Canadian Heritage Committee on Feb. 26th, 2021

[The Chair, Liberal, Scott Simms]

Welcome back, everyone.

This is our study of Bill C-10, now at the committee stage after succeeding through a second reading vote. Here we are with the study.

I'd like to point out one thing. During the question and answer session, please point out to whom you're directing your question. It will make things flow a lot easier.

To our guests, if you want to weigh in on a certain topic that's being asked about, you can use the “raise hand” function, if you wish, or wave your hand. The chair, meaning me, will not interrupt to provide you the opportunity. You will have to get the attention of the person asking the question.

Right now we're going to start with our five-minute opening statements.

We have with us Mr. Richard Stursberg. We have, from Corus Entertainment, Troy Reeb. We also have, from the Society of Composers, Authors and Music Publishers of Canada, Geneviève Côté and Martin Lavallée.

We're going to start with Mr. Stursberg, for up to five minutes.

Go ahead, please.

[Richard Stursberg, President, Aljess, As an Individual]

Good afternoon, everybody. Thank you for inviting me. It's a great pleasure to be here.

My name is Richard Stursberg. I am the author, with Stephen Armstrong, of The Tangled Garden: A Canadian Cultural Manifesto for the Digital Age. We were honoured to have our book shortlisted last year for the Donner Prize, which is given for the best book on public policy written by a Canadian. The book deals with many of the issues that are before you with Bill C-10.

I have worked in the broadcasting business for many years. I was the head of English services at the CBC, chairman of the Canadian Television Fund, executive director of Telefilm Canada, president of Shaw Direct, and CEO of the Canadian Cable Television Association. I am now retired and represent nobody but myself.

In the more distant past, I was the assistant deputy minister for culture and broadcasting. In 1990, I was one of the architects of the current Broadcasting Act, so it is a pleasure to have a chance to talk to you today about the new act.

I start from a simple premise. The reason we have a Broadcasting Act, along with the associate regulations of the CRTC, the tax credits and the Canadian Media Fund, is to support Canadian culture. We spend all this money and energy to ensure that Canadians can see themselves and their stories on television. The objectives of the system are cultural, not industrial or economic.

In approaching Bill C-10 today, I believe that the fundamental principles governing future broadcasting policy must be support for Canadian culture and equity of treatment. The latter point requires that the obligations imposed on Canadian broadcasters such as CTV and Global must be borne by foreign broadcasters such as Netflix and Amazon. By the same token, whatever advantages are enjoyed by Canadian broadcasters must be extended to the foreign ones operating in our country.

Today I would like to talk about the four key supports for Canadian television: Canadian ownership, the spending requirement, the system of subsidies and the definition of Canadian content.

First, under the present act, broadcasting companies operating in Canada must be owned and controlled by Canadians. There has been much talk about whether Bill C-10 eliminates this requirement. The legal issue is largely academic, since the requirement was ceded a decade ago. Over the last 10 years, foreign broadcasters like Netflix and Amazon have been offering TV programs to Canadians without any need to be Canadian-owned. There is no chance in the future that they will be forced to become Canadian-owned.

In the interest of equity, you may want to consider putting Canadian and foreign broadcasting on the same footing by amending Bill C-10 to make sure the Canadian ownership requirements are gone. Not to do so would be to disadvantage Canadian broadcasters in their own market.

SecondC-10, Canadian broadcasters have to spend a certain percentage of their gross revenues making and commissioning Canadian TV shows. Bill rightly extends this requirement to the foreign broadcasters and leaves it to the CRTC to determine the appropriate level. If the commission leaves it at 30% for CTV and Global, as it is now, it should be 30% for Netflix. If it is set at 20% for Netflix, it should be the same for Canadian broadcasters. Equity is key. You may want to make sure that the equity principle is clearly incorporated in Bill C-10.

