BTLR report proposes sweeping overhaul of Cancon funding system

The report's 97 recommendations include combining the CMF and Telefilm, mandating that streamers contribute to Cancon, reintroducing terms of trade and an ad-free CBC.
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The panel tasked with overseeing the Broadcasting and Telecommunications Legislative Review (BTLR) on Wednesday laid out a set of recommendations that could have a seismic impact on the Canadian production sector if they are implemented by the government.

The 235-page report, published Wednesday, contains 97 key recommendations including: a plan for CBC to go ad-free within five years; a single funding agency combining the CMF and Telefilm; the reintroduction of terms of trade; enhanced powers for the CRTC; and an urgent call for foreign-based streaming services to be brought into the regulatory tent.

“Canada’s Communications Future: Time to Act” arrives hours ahead of the kick off to the 25th edition of CMPA Prime Time, where the domestic industry will have an abundance of big- and small-picture issues to discuss, digest and weigh in on.

Sweeping overhaul of Canadian content funding

Among its more eye-catching recommendations, the panel said the Canada Media Fund (CMF) and Telefilm Canada should be merged under a single entity that is funded entirely from public sources.

“Given that forms of content are converging, and that distinctions based on distribution media (cinemas, cable, online, etc.) or screens (television, computers, tablets) are less relevant, it is no longer appropriate to distinguish the source of funding by screen, platform, or format,” said the report.

Under the merged funding body, revenues derived from privately-owned Canadian BDUs would be directed away from the CMF (which is currently funded through a combination of government funding and a levy on BDUs) and towards Certified Independent Production Funds (CIPFs).

As well, the BTLR panel said the hybrid CMF-Telefilm funding institution should transition away from a model based on broadcaster envelopes to one “based on supporting activities ranging from development to creation to production and discoverability, regardless of the distribution medium,” advising also that the federal government should develop the “mandate and operational parameters” of the new entity in consultation with stakeholders.

The idea of merging the CMF and Telefilm has been floated in the past – most recently in 2017 – though at the time the filmmaking community came out in strong opposition to the proposal of a combined entity, calling it a potentially “devastating blow to Canadian cinema.” However, the landscape has shifted dramatically in the time since, and the industry at large may be more receptive to the proposal as the lines between film and television continue to blur.

As well, to ensure government support to public institutions like CBC, NFB and Canada Council for the Arts does not stagnate, the report proposed that funding to public institutions is tied to the rate of inflation.

More generally, the report said the government must ensure that both tax credits and funds are “platform-agnostic and are accessible to all Canadian production companies, whether independent or broadcaster affiliated.”

Reintroduction of terms of trade 

The Canadian production sector has been vocal about the need for terms of trade – which regulates the economic relationship between indie producers and content commissioners – since it was discontinued in 2016 following the CRTC’s Let’s Talk TV hearings.

In its submission to the BTLR panel, filed last year, the CMPA said that an abundance of producers and scarcity of commissioners meant Canadian broadcast groups and streaming services wielded disproportionate leverage over producers.

Those calls were heard by the panel, which said the CRTC must be given “explicit jurisdiction” to regulate the economic relationships between media content undertakings and content producers, and allow producers to retain the commercial rights.

“The CRTC should be able to determine or approve terms of trade to ensure that independent producers are treated fairly,” said the report, which pointed to the way U.K. regulator Ofcom has addressed this imbalance through its own terms of trade agreement between indies and broadcasters.

Urgent need to make streamers contribute

The Janet Yale-fronted panel’s report was crystal clear in its determination that internet broadcasters such as Netflix should be regulated and subject to spending obligations to support Canadian content production.

This needs to happen quickly, noted the document, which recommended a two-phase process for bringing internet broadcasters under domestic regulation.

First – as an interim measure, prior to the introduction of new legislation – it advises the government to “urgently” direct the CRTC to hold a hearing and issue a new exemption order to impose obligations on internet programming undertakings that generate a threshold amount of revenue in Canada.

According to the BTLR panel, the Commission already has “ample jurisdiction” to amend the existing digital media exemption order (DMEO) and impose conditions on such services.

Phase two, which the report acknowledges will take considerably more time, would see the government enshrine content obligations for international digital services into the Broadcasting Act. Once the Act has been amended, the panel says a “registration regime,” overseen by the CRTC, would be the best way to regulate these services.

The registration process would exist alongside the CRTC’s existing licensing process and apply to media undertakings operating over the internet. In addition, the registration regime would enable the CRTC to impose penalties on services that fail to comply with their conditions of registration.

The report noted the financial contributions should be based on a “simple calculation of the percentage of Canadian-derived revenues.” However, it stopped short of suggesting the exact manner in which services are obligated to contribute. “The CRTC would determine the specifics – i.e. who contributes how much, based on which activities,” said the BTLR panel.

The Commission was also advised by the Yale panel to impose discoverability obligations on all audiovisual services, and to collect information and consumption data from all players operating in the space. That data, which has been closely guarded by Netflix and others up until now, should be published in aggregated form.

In addition, the panel recommended that the federal government require internet broadcasters to collect and remit GST/HST. However, the panel made clear that consumers should not have to foot the bill through higher subscription prices.

“It is more appropriate to establish a regime that requires such online streaming services that benefit from operating in Canada to invest in Canadian programming that they believe will attract and appeal to Canadians. This approach would ensure a meaningful contribution to Canadian cultural policy objectives and the production sector. It need not result in higher prices for consumers,” read the document.

An ad-free CBC

The report also envisions a new role for Canada’s public broadcaster, recommending that CBC/Radio-Canada adopt a framework that would see it transform into a “public media institution with a singular focus on serving a public rather than a commercial purpose.” To do this, the report says the pubcaster should gradually eliminate advertising across all its platforms over the next five years, beginning with ads on its news content.

By reducing CBC/Radio-Canada’s reliance on a “dwindling pot of traditional advertising revenues,” the pubcaster would also create some “useful breathing space” for private broadcasters, noted the report. It should be noted also that the BTLR recommendation mirrors one the CBC itself put three years ago, when it said it would require approximately $400 million in order to move to an ad-free model.

As well, the report recommended that the CRTC’s role shift from licensing individual CBC services to take a more fulsome approach and oversee “all its content-related activities.” In addition, the CRTC would report to the Minister of Canadian Heritage every year on how the public broadcaster is meeting its mandate.

It should also be noted that CBC/Radio-Canada has a CRTC licence renewal hearing in May. It’s unclear exactly how the recommendations in this report will affect the renewal process, though it seems likely the Commission will take into account the proposals put forth by the BTLR panel.

What comes next? 

With the report now in the hands of the Department of Canadian Heritage, the question shifts to if, how and when the minority Liberal government will choose to implement the panel’s suggestions. In the case of the recommendation to make OTT platforms contribute to the funding of Cancon, Heritage Minister Steven Guilbeault has already reiterated the government’s intention to act swiftly to bring streamers into the regulatory tent once the BTLR report is published. He takes the stage tomorrow morning at Prime Time for a keynote interview.

The BTLR panel received more than 2,000 written submissions when its call for comments opened in the fall of 2018. The review of the Broadcasting and Telecommunications Acts was first announced more than two years ago when Prime Minister Justin Trudeau tabled his 2017 budget. The panel, headed up by Yale, the former EVP of Telus and president and CEO of the Canadian Cable Television Association, was appointed in July 2018.