{"id":134,"date":"2021-03-01T21:10:06","date_gmt":"2021-03-02T02:10:06","guid":{"rendered":"https:\/\/pressbooks.library.ryerson.ca\/mediaucracy\/?post_type=chapter&p=134"},"modified":"2022-10-22T11:35:54","modified_gmt":"2022-10-22T15:35:54","slug":"chapter-5-20th-century-brilliant-innovation","status":"publish","type":"chapter","link":"https:\/\/pressbooks.library.torontomu.ca\/mediaucracy\/chapter\/chapter-5-20th-century-brilliant-innovation\/","title":{"raw":"CHAPTER 5: 20TH CENTURY\/BRILLIANT INNOVATION","rendered":"CHAPTER 5: 20TH CENTURY\/BRILLIANT INNOVATION"},"content":{"raw":"
\r\n

CHAPTER 5<\/span><\/h2>\r\n

BRILLIANT INNOVATION<\/span><\/h2>\r\n<\/div>\r\n
\r\n

\u201cWhat constitutes merit is contextual to the particular country and will vary greatly. Americans worry about sex more than the French. Swedes fret about violence. Germans are sensitive about racist incitement. \u2026 Each country has its concerns, problems, issues, traditions, priorities. Canada is concerned about a weakening of its national identity. Whether these concerns are justified, or in their own public\u2019s interest, is not the main question. What is important is that governments act<\/span> on<\/span> them. The main purpose of television regulation is to advance such goals.\u201d<\/span><\/i>132<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

How did Canada arrive at the present policy moment? For nearly five decades, a majority of TV public funds have been spent on high-budget, scripted TV, the genre that is the financial driver of the global TV industry. The question remains: Why has Canadian TV not achieved financial sustainability? The short answer is that financial sustainability was never the goal. Industry and government collaborated more than 50 years ago with a goal to build two infant TV sectors: broadcasting and production. They succeeded brilliantly. <\/span><\/p>\r\n

While the impact of digital shift is largely a case of unintended consequences, the Canadian government has not been without foresight regarding the framework\u2019s vulnerability to disruption. In 1986, a federal broadcasting commission worried about the impact of cable technology and posed a prescient question:<\/span><\/p>\r\n\r\n

\r\n

\u201cWill technology be the ultimate de-regulator?\u201d<\/i>133<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

Fears about cable did not materialize, rather the opposite. Cable technology facilitated a policy innovation, namely simultaneous substitution, that literally built both the broadcasting and production sectors. More than fifteen years later, in 2003, with the framework expanded, another report predicted a policy fail: <\/span><\/p>\r\n\r\n

\r\n

\u201c[The Committee] is very worried that the existing programming model\u2014which has become overly reliant on cross-subsidization of Canadian revenues through revenues generated by American programming\u2014will eventually collapse.\u201d<\/i>134<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

Another decade passed. Nearly thirty-years after the first warning, technology did become the ultimate de-regulator, not just of Canadian TV, but throughout the world. While creative destruction was thrilling elsewhere, digital disruption threatened the Canadian framework\u2019s three financial pillars: territorial market monetization, linear broadcasting and cable delivery. The industry panicked: Where would their money come from? The purpose of this chapter is to examine the history of Canadian electronic media policy because understanding the chronology is essential to future-proofing the framework for the global, online era. <\/span><\/p>\r\n

All paths to decoding the history of Canadian TV lead towards a single prevailing assumption, whether true or not: neither the broadcasting or production sector would exist without cultural policy and protective regulation. Exactly what<\/em> is being protected (Canadian culture) has always been somewhat vague. However, from whom<\/em> Canada is being protected has always been clear: the U.S.\u00a0 All Canadian TV policy has been a response to the position that U.S. electronic media is a threat to the economics of Canada\u2019s electronic media industry and more fundamentally, to the nation\u2019s cultural sovereignty. This double threat has long rationalized the need for policy intervention to protect Canada. So it is not possible to understand Canadian media policy without delving into the relationship between Canada and the U.S. Many books have been devoted to this,135<\/sup> but it can be essentialized to one sentence. A paradoxical, love\/hate relationship with the U.S. is embedded in every policy since the beginning of electronic media nearly a hundred years ago. <\/span><\/p>\r\n

This observation is deepened with the understanding that Canadians have a tolerance, even a comfort, with irresolvable paradoxes.136<\/sup> This is visible in the quixotic Canada-U.S. relationship. On the surface, the two countries\u2019 similarities and alliances are numerous. The neighbors share similar forms of democratic governance and the planet\u2019s longest undefended border of 8,891 kilometres. They trade more than a billion dollars a day. The U.S. is the destination of 75% of Canada\u2019s exports, and is, by far, Canada\u2019s largest trading partner. English is the most common language in both countries, spoken by 75-80% of both populations. Most significantly for this book, Canadian and U.S. audiences share very similar tastes in entertainment. Yet, for Canadians, there is an undertow. Canadian literary theorist, Northrop Frye, pinpointed the Canadian weltanschauung <\/i>as a north-south conundrum. He wrote that gazing north, Canadians see vast emptiness. When facing south\u2026<\/span><\/p>\r\n\r\n

