Internet video, music services must pay up to save Canadian content, CRTC says

The broadcast regulator is adding its voice to the domestic chorus calling on the federal government to pry more commitments — monetary or otherwise — from online streaming giants like Netflix and Spotify and consider new internet levies to fund Canadian content.

In a report released Thursday, the Canadian Radio-television and Telecommunications Commission recommended the Trudeau Liberals consider regulating any online video or music service, no matter where they are located, and have them pay for the creation of, or better promote domestic content.

The financial burden for creating new content would be spread beyond traditional domestic companies to avoid losses of jobs, services and content, as well as save things like local news and reduce the pressures on federal coffers to fund production.

Internet service providers might find themselves facing a new levy if the government adopted all the recommendations in the report, while traditional companies would see reductions in their mandatory contributions.

University of Ottawa professor Michael Geist said on Twitter that the CRTC was effectively calling for a "regulate everything model" that included "ISP and Netflix taxes." Advocacy group OpenMedia said the Liberals couldn't take the report seriously when it was clear that "internet affordability is the top concern for Canadians."

Consumers are not expected to see any overall change in how much they pay, said CRTC chairman Ian Scott, who added that the recommendation doesn't amount to an internet tax.

The Liberals have been loath to introduce anything that could be styled as a Netflix tax or an internet tax, having repeatedly said it is not in their plans.

But the CRTC report, which the Liberals requested, is likely to play a role in a planned review of the federal laws overseeing television, radio and telecommunications services.

Innovation Minister Navdeep Bains said the government wanted to review the report before deciding what steps to take, but he was clear that any decisions could lead to consumers paying more for their services.

"How are consumers going to be impacted by this? What are the cost implications for consumers? And that's going to drive a lot of our decision-making," he told reporters at a military trade show in Ottawa.

Friends of Canadian Broadcasting said in a statement that the Liberals should heed the CRTC's advice to require foreign streaming services to create and promote Canadian programs, as domestic companies are required to do.

"We have to address all the players in the system," said NDP heritage critic Pierre Nantel.

"When you read this report, you realize that if you still want Canadian content on our screens for the coming years, everybody has to chip in."

Canadians are increasingly spending on online video services with estimates that over half the population subscribe to a service, Netflix being the largest available. Netflix has become so large in Canada that if it were a television network, it would be the most popular for almost all Canadians aged two to 54.

What the CRTC is proposing is a regulatory shift to handle this new reality. Instead of the existing licensing model, all online and music services would sign binding agreements that set out obligations and standards that online services would have to follow.

The agreements may or may not include spending commitments.

There would be incentives to pay for domestic content, but the CRTC makes clear that any new legislative or regulatory regime would also require ways for the government to crack down on anyone skirting the rules, including through fines.

"We're not proposing something radically new, so it shouldn't be a problem," Scott said. "The real trick is going to be get the incentives and disincentives right so that (companies) will want to come in ... and be part of the system."

If there are no changes, the CRTC warns the public purse will face increasing pressure to cover the cost of creating content.

Federal top-ups to existing production funds like the Canada Media Fund, are only a short-term solution to the problem, and the CRTC suggests the government better align some $770 million in spending spread across multiple media and music funds.