Cancon redux: Canada’s TV “system” battles the Internet

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“Somebody called me a protectionist this week. I’ve been called far worse, but the term rankled because I had not argued that Canadian television should be protected from foreign competition.”

Kate Taylor, Jan 18: A contemporary argument for Canadian content

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The ball’s in somebody’s court and needs to be lobbed back.

Let’s start with who or what is protectionist. The only such reference I made was to  the policy regime we’ve had in Canada since the 1970s:

“Bell and Rogers (plus Shaw and QMI) have made fabulous amounts of money thanks to the vast protectionist apparatus they’ve enjoyed for decades.”

While life may be tougher now, it would be hard to argue that our broadcasters aren’t still benefitting from protectionism: foreign ownership restrictions, simultaneous substitution and restriction of US satellite signals to the approved list are three current examples. Simsub is also a good example of a policy designed to help our TV business rather than TV viewers, who hate it – as in, where are the Super Bowl ads?

TV or not TV

In the same passage, Ms Taylor offers a misleading reminder of what she said in her original piece:

“I had simply pointed out that Netflix is an unregulated television service competing directly with Canadian broadcasters who have to program a certain amount of Canadian content by law. Whether they like it or no – and their commitment often seems lukewarm – the broadcasters are supporting television production in Canada. Netflix, which, by the way, pays no taxes in Canada, can license and commission entirely as it pleases.”

First of all, Netflix is only deemed to be a “television service” in the arcane meaning of our enabling statute, the 1991 Broadcasting Act. The date alone tells you all you need to know: the Act was passed within a few months of the World Wide Web going public, almost 25 years ago. Netflix is an over-the-top, online video service. But in this country, if content moves and it’s video, it becomes (with exceptions like personal messaging) broadcast programming and thus subject CRTC regulation.

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TV show multitasking

To say Netflix is “unregulated” is also misleading. Many people I’ve met seem to think that online video services like YouTube and Netflix couldn’t possibly be considered programming and subject to regulation since doing so would be, well, absurdly difficult and wasteful. Besides, the CRTC doesn’t currently regulate them. But there’s a catch. So relentless and inflexible is our legislation that YouTube and Netflix are indeed considered to fall into the category of regulatable content.

In its wisdom, the CRTC has twice decided – in 1999 and again in 2009 – to have it both ways. Yep, we could regulate this stuff if we wanted to, but instead we’re going to put the online content (now known as digital media broadcasting) under an exemption order. Presto: we keep the hammer but save ourselves and everybody else a lot of trouble.

Ms Taylor also refers to Netflix as “competing directly with Canadian broadcasters.” So far, it seems Netflix is not competing directly in the economic sense of being a substitute for Canadian broadcasters and by extension for Canadian TV distributors (broadcasting distribution undertakings, BDUs). But even if it is a competitor, so is a great deal of other video-based content on the Internet. To imply Netflix is cheating somehow, because it’s competing without all the same obligations as licensed broadcasters, is to miss the point. It isn’t Netflix or YouTube that needs to be fixed or altered to suit Canadians better; it’s our own broadcasting system that needs fixing to suit Canadians better. Our Broadcasting Act is long past doing Canadians any favors, except for those who work in the TV business.

Apples and oranges

Two other points arise from Ms Taylor’s opening statement: one about the entities Netflix is being compared to, the other about the legal obligation to make Canadian programs. First, this passage is the only one in which Ms Taylor actually mentions “broadcasters.” The rest of her piece is devoted to an entirely different animal: the OTT (over-the-top) services cobbled together by our incumbents, i.e. Shomi and CraveTV.

cravetvThis is not a trivial distinction. Just like Netflix, Shomi and CraveTV are not considered broadcasters by the CRTC and are also not regulated. That in turn has another important effect, which is that our homegrown OTT services do not legally have to produce any Canadian content, any more than Netflix does. And according to word I’ve just received from my TV producer friend, Shomi and CraveTV have no plans to commission anything from Canadian producers.