\r\n

\u201cA Canadian becomes either hypnotized or repelled by the United States; either he thinks up reasons for being different and somehow superior to Americans or he accepts being swallowed up by the United States as inevitable.\u201d137<\/sup><\/i><\/span><\/p>\r\n<\/blockquote>\r\n

Over time, Canada\u2019s cultural vulnerability to the U.S. became paired with its national identity. Well before the online era, it was observed that separating these two concepts would be essential for Canada to compete in a global ecosystem: <\/span><\/p>\r\n\r\n

\r\n

\u201cFederal bureaucrats need to come to terms with the fact that... industry growth does not equate with opportunities for national discourse. \u2026 [Until these concepts are decoupled] citizens will continue to be bound to a paradigm of Canadianization at odds with their best interests.\u201d<\/i>138<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

An outcome of this worldview has been TV policy that reflects Canada\u2019s obsession with its national identity. The chronology of Canadian electronic media policy can be seen as a sequence of choices in response to the perceived threat of U.S. dominance. This quote bears repeating:<\/span><\/p>\r\n\r\n

\r\n

\u201cCanada is concerned about a weakening of its national identity. Whether these concerns are justified, or in their own public\u2019s interest, is not the main question...\u00a0 The main purpose of television regulation is to advance such goals.\u201d<\/i>139<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

1929: Aird Commission\/Seeds sown<\/span><\/h1>\r\n

Canada\u2019s first federal commission on electronic media concerned radio. Known as the Aird Commission, per Chairperson Sir John Aird, it set the stage for a century of policy to come. Both the approach and findings of the 1929 Royal Commission on Radio Broadcasting<\/i> turned on the perception that U.S. radio threatened the economics of Canadian radio and the country\u2019s cultural sovereignty. Back then, it was already clear that English-speaking Canadian and U.S. audiences had similar media preferences. A fledgling radio station, CNR Radio (run by Canadian National Railways) had acquired some popular U.S. radio shows like Bob Hope<\/i> and Jack Benny <\/i>to maintain an audience.140<\/sup> This consumption pattern worried the government and led, in December 1928, to Prime Minister William Lyon Mackenzie King appointing banker Sir John Aird to lead an inquiry into the new radio business. Commissioners travelled across Canada, Europe and the U.S. where they received 164 oral presentations and 124 written submissions; and thus established a pattern of Canadian media inquiry, a component of the mediaucracy still used today. <\/span><\/p>\r\n

The Aird report is notable not only for its brevity. At 14 pages, it is teensy by the standards of policy tomes in subsequent decades that would evolve to hundreds, even a thousand pages. Most notable is that the Aird report evidences a dichotomous response to the U.S. Despite the popularity of U.S. radio with Canadian audiences, the commission did not regard the U.S. as an advisable model for radio broadcasting. As the document is not readily available to the reader, enclosed are a few screenshots. Notably, the paragraph on page 4 about \u201cmethods in other countries\u201d does not mention the U.S. Perhaps the strongest indication of its perspective is in the Appendix, which details 26 countries studied by the Commission. It features detailed descriptions of how broadcasting works in countries such as Estonia, Finland, Sweden, Switzerland, Turkey, the United Kingdom, and the Union of South Africa. The U.S. blurb is shortest of all, just two lines about an industry that had already captured the attention of Canadian audiences: <\/span><\/p>\r\n\r\n

\r\n

\u201cUnited States of America: Broadcasting in the United States is carried on by private enterprise under licence of the Federal Radio Commission. There are 604 stations licensed. There is no licence fee for listeners.\u201d<\/i>141<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n\r\n\r\n\r\n\r\n
\"Figure<\/a><\/a><\/td>\r\n\"Figure<\/a><\/td>\r\n<\/tr>\r\n
Source: Royal Commission on radio broadcasting (Aird Commission), 1929 143<\/sup><\/em><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n

In hindsight, the Aird recommendations inaugurate the policy practice of selling industrial strategies to the Canadian public via rhetoric of cultural protection:<\/span><\/p>\r\n\r\n

\r\n

\u201cThere has, however, been unanimity on one fundamental question \u2014 Canadian radio listeners want Canadian broadcasting,... the majority of programs heard are from sources outside Canada\u2026 broadcasting will undoubtedly become a great force in fostering a national spirit.\u201d144<\/sup><\/i><\/span><\/p>\r\n<\/blockquote>\r\n

The Aird Commission recommended launching a national broadcasting system and this recommendation was taken up. In 1932, the Canadian Radio Broadcasting Commission (CRBC) was established, in 1936 becoming the Canadian Broadcasting Corporation (CBC). By then, it was CBC radio broadcasting Jack Benny<\/i>\u00a0in order to capture an audience.<\/span><\/p>\r\n

While radio thrived, TV was coming soon. In the U.S., TV\u2019s breakthrough year was 1939, the same year that Gone with the Wind<\/i> and The Wizard of Oz<\/i> were theatrical hits. TV sets were demonstrated at the 1939 New York World\u2019s Fair and President Roosevelt\u2019s opening speech was broadcast. NBC broadcast its first baseball game, played between the Cincinnati Reds and the Brooklyn Dodgers. By 1950, there were more than 10 million TVs in the U.S.145<\/sup> Compared to the explosive start of the U.S. industry, the Canadian TV startup was modest. TV technology was demonstrated at the 1939 Canadian National Exhibition in the same year of the U.S. debut. Yet, the first Canadian broadcast did not come till nearly a decade later with one received \u2014 rather than sent \u2014 in Windsor from a Detroit station.146<\/sup><\/span><\/p>\r\n\r\n

