The American shakedown of Canadian cultural sovereignty is the real trade irritant.

The trilateral CUSMA deal is announced in July 2018

December 16, 2022

In the finest tradition of Parliamentary politics, the Official Opposition’s approach to the Online Streaming Act Bill C-11 and the Online News Act Bill C-18 is not unlike a game of paintball. A lot of wasted paint with the occasional messy hit.

One of the touchés claimed by the Conservatives is the potential for ‘trade irritants’ between Canada and the United States to result from the two Liberal Internet bills.

The possibility of American trade retaliation grabbed news-cycle attention on December 2nd when International Trade Minister Mary Ng emerged from a meeting with US trade representative Katherine Tai and acknowledged American grumbling about C-11 and C-18.

Tai later claimed that “pending legislation in the Canadian Parliament …could impact digital streaming services and online news sharing and discriminate against U.S. businesses,” repeating verbatim her statement from the previous July.

You may have noticed the ‘could.’

By coincidence, Parliamentary committees reviewing C-11 and C-18 were in session that week, so the Conservatives were all over it. Never mind the Party campaigned in the 2021 federal election on supporting legislation very similar to both Bills. [See pages 153-155 of their platform].

Let’s begin with the obvious. Most trade irritants are not trade violations. They are complaints. Or threats to have complaints. Or whining. And they are driven by the politics of American companies coveting the market share of Canadian firms, in the US or in Canada.

American companies, like the world’s biggest media and tech companies domiciled in the vote-rich Blue state of California, expect President Biden to go to bat for them.

Despite the three free trade deals between our two nations since 1988, we’ve endured American whining, irritants, complaints and even the occasional tariff touching upon many sectors of the economy: dairy, auto, softwood lumber, potatoes, you name it.

Oh, and there were the steel and aluminum tariffs Donald Trump levied on the grounds that Canada’s access to the American steel and aluminum markets represented a threat to US national security, a meritless sanction deployed as a cudgel during the 2018 CUSMA talks and only rescinded after the deal was signed. Last week the World Trade Organization retrospectively ruled the tariffs illegal while the Biden Administration stoutly defended them.

You get the picture.

For the most part, our federal government has been good at not freaking out. Global Affairs Minister Chrystia Freeland was decidedly not freaked out by the Trump administration’s attempt to bully Canada during the CUSMA negotiations.

Beginning with the 1988 Free Trade Agreement, Canada’s refusal to be bullied included winning recognition of our ‘cultural sovereignty’ as a special case within bilateral trade rules.

In the last trade talks the exemption of ‘cultural industries’ was renewed in CUSMA. It’s not complicated. CUSMA provides that American media or tech companies doing business in the US should not be treated in a “less favourable” manner in competition with Canadian companies. If they are, Canada may still justify the discrimination in the name of defending our cultural industries and there’s no treaty violation.

But if we do, the US can respond with countervailing trade sanctions of equivalent commercial value, in any trade sector it chooses.

It’s worth a brief summary of how we got there, recounted by the University of Calgary’s Hugh Stephens in a July blog post. (There’s a longer discussion in Garry Neil’s ‘Canadian Culture in a Globalized World.’)

The Harper government actually gave away the key elements of the 1988 cultural exemption during multilateral negotiations for the Trans Pacific Partnership (TPP). Annex II of that trade deal would have made it a treaty violation for Canada to establish “discriminatory requirements on service suppliers or investors to make financial contributions for Canadian content development …[or] measures that restrict access to on-line foreign audio-visual content.”

It was the former scenario that was more likely to occur one day under a Bill like C-11 —-the prospect of compelling foreign streamers to contribute to the Canadian Media Fund (CMF) without getting access to its funds on the same footing as Canadian broadcasting undertakings.

But, when Donald Trump pulled out of TPP on the third day of his Presidency, the Trudeau government was able to recover some of the ground lost through bilateral side letters in the rebooted ‘Comprehensive and Progressive TPP’ (CTTPP) trade deal with the remaining participants, a year later.

As a matter of wise trade policy we avoid having to play our ace of spades, the cultural exemption, and instead try our best to keep on the right side of the ‘less favourable treatment’ line.

Ironically when we look at C-11 we find that in fact any discriminatory harm in C-11 flows north, not south.

The most blatant C-11 discrimination favours American media companies. It’s located in section 3(1)(f and f.1) which for the first time admits Hollywood studios as co-equals with Canadian media companies in making Canadian video content. That was the point of the Bill. But the surprise is that American companies are expressly excused from Canadian regulations on using Canadian actors, directors and writers:

3(1)(f) each Canadian broadcasting undertaking shall employ and make maximum use, and in no case less than predominant use, of Canadian creative and other human resources in the creation, production and presentation of programming, unless the nature of the service provided by the undertaking, such as specialized content or format or the use of languages other than French and English, renders that use impracticable, in which case the undertaking shall make the greatest practicable use of those resources;

(f.1) each foreign online undertaking shall make the greatest practicable use of Canadian creative and other human resources, and shall contribute in an equitable manner to strongly support the creation, production and presentation of Canadian programming, taking into account the linguistic duality of the market they serve;

There are two key points here.

First, the Americans have been accorded ‘equitable’ treatment with respect to supporting the creation of Canadian programming, whether it’s through financial contributions to the CMF or making their own Canadian movies. This non-discriminatory treatment satisfies the Americans’ key trade demand dating back to the abandoned TPP deal. If there is any fine tuning to be done, former CRTC Chair Konrad Von Finkenstein has offered advice to the Minister.

As for the employment of Canadian talent in making Canadian content, it will be up to the CRTC to measure how much less Canadian talent may be employed by the US studios when filming Hollywood versions of Canadian stories. But the text in section 3(1)(f.1)——“greatest practicable use” instead of “maximum” or “predominant”——makes it crystal clear it will be less.

Canadian Heritage officials don’t deny giving the the US studios a break on employing American instead of Canadian actors, writers and directors: Heritage officials acknowledged to Canadian Senators that Washington wanted it and even offered Senators the fatuous reasoning that Netflix and Disney deserve it because they ‘have a global business model.’

It’s unclear from the Parliamentary debates if the federal government also wrote section 3(1)(f.1) as a mandate to the CRTC to give Netflix and Disney what they insist upon: getting rid of the rule that intellectual property and re-sale rights in heavily subsidized Canadian video content must remain with Canadians. In fact to that end, sympathetic Conservative Senators backed two amendments requested by the US Motion Picture Association and one of them passed by a narrow majority.

That wasn’t the only cringing before the Americans.

Under C-11, the CRTC’s oversight of ‘section 9(1)(h)’ provisions governing the carriage and compensation of Canadian public service channels was stripped of all enforcement power, again because Washington didn’t want Amazon and other US online platforms to live up to the same regulatory obligations as Canadian cable companies. Heritage Minster Pablo Rodriguez admitted the American intervention to both Parliamentary committees. This is yet another case of discrimination in favour of American companies in C-11.

Maybe this page is too harsh on the federal government or too naive about the danger of trade conflict. But depending on your perspective, a government holding so many of the high poker cards in its hand is either very risk averse or needlessly intimidated.

Or ask this: why have Canadian trade negotiators made our cultural exemption a ‘dealbreaker’ in three historic trade deals, claiming political credit with the Canadian people for doing so, if not to use it when the chips are down?

A handful of Canadian commentators have alleged that Bills C-11 and C-18 constitute a ‘shakedown’ of Big Tech and Hollywood by a federal government pursuing an illegitimate transfer of wealth between American and Canadian companies.

