The absolutely horrible decision by the CRTC to try to force online streamers to pay 15% of their revenues to fund Canadian content was not the only bad decision on Thursday. The CRTC also decided to continue to stick it to Canada's traditional broadcasters by keeping outdated spending requirements on them.
The only difference is that the CRTC reduced the requirements that traditional broadcasters need to pay from 30-45% of their revenues down to just 25% of their revenues.
I keep hammering this point because I think it is important and most people do not get it. These companies are being ordered by a government regulator to commit a portion of their total revenues — not profits, but revenues — to government mandated programs.
For traditional broadcasters that will be 25% of all Canadian revenue, for online streamers, it is 15% of all Canadian revenue.
Do these companies exist to generate government revenue?
That is before any of these companies pay any corporate income tax, for those that do. It is over and above any GST/HST revenue their business activity generates for various governments, it is before the personal income taxes paid by all of their employees are taken into account and before the property taxes they pay for locations across the country that help pay for services.
You start to wonder, do these companies exist to provide a product or service or do they exist to generate money for government?
We know what the view is in Ottawa, especially at the horribly out of touch and perennially mismanaged CRTC.
CRTC led by people with zero industry experience
“Today’s decisions are about building a stronger broadcasting system,” Vicky Eatrides, the CEO and chair of the CRTC, said in a statement on Thursday.
That Eatrides would say such a thing shows that — just like other senior staff and leadership at the CRTC — she knows absolutely nothing about the broadcast industry and the problems facing it. She has no idea how to make changes that will benefit Canada’s broadcasting industry and prepare it for a rapidly evolving future.
Like most people at the CRTC, Eatrides has no real world experience in the very complex industry that she is regulating. Like her v-p of broadcasting at the CRTC, Scott Shortliffe, Eatrides is a career bureaucrat who, according to her own CRTC posted bio, has held “a number of senior executive positions at the Competition Bureau, Natural Resources Canada, and the Department of Innovation, Science and Economic Development.”
Her experience prior to becoming a bureaucrat was working as a regulatory lawyer.
Like too many of her staff, the problem with Eatrides is that when the only tool you have is a hammer, every problem looks like a nail.
Feds should be thinking outside the box
The blame for this, though, must also rest with the Carney government, and the Justin Trudeau government before it. Neither leader nor their governments seem to understand that everything has changed in media and how the government regulates the industry must change as well.
When broadcast regulations on Canadian content first emerged it was because broadcast firms were using a public good — the publicly owned airwaves to broadcast their TV and radio services. Then it became cable, which was a bit different but was allowed to spread using public spaces.
Plus, back then, everyone was making so much money it did not matter what you were charged, it was the cost of doing business.
Those days have changed and no one is making money like they used to. Telling these companies they must hand over 25% of their revenues to fund Canadian content — a government initiative — is punishing to these companies.
It is an expensive and inefficient way to fund a government priority.
If you want to subsidize, then subsidize
If Canadians, or Canada’s government, decide they want to fund Canadian programming, then they should do it directly with subsidies. The current system drives up costs for consumers, and it makes investing in Canadian content less appealing.
If you believe in subsidies, make the argument.
The way we are doing things now is making it less attractive for the foreign streamers to operate here while also exacerbating a trade war. For our domestic broadcasters and streamers, it makes it more expensive to operate, it makes investing in Canadian content less attractive.
The old business model is dead, we need to kill off the old regulatory model and come up with new thinking.
That will not happen with the current leadership of the CRTC who do not seem to know which end of a TV — or more importantly smartphone — to watch.
