In the future, Canadians will increasingly rely on the Internet to discover and consume music, entertainment, news and information. Already, more than two-thirds of data on fixed networks and more than one-third of mobile data is used for real-time video and audio entertainment, and this amount is steadily increasing. Although traditional television and radio will continue to evolve and play important roles, the roles will be smaller than in the past as they are gradually overtaken by online services.

Traditional Canadian services have historically operated in a closed economic and regulatory system, with closely guarded borders, protecting them from competitors outside and in many cases within Canada. Those borders are now being forced open, creating new benefits and challenges. As can be seen throughout this report, Canadians have access to more global content than ever before; the creation and distribution of content has been democratized and the tools made available to new creators; there is a much better understanding of the content Canadians want; and there are more buyers of content than ever before, as well as more eyes watching and ears listening to it around the world than were possible in the closed system.

But there are also real challenges to overcome. It is apparent from this report that traditional television and radio services are at best mature and that some segments are in decline—not necessarily a steep decline, but an evident one. Subscriber and advertising revenue declines are likely to result in the loss of various types of domestic content in French, English, Indigenous and other languages, particularly in the case of content that is already less profitable or more costly to create. The economics of financing Canadian content mean that a declining traditional system may be unable to support production, promotion or discoverability. Canadian culture, ideas and values may be less visible as a result. Though Canadians’ expectations are higher than ever before in terms of what video and audio content they consume and where and how they consume it, traditional Canadian television and radio services will face increasing difficulties in meeting those expectations. At the same time, the collection of data from or about Canadians by online services allows a better understanding of audiences, while also creating the risk that this extensive data will be misused.

In this new environment, fostering a spirit of innovation and helping to build a vibrant domestic market in the future—including the new industries and jobs that the Canadian economy will rely on—will require action and investment by governments and all other stakeholders. The opportunities and risks of the new environment demand new strategies and directions. The approach of the past will not work to surmount the challenges and harness the opportunities of the new environment. The focus will need to move to an approach that will bring about participation in a stronger, more broadly based system.

It is evident that Canadians already rely on international online services that are deeply integrated into our broadcasting system and that the role of these services cannot be ignored or minimized. These are new types of services with different business models and not simply other television, radio or distribution services. If we approach these as traditional services, Canadians and Canada will fail to benefit from the opportunities they present. At the same time, services operating in Canada, just as in any other nation, have social responsibilities to the Canadians they serve. Such services benefit from Canada and Canadians and consequently should also participate in the enrichment of our cultural, social, democratic and economic fabric.

Important elements of the existing system will nonetheless remain essential. For example, strong foundations for valued cultural stakeholders such as the Canadian Broadcasting Corporation, Canada Media Fund, Telefilm and the Canada Music Fund will continue to be necessary in the future, but this should not prevent pressing ahead with bold new funding and other strategies that will not only support innovation that benefits Canadians but also allow it to thrive.

Most Canadians, Canadian companies and other stakeholders that have engaged in creating this report were generally in agreement with the preceding conclusions. However, these same participants made widely varying proposals as to what legislative, policy and regulatory approaches would best move Canada forward into the future. These proposals tend to fall into four broad types:

1. Maintain the current approach

If we maintain the current approach, increasing pressures on broadcasters and content creators may drive even greater demand for government support, which could place unsustainable stresses on the current system.

The current legislative and regulatory approach is focused almost exclusively on traditional television and radio services and is becoming less effective. As consumption of these services declines, so too does revenue. This will impact the production of high-quality content, including news and information provided by these services, as well as the associated creative and knowledge-based employment. Canadian content creators will continue to call for ever-greater government and regulatory intervention to make up for these declines, potentially placing increasing burdens on broadcasters, which will further reduce their ability to compete with new online players.

The impact of maintaining current approaches may be that traditional audio and video services will dwindle—though likely not disappear—over time. As they do, the stresses on the current system of funding and support will mount, and, if nothing else changes, yield diminishing employment opportunities for Canadians and Canadian creators. Content that Canadians tell us is important (including local news, content accessible to persons with disabilities, content for official language minority communities, dramas, documentaries and children’s programming) could become less feasible to produce in the traditional system. Declining consumption of traditional radio and television services will also limit the ability to promote and discover Canadian audio and video content. At the same time, this approach does not allow the opportunities presented by new technologies and services to be harnessed

2. Deregulate traditional players

The economics of Canadian production mean that content creation needs financial support. While deregulation may improve competition and profitability for some players, it removes important supports for Canadians and Canadian creators.

