of life or death’.

Leonard Asper of Anthem Entertainment made his opening statement. He said that he agrees with the previous witnesses. He also comments that internet broadcasters are taking audience away from them. Most of his statement revolves around ensuring that smaller providers have a carve-out in the bill so that there is a mandatory minimum carry for their products.

Questions to the Witnesses

Senator Leo Housakos starts off the question segment. His question revolves around the CBC and he had an exchange with Péladeau. He then comments about foreign broadcasters taking over their audience and about taxation.

Housakos then directed a question to the whole panel. He notes that the government has chosen not to release the policy directives on the implementation. He asked if the governments failure to release the policy objectives for the CRTC create uncertainty and whether it would be beneficial to have them.

After a good deal of silence, Asper responded. He said that it would be helpful in broad terms what comes next. He comments that a general framework would be helpful, but not at the expense of delaying the bill. Asper said that he would rather see the bill passed quickly, though.

Reeb chimed in, saying that he echo’s the sentiments in that he doesn’t want to see a delay in the bill, though it would be nice to see this framework. His priority in all of this is to “level the playing field”.

Peggy Tabet (Quebecor) agreed.

Senator Paula Simons comments that there is a concern about local news deserts. She comments that Bill C-11 is largely silent on that issue, so she asked if Bill C-11 is enough to sustain news in the country.

Péladeau responded by saying that there are different segments like local, national, and international – though international is not as well represented. He said that the different segments need to be properly financed.

Simons asked Corus about local news and whether Bill C-11 allows small local news to have a footing given that radio can fill some of those local news deserts.

Reeb says that the bill doesn’t do enough, but it is a very important step. He says that there needs to be less of a regulatory burden on traditional broadcasters as Google and Facebook takes away their advertising dollars. He says that there’s only so many burdens that broadcasters can carry. From there, he repeated the buzzword of “level the playing field”.

Senator Simons then comments that the move from print journalism to digital is a hard transition to make. So, she asked whether or not enough effort has been made to make that transition. She asked about vertical integration and whether they are able to compete in a streaming space.

Reeb responded that they have moved “very aggressively” into the online space. He said that advertising is controlled online by the major platforms and they are getting only dimes and pennies on the dollar. He says that this is something Bill C-18 addresses (it doesn’t). Reeb says that Bill C-11 may not be the best place to tackle that issue.

Senator Simons then directed that question to Quebecor.

Péladeau responded by saying that many newspapers in North America closed. He said that Quebecor was an ‘early bird’ in creating an online streaming platform. He then says that it’s difficult to compete against Netflix and Google, however and they are not on the same footing.

Senator Julie Miville-Dechene comments that she is worried about Quebec’s culture and even the survival of the language in the presence of major American cultural players. She asked about the regulation of Canadian content and whether what is being asked is regulation, money, or something else.

Péladeau responded by saying that it is not merely about money but how they can effectively regulate foreign undertakings. He called for less regulation on traditional broadcasters and said that foreign streamers are not producing Canadian content. He also notes that there are cord shavers and cord nevers (presumably referring to cord cutters), so funding is needed to continue to develop careers in light of this. In his view, the regulations are what keeps younger audiences from tuning in and turning to streaming services. He then reiterates how it’s so difficult to compete with Netflix.

Senator Julie Miville-Dechene asked what the priority should be for Canadian content.

Péladeau responded that, in his view, the priority should be on reducing regulation.

Peggy Tabet discussed taxes, saying that foreign services should contribute to Canadian content.

Senator Donna Dasko comments that the main rationale for Bill C-11 is that audience and revenu is shrinking for traditional broadcasters. However, she notes that the CRTC statistics showed that in 2021, there was an increase in audience and revenue. She asked if Corus has a response to that.

Reeb responded that revenues had been on a 10 year downward trend. In 2020, they cratered due to COVID-19, but in 2021, they had some recovery. Asper chimed in saying that news is a separate thing and needs to be separately addressed in Bill C-18.

Senator Dasko asked if Quebecor supports the idea of privatizing the CBC.