The contrary is true. What is illegitimate is the American shakedown of Canadians’ solemnly ratified treaty rights to cultural sovereignty by concessions sought and obtained in Bill C-11.

The same ‘trade irritant’ trope has been mooted about the Online News Act C-18.

Trade Representative Tai’s allegation of Canadian discrimination against Facebook and Google is risible. That’s because C-18’s designation of ‘digital intermediaries’ would apply equally to similar Canadian platforms, if only one actually existed in defiance of the global monopolies in Search and Social. The University of Calgary’s Stephens has also written about this in depth.

Then there is the copyright issue in Bill C-18 sticking out like a sore thumb because the legislation includes a “greater certainty” clause stating:

S.24 For greater certainty, limitations and exceptions to copyright under the Copyright Act do not limit the scope of the bargaining process.

As a ‘greater certainty’ clause, the text clarifies the government’s interpretation of the federal Copyright Act as meaning that Facebook and Google cannot avail themselves of statutory ‘fair use’ exemptions to intellectual property rights to stymie bargaining over the value of news content made available on their platforms.

For the drafters of C-18 to claim section 24 clarifies rather than amends our existing copyright law is both true and false at the same time. Canadian copyright law is blurry when asked to draw a bright line between intellectual property and its flip side, ‘fair’ use without permission or compensation. That’s especially true for content posted to online platforms.

Indeed one Canadian expert has described the general principles in the Copyright Act purporting to draw the line between intellectual property and free use as ‘intentionally ambiguous.’ The point of section 24 in C-18 is to make it unambiguous in its application to Facebook and Google republishing ‘news content’ from ‘eligible news outlets.’

The fussing about C-18’s impact on copyright is understandable coming from folks like University of Ottawa law professor Michael Geist, a lifelong advocate of expanding fair use of copyrighted intellectual property, an expansion that the Supreme Court has favoured in principle but in a different context than C-18.

As for how other nations have parried the copyright and fair use issues, Australian legislators simply ignored them in drafting the News Media Mandatory Bargaining Code, the model for C-18.

European legislators were more direct in their 2019 Directive on Copyright, affirming news outlets’ copyright ownership of their content republished by search engines or social media platforms. That included republishing by hyperlinks only (which Australia and Canada have done as well).

The EU approach was embraced in 2021 by Canadian Conservative Senator Claude Carnighan in tabling Bill S-225 which died on the order table prior to the federal election. His Bill confirmed publishers’ copyright on content posted to Facebook, Google and even smaller platforms. On the face of the Bill, news content linked by hyperlinks was exempt but during debate the Senator backed away from that position.

When Erin O’Toole’s Conservatives addressed all of this in their 2021 election program, they appeared to take their cue from S-225 and positively referenced both the pro-copyright EU approach in France and the copyright-agnostic Australian model.

But back to Geist’s claim, he goes on to say that if C-18 deprives Facebook and Google of the ‘fair use’ defence against copyright infringement, then Canada ‘may’ ——note the careful choice of ‘may’—- be in violation of its international copyright obligations under the Berne Convention.

The Convention has no legal effect in Canada other than committing signatory nations to a ‘minimum standards’ approach when legislating their national copyright regimes. One of those standards is article 10(B) respecting the right to create news summaries without restriction by copyright.

The University of Calgary’s Stephens, a copyright expert, told Heritage MPs on September 27th that C-18 did not violate the Berne Convention and, in his blog post two days later, said a US complaint “would almost certainly fail.”

Even if Stephens was wrong —-and the United States as a self described ‘minimal’ signatory to the Convention has a plausible trade complaint against Canada—- presumably the Trump or Biden administrations would have filed against European and Australian signatories to the Convention when they legislated in 2019 and 2021.

They didn’t. And they haven’t.

So perhaps Geist’s ‘may’ was the right choice of words after all.

And perhaps we should take this lesson to heart: claims of trade violations are just claims, whether they are made by law professors, American trade representatives, or anyone else.

Unless the facts say the claims are more than the typical threats we get all of the time, Canadian legislators and commentators might stop repeating them and let the Americans make them instead.

***

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A before and after picture of the Online News Act C-18, with Heritage Committee amendments.

Heritage Minister Pablo Rodriguez sponsored Bill C-18 in the House

December 12, 2022

Here is the unofficial English text of Bill C-18 including amendments passed last week by the Commons’ Heritage Committee.

Amendments have been highlighted. It’s a cut and paste document so please contact me at howard.law@bell.net with any errors or omissions.

A few observations are in order as the Bill is prepared for Third Reading in the House in February.

The legislation was conceived by Heritage Minister Pablo Rodriguez as the Canadian version of the 2021 Australian News Media Bargaining Code, in spirit if not to the letter.

Following a lengthy investigation and report by the Australian competition commissioner Rod Sims, the ‘Australian model’ was designed as a remedy to Facebook and Google exploiting market power over news distribution to the detriment of news organizations that have little choice but to distribute on those platforms. The Australian Code was mostly agnostic about which news organizations participated or benefited from the mandatory bargaining scheme.

This philosophy of ‘competition policy first’ was reaffirmed in the Australian Finance Minister’s recent report that rejected ‘media policy’ considerations of which news organizations belonged in the Code, how much they should be paid, or indeed how much they need to survive. That’s best left to targeted government subsidies, said the report.

Canada’s Bill C-18 is founded on the same principles. Nonetheless the Minister injected a large dose of media policy into the Bill, which was magnified by further amendments during the Committee process, to meet political demands made by small news outlets or those considered voices of underrepresented communities. Indigenous outlets were a major focus of amendments.

What is important to remember is there is nothing in the Act which suggests that every news outlet can prove the value of its news content exceeds the distribution benefits it receives in return from Facebook or Google, driving a net compensation pay-out.

What’s more, nothing in the Act suggests news organizations are entitled to either a pro rata or equal payment. There will be as many views about the value (and volume) of news content as there are bargaining parties.

At least in theory.

In practice most if not all of the ‘news outlets’ that can meet the statutory definition should end up getting paid and in an amount comparable to similar news outlets. This is especially likely if they combine with other news outlets in a bargaining coalition that is authorized by the Bill and then reach agreements with the Californian platforms. That’s what happened in Australia.

There is always the default option for either party to go to arbitration which offers the opportunity to make a case on value exchange.

Here are some of the more significant changes to C-18:

  • Indigenous news outlets: NDP MP Peter Julian sponsored a series of amendments with all-party support. An Indigenous news outlet can be as small as a single owner/operator journalist who focusses on community issues and is mostly exempt from having to meet other journalism criteria in the Act. While the provisions in section 11(1)(a)(vii) of the Act can hypothetically result in an Indigenous news outlet being excluded from compensation, section 31(2.1)(b) appears to override this and guarantee a positive bargaining outcome.
  • The threshold requirement for a news outlet to employ two independent journalists was watered down to allow either journalist to be a proprietor or family member.
  • News organizations must demonstrate real news gathering activity. They must also belong to a legitimate Press Council or else adhere to a professional journalism code of conduct.
  • Attempts to make bargaining outcomes public —providing transparency and helping smaller news organizations benchmark their bargaining expectations—- failed. The government defended its use of the confidentiality carrot to entice Google and Facebook into reaching voluntary agreements, as they did in Australia. Some less ambitious transparency measures were added to the Bill.
  • An amendment lengthening the duration of a platform exemption (and therefore the length of any voluntary deal with news organizations) to five years offers some protection to news outlets. The downside is that any news start-ups during that five year period will be frozen out.
  • The government rethought section 51 of the Bill inviting the CRTC to second-guess the platforms’ news ranking algorithms. The amended Bill follows the Australian model by restricting the CRTC’s authority to self-dealing by the platforms or bargaining-related retaliation against news organizations.

