Canada’s broadcast regulator has long been considered one of the most incompetent bodies in Ottawa. On Thursday, the Canadian Radio-television and Telecommunications Commission (CRTC) proved why they deserve that title once again.
In a stunningly stupid decision that is sure to escalate the trade war with Washington, the CRTC announced that streaming giants such as Netflix, Amazon, and Disney must pay 15% of their Canadian revenues towards Canadian content. This is not a 15% tax on profits, nor is it charging GST/HST on sales. It mandates handing over 15% of all revenues to programming approved by the government.
There is no scenario where, if this stands, each of these streaming services does not become more expensive for consumers. Taking 15% of any company’s revenues inevitably leads to price increases for the products or services they provide.
Picking Another Fight with Washington
What is worse is that this entire issue—the treatment of foreign, mostly American, streaming companies—has become a major trade irritant between Ottawa and Washington. This decision will only make things worse.
Congressman Lloyd Smucker, a Republican from Pennsylvania, has already introduced a bill that could see more tariffs added to Canada for unfair treatment of American companies. Thursday’s CRTC ruling will transform that bill into a bi-partisan rallying cry for both Republicans and Democrats.
CRTC Doesn’t Care About Trade Negotiations
Scott Shortliffe, vice-president of broadcasting at the CRTC, told reporters in a media briefing Thursday that he is not concerned with trade negotiations because the government agency does not concern itself with such matters. If the CRTC will not, then the Mark Carney government, which the CRTC reports to, should—if they actually want to lift tariffs that are killing jobs in areas like steel, aluminum, autos, and lumber.
Shortliffe is a bureaucrat who has held positions at Canadian Heritage and the CRTC, helping the government squeeze the life out of the broadcast sector year after year. He wields enormous power over a sector he has never worked in and does not understand.
“No one ever likes, particularly, being asked that they should pay more into a system,” Shortliffe said, dismissing concerns of the streaming companies. “Clearly, streamers would have preferred not to have base contributions, much less the requirements today.”
Court Case Challenging Law Continues
This mandate to provide a cut of revenues to government priorities is already being challenged in court by the Motion Picture Association – Canada, a group that represents the streamers plus traditional studios such as Paramount, Warner Bros., and Sony—all of which may need to pay in as well. The MPA argues that the Online Streaming Act, the legislation that led to this move, violates Canada’s obligations under CUSMA and amounts to an unfair trading practice, said MPA CEO Charles Rivkin in a statement.
“American studios and streaming services are already the top foreign investors in Canada’s film and TV ecosystem – delivering content to Canadian audiences and sharing Canadian stories with the world,” Rivkin said. “This decision triples the cost of doing business in Canada and will spark even more inflation in the market, making further investment and innovation less attractive.”
Bottom line, this move increases costs for consumers. It will make studios and streamers rethink their decisions to shoot on location in Canada at a time when they are already under pressure stateside to repatriate production. This move also undercuts trade talks at a time when we do not need any more irritants.
“It will always be paramount to ensure that Canadians continue to see themselves reflected on screen, hear Canadian voices, and celebrate what makes this country unique,” Carney’s heritage minister Marc Miller said in a statement. If we want to ensure that Canadian stories are told, there are ways to do that without killing off foreign investment in our industry and making trade talks with Washington even more difficult.
It is almost as if Carney does not want a deal with Trump. Once again, it looks like he is putting his political future ahead of the country’s economic interests.
