THE STANDING SENATE COMMITTEE ON TRANSPORT AND COMMUNICATIONS
EVIDENCE
OTTAWA, Thursday, September 15, 2022
The Standing Senate Committee on Transport and Communications met with videoconference this day at 10:03 a.m. [ET] to examine the subject matter of Bill C-11, An Act to amend the Broadcasting Act and to make related and consequential amendments to other Acts.
Senator Leo Housakos (Chair) in the chair.
[English]
The Chair: Good morning. I am Leo Housakos, senator from Quebec and chair of this committee. I would like my colleagues to briefly introduce themselves.
Senator Miville-Dechêne: Julie Miville-Dechêne, Quebec.
Senator Dawson: Dennis Dawson, Quebec.
Senator Simons: Paula Simons, Alberta, Treaty 6 territory.
Senator Sorensen: Karen Sorenson, province of Alberta.
Senator Quinn: Jim Quinn, province of New Brunswick.
Senator Clement: Bernadette Clement, Ontario.
Senator Dasko: Donna Dasko, representing Ontario and Toronto.
[Translation]
The Chair: We are meeting to continue our study on the subject matter of Bill C-11, An Act to amend the Broadcasting Act and to make related amendments to other Acts.
[English]
For our first panel, we are pleased to welcome officials from Corus Entertainment Inc.: Troy Reeb, Executive Vice President, Broadcast Networks, who is with us via teleconference; from Quebecor Media Inc., Pierre Karl Péladeau, President and Chief Executive Officer, and Peggy Tabet, Vice-President, Regulatory and Environmental Affairs; from Anthem Sports and Entertainment, Leonard Asper, President and CEO, and Anthony Cicione, Game Media Group. Welcome and thank you for joining us before this committee.
Mr. Reeb, we’ll begin with your opening remarks, followed by Mr. Péladeau and then Mr. Cicione, before we move to questions from members of the committee.
Troy Reeb, Executive Vice President, Broadcast Networks, Corus Entertainment Inc.: Thank you, Mr. Chair, and good morning, honourable senators. My name is Troy Reeb. I am the Executive Vice President of Broadcast Networks with Corus Entertainment. On behalf of our more than 3,000 employees across Canada, I do want to say thank you for inviting us to share our views on Bill C-11, which we are urging you to review and pass without delay.
After many years of industry transformation and public debate, it is long past time to update the three-decade-old Broadcasting Act, and Bill C-11 does the job. Put simply, the bill is not perfect, but it gets the biggest thing right, and we support it for that reason.
Corus is proud to be Canada’s leading independent media and content company. Our subsidiaries include animation studio Nelvana; children’s book publisher Kids Can Press; Corus Studios, a producer of lifestyle and factual programming; and Toon Boom, a Montreal-based animation software company. All told, Corus’ Canadian content is exported to 160 countries worldwide, but broadcasting here in Canada remains the core of our business. We operate 15 Global Television stations and 39 radio stations across eight provinces, in addition to 33 specialty TV channels like YTV, Séries Plus and Food Network Canada, along with the fast-growing streaming service StackTV.
We are also the proud home of Global News, one of Canada’s largest journalism organizations. Global serves large and small communities across the country with fact-based, up-to-the-minute news and information on multiple platforms.
For the better part of a century, successful Canadian broadcasting policy has depended on successful Canadian broadcasters. That’s how we support cultural priorities in this country; the two go hand in hand. Unfortunately, we can no longer take the success of broadcasters for granted. As Senator Simons rightly said on the Senate floor in June 2021:
Private radio and television stations across the country are in dire financial straits, with many on the brink of closure and collapse . . . .
That is why Bill C-11 is so urgent. As a Canadian broadcaster, Corus embraces its cultural policy responsibilities, and we want to continue contributing for years to come, but we can no longer do this alone or under decades-old broadcasting rules. Incredibly, broadcasting regulations still dictate how much we have to spend on certain shows, when our shows can air and the types of songs we can play on our radio stations. I could go on and on. This regime was designed for a world that simply no longer exists. It continues to wrongly assume that regulated Canadian broadcasters somehow enjoy privileged access to Canadian audiences when, in fact, the biggest TV networks in Canada, day after day, are no longer Canadian at all. They are unregulated, foreign streamers.
This status quo is unsustainable. Case in point: Earlier I mentioned local news, and Corus is uniquely able to provide this vital service through local stations that foreign streamers will never replicate. They don’t want to; they can’t do it. But it comes at a significant cost to do local news because news is a challenging business. Traditionally, we have offset our news losses through more profitable entertainment programming, but this is no longer a feasible strategy. Our ability to provide local, fact-based news in large parts of the country, in small markets and in places like the English-language minority community in Montreal, it all teeters on the brink.
We support Bill C-11 because it gets the biggest thing right: It will finally bring these large, foreign digital broadcasters operating in Canada into the same regulatory framework that we are in. This is a necessary precondition for all other meaningful policy reforms, including measures to support news.
The bill does some other important things, too. With massive foreign broadcasters now flooding our market, it’s becoming harder for Canadian businesses to own and equitably benefit from programs that we develop, finance and produce. By emphasizing contributions from the Canadian production sector as a whole and beneficial IP ownership for all Canadian businesses, Bill C-11 takes some encouraging steps. We’re confident the bill will support strong Canadian creative businesses that have the scale to compete on the world stage.
Now, I’d like to conclude by addressing some of the criticisms we’ve heard about this legislation. Some claim that Bill C-11 is simply unnecessary because Canadian and foreign media companies operate in different markets. That could not be further from the truth. In reality, Facebook and Google compete with us for advertising and, in fact, take the lion’s share of it in this market. Netflix and Amazon compete with us for audiences and are now taking more of it than ever. The same U.S. studios who used to license us content for Canadian television are now going around Canadian broadcasters to take it directly to Canadians themselves.
Some would argue that Bill C-11 requires extensive reconsideration. Again, we disagree. Senators would be hard pressed to find another piece of legislation whose core policy issues have been scrutinized more than Bill C-11 and its predecessor. This bill may not be perfect. We certainly know it. However, it reflects six years of consultation and compromise among stakeholders, officials and members of the public. Now is not the time to go back to the drawing board.
Finally, some claim that Bill C-11 encourages regulatory overreach, but this concern is unfounded. This bill is about future-proofing the Broadcasting Act. It took us 30 years to revisit this law, and it probably will not be reopened any time soon. Any overly prescriptive bill that ties the hands of the regulator will be quickly overtaken by events. To regulate the industry fairly and effectively, the Canadian Radio-television and Telecommunications Commission, or CRTC, needs a clear mandate and appropriate discretion to oversee digital platforms that act like broadcasters, just as Bill C-11 provides.
Honourable senators, I hope you’ll agree the status quo is not sustainable and that you will help us complete the long project of reforming the Broadcasting Act in Canada. The future of an entire Canadian industry is hanging in the balance. Thank you, and I’m happy to answer your questions.
[Translation]
The Chair: Thank you very much. Mr. Péladeau, go ahead.
Pierre Karl Péladeau, President and Chief Executive Officer, Quebecor Media Inc.: Mr. Chair, honourable senators, my name is Pierre Karl Péladeau, and I am President of Quebecor Media. I am joined by Peggy Tabet, Vice-President, Regulatory and Environmental Affairs.
[English]
First of all, I would like to thank Mr. Reeb for his testimony. You will understand that, basically, we share the same perspective.
[Translation]
Bill C-11 is a long-awaited revision of the Broadcasting Act. Since the act was last updated, more than 30 years ago, when the internet was in its infancy, the broadcasting industry has been disrupted by the meteoric rise of foreign online broadcasters such as Netflix, Disney+ and Amazon. We can anticipate that there will be others, too, in the coming months and years.
The regulatory framework for broadcasting has by no means kept pace with the technological tsunami, and traditional companies such as TVA and Videotron have found themselves faced with a two-tier system, where it has become impossible to compete with foreign online services.
Those services have even overtaken cable TV services in Quebec. According to the latest survey, in 2021, 66% of Quebecers subscribed to a cable TV provider, compared with 71% who subscribed to a paid online video content delivery service.
By imposing regulatory constraints on foreign online video services, Bill C-11 does not ensure the sustainability of businesses here. After all, it doesn’t change the fact that Netflix, Disney+, Prime Video and other major U.S. platforms will spend more than $150 billion globally this year to create movies and TV series that will drive more Canadian viewers away from our broadcasting system. To ensure the survival of local businesses, a significant reduction in the administrative and financial regulatory burden must be undertaken.
Since our testimony before the House of Commons Standing Committee on Canadian Heritage three months ago, the already worrisome situation for Canadian broadcasters has only gotten worse. The Canadian Radio-television and Telecommunications Commission, CRTC, has released a long-awaited decision on the renewal of the licenses of the Canadian Broadcasting Corporation, CBC. The public broadcaster, which, remember, was already less regulated than private broadcasters, was granted more regulatory relief and flexibility.
The CRTC clearly intends to give free rein to the public broadcaster’s anti-competitive practices in the advertising market and its race for ratings at the expense of its public interest mission. Meanwhile, the CRTC has decided to keep private broadcasters in a rigid and outdated regulatory straitjacket.
Following this decision, the entire broadcasting industry was up in arms. No less than 14 appeals to the Governor-in-Council have been filed asking the CRTC to review its decision regarding the renewal of CBC’s licenses. In doing so, it is imperative that the review of the CBC’s mandate be subject to legislative intervention in order to restore fairness with private broadcasters.
Recently, Netflix and Disney+ announced their imminent entry into the Canadian advertising market, as they have just done in the United States. These companies add to the already overwhelming competition from Facebook and Google, which will now be almost equivalent to online broadcasters competing with Canadian broadcasters.
As a result, broadcasters will have less ability to fund news programming and the creation of content that is of value to the Canadian cultural industry. In addition, the business model for private television is being eroded. Last July, the CRTC published an alarming study highlighting that Canadian private broadcasters are finding it increasingly difficult to acquire broadcast rights for the content that attracts the largest audiences, owing to a lack of resources.
From 2010 to 2021, private conventional broadcasters ran a deficit of nearly $188 million. The impoverishment of Canadian broadcasters in favour of foreign online services is a real threat to the production of homegrown news and information programming and, of course, in the public interest.
The disappearance of local companies would make the Canadian broadcasting system entirely dependent on foreign actors, thus depriving Quebecers and Canadians of their cultural sovereignty. In this context, the legislator must act before it is too late.
Therefore, Bill C-11 must mark out CBC’s mandate so that the broadcaster would act in a complementary manner with private broadcasters, and it must put an end to CBC’s anti-competitive practices by eliminating all forms of advertising on its platforms.
The modernization of the broadcasting act must also not sacrifice the principle of fairness among the different parts of the Canadian broadcasting system. Parliament must put an end to the two-tiered system, where private broadcasters are burdened by an anachronistic regulatory regime, and foreign online video services benefit from the Canadian market without any constraints.
In this sense, Bill C-11 should be amended to ensure that all broadcasting undertakings are treated fairly and equitably, as was the case in the previous version of this reform, with the goal of freeing these important local economic players from their straitjacket.
Honourable senators, perhaps the wording may seem over the top, but it is a matter of life and death. Thank you very much for your attention.
The Chair: Thank you very much, Mr. Péladeau.
