Canada will tax online streaming companies to fund local broadcasters

The Canadian Way: Big players in the streaming market are making billions in revenue, forcing users to endure an endless cycle of price increases worldwide. Canadian authorities have decided to turn a small portion of this largely unregulated business into a funding opportunity for local productions.

The Canadian Radio-television and Telecommunications Commission (CRTC) is imposing a new tax on online streaming services, requiring Netflix, Amazon, and other major companies to contribute five percent of their Canadian revenue to the local broadcasting system. This tax is part of the recently approved Online Streaming Act (OSA), designed to modernize Canada’s broadcasting framework.

The five percent fee will take effect in September and is expected to generate an estimated $200 million annually. Both video and music streaming services will be required to pay the new tax, although companies making less than $25 million per year are exempt. Other online services, such as audiobooks, podcasts, video games, and user-generated content networks, will be excluded, meaning that YouTube won’t have to pay.

The estimated $200 million collected annually will be directed to “areas of immediate need” within Canada’s broadcasting system, the CRTC said. These areas include local news, radio, and television stations, French-language content, indigenous content, officially recognized minorities, and more. The CRTC is expected to provide “some flexibility” to streaming companies interested in directly funding and supporting Canada’s TV productions.

The Canadian regulatory agency for broadcasting and telecommunication industries highlights the open approach followed with the OSA, which was approved after receiving more than 360 “detailed submissions” and following a three-week public hearing with over 120 groups. The five percent tax on Canadian-based revenues of streaming companies was based on those public records, the CRTC said.

While Canadian regulators are welcoming the new fee, trade organizations representing the streaming industry are not pleased. The Motion Picture Association, whose members include Disney and Netflix, stated that the OSA and the five percent tax are part of a “discriminatory,” decades-old regulatory approach designed around cable companies.

Global streamers will have a harder time establishing direct partnerships with Canadian creatives now, the MPA said, arguing that the CRTC did not properly account for the “significant contributions” streaming corporations are already making to Canada’s content industry. The Digital Media Association, representing music streaming companies, also described the new tax as a discriminatory approach and a blatant protectionist attempt to secure free subsidies for Canadian radio stations.