Vicky Eatrides, chairperson and CEO of the Canadian Radio-television and Telecommunications Commission, participates in an interview at the CRTC's offices in Gatineau, Que., on April 22.Justin Tang/The Canadian Press
Brad Danks is chief executive of OUTtv Media Global and an adjunct professor of law at the University of Victoria.
The Canadian Radio-television and Telecommunications Commission’s most recent decision on funding for domestic programming gets it right.
Requiring online streamers to use 15 per cent of their Canadian revenue to support domestic programming, applicable to those with annual revenue of $25-million or more, is the lowest credible amount the CRTC could have set. In France, it is 20 per cent; in Australia, 7.5 per cent or 10 per cent of local programming expenditures; and across the EU, similar contribution levels are becoming standard.
The 15-per-cent contribution is divided roughly into three parts: one to Canadian funding agencies, another to “enhanced partnerships,” and the remainder to direct commissions between the streamers and Canadian producers.
At best, one-third will be available to Canadian companies for their own content. While it is not the panacea many in the industry hoped for, this is better than nothing, as it will lead to more Canadian productions and jobs. It will be up to the government to determine in talks about the United States-Mexico-Canada Agreement “if the juice is worth the squeeze.”
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But the new CRTC rules also increases our dependence on foreign platforms for the production and distribution of our content. This is a growing problem because we are in danger of outsourcing both our culture and the economic benefits of our intellectual property.
To understand this, think of the media industry as comprising two parts: the production of content and then, the marketing, distribution and monetization of that content. Production produces real wages and revenue through licensing fees, but direct distribution builds audience relationships, data, a content library and long-term corporate value. Production alone is like building cars without roads. The result is a system that creates content, but fails to capture its full value.
Historically, Canadian media policy focused on the creation of domestic content both for audiences at home and for global licensing. Since the wide adoption of cable more than 50 years ago, the broadcasting system operated within a technologically sealed walled garden, where Canadian broadcasters held a monopoly on distribution and audience. In exchange for this monopoly, Canadian programming expenditure was created to finance the making of domestic content.
That system worked until Netflix’s arrival in 2010. Since then, along with the other streamers, the wall has been gradually eroding, resulting in less funding for Canadian content and less control over our distribution. In response, the government has boosted funding for production, without supporting Canadian-controlled distribution companies.
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Some Canadian services already create their own opportunities. Media companies such as Blue Ant, WildBrain, Gusto TV, APTN, Anthem TV, Stingray, and OUTtv are building streaming businesses – both domestically and globally – that capitalize on the worldwide explosion in distribution.
In addition, a new generation of creator-led companies is using Canadian content to build their distribution footprint outside the system. However, the current design of the Canadian system doesn’t support these activities and, in many ways, discourages them. This is the hole in our current policy that urgently needs fixing.
Moreover, this hole is becoming too expensive to ignore. Currently, producers are adopting AI processes that reduce costs and will soon significantly increase the amount of available content. Meanwhile, advances in distribution are accelerating, driving globalization. As content becomes cheaper to produce, more of it is competing for audience attention. This shifts more economic value to distribution.
AI’s impact on industry economics is clear. In a recent report, McKinsey and Co. estimates that AI could redistribute up to $60-billion of annual revenue in the U.S. film and TV industry within five years of mass adoption. It notes that the shift is about redistribution of existing revenue, not net new revenue for the whole market.
Value is shifting from production to distribution, but Canadian policy is not. Even the federal Broadcasting Act calls for an environment that “encourages the development and export of Canadian programs globally.” Yet, our current policies do none of that.
We need more Canadian companies that produce and directly distribute our content to consumers worldwide. Our policies need to incentivize their development and recognize their importance to the system’s long-term viability. Canada already supports production through tax credits, regulatory obligations and public funds. Comparable support for export capability needs to become a priority. The instruments for these policies already exist.
This shift in policy does not require a trade fight, but it does require a different policy lens. There is still much that should be done to strengthen our domestic market and support entrepreneurial Canadian companies. Upcoming CRTC decisions, regarding the broadcasting system’s market dynamics, for example, are chances to widen that lens. After more than 50 years of focusing inward, it’s time for Canada to also look outward.