Critiques of C-18 will continue. They boil down to this:

  • A rejection of the Australian Competition Commissioner’s findings that Facebook and Google exploit market power over the value exchange between them and news organizations or that mandatory bargaining with the availability of binding arbitration is required to correct that. This denial is the Facebook narrative. It also has Canadian supporters: Jen Gerson of The Line tersely called C-18 “a lie.”
  • Putting aside the argument over value exchange, other Canadian voices like Michael Geist and fellow members of the Internet Society oppose in principle most government regulation of the Internet. Those commentators are especially critical of removing the platforms’ copyright shield of fair use and legislating compensation for content made available through hyperlinks.
  • Others oppose government aid to media under any circumstances, whether it’s payments from Big Tech or government subsidies. They favour ‘creative destruction’ in which news organizations either find a market solution or fail, leaving their market share to other news organizations.
  • Some oppose any scheme that aids big news organizations —-to name a few: Postmedia, the Toronto Star, Bell Media CTV, Global News, Rogers City-TV, and Québecor— because they don’t like corporate media for a variety of reasons.
  • The Conservatives dip into most of these narratives. They are especially opposed to the CBC benefiting from the legislation, a position that dovetails with their ‘defund the CBC’ platform.

***

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Senators back YouTubers in C-11; Heritage MPs amend and pass C-18

Alberta Senator and former Edmonton Journal columnist Paula Simons navigated a key amendment to Bill C-11 through the Senate Transportation and Communications Committee.

December 10, 2022

It was a busy Ottawa week in Canadian media policy. Parliamentary committees wrapped up amendments to the Online Streaming Act C-11 in the Senate and the Online News Act C-18 in the House.

On C-11, Senators approved 25 out of 100 proposed amendments after logging 65 meeting hours and hearing from 135 witnesses, stretching from June to December.

The headline news is an amendment to the Bill’s controversial regulatory power over video and music “programs” uploaded to social media services like YouTube.

The rewrite of article 4.2(2) was authored by Alberta Senator Paula Simons and Québec’s Julie Miville-Dechêne. Former journalists, both were appointed to the Senate by Justin Trudeau and both joined the dominant Independent Senators Group made up of former Liberal senators who more often than not can be counted upon to support government bills.

Their keystone amendment was neither endorsed nor opposed by the official Government Representative in the Senate, Marc Gold. This suggests the two Senators were able to round up enough votes to overcome the wishes of the governing party. Senators skipped a roll call vote on the amendment. For now, the federal Liberals’ view of the amendment —-whether it will be adopted when C-11 returns to the House of Commons in the new year—- remains unclear.

Simons told Senators the amendment had been put together with input from YouTube, TikTok, and Québec music producers, all of whom have been quiet since the amendment passed.

The amendment restricts the CRTC’s regulatory authority over programs uploaded to social media platforms to content either posted by the platforms themselves (for example, YouTube’s proprietary music service); songs uploaded by music companies; or videos uploaded by licensed broadcasters or streaming services. That means CRTC regulation of user-generated content uploaded by YouTubers or anyone else would stay forever out of bounds.

Here’s the text describing how the CRTC could “scope in” certain programs to be subject to regulation:

4.2 (2) In making regulations under subsection (1), the Commission shall consider the following matters:

(a) the extent to which a program contains a sound recording that has been assigned a unique identifier under an international standards system;

(b) the fact that the program has been uploaded to an online undertaking that provides a social media service by the owner or the exclusive licensee of the copyright in the sound recording, or an agent of the owner;

(c) the fact that the program or a significant part of it has been broadcast by a broadcasting undertaking that

(i) is required to be carried on under a licence, or

(ii) is required to be registered with the Commission but does not provide a social media service.

No doubt, the amendment will be parsed for legal nuances or loopholes in the coming weeks.

An important caveat is that Senators did not vote down C-11’s obligations on broadcasting undertakings to promote Canadian videos and music, otherwise known as “discoverability.”

Nonetheless if the Simons/Miville-Dechêne amendment is accepted by the government, YouTuber fears of algorithmic “backfiring” or international retaliation will have been addressed.

What will happen when this amendment goes back to the House of Commons in the new year?

The political momentum behind C-11’s discoverability powers has been driven by the Québec music industry and like-minded cultural nationalists. That brings Bloc support for any changes to C-11 into the equation.

The leadership shown by the two Senators can only attract admiration. The symbolism of a compromise amendment brokered by an Albertan and a Québecoise is unmissable. But as intriguing as it is, the amendment could flicker out or it could serve as the template for a rethink by Heritage Minister Pablo Rodriguez.

As for other amendments, three weeks ago MediaPolicy.ca recommended six “must haves” to Senators.

Here is how they fared:

No Internet Czars: Senators voted down section 7(7) of the Bill which expands the federal cabinet’s s.7(1) powers to give “policy direction” to the CRTC on subject matters listed in the CRTC’s general regulatory power in section 5(2). The new 7(7) power allows cabinet to write detailed terms and conditions for the activities of online undertakings, the very kind of authority that section 7(2) forbids to cabinet in the case of licensed broadcasters. Despite the government gamely defending 7(7) as legislative housekeeping, it is anything but.

Cabinet appeals quashed. Senator René Cormier failed to sway a majority of Senators to mirror the existing s.28(1) rights of Canadians to petition federal cabinet over CRTC policy errors when licensing broadcasters for similar mistakes in regulating online undertakings (i.e. Netflix or Disney). The government wants rid of these troublesome appeals and minced no words on the topic. That is ironic since cabinet just approved one such appeal in the case of the CRTC’s hash-up of the CBC licence renewal.

Public Service Channels on foreign platforms. Senators turned down another Cormier amendment to extend existing CRTC powers compelling cable companies to carry and pay fairly for Canadian “9(1)(h)” public service channels to foreign online platforms operating in Canada, like Amazon Prime or PlutoTV. However Cormier had a back-up plan and it worked: Senators accepted his amendment authorizing the CRTC to replace the revenue that public service channels will lose with a levy on Canadian media companies, perhaps something analogous to the Canada Media Fund or the Independent Local News Fund. Government Senate Representative Marc Gold spoke in favour of the amendment.

Not saving local news. No amendment was tabled to provide the CRTC with a more ambitious mandate to fund local news. (Regrettably MediaPolicy.ca is filing that one in the “told you so” folder).

• The Bill’s union-busting changes to the federal Status of the Artist Act were repealed with the endorsement of the Government.

California or Canada? Lastly and certainly not least, Senators rejected an amendment to overturn the Bill’s section 3(1)(f.1) exemption of foreign online undertakings from domestic laws on hiring Canadian writers, directors and actors when making Canadian content.

Among other amendments that passed Committee, one surprise was the Conservatives’ narrowly approved motion to amend section 10 (1.1) which sets out, in general terms, the well known CRTC definition of Canadian content.

The amendment appears to water down the requirement that Canadian content be solely produced by Canadians retaining ownership of global distribution and other re-sale opportunities.

The Government Representative neither endorsed nor opposed the amendment. That will put the Canadian film production community on full alert.

One last point of interest on C-11: several amendments seeking to shoehorn changes to the CBC into the Bill were defeated (except for an amendment commanding the public broadcaster to exit its ‘Tandem’ advertorial business, which the government opposed). In speaking against them, Government Representatives promised that Heritage Minister Rodriguez intends to deliver on his Mandate Letter to review the CBC.

