Peter Menzies: Canada's walled content garden has collapsed

Our regulators are pretending that quaint old rules can still apply in a world now dominated by online streamers. It won't work

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By: Peter Menzies

Many years ago, as a naive new CRTC commissioner, I attended the Canadian film and television industry’s annual Prime Time convention in Ottawa and posed a question.

I asked Glen O’Farrell, who led the Canadian Association of Broadcasters (CAB) for many years, if there was a plan or if anyone could foresee a time in a future, more populous Canada — even 50 years from now — when the nation’s film and television industry could thrive without dependence on government subsidies.

The answer was a firm “No.” Such a day will never come.

Thus began my journey into the mindset of the regulated broadcasting and cultural content-production industries: What exists today will remain as it was in the beginning and ever shall be.

That theology hasn’t changed — it inspired the Online Streaming Act — but the world has. Members of the Canadian Media Producers Association (CMPA) have for decades depended heavily on what once were reliably increasing cable company revenues — five per cent of which, thanks to the Canadian Radio-television and Telecommunications Commission (CRTC), must be directed into the Canada Media Fund, which then distributes the loot to producers. But the old adage that no one ever went broke running a cable company can no longer be stated with confidence. Cable revenues have been in decline for several years now — a trend highlighted in the Convergence Research Group’s latest report, The Battle for the Canadian couch potato: OTT and TV.

It notes that, as of last year, 48.5 per cent of Canadian households no longer have a cable or satellite subscription. By the time 2028 rolls around, that number is forecast to be 57 per cent, with revenues continuing to decline at a pace of around five per cent a year. Little wonder Rogers is offering severance packages in the hope of reducing its workforce.

Most of this is a result of the fact that, over the past 15 years, the walled garden that the CRTC had created to encompass cable firms and content producers collapsed as hordes of streaming companies swept across the border like so many Visigoths and into Canadian homes via the internet.

At this point, I could easily get into the weeds and lose you completely but, suffice it to say, I am not without sympathy for the Canadian dilemma. I’m an un-hypenated cultural nationalist who will cheer for my country and mine alone at the upcoming World Cup. I detest the fact that American entertainment and sports programming can be dumped into the Canadian market for pennies on the cost of production dollars at the expense of our own companies. That’s a situation that would not be tolerated in any other industry or country. I am old enough to remember when Canadian books, which now have a mere five-per-cent market share, sold hundreds of thousands of copies individually and millions collectively in a market half the size of today’s, and authors such as Pierre Berton and Peter C. Newman were household names. And I am wise enough to understand that Canadians’ learned preference for all things American on their screens will only continue to erode our increasingly wobbly sense of national identity which, today, is often described by our leaders as something something something.

So, foreign companies entering the Canadian market should not be allowed just to dump their product here, scoop up their profits and leave. They should, as with our domestic companies, be expected to be of benefit to not only the national treasury, but also the social fabric.

But, as the CMPA’s latest annual Profile report illustrated last month, there’s evidence to suggest foreign streamers and producers are doing that, just not in the way the Canadian industry is used to. In other words, they are not doing it as an obligation through designated, regulated funds overseen by the CRTC’s social engineers but directly as an investment. This is what is at the heart of the current dispute between the American streaming companies and the CRTC, which is — ponderously — trying to implement the Online Streaming Act as if the internet is the new cable. The Americans view having to pay money into funds as the least productive way to make attractive Canadian content that will give them a financial reward.

What has been unfolding is that the Online Streaming Act, which is now, predictably, a key point of contention in trade negotiations with the U.S., is trying to maintain the Canadian cultural funding world as it was, is and ever shall be. It, through the CRTC, is focused on keeping a system based upon 20th century realities, and not 2026.

That reveals what is the deepest flaw in the thinking upon which the contentious Online Streaming Act is based. It assumes that the “system” it is trying to maintain, in terms of supporting products that enhance Canadians’ understanding of their history, their nature and themselves, has worked. But while it has certainly functioned reasonably well as an economic stabilizer ensuring employment for actors, writers and others, there’s evidence to suggest the cultural foundations of what the current U.S. administration describes as a “51st state” have been increasingly Americanized.

An overwhelming majority of us, according to a poll commissioned by the CMPA, support the ambitions of the Online Streaming Act when it comes to maintaining cultural sovereignty. Such polls always do. But they stand in contrast to Canadians’ behaviour when it comes to consumption. Of the 52 per cent of us who still subscribe to cable, fewer than half — 43 per cent — watch domestic channels (where programming is dominated by U.S. content) while 25 per cent watch U.S. networks where there is no Canadian content whatsoever. When it comes to streaming services, we overwhelmingly choose foreign/American content.

We may talk a good game and respond robustly to polls when it comes to showing the Americans who’s boss. And while some of us may be refusing to party in Vegas or drink California wines and Kentucky bourbon, we still lap up American entertainment and sports just as if we were the good old boys and girls watching NCAA hoops in Lynchburg, Tennessee.

As Ken Whyte of Sutherland House recently put it, “Canadian consumption of Canadian content is shrinking by the year. We have Canadian media, Canadian-produced books and films and television shows, but they command pathetically small fractions of the domestic audience.”

Prime Minister Mark Carney has distinguished himself as a leader who believes that the nation must navigate the “world as it is, not as we wish it to be.”

It will require unspeakable contortions for him to apply that philosophy to the dilemma he is faced with when it comes to the Online Streaming Act in the months ahead. No doubt he will remember his appearance at the CMPA’s Prime Time conference this past winter. It was there that CMPA President and CEO Reynolds Mastin, in thanking Carney, vowed allegiance by stating that “every person in this room and the 180,000 people who work in this industry have your back, just as we know you have ours.”

It would be nice if at the end of this, people are happy and there is a rich and meaningful cultural industry that enhances the nation’s aesthetic. But if the CRTC and its codependents believe that can happen without a significant rebuild of a system it thought would last forever, it’s got another thing coming.

This is not just a glitch in Canada’s matrix of mythologies. It is, as someone once said, a rupture.

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