Streaming Services Required to Contribute 5% of Revenues to Prescribed Funds

On June 4, 2024, the Canadian Radio-television and Telecommunications Commission (CRTC) issued Broadcasting Regulatory Policy CRTC 2024-121 (Decision), which imposes a base financial contribution requirement of 5% of “annual contributions revenues” on certain online streaming service providers operating in Canada. These contributions must be allocated to prescribed funds to support the creation of Canadian and Indigenous content.

Background

The Decision stems from a public consultation process initiated by the CRTC on May 12, 2023. It is the fourth decision issued by the CRTC with a view to modernizing Canada’s broadcasting regulatory framework following the enactment of the Online Streaming Act (formerly Bill C-11) that amended the Broadcasting Act. On September 29, 2023, the CRTC issued two decisions that impose conditions of service on online undertakings and require certain online undertakings to register with the CRTC (for more information, please see our Blakes Bulletin: CRTC Issues First Decisions Regulating Online Broadcasting Undertakings in Canada). The CRTC subsequently published a decision on March 21, 2024, that led to the coming into force of new Broadcasting Fees Regulations on April 1, 2024. These regulations require Canadian broadcasting undertakings (including online undertakings) to pay fees that finance the CRTC’s regulatory costs.

Scope of Application

The Decision provides that only certain online undertakings are required to make base financial contributions. In determining which online undertakings will be required to make contributions, the CRTC will primarily examine details surrounding the online undertaking’s ownership group and its annual Canadian broadcasting revenues.

In respect of ownership, the Decision excludes online undertakings operated by or affiliated with a licensed broadcasting undertaking or a broadcasting undertaking subject to an exemption order from the contribution requirements. As such, online undertakings affiliated with traditional Canadian broadcasters will not be subject to the base financial contribution requirements.

In respect of revenues, the Decision provides that only online undertakings that earn C$25-million or more in “annual contributions revenues,” or that are part of an ownership group that exceeds that threshold, will be required to make base financial contributions. The C$25-million threshold exceeds the C$10-million threshold that the CRTC initially proposed and relies upon in respect of the registration requirement. As such, online undertakings that are exempt from the requirement to register with the CRTC, and those that are registered but earn revenues below the C$25-million contribution threshold, will not be required to make base contributions.

“Annual contributions revenues” is a new term introduced by the CRTC in the Decision. It is defined similarly to the term “annual Canadian gross revenues” set out to establish the threshold for registration and the application of certain conditions of service under the CRTC’s previous decisions, which referred to an undertaking’s annual Canadian gross broadcasting revenues, less certain excluded revenues. However, a broader scope of revenues is excluded when calculating “annual contributions revenues” compared to these past CRTC decisions. In particular, in addition to revenues derived from providing audiobook services, video game services and other services excluded by order, revenues associated with podcast services and user-generated content (including advertising and subscription revenues associated with this content) are also excluded from the calculation.

Prescribed Contributions and Allocation

Online undertakings in both the audio and audiovisual sectors that are subject to the contribution requirements will be required to contribute at least 5% of their annual contributions revenues from the previous broadcast year to support the creation of Canadian and Indigenous content through allocations to existing funds and direct expenditures as prescribed by the CRTC.

Allocations to existing funds were selected to target “areas of immediate need.” These areas include local news on radio and television, French-language and Indigenous content, and content created by and for equity-deserving communities, official language minority communities (OLMCs) and Canadians of diverse backgrounds. To ensure these areas receive relatively quick access to funding, the CRTC’s allocation relies primarily on existing funds rather than the creation of new funds.

In the audiovisual sector, online undertakings must allocate their 5% contribution as follows:

• 2% to the Canada Media Fund (CMF). Online undertakings may choose to direct up to 0.9% of their annual contributions revenues in this category toward the production or acquisition of English-language certified Canadian content and 0.6% toward the production or acquisition of French-language certified Canadian content. The remainder (as low as 0.5%) must be allocated to the CMF.

• 1.5% to the Independent Local News Fund

• 0.5% to the Black Screen Office Fund, the Canadian Independent Screen Fund for Black and People of Color creators and/or the Broadcasting Accessibility Fund

• 0.5% to the Certified Independent Production Funds supporting OLMC producers and producers from diverse communities

• 0.5% to the Indigenous Screen Office Fund

In the audio sector, online undertakings must allocate their 5% contribution as follows:

• 2% to FACTOR and Musicaction (60% to FACTOR and 40% to Musicaction)

• 1.5% to a new temporary fund supporting local news production by commercial radio stations outside of the designated markets

• 0.5% to the Canadian Starmaker Fund and Fonds RadioStar

• 0.5% to the Community Radio Fund of Canada

• 0.35% to direct expenditures targeting the development of Canadian and Indigenous content (which include certain songwriting camps, support for the production of sound recordings by Canadian and/or Indigenous artists, and support for award shows and festivals exclusively featuring Canadian and/or Indigenous artists) and/or a variety of selected funds

• 0.15% to the Indigenous Music Office and a new fund to support Indigenous music

Online undertakings subject to the contribution requirements will also be required to participate in annual broadcasting surveys to provide information on their revenues, contributions and programming, as well as reviewed financial statements.

Next Steps

The obligation to make contributions will come into effect in the 2024-2025 broadcasting year, which covers September 1, 2024, to August 31, 2025. The CRTC will implement these requirements through an order imposing conditions of service. Interested parties may comment on the draft orders attached to the Decision by June 14, 2024 (this deadline is extended to June 25, 2024, in the case of OLMCs).

The CRTC has indicated that the base financial contributions set out in the Decision are the “foundation” of a contribution framework that will be imposed on online undertakings. Online undertakings may also be required to make other types of contributions, such as additional financial contributions toward specific sectors, direct expenditures on certain types of programming and the carriage of certain services. Additionally, alongside a current consultation on the definition of Indigenous content for the development of a modernized Indigenous broadcasting policy, the CRTC is expected to initiate consultations on the definition of Canadian content as required by the Governor in Council’s November 2023 Policy Directions. The outcome of such consultations may result in contributions toward the promotion, discoverability and prominence of Canadian and Indigenous content. The CRTC will “fine-tune” the contributions of all broadcasters as it continues to consult on other aspects of Canada’s new broadcasting framework in accordance with its regulatory plan to modernize Canada’s broadcasting framework.

For more information on recent updates to the CRTC’s regulatory plan, please see our May 2024 Blakes Bulletin: CRTC Releases Updated Regulatory Plan to Modernize Canada’s Broadcasting Framework.

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