Third, the system of subsidies for the production of Canadian shows is expensive and complicated. It consists of the Canadian Media Fund, federal and provincial tax credits, and Telefilm Canada. Last year, they collectively cost Canadian taxpayers over $1.2 billion. Those subsidies are only available for Canadian shows, defined as those made by Canadian-owned production companies and employing Canadians in key creative positions. If we require foreign broadcasters to spend 20% to 30% of their gross revenues commissioning Canadian shows, they should have access to the subsidy. Again, the principle of equity should prevail.

The subsidy system itself is fiendishly complicated and expensive to administer. The long-standing joke has been that Canadian producers are not experts in making shows but in navigating the system. There has been some talk of collapsing Telefilm Canada and the Canadian Media Fund into one organization to address the problem. That is not the best approach. It would be much better to wind up Telefilm Canada and the Canadian Media Fund and transfer their financial resources to an enhanced tax credit. This would create a system that would be dramatically simpler, more predictable, better attuned to changes in the market and much less expensive to administer. The Tangled Garden estimates that this approach would save $60 million per year in administrative costs.

You might want to consider amending Bill C-10 to make this change.

Fourth, and finally, all of these arrangements hinge on the definition of what constitutes “Canadian content”. For decades, Canadian content has been defined on the basis of a 10-point scale, where points are assigned to the creative talent involved in making the show. The problem is that as long as Canadians are employed, the show could be culturally completely foreign. It could be set in another country, featuring foreign characters and involving a foreign story. This has happened very often in the past. Toronto may be made to stand in for Chicago, while American characters struggle with losing their health insurance.

There has always been great pressure on Canadian producers to disguise the Canadian character of their shows so they can be sold in the States, making them more profitable and easier to finance.

[The Chair, Liberal, Scott Simms]

Mr. Stursberg, I'm sorry; I have to stop you there. We're over five minutes.

You can perhaps work in the next couple of paragraphs through the question and answer period. I apologize.

[Richard Stursberg]

I hope so. I'm going to tell you how to reform the Canadian point system.

[The Chair, Liberal, Scott Simms]

I'm sure we'll look forward to it. We also have it in writing. I hear your book is good, so maybe we can get it from that as well.

We will go over to Corus Entertainment and Mr. Reeb.

Mr. Reeb, I enjoyed your reporting for years. It's nice to meet you, albeit virtually.

You have five minutes, sir.

[Troy Reeb, Executive Vice-President, Broadcast Networks, Corus Entertainment Inc.]

Thank you, Mr. Chair.

Good afternoon to the committee members.

My name is Troy Reeb. I serve as executive vice-president of broadcast networks for Corus Entertainment.

On behalf of our 3,500 employees across the country, I want to thank you for inviting us to discuss Bill C-10, which we are urging Parliament to pass without delay.

Before getting into the bill, I want to provide a brief overview of our company. We're very proud to be Canada's leading pure play media and content company. We have Corus Studios, a leading producer and distributor of Canadian lifestyle programming; Nelvana, a premier animation studio; Kids Can Press, Canada's largest independent children's book publisher.

Lastly, Toon Boom, our Montreal-based division, creates software for international studios.

All told, our Canadian-made content is exported to 160 countries around the world, but our bread and butter remains broadcasting here in Canada. We operate 15 Global TV stations, 39 radio stations and 33 specialty channels, in both English and French, such as YTV, Séries Plus and Food Network Canada. We are the proud home of Global News, one of Canada's largest news organizations, delivering thousands of hours of local, regional and national stories every year.

To emphasize this, Corus is a pure play media business. We have no cable or telecom assets to subsidize us. We are an independent, publicly traded company competing in a trillion-dollar global entertainment sector. We think we've assembled the vision, the team and the expertise to build an international media powerhouse right here in Canada, but even the best people and ideas cannot overcome badly outdated regulation, and that's why your work today is so important.