[English]
Leonard Asper, President and Chief Executive Officer, Anthem Sports and Entertainment: I was actually going to be the speaker today. I’m sorry if there was any confusion. I’ll step in here and save Mr. Cicione.
First of all, I’ll wish you all good morning and thank you to all senators on the Standing Senate Committee on Transport and Communications. It is an honour to be here.
I am Leonard Asper, and I am the President and CEO of Anthem Sports and Entertainment. Anthony Cicione is with me. He is the President of the Game Media Group here, which operates our Canadian TV business, among other assets we own.
It’s an honour to be here today, as I say. I also want to point out at the outset that what I’m about to say is not meant at all to diminish the incredible contributions of companies like Quebecor, Corus and many others like them that contribute significantly to this Canadian system and are facing the same threats we are.
It is really about relative fairness here, as I get into what I’m about to say, but these are companies that are doing phenomenal work and creating significant employment in Canada, and I applaud them for that.
I could almost say they did most of the work for us here, but we have a smaller, narrower issue specific to companies like ours. At Anthem, we’re an unaffiliated, independent Canadian specialty broadcaster operating in a very heavily concentrated media landscape in which the cable and telco carriers also own a large number of Canadian channels that they carry. We operate independent channels, three of them in fact. They are English-language entertainment and sports-themed channels known as GameTV, Game+ and the Fight Network.
We are Canadian. We are based in Toronto, and we provide over 70 high-quality jobs directly through our organization. We are broadcasters, but we also produce a significant amount of content in Canada. We buy and produce Canadian shows, and we sell and distribute our content to about 120 countries around the world.
We also own a company named Impact! Wrestling, which is what it sounds like, a wrestling promotion, but it, too, is Canadian, produced by people in Canada from Windsor through to Toronto. It employs a number of people around the country as well. That content is distributed on digital. All of our content is distributed on some digital platforms around the world.
Our channels are what they call “discretionary.” That means no one has to carry us, unlike over-the-air broadcasters who have mandatory basic carriage which entitles them to reach the entire Canadian population. There used to be a large number of these discretionary channels, but they were mostly bought by the major cable and telco companies, and that gave them an immediate advantage for carriage, obviously.
We compete against a number of other kinds of broadcasters, but we don’t have the same advantages they have. As a result, a number of discretionary services like ours simply closed their doors in the face of this competitive disadvantage.
But all broadcasters have requirements to acquire and schedule a minimum amount of Canadian content, regardless of whether carriers are willing to compensate us fairly for our work. Our programming obligations — like everyone’s — support Canadian producers and create jobs. For the record, we are not opposed at all to Canadian content rules.
But we also face a disadvantage against the production community. They receive tax credits, corporate funding mechanisms, provincial development funding, Telefilm funding or revenue from the Canada Media Fund. They have, effectively, a “forced buyer” in all Canadian TV channels, including the public broadcaster. So they have a number of these support mechanisms to make their businesses profitable. As I said, over-the-air broadcasters have guaranteed reach of the entire population, which enhances their ad revenues, and they receive additional compensation.
There are these three parts to the system. They are all challenged. Make no mistake about it. We support all of what they have said, but we have a specific issue in that specialty broadcasters sometimes in these legislative processes and under the CRTC regime are the ones left out in the cold.
We applaud the government for undertaking this piece of legislation, and we do agree, of course — as everyone has said here, and many people have said — that the system is way out of date relative to the way the world has developed and the internet has grown. It does need this updating. We simply want to be assured that Canadian independent specialty broadcasters, like us, are kept in the conversation. That occurred in Bill C-10 and now with Bill C-11. We just want to make sure, again, that there is an acknowledgement that there are different types of broadcasters and that we are included in the conversation, as I say.
We’re simply here to urge the Senate to keep this language in Bill C-11 — the recognized independent broadcasters — and make sure that the priorities in the legislation are implemented because it’s not simply the legislation, it is, of course, what happens after the fact.
We do ask you, the senators of this committee, to work with your colleagues in the public service and the House of Commons to direct the CRTC to ensure meaningful distribution of, and compensation to, the independent Canadian specialty broadcasters to allow us to continue our vital contribution and to employ talented Canadians.
Specifically, what we’re asking for is of the contributions made by multinational corporations as a part of this bill into Canada’s broadcast system, we urge the government to commit a meaningful percentage of these contributions to the specialty broadcasting sector.
We know you have many questions about the bill, and you’ll hear today throughout your study from both those who support the legislation and those who are against it.
We ask you simply to consider a few questions. Does this bill ensure that Canadian independent broadcasters can continue to compete? You’ve heard from all the witnesses how difficult it is. Even if we do say that we have a relative disadvantage to companies like Corus or Quebecor, we are all facing the same issues with the competition that is unregulated. Does this bill ensure that all those who are benefiting from the broadcast system contribute fairly to it? Does it ensure that Canadians will still have access to the high-quality content that Canadian independent broadcasters continue to make?
We think this bill answers yes, and, as Mr. Reeb said, it’s not perfect, but it goes a long way to achieving the objectives that underpin the system and have for many years. It provides a significant update to reflect the competition that has evolved, especially not only from the internet, but also the streamers who used to sell their content to Canada but who are now coming, broadcasting and taking even more audience away.
We have a narrow issue, but we also support the entire Canadian broadcast system and production community in their support for this bill.
Thank you for listening to us and we will be pleased to answer your questions.
[Translation]
The Chair: Thank you very much. My first question is for the Quebecor representative.
Mr. Péladeau, when you appeared before the House of Commons committee on May 31, you concluded your presentation as follows:
Instead of asking the CRTC for a new set of sprawling regulations with mind-boggling requirements, Parliament should focus on the essentials, such as a lighter regulatory regime in which foreign online platforms contribute financially to our ecosystem and to the various industry stakeholders, to maintain a strong and robust Canadian broadcasting system.
First, do you think Bill C-11 helps ease the regulatory system? If not, isn’t the government creating more “tentacles,” to use your phrase?
Second, should the change you are calling for to CBC’s mandate be part of Bill C-11?
Mr. Péladeau: It is not always easy to understand the ins and outs of the relationship that can exist between the government and the CRTC. Of course, it is an independent organization. It must also be attentive to social, economic and cultural dynamics, given the primary role it must play in this matter.
It is undeniable that players in the online video content space have come to significantly disrupt the landscape. Neither the CRTC nor the government can ignore this fact. A few years ago, there was talk of taxing foreign services and a big debate about it. Was it a Netflix tax or just a sales tax? More and more, it came down to the basics.
What is the foreign online broadcaster, which is increasingly taking Canadian audiences, able to bring to or take away from the Canadian broadcasting regime?
Does the bill address these issues? It undoubtedly does, since it concerns foreign companies. Is it not also time, in the context of this issue, to consider the regulation of Canadian broadcasters? One would think that, in its decision on the renewal of CBC’s license, the CRTC would be interested in this.
It opened the door to reduced regulations for Radio-Canada, which is quite surprising; it should therefore, where applicable, make the same allowance so that foreign companies do not have a special role in relation to the importance of Canadian broadcasters — their historical importance, as well as their economic and social importance to this day.
We want to maintain a system of Canadian broadcasters that play an important role in the Canadian economy. This is especially true in Quebec, given the scope of independent production, including news, series, film and all other cultural activities. We need strong Quebec broadcasters because they are the foundation of Canada’s cultural ecosystem. Without steps to maintain this situation, the entire system will be weakened.
The Chair: Thank you.
[English]
My second question is for all the witnesses on the panel. The government has thus far refused to release their policy directives and the regulatory directives to the CRTC on the implementation of the legislation, and I think that’s an important element. As we all know in this town, the regulatory aspects and policy directives are part and parcel of a piece of legislation as important of this.
Do the witnesses believe it would be useful or important to have those directives in advance so that legislators and witnesses can evaluate them, and does the failure to release such policy directives contribute to the uncertainty around the government’s objective with Bill C-11? This question is open to any members of the panel.
Mr. Asper: There is definitely a concern, as we always have when there’s legislation that gets translated into actual policy and implementation. As I noted in my comments, it would be helpful to understand in broad terms what comes next because what happens sometimes after legislation is passed is that there’s a whole other round of lobbying. Certainly from our perspective, as a smaller group in the subset of constituents of the system, we worry that we would get out lobbied, effectively.
I did signal that we would certainly welcome the legislators’ intent to be reflected in the subsequent implementation, so I would probably lean towards, at least directionally, some framework that the CRTC is considering to be made available sooner rather than later, but not at the expense of delaying the bill. In our world, we certainly would rather see the bill passed quickly, and then have, if possible — whether it’s Canadian Heritage, the House of Commons or the Senate — some role in shaping the subsequent policy implementation.
Mr. Reeb: I will echo Mr. Asper’s comments. Obviously, we would love to be able to see what the policy direction would entail. I think there’s an open question as to whether that policy direction would call for a heavier or lighter touch when it comes to the regulation of both the current Canadian broadcasters who are in the system and the internet foreign broadcasters who are not. But to echo what Mr. Asper said, we don’t want that to come at the expense of the delay of the bill. The most important thing is that we start to take the steps to level the playing field because right now we face this situation where Canadian companies that pay Canadian taxes, create Canadian jobs and Canadian content face a whole pile of regulations, taxes, fees and quotas, and the foreign competitors come into the market without facing any of that. That’s the first thing that needs to get fixed.
[Translation]
Peggy Tabet, Vice-President, Regulatory and Environment, Quebecor Media Inc.: We would like to see the directive like the last time, because this directive in intended to establish the principles of flexibility and equity.
To answer your first question, these principles should be entrenched in the act and should not rely solely on a government directives, since a directive can of course be changed from one day to the next. If these principles are entrenched in the act, it is more difficult to change. That answers your first question, as to whether there are enough principles to uphold flexibility and equity among the various industry stakeholders. The answer is that we would like to see more wording to that effect. That is what we will say in our brief in terms of an amendment, similar to the principle of what is fair and equitable, which was in Bill C-10, but has unfortunately disappeared from Bill C-11.
We would like to see these things entrenched in the act. So much the better if the directives are in the same vein, but it is also important to have them in the act.
The Chair: Thank you.
[English]
Senator Simons: As some of you may know, I spent 30 years as a working journalist, and 23 of them working for a daily newspaper. Indeed, Mr. Asper used to be my boss. I’m really concerned about the issues of local news deserts and the strength of our news sector, which are problems that I do not think are going to be well addressed by Bill C-18.
For Mr. Péladeau and Mr. Reeb, Bill C-11 is relatively silent on the question of news. Do you think that the bill does enough to ensure the continued sustainability of the news sector in this country and for your companies?
Mr. Reeb: I defer to you, Mr. Péladeau. I’ll happily jump in after.
Mr. Péladeau: I would say that we need to consider broadcasting as a set of different segments, one of which is news, local news, national news and probably also international news, which are certainly less covered by the private broadcasters than the national broadcasters. Given that it’s an ecosystem, the different parts need to be properly financed. If we have a gap economically, if we are not heading in the right direction, if we are moving in a deficit environment, I guess that, one day or another, that would have an impact on our capacity to continue to finance searching, capturing and delivering local news. You’re right to say it’s pretty important. That’s probably the most important. That is what makes the Canadian broadcasters Canadian because if we were to wait for international broadcasters to be able to deliver that news, we’d wait a long time because it’s not going to happen.
