July 2, 2024
Mr. Marc Morin
Secretary General
Canadian Radio-television and
Telecommunications Commission
Ottawa, ON K1A 0N2
Filed Online
Dear Secretary General Morin:
Re: Broadcasting Regulatory Policy CRTC 2024-121 – Proposed orders imposing conditions of service and expenditure requirements for carrying on certain online undertakings – DIMA Reply Comments
Introduction
1. We appreciate the opportunity to reply to comments filed in this consultation on the proposed orders (“Orders”) and related conditions of service (“Conditions”) set out as Appendix A to the CRTC’s Broadcasting Regulatory Policy 2024-121 (the “Policy”).
Timing of the Orders
2. The Canadian Radio-television Telecommunications Commission (“CRTC”) proposes to initiate the contributions regime under the Orders in the 2024-2025 broadcast year, citing “immediate need” and an objective of ensuring that contributions are received “quickly” (1). Certain parties commenting on the Orders similarly took the position that expenditure requirements are urgent, or that payments should be advanced (2). We maintain that the CRTC should not impose any contribution requirements on online undertakings to support Canadian and Indigenous content until it has fully assessed the services’ existing contributions, has determined what constitutes Canadian and Indigenous content for the purposes of the new regime, and has developed its Indigenous Broadcasting Policy. The Broadcasting Act and the Governor in Council’s Policy Directions to the CRTC (“Directions to the CRTC”) require the CRTC to fully assess broadcasting undertakings’ contributions (3), recognize and accommodate the real differences between classes of undertakings (4), and rationally connect any new obligations to purposes that are clearly articulated and supported by evidence(5). Without a meaningful review of the extent to which our members’ existing contributions
meet the policy objectives of the Broadcasting Act, and without definitions of Canadian and Indigenous content that align with those policy objectives under the new Act, we respectfully submit that the CRTC cannot fulfill the above binding mandates.
3. We also support comments by Amazon (6) and Spotify (7) that the proposed application of the obligations is not only premature, but impermissibly retrospective. The wording of the draft Condition – “commencing in the 2024-2025 broadcast year” – masks its actual retrospective effect. If the intent is indeed to impose payment obligations in the 2024-2025 broadcasting year on the basis of 2023-2024 revenues, it is clear that (in the words of the Conditions) the regime would attach to “broadcasting activities from” 2023-2024, before the Orders have taken effect. There is no basis under the Broadcasting Act to allow the CRTC to enact an order under sections 9.1, 11.1 or the transitional provisions, with retrospective effect.
Orders effectively impose an unfair levy
4. We support submissions by Spotify (8) and the U.S. Chamber of Commerce9 that these expenditure requirements would effectively impose an unfair levy on foreign online undertakings. We agree that the proposed Orders would single out non-Canadian streaming services for a 5% expenditure, without regard either to (a) the investments those services already make in the Canadian system; or (b) the “outcomes-based approach” the CRTC previously said that it favoured to connect any contributions to “clearly defined, measurable regulatory objectives” (10).
Mechanism
5. We share the concerns raised by Rogers (11), Amazon (12) and Spotify (13) that it would exceed the CRTC’s authority to impose the expenditure requirement by way of these Orders, and that the Broadcasting Act requires the CRTC to proceed by way of regulation. We agree with these parties’ positions overall that if these expenditure requirements are to be imposed, a regulation would (a) be the clearest legal mechanism under the Act; (b) give all stakeholders appropriate notice and time for comment; and (c) provide a fuller set of definitions, terms, procedures and guidance for the benefit of affected companies and organizations.
Payments
6. We oppose the proposal by some participants, including the Canadian Association of Broadcasters (14), Independent Broadcast Group (15), and Friends of Canadian Media (16), to require contributions to be paid in monthly installments, as broadcasting distribution undertakings (“BDUs”) do in some cases. These proposals are unrealistic and ignore the financial and operational burden these significant new payments would impose on audio streaming services.
7. DIMA members currently pay around 70% of all revenues they receive for music streaming as royalties to music rightsholders. And out of that remaining 30%, they not only pay the considerable costs of operating their services and investing in innovation, but also provide a wide variety of financial and non-financial benefits to Canadian artists of all sizes, including opportunities to showcase and advance their music to fellow Canadians and global audiences alike.