You've already heard from many stakeholders about Bill C-10, and no doubt each of them has an interest in the Canadian broadcast system, but we have to remember that what the Broadcasting Act is really about is the rules for broadcasters operating in Canada. This act enables a web of regulations, policies, conditions and codes that touch every level of our operations. They dictate how much we have to spend on certain kinds of shows, when those shows can go to air, the types of songs we can play on our radio stations, the number of commercials we can sell to advertisers and from whom we can buy our programs. I could go on and on.

Most of these rules were designed for an industry that doesn't even exist anymore, one where licensed broadcasters enjoyed privileged access to Canadian audiences. That is no longer the case. We're doing everything we can to adapt and compete, but in far too many cases, the old broadcasting rules make it impossible to do so. After more than 10 years of escalating unregulated foreign competition, five years of rolling policy consultations, and one devastating pandemic, we simply cannot wait any longer.

Bill C-10 is not perfect, but it gets one big thing right: It will finally bring foreign digital broadcasters into the regulatory fold and start to level the playing field for Canadian media. For us, this is reason enough to support it.

Let me be clear. New players should not have to play by the old rules. The level of regulation currently applied to Canadian broadcasters is simply untenable in a world of open competition. Going forward, all players—foreign and domestic, digital and traditional—must have a more flexible, less onerous set of obligations than Canadian broadcasters have now. All players should be able to contribute to the system in ways that make sense for their audiences and their business.

Here at Corus, news is a prime example. We're very proud of our work at Global News, and we're uniquely able to provide news through local stations across Canada that foreign streamers will not and cannot replicate, but local news is a very challenging and expensive business. While it's still highly popular on all platforms, it is entirely dependent on ad revenues that have been increasingly siphoned away by foreign Internet giants.

For many years now, we have offset our losses in news by providing internal cross-subsidies from more profitable entertainment programming, but now our ability to do that is also fading fast. Foreign digital broadcasters are siphoning away those profitable audiences with no obligations in return to support Canadian content or communities. If this continues, we will soon face some very difficult decisions, as other Canadian broadcasters already have.

Going forward, news should not represent just one of our many obligations but should be recognized as our primary public service contribution. Giving us more flexibility to compete in other parts of our business will provide us a more sustainable way to cross-subsidize news in the future.

Now, as I've said, this bill is not perfect. In our written submission, we will propose amendments to improve it.

We're also strongly urging this committee not to amend the bill to empower the CRTC to regulate private dealings between broadcasters and producers. That kind of amendment would further benefit producers who are now enjoying record profits at the expense of Canadian broadcasters, who are seeing record declines. The CRTC already rejected this “terms of trade” approach six years ago, and there is no compelling policy reason to reverse course now.

In closing, Canadian broadcast policy has always depended on strong private broadcasters. We want to continue creating Canadian jobs and serving Canadian communities, but we simply can't do that when faced with a regulatory environment that allows foreign players to scoop profits out of the country while leaving us as Canadians with all the obligations.

By prioritizing equity between foreign and domestic players and signalling that obligations should be suitable for individual circumstances, we believe Bill C-10 can help us begin the difficult work of building a fairer and more sustainable broadcasting system, and we urge you to move it forward.

Thank you.

[The Chair, Liberal, Scott Simms]

Thank you, Mr. Reeb.

Now we go to the Society of Composers, Authors and Music Publishers of Canada.

We have Geneviève Côté, chief of Quebec affairs and visual arts officer, as well as Martin Lavallée, senior legal counsel.

Mrs. Côté, you have five minutes.

[Geneviève Côté, Chief Quebec Affairs and Visual Arts Officer, Society of Composers, Authors and Music Publishers of Canada]

Good afternoon. We are before you today on behalf of SOCAN. We represent the rights to musical works of our 160,000 members, songwriters, music composers and music publishers. In short, we grant licenses, and collect the rights arising therefrom, notably from traditional broadcasters—radio and television—and digital audio and audio-visual platforms, for the use of music as part of their business.

