The Online Streaming Act is supposed to generate huge payoffs. Yet, layoffs hitting Disney and Paramount further puts that into question.
When the Online News Act was still legislation, the mainstream media was expecting a massive financial windfall. Instead, the media sector was hit with steep losses after Meta rolled out news link blocking. That worked out to a direct estimated loss of $230 million per year. That massive hit in revenue losses easily eclipsed the $100 million per year Google fund model. What’s more, most of that $100 million isn’t even new money as it rolls existing deals into that $100 million. Some news organizations ended up money behind in even that. While desperate supporters of the legislation played the creative accounting game to mark this as a win, no amount of fun with numbers was going to cover up the huge losses that hit the media sector. That is especially apparent with the fact that the mainstream media has become wholly dependent on government bailouts to keep their operations afloat.
Faced with mounting losses across the board, the Canadian mainstream media resorted to working their plan “B”. That is to redirect their expected financial windfall from the Online Streaming Act to try and make up the difference.
The Online Streaming Act, in part, demands that a chunk of profits generated with online streamers be sent directly to Canadian corporations instead. This because Canada’s cultural elite not only can’t create a competitive product, but they actively refuse to adapt their business models to a modern era as well. As more and more people turn away from their products, the idea is that their competitors pay a massive tax to keep doing business in Canada. Those tax dollars then get redirected to their bank accounts so they don’t have to go through the trouble of creating content people want to consume. They just get the financial windfall after.
So, what is this plan “B” specifically? Well, the idea is that the mainstream media should receive a huge chunk of that money as well. A percentage of the financial windfall they think is coming will go directly to the mainstream medias bank accounts even though they have little to nothing to do with the content targeted by the Online Streaming Act. This in an effort to make up the difference from all their losses suffered from the badly thought out Online News Act.
For them, they are holding Canadian audiences at ransom. If you want to do business in Canada, be prepared to pay huge sums of money to the mainstream media and the cultural elite or be barred from showing your content to Canadian audiences. How much are these ransom payments? Thanks to a CRTC decision late last month, that works out to about 5% of all revenues. A steep price for an industry that operates on wafer thin margins to say the least.
There’s just one really big problem with this whole scheme. Are companies really going to pay the ransom payments or are they simply going to forgo bringing their product to an audience roughly the size of California’s population? Well, there’s increasing evidence that they aren’t. Last year, we reported that online streamers have collectively lost an estimated $5 billion. In response to the Online Streaming Act, Disney has already pulled investment money out of Canada. More recently, Netflix followed suit by pulling tens of millions in sponsorship program support in Canada. Other platforms have openly contemplated leaving Canada altogether. The music industry has basically resorted to begging the CRTC not to follow through with their plans as they face a nightmare scenario of online services quickly becoming financially unviable overnight.
As a result, it is increasingly looking like numerous streamers are looking at the very real possibility of just pulling up stakes and leaving Canada altogether. All their investment dollars, of course, are going to leave with them. For those that do stay, however, it’s looking like they are going to be passing their costs onto consumers, worsening the affordability crisis in Canada in the process. Once the Online Streaming Act takes effect, you might see an added 5% tax added to your subscription service as platforms pass the costs of operating in Canada onto consumers. In short, it’s looking like the predictable disaster that unfolded with the Online News Act is going to predictably happen with the Online Streaming Act.
For those who want even more evidence that this is going to happen, well, we recently stumbled across that evidence. Yesterday, there were reports that Disney is currently in the process of issuing massive layoff notices. From Forbes:
As if Hollywood needed any more reminders why the mantra “Stay Alive Until 2025” is going to be difficult for many industry workers, Disney embarked this week on another 300 layoffs, on top of thousands of other reductions there and across the industry.
This set of layoffs in the Burbank, Calif.-based Disney largely hit corporate workers in divisions such as legal, human resources, finance and communications, Deadline reported. All told, CEO Bob Iger has targeted 8,000 jobs for elimination. Some 4,000 of those cuts landed in April of last year, but more keep coming.
In May, Disney’s Pixar laid off 175 workers amid a sustained box-office slump for the animation unit’s films. Even the subsequent record-setting performance of Inside Out 2 this summer wasn’t enough to fend off the Mouse House reaper.
If that weren’t enough, Paramount was also laying off staff in droves. From Deadline:
Paramount Global has initiated the next phase of its plan to lay off 15% of its U.S. workforce, saying the cuts will be 90% complete after further cutbacks today.
George Cheeks, Chris McCarthy and Brian Robbins conveyed the news to staffers in a memo this morning. (Read it in full below.) The Co-CEOs months ago said they were aiming to achieve $500 million in annual cost savings, with layoffs a key component in hitting that target.
Sources have indicated to Deadline in recent days that the streaming organization within Paramount, encompassing several departments, is expected to be the most directly affected by Phase 2. The company’s advertising division was targeted by a number of cuts last week. Over the course of the year, a number of high-profile execs have left the company and Paramount Television has shut down, with its shows moving to CBS Studios.
“Like the entire Media industry, we are working to accelerate streaming profitability while at the same time adjusting to the evolving landscape in our traditional businesses. In order to set Paramount up for continued success, we are taking these actions,” the memo said. “Days like today are never easy. It is difficult to say goodbye to valued colleagues, and to those departing, we are incredibly grateful for your countless contributions.”
This is the well that the cultural elite were hoping to draw money from here in Canada. For years, lobbyists pushing the ill-advised Online Streaming Act have insisted that streamers like the above mentioned Disney and Paramount are just making money hand over fist. As a result, they believe that it’s time that they hand some of those profits over to them because, in their infinite wisdom and self-entitlement, they are more deserving of that money because… reasons.
The problem, however, is that with the layoffs and losses experienced by many of these allegedly wealthy operations, the chances are quite high that they’d rather just leave Canada altogether. That would leave Canadian’s with fewer choices and either resorting to using something like a VPN or just doing without altogether. The knock-on effect is, at best, that the money the parasitic corporations hope to get out of this will be substantially less than expected. Everyone in question loses in the end.
Afterwards, people like us will find ourselves saying, yet again, that we warned the greedy corporations about the consequences of these actions, but those corporations refused to listen. As a result, the predictable consequences will come to fruition and those companies will either issue a new wave of denial or try and sweep this whole sorry affair under the rug, hoping no one notices their second abysmal failure.
