Coming soon to a screen near you: Ottawa’s new streaming tax. To be sure, that is not the Liberals’ preferred nomenclature for the levy of 5 per cent of Canadian revenues that large foreign video and music streaming platforms will have to pay starting this September.
Instead, the Canadian Radio-television and Telecommunications Commission, or CRTC, calls it a “contribution,” as if it were in some way voluntary. It is not. It is a tax in everything but name, aimed at transferring $200-million a year from streaming platforms to assorted worthy groups, under the auspices of supporting Canadian content.
It’s worth noting that the premise of the fund supporting Canadian content producers is misleading: Domestic broadcasters will get 40 per cent of the payments from video streamers, and 30 per cent of those from audio streamers.
The government and the CRTC are pretending that the companies paying out those hundreds of millions will simply accept lower profit margins. Unsurprisingly, some firms and industry associations have already warned that prices for consumers may rise.
Those aren’t idle threats, despite the dismissive attitude of the government and the CRTC. Indeed, their nonchalance is reminiscent of the assumption that Meta was not serious about its stated intention to end the distribution of Canadian news content on Facebook if Ottawa proceeded with a similar “contribution” to news outlets. (Spoiler: It was.)
The companies running streaming platforms are profitable for the most part, although Spotify has said its industry’s margins are razor thin, even negative. But there’s no doubt that Amazon and Netflix, for instance, make substantial profits on their global operations.
However, there are complexities. Netflix already spends substantial sums on Canadian content; how will that be accounted for? Amazon Prime subscriptions include services such as expedited parcel delivery; how does the CRTC propose to separate out that part of Amazon’s revenue?
The federal Liberals’ simplistic calculation seems to be that: a) Big Tech companies have lots of money; b) we want to spend money, so c) Big Tech should hand over some of their money because d) they will still have lots.
But there’s no reason to believe that streaming platforms will simply pony up, particularly since they will all be hit with the same levy at the same time. That will make it easy for them to add a 5-per-cent surcharge to consumers’ bills.
Beyond the practical issues, there are more fundamental questions that Ottawa is simply ignoring. Why should online streaming platforms fund Canadian content? Isn’t that a broader social good? Imagine if Ottawa imposed a special tax on tire makers to fund highway maintenance, or on sports equipment makers to fund recreational centres. Such policies would rightly be looked at as bizarre.
Once upon a time, there was (some) logic in requiring broadcasters to pay into a fund that subsidizes Canadian content. There were a limited number of television and radio channels; requiring payments as a condition of being granted such a licence made some sense.
But that decades-old approach, and the contribution rules, have continued through to today. Its logic does not apply to the internet, where channel scarcity does not exist. Rather than adapt its regulatory framework to that new reality, Ottawa is instead attempting to stuff the 21st-century reality of content production and distribution into the ill-fitting clothes of the 1970s.
A modern policy for Canadian content would shift the financial burden from domestic private broadcasters and, now, streaming platforms to direct government support.
We’ve previously argued that the dwindling audiences for CBC’s English-language television in recent years no longer justify the expense of funding that service. Those funds could be put to far better use by directly subsidizing Canadian content makers.
Such a break with orthodoxy would substantially improve the economics of private broadcasting, by removing the burden of Canadian-content contributions and eliminating the distortions caused by having to compete with a state-funded public broadcaster.
At a stroke, Ottawa could avoid handcuffing the streaming industry, lighten the financial burden on struggling private broadcasters, give Canadian content a fighting chance in the marketplace – and not punish consumers.