Source: Unsplash

A group of U.S. streaming companies have asked a Canadian court to halt their financial obligations under the Online Streaming Act, which would force them to fork over 5% of Canadian sales to support Canadian news broadcasting. 

The request was made by the Motion Picture Association Canada, an industry group representing major American companies who produce and distribute content in Canada, specifically Netflix, Walt Disney, Warner Bros. Discovery, and Paramount Global. The group says CRTC “acted unreasonably” in imposing the requirement.

“The CRTC’s decision to require global entertainment streaming services to pay for local news is a discriminatory measure that goes far beyond what Parliament intended, exceeds the CRTC’s authority, and contradicts the goal of creating a modern, flexible framework that recognizes the nature of the services global streamers provide,” said Wendy Noss, president of the Motion Picture Association Canada 

According to the association, the Canadian Radio-television and Telecommunications Commission order exceeds the broadcast regulator’s authority and doesn’t recognize the billions of dollars spent within Canada each year by those streaming giants.

The association seeking appeal court intervention said that global studios and streaming services have spent over $6.7 billion annually producing content in Canada made by Canadian production companies. 

That figure is an investment which goes far beyond the CBC, Canada Media Fund, and Telefilm combined.

“Our members’ streaming services do not produce local news nor are they granted the significant legal privileges and protections enjoyed by Canadian broadcasters in exchange for the responsibility to provide local news,” said Noss.

The levy imposed by the CRTC is likely to result in increased costs for consumers, warned the streaming companies, with some even saying they may pull services out of Canada entirely.

The association filed with Canada’s Federal Court of Appeal, with its lawyers claiming that the CRTC didn’t reveal “any basis” for why foreign streamers are required to contribute to the production of local television and radio broadcasts.

The filing alleges that the CRTC “concluded, without evidence, that ‘there is a need to increase support for news production.’”

“Imposing on foreign online undertakings a requirement to fund news production is not appropriate in the light of the nature of the services that foreign online undertakings provide,” it said.

The CRTC responded by saying that as an independent quasi-judicial tribunal that regulates the Canadian communications sector, its decisions are based on public interest. 

“The CRTC holds public consultations on telecommunications and broadcasting matters and makes decisions based on the public record,” a spokesperson for the CRTC told True North.

“The Online Streaming Act, which amended the Broadcasting Act, requires the CRTC to modernize the Canadian broadcasting framework. The CRTC will continue to balance consulting widely with moving quickly to build the new regulatory framework.”

The spokesperson declined to comment on the legal action specifically as it is before the courts.

Despite the backlash from streaming companies and taxpayers, the CRTC called the decision a “major step forward in the implementation of the Online Streaming Act” last month. 

“Today’s decision will help ensure that online streaming services make meaningful contributions to Canadian and Indigenous content,” said CRTC chairperson and chief executive officer Vicky Eatrides at the time.

Eatrides claims that these regulations will keep “certain types of content like local interest stories will not be made or distributed anymore. Or that they will become less available because they will not be funded by market forces alone.”

Payments are expected to begin on Sept. 1 at the beginning of the 2024-25 broadcast year and are projected to rake $200 million annually to Canada’s broadcasting system.