This is why we need to take this as a global issue because there are different parts that include this important aspect for Canadians, but also for democracy. What will we do without proper coverage of our local communities?
Senator Simons: Mr. Reeb, especially with Corus’ radio stations, they’re often the only source of news in these otherwise news desert areas. Radio often doesn’t get its fair share of attention. Do you feel there are enough things in Bill C-11 that — I hate this phrase — “level the playing field”? Is there enough to keep news, especially local news, on a footing?
Mr. Reeb: Thank you for the question. It’s obviously an issue very core to my heart. I spent years as a working journalist and television anchor, and also had Mr. Asper as a fantastic boss at one point.
Does the bill do enough? No. Is it an important first step? Yes.
The challenges in the broadcasting sector are distinct from the challenges in the print business. Print, which was a largely unregulated space, faced a meltdown in its economic model with the disappearance of classified ads, movie ads and auto advertising — that kind of thing.
Local news in broadcast, radio and television are facing some of those same challenges with the migration of advertising dollars away from local broadcasters to platforms like Facebook and Google. But the broadcasting sector overall continues to carry this enormous regulatory burden, and it can only carry so many burdens.
At Corus, we’re super proud. We would say our number one obligation that we are proud to fulfill every single day to Canadians is to provide local news across our 15 Global Television stations. We do that, I think, in a fantastic way in all our local markets, and that’s a money-losing business.
News is a money-losing business in print. It was subsidized by all those other sections of the newspaper. It’s a money-losing business in radio that was subsidized by music and it’s a money-losing business in television that’s subsidized by entertainment programming.
It’s those cross subsidies that can no longer be provided to news, and we can only carry so many burdens. We have all these other quotas, fees, requirements for Canadian content, requirements on Canadian production, et cetera, and, at the same time, have foreign competitors who come in and take audiences at the same time as Facebook and Google take advertising dollars. Part of it is just levelling that playing field so that we actually have fair competition with the foreign internet broadcasters. The second step, to Mr. Péladeau’s earlier point, is to start to reduce the burden on Canadian broadcasters with some of those other regulatory requirements. As we level that playing field, it’s bringing the foreign players up and bringing the Canadian players down so that Canadian broadcasters can prioritize local news.
Senator Simons: I know from having worked in a newspaper that it’s difficult to do the transition from conventional to online media. Goodness knows Mr. Asper and I know that very well.
But I’m wondering if, for both Corus and Videotron, you have moved aggressively enough into the digital space. Do you foresee a time when you will stop doing conventional broadcasting and become streamers yourselves? Have your two companies done enough to make sure that you are vertically integrated and are able to compete in a streaming space for a generation of people who no longer watch conventional television and expect all their information and entertainment to be streamed?
Mr. Reeb: Another terrific question. I’ll take this one first if you don’t mind, Mr. Péladeau.
I would say, yes, we’ve moved very aggressively into this space. As you may know, we were the first Canadian broadcaster to provide streaming news services, not just for our national Global News feed but for all local markets that we serve. Those are available through myriad platforms, through the Global TV app, through Prime Video and through the web. We’re experiencing tremendous growth in audiences on those platforms, but understand that the advertising proposition on those platforms is very different. The ad networks are often controlled by these major foreign multinationals, so the dollars that we still get on television and radio are traded for dimes or sometimes pennies on digital platforms.
That’s something that Bill C-18 is aimed at trying to address. I share some of your skepticism — but I also share some of what I think is your hope that Bill C-18 will address some of that discrepancy in that playing field — but I don’t think Bill C-11 is necessarily the place to try to tackle that issue. One foot forward at a time, and the first thing we need to do is tackle the much larger economic issue for broadcasters, and that’s the competition with Netflix, Amazon Prime Video and Disney+. For us, that’s a billion-dollar business, whereas news is a $100 million business.
Senator Simons: Mr. Péladeau, like Videotron, has there been enough of a transition?
Mr. Péladeau: I’m pretty jealous because everyone has been working for Mr. Asper.
Mr. Reeb: He has the wrestling jobs.
Mr. Péladeau: It also gives me the opportunity to say that he used to be a significant publisher a few years ago.
In fact, referring to that, remember how the newspaper business was important for Canadians, and look at what happened not only in Canada but also in North America and elsewhere — the number of newspapers that have closed.
We used to have 30 pages of classified ads, and that has completely disappeared. Mr. Reeb is completely right that this needs to be addressed in Bill C-18, but it doesn’t mean that the Canadian companies just watch the show and wait to see what’s going to happen.
To refer specifically to your question, Videotron was an early bird in facing or anticipating what would take place in the streaming business. We were the first company to launch a streaming service called Club illico, where we have original series that were broadcast which we started ten years ago. Today, it’s one of the most important streamers in French. We compete — imagine — against La Société Radio-Canada, which decided it will go on a streaming service. We already pay for La Société Radio-Canada, but they decided that you need to pay more because if you want to watch all the extras, you need to pay $10. When we’re talking about anti-competition measures, these are the types of things that we refer to.
We were there at the beginning. We’re still investing to make sure that we will be able to propose and compete against the international players, but we certainly do not have the same financial means that those huge organizations have.
We can say that the market capitalization of Quebecor is big. It’s $7 billion, but it’s nothing compared to Google or Netflix, which is $100 billion and more. If we were to put together all the market capital of the American companies, it would be over a trillion dollars.
So, yes, we’re doing what we think we should do. In fact, we certainly have advantages because we understand how Quebec and French culture can differentiate us from the Americans, but certainly not at the levels of production that we are seeing and the way that they’re distributing because their market is the world. Our market is Quebec and the French part of Canada, but certainly not that size.
We will continue to do so, and, being part of the ecosystem, we are able to finance other pieces like the local news that I was referring to, but we are certainly not on the same footing.
[Translation]
Senator Miville-Dechêne: Welcome, Mr. Péladeau.
Let me begin by saying that, like you, I am worried about the future of francophone culture, Quebec culture and even the French language with the advent and powerful presence of these American giants.
All of this does have quite a significant impact in Quebec.
That said, I would like to hear your thoughts on the paradox that some people might see in your seeking regulatory lenience — and I am wondering if you are also seeking regulatory lenience on Canadian content rule — , at a time when foreign platforms are about to be subject to regulation.
I would like to hear your thoughts specifically on the Canadian content regulations imposed on Canadian broadcasters, and also please clarify what you meant when you said that CRTC regulations would in future be far-reaching and full of astonishing requirements.
If I understand correctly, you would like the discoverability criterion, the algorithms, etc. to be dropped, while foreign companies should simply be required to pay. Is that correct?
Mr. Péladeau: That is not a simple matter, senator. The question is, how can foreign companies really be regulated, especially since they are from now on — in the past, you worked for a long time with the Canadian broadcasting system, a license was needed to broadcast content? As a result of technological developments, it is no longer necessary to hold a licence. So how can we regulate as forcefully as the CRTC regulated license holders in the past? That is not an easy question to answer, as you are certainly aware. If this is the reality, what can we do? In our opinion, to ensure that fairness is restored or could be restored, the best option would simply be to deregulate.
From our point of view, and since there are not many Canadian and Quebec broadcasters, I think they know very well that if they want to retain their audience — this is what TVA and its other specialized channels have experienced for decades — people won’t watch Gilligan’s Island any more, but will watch series from Quebec instead. On Monday, we just launched a new daily program, called Indéfendable, roughly translated as “Indefensible.” This is the best and most powerful example. It means that broadcasters will no longer be required to produce and disseminate Canadian content.
The problem arises when they say it needs to have this thing or that thing in it. In cable television, having a basic package that penalizes us — you know, there’s something called cord-cutting, cord-shaving or cord-never. Young people don’t subscribe to cable anymore, as you know. You should also know that it’s the cable system that pays into the Canada Media Fund to a very large extent, and we absolutely need the Canada Media Fund to showcase the talent and everything that we’ve developed in Quebec, certainly in the francophone community. The same thing goes for the anglophone community: to showcase those behind and in front of the camera — goodness knows, there are so many of them. It’s not just the camera operators. We also have writers. It’s an extremely important industry.
With this in mind, we’d like to see this deregulation make people more likely to maintain a subscription rather than being forced to subscribe to a basic package and pay the fee for that. It’s pretty prohibitive, and it’s one of the reasons we’re seeing young people turn to YouTube rather than subscribing to cable.
Sure, we have the internet, and that can be used to promote our culture, but we’re up against foreign giants who can drown us out in terms of content and make it even more difficult for us to compete in this business.
The relief we need is not necessarily technical in nature, but it will level the playing field and have a ripple effect to help us maintain subscriptions, rather than see families and young people spend their money on Netflix, Disney+ and Amazon subscriptions. There are no regulations for those companies and they decide what to broadcast, when to broadcast it, with the extremely powerful technology they have. Those are the dynamics, the challenge and the stakes.
Senator Miville-Dechêne: Those regulations cannot be in this bill. That’s part of what the CRTC should do. So, would you rather have clearer guidelines or do you want the bill to provide regulatory relief?
I’d like to hear what you have to say about the other half of the equation. What do you think should be required of foreign broadcasters, foreign platforms, in terms of Canadian content? You have said several times that they must contribute to the fund in Part II. Should that be the priority, or should they make Canadian content discoverable on their platforms, which compete with the Canadian ones?
Mr. Péladeau: I tend to think that because we’ve nurtured extremely talented people for decades now — we know this, since many have gone to work for studios in the United States and had a hand in creating and developing international platforms.
What we would like is to keep that talent in Canada in a solid and sustainable way. Are we going to achieve that by imposing more requirements? We need to be careful, because we’ve already imposed Canadian content conditions, even on Canadian broadcasters. However, it’s not always easy to define Canadian content. What exactly is Canadian content? Is it the producer, the financing, the broadcaster? Again, sadly, we came to realize that what was intended to be Canadian wasn’t necessarily Canadian.
Should foreign web content distributors be required to stream Canadian content? That still remains to be seen. It’s not a black and white question. In fact, that’s why we think it’s much simpler to deregulate, to ensure that all options are open to Canadians. You mentioned Part II, but there’s the part involving distributors too. I’m going to ask Ms. Tabet, who is a leading expert in the field, to talk to you about that. There’s deregulation, there’s the basic package, but there’s also the tax imposed on distributors. I’m thinking of Part I or Part II. These are significant amounts of money.
Ms. Tabet: There’s Part I and there’s Part II, that’s right. Part I deals with administering the CRTC, but there’s also the 5% of cable operator revenues that goes to the Canada Media Fund and Canadian programming or community television. If you want foreign services to be subject to the Broadcasting Act, they should contribute to creating Canadian programming. Is that to their advantage or the industry’s advantage? The industry’s. Their contribution will go into a fund. Is it the Canada Media Fund? It will go to Canadian production. That’s the easiest way to make them contribute.
That being said, we need to roll back our regulations and remove all this administrative and financial burden we have right now. You should know that whether they regulate or deregulate Canadian content, we’re still going to produce it. As Mr. Péladeau said, in Quebec it’s our mission to produce Canadian programming. Right now, 55% of the dollars spent on Canadian programming on privately owned conventional TV come from TVA. Of all the privately owned TV networks in Quebec, 55% of the total spending on Canadian programs comes from us. That’s not the problem. Whether or not that requirement is removed, it’s all the same to us. We will continue to produce it because that’s how we set ourselves apart.
