Canadian Heritage (PCH) projects that contributions by online broadcasters to Canadian content and creators could reach $830 million annually by 2023.
This $830 million estimate assumes that the Canadian Radio-television and Telecommunications Commission (CRTC) would impose requirements on online broadcasters similar to those currently imposed on conventional broadcasters and is based on PCH's estimates of online broadcasters' revenues.
This figure is an illustrative estimate, not a target or a guaranteed amount.
Concretely, the $830M estimate was developed by:
Identifying the cohort of services that would likely be regulated by the CRTC
For each service, estimating their revenues for 2019 and projecting their revenues for 2023
For each service, applying an estimated contribution rate to the 2023 projected revenue amount
Ultimately, the CRTC will decide which services will contribute as well as the appropriate contribution rate. Any estimate must therefore be based on assumptions. Because of this uncertainty, PCH prepared multiple scenarios, each with different sets of assumptions about what services would contribute, and at what rate. The average contribution across these scenarios was $830 million.
Cohort of services
Only broadcasting undertakings of significant size were considered in the development of the estimate. This is consistent with Bill C-10, which indicates that the CRTC should avoid imposing obligations on any class of broadcasting undertakings if that imposition will not contribute in a material manner to the implementation of the broadcasting policy.
While a strict threshold was not applied, none of the scenarios that were examined included services with a subscriber base below 100,000.
Using 2019 as the baseline year, the Department estimated total online revenues that could potentially fall under the scope of the Broadcasting Act to be $2.68 billion. It was then estimated that total growth in online revenues would be 26 percent between 2019 and 2020. This growth rate was based on two key factors, on which we had data to base our estimates:
New services: Both Disney Plus and Apple TV launched in Canada towards the end of 2019. In 2020, both appear to have generated significant subscriber bases, without a notable decline in the subscriber bases of their competitors, leading to an overall increase in revenue.
Continuing growth in subscribers: Established services appear to have continued to have significant growth in their subscribers in 2020. Many have speculated that the relative lack of available leisure activities during COVID-19 has led people to increasingly turn to streaming services.
Based on this estimation, growth rates are projected to taper off after 2020. Annual percentage growth in total online broadcasting revenues were projected to be the following: 9 percent (2021); 8 percent (2022); 6 percent (2023).
We expect online players will be contributing before 2023, so figures for 2023 will represent a full year of contributions.
Four possible contribution rates were considered:
30% of revenues
requirement to spend on Canadian content, currently used for television broadcasters
5% of revenues
levy paid to an independent fund, currently used for cable/satellite companies
0.5% of revenues
levy paid to an independent fund, currently used for radio stations
0% of revenues
for services that will not be subject to any contributions under the Broadcasting Act
For some services, the parallels to traditional services are clear. For example, services like Netflix and Club Illico are in the business of commissioning and programming content, similar to television broadcasters. These types of services were assumed to contribute through a 30% spending quota in all scenarios.
However, for other services, the parallels between online and traditional business models are less clear. For example, it is unclear which of the contribution rates is best suited to online music services (e.g. Spotify). There are parallels to radio stations, which also broadcast music and audio content. However, unlike radio stations, content quotas are unlikely to be effective tools for requiring music streaming services to support Canadian content. Furthermore, music streaming services are far more concentrated than the radio sector, giving them more of a “gatekeeper” role between rights holders and audiences. As such, music streaming services were assumed to contribute at 0.5% in some scenarios, and at 5% in other scenarios.
16 scenarios with different assumptions were developed, producing results ranging from $760 million on the low end to $900 million on the high end.
The average, $830 million, appears to be a good central estimate. Half of the scenarios are above $830 million, half are below it.
On average – across the scenarios that were examined – the estimated contributions break down as follows:
$783 million in spending on Canadian content (application of 30% rate)
$29 million in levies from audiovisual services (application of 5% rate)
$18 million in levies from audio/music services (application of 0.5% rate and 5% rate, for different scenarios)