1951: Massey Commission\/Invasion metaphor<\/span><\/h1>\r\n

Canada\u2019s most famous broadcasting inquiry kicked off in 1949, at the dawn of the Canadian TV era. Similar to the Aird Commission, The Royal Commission on National Development in the Arts, Letters, and Sciences<\/i> became known by the name of its Chair, Vincent Massey. By 1949, TV was already a wildly embraced and profitable entertainment innovation in the U.S. There were TV hits in similar genres as today. Top ten shows included The Lone Ranger <\/i>(drama), You Bet Your Life<\/i> (reality\/game), and Arthur Godfrey\u2019s Talent Scouts<\/i> (talent search). The iconic hit, I Love Lucy<\/i> (sitcom), debuted a few months before the Massey report was tabled in 1951 and on average, attracted more than half the audience.147<\/sup> Perhaps most significantly, hit shows spectacularly monetized TV advertising, a new sector that had begun with a 10-second Bulova watch commercial that delivered a $7.00 profit.148<\/sup><\/span><\/p>\r\n

The Massey report, in its process and results, cemented the idea of Canadian victimization by U.S. media. The lead-up included 114 public hearings across Canada. Twelve hundred witnesses testified. Additionally, there were 462 formal submissions and hundreds of letters from Canadian citizens. However, history may have obscured a few salient details. A nuance centres on the Chair, Vincent Massey. Known to be a passionate anglophile, he was the older and reportedly less handsome brother of actor Raymond Massey who had emigrated to Hollywood and had been nominated for an Academy Award as Best Actor for his starring role in the very American movie, Abe Lincoln in Illinois <\/i>(1940). Is it plausible to wonder: Did sibling rivalry play a role in the findings of the Massey Commission? <\/span><\/p>\r\n

Similar to the Aird report, Massey\u2019s comparative studies of other countries had a defensive, dismissive tone. Notes by the Saskatchewan commissioner state the following:<\/span><\/p>\r\n\r\n

\r\n

\u201cWhile in New York, Neatby [Commissioner who examined the U.S.] talked informally with television viewers and an actor from Canada who worked in television, watched fifteen hours of television herself, an experience she described as personally \u2018an unrewarding occupation\u2019\u201d<\/i>149<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

Despite Neatby's claim, arguably, TV was not unrewarding for audiences seeking entertainment or for the exploding economics of the TV industry that turned on one factor: popularity. The hit variety series, The Texaco Star Theatre<\/i>, was watched by more than 62% of homes owning TV\u2019s. This program alone is said to have increased the number of U.S. TVs nearly 11,000% during its run from 1948-1956.150<\/sup><\/span><\/p>\r\n

During the November 1949 Massey Commission hearings in Western Canada, there was a pivotal policy moment. An executive from the fledgling CTV network, Kent Cooke, made an impassioned pitch for open competition with, rather than protection from, the U.S. as the way to strengthen Canadian media:<\/span><\/p>\r\n\r\n

\r\n

\u201cAn American is basically the same as a Canadian\u2014motivated by the same impulses, exposed to the same influences of literature, music, the theatre, movies and radio... By \u2018non-Canadian material,\u2019 the CBC is obviously referring to American material. In the first place, what is wrong with American material? If we are ever to have a Canadian culture, it will come as a result of exposure to what is undoubtedly the fastest rising culture in the world today\u2014that of the U.S.A.\u201d<\/i>151<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

Reportedly, Cooke was admonished by the Chair for his remarks. When the Massey Commission tabled its report of more than 500 pages on June 1, 1951, it was clear that Cooke\u2019s pleas had fallen on deaf ears. A fork in Canada\u2019s TV policy road had been taken. The Massey prose was consistent with the tone established by the Aird report twenty years earlier, yet more powerful and effective. The Massey prose demonizes U.S. TV, describing it as emanating from \u201can alien source.\u201d152<\/sup> It criticizes the U.S. industry that had already produced talents like Carl Reiner, Mel Brooks, and Lucille Ball. The Ed Sullivan Show<\/i> (CBS and CTV, 1948-1971) would soon welcome Canadians Wayne and Shuster for their first 58 appearances,153<\/sup> all of which were broadcast by CTV. Yet, here is Massey:\u00a0<\/span><\/p>\r\n\r\n

\r\n

\u201cTelevision in the United States is essentially a commercial enterprise, an advertising industry. Thus sponsors, endeavouring to give the majority of people what they want, frequently choose programmes of inferior cultural standards.\u201d<\/i>154<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

The report\u2019s most famous line concerns the American \u201cinvasion.\u201d In Chapter II, \u201cThe Forces of Geography,\u201d it makes a dagger-like turn on the hand already feeding Canadian TV and intones the once-uttered, never-forgotten, passive-aggressive invasion metaphor that belied the underlying love-hate for the U.S. (my bold):<\/span><\/p>\r\n\r\n