The Chair: Thank you, Ms. Tabet.
[English]
There are four colleagues on my list for questions, and we have only 16 minutes to go. I intentionally have not interrupted the long responses from our witnesses because they have been interesting responses, so I’ve taken the liberty to allow them to share their views.
Senator Dasko: Thank you to the witnesses for being here today. I have two questions for Mr. Reeb and one for Mr. Péladeau.
The main rationale and the context for Bill C-11 is that the revenues from traditional broadcasting have declined, which has therefore created a very difficult situation for them, so we have to bring into line the foreign streamers. But looking at the recent CRTC report, which looks at audience measurements and revenues up to 2021, I see that in 2021 there was actually an increase in advertising revenues going to conventional television over that period.
Do you think that this provides a bit of a challenge to the argument, and how would you explain that? It’s not as if it’s a constant downward trend in revenues. In fact, we’re seeing revenues going up.
Corus, I don’t know whether your television stations have gone up or down in revenue during that period, but, nevertheless, these figures do show that revenues have actually gone up in that period. I wonder if you have a response to that, and how you will explain that?
Mr. Reeb: I have a very simple explanation for that. Revenues have been on a ten-year downward trend. In 2020, they absolutely cratered because of COVID. In 2021, they had some recovery, but if you look at the ten-year downward trend that continued in 2021. It was a small recovery from the COVID collapse where we had just a broad shutdown in advertising dollars across the system.
The conventional television sector overall for years has lost money, and by conventional, I mean the over-the-air television sector. You can look at CRTC returns year after year for the last decade, and the conventional over-the-air sector has been underwater. So it’s been cross-subsidized by the specialty subscription sector.
Senator Dasko: Are you saying that this one-year increase is an anomaly, and you’re expecting the revenues to continue to go down?
Mr. Reeb: Correct.
Mr. Asper: If I can jump in, senator, as someone living in the system for a long time, there are multiple components in a broadcaster profit line, one of which is the costs, and the cost of content has risen. Mr. Reeb is quite correct that the one-year partial comeback from a significant decline is an anomaly and doesn’t address the overall decline of the sector. The over-the-air broadcasters all combine with specialty channels because those were subsidizing the broadcast part of the business.
I can give you one example. Global TV used to make five times what Home and Garden TV made, but by maybe 2010 or 2011, Home and Garden TV — because it had subscription revenues and much lower costs — was more profitable than Global Television and, I’m pretty sure, CTV, which have these incredible labour-intensive, cost-intensive news requirements. Also, subscriber revenues are on a significant downward trend as people go to the internet.
On the news point, I think it’s important that we think of news as a different animal than what Bill C-11 is trying to address. I just want to weigh in on that, that we have to get this one settled with Bill C-11, as Mr. Reeb suggested, move it forward and then look at the news issue because it involves print, radio, TV and internet, and there is a very different kind of solution required.
Mr. Péladeau’s point on the financial mismatch between the big streamers, in that they can invest in content, how good that content becomes — because it is an issue — is addressed by the redistribution of the revenues back to the broadcasting system so they can invest that money into either news or entertainment programming. That will create better content, and, I think, will allow the companies like Quebecor, Corus and Anthem to compete. It’s important to think about redistribution, allowing people like Mr. Reeb to invest in their news product or their entertainment product.
Canadians are very good at unscripted content. Mr. Péladeau makes a very good point that the regulation on spending requirements is really the one that gets the broadcasters because if they can make content that is cost-effective but still has significant viewership, there should be no requirement to spend more than they need on certain kinds of content. This regulation of the amount of content that Canadians are required to watch, in terms of the percentage they’re forced to air of their schedule, is okay. But when the government and the CRTC get into monitoring how much someone spends on a particular program, it poses a burden on the system.
Senator Dasko: Thank you. Mr. Péladeau, you made several comments about the CBC and Radio-Canada. Do you favour privatizing the corporation? What is your view on that?
Mr. Péladeau: That’s a good question. I think the CBC has its own mission. Having a national or a state broadcaster is important for our democracy. But I think it’s important that the mission of the broadcaster is different from what private broadcasters will bring.
There’s a market, and I guess Senator Miville-Dechêne knows that very well. In fact, that’s also a pretty good example. Ici Radio-Canada, although it is the equivalent of CBC Radio, doesn’t carry any advertising, and there’s a market for that. Personally, I even listen to CBC Radio, even though obviously I watch Radio-Canada on television. But you can see that the mission of Radio-Canada on the radio is different than what the private broadcasters are doing on radio in Quebec. Why shouldn’t this also take place with television? Obviously, no one can go back to 20 years ago, but the mission at that time was a mission of public interest, which, to me, is not the case anymore, and they compete against private broadcasters.
I was talking earlier about a quotidienne. We launch a quotidienne on Monday. You should look at the amount of money that was invested by Radio-Canada in advertising to make their own new quotidienne known. It was all over the place. I think they spent $10 million or even more. So they’re reacting as a private competitor. Is that what we should look for a public broadcaster to do? My opinion is no. My opinion as a Canadian and a Quebecer is that it’s important to have a public broadcaster, but different from what is provided by the private broadcasters.
To come back to the first part of your question, which is also in relation to Radio-Canada, they receive $1.4 billion in financing every year. The private broadcasters don’t receive anything, and they face what the marketplace is all about. When you compare, some will say, “It’s stupid, it’s economy,” but this is what we’re talking about. The trend of seeing advertising going down for the last 10 years, as Mr. Reeb mentioned, is a real fact. And you’ve been seeing Corus, and it’s unfortunate to say it, but we just cannot ignore it.
In fact, Corus recently announced that they’re facing a tough situation, and the stock of Corus dropped significantly. Do you know what the market cap of Corus is today? It’s $500 million. Do you know what is the market cap of Netflix is? It’s over $100 billion. So this is what this business is all about, and if we’re not able to carry a business with profit because we’re not subsidized by any state aid, then it will disappear.
[Translation]
The Chair: Thank you, Mr. Péladeau.
[English]
I hate to cut you off, but there are three senators left and we have only five or six minutes. Maybe we can combine a bunch of questions to get everyone’s questions in. I apologize for the time constraint. As I said, the answers were very wholesome and interesting.
Senator Dawson: Coming back to the bill — because I agree with you, advertising on CBC, come back, and I’ll support you on that. But this is not about CBC, this is about big competition, which is coming on Bill C-11. As sponsor of the bill, I’m quite happy to hear people say, pass it and pass it quickly.
[Translation]
If I may, Ms. Tabet, it also worries me that people would want to include regulations, because it took 30 years to get the bill tabled. If we go into detail and weigh down the bill, we will inevitably put up roadblocks. I hope it doesn’t take 30 years, because given how rapidly technology is advancing, we can’t afford to wait 30 years.
If we make the bill more complex by including the CBC and regulations, I feel we would be working against Bill C-11’s true objective, which is to re-establish balance with the international industry. I don’t mean to criticize you, but we can’t have it both ways. The government tried to find a middle road — I’m a sponsor in the Senate.
[English]
I was saying last night to Mr. Péladeau that yesterday, 3 million Québécois were listening to Québécois television because we consume what we produce.
[Translation]
An outstanding week, and it may not be so great this evening with the leaders’ debate, but we’ve had a successful week of French-language television under the existing regulations.
It’s because the language is protected in Quebec, it gives us that leg up. We need a framework for the rest of Canada, and that’s what Bill C-11 aims to do.
I’d like to thank my friends from Corus Entertainment Inc., and by the way, Mr. Reeb’s father was a client of mine, but he was never my boss. Mr. Péladeau, your father appeared as a witness before me 30 or 40 years ago, but the reality is that things are moving so slowly, we don’t want overly restrictive regulations.
That’s the balance I was seeking. What do you think of my comments?
Ms. Tabet: It’s quite the opposite. We’re not looking to increase the regulatory burden, we want to lighten it. That’s very important, we don’t want to increase it, we want fewer regulations.
Senator Dawson: If we put it in the act, we’ll make it harder to improve as we go.
Ms. Tabet: We want to throw in our two cents to make it fair and equitable. No, we want to remove many of provisions in this act to lighten it up. The goal is to ease regulations, not add more.
Senator Dawson: The reason we’re here is to try to improve the bill, so I’m happy to work with you.
[English]
Senator Quinn: I’m going to pass because both Senator Miville-Dechêne and Senator Dasko touched on the subject, so in the interests of time, go to the next senator.
The Chair: You’re a gentleman and a scholar.
[Translation]
Senator Clement: I really appreciated the sense of urgency you put into your presentations. I feel we’ve come to that.
[English]
Thank you for the sense of urgency with which you speak.
I wanted to shout out to Corus for boom 101.9. I’m from Cornwall, a small market, and those local radio stations are really an important source of connection, so thank you to Corus for that work.
Mr. Reeb: Thank you.
Senator Clement: Bill C-11 requires through its programming and employment opportunities that the Canadian broadcasting system must serve the needs and interests of Canadians, including Canadians from racialized communities and Canadians from diverse backgrounds. What impact does that have on you? Are you already doing this? Are you happy about this? Because certainly many communities are.
Mr. Reeb: I would say that it’s a mandate that we embrace, and it is an example of where the Broadcasting Act takes an important public policy goal and applies that to regulated Canadian broadcasters in a way that is asymmetrical with what happens with foreign players that come into the market and don’t have the same kind of requirements, encouragements and inducements that the Canadian broadcasting system does.
It speaks to the overall concern that there are so many things about the Canadian Broadcasting Act that are enriching for Canadian culture, and, conversely, can complicate the business model for Canadian broadcasters. What Bill C-11 gets right is trying to level that to make sure that whether there are more regulations, more encouragements, more inducements, more quotas or whatever it’s going to be, that they will be equitable to the foreign players that come into the system. Because that is a place, to your point, senator, where the system can be encouraging and supportive of Canadian broadcasters, and broadcasters need to be held to account for it in a way that foreign players simply are not.
Our key point is whether or not — and I’m pleased to hear Senator Dawson say they’re looking at reduced regulation, not increased regulation on Canadian broadcasters as a result of this bill — this is about putting more regulations on foreign players or lowering the regulations on Canadian broadcasters so that we can compete with foreign players, the most important thing is that we have to have an equitable system that brings everybody into being able to compete with each other.
The Chair: That brings us to 11:15. I want to thank all our witnesses and panellists today, it was a great exchange and it really helped in pushing the file forward.
For our second panel this morning, we are pleased to welcome our witnesses: from Spotify, Regan Smith, Head of Public Policy, Government Affairs, who is with us by video conference; Nathan Wiszniak, Head of Artist and Label Partnerships, also by video conference; from one of my favourite companies, the Walt Disney Company, David Fares, Vice President, Global Public Policy; and from the Digital Media Association, Garrett Levin, President and Chief Executive Officer. We’ll begin with our opening remarks from Ms. Smith, followed by Mr. Fares and then Mr. Levin before we move to questions from members. Ms. Smith, the floor is yours.
[Translation]
Nathan Wiszniak, Head of Artist and Label Partnerships, Spotify: Mr. Chair, committee members, thank you for inviting us to speak to you today.
