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Canada Moves to Regulate OTT, Charge Netflix and Other OTT Services Millions

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After years of global OTT services like Netflix and Amazon cutting into Canadian TV audiences without domestic compensation, Canada's federal government plans to charge all online services substantial fees under the country's revised Broadcasting Act in exchange for the right to keep selling content to Canadians.

Under Bill C-10—aka "The Broadcast Modernization Act"—which was introduced in the Canadian House of Commons on November 3, 2020 – the federal government is "Confirming that online broadcasting is covered under the Act," said a C-10 backgrounder released by the Department of Canadian Heritage. "Currently, online undertakings that deliver audio and audio-visual content over the Internet are exempt from licensing and most other regulatory requirements. The Bill clarifies that online undertakings are within the scope of the broadcasting regulatory system."

"One system for our traditional broadcasters and a separate system for online broadcasters simply doesn't work," Canadian Heritage minister Steven Guilbeault told reporters. "This outdated regulatory framework is not only unfair for our Canadian businesses, it threatens Canadian jobs and it undermines our ability to tell our own Canadian stories."

The reason Bill C-10 matters to both domestic and foreign OTT services is money, specifically lots and lots of money for Canadian content producers.

If Bill C-10 is passed (and even in Canada's current minority government situation, this will likely happen), it will compel "online broadcasters to contribute to Canadian content (production) at a similar rate to (already imposed on) traditional broadcasters," said an analysis by the Canadian law firm Dentons. This "could result in online broadcasters being required to invest more than $800 million [almost $600 million USD] in our creators, music and stories by 2023."

Boosting the production of Canadian-based content (known as "CanCon") by requiring broadcasters to pay up is nothing new. For decades, CanCon rules/fees have been regulated and enforced by the Canadian Radio-television and Telecommunications Commission (CRTC), Canada's version of the FCC. These rules just haven't applied to OTT, because the Broadcasting Act hasn't been revised since 1991.

CanCon rules/fees have proven effective in nurturing a homegrown production industry that makes now hit shows for domestic/international audiences, NBC's Toronto-produced medical drama Transplant being the latest example. As far as most Canadians are concerned, CanCon works.

Still, the fact that Netflix, Amazon, Disney+, and other global OTT services (as well as domestic ones) are now expected to help fund CanCon isn't good news for them. And make no mistake: Canada now expects compliance in exchange for continued access to Canadian OTT viewers.

"Failing to comply with such CRTC orders could lead to monetary penalties," reported the Associated Press. "How all of this will work remains unclear. The legislation gives broad powers to the CRTC, but much of the detail about how funds would be collected and distributed will be left to the CRTC to sort out after a period of public consultations."

In the meantime, non-Canadian OTT services are being diplomatic as they wait to see how the situation plays out.

"We all have a role to play in supporting the future of film and television created in Canada," said a Netflix spokesperson in response to Streaming Media's questions. "We are reviewing the legislation and remain committed to being a good partner to Canada's creative community while also investing in local economies."     

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