Last week, with trade negotiations with the U.S. as a backdrop, the federal government announced it would roll back the chief function of the 2023 Online Streaming Act: the requirement that streaming companies finance the production of Canadian content. By doing so, the federal government has capitulated to U.S. pressure and gutted the cultural exemption in Canada’s trade and investment agreements.
Most of Canada’s trade agreements have so-called “cultural exemption” clauses. The reasoning is simple: given the dominance of U.S. and other foreign cultural works, Canada must have policies and programs to encourage the creation, production and distribution of Canadian stories, music, arts and culture, even if those policies run counter to the principles of absolute free trade.
Canada’s policies are not exclusionary: Canadians continue to enjoy cultural expressions from everywhere. But we must ensure that, in the plethora of cultural production, high-quality Canadian choices are available, in every genre. As some of our existing policies would otherwise be contrary to trade obligations—particularly the so-called “most-favoured nation” provisions, which mandate equal treatment of goods regardless of their country of origin. Canada has fought to secure and maintain a cultural exemption in virtually every trade and investment agreement.
On June 3, the government issued a policy direction to the Canadian Radio-television and Telecommunications Commission (CRTC), the body which regulates broadcasting and telecommunications in Canada. The government ordered the CRTC to remove its pending requirement for streaming services (primarily U.S.) to contribute between five and 15 per cent of their Canadian revenues to Canadian content. While the CRTC is an arms-length agency, it is likely to comply with the policy direction. Concurrently, the government announced it would provide $600 million annually to support Canadian music and audiovisual productions, including Indigenous, French, and equity-deserving communities. The government argues the funding support is essentially equivalent to the levy on steaming services.
There are major problems with the new government approach.
Structural cultural policy measures are durable, and they are protected by cultural exemptions in agreements like the Canada-U.S.-Mexico Agreement (CUSMA). Examples include content quotas, priority placement, and spending requirements on key players, including broadcasters, cable companies and others. While direct subsidy of domestic producers is permitted under trade and investment agreements, government grants are notoriously fickle, and subject to political whim. Next year’s budget will certainly have different priorities.
It is ludicrous for the government to contend that streamers will simply increase the subscription fees of Canadian viewers in response to the CRTC requirement. First, it is a competitive field. Second, several European countries and others have similar measures. Third, streamers currently produce, acquire and show high-quality works that attract global audiences, and they must continue to do so. The CRTC requirement would simply ensure a small share of their Canadian revenues would be devoted to Canadian content, a small fraction of their inventory. It is estimated Netflix is spending $20 billion annually on content.
This is a difficult time for Canada’s recorded media industries. According to the Canadian Media Producers Association’s Profile 2025 report, Canadian film and television content production declined by 2.2 percent, a second consecutive year of decline. The Canadian Association of Broadcasters, for their part, commissioned the Broadcasting in Canada 2025 report, which found that the dominance of streaming services has caused a structural crisis in the Canadian broadcasting industry. Streaming services now dominate advertising revenues. In the past few years, total internet-based advertising in Canada rose from $0.56 billion to $17.7 billion, while broadcaster advertising revenues fell from $3.0 billion to $2.6 billion.
As a consequence of these challenges, the CRTC also adjusted the regulatory framework for traditional broadcasters and lowered their obligations. Traditional broadcasters making more than $25 million annually will contribute 25 per cent of their annual revenues to support Canadian content. This is down from current requirements ranging from 30-45 percent, but still higher than the CRTC requirement for foreign streaming servicers. Broadcasters making less than $25 million will be exempt from these contributions, the same threshold applies to streamers.
The Canadian recorded media industry (music, television, radio, theatres and online) is struggling in this age of streamers and AI. The government’s June 3 decision will hasten its demise.