Neverthess, Ms Taylor offers the following invidious comparison:

“It certainly makes Rogers, Shaw and Bell look like better corporate citizens than Netflix Canada, a free-rider on the Canadian broadcasting system that competes with conventional broadcasters without contributing to the production of Canadian programming.”

The main difference between Netflix and our homegrown OTT services seems to be that Rogers, Shaw and Bell pay taxes here, which hardly makes them better than any other firm in the media business. If you want to get some idea of how well behaved our incumbents are, have a look at any of dozens of my posts on this general topic (I have 50 on Bell alone in my homepage categories list).

Moreover, if you count up the Canadian titles on each of the three services, Netflix has lots more Cancon than either of its Canadian competitors. That count is of course in absolute terms, not as a proportion of their overall libraries, since the Shomi and CraveTV libraries are tiny.

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Content obligations vs benefits

In her famous brawl at last September’s TV hearings with the CRTC chair, Corie Wright, Netflix’s Director of Global Public Policy, made some enemies by refusing to get into a numbers game over Canadian content. But let’s keep something in mind besides how much Cancon you’ll find on Netflix. Netflix has provided several dozen titles for its Canadian service for the good commercial reason that it expects some of its subscribers will want to watch them. Our incumbents, who have never had to worry about market demand for any of their services, are more interested in looking good to Ottawa than looking good to their customers. Each OTT can, in Ms Taylor’s phrase (which she applies to Netflix), “license and commission entirely as it pleases.” In other words, they’re all tarred with the same brush.

As for the point about the obligation to make programs, there’s another catch in the regulatory arrangements that isn’t obvious to the viewer at home. Through ownership restrictions, tax law, cable distribution rules, genre protection and a whole panoply of other protectionist measures, the CRTC and Parliament have ensured over the years that our licensed broadcasters would make a shit-ton of money.

Yes, smaller operations, both conventional and specialty, have fallen by the wayside in recent years as the TV industry as we’ve known it has blown up. But the basic deal was always clear. You guys get to make all that money and we get to tell you how much of it to spend on Canadian content. Whether it was a marriage made in heaven or a deal with the devil, the arrangement was good for the broadcasters, as well as the program producers and the policymakers.

Whether it’s been good for the audience is another question. At the very least, it’s exceedingly difficult to show empirically how audiences, rather than program producers, have benefitted from having more Canadian TV available, even though the benefits may be self-evident or axiomatic to some. That’s why the CRTC and other agencies measure their success in terms of industry turnover, jobs created, titles produced, etc – the supply-side approach of industrial policy.

TV vs TCP/IP

Ms Taylor acknowledges that the Cancon regs are in some trouble these days:

“[T]he distinction between Internet and conventional television will gradually blur, putting more and more pressure on the Canadian content regulations first drafted back in the 1970s. If we simply ditched the regs to level the playing field, how much Canadian programming would survive?”

I certainly agree that the content regs are coming under more and more pressure. I don’t agree, however, that the pressure is coming from a blurring between the Internet and conventional TV. On the contrary, the Internet is showing how absurd it is to have online content regulations of any kind, especially those crafted to support a system that has nothing to do with how online video is distributed and consumed.

Conventional TV is heavily regulated and has very high barriers to entry. It is strictly top-down, carefully controlled through scheduling, counter-programming, lead-ins and appointment marketing. In conventional, ad-supported TV, moreover, the product has always been the viewer, not the program itself or the goods on offer – a nice piece of irony for a country in which the idea of consumer demand fits so poorly into the citizenly theme of national cultural sovereignty.