\r\n

\u201cWe are thus deeply indebted to American generosity... Many institutions in Canada\u2026 could not have been established or maintained without money provided from the United States\u2026 Every intelligent Canadian acknowledges his debt to the United St<\/i>ates for excellent films, radio programmes and periodicals but\u2026 the price may be excessive\u2026 the American invasion by film, radio, and periodical is formidable.\u201d155<\/sup><\/strong><\/em><\/span><\/p>\r\n<\/blockquote>\r\n

There was never an invasion. Canadian audiences embraced \"good stories, well told\" then, as they do today. Canadian Robert Fulford observed that Massey\u2019s prose gave permission, if not imperative, for Canadians to expect government support for a media industry via funding that would masquerade as cultural protection. Fulford called the report \u201cthe most important official document in the history of Canadian culture\u201d because it \u201cgot us going in the wrong direction.\u201d He critiqued its central argument:<\/span><\/p>\r\n\r\n

\r\n

\u201cThe nation should support the arts so the arts could support the nation\u2026 All nonsense. The argument needed something more, an outside enemy. Massey, whose sympathies lay entirely with English culture, knew where to direct negative attention\u2026 The U.S. emerged as a bad example and menace. Worse, they were monstrously popular\u2026 We were to support culture not for its own sake but to save us from Americanization. Since 1951, that idea has haunted the discussion of the arts in Canada\u2026 Making survival the focus hardly encourages a vibrant cultural atmosphere. It\u2019s a downer.\u201d<\/i>156<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

Seventy years later, Massey\u2019s influence could be felt in recommendations of the BTLR report of January 29, 2020, the final report of Canada\u2019s fourth federal inquiry on the impact of digital shift.\u00a0\u00a0<\/span><\/p>\r\n\r\n

1958: The Broadcasting Act<\/em>\/A supply-driven system<\/span><\/h1>\r\n

Reflecting the spirit of the Massey report, the government moved to protect Canadian TV. It established the first Canadian content quotas in 1959157<\/sup> and codified them in 1958 by updating the 1936 Broadcasting Act (The Act)<\/i>. The Act<\/i> deftly blended cultural and industrial goals; key sections are still preserved in the 1991 extant version. Fundamentally, Canadian broadcasting owes its existence to the ownership regulations set out in a direction issued under Section 26(1)(c),158<\/sup> which stipulates that Canadian broadcasters and cable companies must be majority Canadian owned.\u00a0<\/span><\/p>\r\n

Additional Canadian laws complement The Broadcasting Act<\/i>. The Telecommunications Act<\/i> dates back to 1919, when it was called The Railroad Act<\/i>, purposed to connect Canadians physically then retooled for electronic connectivity in 1993. A triumvirate of communication laws includes the 1921 Copyright Act, <\/i>revised in 2019.159<\/sup> <\/span><\/p>\r\n

In 1968, an arms-length agency to implement the tenets of The Broadcasting Act<\/i> (The Act<\/em>) was established. Originally known as the Canadian Radio-television Commission (CRC), today\u2019s Canadian Radio-television and Telecommunications Commission (CRTC) has about 500 employees and a 74M annual budget to preside over the broadcasting and telecommunications acts and related initiatives.160<\/sup> Federal oversight and funding organizations include the Canadian Audio-Visual Certification Office (CAVCO); Canada Media Fund (CMF); Telefilm Canada, and more. Interlocking provincial organizations comprise a complex mediaucracy to ensure that Canada has an economically viable broadcasting industry, knit together with the rhetorical goal to protect Canada\u2019s cultural sovereignty and especially to protect the nation from U.S. media. <\/span><\/p>\r\n

While Hollywood TV grew organically in response to audience demand, Canadian TV evolved in response to a legal obligation in The Act<\/i>\u2019s most quoted language, the Broadcasting Policy for Canada. The thrust of the key Section (3) in The Act<\/i> is to ensure a supply<\/i> of programming and jobs for Canadians, but it could not, of course, require that Canadians watch that programming. Policies were created to fulfill the requirements of The Act<\/i>, but these did not much concern the audience. Theoretically, such focus could have been an interpretation of clause (iii) that includes \u201cserve the needs and interests,\u201d but it wasn't to be. (Remediating this problematic outcome of regulatory policy could have been a key recommendation of the 2020 BTLR report, but it wasn\u2019t addressed.) The supply-driven thrust of regulatory policy became both a defining strength and a resistant weakness of Canadian TV.<\/span><\/p>\r\n\r\n

\r\n

Canada Broadcasting Act<\/em>, Section (3)<\/span><\/p>\r\n

\u201c(d) the Canadian broadcasting system should<\/span><\/p>\r\n

(i) serve to safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada,<\/span><\/p>\r\n

(ii) encourage the development of Canadian expression by providing a wide range of programming that reflects Canadian attitudes, opinions, ideas, values and artistic creativity, by displaying Canadian talent in entertainment programming and by offering information and analysis concerning Canada and other countries from a Canadian point of view,<\/span><\/p>\r\n

(iii) through its programming and the employment opportunities arising out of its operations, serve the needs and interests, and reflect the circumstances and aspirations, of Canadian men, women and children, including equal rights, the linguistic duality and multicultural and multiracial nature of Canadian society and the special place of aboriginal peoples within that society, and<\/span><\/p>\r\n

