Canadian Heritage Committee on Feb. 26th, 2021

[Richard Stursberg]

I'll give you a little list at the end of my talk, but on the issue of equity between the players, if the issue of equity is front and centre, then the problem that Troy talked about will go away, because if they're not paying the fees, then the Canadian broadcasters should not be obliged to pay the fees. If Canadian broadcasters are obliged to pay the fees, then they should pay the fees. The principle of equity needs to be enshrined in the law.

The other thing I would say, on Canadian content rules, is that I deeply believe that if we are going to be dominated by foreign broadcasters, it is absolutely essential to change the Canadian content rules to make sure we have distinctive content, whether it's in French or in English.

[The Chair, Liberal, Scott Simms]

Thank you, Mr. Stursberg.

I'll leave it at that. You do indeed have the last word.

I want to thank our guests for this first hour of testimony: Geneviève Côté and Martin Lavallée from the Society of Composers, Authors and Music Publishers of Canada, also known as SOCAN; from Corus Entertainment Inc., Troy Reeb; and Richard Stursberg, president of Aljess.

I thank you so much.

Colleagues, we'll take a break before our next round of testimony.

[The Chair, Liberal, Scott Simms]

Thanks, everyone, for joining us again on our second round. This is our analysis of Bill C-10 before we proceed with clause-by-clause.

I'd like to introduce our guests at this time. From the Fédération des télévisions communautaires autonomes du Québec, we have Amélie Hinse, director general, accompanied by Catherine Edwards. From Netflix, we have Stéphane Cardin, director of public policy. From Rogers Communications, we have Pam Dinsmore, vice-president of regulatory cable, and Susan Wheeler, vice-president of regulatory media.

As we've mentioned, you get up to five minutes. I'm going to be a little strict, because I'd like to get a couple of rounds in. Following that, we get into the questions.

Let's start with the federation. You have up to five minutes.

I believe, Ms. Hinse, you're starting.

[Amélie Hinse, Director General, Fédération des télévisions communautaires autonomes du Québec]

Thank you, Mr. Chair.

I'd like to thank you for having us today. We're very pleased to appear before the members of the Standing Committee on Canadian Heritage. This is the first time we've appeared before the committee, and we're delighted to have this opportunity.

I'm going to talk to you about community television in Canada. Community television stations have been established across the country for over 50 years. In Quebec, in particular, there are more than 40 independent community television stations, or ICTs, in 14 of the province's 17 administrative districts. There are 30 more in the rest of Canada, which is very few compared to Quebec. There were more than 300 in the 1990s, but the lack of specificity and guidelines for ICTs has meant that they have gradually disappeared as a result of amendments to the Canadian Radio-television and Telecommunications Commission Act, among others.

Our ICTs produce, on average, six hours of original programming per week, a third of which is news, which is still a lot. There are 200 full-time jobs, 70 part-time contract jobs, and more than 1,500 volunteers who focus on local production. Television stations generally have a budget that varies between $45,000 to $500,000 per year—a very wide range. In Quebec, we are fortunate to be funded by the Quebec Department of Culture and Communications, in addition to receiving a portion of the investments that are made in government advertising. This doesn't exist either at the federal level or in the other provinces.

The community component is essential to the Canadian broadcasting system. The community component is one of the three pillars of the Canadian system, along with the private and public sectors. Today, more than ever, we need a robust community broadcasting system. Newsrooms have been closing for a number of years now, while commercial business models are struggling to adapt to digital competition, among other things. Communities outside the major centres are being abandoned, and they are becoming media deserts quite quickly.

Studies clearly show that the lack of local representation compromises Canadian democracy. Community broadcasters are local non-profit organizations created by and for citizens. We are ensuring that minorities and local populations have access to traditional and digital platforms, which is very important.

The advantage of community media is that they’re part of the community. They’re there for the long term. They collaborate and provide visibility to businesses, community and sport organizations, local artisans and artists, educational institutions, as well as various levels of government, from municipal to federal, and elected officials who do not have a voice in traditional national or regional media.

The community model is effective, efficient and sustainable. It makes it possible to produce productions for much less than what is done in private companies.