Traditional players operate under various legislative and regulatory obligations, such as the requirement to contribute money to funds or particular activities that support the production of audio or video content; to acquire, produce or broadcast minimum amounts of Canadian content; and to provide content of high quality that adheres to laws, regulations, codes and other standards. These measures have historically worked well to ensure that Canadians have access to the best content from Canada and around the world. Arguably, without them there would be no distinct English-language, Indigenous or other language Canadian music or television industries, as well as diminished French-language industries. In the future, the economics of Canadian production are unlikely to change, and most content will not be profitable to produce without supports. While such measures are deeply challenged by the developments described in this report and will require updating, they may continue to play a key role in ensuring a vibrant domestic market for the foreseeable future.

Reducing or eliminating current regulatory requirements—and trusting the CBC to continue to meet its objectives without regulatory oversight—would, without doubt, make it easier for traditional distribution and programming services to adapt and compete more effectively with new players and thus maintain or increase profitability. Canadians, however, could lose the diversity of content and content sources they currently enjoy and are likely to lose access to many types of content, including at-risk programming that is less profitable to produce. With the removal of regulatory requirements that promote or provide support for Canadian producers and creators of all types of content, Canadians will see less of themselves and less of the content that reflects their values, needs and interests, not to mention the heavy negative impact on Canadian artists, creators and producers.

3. Apply existing regulatory approach to new players

New content models challenge our traditional understanding of broadcasting. Applying regulatory approaches developed for traditional television and radio to these online players is unlikely to maximize benefits for Canadians.

The existing legislative and regulatory toolkit was designed to apply to traditional television and radio services operating in a closed system. Applying these tools to digital services poses significant challenges. Take, for example, requirements to make financial contributions to Canadian production. How would such requirements be reasonably applied to a service that does not derive any revenue from its audio and video content, but instead gives it away for free when tied to retail services unrelated to broadcasting, such as Amazon Prime? Exhibition quotas have been a key regulatory tool applied to traditional linear radio and TV services, but are not applicable to on-demand and algorithm-driven services like Spotify and YouTube. Even a service such as Netflix, which appears in some ways similar to traditional services, operates under a fundamentally different business model and, as a global company, in very different ways than was contemplated when the existing regulatory tools were put in place.

In many ways, these services challenge existing definitions of distribution and programming services and even broadcasting. Applying current regulatory approaches to these online players based on these definitions is unlikely to maximize benefits for Canadians. Nor are the existing tools in the policy and regulatory system sufficient or sufficiently adaptable to ensure or incent the participation of such new players. The current legislative and regulatory scheme is too rigid to encompass the new media environment. Applying the existing rules could hamper innovation, limit choice for Canadians, create inequitable regulatory burdens and present practical challenges to implement. More importantly, is this really the optimal approach?

4. Develop new adaptable and innovative approaches that engage new players

Canadians will benefit most from strategies that emphasize discoverability and promotion alongside production, establish clear roles and responsibilities for both traditional and new online players and are responsive to fast-paced, disruptive change.

The other three approaches—status quo, deregulation and applying existing rules to digital players—are short-sighted because they assume that the marketplace of the future, particularly the growth and impact of online services, can only be addressed by applying or abandoning current tools and approaches. Ensuring a vibrant domestic market in the future will require new tools and approaches. It is imperative to innovate to benefit from the communication opportunities presented by these evolving technologies and services. Incentives are necessary to engage both traditional and new players in a system that provides content Canadians want to watch and to hear, as well as knowledge-based employment. Adaptability is essential to ensure that the benefits achieved can be maintained in the future. If Canada and Canadians are to be best equipped to move forward into the future, bold new strategies are necessary.

More specifically, the CRTC proposes that the future legislative and regulatory approach to content and its distribution should:

i. Focus on the production and promotion of reflective, informative and/or entertaining high-quality content by Canadians that is discoverable by Canadians and the rest of the world

78% of Canadians consider content made in Canada to be of moderate or high importance to them personally. In addition, “[m]any focus group participants said they support a government role in the development of Canadian content. Some view Canadian content as helping to strengthen unity and shared identity. Others noted that financial support to ensure the production of Canadian content helps to develop talent of actors, writers, and producers and creates employment throughout Canada.”

According to EKOS’ research

This principle brings together several of the objectives of the current Broadcasting Act and adds an emphasis on the promotion and discoverability of content. Even the best content cannot be successful if it is not presented to Canadians and the rest of the world in the most effective ways possible. Shifting focus from production alone to include the promotion and discoverability of content will be essential to ensure a vibrant domestic market in the future.

This principle also recognizes that content is not only important for economic reasons but also as an aspect of Canadian culture that has value in its own right.

“As someone who cut my cable and went completely digital, I find I miss Canadian content.”

