OutTV CEO Brad Danks
November 23, 2022
Last week MediaPolicy.ca reviewed an intriguing proposal from Bell to amend Bill C-11 in a manner that puts Canadian media companies in a stronger position to retain the distribution rights to profitable American programming that are often linked to their ability to fulfill their licence obligations to make Canadian shows and local news.
Although last week’s post did not point this out, the Bell proposal is responsive to the call to bold action that industry analyst Peter Miller issued in concluding his recent study on programming rights for the CRTC.
The Bell amendments and full Senate submissions are reproduced at the bottom of this post.
The original post drew some caustic remarks on Twitter but also some thoughtful comments, including a reply from OutTV CEO Brad Danks who is a frequent participant in CRTC and Parliamentary hearings and a contributor to industry publications like Cartt.ca.
To better organize and expand upon those comments, MediaPolicy interviewed Mr. Danks:
Q – Brad, you’ve been a long time advocate for the interests of independent programming services in a regulatory regime dominated by the vertically integrated (VI) media companies Bell, Québecor, Rogers etc. Does Bill C-11 change that dynamic for you?
The big change is that we are moving from a two-tiered system in Canada with Vertically Integrated companies – those that own both media and distribution to a system — to one where we are all independents as our distributors will be Big Tech and Big Media platforms. This is the really important shift over the past decade but it has accelerated dramatically in the past three years as the Hollywood Studios have launched direct-to-consumer streaming platforms. This is really what C-11 is all about.
Q – Bell’s position (and my guess is ditto for Corus) is that the best way to deliver American content to Canadians, as well as Canadian news, sports and entertainment programming, is to have national broadcasting champions who make enough money by retailing American shows that they can finance authentic Canadian and local programming. Do you think Bell and the other VIs can salvage that strategy ?
No, I don’t think so. Certainly not entirely. It is all very complicated but useful to consider the ramifications if their amendments became part of the Act. The thing that has really struck me as odd about this proposal is how little discussion it has received. I know a lot of people who just dismissed it entirely when it was first proposed in June. Since then I haven’t seen a single formal response to it from anyone. Here you have the largest media company in the country basically saying they disagree with the fundamental premise of the proposed legislation and they require these significant amendments and no one is discussing it. It’s really unusual.
Q – What do you mean “fundamental premise”?
In my view, the legislation basically concedes that the streamers will bring their content into Canada and offer it exclusively direct-to-consumer. But in exchange for this the platform aggregators will be required to carry Canadian services on their distribution platforms like broadcasting distribution undertakings (BDUs) do now. And they will all contribute a share of revenues to a content fund – again, as BDUs do now. So basically the online platforms become regulated BDUs. I think that’s it in a nutshell.
What Bell is saying in their proposed amendment is that they don’t want to concede the first part. They want the streamers to have to make their programming available to Canadian programming services for a “reasonable” price and to encourage partnerships with Canadian programming services. It’s a huge ask.
Q – But wouldn’t that just mean extra revenue for the streamers from cable audiences, in addition to their own streaming platforms? What am I missing?
What you are missing is the details and so are the proposed amendments. For example, their amendment doesn’t require that the programming will be offered in a co-exclusive initial release. You would assume Bell would want to ensure this because the initial release has the most market value. Perhaps it would be in their interpretation of the word “reasonable” because their entire proposal really hinges on the interpretation of that word.
What they appear to want is for the streamers to offer all their programs – their best programs— to the Canadian programming services like they did fifteen years ago prior to Netflix and later Amazon’s arrival into Canada. In other words, rewind the clock.
Q- And you think the streamers would object?
One hundred per cent. This would be way worse for them than a five or ten per cent or even greater financial contribution to a fund. They would lose a lot of money this way.
Q – How so?
