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Streaming companies ask Canadian court to block news funding law

The Disney Plus streaming app on a smartphone. (Photo by Mika Baumeister via Unsplash)
The Disney Plus streaming app on a smartphone. (Photo by Mika Baumeister via Unsplash)

A consortium of American streaming companies have petitioned a Canadian court to block a forthcoming law that would require them to set aside 5 percent of their domestic revenue in order to fund local news initiatives.

This week, the Motion Picture Association of Canada (MPA Canada) said in a court filing that the regulation imposed by the Canadian Radio-Television and Telecommunications Commission (CRTC) — that country’s version of the Federal Communications Commission — exceeded its authority when it said streaming services had to help local broadcast news outlets and other content there.

“The CRTC’s decision to require global entertainment streaming services to pay for local news is a discriminatory measure that goes far beyond what Parliament intended, exceeds the CRTC’s authority, and contradicts the goal of creating a modern, flexible framework that recognizes the nature of the services global streamers provide,” said Wendy Noss, the President of MPA Canada.

Streaming services and entertainment brands represented by MPA Canada in the action include Netflix, the Walt Disney Company, Paramount Global, Sony Pictures and Warner Bros Discovery.

” Our members’ streaming services do not produce local news nor are they granted the significant legal privileges and protections enjoyed by Canadian broadcasters in exchange for the responsibility to provide local news,” Noss affirmed.

Entertainment studios have spent more than $6.7 billion producing content for Canadians on an annual basis, according to figures cited by the MPA Canada.

Some of that content production is rooted in a requirement imposed by CRTC that television broadcasters, especially foreign ones, are required to set aside a portion of their schedule for TV shows and movies that are produced in the country in order to hold a broadcast license there or be approved for distribution on cable and satellite, a rule known as CanCon.

For broadcasters, the CanCon rule requires them to air Canadian-produced series during at least 50 percent of their broadcast day, or 55 percent of the year. A similar measure is imposed on radio station that broadcast music. In addition to the content requirements, CanCon requires domestic broadcasters like Bell Media, Rogers and Corus to invest 30 percent of their revenue back into Canadian-produced series.

In June, the CRTC updated their rules to require streaming services operating in the country to contribute 5 percent of their total revenue to a special fund that will support domestic broadcast outlets. The regulator estimated the rule would provide as much as CA $200 million (around $146 million) in new funding each year.

The rule was imposed after the CRTC heard from more than 120 groups representing broadcasters, content producers and streaming services. It also held at least four inquiries into the matter before settling on the 5 percent rule, which aims to help boost local news output and Canadian television production.

“The funding will be directed to areas of immediate need in the Canadian broadcasting system, such as local news on radio and television, French-language content, Indigenous content, and content created by and for equity-deserving communities, official language minority communities, and Canadians of diverse backgrounds,” the CRTC said at the time. “Online streaming services will have some flexibility to direct parts of their contributions to support Canadian television content directly.”

It was the latest action by a Canadian government body or agency — the CRTC describes itself as quasi-independent — targeting the wallets of technology companies in pursuit of additional revenue that could help bolster local news and other initiatives.

Last year, Canadian lawmakers passed a measure that requires Alphabet and Meta to pay news organizations in exchange for sharing links to their content within search engines and social media platforms. The measure was specifically targeted at Google, a product owned by Alphabet, and Facebook and Instagram, which Meta owns.

The law requires social media and search engine platforms to engage in a bargaining process for the privilege of linking to content. In response, Facebook concealed links to news stories whenever they were posted by users — a practice that continues to this day.

“We have repeatedly shared that in order to comply with Bill C-18, passed today in Parliament, content from news outlets, including news publishers and broadcasters, will no longer be available to people accessing our platforms in Canada,” a spokesperson for Meta said in a statement.

Streaming services are unlikely to take the same approach with respect to their platforms in Canada, though they are clearly just as bothered by a regulation they consider to be onerous and unfounded. Entertainment companies say they’ve spent more money investing in Canadian content than the domestic broadcaster, the CBC, or “the Canada MEdia Fund and Telefilm combined,” the MPA Canada said on Thursday.

The legal challenge filed by MPA Canada asked for an injunction that would prevent the new regulation from going into effect, as well as a judicial review of the rule. The rule is supposed to take effect next year.

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About the Author:

Matthew Keys

Matthew Keys is a nationally-recognized, award-winning journalist who has covered the business of media, technology, radio and television for more than 11 years. He is the publisher of The Desk and contributes to Know Techie, Digital Content Next and StreamTV Insider. He previously worked for Thomson Reuters, the Walt Disney Company, McNaughton Newspapers and Tribune Broadcasting.