Will Streaming Platforms Leave Canada Over the Online Streaming Act? Maybe

With the Online News Act causing platforms to drop news links, will a similar thing happen in response to the Online Streaming Act.

When the Online News Act became law, it was very obvious what the platforms intended on doing in response. It was clearly better to drop news links in Canada than to participate in a blatant rent seeking shakedown. Facebook pulled the plug and Google is still largely expected to do the same.

To say that the Online News Act is an unworkable mess is basically stating the obvious. It is common knowledge that the large publishers post those news links onto the platforms knowing full well that they get huge amounts of traffic when they do so. Demanding platforms pay for that activity on top of it all is pure nonsense. The data largely concluded what anyone with any working knowledge of the internet already knows: publishers need platforms far more than platforms need publishers. No amount of talking points trying to say otherwise was going to try (and boy did the major media companies try with a seemingly endless fire hose of misinformation and disinformation).

For some, however, the question in all of this is would all the major streaming platforms do the same in response to the Online Streaming Act? After all, if platforms were rightfully dropping news links in response to the completely ridiculous Online News Act, how are the streaming services going to react to the Online Streaming Act? Well, contrary to what you might have read by major publishers, there are actually many dimensions beyond “Big Tech” vs the cultural elite who’s expertise simply lies in gaming the system rather than producing content people want to watch or listen to in this debate.

One angle is how the smaller streaming services would theoretically interact with this. If you are a streaming service that specializes in anime like Crunchyroll or a service that specializes in British productions like Britbox, there’s a rather immediate problem with the Act. Such services would be expected to showcase a pretty big percentage of Canadian content. At best, there’s only so many Canadian content such services can even find to showcase in the first place – let alone reach the lofty goals set out in the Act. The regulator charged with administering this, the CRTC, hasn’t exactly been open to the idea of excluding smaller platforms in the first place. So, in those scenario’s, it’s quite easy to see those services simply shutting down access to the Canadian market, forcing users to use VPNs to continue to access that content.

A second angle is, of course, the user generated content. Understandably, this has soaked up a lot of attention because basic forms of expression are being completely redefined as something that fits the definition of a “broadcast”. This, of course, makes absolutely no sense and would rightfully be an absolute magnet for Charter challenges through the Canadian court system. Many digital first creators were rightfully scared out of their minds because they see a system that was about to completely gut their Canadian audience counts. This affects platforms like YouTube and Tiktok who have both asked for user generated content to be exempt from the regulations (Google’s filing, TikTok’s filing).

In a similar vein, while many have called for the definitions of what counts as “Cancon” to be loosened, the lobbyists representing the cultural elite in this country have actually been pushing to make it even harder to qualify for Canadian content, seemingly fearing that there is a remote possibility that there might actually be remote competition in the sector. Don’t want any of those pesky Canadian’s taking advantage of their carefully crafted “Cancon” system, now do we?

The thing is, neither of those scenarios are exactly deal breakers for the platforms in question specifically. What would no doubt be a deal breaker for those platforms is the CRTC’s push to have the results of their algorithm meddling made globally. That, of course, would dramatically change the discussion and bring in the very real possibility that platforms that deals with user generated content would rather block Canadian IP addresses rather than send their entire business model into the abyss to appease a bunch of clueless Canadian bureaucrats.

A third angle are the larger streaming platforms such as Netflix, Disney+ and Amazon Prime. At least in those cases, it’s theoretically possible to pull together all the bland and boring “Cancon” content to make those requirements in the first place. So, it’s possible for those platforms to go along with the governments mandate of ramming that garbage down Canadian’s throats, but that’s by no means the end of that aspect. While many Canadian’s would think that such results would only be tailored to Canadian viewers, the complete morons at the CRTC is, as earlier mentioned, pushing to have those results made global. So, if you are an American watching Netflix in America, the CRTC’s idea here would be that those American audiences should be force fed “Cancon” content. It doesn’t take a genius to figure out that the streaming platforms would give each other a look and say, “we’re out.”