Consider the most likely outcome of this proposal. What if Netflix had to licence “The Crown” and “Stranger Things” to a Canadian programming service? And Disney had to licence the Marvel and Star Wars shows, Amazon had to licence “Lord of the Rings” and their best shows. Look at how Paramount+ is using “Yellowstone” now to sell subscriptions. They use these shows to drive subscription revenue through the exclusivity of that show. If they have to share it they lose that competitive advantage.
If their amendment was adopted in C-11, the most likely outcome is one Canadian service would get most, if not all, the best shows. Who would be that service? The obvious answer is Bell Crave although Corus might get some top shows for StackTV. I would assume they want the same thing for TSN and sports. The reason is simple, they have the biggest existing platforms and could outbid everyone. In fact, once locked in as the “go to” place for the best shows it would impossible to unseat them. They would soon have more subscribers than any other streaming service – as Canadians would know all the best shows will be there. In fact, this sort of thing happened about ten years ago when consumers would say they would just wait for everything to go to Netflix. That was back when the Studios were still licensing them most of their premium content. Then, of course, the Studios stopped doing that.
Q – But wouldn’t the streamers be compensated with the licence fee?
Again, the tricky part would be the definition of “reasonable” contractual terms, particularly price. Remember that the streamers have already made the financial calculation that it is better to hold on to their premium programs exclusively and not sell them to Canadian programming services. Therefore, from their perspective, a reasonable price would include compensating them for the loss of that exclusivity. However it is very doubtful that Bell would see it that way.
Bell would want a price that is reasonable to them to make a profit but was a dollar more than any other Canadian programming service could pay. Again, this was the market fifteen years ago before the streamers arrived. This is why acquisitions are much cheaper than making original programming. The prices are set based on the local markets’ ability to pay and are entirely unrelated to the cost of production. So who decides what are the licence fees when there is no competitive market operating?
Q – Wouldn’t the CRTC do that?
The proposal is silent on this but it would come under CRTC jurisdiction. I am sure they would run screaming from this as fast as they could. Remember that this wouldn’t just apply just to the top shows but technically apply to all content coming into Canada. Right now there are still hundreds of people in the industry in Canada who spend the majority of their working days screening content for acquisition, going to markets and negotiating deals. How do you replace that with a regulated system? It would be a nightmare to manage. Impossible really.
Q – What are your thoughts on the partnership portion of the amendment, that the CRTC “encourage” or “incent” the streamers to partner with Canadian distributors?
I think that’s just another attempt to roll-back the clock fifteen years. The Studios did exclusive deals for years because the Canadian programming services controlled the distribution to Canadian consumers. This gave the Canadian services leverage to negotiate these deals and the incentive for the Studios to do them. However the direct-to-consumer model doesn’t require a Canadian partner.
There are still opportunities for partnerships but putting it in the legislation as a requirement is extreme. It would be like legalizing shot-gun weddings. How is this going to implemented? It all feels like too much and too late.
Q – I am guessing an incentive for the streamers to go into Canadian partnership might look like relief from other regulatory obligations or contributions to go into a “Disney on Corus” or “Bell Netflix.” What do you think?
My initial thought was that this was designed to force one of the streamers to buy them. I really don’t see how you regulate a partnership.
Q – What do you think will happen if their amendments are not accepted by the Senate?
It’s a good question. It isn’t clear to me if this is a proposal or an ultimatum. Are they going to leave broadcasting and use this as the excuse? I guess we will find out if their proposal is not accepted by the Senate.
3.(1) (s.1) foreign broadcasting undertakings should
(i) make their programming available to Canadian programming undertakings pursuant to contractual arrangements on reasonable terms; and
(ii) be encouraged to partner with Canadian undertakings in the distribution of their programming throughout the Canadian broadcasting system.
5.(2) The Canadian broadcasting system should be regulated and supervised in a flexible manner that
(i.1) Ensures foreign broadcasting undertakings make their content available on reasonable terms to Canadian broadcasting undertakings; and
(i.2) Foreign broadcasting undertakings are incented to partner with Canadian broadcasting undertakings in the distribution of foreign programming in Canada.
Full Senate Submission:
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