[English]
My name is Nathan Wiszniak, I’m Head of Artist and Label Partnerships at Spotify Canada and I’m joined by Regan Smith, our Head of Public Policy, Government Affairs.
Today’s conversation is deeply important to Spotify. We share the government’s commitment to celebrating Canada’s unique and diverse cultures, uplifting voices and stories. The process before this committee is important, and we’re here to be a constructive partner and offer suggestions to help the proposed law achieve its objectives.
Spotify invests in Canadian voices at home and on the global stage and we plan to continue this work. We want Spotify to be a model for how an online platform can responsibly contribute to Canada’s creative ecosystem. However, while we support the goals of Bill C-11, we are concerned that without adjustments it may actually make it harder for us to continue this path. We urge you to consider constructive changes to ensure services like Spotify can meet the policy goals of Bill C-11 without disrupting existing investments that are supporting Canadian artists or damaging listener trust or the quality of the listening experience.
Let me show you what I mean. After launching in 2014, Spotify Canada has grown to over 11 million monthly users. In a given week, our Canadian users explore 83 times more Canadian music on Spotify than played on broadcast radio; 8 billion streams of Canadian content are exported all over the globe every month, providing artists with royalties for over seven times the streams overseas for each one in Canada.
Spotify unlocks success for Canadian artists in different genres and stages of their career from superstars Drake and The Weeknd, to award winners like Charlotte Cardin, to more than a thousand emerging artists we’ve featured in our RADAR Canada franchise for the very first time. We do this through editorial and marketing support as well as personalized recommendation. My team helps curate over 90 playlists focused on elevating Canadian artists who may be Indigenous, a francophone rapper or a local Punjabi artist making waves overseas. We are proud to highlight Canada’s diversity with marketing campaigns that celebrate Black creators, women in music and LGBTQIAS+ voices.
Spotify uplifts artists that aren’t played on the radio. For example, 7 out of the top 10 most streamed French Canadian artists are independent rappers and only two of those artists currently appear on French Canadian radio charts. Streaming is based on understanding user preferences and exceeding their expectations, and it enables discovery in a way broadcasting never has. Audio streaming isn’t radio and it’s different than video streaming and it can’t be regulated in the same way.
For example, overriding user preferences could backfire. Rather than pushing content in a one-size-fits-all manner, we recommend content users want to hear.
Next, with over 80 million tracks, we do not receive sufficient metadata from partners to apply the radio definition of CanCon to our music libraries. This means that many songs our culture considers Canadian across all tiers are unlikely to technically qualify.
Moreover, our economic model also differs from both radio and video. Approximately two thirds of every dollar we earn from music is paid over to rights holders who, in turn, pay artists. This amount is 8.5 times the rate paid by radio and should be factored into contribution expectations.
As Canada prepares to enact this first-of-its-kind legislation, it is critical that this committee hears from the businesses who are driving the industry and would be impacted by the law.
We respectfully recommend three practical changes to be considered. First, the CRTC should be given criteria it must consider before regulating these undertakings. While the bill refers to criteria specific to video production, it needs similar guidance for audio streaming platforms. Cultural fund expectations should take into account all contributions made to support Canadian culture, including royalty payments.
Second, rules should ensure that Canadian consumers get options while retaining control of their listening experience. Asking services to repeatedly bias recommendations against listener preferences strikes at the core trust that we built with our customers and could create negative feedback for those songs, ultimately harming the artist.
Third, the rules defining what qualifies as Canadian content should be updated and related obligations should reflect the audio streaming model. Given the scale of the streaming libraries, the industry will benefit if platforms can make good faith, commercially reasonable judgments to identify Canadian content using the expertise and information available to them.
Finally, the CRTC should be given time to follow the evidence before making decisions. Canada has momentum on Spotify and we want to make sure we can build on that. Thank you. We look forward to hearing your questions.
The Chair: Thank you. Next in line we have Mr. Fares.
David Fares, Vice President, Global Public Policy, The Walt Disney Company: Thank you, Mr. Chair and members of the committee for inviting me here today.
I appreciate the opportunity to discuss the important relationship between the Walt Disney Company and Canada, as well as Bill C-11.
Canada is one of Disney’s top four production markets. In the last three years, our content spanned across all of our production companies was approximately $3 billion on content to be featured on multiple platforms for worldwide distribution.
We produced six of our most recent feature films in Canada. In 2021, we produced 18 TV and VOD original series in Canada with Disney+ Originals offering a source of growth for productions. Indeed, when Disney+ launched, three of its six original programs were produced in Canada.
We have also produced uniquely Canadian stories. First, “Barkskins,” produced by National Geographic, tells a unique Quebec story following two French families over a 300-year period, beginning with their arrival in New France. The “Barkskins” production team worked closely with the Wendat Nation to ensure historical accuracy and respect.
Second, “Turning Red,” a Pixar animation film released on Disney+ on March 11, is a love story about growing up in Toronto, created and directed by Canadian award-winner Domee Shi.
We are also producing a series based on the award-winning Canadian novel Washington Black.
It is important to note that “Barkskins,” “Turning Red” and Washington Black do not qualify as Canadian programs under the CRTC’s current definition, notwithstanding their unique Canadian stories.
Our special relationship with Canada is not limited to productions, but includes a permanent physical footprint with state-of-the-art and innovative facilities staffed by high-skilled talent.
Two of Disney’s production companies have a physical presence in Canada and are expanding to fuel growth in the AV sector, including infrastructure and skills development. Industrial Light & Magic, or ILM, a visual effects subsidiary of Lucasfilm, has one of its five global offices in Vancouver, employing 500 people at any given time. ILM is expanding its footprint, building a 20,000-square-foot virtual production stage. The StageCraft LED system will ensure that Vancouver continues to be one of the most innovative VFX hubs in the world.
In August 2021, Disney Animation Studios announced that it would open its first production facility outside of Burbank, California, in Vancouver, hiring 400 highly skilled employees over the next two years.
Disney also works with independent Canadian production companies, helping them grow and establish themselves as leaders in their fields. Two important examples are Mercury Filmworks in Ottawa, an animation studio with which Disney has worked on at least 10 productions. The second is Omnifilm Entertainment based in Vancouver. It is a live action production company with which we have worked on at least five productions.
We’re also very pleased that we have recently hired Stephanie Azam as our director of content for Canada. Ms. Azam is ramping up our Canadian programming strategy and its deployment, which will seek the best storytelling available across the entirety of Canada from Ontario to B.C. and Quebec to the North Atlantic.
Mr. Chair and committee members, I understand that a main driving and motivating factor behind Bill C-11 is that if you benefit from Canada, you should contribute to Canada. I hope that in the last few minutes I have successfully demonstrated Disney’s proud contributions to Canada and its creative ecosystem. We hope to invest further in Canada, and a flexible regulatory regime will allow us to maximize those future investments.
From our perspective, a flexible regulatory regime would recognize that each company offers a different proposition to its consumers. Accordingly, consumer expectations flow from a company’s particular offering. Disney+ is unique in that it predominantly offers content from Disney’s own brands — Disney, Pixar, Marvel, Star Wars, National Geographic and Star. Given this unique offering, we hope that Bill C-11 will allow each company to contribute to the health of the Canadian AV ecosystem in a manner consistent with the service it offers, fuelling consumer choice, benefit and diversity.
As noted, Disney is proud of its contributions to Canada, but they differ from those of Canadian broadcasters by the very nature of the content on offer. For example, Canadian broadcasters devote a significant portion of their content spent on news and sports, content that Disney does not produce in Canada. We would welcome the opportunity to work with you to ensure that Bill C-11 recognizes and embraces such differences. Thank you, Mr. Chair and committee members, and I look forward to answering any questions that you may have.
Garrett Levin, President and Chief Executive Officer, Digital Media Association: Good morning, Mr. Chair and honourable senators. Thank you very much for inviting the Digital Media Association, or DiMA, to appear before you today to discuss Bill C-11, the Online Streaming Act. DiMA is the trade association advocating on behalf of the world’s leading audio streaming companies — Amazon, Apple, Spotify, YouTube and Pandora.
Streaming is a success story in Canada, one whose benefits will continue to grow in the coming years. A decade ago, the music industry was faced with declining revenues, struggling to get people to pay for music. Today, in Canada alone, audio streaming services are generating hundreds of millions of dollars in royalties to artists and rights holders. The successful turnaround demonstrates the indispensable role that DiMA’s members play in providing Canadian creators with unparalleled access to audiences, both at home and on a global scale, and likewise connecting Canadian music fans with incredible music from Canada and around the world.
In today’s streaming-powered music industry, Canadian success stories like Drake, Justin Bieber, Shawn Mendes, The Weeknd and Jessie Reyez are not just household names in Montreal, Ottawa and Saskatoon, but also in Paris, London, New York and across the globe.
The impact of streaming goes beyond global superstars. DiMA’s members support Canadian artists and rights holders in both financial and non-financial ways that traditional broadcasters simply cannot match. For instance, our members currently pay between 65 and 70% of their revenues to rights holders in the form of royalties stemming from licensing agreements. Canadian commercial radio stations pay just 8.2% of revenues.
Music streaming launched in Canada less than a decade ago and now comprises almost 78% of the country’s recorded music market, as measured by revenue generated. The most recent data showed an 18% year-over-year growth in 2021, outpacing all other segments. What does this mean for Canadian artists and rights holders? A 2021 study commissioned by Canadian Heritage found that Canadian songwriters, music publishers, performers and record labels earned more than $500 million from streaming in 2019 alone. That number has continued to grow in the three years since, and there’s no reason to believe it will stop any time soon.
What makes streaming different than other distribution models? Unlike record stores of the past, streaming provides unlimited shelf space for Canadian music, including for independent and French Canadian artists. Those limitless shelves are offered to an audience of over half a billion worldwide users. Moreover, unlike traditional radio where airtime is finite, on-air playlists are limited in scope and transmission is one to many within a local area, streaming occurs simultaneously around the world in millions of one-to-one transmissions that are chosen on demand by fans and personalized through the use of sophisticated recommendation engines and discovery tools.
Streaming services deliver quite literally nearly every single Canadian recording ever made to fans both domestically and abroad, obliterating old barriers and unlocking access to the full spectrum of Canadian voices.
To fully meet this bill’s important goals of supporting Canadian art, it’s vital to recognize and account for the differences between streaming and legacy broadcasting at this point in the legislative process. We therefore urge Parliament to make changes which we believe will continue to allow the industry and Canadian creators to thrive at home and in the borderless global music industry that streaming has facilitated.
We propose six amendments in our written brief, and we urge this committee to consider all of them. We would like to emphasize two today.
Algorithms are essential to the streaming user experience and discoverability of music. The combination of personalization and catalogue breadth sets streaming apart from all other distribution models. Accordingly, this committee should add a provision that prevents the CRTC from interfering with algorithm decision making.
Section 9.1 of the bill currently prohibits the CRTC from requiring the use of a specific algorithm or source code. This narrowly drafted text risks diminishing the very user experience that has made streaming a success, ultimately threatening to limit both the local and global reach of Canadian artists. We propose adding a subsection that ensures the commission will not “require changes to or the use of” an undertaking’s algorithms or source codes. This would allow for common sense regulation that does not threaten to diminish the consumer music-streaming experience.