Péladeau seemed to think for a while on his answer before saying that state broadcasters mission should be different from private broadcasters. He did say there is an importance of a public broadcaster, but that they shouldn’t compete against private broadcasters.

Senator Dennis Dawson said that he appreciates the comments about the CBC, but Bill C-11 is not about the CBC. He talks about how Bill C-11 is about levelling the playing field.

Senator Bernadette Clement raised the issue about diversity and Reeb said that they do, but foreign streamers don’t have the same mandates or requirements and that regulation needs to be brought in to level the playing field.

The chair then concluded the hearing.

Concluding Thoughts

This segment certainly had a number of buzzwords again. What was very noticeable is how there was plenty of comments about just reducing regulation, but when it came to “foreign” streamers, the witnesses were tripping over each other to say how much they need more regulations. It was almost a “regulations for thee, but not for me” kind of call.

I think the biggest surprise was that anyone in the room had the guts to bring up cord cutting. The cord cutting phenomenon has been happening for years and this is not exclusive to Canada, though it does happen in Canada as well. There are a number of reasons why cord cutting does happen, but the most common two reasons is the rising cost of paying for TV and the decline of quality on TV. So often, the response to cord cutters is just raise the rates for the remaining subscribers to make up the difference which only exacerbates the problem.

It’s funny because you hear endlessly about how these companies are showcasing great and amazing content, yet they admit cor cutting is a problem. If the content is so great, why are Canadians tuning out? Rather than admit that the content is unappealing, the response is that it’s all the regulations fault. So, it’s the regulation’s fault that scripted TV is so unpopular? Is it the regulations fault that reality TV took over the airwaves and turned off viewers? Is it the regulations fault that radio constantly plays 40 year old music that is completely out of touch of people 35 years of age and younger? It’s a response that just seems out of touch with what is happening in the market.

Yet, at the same time, these broadcaster types feel that they should have the power to force feed their content onto viewers who have already decided against viewing their content. This over top of the problem that these broadcasters rely so heavily on foreign produced content whether it is rebroadcasting American television programs like the CSI shows, Survivor, and 2 Broke Girls or American produced music all the time and only scraping by with the bare minimum of Canadian content on the airwaves. There is a lot of mismatching going on in this hearing.

Second Segment Opening Remarks

Nathan Wiszniak, sitting next to Regan Smith (both of Spotify) began his opening remarks. He notes that while he supports the objectives of Bill C-11, adjustments would need to be made in order for Spotify to continue to invest in Canadian talent. He notes that pushing mandates that affects user preferences could backfire. As opposed to a one-size-fits-all approach, they recommend music that users want to hear.

Additionally, he notes that the meta data available to Spotify is not sufficient to follow the mandate of identifying Canadian content. As a result, many Canadian creators would be unable to qualify.

From there, he recommends three changes to the legislation. The first is that there needs to be sufficient guidance on audio content which appears to be present for audio-visual content. Second, he recommends changes that will allow audiences to retain control of their listening experience. Third, he recommends updating the rules surrounding what is considered Canadian content.

He concludes that Canada should follow an evidence based approach when crafting this legislation.

David Fares then opened with his remarks. He spoke about how much production has gone on in Canada and highlighted some of the films that were created within Canada as well. He notes that he understands the objective of Bill C-11 is that if you benefit from Canada, you contribute to Canada. Further, he notes that the objectives of Disney differs from broadcasters. Specifically, he notes that broadcasters focus on local news and sports – something that Disney does not produce. He says that he hopes that Bill C-11 recognizes those differences.

Garrett Levin of the Digital Media Association then opens with his remarks. He notes that his members such as Amazon and Spotify help Canadian creators not only reach local audiences in Canada, but audiences all across the world. Further, he notes that the percentages of royalties paid out easily tops those of traditional broadcasters. He comments how fundamentally different online streaming services are to traditional broadcasters and that he hopes that Bill C-11 reflects this.

From there, he recommends 6 amendments to the legislation, though emphasizes two of them. The first is to prevent the CRTC from interfering with algorithmic decision making. Additionally, he recommends an amendment that compels the CRTC to consider the full benefits that streaming services provide.

