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December 20, 2017

"If internet-delivered TV continues to increase in popularity, this could lead to a significant decline in the amount of available Canadian television content, at least in the regulated system."

The world of Canadian content regulation was developed in an earlier analog environment. Broadcasting was largely a closed, regulated system that included subsidies designed to help create more domestic content.

But the broadcasting system is no longer closed. High-quality television programming is available from the internet and Canadians are avid consumers. When TV is delivered over the internet, none of the Canadian regulations apply. So, the current system is not working; and it's clear that the quest to boost domestic content is an uphill battle.

In English Canada, the top 10 shows in 2016 were American. The next 10 shows were: three U.S. dramas; one U.S. reality show; four Canadian reality shows; and two Canadian sports programs. Canadian scripted programming (or "dramas") was not represented despite being the obsession of the CRTC for decades. Its efforts to improve Canadian drama performance are understandable. Dramas account for 40 per cent of Canadian television viewing. But despite years of effort, only 20 per cent of drama viewing in English Canada is Canadian, with just less than 30 per cent in French Canada.

So we face two related problems. First, if internet-delivered TV continues to increase in popularity, this could lead to a significant decline in the amount of available Canadian television content, at least in the regulated system. Second, if Canadian broadcasters and cable companies are regulated, and internet-delivered competitors such as Netflix are not, it will be difficult for domestic providers to compete or even to survive, especially if foreign competitors face no taxation in this country.

Ottawa began to address the issue last September with its Creative Canada Policy Framework, a high-level overview of cultural policy direction that summarized initiatives to date and announced some next steps. Among the next steps is a review of the Broadcasting Act and the Telecommunications Act, preceded by a CRTC examination of new and traditional distribution models and their capacity to support Canadian programming. This examination and modernization of cultural policy is timely.

But, so far, the government has been short on specific new policies or revisions to current regulations. It is time for a more detailed road map. We suggest the following principles and ideas:

1. The existing regulatory system is worth saving. Despite getting a bit smaller each year, Canadian regulated television probably has at least 10 years of life before it is replaced by online viewing;

2. The problem is that the Canadian market is small, and TV production is a big-budget business. One solution is to spend the same amount of money but to produce less (but hopefully better) programming. In recent years, the CRTC has accomplished this by keeping Canadian content (Cancon) expenditure requirements the same but no longer requiring Cancon to be aired outside of the evening hours. This trend should be continued by further reducing the Cancon exhibition requirements;

3. One solution to the problem of a small domestic economy is to produce product for export. This will allow for bigger-budget shows and may eventually make Canadian television self-sufficient. The Canada Media Fund (CMF), which provides subsidies for Canadian television, has recently started a pilot project to promote the export of domestic TV programming. Both the CMF and CRTC should continue these efforts.

As well, the government should require all suppliers of video products to Canadian consumers to collect HST. This policy should apply as well to all internet-based programming sold to Canadians.

Further, the CRTC should have the authority to collect data from any supplier of video products to Canadians. Without robust, accurate data, it will be increasingly difficult to ensure a level playing field for all competitors.

In a sector as technologically dependent and fast changing as the digital world, the government should build in periodic-review mechanisms.

Some of these changes will irritate industry participants. But doing things the same way and expecting a different result is the definition of insanity. Let's keep spending on Canadian content but do it more wisely to generate more hits.

 

Lawson Hunter, Kenneth Engelhart and Peter Miller are authors of the C.D. Howe Institute paper "Strengthening Canadian Television Content: Creation, Discovery and Export in a Digital World." The authors are actively engaged in the sector. The views in this paper are their own.

Published in the Globe and Mail