8. Our members currently have the flexibility to contribute to Canadian and Indigenous creators and content at a pace that aligns with our partners’ and artists’ needs, and the investment opportunities that arise – or that our members create – in real time. The proposed new regime would require services to undertake a full financial impact assessment, and set up accruals and financial planning, to accommodate a set expenditure amount, within a set time period.
9. While we acknowledge that BDUs make some of their regulated contribution expenditures on a monthly basis, their operations are local (country-specific), and their monthly payment system has already been in place for a long time. By contrast, this new obligation, placed solely on foreign online undertakings that operate globally, is an unprecedented new regulatory requirement, and is counter to the requirement under the Broadcasting Act that the Commission regulate the broadcasting system in a flexible manner (17). Flexibility for online undertakings would also be only fair given that the CRTC gives Canadian broadcasting undertakings other than BDUs the flexibility to make payments over the course of one or more broadcast years. Our members seek the same flexibility (18).
Data Collection
10. We support the positions of many parties (19) in this consultation opposing any requirement for online undertakings to (a) share sensitive commercial information with third parties, including Canadian broadcasters; and (b) provide reviewed financial statements that have been prepared in accordance with Canadian accounting principles. We also strongly object to the proposals by some parties (20) to (c) use these Orders as the basis to collect even more financial and operational information from online undertakings, either on a confidential basis or not. Each of these proposed requirements would be an unnecessary, inappropriate, intrusive and onerous burden on online undertakings. As such, imposing them would be contrary to the CRTC’s clear mandate to regulate in a flexible manner that is sensitive to administrative burdens, avoids imposing inappropriate regulation (21), and considers the fact that non-Canadian companies are already subject to their own established domestic financial and operational regulatory requirements and practices (22) for accounting, data management, and protection of confidential information.
11. Thank you for the opportunity to provide these reply comments on the Orders.
Sincerely,
Colin Rushing
Executive Vice President and General Counsel
Digital Media Association (DIMA)
Footnotes
1 Policy, Summary.
2 See Canadian Association of Broadcasters, p. 2 “leveling the playing field remains an urgent priority”, paras. 19 and 23; Québecor Média, para. 6. The Indigenous Music Office has proposed (p. 1) that contributions scheduled for
December 2024 should be accelerated to September 2024.
3 Broadcasting Act s. 3(1)(a.1): “each broadcasting undertaking shall contribute to the implementation of the objectives of the broadcasting policy set out in this subsection in a manner that is appropriate in consideration of the nature of the services provided by the undertaking”.
Broadcasting Act s. 5(2)(h): “The Canadian broadcasting system should be regulated and supervised in a flexible manner that […] (h) takes into account the variety of broadcasting undertakings to which this Act applies and avoids imposing obligations on any class of broadcasting undertakings if that imposition will not contribute in a material manner to the implementation of the broadcasting policy set out in subsection 3(1)”.
4 Broadcasting Act s. 3(1)(a.1), supra note 3; Directions to the CRTC, s. 12: “In exercising its powers under section 11.1 of the Act, the Commission is directed to […] (b) recognize the diversity of services provided by broadcasting undertakings”.
5 Directions to the CRTC, s. 12: “In exercising its powers under section 11.1 of the Act, the Commission is directed to (a) regularly review expenditure requirements to ensure that they are proportional to their objectives and that those objectives are clear”.
6 Amazon, para. 58.
7 Spotify, para. 9.
8 Spotify, paras. 5 and 31.
9 U.S. Chamber of Commerce, pages 1 and 2.
10 Broadcasting Notice of Consultation CRTC 2023-138, para. 58.
11 Rogers, paras. 4-10.
12 Amazon, paras. 9-15.
13 Spotify, paras. 6-7.
14 Canadian Association of Broadcasters, paras. 18-24.
15 Independent Broadcast Group, paras. 11-12.
16 Friends of Canadian Media Group, para. 3-9.
17 Broadcasting Act s. 3(1)(a.1), supra note 3.
18 Directions to the CRTC, s. 12: “In exercising its powers under section 11.1 of the Act, the Commission is directed to […] (c) consider providing flexibility for all broadcasting undertakings in meeting expenditure requirements”.
19 Spotify paras. 12-18; Amazon para. 64; Roku paras. 3-4; Apple paras. 6-9; Google paras. 9, 11-13; Motion Picture Association-Canada paras. 4-7.
20 ADISQ paras. 7-15; Association des professionnels de l’édition musicale paras. 3-6.
21 Broadcasting Act s. 5(2)(g) and (h).
22 Directions to the CRTC s. 8(f).
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