Canadian Heritage Committee on March 8th, 2021

[Marci Ien, Liberal, Toronto Centre, ON]

With regard to the digital giants, Netflix being one of them, we have heard from several witnesses, and they made the point that they already contribute in their minds. Many of them have head offices here. They hire Canadians—Canadian producers, Canadian talent, Canadian writers—so when it comes to asking them to contribute more, we could very much be at a crossroads.

Could I get a comment or two about the giants who say they're already giving Canada lots?

[Jean-Stéphen Piché]

I can start.

It is true that by operating in Canada, the web giants have activities in Canada that benefit Canadians as well. The issue here—and the keyword—is a level playing field.

In terms of the framework we have in Canada, in the traditional system, in exchange for a licence, you needed to contribute either to a fund or to an expenditure requirement towards a creation of Canadian content. What this legislation seeks to achieve is to make sure that we direct those investments toward the creation of Canadian content.

Of course, the employment components are very important, but it's to make sure that we have a net benefit that is aligned with what Canadian broadcasters need to do, as well, within that context. That's why it's really about having common measures to ensure we have a level playing field in that space.

There will be a lot of work done within how it's supplied. A lot of the “how” will be determined in the subsequent phase with the CRTC, in the implementation phase of what those measures will be.

[Marci Ien, Liberal, Toronto Centre, ON]

Thank you.

[The Chair, Liberal, Scott Simms]

Thank you, Ms. Ien.

Mr. Champoux, the floor is yours for six minutes.

[Martin Champoux, Bloc, Drummond, QC]

Thank you very much, Mr. Chair.

My thanks to the witnesses for joining us today. Their testimony is very enlightening.

Mr. Ripley, I would like to go back to your comment that the Department of Canadian Heritage estimates additional revenue of $830 million. You said that this was an estimate and that the amount would depend on the way in which the CRTC decides to develop or implement the regulations. As I understand it, that estimate of $830 million is a little vague. It's perhaps even a little fanciful. Basically, it could very well turn out to be $200 million. As you say, it's an estimate, so mine is just as good as yours.

Don't you feel that the Canadian cultural industries and Canadian broadcasting might need a few more guarantees at the moment? We are really talking about their survival in an extremely changeable and competitive market.

I would like to hear your opinion on the matter of the $830 million in revenue. To many members of this committee, it's a concern, frankly.

[Jean-Stéphen Piché]

Owen.

[Thomas Owen Ripley]

Thank you for the question, Mr. Champoux.

It's certainly the case that the proposed model is based on the current model, because we have no other points of reference at the moment. We therefore focused on the way in which broadcasters have to contribute to Canadian content right now. In some cases, they are required to invest a certain portion of their income in Canadian content. In other cases, the contribution goes to production funds, like the Canada Media Fund, or with music, to funding development initiatives.

We looked at determining what each of the services, such as Netflix, would match with. In some cases, it really wasn't easy to determine. For example, is Spotify a traditional radio broadcaster or a gatekeeper that has to contribute to a production fund? So we came up with 16 scenarios to cover all possibilities. The $830 million we mentioned is the average. The lowest estimate was $750 million and the highest was around $900 million.

The important point with this model is that we can look at significant contributions to Canadian content. Of course, we have no guarantees as to the way in which the CRTC is going to implement the new regulatory framework, but it gives us an idea of the revenue that we are looking at raising.

[Martin Champoux, Bloc, Drummond, QC]

On the one hand, we have the current broadcasting companies who are looking for deregulation and their own obligations to be lessened. On the other, we have online broadcasters and the foreign giants who will come in and make representations to the CRTC. All those companies are probably going to be asking for the same thing: some will want a lighter financial burden and the others will clearly want to pay as little as possible. On the other side of it all, the cultural industry will likely be getting much less in the way of resources from those companies.

How do you feel that the CRTC will be able to make sense of things if the act itself does not establish extremely clear, specific objectives with a view to finding a balance between all the players in the market, especially those who create content?

[Thomas Owen Ripley]

The starting point is that those players have to make a significant, but appropriate contribution. The challenge in 2021 is that business models are more and more diversified. In the past, we had a broadcasting model that was more or less uniform. We had networks that broadcast dramas, news, sports, and so on. We know that this is no longer the case. Streaming services have many different models.

I recognize that it will be a challenge, but the CRTC will have to find a way to create a fair regulatory framework that continues to require a major contribution from Bell Media and Québecor Média, while now requiring a major contribution from players like Spotify and Netflix. It's a matter of determining the contribution that each can make to Canada's media sector.

[Martin Champoux, Bloc, Drummond, QC]

The current Bill C-10 removes the option of going to the Governor in Council.

Given the discussion we are having at the moment, do you not feel that we would be justified in putting that option back?

[Thomas Owen Ripley]

Of course, we have heard concerns about this change from some stakeholders. However, the change is because we are looking at moving from the current model, where each company holds a licence to conduct activities in Canada, to a model that is much more regulated.