Questions to the Witnesses

Senator Julie Miville-Dechene started off the questions by saying that she notes that there is an emphasis on producing Canadian content. As far as she’s concerned, the legislation only codifies the use of Canadian content (LOL!). She then asked about studies and figures on Canadian audiences.

Regan Smith responded that she is right and that they do support the broad objectives of the legislation. She said that they are there because Spotify believes in legislative adjustment before proceeding. She says that she wants to see that what is working for them to showcase Canadian content is not disrupted.

Senator Miville-Dechene pressed on specific numbers.

Smith replied that on a given week, 83 times Canadian content was played by Canadians as opposed to radio. That accounts for over 600,000 tracks. She also noted an 18% uptick in revenue for content they consider Canadian music.

Senator Miville-Dechene said that she wanted more numbers to which Smith said that she would be happy to share with her those numbers in writing.

Senator Miville-Dechene then asked about algorithms and how Canadian content is already recommended. So, her question was about how the algorithms would change under Bill C-11.

Smith replied that the algorithms do promote Canadian content. She said that where the bill is deserving attention is the need for guardrails that doesn’t interrupt the user led discovery of content.

Senator Miville-Dechene said that the CRTC is demanding results, not forcing them to use a specific algorithm.

Smith replied that she appreciates that, but more specificity is needed. Specifically, she doesn’t want to make changes that would disrupt the Canadian experience.

Senator Paula Simons then picked up on the other senators comment. She noted OpenMedia and PIAC’s comments that boosting the algorithm could have a backlash effect on artists where artists are getting skipped over. She then asked if these are a legitimate concern from their perspective.

Levin responded that he believes that this goes to the heart of the concerns of DiMA and its members. He comments that some people think that the internet is just an evolutionary step from broadcast TV and radio, but it is actually a never before seen experience to how we access things like music. So, the problem is that if, at the end of the day, the CRTC is dictating outcomes of those experiences, you’ll end up with a far less satisfying consumer experience and a far less dynamic market. He notes that the concerns are well received and why his members are seeking clarity on algorithms.

Senator Simons says that she has sympathy for the algorithm side of things, but at the same time, she has less sympathy for the royalties. She says that paying royalties is the rent that they pay to play the music. The question revolves around paying money to royalty societies such as SOCAN. She says that she has concerns about the insufficient meta data to pay those publishers. She says that it seems to her that tracking the meta data is the least of the problems and wondered why the appropriate meta data is insufficient.

Levin responded that the question with the metadata by pointing out that the meta data needed to identify Canadian content and the meta data needed to identify Canadian content that would satisfy royalty concerns are two separate questions. There are a lot of different problems with meta data and this can be the result of the speed that the content is introduced as well as the volume of content that is introduced. Another problem is the issue of rights holders being able to appropriately assign appropriate data at the point of submitting that content and introducing it to their services.

With respect to royalties, Levin said that it is correct to say that royalties isn’t the only way to contribute. He said that the 70% of royalties paid out vs the 8.2% paid out by radio should be a factor in determining what kind of contribution is being made by large streaming services.

Smith added that the meta data they receive from rights holders can’t be scaled to what is needed to properly identify Canadian content for what is expected from a royalty perspective. She notes that SOCAN is a partner with Spotify.

Senator Jim Quinn then asked about the profits the companies receive. He asked if the profits should also go to SOCAN instead of share holders. There was a long pause after.

Smith responded that when it comes to the CRTC determining contributions, that the CRTC should look at the whole picture of the nature of supports that is given. She notes that the margins are much thinner than those found in record stores. She hopes that the system put in place should incentivize all players.

Levin chimed in, saying that there are contributions being made by the platforms that are not matched by the broadcasters. This includes a number of things like the incubation of artists that would never otherwise have been featured on the radio. Those are the considerations that they are asking the CRTC to take into account. he notes that there is a perception that royalties and SOCAN contributions are the only ways of contributing to Canadian culture. He said that streaming is showing that there are other ways to contribute to Canadian culture.

Wiszniak added that they work on playlists and marketing campaigns. He also notes that there are recording studios and martnerships that they have as well.