EKOS focus group participant - Montreal, translated

“If everyone has access to content from everywhere in the world, it’s possible people would watch less content from here. I think international content is very important, but that means I watch less Canadian content. A lot of people who work in the field would suffer as a result.”

EKOS focus group participant - Montreal, translated

ii. Recognize that there are social and cultural responsibilitiesFootnote 1 associated with operating in Canada and ensure that all players benefitting from Canada and Canadians participate in appropriate and equitable—though not necessarily identical—ways to benefit Canadians and Canada

A vibrant domestic market is not possible unless it engages all players in the system and ensures that each participates in the most appropriate and equitable ways. The current regulatory approach to audio and video content establishes benefits for traditional players, as well as related obligations. Neither these benefits nor these obligations are applied to the many online international services also operating in Canada and playing increasingly important roles in the broadcasting system. These services draw significant revenues from Canada and Canadians and, in some cases, also make important contributions, but neither their roles and responsibilities nor their contributions are currently recognized—and are certainly not guaranteed. These services are not identical and so should not make identical contributions. Instead, their contributions should be appropriate to their circumstances, while providing the greatest benefit to Canadians. These contributions, however, should be equitable to ensure that all players can compete fairly and effectively, which also benefits Canadians.

iii. Be nimble, innovative and continuously capable of rapidly adapting to change

As society and technologies change, so too must legislation and regulation. To best face the challenges of the future and benefit from its opportunities, it is essential to effectively adapt to these changes and enable platforms and services to do the same. More than simply reacting, the objective should be to keep apace with change. Having a vibrant domestic market in the future will require developing systems and approaches that provide an environment in which innovation that benefits Canadians can thrive, creators can flourish and opportunities for creative and knowledge-based employment are optimized. Today our legislative and regulatory approaches lag behind even current technological and social realities. The tools we develop for the future must assume that unforeseen changes will be the norm and must be flexible enough to continuously adapt along with them.

Potential options

Taking into account the conclusions in this report, there are a number of possible ways forward. The following sections identify some of the public policy options the government could consider. These potential options are not prescriptions, but rather alternatives that could be considered in making legislative changes that may more effectively engage the challenges and opportunities of the future. What is apparent from the conclusions is that bold and judicious change is necessary to effectively and equitably engage both traditional and new players in a legislative and regulatory environment that will ensure a vibrant domestic market in the medium and long term and provide the greatest possible benefits to Canadians.

Replace prescriptive licensing with comprehensive and binding service agreements that include traditional and new players

Traditional licensing models do not reflect the emerging reality of broadcasting or the ways in which Canadians consume and create content. Nimble regulatory approaches, such as binding agreements that clearly and transparently set out obligations, would better incent constructive participation and secure essential commitments from all participants.

To ensure a vibrant domestic market and be equitable to all players, it will be essential to develop better regulatory approaches that engage all audio and video services and for each to participate in the most appropriate ways in creating and promoting content by and for Canadians. Accordingly, if legislative change is to take place, it should clearly and explicitly make any video or audio services offered in Canada and/or drawing revenue from Canadians subject to the legislation and incorporate them into the broadcasting system. This should apply to traditional and new services, whether Canadian or non-Canadian. Further, any new or revised legislation should be founded on the principle of ensuring that Canadians continue to have access to high quality audio and video content and that is made by and for Canadians, as well as the best content from around the world, regardless of the platform, device or technology they wish to use. This principle is, in essence, similar to many of the current Broadcasting Act objectives, updated to better reflect the future of content distribution in Canada.

To achieve these goals, new policy and regulatory tools will also need to be designed, tools that are readily adaptable to current and future realities and that allow an equal level of flexibility in how they engage with services. The current licensing approach set out in the Broadcasting Act, for example, is a rigid system based on a set of prescribed classes of licence with standardized requirements. Over the years, this has led to a system in which thousands of individual licensees and other undertakings must each be managed and, in many cases, individually monitored and regulated. Most importantly, this approach does not reflect the reality of the ways in which Canadians engage with content or services, nor the ways in which companies offer this content and these services to them.

New legislation should not be based on the traditional method of licensing, but could adopt a more innovative and nimble approach with a view to reducing the regulatory burden on traditional players and more fully engaging new players, while still maintaining obligations essential to the future of the system. Regulation and policy could focus, for example, on more broadly based agreements tailored to and established with a few dozen specific companies or affiliated groups of companies, individually or collectively offering a variety of services (service groups) to Canadians. Such agreements should be adapted to their technological and business reality, should be subject to public scrutiny and should set out specific binding commitments applicable to the service group. Commitments could include performance-based measurements tailored to achieve policy outcomes. Service groups operating under such agreements would gain access to a number of incentives.

