Canadian academic George Grant published his famous Lament for a Nation in 1965, decrying the death of Canada’s functional sovereignty in the face of American cultural and economic influence. Ever since, the prominence of foreign (specifically American) pop culture and political narratives has arguably only increased. In response to these pressures, the Canadian government formed the Department of Canadian Heritage in 1993, mandated with “fostering and promoting Canadian identity and values, cultural development, and heritage.” The majority of the Canadian Heritage Department’s work is relatively uncontentious and mundane, such as the funding of museums and the organization that provides grants for amateur and professional sports. However, certain activities administered by Canadian Heritage are incredibly controversial, and the process of bringing Canadian Heritage into the digital age has not been without roadblocks.
On the ground, the work of Canadian Heritage often manifests as Canadian content requirements for private companies, administered by its sub-department, the Canadian Radio-Television and Telecommunications Commission (CRTC). Canadian content requirements force radio and television broadcasters to dedicate a certain amount of space and funding for Canadian programming. In radio broadcasting, for example, that amount is 10 per cent. Canadian content requirements are controversial because of how they cut into the profit margins of businesses.
In 1999, the CRTC, likely expecting that internet broadcasting would remain a marginal format, announced an exemption (referred to as the digital exemption) for all internet-delivered content. The exemption declared that the internet could not be declared a broadcaster, and would therefore not be subject to Canadian content requirements, nor would foreign services such as Netflix be forced to collect and pay sales tax on their subscriptions to fund Canadian Heritage. In the years since, internet-based streaming broadcasters have massively expanded into the Canadian market, displacing the market share of incumbent media companies.
Now Canadian politicians have a tough challenge ahead of them: how can Canadian content requirements be reformed to work in the 21st century? The simple solution, supported by many advocates, is to rescind the digital exemption, forcing streaming services to compete with Canadian media companies under the same rules as radio and television. However, this option carries the risk of foreign streaming services deeming the regulatory barriers to entering the Canadian market too high. Canada will always be a small market compared to the United States; in Canada (excluding Quebec), the ten most-viewed shows in 2016 were American. The marginal incentive to create Canadian content, in a less competitive market for Canadian actors and producers, may not be enough for billion-dollar companies. This may also have the effect of making Canada a profitable market for only the largest services like Netflix (albeit with higher prices), and not for its smaller competitors, increasing Canadian reliance on large American streaming services.
Rescinding the digital exemption may also not be enough. The on-the-ground reality of the Canadian media market has fundamentally changed since 1999. The streaming firms that functionally (if not legally) act as broadcasters have become transnational, and invested billions into their own original content, which is associated with no particular country’s regulatory regime. Nearly half of young Canadians have cut the cord on their cable TV subscriptions. It could be that Canada must abandon heavy-handed Canadian content requirements in favour of gentler subsidies and government funding for Canadian actors to pursue their careers.
For the governing Liberals, large reforms could be politically risky. They can choose to increase regulations on digital media, which could cause Canadian consumers to suffer, or continue to allow non-Canadian media companies to profit from the digital exemption, with the potential of foreign broadcasters outcompeting Canadian media companies. Possibly due to the many different stakeholders and risks involved, the political consensus seems to be targeted towards incremental reform, rather than abandonment of the Canadian content system; and this could be for good reason.
Under former Canadian Heritage minister Mélanie Joly, and current minister Steven Guilbeault, the Department has launched a review of the CRTC act and Canadian Heritage’s general mandate. In October 2020, the Liberals released their plan to reform and modernize the Broadcasting Act. Immediately, critics warned that the proposed changes, which remove a formal reference to Canadian control over media and mandate some non-tax rules for foreign providers, will open loopholes for foreign broadcasters to enter the unregulated market via the digital exemption and outcompete Canadian media. Nonetheless, the Liberals’ reforms aim to create a common regulatory regime by acknowledging and mandating the presence of foreign streaming services as a part of the Canadian market, despite not yet creating a “Netflix tax.”
The instrumental case for Canadian content protections may be persuasive; the arts and culture industry creates many jobs, and helps to highlight Canada’s varied cultural identities. While it remains to be seen what direction reforms at Canadian Heritage may go, Canada has never been and never will be a cultural island. Foreign influence will persist, and the Canadian government will be forced to adapt in a way that protects consumers, broadcasters, and the arts and culture community.
Edited by Ryan Brown
The opinions expressed in this article are solely those of the author and they do not reflect the position of the McGill Journal of Political Studies or the Political Science Students’ Association.