***

In the “other place,” as Senators like to describe the House of Commons, MPs on the Heritage Committee finished clause-by-clause review of C-18.

Here are a few highlights:

• Bloc MP Martin Champoux won approval of a critical amendment to the definition of ‘eligible news business.’ Membership in a Press Council or adherence to an Editorial Code of Conduct will be mandatory.

• Conservatives are not accepting victory despite scoping in small publishers that employ no independent journalists, only proprietors and family members. The Tories were holding out for covering self-employed freelancers under the Bill which was not agreed by the other parties.

• Conservatives tried but failed to exclude the CBC from C-18’s bargaining scheme. This forms the basis of their political narrative that the Bill denies aid to small publishers (almost entirely untrue) in order to funnel compensation to CBC, Bell Media and Rogers (but omitting any reference to the right-leaning Postmedia and Québecor).

  • A series of motions from NDP MP Peter Julian designed to give small and independent news organizations access to the details of voluntary agreements reached between the platforms and other news organizations were defeated. The purpose of Julian’s amendments was to give these news organizations the ability to benchmark their bargaining expectations against other negotiated outcomes. The amendments were defeated without support from any of the other three parties.

• The Liberals scaled back the Bill’s ‘undue preference’ regulation of algorithmic news rankings which had drawn the ire of Google. The legislation is better for it.

An updated MediaPolicy.ca review of C-18 amendments is posted here.

Also, I posted a summary of the Australian Finance Minister’s report on the forerunner of Canada’s C-18, the News Media Bargaining Code, following its first 18 months of operation.

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The American equivalent of Bill C-18, the Journalism Competition and Preservation Act (JCPA) has stalled in US Congress.

The week had started off with speculation the legislation would be earmarked into the lame duck Congressional bill on defence spending. The Bill is sponsored by Democratic Senator Amy Klobuchar and has support (but also opposition) among Democrats and Republicans. Notably, Senate Minority Leader Mitch McConnell (R-Kentucky) backs it.

Adding to the drama, the New Zealand government announced its intention to follow Australia and Canada with a similar bill.

Then Facebook re-issued its now standard threat to walk away from news content if Congress passes the JCPA in a carbon copy statement made previously to Canadian MPs.

By the end of the week, the JCPA did not make it into the defence omnibus bill and its fate remains unclear.

***

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C-18: What we learned from the Australian News Media Bargaining Code

December 5, 2022

The Australian Finance Minister’s overdue anniversary review of the groundbreaking News Media Bargaining Code (NMBC) gives Canadians some welcome pointers on how to think about, improve or critique our Bill C-18, the “FaceGoogle” Online News Act.

The Report does two things well, the first being an evaluation of how well the Australian legislation was implemented. The other is that Finance Minister (‘Treasurer’ in Oz lingo) Jim Chalmers unapologetically backs the Code as an anti-oligopoly law and downplays using the Code as a tool for reshaping news journalism. Both points ought to be helpful to Heritage MPs who are mid-way through amending C-18.

The Treasurer neatly sums up the goal of the NMBC, also that of C-18:

The Code aims to address bargaining power imbalances to ensure that news businesses receive fair remuneration from digital platforms for the value generated from their content.

In broad terms, the Code therefore aims to ensure that digital platforms remunerate news businesses where they generate more value from news content than the business creating this content obtains from its distribution via the platform.

The practical lessons learnt by the Australians are limited by the ‘non-designation’ route chosen by Facebook, Google and 34 news businesses in favour of reaching voluntary agreements, reportedly valued at $190M. This meant the Australians had no opportunity to test the Code’s formal bargaining and arbitration scheme.

The Australian government’s decision to confer its blessing on the voluntary agreements, and so grant ‘non-designation’ status to Facebook (for three-year agreements) and Google (for five-year agreements), courted controversy because Facebook stiffed two reputable news organizations, the Special Broadcasting System (similar to our OMNI TV) and the investigative news site The Conversation. Additionally, radio stations were shut out although that hasn’t attracted much attention.

We don’t know what happened exactly. The two news outlets professed bewilderment. Google and Facebook said some Australian news businesses had unrealistic expectations. The Treasurer’s narrative suggests that after four months of bargaining Facebook ran out of money it was willing to spend on settlements and the two outlets fell victim to circumstances. 

At least as far as Facebook was concerned, by the summer of 2021 the Treasurer was on the spot to decide whether, as Menlo Park surely hoped, it had done enough to meet the statutory test of non-designation by making ‘a significant contribution’ to Australian news journalism. The Treasurer at the time, Liberal Josh Frydenberg, said it had.

Despite the public outcry supporting the excluded news outlets and calling for the revocation of Facebook’s exemption from formal designation, nothing in this Report suggests the new Treasurer, Labour’s Chalmers, thinks any differently than his predecessor.

The very idea of Facebook or Google doing ‘just enough’ to avoid designation is what keeps CEOs of Canadian independent news businesses awake at night. The authors of C-18 have done a decent job of addressing that concern by writing in detailed criteria for the Canadian “exemption test” as well as putting the decision in the hands of the CRTC rather than federal cabinet. I am thinking especially of the legal text in section 11(1)(a)(vi) requiring deals with a diverse range of news outlets:

(vi)…. they involve a range of news outlets that reflect the diversity of the Canadian news marketplace, including diversity with respect to language, racialized groups, Indigenous communities, local news and business models;

Another implementation lesson from Australia impacts the Canadian debate over the scope of ‘eligible news business,’ in particular the line between legitimate news outlets and citizen-journalists or opinion sites run by political partisans.

In Australia, the Competition Commissioner turned away twelve of the 46 applicants for official status as news organizations (regrettably the Report only lists those who were approved). The Treasurer acknowledges in his Report that some applications were ‘opportunistic.’ 

On that point, an interesting feature of the Australian Code that Bill C-18 has not replicated is the NMBC’s requirement that an eligible news business brings in at least $150,000 (AUS) in annual revenue. That’s based on the plausible theory that no one can run a legitimate news business on anything less. 

In Canada the drafters of C-18 chose instead to draw the line based on a number of arm’s length employed journalists (two) although that was watered down last week by Heritage MPs to include proprietor-journalists and employed family members. 

The Treasurer’s Report also emphasized, anecdotally, that several news organizations went on a hiring binge adding more journalists with the settlement monies. 

He dismissed any criticism that news organizations might spend those funds on paying down corporate debt on the grounds that less debt will increase the sustainability of those news organizations in the long run. It’s an interesting policy argument although its chances of mollifying Canadian critics of the debt-encumbered Postmedia receiving C-18 funds are zero. On the Kelvin scale.

The other major theme of the Report might be too policy-focused for some, but it perfectly anticipates the partisan politics over C-18 on Parliament Hill.

The Treasurer is impatient with criticism that the NMBC has not done more for small independent media outlets. 

In his own words:

While some stakeholders raised concerns about the Code’s impact on competition and media diversity, the objective of the Code is to address bargaining power imbalances so as to ensure news businesses receive fair remuneration from digital platforms for the value their content generates. It is not designed to redistribute resources across the news sector or to guarantee that all news businesses receive funding. Other policy and funding tools are available to achieve these objectives.

Another way of putting it is that the NMBC exists to correct a market imperfection in news monetization caused by FaceGoogle’s oligopoly power over advertising and distribution to the mass audience in Search and Social Media. 

As a competition remedy, the NMBC checks abuses of market power between platforms and news organizations, it does not subsidize news businesses, no matter how deserving. Any subsidies lay elsewhere in the realm of media policy. Chalmers’ Report includes a long list of government subsidies available to public broadcasters and small publications. 