We meet a need for local programming in Canadian media. We are very inclusive. We make sure that local communities are represented. Education and training are among the main missions of community television. To achieve this mission, we need more recognition and specificity in our role.

It's with this in mind that we've made the various requests for amendments to the act that we have presented to you.

Thank you.

[The Chair, Liberal, Scott Simms]

Thank you very much, Ms. Hinse.

Now we will go to Netflix.

Mr. Cardin, you have the floor for five minutes.

[Stéphane Cardin, Director, Public Policy, Netflix]

Mr. Chair, members of the committee, thank you for the opportunity to address you today.

Last September marked Netflix's 10th anniversary in Canada. We're grateful that over the last decade around seven million Canadians have welcomed us into their homes.

We filmed our first series in Canada in 2012, and our activity has grown ever since. In 2017, we signed an agreement with the government to establish Netflix Canada under the Investment Canada Act, which enabled us to hire Canadians directly. In return, Netflix made substantial commitments, including to invest a minimum of $500 million over five years in production activity across the country. Canada is one of our top production countries globally, and since 2017 we have in fact invested more than $2.5 billion here.

This includes our original series and films, as well as collaborations with independent producers and broadcasters in English and French. We also continue to acquire series and films, most recently Le guide de la famille parfaite.

Netflix also contributes to the vitality and competitiveness of Canada's audiovisual industry through long-term leases for stages, collaborations with leading animation and VFX studios, and the hundreds of vendors we work with across the country.

Earlier this month, we shared great news about our plan to open an office and hire a dedicated content executive in Canada. Netflix is excited to expand our connections with the Canadian creative community and to continue strengthening our local work and partnerships.

Our track record over the past decade is clear. Netflix is committed to Canada, and our message to you is equally clear. We will continue to bring Canadian stories to the world.

We understand that policy-makers must consider the nature of contributions from all players in Canada's entertainment ecosystem. To the extent that Bill C-10 aims to create a flexible framework that will enable the CRTC to tailor conditions of service applied to online undertakings and to recognize the different ways that online services contribute, we think such an approach makes sense.

However, simply imposing the regulatory obligations of licensed Canadian broadcasters onto online entertainment services would not be an appropriate approach to ensuring contributions from this otherwise vibrant sector. Services like Netflix do not perform the same roles as traditional broadcasters, nor do we have the same content strategies.

We look forward to discussing these issues at public hearings before the CRTC at the appropriate time. For now, we note our concern with an approach that would impose a uniform 30% Canadian programming expenditure requirement to the Canadian revenues of online video entertainment services.

Such an approach would not create a level playing field, nor would it be fair and equitable. Netflix seeks no regulatory benefits. Nor do we offer news or live sports programming—the categories that enable Canadian broadcast groups to meet the majority of their spending obligations.

Canadian consumers have more entertainment options than ever. An overly burdensome regulatory framework could result in reduced choice for Canadians. As new global services are launched, some may decide not to enter the Canadian market at all, while others may avoid regulation by providing their content through a Canadian intermediary instead of setting up here.

The government has stated its ambition to create a world-class communications sector for Canada and highlighted the importance of enabling and promoting Canadian culture, contributing to economic growth, and safeguarding the interests of Canadian consumers.

In order to achieve that ambition and build a well-balanced, forward-looking and resilient model, let's acknowledge the contributions of each participant in the system and enable them to play to their strengths for the benefit of Canadian stories, workers and consumers.

Thank you, Mr. Chair. I'd be happy to take your questions.

[The Chair, Liberal, Scott Simms]

Thank you, Monsieur Cardin. It's good to see you again, and I thank you for your testimony.

We now move on to Rogers Communications, with Ms. Dinsmore and Ms. Wheeler. Could I see a hand for who wishes to begin?

Ms. Dinsmore, you have up to five minutes, please.

[Pam Dinsmore, Vice-President, Regulatory Cable, Rogers Communications Inc.]

Mr. Chair and members of the committee, thanks for inviting us here to discuss Bill C-10. My name is Pam Dinsmore. I am vice-president, regulatory cable, and with me is Susan Wheeler, vice-president, B2B distribution and regulatory, for Rogers Sports and Media.

