Canada Orders Foreign Streamers to Contribute 5% of Canadian Sales to Broadcasting System — 3rd Update

By Paul Vieira

OTTAWA--Canada's broadcast regulator said foreign streaming services such as Netflix, Disney+, Spotify and Amazon Prime Video would need to contribute 5% of their Canadian sales to help fund local broadcast newscasts, and video and audio content for indigenous and francophone communities.

The Canadian Radio-television and Telecommunications Commission said Tuesday the payments would begin in the 2024-25 broadcast year, starting Sept. 1, and are expected to annually contribute 200 million Canadian dollars, or the equivalent of $146 million. The order to hand over 5% of Canadian revenue would apply to streaming services with more than C$25 million sales in the country.

The financial contributions are mandated as part of a law that Canada's parliament adopted last year, which compels streaming services and digital platforms such as Alphabet's YouTube and Bytedance's TikTok, to prominently showcase Canadian programming to users in this country. The law marks one of the most aggressive attempts yet by a Western government to use regulatory changes to protect domestic interests in light of the big inroads the world's biggest digital companies have made in transforming how households watch programs, listen to music, conduct day-to-day business and consume news.

Officials said the estimated C$200 million marked an initial contribution from digital players to the Canadian broadcasting system, and suggested they may be ordered to pay more to help ailing Canadian broadcasters and the local artistic community. Canada's Liberal government has previously said that digital platforms and streaming services could end up making annual contributions totaling C$1 billion.

Representatives for Netflix, Disney and Amazon, owner of Amazon Prime Video, weren't immediately available for comment. The Biden administration has previously warned Canada that measures targeting online streaming could "discriminate against U.S. businesses."

In a report issued Monday, Motion Picture Association Canada, which counts Disney and Netflix as members, said that based on an analysis by KPMG, foreign studios and streamers spent nearly C$900 million on Canadian television and film productions in 2022, along with billions more in global programming shot in Canada. Data from the Canadian Media Producers Association indicates the total volume of film and TV production rose 4.4% in the most recent fiscal year to reach over C$12 billion.

Vicky Eatrides, the broadcast regulator's chairwoman, said the mandated contributions are meant to address concerns that "certain types of content like local interest stories will not be made or distributed anymore. Or that they will become less available because they will not be funded by market forces alone."

Officials said the share of revenue from streaming services would be allocated to address priority areas such as the production of local television and radio news, and francophone and indigenous content, and content created by and for ethnic communities.

Some industry watchers and insiders warn this could prompt some streaming services to reconsider their Canadian presence.

"Audio streaming services operate on thin margins and 5% of revenue will have a major impact that will result in either exiting the market or sharp increases to consumer prices," said Michael Geist, an internet law professor at the University of Ottawa and a critic of the government's approach to regulate digital platforms.

Digital Media Association, a Washington-based lobbying group for audio streamers such as Spotify, Apple and Amazon, said Canada imposed "a discriminatory tax" on its members, which is the growth engine for the country's music industry. The association said it would review the decision and members would "plan next steps accordingly."

In March, Spotify increased prices for subscribers in France after that government imposed a tax targeting streaming services to help foster the domestic music sector.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

June 04, 2024 13:51 ET (17:51 GMT)

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