If this sounds anything like the Canadian government’s rationale for C-18, it’s no coincidence. But unlike the Australian NMBC which was supported by the major political parties, Canadian Conservatives do not support the Bill C-18. They seem to have found their wedge by championing one-journalist news outlets whose C-18 pot of gold they say is about to be pillaged by the CBC, Bell Media and Rogers (but not Postmedia, strangely enough).

Like the Australian Treasurer, our Heritage Minister Pablo Rodriguez hastens to point out his own list of federal subsidies keeping small Canadian publishers afloat that will continue to be available no matter which side of the eligibility line they fall under C-18.

But that’s not to say that C-18 is agnostic about which news organizations pry loose compensation from the Platforms. As noted above, the bill’s ‘exemption’ criteria requires Facebook and Google to make deals with a diverse range of news outlets.

Yet all of this parsing of C-18’s eligibility rules may be policy navel gazing. 

C-18 favours a pragmatic approach to compensation, perhaps too much for some, by incentivizing Facebook and Google to decide which news organizations will find themselves in the ‘significant portion’ of outlets that get deals, and how rich those deals are, subject to the CRTC’s authority to approve the exemption. 

The platforms will in turn wash their hands of unpleasant decisions by encouraging small outlets to join one of the bargaining coalitions authorized for news organizations under the Bill. The platforms will then negotiate a lump sum with each coalition and leave it to news organizations to divide the spoils among themselves. 

If any news outlet gets the short end of the stick, and we can expect some will at least think they did, expect a CRTC hearing to sort it out.

***

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Catching Up on MediaPolicy.ca – Brits soften Online Safety Bill – C-11 and C-18 plod through Parliament – Bunny Ears TV is back, only it’s online.

Journalist and Nobel Prize winner Maria Ressa appeared on Stephen Colbert’s Late Show on November 30th to describe the impact of Facebook’s content moderation failure on political violence and democracy in Philippines.

December 3, 2022

The UK government announced this week it is backing away from take-down orders against social media platforms in its proposed Online Safety Act for legal but harmful content and will rely on self-regulation by the platforms.

Canada is still waiting for its own Online Safety Bill. It seems likely we won’t see it until Bills C-11 and C-18 make greater progress through Parliament.

***

Canada’s Online Streaming Act Bill C-11 made little progress during its two sessions this week in the Senate Transportation and Communications Committee. Senators are bogged down in section 3(1) of the Act which enumerates the goals of the national broadcasting policy, mostly in symbolic or general terms.

Ontario Senator Donna Dasko’s motion to make ‘audience’ satisfaction more explicit won government support (but not from Conservatives who preferred ‘consumers’) which means the House will accept the change.

New Brunswick Senator René Cormier also earned the government’s endorsement to reverse the House’s ill-advised change to the existing Act that puts broadcasters’ in-house production on the same level of priority as productions supplied to them by independent Canadian filmmakers. If not for Cormier’s amendment, C-11 would have put a big dent in the CRTC policy of supporting a viable Canadian TV production industry.

Cormier’s second motion was defeated by both government and Conservative senators. This was an attempt to undo C-11’s “two-tier” treatment of domestic and foreign film producers in section 3(1)(f-f.1). Expect to hear more about this issue, it isn’t going away.

In industry news relevant to C-11, two Canadian “FAST” (free, advertising-supported television) online platforms launched this week. CBC Explore and PlutoTV (a Corus/Paramount partnership) will offer a range of channels and programming without a paid subscription. Each will include their daily news shows, but other programming will be mostly non-premium entertainment and re-runs.

This new kind of platform has potential as a cord cutting option in tandem with premium streaming subscriptions. And for those of us who grew up watching bunny-eared over-the-air television, FAST may feel very Retro.

***

As for Bill C-18, MediaPolicy posted that Heritage MPs need to carefully define the parameters of ‘eligible news business,’ with attention paid to the line drawn between small publishers and citizen journalists. I posted a second time suggesting MPs look at Rebel News as a test case of distinguishing between professional journalism and political actors.

When MPs met yesterday to grapple with section 27(1) defining an eligible news business, they agreed to qualify any news organization staffed by a minimum of two journalists including a proprietor and a family member.

MPs are poised to approve Bloc MP Martin Champoux’s much needed amendment requiring news organizations to either belong to a recognized Press Council or adhere to a bone fide editorial code.

Heritage MPs have moved through about two-thirds of C-18 amendments now and may be headed for completion with four sessions left before the seasonal break (although one of them is earmarked for the Hockey Canada file).

By coincidence, this week the Australian Finance Minister released its first anniversary report on the implementation of its own FaceGoogle legislation, the forerunner of Bill C-18. Its report is less transparent than a similar report the CRTC will be required to publish annually after Bill C-18 passes.

But the headline on the Minister’s report was that the Australian government will allow Facebook to keep its three-year exemption from mandatory bargaining with news organizations even though its series of voluntary deals with news organizations excluded two important independent outlets.

***

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The vexing ‘original news’ problem of Rebel News and Bill C-18

November 30, 2022

When the Heritage Committee meets Friday it will begin debate on amendments to Bill C-18’s section 27(1)(b). That is the definition of an ‘eligible news business’ that qualifies a journalism outlet for bargaining rights with Google and Facebook. MediaPolicy posted about this on Monday.

A test case of such a news organization would be Rebel News (there might be others, including those on the Left).

Rebel News got punted earlier this year from the federal Qualified Canadian Journalism Organization (QCJO) program for journalist wage subsidies. The Independent Advisory Board on Eligibility for Journalism Tax Measures decided that Rebel News no longer met the Revenue Canada directive on “original news” reporting.

That Revenue Canada ruling gives us some insight into what might (or not) occur under an unamended section 27(1)(b).

To refresh your detailed recollection of section 27 (reproduced at the bottom of this post), there are two ways for a news organization to qualify for bargaining rights under Bill C-18. 

The door marked ‘section 27(1)(a)’ doesn’t specify any journalism criteria. Rather it rubber stamps the eligibility of any online news site (television is excluded) already granted “QCJO” status by Revenue Canada’s arm’s length Advisory Board. On Tuesday, Heritage MPs amended that section to include pre-qualification of CRTC licensed community TV stations.

The other door marked ‘section 27(1)(b)’ spells out the CRTC’s criteria for ‘eligible news business.’ It gives the CRTC interpretative guidance but is missing some of the harder rules of the QCJO program, namely a percentage of journalist time spent news gathering and a requirement for ‘original news content.’

When the aforementioned Advisory Board yanked Rebel News’ QCJO tags it focused on the lack of original news under section 248(1)(a)(v) of the Income Tax Act. Here is the relevant text in the denial letter:

[As required by section 248(1)(a)(v),] the Advisory Board found that Rebel News produces content which is of general interest, including coverage of democratic institutions and processes, and not primarily focussed on a particular topic. However, the Advisory Board’s assessment is that Rebel News does not provide original news content, on the basis that the content was found to be largely opinion-based and focused on the promotion of one particular perspective.