Sp does all this disruption mean we should ditch our 40-year-old regs? Part of the answer lies in the problem of gatekeeping, according to Ms Taylor:

“A global and digital age offers vast opportunities to participate anywhere, any time, yet it seems to have spawned gatekeepers, the Netflixes, Amazons and Googles of this world, as culturally monolithic as any broadcaster that ever preceded them. Think of Canadian content as the cultural equivalent of the 100-mile diet.”

obama_state_of_the_unionI agree that gatekeeping is a huge problem for Canadians. But if it’s bad in the content business, it’s far worse in the Internet access business, over 90% of which is still controlled by the incumbents. In his State of the Union this week, President Obama spent a lot of political capital insisting that American consumers need more Internet access choices and far better protection from their incumbents than they’ve had until now. Exactly what we suffer from in Canada, except that the vehement debate about network neutrality raging in Washington is completely AWOL up here.

Yet even if content is troubled in some way, I don’t get how the Netflixes of this world can be considered “culturally monolithic,” as Ms Taylor claims. If anything, Netflix has been made fun of for going overboard with the diversity supported by its recommendation algorithms – like the 76,897 unique ways to describe types of movies unearthed by Alexis Madrigal at The Atlantic

When I cast my eye down the Netflix browse page, monolithic is the last thing that crosses my mind – and the page I’m looking at has been “simplified” to suit my particular preferences. If anything is monolithic about the browser, it’s the sense that Hollywood is much too evident – the Hollywood of formula rom coms, action movies for teenage boys, slasher movies for slasher fans and so on. As with many other social issues, however, the global homogenization of entertainment wasn’t caused by the Internet. Hollywood got us on that score long before Sony Pictures began worrying whether I was going to log into Netflix US from Toronto and deprive them of their piece of the Canadian action. 

Cancon in the arts

I found myself agreeing with Ms Taylor on her more general point about the importance of supporting Canadian content in the performing arts, including the theatre.

“Shakespeare may be a great playwright and The New York Times may have raved about the latest Broadway hit, but if you never program any Canadian plays at your Canadian theatre company, there will never be a living playwright in the rehearsal hall.”

I get that. I’m OK with Ottawa taking money from general tax revenues to support the performing arts, the fine arts, even novelists. But there are two problems to look out for.

theatre-gctcOne problem is that Internet video is not local theatre. Whereas it’s very difficult to amass market power in the local theatre business, the networked media were tailor-made for concentration of ownership; for the conflicts of interest that arise from killing off the principle of common carriage; and for the phenomenon of gatekeeping, which in an unregulated market like residential broadband, means you’re pretty much at the mercy of Bell and Rogers for your entire online life.

As a friend put it recently, broadcasting policy has been allowed to grow into a massive money machine, redistributing subsidies and revenues from distribution into the production and exhibition of Canadian programming. The pot has become so big, and the players so interdependent, that even the creative destruction wrought by the Internet can’t make a dent in it. Worst of all, vertical integration means that most of that money flows, directly or indirectly, from consumers and taxpayers back into the pockets of the same four or five vertically integrated conglomerates. Once Ma Bell was allowed to buy up Canada’s largest private TV network, the cultural goals behind broadcasting policy became an old-fashioned distraction from the real media issues of the 21st century.

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The other problem I was just alluding to is summed up nicely in the piece published yesterday by Ms Taylor under the title, Canada Council’s big makeover: What it really needs is more money.

Arts funding in Canada has been stagnating for decades, just like funding for the CBC and other federal agencies that could be producing more Canadian content. Ms Taylor doesn’t need to persuade me that Canadian culture is worth funding – as long as the funders don’t try to kill off my right to watch un-Canadian content into the bargain.

The person she needs to persuade is the dude in the prime minister’s office. If, in Ms Taylor’s phrase, finding the mechanisms to nurture Canadian content is a “simple matter of self esteem,” then maybe our cultural revolution needs to start by replacing the guy who’s been running the country.

D.E.

(If you’d like to read a couple of even longer, more strident posts on this subject, going back to June 2011, check out Get yer grimy paws off my Netflix: Ottawa’s big OTT scam, part 1 and part 2.)