Fares jumped in and commented about how they are hiring Canadian’s to build up different studios.

Senator Quinn then asked about the appeals process. He notes that there is a narrow and limited appeals process and asked if this is appropriate or if there is another appeals process that they’d like to see.

After a long pause, Levin responded that he’s not an expert in Canadian regulatory law. he said that it’s a question they can later respond to in writing if that would be helpful.

Senator Donna Dasko offered a hypothetical situation of if Bill C-11 passes without the changes requested. A year from there, they find themselves with the chair of the CRTC and the CRTC asks what they would like to see for discoverability. What is it that they’d like to see to promote and exhibit Canadian content.

Smith responded that there are a number of ways that they are promoting Canadian music and podcasts.

Wiszniak added that they are already doing the work to showcase Canadian content such as through hubs and playlists. A lot of growth has happened and that they want to continue to do that work to grow the Canadian music industry.

Senator Dasko asked for clarity in that it’s about not changing the algorithms and the user experience.

Wiszniak responded that that is correct and he’d like to continue to help promote Canadian art.

Levin chimed in saying that the advantage of having a years more of time is that they would have another years worth of data. He notes that this is a fast moving industry that is still quite young.

Senator Bernadette Clement commented that she likes disrupting cozy listening experiences. She says that she worries about how little Canadians know about how algorithms work. She says she worries about metadata not being available. She asked Disney that on the one hand, they don’t want forcing of the algorithms, yet they are already doing Canadian content.

Fares responded that the problem isn’t that they can’t curate. He notes that they also have an imperative to provide content that consumers want to watch. They are not saying that they can’t do it because they can. What they don’t want are prescriptive regulations would prohibit their ability to innovate over time.

The question was passed over to Wiszniak who responded about new opportunities for artists getting access all over the world to new audiences.

Smith chimed in saying that the meta data they get might be lacking from new and emerging artists.

Senator Housakos asked about the flexibility being asked by the witnesses.

Fares responded that the three movies that he highlighted do not count as Canadian content because Disney owns the intellectual property rights. At the same time, content that does not tell a Canadian story does count in the points system currently in place. The aim for them is to rectify that anomaly so there is a flexible definition.

Smith largely agreed and noted that the audio visual rules are different from audio rules. She notes that there should be better flexibility for content that would colloquially be considered Canadian content could be considered Canadian content.

Levin notes that the Broadcasting Act was created with local production in mind, but the platforms are a much more global market. As such, rules meant for production standards 30 years ago don’t necessarily reflect music production today.

Senator Housakos commented that the 70% royalties paid out vs 8% for radio is quite spectacular and wondered if that could be elaborated on. He also asked if the bill is not amended, what would be the consequences for the industry in their perspective.

Levin confirmed the royalty numbers.

Senator Simons noted the investments into Canadian creators is excellent. At the same time, she wondered if the intellectual property could be shared so that independent Canadian producers can share in the distribution of those works.

Fares confirms that they own the IP. He notes that if it’s a co-production where Disney assumes all the risk and pay for the whole production, then they would assume they would get the intellectual property. On the other hand, if they buy only some of the rights of a production, then the producer would still retain some of those rights. It all depends on the arrangement.

Senator Simons noted that she loves podcasts and that she even has a podcast on a number of platforms. She notes that Bill C-11 is largely silent on the issue of podcasts. She asked if there are concerns about podcasts and whether podcasts would be captured by Bill C-11.

Smith responded that podcasts are exciting for Spotify. Where they want to be careful is to make sure that the podcasts are allowed to grow and grow organically. She notes that there isn’t much in the way of determining what is considered Canadian content in that regard and she’s looking for a careful and measured approach from the CRTC.

Senator Quinn asked about emergency broadcasts on these services.

Levin responded that this speaks to the technological limitations of streaming services. They don’t have pinpoint geographical location information on users.

Senator Miville-Dechene covered the intellectual property question and Fares repeated the answer. Senator Miville-Dechene asked for specific examples and Fares offered some more examples.

Senator Housakos then convened the meeting.