Second, Bill C-11 should ensure that the CRTC considers the significant financial and non-financial contributions made by streaming services to Canada and Canadian artists. From substantial royalty payments to concerted efforts to highlight and support Canadian music, all of streaming’s benefits should be considered during the regulatory process. We propose creating a new section to explicitly require the CRTC to examine the full range of benefits that streaming services provide.
I want to thank the honourable senators on this committee for seriously considering Bill C-11 and working to produce a legislative framework that ensures the future for Canadian artists, fans and rights holders alike remains innovative, successful and open to the world. Thank you for your time. I would be pleased to answer any questions.
The Chair: Thank you, and I will turn it over to my colleague Senator Miville-Dechêne to launch our period of answers and questions.
[Translation]
Senator Miville-Dechêne: My question is for the Spotify representative. You seem to attach a lot of importance to Canadian content, to French-language content. With that in mind, I’m of course wondering why you fear certain aspects of Bill C-11, which will ultimately only codify the importance of Canadian content.
More specifically, could you give us some figures? You’re talking about Canadian content, so you surely have numbers as to what’s being listened to in terms of Canadian and Quebec content. Can you share them so we can get an idea of how that music content fares on your platform?
[English]
Regan Smith, Head of Public Policy, Government Affairs, Spotify: Thank you for the question, senator. You’re right, we do support the broad objectives of the online streaming act. Spotify works very hard to support and uplift Canadian creators in the musical space as well as in podcasts. We believe that what we’re doing is working and is growing listenership, particularly in genres and voices that might not be heard on traditional radio.
We are here because we do think that some legislative adjustment is appropriate before proceeding to make sure that those efforts can continue and that, as we work to implement around Bill C-11, if enacted, what has already been working is not disrupted.
We have been seeing a growth — as I think is borne out in the industry, as Mr. Levin testified — in consumption of recorded music in Canada on streaming platforms. That is true in and out of francophone markets.
Senator Miville-Dechêne: Can you be more specific in terms of numbers? To understand the situation, we need to know how often Canadian music — Quebec music — is listened to on your platform, which was one of the biggest.
Ms. Smith: Thank you. Yes, I appreciate that. I think as we explained, in a given week — we surveyed a week in the spring — over 83 times more Canadian content was played by Canadian listeners on Spotify than on radio. That was over 600,000 tracks in general.
When we also look at the trend line, since 2019, we’ve seen an 18% uptick in revenue associated with what we would consider to be Canadian music. That is actually 21% when we look at music that is Québécois, so that trend is going higher for Quebec. Some of that is, we think, related to an increase in users in the younger generation, particularly Gen Z in Quebec, which we see as positive because we’re reaching people who may not be listening to traditional radio.
Senator Miville-Dechêne: I’m trying to understand. I’m sorry, you said 21% of Quebec music. To get a feeling of exactly what we’re talking about, you said 600 tracks that are Canadian — on how many, and what kind of percentage is that? Also, the 21% Quebec figure refers to an increase and certainly not the total listening on your platform.
I’m trying to get a sense of how much Canadian and Quebec music people are listening to on your platform, so I need figures that make sense.
Ms. Smith: Certainly. We’ll also be happy to follow-up in writing if that is helpful because I understand the figures and I want to make sure they come across.
I think the figure of 600,000, which was the number of individual tracks that received a play in Canada — of music we would consider Canadian — is the first statistic. The second statistic is, in Quebec, a 21% increase in listenership. So, compared to what was before in 2019, that is what we are seeing now.
Senator Miville-Dechêne: I have just one last question, which is on discoverability. I’d like to hear about algorithms because it seems to me — I’ve read your brief, which is quite good — you’re already recommending Canadian music in algorithms. So how would that change with Bill C-11?
Ms. Smith: Thank you again. Yes, we are absolutely promoting Canadian music both algorithmically and through all of the efforts that my colleague has detailed through our marketing and human editorial support. We want to keep doing that.
Where we think the bill is deserving of your attention is to ensure there are sufficient guardrails so that any regulation does not disrupt the way we’re using our algorithms to sort of nudge discovery along with the user-led nature of streaming. We have offered a practical amendment to that effect.
Senator Miville-Dechêne: As you know, the CRTC is asking for results, however you reach them. They’re not forcing you to use algorithms.
Ms. Smith: We appreciate that but we do think — and I say this as a former regulator — we believe more specificity for the CRTC may be helpful as it sets out to enact and promulgate the roles that will allow all of us, including Spotify, to work to implement the desired results, so we would not want to be encouraged to make changes that would disrupt the listener experience or damage the trust. We don’t think that would serve the interests of the listeners, or the artists, as well as our platform. Thank you.
Senator Miville-Dechêne: Thank you very much.
Senator Simons: I wanted to follow-up on Senator Miville-Dechêne’s questions.
We heard yesterday from OpenMedia and the Public Interest Advocacy Centre. They spoke to us about their concerns that if the CRTC directed streamers, whether that was YouTube, Spotify or other music services, to sort of goose the algorithm to promote Canadian music, it could actually have a backlash effect and mean that the artists in question were prejudiced because people were skipping them and not listening.
Mr. Levin, Mr. Wiszniak or Ms. Smith, could you explain whether you think that’s a legitimate concern, and how that would happen if so?
Mr. Levin: Thank you for the question, it’s a very important one. It goes to the heart of what DiMA’s members, including Spotify, have concerns about, which speaks to how users actually interact with services. We tend to think of — or at least the bill is often discussed as if streaming is just an evolutionary step from radio broadcasting, but really what it is is a never-before-seen combination of every way we’ve accessed music before. That includes record stores, radio stations, mix tapes and mix CDs from your friends and your friend recommending a great artist you would love.
That means that every user is interacting with the service in a slightly different way. At the heart of that is the customization and personalization that the algorithms and recommendation engines allow for. At the end of the day, if the regulations are such that they are dictating content and outcomes based on how we tend to think about radio programming, you will end up with a far less satisfactory consumer experience and a far less dynamic market. That applies both within Canada and more broadly on a global scale, as well.
Those concerns being articulated about forcing content onto folks are really well taken and are behind a lot of why we’re asking for clearer direction to the CRTC with respect to algorithmic decision making.
Senator Simons: Whereas I have a great deal of sympathy with your arguments about algorithms, I have a little less sympathy with your argument that making royalty payments ought to be considered part of your contribution, above and beyond. Royalty payments are the rent you pay for the right to play the music. Otherwise, you are, to put it bluntly, stealing the music.
So I’m concerned when Mr. Wiszniak of Spotify says that the metadata is insufficient to categorize things as Canadian. I presume that also means the metadata is insufficient to make the appropriate payments to SOCAN and the music publishers.
I don’t know if this is a question to Mr. Wiszniak, Ms. Smith or Mr. Levin, but it seems to me that in this day and age, tracking the metadata ought to be the least of our challenges. Why are you unable to track the metadata to make the royalty payments appropriately, and why on Earth would you consider royalty payments to be part of your contributions, above and beyond? The music belongs to the artist. You must pay them royalties. Otherwise, you’re not paying for the use of their work.
Mr. Levin: I’m happy to start on that —
Ms. Smith: Why don’t you start, and we’ll add.
Mr. Levin: I spend a lot of time talking about data in the music industry, and it’s an issue of deep interest to the streaming services. I would like to note, for the record, that the question of the metadata with which to pay rights holders versus the kind of metadata that would be required to specifically identify things as Canadian content under the standards as they exist now are actually two different questions. However, the data challenges that exist in today’s music industry come from a lot of different reasons, primarily due to the speed with which music is introduced, the volume of music that is introduced and the ability of rights holders to accurately assign the proper data information at the point of creation.
I certainly do not want this committee to be left with the impression that services are failing to pay rights holders because of metadata challenges. I do think metadata challenges impact how accurately and efficiently collectives like SOCAN are able to get the money to the proper creators, but that is a slightly different issue than the one that Mr. Wiszniak was raising about the ability to identify things as Canadian content.
On the royalty point, I don’t want to leave the impression that we’re saying that royalty payments are the only type of contribution that gets made. You are absolutely correct that royalties are the cost of actually getting the licences to stream these works. At the same time, what we are trying to point out is that the delta between the royalties that streaming services are paying — upwards of 70% of their revenue — versus the royalties that are being paid by the commercial broadcast sector at 8.2% actually should factor into the question of what kind of contribution is being made to the Canadian music industry and the creation of Canadian art.
Nothing is actually more directly relevant to whether more art is created than the amount that is received in compensation for the use of that art.
Ms. Smith: I think that explained the industry well. I just want to clarify that what Mr. Wiszniak was saying about the metadata we may or may not receive about nationality, of place of production, artist or co-writers in terms of adhering to the current CanCon system, that is very separate from not having the correct data to pay the rights holders we have contracted for use of music on the platform, which we do. So SOCAN, for example, has seen a record revenue, and they are one of our partners that we pay. That is separate from whether or not on a scale of 80 million plus musical tracks, the specific radio rules for determining whether something qualifies as Canadian can be scaled with the metadata we receive from our partners.
Senator Simons: Instead of using the MAPL system — I used to be a radio producer; I used to have to program the music — maybe we just need to say that if they’re SOCAN rights holders, they are perforce Canadian content.
If there is a second round, I would love to have a question for Mr. Fares too.
Senator Quinn: Thank you to everyone for appearing before us today. My questions are simple. This is an area of expertise outside my realm of expertise, but I’m interested in all the discussion that has taken place over the last couple days about contributions to SOCAN and promoting and developing Canadian talent in all aspects. While I agree, I think Senator Simons hit it on the head when she talked about royalties belonging to the artist — and I think I just heard agreement with that. So too is the establishment of brick and mortar and the jobs that go with creating that and employing Canadians in the various activities that take place within those brick-and-mortar establishments.
My question is more along the lines of what happens to the profits that go back to the mother house — back to the shareholder, if you will — like Spotify, Walt Disney or any of the big companies. Shouldn’t they, too, be contributing to SOCAN so that pool of talent being drawn upon continues to develop and expand? Isn’t that to your benefit?
That’s for all of them.
The Chair: Anyone want to take that on? Not everyone at the same time.
Senator Quinn: Maybe there’s no answer.
Ms. Smith: I think what we are saying is that when the CRTC is to figure out how to look at what an appropriate contribution is, it should look at the whole nature of supports and how, in the example of audio streaming — and I can’t speak for video streaming — it operates differently.
Mr. Levin may be able to speak to broader industry trends, but speaking for Spotify as a pure play service, the margin pressures are historically thinner than in the record store days or, I think, with radio and so that is partially why we think all the contributions should be factored in, both the amount of content that is available on the platform, the range of supports that are provided, the tools that are provided to artists — as well as the royalty payments. Because it is not just about music revenues that come in but what is able to be kept and looking at that and ensuring that the system is sustainable for all players in the Canadian audio ecosystem — which would include the platforms as well — and that we are incentivized to consider pouring in investments in campaigns that are really starting to elevate new voices and new genres of Canadian artistry here in Canada as well as around the globe.
Mr. Levin: I think it’s a very good question. I would just add that while we have talked about the royalties, the other benefits that, I think, Ms. Smith was just talking about — which Spotify highlights in their brief and that we have highlighted on behalf of some of the other DiMA members in our brief — there are contributions to the sustainability and creation of Canadian art being made by streaming services that are not matched by broadcasters today whether that’s through the curation of Canadian-specific playlists, through investment in in-country employees and facilities or the incubation of artists that never would have been and aren’t played on the radio unless and until they achieve some sort of star status.