Because of this, we see the two perspectives of the economic value of music, the value for rights holders and the value for music listeners. It seemed important to us to come and testify before you to make a few points of clarification.

From the outset, like many players in the music ecosystem, we welcome Bill C-10. We believe that subjecting digital platforms to the same legislative and regulatory conditions as those applicable to all Canadian broadcasters will end the distinction that the music industry has been decrying for years.

When we compared distributions made to Canadian music rights holders with what was distributed to foreign writers in regard to uses in media, we came to a devastating conclusion. In digital media, royalties paid to Canadian creators were three times lower than those related to uses in traditional media. The average percentage for traditional was 33.9% over the past six years—

[Martin Champoux, Bloc, Drummond, QC]

A point of order, Mr. Chair.

[The Chair, Liberal, Scott Simms]

Sorry, Madame Côté, we just want to stop for one moment.

Monsieur Champoux, go ahead.

[Martin Champoux, Bloc, Drummond, QC]

I'm really sorry for interrupting Mrs. Côté, but when she went to English, there wasn't any interpretation into French.

[The Chair, Liberal, Scott Simms]

Madame Côté, you're reading from a prepared text. Could you read the first sentence, just to clarify with our interpretation, please, in English?

[Geneviève Côté]

When we compared distributions made to Canadian music rights holders....

[The Chair, Liberal, Scott Simms]

Carry on, then. It seems we've rectified the situation. Go ahead.

[Geneviève Côté]

I'll be doing two other paragraphs in English, and then Martin will be speaking in English, and I'll be coming back to French.

[The Chair, Liberal, Scott Simms]

Thank you very much.

[Geneviève Côté]

That's Canada.

When we compared distributions made to Canadian music rights holders with what was distributed to foreign writers in regard to uses in media, we came to a devastating conclusion. In digital media, royalties paid to Canadian creators were three times lower. The average percentage for traditional was 33.9% over the past six years, while in the digital realm, that average did not reach 10%. Even more alarming, when we focused on audiovisual media only, the average percentage of royalties paid to Canadian writers for uses remained over 30% but slid to a meagre 6.8% on digital platforms. That is almost five times less.

In light of these figures, we can only encourage the Canadian government and Parliament to pursue their desire to include the web giants in the scope of the Broadcasting Act so they have obligations towards discoverability and promotion of Canadian music and so they participate, as do their traditional equivalents, in the financial support programs and funds that help foster Canadian music.

[Martin Lavallée, Senior Legal Counsel, Society of Composers, Authors and Music Publishers of Canada]

SOCAN deals primarily with copyright issues as well, so we pay particular attention to any modification to the Copyright Act that would affect the rights of our members or play a disruptive role in our negotiations with users. Therefore, the proposed amendments that Bill C-10 introduces into the Copyright Act in respect of ephemeral recordings, which would add online undertakings to this exception, are simply unacceptable and go contrary to the intent of this bill.

An ephemeral recording is a copy of a program made by a TV broadcaster, for example, to permit them to broadcast the same program at the same time of day in different time zones. This is called time shifting. The proposed amendment wants to extend this exception to online undertakings, which, in our experience, should not be the case. In the digital realm, you can always choose what you see at the time of your choosing, so doing this broadens the scope of what is generally understood and applicable as of now. Neither online undertakings nor TV broadcasters have, to our knowledge, used this exception or even raised it in a negotiation.

As we saw when a plethora of exceptions were introduced in the act back in 2012, these exceptions triggered what we predicted: legislation by litigation. We've spent a significant amount of money and time to defend any overreaching interpretation of these exceptions. At the same time, technical giants resisted our effort to have them pay fair value, since they were claiming that such and such exception could be interpreted in their favour.

History must not repeat itself today in this very bill that aims at providing a means from which money will flow to creators. The proposed amendment to the Copyright Act is anything but status quo. In order to truly be status quo, the ephemeral exception absolutely needs to remain as is—limited to radio and TV—or clearly specify that those provisions do not include online undertakings.

