Stakeholders upset over forcing streamers to pay into broadcasting fund

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Last month’s decision by Canada’s broadcast regulator mandating that streaming providers like Spotify and Apple Music pay taxes into a legacy broadcasting fund is based on pre-internet thinking that rewards old firms while discouraging investment in new innovation, the country’s recording industry association says.

Music Canada CEO Patrick Rogers said he had hoped new rules were going to focus less on industry policy and more on Canadian artists, but he said last month’s decision does little but prop up outdated aspects of Canada’s broadcasting industry — particularly that nearly half of the taxes collected will support terrestrial radio broadcasters.

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“We spent three-and-a-half years working towards a modern regulatory system … and a goal was to create a regulatory regime around it. We really bought into it, and we were happy to take part in it,” he said.

“Throughout, I would say things like ‘the one thing we can’t do is jam the old rules onto this brand new economy,’ and everyone would go ‘oh no, we’re never do that.’”

Rogers said despite his and others’ efforts, that’s exactly what happened — describing last month’s “bewildering” tax decision as a means to hold onto old policy rather than to modernize, ignoring the role licensed streaming plays in building the careers of Canadian artists.

As part of the Online Streaming Act, formerly Bill C-11, the Canadian Radio-Television and Telecommunications Commission (CRTC) announced in June requirements for streaming companies with annual domestic revenues of over $25 million to contribute five per cent of their Canadian sales towards a fund supporting Canadian broadcasting. The money will be distributed to the Canadian Media Fund, the Independent Local News Fund, and various diversity initiatives, including the Black Screen Office Fund, the Canadian Independent Screen Fund for BPOC Creators, and the Indigenous Screen Office Fund.

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Once the new rules go into effect on Sept. 1, The CRTC expects the initiative will represent $200 million in new funding for Canadian media.

Last year, as part of its Online Streaming Act, the federal Liberal government mandated that all online audio and video streaming services — including social media — must register with the CRTC.

In a speech last summer to the Banff World Media Festival, CRTC CEO Vicky Eatrides indicated the changes would give regulators a clean slate to reimagine Canada’s broadcasting space.

“We have a blank sheet of paper before us, and it’s inviting us not to reshape a world, but to create a system that touches the lives of every one of the almost 40 million of us who lives in this country,” she said in her speech.

“To re-imagine our broadcasting system, we need to involve a greater diversity of players who can add depth and breadth to foundational conversations.”

Rogers said the reality of the CRTC’s tax plan has turned out to be very different from what was described in Eatrides’ remarks and continues to think in radio terms when it comes to promoting music.

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“Streaming and radio aren’t just different, they’re the opposite. There’s a finite number of hours, a finite number of channels, a finite number of options on radio,” Rogers said.

“Streaming is infinite — every user is their own station. (Streaming services’) algorithms have the ability to reach people with the music that they want. People are, importantly, paying for music again, creating opportunities for artists.”

The CRTC defended the tax as a means to level the playing field in Canadian broadcasting.

“This decision is based on an extensive public record, which includes more than 360 detailed submissions and a three-week public hearing during which the CRTC heard from over 120 groups,” it said in a statement to National Post.

“Overall, this decision brings more fairness and more funds into the Canadian broadcasting system.”

Despite today’s diversity in music listening options, the statement said that traditional radio maintains a strong foothold among Canadians, pointing to data that suggest 83 per cent of Canadians still listen to broadcast radio.

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“This decision supports content produced by Canadians. News content, even content that originates from traditional services, will often end up on multiple platforms, including online platforms,” the statement read.

Michael Geist, Canada Research Chair in internet and e-commerce law at the University of Ottawa, said that compelling streamers to pay five per cent of their revenues could have unwanted effects for both consumers and the government.

“Music streaming services operate on thin margins, and the CRTC’s ruling could have an enormous impact on the sector leading to one of two possibilities: either increased costs for consumers or a decision by some streaming services to block the Canadian market on the grounds that the regulatory costs render the business unsustainable,” he said.

“The CRTC seems to have little understanding or interest in the economics of the market and by treating all streaming services as equivalent, it has created great risk and sparked multiple lawsuits.”

Music Canada’s Rogers said the CRTC had plenty of opportunities to create policy that both addresses contemporary needs and looks towards the future of the industry.

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“What we put forward was a vision of a modern system that understands how streaming works,” he said.

“Canadian artists are not up against other Canadian artists — Canadian artists today are up against every song ever recorded from everywhere, and some Canadians are finding great success on that stage.

“There’s been a complete miss of an opportunity.”

National Post

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