(iv) be readily adaptable to scientific and technological change;<\/span><\/p>\r\n

(e) each element of the Canadian broadcasting system shall contribute in an appropriate manner to the creation and presentation of Canadian programming;<\/span><\/p>\r\n

(f) each broadcasting undertaking shall make maximum use, and in no case less than predominant use, of Canadian creative and other resources in the creation and presentation of programming, unless the nature of the service provided by the undertaking, such as specialized content or format or the use of languages other than French and English, renders that use impracticable, in which case the undertaking shall make the greatest practicable use of those resources;<\/span><\/p>\r\n

(g) the programming originated by broadcasting undertakings should be of high standard;<\/span><\/p>\r\n

(h) all persons who are licensed to carry on broadcasting undertakings have a responsibility for the programs they broadcast;<\/span><\/p>\r\n

(i) the programming provided by the Canadian broadcasting system should<\/span><\/p>\r\n

(i) be varied and comprehensive, providing a balance of information, enlightenment and entertainment for men, women and children of all ages, interests and tastes,<\/span><\/p>\r\n

(ii) be drawn from local, regional, national and international sources,<\/span><\/p>\r\n

(iii) include educational and community programs,<\/span><\/p>\r\n

(iv) provide a reasonable opportunity for the public to be exposed to the expression of differing views on matters of public concern, and<\/span><\/p>\r\n

(v) include a significant contribution from the Canadian independent production sector\u2026\u201d161<\/sup><\/span><\/p>\r\n\r\n<\/div>\r\n \r\n

Numerous regulatory and policy instruments were established from 1959-1979 in order to achieve The Act<\/i>\u2019s requirements. Following from the requirement that a Canadian broadcaster must obtain and maintain a valid licence from the CRTC, an exhibition quota was imposed. Additional instruments to ensure a supply of Canadian TV included Canadian Production Expenditures (CPE), levies on the cable sector, and various public funds and tax incentives, all including the requirement for regular reporting to CRTC. A definition of what would become known as \u201cCanadian content\u201d was debated but remained informal. CRTC faced a more urgent question: How to finance a supply of Canadian programs?<\/strong> Two remarkable policy innovations made it happen: simultaneous substitution and the production point system.<\/span><\/p>\r\n\r\n

1970: Simultaneous substitution\/AmCon for CanCon <\/span><\/h1>\r\n

Throughout the 1950\u2019s and 1960\u2019s Canadians continued their love affair with Hollywood hits, turning rooftop antennas, called yaggis, southward to capture U.S. TV signals. This consumer practice made it nearly impossible for Canadian networks to attract audiences and consequently, advertisers. However, in 1969 Canadian broadcasting entrepreneurs figured how to take financial advantage of this pattern of audience consumption. They innovated an existing U.S. broadcasting instrument in response to their need for a business model. Its name is simultaneous substitution. <\/span><\/p>\r\n

The policy innovation process began when CRTC issued Decision 70-03 on April 10, 1970, which prohibited simultaneous substitution. This meant that Canadian stations could not <\/i>play a U.S. program at the same time it was airing on a U.S. border station. Canada was not (yet) a broadcasting market. CRTC\u2019s reasoning was that since U.S. advertisers had purchased rights to these shows, CRTC would ensure respect for those territorial advertising rights:<\/span><\/p>\r\n\r\n

\r\n

\u201cThe non-Canadian programs broadcast by Canadian broadcasting stations shall not be duplicated on a cable system simultaneously or during the week prior to and the week subsequent to the date of airing\u201d<\/i>162<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

Less than a year later, on February 26, 1971, CRTC acknowledged objections to the 1970 decision. More remarkably, in July 1971, the CRTC policy was completely reversed and simultaneous substitution was made obligatory<\/i>. Canadian cable distributors, called Broadcast Distribution Undertakings (BDUs), would thereafter be obliged to remove U.S. commercials from border stations when they were being watched by Canadians and substitute Canadian advertisements -- whenever the U.S. programs were broadcast simultaneously:<\/span><\/p>\r\n\r\n

\r\n

\u201cIn its first public announcement on cable television policy of May 13, 1969, the Commission accepted, for the time being, the long-standing Department of Transport policy that cable television systems should not alter the signals received from broadcasting stations. Since then, the Commission has carried out extensive studies, which demonstrate that the unaltered carriage of some of these signals disrupts the ability of Canadian television stations to fulfill their mandate. The Commission is concerned to restore the licensing logic of the Canadian broadcasting system, and to strengthen Canadian television service.\u201d<\/i>163<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

