The damaging implications of Bill C-11 continue to rear their ugly head as major record labels beg the CRTC not to destroy online streaming.
The Online Streaming Act (formerly Bill C-11) is continuing to show that it was basically sending a giant wrecking ball into the Canadian creative sector. There are many layers to the absolutely awfulness of this law. One of the major flashpoints was the CRTC announcing a scheme to effectively steal 5% of revenue from platforms and creators, siphoning off to the establishment media who have done nothing to generate that wealth, then basically deny any of that funding from flowing back to the very creators that generate that wealth. This while completely undermining Canadian creators by downranking their content on platforms while ordering platforms to promote content the government wants them to promote.
In short, this bill punishes innovators while propping up the past run by venture capital vampires and anti-innovation fail upwards CEO’s who are largely content with business as usual tactics in the midst of a sea change on how people consume content. While more Canadians than ever before have switched to online only sources to consume content, the government basically decided that it’s the consumers that are wrong and that they should be going back to radio and television to consume content. If they refuse, force them to watch that content wherever they end up going to get away from all that awful unwatchable content.
Much of the concerns have revolved around how badly this bill screws over independent online creators. Specifically, people who use platforms like YouTube, TikTok, and Twitch (among other platforms) to find their audience and grow into a full blown business. However, there are many other aspects of this legislation that make this bill absolutely terrible. Other examples include how premium services would be severely negatively impacted. Several platforms have already indicated that they are thinking of pulling out of Canada altogether. Others are seemingly more likely to pass the added costs of this law onto consumers.
Some have chosen to also fight against these likely unconstitutional laws. As a result, the CRTC has already incurred not one, not two, but at least three lawsuits. This over top of the numerous threats from the US who have already threatened trade retaliation for targeting American companies – a violation of the CUSMA/USMCA trade agreement.
Some platforms have already responded to the new law by pulling investment dollars out of Canada altogether. Disney, for instance, have already pulled funding for Canadian projects. More recently, Netflix followed suit and pulled their funding from numerous training and development programs. This, alone, undermines the Canadian creative sector quite significantly given that it would be hard to even replace that funding with other revenue streams. Some programs are already facing outright closures because of this.
Make no mistake, Canadian’s are facing a creative Armageddon here. Programs that help them find and hone their voice are disappearing. Investment dollars for their projects are disappearing. Finding their audiences online is going to be extremely difficult. Sanctions from the US are on the horizon, affecting who knows what part of the overall general Canadian economy. All this just to stamp out creativity and independent business growing in Canada because companies like Bell need to hand investors another dividend payment. While the damaging implications are already rearing their ugly head, the worst is yet to come.
While we’ve spent much of our time focusing on video content, other kinds of content are getting the raw end of the deal here as well. This includes the music industry. Today, we are learning that the music industry is trying one more time to beg the CRTC not to ruin online streaming (good luck, they are going to need it). Here’s a joint press release that was recently published:
At the end of each session we were encouraged to write to the CRTC with further thoughts or clarifications on the sessions. With this in mind, we write to you today to reinforce an important message shared throughout the consultations: radio and audio streaming are not the same.
Out of context, it might seem odd for the largest streaming services and major music labels in Canada to write to a regulator asserting a truism, but we believe that the recent workshops have made this necessary. From the discussion guide to the moderated questions, there was a clear attempt to place the continuation of radio regulations on audio streaming services as an obvious next step.
We do not agree.
Today’s radio regulations were carefully crafted for Canada’s radio environment. One that is shaped by our vast geography, linguistic duality, and a willingness in an analogue system to make decisions about what is available to Canadian listeners. They also reflect the limitations of the medium: a finite number of hours, increasingly centralized programming, and a live broadcast format, and relatively small number of recordings that radio broadcasts.
Streaming is none of these things. Being driven in terms of each consumer’s individual interest and activity, it represents nearly infinite hours of listening, a vast catalogue of recordings, a plethora of languages, and has broken down not just physical geography but international borders as well. Three of the top 10 songs streamed in India in 2022 were by Canadian artists – a fact that would be inconceivable to the founders of our terrestrial broadcasting system.
Not only has streaming allowed Canadians to reach the world in ways previously unimaginable, streaming has allowed Canadian artists with no home in the traditional radio system to be found by their Canadian and international fans. This has led to higher levels of play on streaming for women and racially diverse artists compared to Canadian radio.