[Geneviève Côté]

In closing, there is another element of Bill C-10 that seems to us to require clarification, maybe even a correction, and that is the possible exclusion of certain social media activities from the application of the Broadcasting Act. Social media are enabling platforms used for music discovery. In all their iterations, digital media recommend content and generate “programmed” viewing. Platforms manage the user uploaded content and the access to it.

As other organizations have mentioned to this committee, notably the Coalition for the Diversity of Cultural Expressions, we believe the Canadian creative ecosystem would benefit more from Parliament, rather than excluding these services from the scope of the act, giving the power to the CRTC to determine how to better regulate social media under the Broadcasting Act.

In our opinion, the Canadian legislator should not focus on who uploads the content that Canadians turn to, but should rather target those whose line of business it is to recommend that content and monetize access to it, so that in the end, these giants share with content creators, the value they get from the use of their creation, of our Canadian music.

[The Chair, Liberal, Scott Simms]

Thank you very much, Mrs. Côté.

Just before we get to the questions, I want to remind everyone, especially our guests, that taking screenshots for your social media is strictly prohibited. Thank you.

Let's go ahead with questioning.

We have Mr. Waugh, for the Conservatives, for six minutes, please.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Thank you, Mr. Chair, and welcome to all three groups.

Mr. Stursberg, your ears must be ringing, as I have been talking exclusively in this committee about your book—I want to congratulate you, along with Stephen Armstrong—about the FAANGs—Facebook, Amazon and so on. You call them the FAANGs. They are FAANGs, and they have had a major influence in the world.

What's your take on the deal yesterday with Facebook in Australia? Let's start there.

[Richard Stursberg]

I'm not sure I fully understand the deal with Facebook in Australia. The deal, as I understood it originally.... In fact, I had written a little article with Kevin Chan, who represents Facebook in Canada, saying that the original Australian deal wasn't a sensible deal, because in effect, every time the newspaper posted, or a citizen posted, then Facebook was obligated to pay. It had absolutely no control whatsoever over the number of posts that were made, which seemed a kind of tough situation. Effectively, anybody could make as much money as they wanted by simply posting more and more articles.

As I understand it, the Australian government has backed off that position now, and has fallen back to a situation where it has said simply that Facebook needs to negotiate with the news organizations. But I think the original structure has now been abandoned.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

You talk about “watering the garden” exclusively in your book. Maybe you could talk about that, because there could be a drought with this bill we're seeing, and the garden could dry up.

It's like flashback for you. You first got involved in this in 1991, and here you are, 30 years later, in the committee talking about the very same bill.

Your experience is valuable—Telefilm, CBC and so on—but you always, in the book, talk about watering the garden and making sure the garden is there for future generations.

[Richard Stursberg]

I think the key thing is that the centerpiece of the bill—which will require foreign broadcasters like Netflix, Amazon and Disney+ to contribute in the same way as current Canadian broadcasters—will make a very significant improvement in the watering of the garden.

For example, right now, Netflix makes, just to make the math simple, just over a billion dollars a year in Canada. If it had to spend the same amount of money on Canadian shows that Global does, at 30% of gross revenue, it would have to inject $300 million into program production.

That's just one of them. If you cascade them up, as the Minister of Heritage has done in terms of his claims of how much more money would be injected into the system, he's quite right. It will be a very substantial amount of money. If we don't do it, however, then the problem is exactly as per what I was saying. The financial circumstances of the major broadcasters in Canada are extremely difficult, and they will be spending inevitably less and less on Canadian programming.

We're going to find a big shift in the system. Canadian production is going to be more and more supported by foreign broadcasters in Canada, and less and less by the traditional Canadian-owned broadcasters.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Thank you.

Mr. Reeb from Corus, I guess you would echo those comments made today. We've talked to you before, but Mr. Stursberg is pretty well singing your tune here in committee today. Would you not agree?