Some key incentives could include:

  • access to Canadian production tax incentives and funds for certified Canadian productions
  • access to Canadian production tax incentives and funds for the use of individual Canadians in key creative positions
  • clarifying the eligibility for advertisers to claim advertising expenses: advertisers on services subject to an agreement could be eligible to claim advertising expenses as deductible expenses for income tax purposes; however, advertising expenses on audio/video platforms not subject to an agreement would not be deductible
  • certain expenses incurred by Canadian companies could be compensated as a result of meeting agreement commitments

Binding agreements could be transparently established with each of the service groups operating in Canada and could set out the specific appropriate commitments made by the service group to benefit Canadians and the Canadian system. While the commitments of one service group should be equitable with others, since each service group could be composed of very different elements and provide services to Canadians in different places and in different ways, each should be obligated to participate in the system in a manner consistent with its technological and business reality. Such commitments could include a wide range of potential ways in which a service group could participate, such as through:

  • supporting the promotion or discoverability of content by Canadians
  • providing content of various types, such as news, drama, programming for official language minority communities or in Indigenous languages, or accessible programming (e.g. through closed captioning and described video)
  • facilitating the prominent placement of Canadian content, its export and/or the attribution of Canadian sources
  • ensuring that content is of a high quality that meets Canadian standards in journalism, advertising, etc.
  • protecting the privacy of Canadians and their data
  • providing more traditional direct financial contributions

Although the individual commitments for each service group could vary, all performance agreements set for service groups should be based, at a minimum, on principles such as the following:

  • Service groups should contribute in appropriate ways to the production and promotion of content by and for Canadians. Service groups operating in French-language markets, including online video services, should also make specific contributions to the production and promotion of content originally produced in French.
  • Commitments should be equitable, though not necessarily identical, with those of other service groups offering similar services and should represent the maximum reasonable contributions the service group can make, without undue burden or impact on its ability to innovate and to provide competitive services to Canadians.
  • Audio and video content offered to Canadians should be of a high standard, meaning that news content should meet Canadian journalistic standards and codes, advertising should meet Canadian standards and codes, and devices and content should be accessible to Canadians with disabilities.

A standard agreement could be put in place for smaller service groups.

Finally, new or revised legislation adopting this approach should include the necessary and sufficient powers to transparently implement and ensure compliance with binding agreements and the commitments set out therein. These tools could include the ability to impose administrative monetary penalties in instances of non-compliance.

Restructured funding strategy

Sustainable funding supports remain essential to Canadian content, but must reflect the new realities of the current and future marketplace without increasing costs for Canadians.

A key concern in the future will be how to support both the production of content by Canadians and its promotion and discoverability in light of the declining capacity of traditional radio and television services to provide such support. The government has committed to maintaining the current level of funding available through the Canada Media Fund. It will be important, however, to also address current and potential impacts on funding programs such as the Canada Music Fund or the numerous independent production funds and also play an important role in providing sustainable support for content. Similarly, the CRTC has implemented its own funding supports for conventional television stations and news production, but these are only short-term solutions.

As can be seen throughout this report, sustainable funding supports are likely to become even more crucial in the future. A longer-term funding strategy should also better reflect the realities of the marketplace. To do so, it should fund online-only or online-first content as well as potential future innovations, place a greater emphasis on supporting the promotion and discoverability of content and be based on equitable contributions from all the industry sectors that benefit directly by providing access to audio and video content.

A restructured funding strategy should be based on a revised contribution structure that is broad-based, equitable and sustainable in the longer term. It could integrate or at minimum align the existing contributions of the federal government directed to audio and video content. It could also incorporate a portion of the revenues derived from spectrum licensing and auctions, since the demand for spectrum is driven to a large extent by the demand for audio and video content.

Similarly, there are numerous services in Canada that connect Canadians to content, whether through the Internet or broadcast networks, such as cable or satellite. Demand for these services is almost wholly driven by demand for audio and video content, yet the Canadian market for this content is only supported by BDUs, television programming and radio services. An integrated fund could also be more broadly supported through existing contributions by all broadcasting and broadband connectivity services (BDUs, radio and appropriate telecommunications services), all of which benefit directly from the distribution of audio and/or video content. Such a fund could support content production, promotion and distribution without diminishing support for broadband development in underserved areas. This could potentially be accomplished to a large extent through the reallocation of existing contributions without the need for new costs to consumers.