We ask that as you move forward implementing the Online Streaming Act, you think of the streaming services and their interactions with Canadians for what they are today and not as a proxy to the broadcasting system of the 1900s.
The release is a follow-up to an earlier one where the Digital Media Association (DiMA) earlier pointed out that the Online Streaming Act would worsen the affordability crisis in Canada.
This debate marks the first time I ever really agreed with Music Canada on anything. Music Canada knows full well why they are pretty freaked out about this legislation. A big part of that has to do with the history with technology and the major record labels.
Throughout the late 90’s and 2000’s, the record labels found themselves living in the past and declaring war on the internet. This with the advent of file-sharing. File-sharing, ultimately, was a technological development that responded to a complete lack of legal online services to discover and listen to music (among other things). The major record labels responded to this by trying to sue everyone involved. Whether it was individual file-sharers en-mass, members of the scene and other sources that rip and distribute content online for free, those who operate servers that help build file-sharing infrastructure, of those who distribute hash codes online, major record labels, among others, were trying to sue their way back into the past where people go to a physical store to buy their music.
While the major record labels had no interest in building up services that competed with free unauthorized sources, others out there finally saw the light and started building platforms and infrastructure that would compete. This included Netflix, Spotify, Apple, and others. After some considerable convincing (and partial neutering of services through DRM), eventually, major record labels inked deals with a select number of services. When those deals happened, revenue soared for the record labels. People have told them for over a decade that adapting their business model was the way to go, and the transition to music being predominantly about digital sales and streams proved those commentators (I was one of them) correct.
Fast forward to today, there has been some problems with online streaming services raising rates and decreasing their offering (often referred to as “enshittification”). As a result, there has been a gradual rebound in using unauthorized sources. So, while online “piracy” has taken a significant hit over the years because of viable online legal sources, the increasingly negative customer experience has started to push some back to unauthorized sources.
Now imagine what would happen if the Canadian government steps in and not only jacks up the rates even further through the stratosphere, but also completely degrades the user experience by forcing users to listen to content they think the user should be listening to. This as opposed to the content that the user has carefully crafted to suit their tastes over time. Both the record labels and the streaming services know exactly what will happen. A violent negative reaction from the customers.
If the customer experience is ruined, it will drive those customers back to unauthorized sources. At that point, the record labels are completely screwed – at least as far as the Canadian market is concerned. Adapting their business models to suit a modern era is the way to go. If, however, the government is ruining that experience and making such services completely unaffordable, the record labels are, well, out of options at that point.
All of my experience with the online industry in general and how things work honestly struggles with a solution at that point. One option might be just putting a levy on ISPs and letting piracy fly (not something that was really entertained before). The only other option I can see is posting previews on the platform and begging users to buy the whole track or album (success may be limited there). Beyond that, though, at this point, I find myself throwing my hands up in the air and saying, “Out of options”. After all, piracy ends up being the default option when there is a lack of legitimate services for consumers.
So, the fact that the major record labels are having collective heart attacks over this legislation is pretty understandable. Their online business models in Canada are about to be torpedoed by the government. The above press release lays out exactly why.
Truth be told, I can see the major record labels doing what several other streaming services have done and just drop all investments and even pulling up stakes and leaving Canada altogether in some cases. It honestly is really hard to figure out much of a viable business model for those labels in the first place once you remove the ability to reach audiences through a platform like Spotify.
Some out there might be thinking that it’s only the major record labels that are affected. Some might just say that the major record labels don’t contribute much to the Canadian music scene and that their comments should be ignored. For those who are thinking along those lines, well, I got bad news for you. Canadian independent record labels have raised pretty much identical concerns. A great example was the Bill C-11 Senate committee hearing appearance of Nettwerk Music Group. They, too, voiced serious concerns about reaching music fans should the full effect of this law be fully realized. Even worse, many of them aren’t anywhere near in a financial position to face the costs of this law as the major record labels. Many of them are in an even worse spot than the major record labels.
At any rate, the Online Streaming Act is a massive disaster for the entire creative sector as a whole. As this recent release shows, record labels are in a very similar boat to the online digital first creators out there in Canada. They are witnessing a potential massive hit to their respective bottom lines thanks to this law. Credit where credit is due, at least the music labels are still trying to beg for their financial lives. At best for them, however, they are facing a huge uphill battle – a hill I’m not entirely sure they will overcome given the history of the government and regulator just ignoring reason and evidence. All I can see is things getting even uglier as time goes on.