At Rogers, we are committed to leading our industry in broadcasting innovation, as well as in celebrating and amplifying Canada's culture and identity. We provide platforms for a diversity of voices and deliver rich local content that engages Canadians across the country. Through our 54 radio stations, seven local Citytv stations, five OMNI-branded multicultural and third-language TV stations, and our OMNI Regional service, we entertain and inform citizens from Medicine Hat to Waterloo, Gander to Victoria.

Across our cable footprint in Ontario, New Brunswick and Newfoundland, we have 30 community TV channels that provide Canadians with coverage of local events and community issues in both official languages. Through these local outlets and our Sportsnet-branded channels, our celebration of community and sport brings Canadians together, transcending gender, age and ethnicity.

We welcome Bill C-10's proposed reforms and urge all parties to work towards a swift passage of the bill, notwithstanding any amendments that might need to be made. We also believe more needs to be done, and quickly, to address the immense disruption happening in Canada's media ecosystem that has put Canada's private broadcasters at a distinct structural disadvantage. This is especially true when it comes to producing national and local news programming, which plays an increasingly important role in democracies as newsrooms shrink and disinformation proliferates across multiple platforms.

Above all, we would like to leave you with an understanding of how profoundly our business model has shifted since the current Broadcasting Act was introduced 30 years ago. The Internet has, over the past decade, turned the economics of broadcasting upside down. Foreign digital competitors operating without oversight or regulation have undercut revenues, splintered audiences and driven up our operating costs. The legislative and regulatory frameworks governing broadcasting in Canada have not kept pace with these changes. In fact, they have disadvantaged Canadian broadcasting companies that compete with foreign streaming services, which have no regulatory obligations.

To address [Technical difficulty—Editor].

[The Chair, Liberal, Scott Simms]

We seem to have lost Ms. Dinsmore.

[Susan Wheeler, Vice-President, Regulatory Media, Rogers Communications Inc.]

I can take it from there.

[The Chair, Liberal, Scott Simms]

Go ahead, Ms. Wheeler, please. Thank you.

[Susan Wheeler]

We have five recommendations to improve Bill C-10 and the government's policy direction to the CRTC that will follow the legislation.

First, include a provision that will ensure regulatory fairness between Canadian companies and foreign streaming services. Bill C-10 should direct the CRTC to impose comparable obligations on all media players drawing revenues from the Canadian broadcasting system. It is critical that Canadian domestic broadcasting companies do not have more onerous obligations than U.S.-based tech giants.

Second, dismantle the regulatory silos. Whereas U.S. streaming services are viewed as single entities despite their roles in both content creation and distribution, Rogers' broadcasting and distribution arms are not. Each is subject to a different set of regulatory obligations that prohibit us from evolving our business models and provide no incentive to invest in content creation. Rogers would like the act to give the CRTC the flexibility to regulate our broadcasting and distribution divisions as a single entity. This could take the form of conditions of service, as has been suggested by the CRTC in its “Harnessing Change” report.

Third, make local news and information a priority in the act. The act should allow Canadian broadcasters to prioritize the production of news programming over all other programming.

Fourth, eliminate part II licence fees from the Broadcasting Act. These fees are not directly tied to broadcasting and are not levied on foreign streaming services. The current bill proposes to keep these fees for Canadian broadcasters while letting the U.S. streamers off the hook. We think that is simply unfair.

Fifth, provide stronger protections to combat online content theft. If steps are not taken to address illegal online streaming, the objectives and debate around Bill C-10 will be moot, as the Canadian content ecosystem will fail.

Detailed amendments to implement these recommendations will be available in our written submission to the committee.

We thank you for your time and look forward to your questions.

[The Chair, Liberal, Scott Simms]

Thank you very much. I appreciate that.

Ms. Dinsmore, hopefully we'll have you back up and running. It looks as though you're okay now. You were frozen for just a bit. It looks like you're back.

Do you want to do a quick voice check for the sake of the questions?

[Pam Dinsmore]

Can you hear me?

[The Chair, Liberal, Scott Simms]

That should be okay. Thank you.

Now we will start with our questions and answers.

Mr. Rayes, you have the floor for six minutes.