The term original news content is not specifically defined in the [Income Tax Act]. To assist with the interpretation of the term, and to ensure transparency, the Guidance on the income tax measures to support journalism (the Guidance) is published on Canada.ca. The Guidance explains:

2.27 The original news content of an organization generally refers to reports, features, investigations, profiles, interviews, analyses and commentaries that are:

(c) based on facts and multiple perspectives actively pursued, researched, analyzed and explained by a journalist for the organization;…

Further, section 2.36 of the Guidance provides:

2.36 Original news content should be based on journalistic processes and principles, which include:

(b) a consistent practice of providing rebuttal opportunity for those being criticized and presenting alternative perspectives, interpretations and analyses;…

The Advisory Board found numerous examples of curated content which is also not considered original news, and is contrary to sections 2.34 and 2.35 of the Guidance which state:

2.34. The rewriting, translation, reproduction or aggregation of news from external sources (including articles from news agencies, a current or previous issue of the same publication or any other publication) would not be considered original. Content produced in such a manner, by or for an organization, will factor into the determination of whether the organization is engaged in the production of original news content.

2.35. In addition, lightly edited reproductions of news content would not be considered original news content. For example, an article that repeats material from a news release with no evidence of further independent research and no additional facts, third party perspectives, or context, would not be considered original news content.

Our review of Rebel News’ application reached the same conclusions as that of the Advisory Board, namely, that Rebel News is not engaged int he production of original news content that meets the requirements of the Act.

Director General, Legislative Policy Directorate, Revenue Canada

For full appreciation of Revenue Canada’s Guidance document, the Director General’s letter might also have quoted section 2.33 which signals the primacy of news gathering over opinion giving:

2.33. The term original news content includes content for which research, writing, editing and formatting are conducted by and for the organization. Therefore, whether news content is original depends on the active involvement of a journalist in its creation. Original news content is produced through gathering facts and should show evidence of first-hand reporting, such as independent research, interviews, and fieldwork. For example, a news article or report about an event would be original if it is written or reported by a journalist and is based on first-hand knowledge that journalist gained by conducting independent research, attending or witnessing the event, or interviewing people who organized, attended, or witnessed the event.

In the end, the significance of Revenue Canada’s disqualification of Rebel News from the QCJO program is that its content lacked original news, especially:

  • Reporting based on facts and multiple perspectives actively pursued, researched, analyzed and explained. 
  • Original news gathering, as opposed to reporting on reporting by others.
  • Giving space to alternative or rebuttal views, presumably in opinion writing.

Putting aside the incendiary reputation of Rebel News, what is instructive to Heritage MPs considering section 27(1)(b) on Friday is the journalistic standard of ‘original news’ as expressed by Revenue Canada in its Guidance document. 

You won’t find the term ‘original news’ in section 27(1)(b), the portal for journalism companies to apply for official status as ‘eligible news businesses’ under Bill C-18.

You will find ‘original news’ under section 31 which is the opportunity for Facebook and Google to ask the CRTC to disqualify certain ‘news outlets’ operated by CRTC certified eligible news businesses —for example, a particular news title published by Torstar or Postmedia— if the news outlet’s content does not meet a number of tests, including original news reporting.

It’s an odd, backwards way to draft a statute. It contemplates the CRTC certifying a news business as eligible under section 27(1)(b), subject to Facebook or Google challenging a particular news outlet (which in the case of independent news organizations may be the same thing) as lacking original news content under section 31(2).

Something for MPs to chew on.

***

***

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Heritage MPs could make C-18 better, or much worse

NDP MP Peter Julian has been busy with C-18 amendments.

November 28, 2022

Tomorrow MPs on the Heritage Committee have an opportunity to make the Online News Act C-18 a better bill, or a much worse one.

C-18 boosts the bargaining power of Canadian news businesses to wring compensation out of Google and Facebook from advertising revenue they make on Search and Social Media using news content as an audience draw.

News organizations aren’t the only content creators who can make this claim, but they are the ones Parliament is helping to do so in the name of news journalism.

That’s why the challenge for MPs is to draw the line in C-18 between legitimate journalism on one hand, and “citizen journalism” or political activism on the other.

Last week MPs debated amendments to one way the Bill certifies professional news outlets: by defining the kind of news businesses with whom the Big Tech platforms must reach voluntary agreements to be exempted by the CRTC from formal bargaining and arbitration.

The exemption text in section 11 of the Act allows the government to outsource the unpleasant task of drawing the line between journalists and activists to Facebook and Google themselves. If a platform reaches voluntary agreements with “a significant portion” of organizations that are, in the platform’s opinion, legitimate news outlets, then the CRTC never has to draw the line between an “eligible news business” (ENB) and a blogger like MediaPolicy.

NDP amendments to remove the platforms as the arbiter of journalism organizations by requiring voluntary deals be negotiated with all “eligible news businesses” were voted down.

Tomorrow MPs will debate amendments to the other way to separate the journalism wheat from the chaff: by nailing down a definition of an ENB in section 27(1) that triggers the formal bargaining and arbitration scheme overseen by the CRTC.

There are two points of entry into section 27(1) and official designation as an ENB.

The first door, section 27(1)(a), is automatic qualification as an existing Qualified Canadian Journalism Organization (QCJO), currently restricted to daily newspapers certified by an arm’s length journalist committee for the purpose of federal tax credits.

The second door—- open to all other news media including television companies—- is where MPs can make either a better or much worse definition of an ENB.

Right now section 27(1)(b) establishes the following criteria for an eligible news business:

  • The news organization operates in Canada, including having content edited and designed in Canada.
  • It regularly employs two or more journalists in Canada.
  • It produces news content, defined as reporting on, investigating or explaining current issues or events of public interest.
  • Its content is primarily focussed on matters of general interest and reports of current events, including coverage of democratic institutions and processes.
  • Its content is not primarily focussed on a particular topic such as industry-specific news, sports, recreation, arts, lifestyle or entertainment.

This definition devised by Heritage officials is serviceable, if not perfect.

It supports news over opinion and communities over political tribes.

It supports the preservation and recovery of newsrooms with enough journalists to carry out proper news gathering.

And it draws a line, even though any line will be arbitrary, between freelance journalists and small publications.

Nevertheless the definition could be greatly improved with an explicit emphasis on professional journalism.

Professional journalism. Aye, there’s the rub.

Professionalism is a problematic descriptor in a craft marked by optional university credentials and non-binding press councils, where legitimate journalism is recognized as traditions and practices, not rules or certifications.

In earlier hearings, Bloc MP Martin Champoux noted the absence in the ENB definition of press council membership or adherence to editorial codes of conduct. Expect an amendment from him this week.

But while the definition of legitimate news organization is probably not perfectible, it could easily be made worse.

That could happen in at least a couple of different ways.

First, there is a move afoot among MPs to water down the threshold requirement of news outlets regularly employing at least two journalists.

Inserting that threshold into the Bill in the first place recognized the advantage of adequately resourced newsrooms over freelance journalists as news gatherers. It also signalled something less than an open invitation to all comers into a government-regulated compensation scheme supporting journalism.

But a practical concern about a “two journalist” rule was raised during hearings: very small rural newspapers could be disenfranchised because they “employ” only one journalist in addition to a proprietor-journalist. MediaPolicy wrote about that problem here and here.

Underdogs being the catnip of Parliamentarians, expect Opposition MPs and perhaps the government to lower the two-journalist threshold, but hopefully not so low that any self declared freelance journalist will be recognized as an eligible news business in their own right. That may not seem so bad to those who picture Chantal Hébert or Paul Wells qualifying as freelancers, but bear with me for a moment.

The second way this could get mucked up is to listen to critics who would repeal the Act’s requirements that an eligible news business must cover news “primarily focussed on matters of general interest and current events” and not be primarily focussed on “a particular topic,” meaning specialty or niche journalism.

Getting wrong either the “two journalist” threshold or the “general interest and current events” criterion is bad enough, getting them both wrong at the same time would be a disaster.