For instance, contributions from these connectivity services could be based on a fixed percentage of the revenues of BDU and radio services, as well as appropriate telecommunications services earning more than a minimum exempted level of revenues. For example, at an estimated level of 1% of revenues, contributions from telecommunications services would be somewhat higher than those expected from existing contribution commitments, contributions from radio services would be somewhat higher than those currently made to Canadian content development and contributions from BDUs would be considerably less than their current requirement to contribute up to 5% of their revenues. With this approach, the burden of supporting content by and for Canadians would be partly reallocated within the system to include appropriate telecommunications services, while continuing support for broadband deployment. This approach recognizes the fact that the vast majority of the demand for telecommunications services and the associated growth in their revenues is driven by video and audio content. It further recognizes that most telecommunications services in Canada are part of highly vertically integrated companies that also include BDUs and often programming services of various types.

Preliminary analysis suggests that such an integrated fund could potentially be revenue-neutral across the entire system. Given the growth in revenues in certain telecommunications sectors, an integrated fund could also ensure continued support for audio and video content. This would include all beneficiaries of existing funds without the need for additional costs for Canadians, who ultimately fund the contributions of all players. Any potential for retail cost increases would be further mitigated by competition in the connectivity markets.

“There’s an aspect of protecting French language and culture, but also Canadian culture. In the world of media and entertainment, everything is dominated by the U.S., and if the government doesn’t play an active role, we’ll lose or dilute Canadian content.” EKOS focus group participant - St. Boniface, translated

If such a fund is created, the manner in which funds are allocated should be the subject of future public discussion, but should include a minimum allocation of funding for:

  • Canadian audio content production, promotion and discoverability;
  • French-language audio and video content; and
  • content by and for Indigenous peoples and official language minority communities.
“We need to promote content in other languages – especially Indigenous languages – without undoing all the work that’s been done to protect French language and culture.” EKOS focus group participant - St. Boniface, translated

This public discussion should also consider the future possibility of funding the following, which are not currently supported and/or unlikely to be adequately funded in the future:

  • content produced in-house by programming services or by affiliated producers;
  • direct promotion of Canadian audio and video content;
  • direct support of new and emerging creators; and
  • audio and video content in languages other than French, English or Indigenous languages.

National strategies

National strategies should address new imperatives driven by the changing content marketplace, such as strategies for content export, emerging technologies, inclusivity and diversity of content, as well as its security.

To better address the future opportunities and risks facing content production, promotion and distribution industries in Canada, the government could consider developing, in consultation with stakeholders, national and cross-sectoral strategies intended to:

  • Enable export of Canadian French- and English-language audio and video content, along the lines of the recently announced Department of Canadian Heritage export development strategy
  • Place Canadians at the forefront of new technological developments, such as in artificial intelligence, search, algorithms, digital advertising and the use of blockchain technologies, through the development and funding of academic or research programs and investment in these new technologies
  • Develop inclusive leadership in key creative positions that is gender-balanced and represent Canada’s multicultural nature in both the French- and English-language markets
  • Develop improved data collection programs for audio and video content that use new technologies to better manage and monitor exploitation and monetization of content rights

Short to medium term steps

Innovate on policy and strategies for more traditional models now, with a view to paving the way for the changes needed for the future.

If the government chooses to pursue any of the options discussed in this report, the necessary changes to legislation and regulation will take time. Whether or not such changes occur, there are certain initial steps the CRTC could consider in the next several years to address some of the issues identified in this report. For instance, the CRTC could:

  • Re-examine the regulatory approach to radio—including, for example, the common ownership policy, Canadian content levels, French vocal music requirements and Canadian content development—to develop innovative ways for this sector to continue to meaningfully contribute to the promotion and presentation of Canadian artists and music in the digital environment
  • Examine ways to support television news production through increased access to subscription revenues
  • Re-examine the role and effectiveness of the existing regulatory approach to online broadcasting distribution undertakings, including the BDU exemption order, to ensure that these services benefit Canadians and the Canadian system to the greatest extent possible
  • Consider the introduction of group-based approaches to the licensing of radio stations and BDUs—similar to those used for television programming services—to maximize benefits for Canadians and Canadian creators
  • Consider new approaches and technologies for content identification and tracking to provide improved data analytics and remove the need for traditional logs and monitoring requirements for radio and television programming services
  • Update definitions of Canadian programming expenditures in light of the digital environment

Additional activities could be undertaken in collaboration with other organizations but may also entail legislative changes. These could include:

  • Examining how best to remove barriers to funding online-only or online-first video content production and promotion
  • Examining the current definitions of audio and video Canadian content and the certification process with a view to updating them to reflect the new realities of digital production and ensuring that they provide the best combination of supports and incentives for the future environment