Large online streaming providers like Disney+, Netflix and Prime Video will be expected to contribute more of their revenue to Canadian content, the Canadian Radio-television and Telecommunications Commission (CRTC) announced Thursday.
The Online Streaming Act, which passed in 2023 under the former Trudeau government, enabled the broadcast regulator to impose a rule ordering all streaming companies with at least $25 million in annual Canadian revenue to direct a portion of that toward supporting the creation of Canadian content including movies, television and local news.
The CRTC initially set that base contribution at five per cent of a company’s Canadian revenue, but that is now being raised to 15 per cent.
“A lot of what we’re today doing is recalibrating [Canadian content contributions],” Scott Shortliffe, a CRTC vice-president, said during a media briefing.
At the same time, the CRTC is lowering the base contribution rate for traditional broadcasters to 25 per cent. Previously that rate ranged from 30 to 45 per cent.
The regulator says the new rules will “stabilize” funding for Canadian content at around $2 billion per year.
The CRTC also changed some of its requirements for how it expects streaming companies to direct their Cancon contributions. Initially, the regulator wanted online streamers to direct their cash toward national funds that produce Canadian content, such as the Canada Media Fund, which helped create the hugely successful television show Heated Rivalry.
Online streamers launched a legal challenge against the initial requirement that they pay five per cent of their Canadian revenue toward Canadian content. (Giordano Ciampini/The Canadian Press)
The new rules would instead allow platforms to work with Canadian production companies to produce content.
“We’re trying to establish paths where streaming services will see this as an investment in great content that will appeal to Canadian and international audiences, as opposed to just saying that there are requirements being imposed on them,” Shortliffe said.
A portion of the funds from traditional broadcasters and online streaming platforms that make more than $100 million per year in Canadian revenue must also be directed to a fund that would support services of “exceptional importance.” Shortliffe said such services would include the Cable Public Affairs Channel and the Weather Network.
The CRTC is also implementing discoverability guidelines with the aim that Canadian and Indigenous content is “prominently presented” to viewers on online streaming platforms.
Minister of Canadian Identity and Culture Mark Miller said in a social media post that the government is reviewing the CRTC changes.
“As we carefully assess its impacts, it will always be paramount to ensure that Canadians continue to see themselves reflected on screen, hear Canadian voices, and celebrate what makes this country unique,” he wrote Thursday.
Court battle ongoing
Streamers challenged the initial five per cent requirement in court, and the funds haven’t started flowing yet. Asked how Thursday’s increase will impact the legal battle, Shortliffe said he was “confident” the court would rule in the CRTC’s favour.
“We do recognize there’s a stay in place, but in the meantime we’re going forward in establishing these policies. We’ll move forward in starting to do tailored conditions of service where we can work with those platforms,” he said. “We’re not stopping our work because of that.”
Michael Geist, the University of Ottawa’s Canada Research Chair in internet and e-commerce law, told CBC News that if the CRTC regulations are held up by the court, Canadians could likely see the cost of their streaming subscriptions increase.
“We may well see increased prices for Canadian consumers as the cost of doing business just went up significantly,” Geist said. “Canada, with this decision, becomes really one of the most expensive [countries] for streamers to operate in.”
The Online Streaming Act orders foreign streamers to put some of their Canadian revenue into funds to support Canadian content. A Republican bill introduced in the U.S. Congress on Thursday would investigate the act as an unfair trade practice and potentially impose retaliatory tariffs.
The Online Streaming Act has come under heavy fire from U.S. lawmakers, who label it a trade irritant and dub it a “Netflix Tax.” Republican Rep. Lloyd Smucker proposed a bill in March that would require the U.S. Trade Representative Jamieson Greer to investigate the tax and take retaliatory action if it’s deemed an unfair trade practice.
“We’ve seen the the U.S. trade representative, which leads on this issue for the United States, specifically cite this legislation as being a trade irritant, and [the CRTC’s latest] decision is only going to accelerate their concerns and in all likelihood is is going to lead to increased pressure for Canada to back off this approach,” Gesit said.
Asked for comment on the CRTC changes, the Motion Picture Association of Canada, which advocates for large streamers like Disney+, Netflix and Prime Video, pointed CBC News to a previous statement the organization released when Smucker put forward his bill.
“Canada and its audiences are important to our member studios and the broader industry. However, Canada’s Online Streaming Act disadvantages American companies and undermines competitiveness by requiring streaming companies to subsidize and promote Canadian content over their own productions through discriminatory obligations,” the statement reads.
These new regulations come against the backdrop of trade talks over the North American trade pact, known as Canada-U.S.-Mexico Agreement (CUSMA), this year.
The text of the agreement says July 1 is the date by which the three countries need to either approve a renewal of the existing agreement or signal their intention to exit the pact, but that process can take up to 10 years.