Those are the types of contributions that we would encourage the CRTC be directed to take into account. Because while for legacy broadcasting there is this view that the best way to support further creation of Canadian art is through contributions through things like SOCAN, et cetera, what I think streaming is proving in both Canada and around the world is that there are a lot of other ways to invest in furthering local creation and supporting local culture and community.
Mr. Wiszniak: I just wanted to build on that. Specifically, my team’s primary job is to work with the Canadian music industry — to work with our local rights holders from major labels to independent record labels to distributors across Canada and specifically in Quebec. We work on marketing campaigns that support the playlists we’re creating — again, we’re curating over 90 playlists based on the spectrum of Canadian content.
In addition, we are facilitating writing studios. We have a writing studio based here in Toronto that is at no charge for writers and publishers to use that studio for songwriting. In addition, we are contributing to the recordings of Canadian content through our Spotify Singles program. We were working with partnerships with recording studios in Toronto and in Montreal.
At the core of the job at the Spotify Canada team and the music team, it is really our job to ensure that Canadian voices are heard through our programming, through our off-platform marketing and those investments that we’re making to build these stories for Canadian artists here at home, and then hopefully take those stories and communicate those to our counterparts in other territories.
Mr. Fares: I’ll jump in here. As I mentioned in my opening statement, over the last three years, we spent approximately $3 billion on content production in Canada. Each one of the productions contributes to the hiring and development of high-skilled talent in Canada and infrastructure, which actually benefits the entire AV ecosystem.
We are also working with the local production companies — I mentioned Mercury Filmworks and Omnifilm — which actually helps build them up and ensures their ongoing success and expertise. We’re hiring people as we build out the virtual production StageCraft LED system in Vancouver. We’re hiring and training people through Disney Animation Studios, which is opening up in Vancouver. There is a lot that we do to contribute to the overall health of the audiovisual ecosystem.
Indeed, we are finding ourselves in a situation in the AV sector where there can be a shortage of skilled talent, and we’re working with numerous provinces to help build up the skills base in the provinces so that we can continue to bring more and more productions to Canada. But when you have skill shortages, that is a problem. There are many things that we’re actually doing that can contribute to the overall health of the Canadian ecosystem. We hope to continue to do more. We need a flexible regime to allow us to be able to do that.
Senator Quinn: As we go forward, there has been a lot of input from various stakeholders about the CRTC and the power it may or may not have. When the act came in, as I understand it, the appeal process was very limited. You went to the courts or, at one point, you could go to the minister. In any case, is that an appeal process that you think is an appropriate appeal process given that we have a much broader demographic and more participants in this field and courts may not be the best appeal process? Is that appropriate according to you or is there another appeal process you would like to see?
Mr. Levin: I think that’s a question that I don’t actually have an answer for today. I’m not an expert in Canadian regulatory law and the appeals process. That’s something that we could definitely take back and respond to in writing, if that would be helpful.
Mr. Fares: Likewise from my perspective.
Senator Dasko: Thank you to the witnesses for being here today. My question is for Ms. Smith and Mr. Wiszniak at Spotify. Here is a hypothetical situation, which may not be all that hypothetical. Let’s say Bill C-11 passes as it is today without the changes that you have requested. So the bill in front of us passes. It’s a year from now, and you are sitting in the office of the chair of the CRTC and he or she asks you the following question: Tell us what your proposal is for discoverability. What is it that you are proposing to profile, to exhibit or to present Canadian content? You’re in a position of having to answer not what you can’t do, but what you will do or can do. I would like to hear what you would say to the chair of the CRTC in this situation.
Ms. Smith: Thank you, senator. We welcome that question, and we are here in anticipation that we will be taking steps to work with the CRTC and help the implementation stage. You’re right, what we can’t do, we think, are areas where the legislation may be deserving of amendment. What we can do, in large part, we’re already geared up toward doing. There are a number of ways we are promoting Canadian music, Canadian podcasts and Canadian voices on the platform. I think we would probably go in and just explain the stories we have that are working. I will let my colleague explain that.
Mr. Wiszniak: Yes, I think it’s in addition to. For us, it’s about that retention of these 11 million incredible consumers that we have on our platform, and we want to be able to have specific areas where we will be able to showcase Canadian content, and a lot of that work is being done. When we search in specific genres on our platform, if I’m going into rock, the first thing I’m going to see is the Canadian playlists that our teams are curating, and in any other genres specifically. In regard to francophone content, we have a hub that is dedicated specifically to our francophone programming and the releases that are coming day over day, in addition to the robust catalogue that we also have.
We are doing a lot of the work as it relates to showcasing Canadian content because, as I mentioned earlier, at the core of our job at Spotify Canada and the artists, the label services and the music team in general, it is our mission and our job to create an environment, since 2014, where Canadian artists will be able to thrive through our playlisting, the marketing we’re doing and the on-platform merchandising we’re currently doing.
We want to ensure that the regulators understand what we’re doing to promote Canadian content. We do feel it’s working. Again, having been here since 2014 — almost 8 years in this job — to see the growth of the Canadian music industry, the infrastructure in the record labels and the investments into the domestic repertoire is the most exciting part of our job. To see the incredible amount of Canadian content that we get to work with every day and that we get to work with our partners in other territories.
The work that we’re doing to showcase currently on platform and in a lot of the investments that we’re making off platform through our marketing campaigns are really doing the job now and we want to be able to continue to do that work.
Senator Dasko: So essentially you’re talking about playlists for Canadian —
Mr. Wiszniak: Correct.
Senator Dasko: — let’s say, rock music or French language playlists, but you wouldn’t be changing your algorithms in any way. That would not be part of it. You would be using these other display options. That’s what I understand, right?
Mr. Wiszniak: Yes, and the engagement we’re seeing through our Canadian playlists and the way that we’re serving those to Canadian consumers results in more discovery of Canadian artists as they’re listening to our playlists. I’m listening to our Canadian hip hop playlist “Northern Bars” and I’m finished that session, but I’m going to continue being served Canadian content that is relative to the music that I was listening to. And the more that our users on the platform are engaging with Canadian content, the way that we are serving them and that they are adding to their collection and the engagement that we’re seeing further results in how discoverability is going to work in their favour for new Canadian artists to be serviced to them as Canadian music fans.
Senator Dasko: Thank you.
Mr. Levin: I was going to offer a little bit of an industry-wide perspective on that because I think it’s a great question, senator. One thing I would note, and I think Mr. Wiszniak was touching on this a little bit, is that one of the advantages of having that conversation a year from now is that we will have a year’s worth more data, engagement, progress and innovation from the streaming platforms. This is a fast-moving industry that is still quite young, all things considered. What you hear from Spotify is an example of what streaming services are doing, but this is true for all of DiMA’s members operating within Canada. This question of discoverability and showcasing is core to the consumer experience, core to the proposition that they present to Canadian music fans and consumers and it’s necessary to the competitive landscape.
A lot of what would be talked about in that hypothetical conversation a year from now is the success that the services have had in promoting, showcasing, making discoverable Canadian content — not just here in Canada, but around the world, which we haven’t touched on much in this conversation, but I think it is a really important element of the conversation as well.
Senator Dasko: Thank you.
Senator Clement: Thank you for appearing before us. I tend to like disrupting cozy listening and viewer experiences. I work towards cheating the algorithms so that I can be presented with things that are unexpected for me. I worry about how little Canadians actually know about how algorithms work. I also worry about metadata and data not being available to regular people. Those are my opening comments.
Disney, I see, for example, you’re offering Canadian content. I guess I’d like to know more about this because it feels inconsistent. You’re saying we don’t want to curate. We don’t want algorithms or forcing Canadian content, but you’re already kind of doing Canadian content curation. I’m struggling with that because in your brief you talk about doing it. How are Canadians engaging with what you’re offering? Do you have data on that?
Spotify, in your brief, you talk about 8 billion Canadian streams. Is that our Canadian superstars — Bieber, Drake, The Weeknd — or does that also include emerging Indigenous artists?
I feel like we need a breakdown of what this means, how you are curating Canadian content and why you are saying that you can’t when you’re already doing it?
Mr. Fares: I didn’t hear you, senator. Was that question also directed to me?
Senator Clement: Yes, it was.
Mr. Fares: If you don’t mind, I’m happy to go first on that. Thank you for the question.
I don’t think that we’re saying that we can’t curate. Indeed, as you know, we do curate. We actually have a collection called the “O Canada” Collection on the home page of Canadian subscribers —
Senator Clement: I’m aware.
Mr. Fares: — which is a subset of our library that is a curated subset of libraries that includes content that has a specific relationship to Canada, whether it’s a Canadian story, Canadian talent or Canadian landscape. We update that every year on Canada Day as part of our celebration of the country.
We also have an inherent incentive, and it is actually an imperative, to provide consumers the content that they want to watch. We’ve come to learn over many years that subscribers like local content. Therefore, our algorithm will respond to queries about the different characteristics of the content that people are looking for.
I don’t think what we’re saying is we can’t do it. What I know we’re saying is we’re constantly trying to innovate to make it possible for that search functionality, or a discoverability of whatever a consumer wants to watch, to be easier for the consumer.
What we don’t want to have are prescriptive regulations that would inhibit our ability to innovate over time. That’s what we’re saying from our perspective, if that helps.
Senator Clement: You’re keeping data on all of this content and reaction to that content?
Mr. Fares: Yes. There is data collection, yes.
Senator Clement: Thank you.
And from Spotify?
Mr. Wiszniak: Yes. That was a great question with regard to the 8 billion streams globally that are being listened to around the world of Canadian artists.
As we launch into new territories, new opportunities come for us to have new audiences for Canadian artists and probably one of the most exciting parts of my job as of late has been our launch in India and with that, we are starting to see Canadian Punjabi artists who are in Canada that have become superstars in India, with over half a million listeners in that territory alone.
So not only are those 8 billion streams with our Canadian superstars — Drake, The Weeknd, Justin Bieber and Alessia Cara — but it is also a full spectrum of Canadian artists, as you mentioned, Indigenous, independent artists who are getting audiences all around the world, playlisting features in the United States, playlisting features in the U.K. and working with, again, the best.
The connectivity with our music teams around the world is that we do have that opportunity to collaborate with a lot of our other global counterparts in order to help move Canadian music around the world. So those 8 billion streams are all-encompassing of the Canadian artists that we get to work with on a daily basis.
Ms. Smith: On the metadata question, there is also a link where sometimes the information that comes in relevance to whether something would be considered Canadian or not might be more lacking with an emerging artist or in a particularly collaborative type of genre including hip hop.
And so allowing Nathan’s team to use their qualitative judgment as well, in light of the information that has come to it, is really a part of how we are sparking these success stories on the platform and we think that would just be a reasonable, constructive amendment to consider at this stage.
Senator Clement: Thank you.
The Chair: I have questions for our witnesses.
Various witnesses have noted that section 10(1)(i) of the bill provides direction to the CRTC on drafting regulations. It outlines various matters that the commission must consider in establishing whether a program or project meets the criteria of Canadian content.