Concluding Thoughts

So, generally speaking, the conversations went in a direction I wasn’t quite expecting, but it was definitely understandable how they did manage to go that direction. They did touch nicely on the themes that digital rights advocates already shared and when Senators asked about the specific concerns, the platforms generally agreed with those themes about discoverability requirements.

One thing that is noteworthy is how much more relaxed the conversations were and it was more about just clarifying what the CRTC is going to do with respect to algorithms and the definitions of what is considered Canadian content. That makes sense because for the platforms, the stakes aren’t anywhere near as high.

For users, these are life and death problems where if the CRTC screws up discoverability in any way (which they are almost certain to do the way things are going), then that could either mean the end of the career of that creator or that creator may find it easier to just move overseas.

For the platforms, they are a, at smallest, a hundred million dollar web service. Even if things grow too ridiculous to the point where they would have to block Canada altogether (obviously, this was never floated), it wouldn’t be that big of a deal. It’s just one less country they would have to work with. So, that is probably a source of where that relaxed nature comes from. I think that if a regulation were to appear that could bankrupt the platforms, we would have definitely seen a lot more urgency in their calls for change.

One thing is for certain is that there was certainly a very obvious contrast between the two segments. In the first segment, you saw witnesses from industry paint this picture of these foreign monolithic entities threatening to Americanize all of Canada while flaunting the rules and how legislation needs to be created to “level the playing field”. At the same time, in the second segment, you have these platforms come in and basically say, ‘Uh, no, we actually not only invest in Canadian content, but also promote that content all over the world in ways that traditional broadcasters are unable to.’

The statistic that was shared of 70% of money paid out in royalties vs 8% paid out by radio was quite the nice needle on traditional radio. Obviously, there is a big difference between paying radio DJs (sometimes they are volunteers), management, acquisition of music, additional production and infrastructure that plays against the radio side. Still, this really poured cold water on the suggestion that these large platforms don’t contribute to Canadian content and Canadian culture.

Now, going into the hearings, there was always going to be some political baggage by the platforms. Just the fact that most are US based alone is going to inherently receive skepticism that they have Canada’s interest in mind when pushing for change in the legislation. Amazon does have that additional reputation of effectively breaking down traditional retail and running some out of business because they can’t compete with such a large giant (basically the new Wal-Mart). So, by showcasing that emphasis on contributions for Canadian culture really stymied that baggage nicely.

More importantly, the contrast between consumer groups and the platforms should also showcase that, although both can tend to go hand in hand when it comes to their interests, they are ultimately two separate interests in a number of ways as well. Some supporters tend to roll critics of Bill C-11 and platforms into one big group and even go so far as to say that criticism of Bill C-11 is just a sign of this monolithic influence that large platforms have on Canada. That is clearly not the case as it is more about two different interests who happen to share the same concerns about the legislation.

Is it true that digital first creators can criticize the platforms on some things? Absolutely. Just bring up YouTube’s ContentID and watch the claws come out against platforms by creators. That’s just one of a number of examples.

Further, the platforms were quite good at articulating their positions. When there was a perceived contradiction such as how platforms create Canadian content, yet they are opposed to the current Cancon approach proposed in Bill C-11. They did a great job at explaining that there is a big difference between showcasing what they found to be Canadian and the CRTC saying “make sure these tracks get the plays in these playlists”. As many witnesses said, this disrupts the playlist flow for users and upends a user drive focus of algorithms.

It’s an explanation that makes sense because if I’m listening to a playlist that consists of drum and bass music, it would be extremely jarring to suddenly head a Nickelback track suddenly play. That’s not what I wanted and I’m more inclined to skip it. It’s the same effect of drinking apple juice, reaching for the wrong glass and getting a mouth full of orange juice unexpectedly. It’s going to be a bad experience no matter what your taste is in drinks.

So, overall, a rather interesting day of hearings.

On a technical note, to our knowledge, there is only one more part left, so we’ll continue our coverage tomorrow with the last of the hearings barring something really crazy happening in the news that disrupts this special reporting.

Drew Wilson on Twitter: @icecube85 and Facebook.

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