What happened? The invention of simultaneous substitution had begun in Hollywood at the May 1970 upfronts, the annual preview market for U.S. network shows, attended by all North American TV programming executives where, for decades they secured their Fall TV line-up to be sold to advertisers. The key point here is that Canada was not yet a TV market. Canadian broadcasters were having difficulty attracting audiences, much less advertisers, because Canadians were already in the habit of watching border stations that broadcast the Hollywood hits they wanted to watch. In a room at the confab, a group of CTV executives saw things differently. They saw gold in Canada\u2019s small population huddled close to a broadcasting powerhouse. Just as they had already invested in hardware, such as towers, to build their broadcasting business, they conceived an idea to spend on software for the same reason. The broadcasters proposed making the entire country of Canada into one TV market and paying for the rights to broadcast Hollywood hits in Canada, rather than just let them be captured by southward-facing yaggis. There\u2019s more. Canadian cable companies would still allow Canadians to tune to those border stations, but since the advertising rights would no longer cross the border, cable companies would replace the advertisements with Canadian ads. Then and there, a Canadian broadcasting model was born. It was then <\/span>and still is -- based on the exploitation of content popularity, specifically Hollywood hits. Its official name is simultaneous substitution. I call it AmCon for CanCon. <\/span><\/p>\r\n

This single policy innovation gave Canadian broadcasters a business model exactly per local U.S. broadcasters in the 210 U.S. TV geographic markets. Due to Canada\u2019s unique geography, whereby most of the population lives near a U.S. border station, simultaneous substitution increased the Canadian audience \u2014 and advertising revenue \u2014 by 30%. The new regulation allowed Canadian broadcasters to count the entire Canadian audience for a program, regardless of whether the consumer was tuned in to the Canadian station or a border station such as Buffalo, Rochester, or Seattle. It was a four-way win for broadcasters, advertisers, program rights holders, and Canadian audiences. It was non-controversial. Canadian broadcasters got an audience. Advertisers got a new territory to exploit. Program rights holders got paid for a new market. Canadian audiences got their favourite shows.\u00a0<\/span><\/p>\r\n

As in 1949, it was CTV who led the 1970 innovative thinking, but this time their idea prevailed. Here's how a CTV executive, who was in the room, recalled the invention of simultaneous substitution: <\/span><\/p>\r\n\r\n

\r\n

\u201cNo one is specifically named as the \u2018father of simultaneous substitution;\u2019 it was the environment of the day. We were down in Hollywood arranging the American buy. Pre-release had been the first step which broadcasters negotiated with the Americans. With changes in network schedules between May and September, we would find we had two programs from competing networks, scheduled at the same time. At first the Americans were terribly nervous about pre-release, until we were able to guarantee this would not interfere with any of their program rights in the U.S. Simultaneous substitution was the next step.\"\u00a0<\/i><\/span><\/p>\r\n<\/blockquote>\r\n

But there\u2019s still more. A fifth win turned out to be a game changing spin-off from simultaneous substitution.\u00a0 Some of the profits derived from the new regulation could be mandated by CRTC to cross-subsidize Canadian production in order to fulfill The Act\u2019<\/i>s legal requirements for a supply of Canadian TV. Financing problem solved! Thereafter -- and still today -- in return for the 30% revenue boost, Canadian broadcasters have been obligated, via conditions of licence, to spend 30% of revenues to commission original programming.165<\/sup> This payback became known as the regulatory bargain. <\/span><\/p>\r\n

Zooming ahead for a moment, today the regulatory bargain remains a key element in heated arguments over levelling the \u201cplaying field\u201d between linear broadcasters and online services. When linear broadcasters complain about their obligation to support Canadian content and insist that online services should contribute fairly to the system, they omit the regulatory bargain. Linear broadcasters\u2019 contribution to the system is net zero because they receive a 30% audience boost from a regulatory benefit, and then contribute that benefit. As I observed in my response to the 2020 BTLR report, online services receive no such benefit. Streamers get only the audiences they get: <\/span><\/p>\r\n\r\n

\r\n

\u201cThere also seems a conceptual error in recommendation #60, which suggests all media content undertakings that benefit from the Canadian media communications sector should contribute to it. Legacy broadcasters benefit from the regulatory bargain whereby a 30% audience boost from simultaneous substitution is granted in return for a 30% spend on Canadian content. This renders legacy contribution a net zero while brilliantly delivering cross-subsidization of Canadian content \u2013 thanks to the popularity of Hollywood hits. In comparison, OTTs compete for Canadian audiences with zero regulatory benefit.\u201d<\/i>166<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

Returning to the history, simultaneous substitution was further embedded into the policy framework with a 4+1 rule for consumer cable packages that oblige Canadian cable companies to include access to U.S. networks even in their lowest tier packages. This perhaps reflected two clauses in section 3 of The Act<\/i>: stipulating that programming \u201cserve the needs<\/i>\u201d of Canadians and \u201dbe drawn from local, regional, national and international sources.<\/i>\u201d The overall result has been to expand the four-way win of AmCon for CanCon to a five-way benefit including linear broadcasters, cable companies, advertisers, Canadian audiences, and the production community. Linear broadcasters get the audience boost from the simulcast of hits, which raises advertising rates. Canadian cable companies get the customers they need by offering Hollywood hits. Canadian advertisers get a new TV market. Canadian audiences get to watch the popular Hollywood hits they demand. The production community gets to share in the profits from Hollywood hits in order to help produce Canadian TV.\u00a0<\/span><\/p>\r\n

The importance of simultaneous substitution as a cross-subsidy instrument was reconfirmed in the 1976, l986, and l997 revisions of Canada\u2019s Broadcast Distribution Regulations.167<\/sup> Its financial bottom line was reaffirmed in 2015 by a study commissioned by the country\u2019s major broadcasters in preparation for Let\u2019s Talk TV<\/i>, Canada\u2019s first inquiry into the impact of digital disruption. This study estimated the boost was about 400 million dollars on revenue of 1.2 billion, still about 30%.168<\/sup><\/span><\/p>\r\n