Some of you have argued that this definition should remain flexible and have suggested that the section be amended to indicate that no one factor should be determinative. This very amendment was proposed on the house side, but was rejected by the government.
Do all the witnesses continue to see such an amendment as being important? Can you explain to us, with a little bit of background, why or why not, if you believe not?
What do you see as the consequences for investment in Canada if flexibility fails to be incorporated into this bill in terms of how Canadian content is defined?
Mr. Fares: Thank you very much for the question. I’m happy to begin on the need for flexibility around the definition of Canadian content and, indeed, the amendment that you highlight that no single factor should be determinative in determining what constitutes Canadian content.
I think that what’s relevant and so important to us about that is I’ve identified three Canadian stories that we’ve produced: “Barkskins,” “Turning Red” and Washington Black. They do not constitute Canadian content because The Walt Disney Company owns the intellectual property of that content.
On the flip side, there are situations where content will be identified as Canadian content, even though it doesn’t tell a Canadian story and it’s not produced in Canada. However, it meets the points system and the IP is owned by a Canadian. Therefore, what we’re trying to do is rectify that anomaly so that there is a flexible definition such that works like “Turning Red,” “Barkskins” and Washington Black can actually qualify as Canadian content.
The mere fact that we own the intellectual property shouldn’t disqualify that when the work is produced in Canada, telling a Canadian story and, indeed, “Turning Red” had a whole host of Canadians — it was directed by a Canadian and had a whole host of Canadian cast and crew on it. That’s why that amendment is so important to us.
The Chair: Does anybody else want to comment on that?
Ms. Smith: I think my colleague and I would both like to. It’s a great question and a reason why Spotify is here in support of the objectives of the bill, but hoping to get greater clarity.
A lot of those issues and what’s currently in the draft legislation is pretty specific to the video production side. Obviously, the Broadcasting Act in general originated with radio and television.
Regulating audio streaming is a first-of-its-kind legislative proposal. We think there should be specific guidance for this sector given the uniqueness of this side of the industry.
The scale of music repertoires or of audio repertoires in general on streaming platforms is comprehensive, and that is different than for video platforms such as Disney+.
We think, in light of that, the obligations with respect to promoting Canadian content should be recognized as needing to accommodate some business reasonable judgments that all platforms will need to make to ensure that they’re still incentivized to promote music that we all colloquially recognize as Canadian but may not fit into the structures of the prior system.
Mr. Wiszniak: Yes. Spotify has a few ways of identifying Canadian content as it stands now. One of them is through our own application called Spotify for Artists, where artists have the ability to pitch their music for playlist inclusion. We have democratized the process in which music gets to our team of editors.
Through that process, they have the opportunity to identify themselves as Canadian. We have that option, as well as working with Gracenote, which is an international entertainment data company that will identify the country of origin.
The last point is just the trusted and direct relationships that we do have with rights holders in Canada across the record label-publisher-songwriter system, identifying Canadian artists.
Again, Canadian artists are making music not in Canada. Some in the country music industry are moving to Nashville to create country music and writing with, potentially, international writers and collaborating with producers and recording in studios that may not be in Canada.
However, if that artist is from Canada, based on the country of origin, we would still call them a Canadian artist. So there is some of the flexibility in what we currently define in CanCon is basically taking the broadcast definition of CanCon into the streaming environment, should be updated before it gets to us.
Mr. Levin: If I could just add, building off what was just said, we heard a lot on the first panel — and have heard a lot throughout the process of looking at this bill — that these are regulations and a law that hasn’t been looked at in decades. It stems from a time when all of media creation was inherently local. Much broadcasting still remains an inherently local medium.
What I think you’re hearing from Spotify, from me and from Mr. Fares is that we are in a much more global and dynamic production market, creation market and distribution state. This is an area where regulations built for a different type of industry, such as a music industry that existed 30-plus years ago, don’t reflect how music is created and who it is being created by today.
The Chair: Thank you. The question I have is for Mr. Levin.
I heard in your testimony — and correct me if I’m wrong — figures related to what the streaming industry reinvests into the Canadian marketplace. I believe you mentioned 70% of revenues go back into royalties as compared to 8% for traditional radio platforms, which I find spectacular. Maybe you can elaborate on that.
I’m also curious, if we continue with this inflexible approach in this bill and if the amendment I referred to earlier is not embraced by the Senate of Canada and is sent back, what would be the investment consequences from your perspective in the Canadian industry?
Mr. Levin: On the first question, the 65%, it is accurate. On average, audio streaming services pay out 65 to 70% of their revenues in royalties. As I discussed with your colleagues, those royalties are the cost of licensing and using the works. The similar cost to licensing and using the works by commercial radio broadcasters sits at roughly 8.2% of their revenue.
While I understand the desire to say that’s not enough of a way to look at the contributions to the Canadian market, it is certainly the most direct contribution to the Canadian market that is being made by DiMA’s members.
On top of that, I think you’ve heard quite compellingly from my colleagues at Spotify that there is additional investment beyond just that pure outlay of revenues through royalties and through the kinds of teams that are being built to incubate and promote new Canadian artists.
Yes, even from the starting point of the amount that it costs to license music for radio versus streaming, it is a roughly 8.5 times delta between where streaming services sit and where commercial radio sits.
The Chair: Thank you.
Senator Simons: Mr. Fares, I’ve had the opportunity to speak to you a couple of times one-on-one, but I wanted to take one of the conversations we’ve had and bring it here to the larger table, and that is the question of intellectual property.
It is true that Disney is spending an extraordinary amount of money on production in Canada and employing thousands of Canadians. I think that is a terrific thing for our film industry and for Canada’s international cultural profile. It is also true, however, that Disney insists on owning the intellectual property in large part, which means that Canadian independent producers and directors don’t have as much chance to leverage the opportunities that your platform provides.
As we look to the future, I’m wondering if there is any flexibility in the Disney business model that would allow shared intellectual property rights, which would give Canadians the chance to tell their own stories and have the gift of distribution through your massive network.
Mr. Fares: Thank you very much for the question. It is true that currently we generally own the intellectual property of the content we produce. As I mentioned, we are embarking on a local content strategy in Canada. You have to look at the different types of licences that we will negotiate. If it is a co-production and we are actually assuming basically all of the risk, risk actually allocates benefit. That’s what you look at in the context of a co-production. If we’re basically funding the entire production, we would largely seek to own the intellectual property.
I would say that doesn’t mean you can’t build in success metrics such that if a program is successful that a producer would actually benefit from the success of that production. But if it is an acquisition, on the one hand, we might license a limited set of rights such that the producer would still have some of the other rights for exploitation.
It really depends on the actual arrangement, whether it’s co-production, acquisition or a pre-buy. The IP ownership can vary in all of those. I think we often get focused on the co-productions and think that you can extrapolate the acquisition model onto co-productions, but it’s a natural market risk-reward analysis.
Senator Simons: I have one more question to DiMA and Spotify. I love podcasts. I listen to podcasts, and I have my own podcast. It’s excellent. It’s called “Alberta Unbound.” I just dropped new episodes this week. It’s carried on both Spotify, Apple and Pandora. We have not talked about podcasts and their role in the information ecosystem.
Bill C-11 is largely silent on the issue of podcasts. Are there concerns you have — whether it’s algorithmically or a more static system — about recommending Canadian podcasts or are you concerned about podcast networks being captured as a species of online undertakings?
Ms. Smith: Thank you for the question, senator. Podcasts are very exciting for Spotify as well. We have over four million podcasts on our platform, including a number of podcasts uploaded by a user, as well as ones that may be original or exclusive to Spotify. Some of those include CANADALAND or podcasts by Radio-Canada or at CBC. For example, we recently produced a podcast about the Indigenous experience by Canadian Cree journalist Connie Walker.
Senator Simons: It was an amazing podcast. I listened to every word.
Ms. Smith: We’re really excited about the growth of podcasts on Spotify to continue to tell more Canadian stories and connect in a culturally relevant way.
Where we think we want to be careful — again, this goes with our overall message of supporting the objectives of updating the Broadcasting Act, but wanting to ensure there is submission clarity for it — is making sure that the podcast world is allowed to grow and grow organically. “Canadian True Crime” is also a great podcast. You might find that when you’re searching through a true crime genre as opposed to looking for something specifically Canadian.
Those examples are ones that I think we all would agree would be considered Canadian, but there are not rules yet that have been developed yet in terms of podcasts as to what might be counted as Canadian programming or not. We want to just make sure that the CRTC is going to be able to take a measured and careful approach that allows the podcast industry to keep growing.
Senator Quinn: In Bill C-11, there was an amendment introduced that would require online undertakings to utilize the emergency notification system. I understand that the Digital Media Association has concerns about technical difficulties with respect to localizing that. Would you explain and expand on that?
Mr. Levin: Yes, absolutely. This speaks to the technological limitations of streaming services. We, as services, do not have pinpoint geolocation data on users. That is information that the wireless providers have, and we rely on them to deliver the app and the streaming content to the users where they are.
The most important aspect of emergency alerting is precision of location, making sure that it reaches people in the right place and at the right time. This is an issue that arose here in the U.S. The Federal Communications Commission, or FCC, looked at the question of adding apps and streaming services to the Emergency Alert System.
We would be happy to share the comments that DiMA and some of the other internet associations shared with the FCC on this topic, but it literally speaks to the technological limitations and the concern that what it would actually introduce into the Emergency Alert System is imprecision and danger rather than help reach people in times of emergency.
Senator Quinn: If you could share that, that would be excellent.
Mr. Levin: We would be happy to.
Senator Miville-Dechêne: This question is for Mr. Fares of Disney in order to follow-up on the question of my colleague Senator Simons on intellectual property.
This afternoon, we will hear from the Canadian Media Producers Association. To prepare for that, I’d like to know if you have ever shared intellectual property with any Canadian producers since you are producing in Canada. Also, what did you answer regarding their claim that it’s such an uneven negotiation that when intellectual property goes abroad, they lose any rights to reproduce anything related to this particular product?
Are you ready to change the mode of negotiations, but first, have you ever shared the intellectual property? If not, why not?
Mr. Fares: Thank you very much for the questions. I think the answer to the producers is a similar answer that I gave to Senator Simons, namely, it really depends on the licensing arrangement. If it’s a co-production where we are assuming all the risk, we generally seek the intellectual property. If it’s an acquisition, we don’t necessarily need all of the intellectual property. We might request certain holdbacks or something like that, but it will depend on the nature of the licensing agreement.
Senator Miville-Dechêne: My question was more precise: Did you ever share intellectual property with Canadian producers since you have been producing in Canada for a while?
Mr. Fares: There are two different types of productions. First, there is our own service production where we are producing the works on our own, so we own all of that intellectual property. In the examples I gave you of Omnifilm and Mercury Filmworks, they were actually producing content which constituted pre-existing Disney intellectual property. In that circumstance, we still owned the intellectual property.
I can’t tell you what will ultimately happen in the local programming strategy. That could vary. It will depend on the nature of the arrangements we negotiate with the local producers as we build out that local programming strategy.
Senator Miville-Dechêne: Thank you.
The Chair: I would like to thank all of the witnesses that were before us here today. We went a couple of minutes over our scheduled time, but I think it was important to have everyone be heard. Thank you to all. We will adjourn this meeting and reconvene for our next meeting at 1:30 this afternoon.
(The committee adjourned.)