For the most part, the CRTC will be making the regulations, which will be public and transparent. It will also issue orders, which will also be public and transparent. The whole thing will clarify the rules for companies with activities in Canada.

[The Chair, Liberal, Scott Simms]

Thank you very much.

Madame McPherson, go ahead for six minutes, please.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Thank you, Mr. Chair.

Thank you to the witnesses for joining us today. Happy International Women's Day.

I have a few questions I thought I'd start with. One is that the current act states that the broadcasting system in Canada must be under Canadian ownership, but the bill removes this reference and opens the door for broadcasting systems to be under foreign ownership as well. I want to understand the motivation for this proposed change and whether it could facilitate the acquisition of our broadcasters by American companies, for example.

I'll pass that to anyone who wants to take it one on.

[Jean-Stéphen Piché]

I will start, and Owen will complete it.

One thing that is important is that if we have international new players, foreign players, in the system, we need to find a way to recognize the fact that they are operating in Canada while we protect Canadian ownership. We are seeking that balance between recognition of the fact that they are operating and protection of Canadian broadcasters in that framework.

Owen.

[Thomas Owen Ripley]

The challenge we face with the current wording is that it says the system shall be owned and controlled by Canadians. The tension, obviously, comes from the fact that that is just not true anymore. The whole impetus for Bill C-10 was to bring streaming services—Netflix, Crave and Spotify —into and include them in the broadcasting system. The reality is that many of those services are not Canadian owned and controlled. That is why we reformulated that policy objective to talk about having all of them make an appropriate contribution as the foundation of the system moving forward.

In terms of your question as to whether that means that Canadian broadcasters could be sold off, the answer is no. Right now there is a directive to the CRTC that provides restrictions on foreign ownership with respect to licensed entities. The reality is that our over-the-air broadcasters and our cable and satellite companies cannot be put under foreign ownership and control as long as that direction remains in place.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Just to clarify, Mr. Ripley, that directive is binding? It is not something that can be changed by the CRTC?

[Thomas Owen Ripley]

It cannot be changed by the CRTC.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Okay. Perfect. Thank you.

I'd also like to know, for the fiscal year 2019-20, how much your department spent on advertising on web giants like Facebook and Google compared to how much was spent on traditional media. Is it possible to provide some of those statistics to the committee?

[Jean-Stéphen Piché]

Yes. I don't have them now, but we could forward them to the committee, no problem.

In terms of the spending by the department, as I said, there is often.... I've heard it said many times that Canadian Heritage does not centrally manage advertising for the Government of Canada. It's PSPC that does that.

We can provide data that is more specifically under our control as it relates to the department itself.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Mr. Piché, would it be possible to provide that data, broken down by year, maybe from 2015?

[Jean-Stéphen Piché]

Yes, we can break it down by year and by types of advertising, and by who.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

That would be wonderful.

Mr. Ripley, I have another question for you, if I may.

Bill C-10 explicitly and completely exempts Facebook, YouTube, Pornhub and other services dealing in user-generated content from the Broadcasting Act. Were you instructed by Minister Guilbeault or his staff to do this, or how did that come to happen? How was it that Facebook and YouTube were excluded from Bill C-10?

[Thomas Owen Ripley]

I'll begin by saying that they are not necessarily excluded from the scope of the act. We are walking a line where certain of their activities will be subject to regulation, to the extent that they act like a broadcaster. In other words, to the extent that Google and YouTube have services where they are commissioning content, controlling that content—its affiliates are controlling that content—it will be captured. It's the same thing with respect to Facebook.

At the same time, we wanted to recognize that many Canadians obviously use these activities for user-generated content. That is a difficult line to walk, and that's the one we've tried to walk in the bill by excluding them, to the extent that they are acting as repositories for user-generated content, while pulling them in to the extent that they are controlling the curation of content on their services.

In practice, that may mean that certain services like Facebook Watch or YouTube Music will be subject to CRTC oversight with respect to broadcasting. That's the bill the government ultimately put forward, and so that's the government's position on that matter.

As Jean-Stéphen alluded to, that doesn't mean we aren't cognizant of the fact that those activities—those user-generated content spaces on those platforms—may need regulation. We are working on a bill with respect to online harms that will look at those issues.

From our perspective, broadcasting regulation is different from the kind of regulation that should apply with respect to user-generated content.

[The Chair, Liberal, Scott Simms]

Thank you.

We have Mr. Aitchison, for five minutes, please.

[Scott Aitchison, Conservative, Parry Sound—Muskoka, ON]

Thank you, Mr. Chair.

My first question will be for Mr. Piché.

I feel like I'm hearing—and I'm wondering if you can clarify for me—that Bill C-10 doesn't completely encapsulate all the changes that need to be made to make the playing field in this new media landscape fair.

Is that a fair statement of where we're at?