As they gather in the Canadian Rockies for Banff this week, Canadian TV executives will be ruminating and deliberating over regulator the CRTC’s decision to impose a 5% levy on foreign streamers. C21 considers the implications.

The new regulations come into effect in the 2024/25 broadcast year

Last week, Canada’s TV regulator, the CRTC, took a big first step towards bringing foreign streaming services including Netflix, Disney+ and Prime Video under domestic regulation.

Under the newly issued decision, streaming services generating C$25m (US$18.2m) or more in annual revenue in Canada will be required to contribute 5% of that revenue back into the local audiovisual sector via production funds.

The CRTC, led by chair and CEO Vicky Eatrides, said the rule will bring around C$200m of new money into the domestic system across audiovisual and music, with a split of roughly 70% (C$140m) to 30% (C$60m). On the audiovisual side, funds will be diverted to “areas of immediate need,” including local news, French-language content, indigenous programming and content created “by and for equity-deserving communities, official language minority communities and Canadians of diverse backgrounds.”

In terms of where the C$140m for audiovisual will be diverted, around 40% (C$56m) will be directed to the country’s main TV and digital funding agency, the Canada Media Fund (CMF), and/or direct expenditure on certified Canadian content; 30% (C$42m) will go to independent local news funds; 10% (C$14m) to the Black Screen Office, the Canadian Independent Screen Fund for BPOC creators and/or the Broadcasting Accessibility Fund; 10% to certified independent production funds; and 10% to the Indigenous Screen Office (ISO).

Within the CMF allocation, roughly 75% (C$42m) is to be used to fund the production or acquisition of Canadian content in English and French. Per the CRTC’s ruling, the split between English and French is 60/40, meaning roughly C$25.2m will need to be spent by the streamers directly on English-language content and C$16.8m on French-language content. The remaining 25% (C$14m) of the CMF allocation will be placed directly back into its funding pool.

Vicky Eatrides

The new regulations are set to begin on September 1 and do not apply to streaming services affiliated to Canadian broadcasters, meaning Bell Media’s Crave, CBC Gem and Corus Entertainment-owned StackTV are not included.

Discussion around the decision is sure to dominate conversation at this year’s Banff World Media Festival, which kicked off yesterday and runs through to Wednesday. As the event begins, C21 takes a look at some of the biggest questions raised by the CRTC’s decision and gets perspectives and takeaways from various people from across the Canadian industry.

Is this the first regulatory step the Canadian industry had hoped for?
As news of the CRTC decision started to filter through last Tuesday morning, the press releases were soon coming thick and fast declaring it as a historically significant moment for the domestic sector.

And to be sure, it is. The decision, which marks the first time streaming services operating in Canada have ever been required to contribute any of their revenues to the creation of local programming, has been the culmination of a years-long campaign from scores of Canadian organisations.

However, there was early criticism of the fact that a significant portion of the money will be directed outside of the film and TV space to news, an area where the foreign streaming services do not operate.

The CRTC was clear that these are “base contribution requirements” and that requirements for both online streaming services and traditional Canadian broadcasters will be “fine-tuned” as it uses Bill C-11 (aka the Online Streaming Act) to implement an updated and modernised version of the Broadcasting Act. So, there could still be more to come, though it seems unlikely that will happen imminently, given the lengthy timeline for future industry consultations.

Are the streamers concerned?
The Motion Picture Association – Canada (MPA-C), which collectively represents the studios and streaming services in Canada (aside from Amazon), has long stated that it does not believe streamers should be subject to regulation in Canada. In its view, the streaming services already contribute significantly to Canada’s cultural ecosystem, through the creation of jobs across the country and collective spending of more than C$6.7bn annually filming shows in Canada.

The MPA-C knew the decision was coming – as evidenced by the fact it released a report touting its impact on the Canadian cultural ecosystem the day before the CRTC’s decision was released – and so it will have been prepared for various outcomes.

Wendy Noss

In its official response, MPA-C president Wendy Noss called the decision “discriminatory” and said it “reinforces a decades-old regulatory approach designed for cable companies.”

Now, the major question becomes, how will MPA-C react and how far will it go in pushing back? The lobby group is fundamentally opposed to the notion of being regulated and will certainly not be happy that Canadian regulatory requirements are now being imposed on its streamer and studio member companies.

