Canada Orders Foreign Streamers to Contribute 5% of Canadian Sales to Broadcasting System — 4th 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.

Some streaming companies and industry watchers warn the levy could lead to higher prices for millions of Canadian subscribers. One digital-media expert said some streamers might reconsider their presence in Canada.

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, to the broadcasting system. The order to hand over 5% of Canadian revenue would apply to streaming services with more than C$25 million in annual 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.

For over five decades, Canada has required domestically licensed television and radio stations to air a minimum amount of domestic programming known as Canadian content, or CanCon. The new law governing streaming aims to replicate that model for the digital world.

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.

Motion Picture Association Canada, which counts Disney, Netflix and Paramount Global as members, said the 5% levy on revenue "reinforces a decades-old regulatory approach designed for cable companies," and ignores the economic contribution their members make to the economy.

The motion-picture group cited an analysis by KPMG, indicating 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.

In a separate statement, Amazon.com said it was disappointed with the regulator's decision. "This onerous and inflexible financial levy will be harmful to consumer choice."

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, francophone and indigenous programming, and content created by and for ethnic communities.

"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, called the levy "a discriminatory tax" on its members, adding streaming 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 14:54 ET (18:54 GMT)

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