This would throw the door into C-18 wide open to freelance journalists, some of whom might be brilliant beat reporters but also to others who form an army of self-anointed citizen-journalists with an axe to grind on their favourite issue.

Like this page, for instance.

And that would give us a Bill we neither need nor asked for.

***

Here is an update on C-18 amendments that have been considered and those yet to be debated.

  • Sponsored by NDP MP Peter Julian, the Bill has been unanimously amended to accord special status to Indigenous news organizations through definitions of “news outlet” (Indigenous-controlled and directed at Indigenous audiences) and “news content” (includes Indigenous storytelling as a legitimate method of journalism).
  • The CRTC’s criteria for awarding a regulatory exemption to Facebook or Google under section 11(1)(a) was amended to direct the platforms to give special attention to non-profit and Indigenous news outlets when making agreements with a diverse range of news outlets. A Conservative proposal to include “ideology and opinion” into “diversity” was rejected.
  • Still on exemptions, the NDP motion to require the platforms to reach voluntary agreements with “every eligible news business” failed. So did a comprehensive CPC amendment which mirrored the NDP amendment and added other detailed requirements including the completion of bargaining within a reasonable time frame; that compensation be comparable between different news businesses; that small businesses are able to negotiate with adequate information, and others. These additional exemption criteria were rejected by government MPs but couldstill end up in future cabinet regulations that are authorized under section 11(1)(b).
  • A heads up amendment was proposed by Peter Julian and adopted: it will provide that the cabinet order that confirms the voluntary agreements and the platform exemption must run for five years. This is likely a response to Facebook’s public messaging casting doubt on its willingness to renew some of the voluntary agreements it already has in the US and Australia. On the other hand the exemption order will shut out start-ups that miss out on negotiations for up to five years.
  • The CPC failed to get support for establishing a revenue threshold below which smaller platforms —-Twitter? Mastadon?—-which don’t exploit market power over news organizations would not be obliged to participate in the C-18 compensation scheme. Former CRTC Chair Konrad Von Finckenstein has made a good regulatory argument in favour of doing so. The cabinet still has the power to create such a revenue threshold under section 11(1)(b).
  • A series of mischief making amendments from the CPC were rejected. They sought to advance amendments affirming the supremacy of the copyright and intellectual property law that have been deliberately limited in C-18.

Still to come are amendments on key sections of the Act governing:

  • the recognition of eligible news businesses and news outlets, including whether CRTC-licensed community outlets “pre-qualify.”
  • Update 29/11/22: the Heritage Committee unanimously adopted an NDP motion to pre-qualify CRTC-licensed community news outlets.
  • Update 2/12/22: the Committee amended the “two journalist” rule to include proprietor-journalists and family members.).
  • Update 6/12/22: the Committee amended section 27 to require that news outlets either belong to a recognized press council or “has its own code of ethics whose standards of professional conduct require adherence to the recognized processes and principles of the journalism profession, including fairness, independence and rigour in reporting news and handling sources.”
  • Update 6/12/22 – the Committee adopted a third category of eligible news organization, indigenous news outlets that “produce news content that includes matters of general interest, including coverage of matters relating to the rights of Indigenous peoples, including the right of self-government and treaty rights,” essentially removing the two-journalist rule for indigenous news outlets.
  • the timetable for bargaining, to guard against delay. (Update 29/11/22: the NDP motion was adopted)
  • a Conservative amendment to disqualify the CBC from compensation. (Update 6/12/22: the motion was defeated).
  • publishing the details of voluntarily negotiated or arbitrated deals on the CRTC website. (Update 9/12/22: all NDP motions to publish the details of negotiated agreements were defeated which will prevent news organizations from benchmarking their expectations against comparable deals. A government amendment to allow the Commission to release this information to arbitrators, in confidence, passed.)
  • competing visions of the undue preference and ranking discrimination provisions from the government and the Conservatives. (Update 9/12/22: A government amendment significantly scaled back the Bill’s open-invitation to challenge Google or Facebook’s news ranking decisions. The amended procedure limits regulation to changes in news rankings that are retaliatory against news organizations or otherwise undermining the bargaining between them and the platforms.)

***

Also from MediaPolicy.ca Must it be war? A peace proposal for C-18 – October 26, 2022

***

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Catching Up on MediaPolicy.ca – C-11 and C-18 inch forward – Brad Danks dishes on Bell proposal- Jordan Bitove goes solo at the Toronto Star – a corporate soap opera at AT&T/TimeWarner

Torstar co-proprietors Jordan Bitove and Paul Rivett are splitsville.

November 26, 2022

The Conservative Party’s stance on the Online News Act C-18 continues to ping-pong between critical support and dogged opposition.

The Conservatives had teed off on C-18 with a disastrous day on October 28th when they appeared to ally themselves with Facebook at a meeting of the Commons Heritage Committee.

At the next meeting, MP Kevin Waugh made a point of stating that Conservatives “support C-18” while also making it clear they will try to exclude television companies from getting compensation from Facebook or Google because that would, they argued, leave more money for newspaper companies.

Having pitched for newspapers, the Conservatives’ first amendment at this Tuesday’s session sought to exclude bargaining over compensation for news content made available through hyperlinks or constituting fair use of copyright. That would restrict bargaining to news content posted (not linked) as full text articles:

news content means content — in any format, including an audio or audiovisual format — that [is protected by copyright and] reports on, investigates or explains current issues or events of public interest. [It does not include a hyperlink that provides access to online news content and is presented without images or extracts of alphanumeric text that are part of the online news content]

Liberal MP Chris Bittle pointed out the obvious: the Conservative amendment would eviscerate the Bill of any meaningful compensation for news outlets. The amendment was defeated.

Yesterday the important challenge to the government’s Bill came from NDP MP Peter Julian who unsuccessfully tabled an amendment to limit the CRTC’s discretion to exempt Facebook or Google from bargaining with every eligible news outlet provided they reach voluntary agreements with “a significant portion” of outlets. His amendment expressly required agreements with “all eligible news businesses”:

11(1)(a)(v) they ensure a significant portion of independent local news businesses [and all eligible news businesses] benefit from them, they contribute to the sustainability of those businesses and they encourage innovative business models in the Canadian news marketplace,

The Liberals, with Bloc support, rejected Julian’s all-in approach and argued a single “bad actor” news organization could sabotage the voluntary bargaining scheme offered under the Act by refusing to come to terms with Facebook or Google. Small news outlets, Liberal MP Chris Bittle reasoned, won’t be shut out if they join together in a bargaining coalition permitted under the Bill.

What MPs never discussed was how the “significant portion” language in section 11(1)(a)(v) empowers the Big Tech platforms to ignore a faux news outlet without putting the CRTC on the spot to deny it “eligible news business” status.

Rebel-washing, if you will.

That kind of news outlet might have been on the mind of Conservatives in tabling an amendment making the diversity of “ideology and opinion” of news outlets one of the CRTC’s considerations when giving its blessing to a set of voluntary agreements. The amendment failed.

After six hours (over three sessions) of clause-by-clause consideration, the Committee has moved through about a third of nearly 100 amendments.

***

Bill C-11 is making slow but forward progress through the Senate Transportation and Communications Committee.

To help Senators along, at the beginning of the week MediaPolicy published a hubris-infused list of demands, “Six C-11 Amendments the Senate Must Pass.”

Senators were so impressed they ignored three of the six when questioning Heritage Minister Pablo Rodriguez the following day in committee: local news funding, the union-busting amendment to the Status of the Artist legislation, and preserving the public right of appeal to cabinet.