There is a suggestion the organisation may seek to challenge or appeal the decision in some way. The CRTC said those affected by the decision can file comments on the proposed orders before June 14, so a clearer picture might emerge before the end of the week.

When asked by C21 if a challenge was forthcoming, an MPA-C rep directed all enquiries back to its original statement. Meanwhile, the CRTC, when asked if it had received an indication around whether MPA-C might seek to appeal its decision, said simply that “third parties will determine their responses to this decision.” It previously said its decision was “final” and that it would “look in [its] toolkit” to ensure compliance with the new regulations.

Might the streamers actually be satisfied with this outcome?
The CRTC has been clear this is a “base” contribution, and additional layers of regulations could be added on top. However, as it stands, many within the local industry have pointed out the level of new funding with which to finance shows is not major, equating to C$25.2m for English-language production and C$16.8m for French-language.

“That’s one TV show,” one producer remarked to C21. “Even in Canada, the prices are about C$3.3m typically per hour, so C$25m for a streamer is one show.”

In all likelihood, Netflix is already hitting that mark with the three scripted projects it has commissioned so far: Tall Pines (Sphere Media, Objective Media), created by Mae Martin; the recently commissioned Japanese manga adaptation Bet (Boat Rocker), from showrunner Simon Barry (Warrior Nun); and North of North (Red Marrow Media, Northwood Entertainment), which was co-commissioned alongside the CBC and APTN.

Reynolds Mastin

How do the producers and writers feel?
While many are still digesting the decision and parsing its finer points, the general response from producers and writers might best be summed up in the following way: grateful and relieved that progress is finally being made; underwhelmed by the dollars and cents; anxious about the CRTC’s proposed timeline for more consultations over the next two years; and eager to learn more.

Canadian Media Producers Association (CMPA) president and CEO Reynolds Mastin called the ruling a “fair and reasonable decision that lays a solid foundation of support for Canada’s media production sector,” while CMF president and CEO Valerie Creighton called it a “win for Canadian and indigenous creators,” and Writers Guild of Canada (WGC) assistant executive director Neal McDougall said it was an “important first step, but there is still more work to do.”

This, after all, is a far cry from the C$1bn that was initially being discussed. Indeed, at Banff two years ago during a lively Canadian media leaders panel, top execs were pondering how this C$1bn would be apportioned, who would be in control of distributing it and who would gain access to it.

In many ways, the Canadian industry has been clinging on for years, hoping and praying that streamer regulation would mean a huge capital injection that would turbocharge the Cancon business. “We were waiting to be saved,” one prominent screenwriter recently said to C21.

Valerie Creighton

As the finish line has been moved further and further away, the local industry has faced a chronic shortage of scripted greenlights, which has left producers and creators with the sense they are fighting over crumbs. That, in part, led to the showdown between the WGC and CMPA, which almost led to a strike last month.

But in general, the reaction to the CRTC’s decision – which came earlier than many had expected – has been welcomed by local players. The general sentiment from producers and writers is that this is a major step in the right direction, and one that could prove crucial as the streamers are further integrated into the local regulatory framework.

Will some streamers exit the Canadian market over this?
The short answer to this is no. For years, the studios and streaming services have made implied threats that they would be willing to exit the Canadian marketplace if they were regulated.

The reality is that, for the larger ones, their direct-to-consumer services are too lucrative to ignore. The advantages they gain from filming shows in Canada (skilled crews, tax credits, favourable currency exchange rate) would also be too big to walk away from.

Take Netflix. In 2019, it disclosed in a securities filing that it generated C$780m in Canadian revenue in the first three quarters of the year, putting its yearly revenue for 2019 at around C$1bn. At the time, it also disclosed it had 6.5 million paid subscribers. This was five years ago, when subscriptions were cheaper and it had fewer subscribers.

More recently, it disclosed that its annual North American revenue (it does not report the US and Canada individually) was US$14.87bn in 2023. Using the very general (and quite imperfect) principal that Canada is worth around 10% of the US market, it would be logical to deduce that Netflix’s annual revenue in Canada is around US$1.4bn – the equivalent of around C$2bn. Interestingly, that means Netflix could potentially be contributing almost half of the C$200m that will now flow through the system under the CRTC’s decision.

