Catching up on MediaPolicy -The Netflix Tax – The News Tax – The Google Tax

Friends of Canadian Media graphic

June 15, 2024

Yesterday MediaPolicy claimed the distinction of being the last member of the broadcasting commentariat to weigh in the CRTC’s first big decision on implementing the Online Streaming Act, Bill C-11.

“Golly, it’s a Netflix tax” is a lengthy 7 minute read, but I haven’t seen anyone else make some of my points, so perhaps you will find it helpful.

One of the issues I didn’t address in the post, out of a concern for brevity, was my obsession with the fate of local television news in this most recent Commission ruling.

Let me bore you for a moment.

Once upon a time (2006-09) the CRTC under its chair Konrad von Finckenstein devoted a lot of energy to finding a stable subsidy solution for local TV news. The fragmentation of the advertising market was well underway, and the future of ad-supported local stations was not bright. That may sound familiar.

The Commission tried a two-pronged strategy. But the plan floundered on both counts when the Supreme Court ruled that the CRTC was without jurisdiction to order cable companies to directly compensate local broadcasters for grabbing signals off of their radio towers. Then in 2012 a new CRTC chair who hailed from the cable industry cancelled the Commission’s alternate plan (an annual $100 million tithing of cable companies to make payments to a local programming fund that all Canadian local stations could access). 

Along came yet another CRTC Chair, Jean Pierre Blais, who in 2017 set up a smaller news fund at $21 million that was (and is) restricted to about a dozen independently owned local television stations in small and mid sized local markets (some of whom have content deals with major networks such as CTV, City-TV and TVA). 

Since then, the CRTC’s Independent Local News Fund (ILNF) has seen its cash pool shrink every year because the funding formula is tied to 0.3% of in-decline cable TV revenues. As of a year ago, it was down to $18 million annually and suddenly found itself beseeched by another 15 applicants from Global News stations. That new problem was created by the Shaw family cutting its news network loose in the 2022 Rogers-Shaw merger which automatically deprived Global of $13 million annually in special news funding from Shaw Cable, now owned by Rogers. 

The CRTC dithered about this for the last two years, promising to do something about a situation in which Global lost 10% of its journalism budget, the pool of televisions stations eligible for the shrinking ILNF doubled, and Rogers enjoys a windfall of $13 million to spend on its City-TV network. 

The solution? Foreign video streamers are going to join Canadian cable companies (of which Rogers is by far the biggest) in funding the ILNF with a contribution that looks to be about $45 million of the $150 million that video streamers are going to be paying now to Canadian media funds.

That’s a heck of a cash injection for local news. 

Is there joy in Mudville? Maybe, maybe not.

What was, for a moment, good news for Global stations was tempered by the bad news for its parent company, Corus Entertainment. That’s because Rogers Sports & Media just outbid Corus for a big chunk of its American programming and content branding from Warner Brothers Discovery. 

Bay Street analysts were grim in their dire projections for Corus. Media blogger Fagstein described it as Rogers “kneecapping” Corus and “stealing their content.” Somewhere, Brad Shaw was clipping his coupons.

Then days later the Corus-owned Global laid off 35 television employees, mostly in Alberta and Toronto. 

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There is a very weird thing unfolding in the implementation of the Online News Act, Bill C-18.

In December, Heritage Minister Pascale St.-Onge made peace with Google in a deal that committed the Big Tech giant to funding Canadian journalism to the tune of $100 million per year. 

Part of that deal was to put Google in the driver’s seat on distributing the cash, giving the company the power to choose an umbrella bargaining agent for hundreds of Canadian news organizations. The government’s main condition was that the Google cash had to be allocated equally on a headcount of employed journalists in all eligible news organizations. 

At the time, it wasn’t hard to predict that news organizations might try to game the distribution with inflated headcounts. 

Two journalism consortiums offered themselves up to Google as a bargaining representative.

The first was the Online News Media Collective, a coalition of the Canadian Association of Broadcasters, the CBC, the print-based News Media Canada, and a number of smaller news organizations (some of whom also belong to News Media Canada). That’s an alliance representing 99% of Canadian journalists and journalism content.

The other bidder to distribute Google’s cash might be called the Indiegraf-Village Media consortium, but it’s going by the name of the Canadian Journalism Collective. Its board is chaired by Erin Millar, the publisher of The Discourse and lead player in the start-up platform Indiegraf. Several of the CJ Collective’s board members use Indiegraf, a news platform and publishing system that got some of its seed capital from Google (give them credit, a good deed). 

The other main CJ Collective player and board member is Jeff Elgie of Village Media, the most successful digital news chain in the country and an opponent of Bill C-18. The CJ Collective has its admirers, including Michael Geist.

It was a mild shock when Google picked the indie CJ Collective over the mainstream Online News Media Collective, given the 1% versus 99% numbers. The Google press release didn’t give away a lot when explaining why. It certainly looked from afar like there could be some politics involved. 

Both umbrella groups are stuck in an unavoidable conflict of interest where, in theory, they become a gatekeeper of distributing funds (which are supposed to be equally allocated) of which their own member news organizations stand to benefit. 

In addition, it turns out that many of the participants in the indie Collective were approached by Google back in 2022 and offered funding to lobby against Bill C-18 (they considered and then rejected it). Google did the same thing in fighting Bill C-11: YouTube funded the upstart lobby group Digital First Canada, landing its unwitting spokesperson in hot water over the issue of lobby registration.

All of this is so much mudwrestling and of limited policy significance, except that everyone involved is brimming with suspicion that the other guy is going to cheat and game the distribution of Google cash with some creative representations of “employed journalist.”

This ought not to be a real threat to the integrity of the payment scheme if the CRTC makes it known that it will supervise and even audit the distribution of Google cash. At least hypothetically, it’s possible that some news organizations are going to shoehorn non-payroll editorial expenses or others might misrepresent freelance stringers and the occasional columnist as “employees.” Geist points out some other things that could go awry.

That’s probably why News Media Canada and some of the other members of the Online News Media Collective issued a press release calling on the CRTC to get involved.

There’s also some blogosphere speculation about whether the unsuccessful mainstream media alliance is expressing sour grapes because it overbid on the administrative expenses it would have charged for negotiating the Google cash distribution.

I have a feeling the mudwrestling isn’t over. 

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