Then there’s a financial angle. Peter Menzies recently published a pretty compelling piece on why the contributions angle might also be a dealbreaker for platforms (probably paywalled):

Netflix’s base here is robust – 6.7 million subscribers – but that is just 10 per cent of its U.S. audience and only 2.8 per cent of its global subscriber base. According to its submission to the CRTC, it has already invested $3.5-billion in film and TV production since launching here in 2010 – roughly equivalent to the Canada Media Fund’s spend over the same period. And, it claims, people are 1.8 times more likely to view a Canadian production on Netflix than on TV. Let that sink in.

Disney+ makes similar arguments. It has 4.4 million Canadian subscribers out of a global total of about 147 million (down significantly this year). It points out that it has invested $1.5-billion in Canada, which is one of its top four production markets. As it gently states in its submission to the CRTC: “We encourage the commission to adopt a modernized contribution framework and a revised, modern definition of a ‘Canadian program’ that provide sufficient incentives for global producers and foreign online undertakings to continue to bring large-scale productions to, and make capital investments in, Canada.”

Large domestic companies that have been forced by regulation to contribute to the production and airing of certified Canadian content, meanwhile, argue for their “burden” in that regard to be reduced and shifted onto the backs of foreign companies.

In its submission, BCE Inc., which has a current profit margin of 21.2 per cent, describes the broadcasting system as in crisis, accuses streamers of having “contributed precious little to the Canadian system” and calls for its contributions to be reduced from 30 per cent to 20 per cent of the media division’s revenue – a figure it believes should be applied to all offshore streamers with more than $50-million in Canadian revenue.

BCE Inc. goes on to argue that if the commission takes its advice and forces the streamers to pay 20 per cent of their revenue directly into Canadian content funds, an additional $457-million – growing to $678-million by 2026 – will pour into the pockets of ACTRA, the Writers Guild and others involved in the creation of certified Canadian TV and film content.

And that, right there, is where Netflix, with a profit margin of 13 per cent clears its throat. Politely but firmly, it says the CRTC appears to have already made up its mind that streamers should be paying into funds and “submits that this is not an appropriate starting point.”

This has been a stance for a number of platforms: if they are being asked to make contributions to the Canadian system, then those contributions should also take into account the huge contributions the platforms are already making to produce content made in Canada. This is not an unreasonable ask and, as Menzies highlighted, these contributions are actually quite significant in Canada – contrary to the lies pushed by lobbyists which says that the platforms are simply “crashing on the Canadian couch” and how this bill is supposedly about the “rent being due”.

A potential problem here is that if what is being expected in terms of contributions excludes the contributions already being made by the platforms, then yes, there’s a good chance that the platforms would easily just say, “forget it” and walk away. Since this bill impacts quite a huge list of platforms, Canada will quickly find itself being sidelined by the ongoing internet revolution. All of the economic benefits that go with it will also exit the Canadian market in the process.

The reason why such talk about the Online Streaming Act hasn’t been as big in all of this is because it was never really that clear what obligations the platforms even had under this Act. Throughout the process, the Canadian government, outside of making it clear that they are regulating user generated content, the government largely punted these hard questions to the CRTC. We don’t yet know if the CRTC really is stupid enough to demand that “Cancon” content should be promoted globally or not. It isn’t yet clear if the CRTC is going to conclude that all financial contributions must be new or if existing contributions will suffice.

At the end of the day, it really depends on what rulings the CRTC comes up with. As Menzies pointed out in his piece, the idea that the CRTC is trying to regulate entities that can say “no” is a novel one for the regulator. If you live in Canada, when the CRTC makes a ruling, then that is a ruling that a Canadian entity has to live with. Here, if the CRTC makes a ruling, if a global platform rolls their eyes and shakes their head at an absurd ruling, they have the option of just leaving. What’s more, leaving isn’t exactly a hard thing for the platforms to do – this given that Canada is a comparatively small market in the grand scheme of things. Platforms can live without Canada – even if it fatally harms Canada’s economic prosperity.

At this point, it’s difficult to pinpoint exactly where all this is going to go. The CRTC could be smart enough to read the room and put out some sensible rulings or they could continue this clueless campaign and make really stupid rulings that pushes the platforms to the exits. With the question of whether or not the platforms will walk, nothing is really that certain at this stage. Not exactly the most satisfying observation given the near certainty with the reaction to the Online News Act, but one that we’re kind of stuck with at this point.

Drew Wilson on Twitter: @icecube85 and Facebook.

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