On that note, calculating Amazon’s contribution will be tricky given Prime Video is an add-on to the Prime shipping subscription. Amazon said it was “disappointed” by the “onerous and inflexible financial levy,” adding that it was “concerned by the negative impact it will have on Canadian consumers.”

While the decision likely will not compel any one streaming service to exit Canada, some might be leaving for different reasons altogether. With the potential sale of Paramount Global in the works, one potential outcome is that Paramount+ is shuttered post-sale and the company goes back to licensing much of its content to third parties. There are still many pieces in play (including the potential that no sale takes place and Paramount Global goes it alone, as outlined by its co-CEOs last week), but if Paramount+ were to leave the market for whatever reason, that would be one less streaming service captured by the new regulation.

How much content have the streamers already developed via their Canadian outposts?
The streamers had pre-empted the introduction of legislation, with Netflix, Prime Video, Paramount+ and Disney+ all establishing local commissioning outposts in 2021 and 2022 and staffing up with an array of well-liked and respected executives.

There was a time when it appeared the streamers might develop and greenlight a lot of Canadian content, prompting huge optimism from the local industry. However, amid hirings and firings, rumours of a commissioning pause and accusations that the streamers are “dressing up” non-Canadian shows as Canadian, that optimism has faded.

Both Disney+ and Paramount+ brought in highly respected execs in Stephanie Azam and Tom Hastings, respectively, to spearhead their Canadian content strategies. However, over the past year, both were let go as those streaming services pulled back on their originally stated Canadian content aspirations.

Tom Hastings

At last year’s Banff, Paramount+ unveiled a vast Canadian content development slate, which was greeted by the local industry with enormous enthusiasm. At the time, it was seen as a sign the streamers were getting serious about making local content. But with the departure of Hastings in April, it appears that development slate is all but dead.

While many have accused the Canadian SVoD outposts as being a case of “smoke and mirrors” – designed to create the illusion of contributing to the creation of local programming in order to lobby the government for favourable terms when regulation did eventually arrive – sources close to those entities have pushed back hard on that characterisation.

A source close to Netflix said the Canadian office is in “active development and planning to greenlight more shows soon,” pointing out that it has continued to staff up with the recent appointments of former Entertainment One exec Chris Bell and CBC alum Edythe Yee.

Meanwhile, a close contact to Amazon in Canada told C21 last month that rumours of a commissioning pause were false and that it was moving ahead with developing and commissioning local content. Some of Prime Video’s recent Canadian projects include Luxe Listings: Toronto and Mr Dressup: The Magic of Make Believe, and it recently greenlit a dramedy from Quebecois comedian and actor Martin Matte. The Amazon contact also said it plans to reveal five additional greenlights at an event later this month.

Prime Video’s Canadian projects include Mr Dressup: The Magic of Make Believe

Meanwhile, a person with knowledge of Disney’s Canadian activities told C21 it has allocated budget for future local content and that it is committed to producing the right balance of local originals that makes sense for its business.

With all of that said, it should be noted that a lot of producers, writers and other broadcast executives within the local industry have privately questioned the validity of the streamers’ commissioning ambitions in Canada. At the very least, the first steps toward regulation should begin to give some clarity around how the SVoD services are expected to operate in the country.

When will the streaming contributions begin to flow through the domestic system?
An urgent question from producers is when exactly this new money will begin flowing through the system. Times are very tight, and any new money to alleviate some of the financial stresses will be welcomed, especially on the heels of last month’s news that Corus Entertainment has been granted regulatory relief over its own Canadian content spending requirements.

Per the CRTC’s ruling, the streaming regulation will begin in the 2024/25 broadcast year, which runs from September 1 to August 31, 2025. It appears likely, then, that the streaming services would make their first payment at the end of that window, after calculating how much they contributed to Canadian content spending over the broadcast year and deducting that from their individual contribution.

That, of course, raises the question of what constitutes Canadian content – a vast and complex issue that will be addressed in another upcoming regulatory hearing.

All of these hearings overlap awkwardly with a Canadian federal election next year, where the Conservative Party of Canada, which has been openly hostile towards the cultural industries, is widely expected to take office. Exactly how that could impact Canada’s push to regulate foreign streaming services is unclear, but there will be plenty to unpack over the next few days in Banff.