In summary, a singular policy innovation gave rise to a national broadcasting sector, a TV advertising sector, and a TV production sector by exploiting a globally unique market quirk: Canada's proximity (culturally and geographically) to the U.S. To be clear, the power of simultaneous substitution is entirely due to geo-cultural proximity between Canada and the U.S. and the affection of audiences in both countries for the same TV. AmCon for CanCon underscores cultural theories regarding Canada\u2019s predilection for paradox because of the regulation\u2019s remarkable dissonance between rhetoric and regulation. <\/span><\/p>\r\n

Contrary to rhetoric<\/em> about saving Canada from<\/i> U.S. TV, Canadian TV regulation<\/em> depends on the enduring affection of Canadian audiences for<\/i> U.S. TV!<\/b><\/p>\r\n\r\n

1984: Point system\/A mediaucracy is greenlit<\/span><\/h1>\r\n

With the simultaneous substitution regulation in place to deliver the money for original Canadian production, there was still a missing piece to the puzzle of how to fulfill The Act\u2019<\/i>s requirements. Who would produce the programs? Canada\u2019s independent production sector was a fledgling community without the capacity to fill a content quota of 50% in a broadcast schedule. But a second policy innovation was coming; it would build a world-class workforce and as a consequence, a world-class production infrastructure. This would become the ten-point system. <\/span><\/p>\r\n

This policy innovation took a four year collaboration between industry and government, 1980-1984.169<\/sup> Charles Falzon led a number of those meetings in the role as founding president of CMPA (then Canadian Film and Television Producers Association\/CFTPA): <\/span><\/p>\r\n\r\n

\r\n

\u201cWe were pioneers... We knew even then the market would eventually be global and we needed a system that would make us competitive. I don\u2019t think back to those days as being protectionist. I think of them as the start of an export era based on talent. Seeds were planted for what would inevitably be a very competitive future. People don\u2019t remember that the point system was supposed to be flexible and nimble, giving Canadian talent an advantage while we catch up to the needs of a global milieu. Yes, it was about having Canadian content, but\u00a0 Canadian talent that would eventually be world class and competitive. Revising history, people think of it as about protecting Canadian culture. It was not. It was about ensuring as much money as possible stays in the Canadian system so content and talent could evolve. Content would rule. Culture would be a by-product of Canadian voices and perspectives.\u00a0 Competition would lead to better talent, which would lead to better content and so on.\"170<\/sup><\/span><\/i><\/span><\/p>\r\n<\/blockquote>\r\n

Consultations culminated in 1984 with the ten point system still in place today.\u00a0The point system brought functional precision to the term Canadian content. To qualify for funds, productions would be required to meet the CRTC definition.<\/span><\/p>\r\n\r\n

\r\n\r\nCanadian 10 point certification:\r\n

(a) Producer must be Canadian citizen or permanent resident; <\/span><\/p>\r\n

(b) A live action production must have minimum of 6 out of 10 points performed by Canadians, based on the key functions below with the condition that either director or screenwriter of each episode and 1 of 2 lead performers is Canadian:<\/span><\/p>\r\n

Director \u2013 2 points<\/span><\/p>\r\n

Screenwriter \u2013 2 points<\/span><\/p>\r\n

Lead Performer \u2013 1 point<\/span><\/p>\r\n

Second Lead Performer \u2013 1 point<\/span><\/p>\r\n

Production Designer \u2013 1 point<\/span><\/p>\r\n

Director of Photography \u2013 1 point<\/span><\/p>\r\n

Music Composer \u2013 1 point<\/span><\/p>\r\n

Picture Editor \u2013 1 point<\/span><\/p>\r\n

(c) At least 75% of all below the line costs, with certain exceptions must be paid to Canadians;<\/span><\/p>\r\n

(d) At least 75% of all post production\/laboratory costs must be paid for services provided in Canada by Canadians or Canadian controlled companies.171<\/sup><\/span><\/p>\r\n\r\n<\/div>\r\n \r\n

The 10 point model gave rise to three categories of Canadian content (10 point productions; co-productions; co-ventures) and one non-Canadian content category, called foreign or service productions. <\/span><\/p>\r\n

10 point productions<\/strong> are the only ones eligible for a \u201cC\u201d number from CRTC and the only category eligible for funding from CMF, the main funding organization. These TV series tend to be the high-budget shows that today utilize more than 60% of CMF funding. They are CMF\u2019s top performing English-language programs but have always lost money for broadcasters.<\/span><\/p>\r\n

Co-productions<\/strong> are treaty partnerships with more than 50 countries but not the U.S., which has no need to formally partner to finance TV. Co-production treaties set terms for international cooperation on TV and film projects to ensure regulatory requirements of both countries are met. For certification purposes, the Canadian portion qualifies as a 100% Canadian production and as such, for 10 point financing. As Falzon observed, co-productions were conceived as an instrument to focus the fledgling industry on the global market:<\/span><\/p>\r\n\r\n