As for MediaPolicy’s remaining three amendments, the Minister’s deputy Thomas Owen Ripley assured Senators that the controversial section 7(7) did not intend for cabinet to usurp the Commission’s daily powers (see our post on “The Next Internet Czar”). Moreover, the Minister himself gave the impression he wasn’t especially committed to 7(7). It seems that if the Senate repeals 7(7), the Minister might accept that or perhaps the deftly worded revision submitted by the CRTC.

The Minister then left the Committee mid-way through proceedings to attend a cabinet meeting. This allowed the policy conversant Ripley to field questions about other controversial elements.

In responding to questions about C-11 provisions giving special treatment to Hollywood studios making movies in Canada [section 3(1)(f))] and global web giants operating content platforms [section 9.1(1)(i)], Ripley defended the Bill but in the end acknowledged the government was ceding ground to American concerns.

This left a weighty question unasked: if the Liberals have already made compromises in the spirit of avoiding trade complaints or retaliation from the Biden administration, what if any reliable assurances were obtained that we won’t see them anyway? It’s worth recalling the line in the sand that Google drew on discoverability when it appeared before the Senate in September.

Senators then began clause by clause review of the Bill on Wednesday evening. In three hours they moved through fewer than ten of 100 amendments.

The most significant amendment debated, and defeated, was a Conservative proposal to narrow the scope of the CRTC’s “discoverability” powers to key word searches by consumers.

Senators then began debating a revenue threshold for social media platforms to be included or excluded from regulation when time expired. The committee will resume amendments next Tuesday and Wednesday.

***

Speaking of C-11 amendments, MediaPolicy interviewed OutTV CEO Brad Danks on the Bell proposal to amend C-11 on the critical issue of distribution rights to American programming.

A good read for industry nerds and those who aspire to be.

***

If you didn’t catch the news report, the co-owners of Torstar have completed their commercial divorce and Jordan Bitove will become the sole proprietor of the Toronto Star and its regional newspapers.

***

If you like corporate soap operas, there’s a good one in the New York Times about the 2016 AT&T/TimeWarner merger that resulted in last February’s spin off of Warner Brothers, CNN and Discovery.

It’s got all of the elements of corporate intrigue, culture clash between telco and creative executives, billion dollar windfalls and share value vaporization, and the Trump administration fixing its baleful gaze upon CNN.

***

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Bell’s C-11 Proposal: a Q and A with Canadian TV exec Brad Danks.

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.

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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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Six C-11 amendments the Senate must pass.

November 21, 2022

The Senate Transportation and Communications committee is set to debate amendments to Bill C-11 at Wednesday evening’s session.

Unelected Senators are expected to be the chamber of sober second thought but not the gallery of second guessers. 

After all, the Online Streaming Act was studied by the Commons Heritage Committee for twelve days before being approved in a blur of amendments on June 14th. The Bill was a reboot of the previous Parliament’s thoroughly debated Bill C-10 and subsequently placed before Canadian voters in the federal Liberals’ 2021 election platform.

But grâce à the Conservatives’ avowal to indefinitely filibuster C-11 in the Heritage Committee, the other parties representing a majority of MPs and voters set a June 14th deadline. That resulted in 42 amendments rushed through the Heritage Committee in a mere twelve hours; some for better, some for worse and some left on the table.

That ugly Parliamentary episode is why it’s legitimate for Senators to aggressively amend the Bill and offer the Minister and the House an opportunity to pass a better one.

Without knowing whether a back channelled discussion of amendments between Senators and Heritage Minister Pablo Rodriguez has occurred, MediaPolicy.ca hereby tenders some gratuitous advice on a better C-11:

Parliamentarians, Do No Harm.

There are provisions in C-11 that are a step backwards for Canada’s broadcasting policy and fixing them deserves non-partisan support.

1. Repeal section 7(7). This dangerous power grab on behalf of federal cabinet to micromanage almost anything under the Act that is normally the responsibility of the arm’s length CRTC has got to go. There is no acceptable version of it. MediaPolicy.ca explained why, here, as did broadcasting experts Robert Armstrong and Monica Auer.

2. Update the public’s right under section 28(1) to appeal to federal cabinet any Commission “orders” to the newly created class of (mostly foreign) online undertakings that play the same role as licence conditions for (mostly Canadian) conventional broadcasting. Appeals to federal cabinet are an important safety valve in the event of egregious policy errors by the Commission. Some might advocate for either a broader or narrower right of appeal to cabinet but including “orders” under section 28(1) simply maintains the status quo in the Internet era.

3. Defend Canada’s cultural sovereignty. The CRTC routinely enforces fair treatment of Canadian programming services by cable companies. That includes a short list of “section 9(1)(h)” public interest channels the Commission deems “must carry” at a fixed compensation rate. The House Bill fails to make these Commission powers binding on foreign online undertakings like Roku, Pluto TV or any number of content aggregators, apparently reflecting Heritage Canada’s fear of an American trade complaint. Do it anyway.

4. In the same vein, repudiate the two-tier favourtism shown to Hollywood studios to use less Canadian talent and production workers than expected of Canadian filmmakers and domestic media companies. Heritage Canada never explained why foreign companies deserve special treatment under a revised section 3(1)(f) but the House Bill certainly gives a new twist to the phrase “most favoured nation status.” And it’s not Canada.

5. Repeal the anti-worker, Hollywood-appeasing section 31.1 which exempts Canadian actors, writers and directors working for online undertakings from the federal Status of the Artist Act and invites American studios to make movies in Canada, draw from our hefty film production tax credits, and operate non-union. It’s hard to understand how federal Liberals would want to be within a thousand miles of this odious provision (it was introduced last minute by the Liberals in the chaos of June 14th as a sop to foreign streamers ).

6. Save local news. This ought to be an easy one. The Unifor amendment strengthens the Commission’s authority to order better financing for local newsgathering, flowing from broadcasting distribution undertakings (e.g. cable companies) to broadcasters. After all, the House Bill removed $120 million in annual “Part II fees” that big Canadian media companies have been paying into the federal treasury, so they can afford it. The Unifor amendment also modernizes the Commission’s authority by including “online undertakings” as the source of news funding when inevitably it will be necessary.

Send a message.

One can’t discuss amendments to C-11 without acknowledging the campaign by Google, Digital First Canada and the Conservative Party to remove provisions in C-11 regulating uploaded videos and music on social media platforms.

In fact their campaign demands a roll back of the Commission’s broadcasting jurisdiction by permanently removing American hosting platforms from Canadian regulation.

The campaign has a libertarian inspiration that clashes with the policy objectives of the Act, but it has been fueled by YouTubers’ visceral fears of regulatory overreach once the Bill has passed. It doesn’t help that the Minister elected not to publish a draft policy directive that might have given the CRTC clear instructions to exempt programs made by small scale content creators and ensure that “discoverability” measures don’t backfire.

But the Liberals, Bloc and NDP don’t share those fears of overreach so the most the Senate can do, if so inclined, is to send a message to the Minister for the Policy Directive he says he will publish after Royal Assent.

That message might be expressed as regulatory exemptions tied to revenue thresholds applied to either the platforms’ and/or creators’ businesses. Another message might express regulation of recommendation algorithms as an exceptional measure.

Don’t hold your breath.

The House Bill includes an elevated process of public consultation over broadcasting policy affecting Official Minority Language Communities in a manner that seems more geared to an expression of respect for those communities than practical necessity.

However an amendment will likely go nowhere. 

And so.

Perhaps an unnecessary last word to Senators: debate but don’t delay this Bill.

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