[Alain Rayes, Conservative, Richmond—Arthabaska, QC]

Thank you, Mr. Chair.

My thanks to all the witnesses for being here today.

My first questions are for Mr. Cardin from Netflix.

Mr. Cardin, I'd like you to tell us more about the government's willingness to impose reinvestments to the tune of 25% to 45%, or 30% on average, in Canadian content. I would also like you to relate that to your position, because I'm sure you've been talking to senior government officials to try to understand the amount of $800 million that would be reinvested in Canadian content.

Where did that calculation come from? Unfortunately, despite multiple requests, we are unable to access that information.

What do you think about it all?

[Stéphane Cardin]

Thank you for your question, Mr. Rayes.

As we said in our presentation, we support the flexible framework proposed in Bill C-10, as introduced last November 3.

However, from the time the bill was introduced, during some of the discussions the department had, the possibility was raised that Canadian spending obligations similar to those currently applicable to Canadian broadcasters—there was talk of 25% to 45%—could be imposed on online entertainment services.

Again, we want to contribute and do more, but in a fair and equitable manner. Given the services we offer, which are essentially series, films, feature documentaries and family programming, and given that we don't offer news and sports, we simply don't think the suggested percentages are appropriate. They are not fair and equitable.

[Alain Rayes, Conservative, Richmond—Arthabaska, QC]

Okay. Let me continue with this topic.

Netflix announced that it has invested $2.5 billion in Canada since 2017. If you do the math as a percentage of revenues, I think that would be more than 30%.

You seem to be pointing out that the way the government or the CRTC does the math doesn't do justice to the investments your company is making in Canada. Why is that?

Is the business model different? Since it's a new business model, should Bill C-10 take that into account?

Is it a misunderstanding on the part of [technical difficulties] the reality of conventional broadcasters compared to digital broadcasters?

[Stéphane Cardin]

I think the main difficulty is simply related to the definition of “Canadian production”.

Let's take the example of the movie Jusqu'au déclin, which was shot in Lantier, in the Laurentians, and was written and directed by a Quebecker, with an all-Quebec film crew and whose entire cast from Quebec. A project like that does not qualify as a Canadian production, since Netflix financed it entirely.

So it's not only about the percentage, but also about what the percentage would be based on. Specifically, the items that were supposed to accompany Bill C-10, which we are awaiting and which the government has indicated as the policy directive or direction to the CRTC, could contain a revision of the parameters that qualify content as “Canadian”.

[Alain Rayes, Conservative, Richmond—Arthabaska, QC]

If I understand correctly, if the rules and parameters were such that what you invest in Canada could be considered Canadian content, given that you invest the entire amount in Canada, in Quebec or in any other province, things would be fairer already.

[Stéphane Cardin]

They would be fairer already. But, as I was also saying, I think that the premise of Bill C-10 is to recognize the differences between different types of services and to impose obligations that take into account the specific nature of these services.

Once again, between an online entertainment service and a broadcasting group that offers a much broader range of programming including, as I said, news and sports, things just have to be fair.

[Alain Rayes, Conservative, Richmond—Arthabaska, QC]

Okay.

What is your position on the issue we hear a lot about, that, very soon, the GST and QST will have to be collected on foreign services? What is Netflix's position on that?

[Stéphane Cardin]

From the very beginning, when the Quebec government asked us to collect the sales tax, we collaborated with them. We are doing the same with the Government of Saskatchewan, and we will do the same with the Government of British Columbia as of April 1. As for the federal sales tax, we will be collecting it as of July 1.

[Alain Rayes, Conservative, Richmond—Arthabaska, QC]

That's perfect.

I have one last question for you.

The Yale report raised a lot of expectations for Bill C-10. The government has decided to go ahead and not act on it. So it ignores the major social networks like Facebook and Google, which have access to many sources of revenue.

Can you explain your situation regarding your subscription revenues? How does it compare to other competitors or companies with different financial frameworks?

[Stéphane Cardin]

Our business model is very simple. We have a single source of revenue: the subscriptions of 7 million Canadian households that use our service in their homes. We don't sell advertising. So our revenue model is simple and clear.