\r\n

\u201cThe international co-production treaties basically were saying this: We have a Canadian cultural agenda but we can\u2019t afford to do it on our own\u2026 If we partner with other countries other than the U.S. that aren\u2019t going to suffocate us, maybe we can be part of more than one cultural agenda\u2026 Those really helped create international commerce big time.\u201d<\/i><\/span><\/p>\r\n<\/blockquote>\r\n

Co-ventures<\/strong>, so named in 1987, were popular during the 1980\u2019s and 1990\u2019s because they allowed Canadian producers to partner with non-treaty countries, by default the U.S.172<\/sup> The timing suggests their purpose was to loosen restrictions to encourage Canadian producers to partner with Hollywood. Co-ventures counted as official Canadian content for quota purposes, but due to a reduced requirement of only 6 points (of the 10), they received a different designation from CRTC, an SR rather than a C number. Co-ventures have become rare because Canadian producers have since learned how to structure high-budget series as 10 point productions when partnering with U.S. studios, a strategy that maximizes public funding.<\/span><\/p>\r\n

Service productions<\/strong> are the fourth category of long form TV.\u00a0 While they do not qualify as Canadian content, they do comprise nearly half of all Canadian film and TV production. This percentage is attributable to Canada\u2019s expert crews, North American location, generous, well-managed tax incentives, and additional Canadian advantages including an often discounted currency. Canada was a first mover in a controversial exodus from Hollywood during which these productions were known as runaways. Today, Canada wins production business over competitive destinations in North America such as Arizona, Florida, Michigan, and international locations. Service productions have continued to be a win for Canada even when the Canadian dollar has been stronger than the U.S. dollar, such as 2009-2014.173<\/sup> Moreover, production excellence incentivized Netflix to open their first studio outside of the U.S. in Canada in 2016 and to expand their investment, announced in September 2020. <\/span><\/p>\r\n

With key building blocks in place including the CRTC, simultaneous substitution and the production point system, a proliferation of supporting policy organizations and instruments followed. As a supply-driven bureaucracy strengthened, the market orientation of Canadian producers weakened. As recalled by Charles Falzon, entrepreneurial spirit gave way to dependence on the mediaucracy and its entitlements: <\/span><\/p>\r\n\r\n

\r\n

\u201cIn my opinion, investments by government started clouding the issue. Bureaucracy and policy overshadowed creativity and the passion to reach an audience. People were asking \u201cWhat does it mean to be Canadian?\u201d and \u201cWhat will get funding?\u201d rather than \u201cWhat works?\u201d and \u201cHow do I connect with the audience?\u201d What emerged was a bureaucratic agenda versus an audience agenda. Success was measured by \u201cCan you get something funded and can you get it produced?\u201d rather than audience satisfaction and commercial success.\u201d<\/i>174<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

The policy of broadcast exhibition quotas further entrenched a supply dynamic because delivery of productions became the priority, not market performance. By the early 1980\u2019s, 60% of the overall broadcast schedule was required to be Canadian and within that, 50% Canadian from 6 p.m. to midnight, called \u201cevening hours.\u201d 175<\/sup> The evening hour strategy allowed broadcasters to fulfill Canadian content requirements yet minimally impact conventional primetime (8-11 pm) when the Canadian lineup was almost entirely Hollywood hits and audiences and revenue were largest.176<\/sup><\/span><\/p>\r\n

There was an unforeseen but positive consequence of the evening hours policy designation, namely Canadian capacity in family drama. Canadian broadcasters adapted to the evening hours quotas by licencing live-action dramas for the prime-access 7-8pm time slot that was normally reserved for syndicating low-cost daytime shows. This strategy kept prime time clear for Hollywood hits and minimized the financial sacrifice associated with Canadian content. A 2019 study that I led suggests that the potential global audience for this evergreen genre may not be yet calculated. The YouTube channel, Encore+ rebroadcasts full episodes of Canadian content on the platform. These shows do well on YouTube\u2019s global platform. Long-running, award-winning series like DeGrassi Street<\/i> (CBC, 1979-1986 and CTV, 2001-2015) also launched the global careers of Canadian global celebrities, for example Drake. Shows such as Anne of Green Gables<\/i> (CBC, 1985); Ready or Not<\/i> (Global and Showtime, 1993-1997 and Disney, 1996-2000); My Secret Identity<\/i> (CTV, 1988-1991) got international attention for their representation of teenage life. Netflix did a spin-off of the Anne franchise, Anne with an E<\/i> (CBC and Netflix, 2017-2019). Fairly unique as a genre, this Canadian capacity was an unintentional positive consequence of the policy framework. <\/span><\/p>\r\n

Over the years, Canadian content requirements for broadcasters fluctuated between combinations of exhibition and expenditure quotas, but notably, not <\/i>direct audience quotas. One financial dynamic of the policy framework remained stable. This is that broadcasters paid inflated fees for Canadian content that were well above market value. For example, if they spent $50,000 per hour for a Hollywood hit, they might commit $150,000 per hour for Canadian content. The purpose was, and is, to fulfill CRTC requirements with a minimum of managerial oversight and achieve the broadcaster's corporate goal, which is renewal of their CRTC licence to continue their business model, which is broadcasting Hollywood hits. When Canadian shows inevitably lose money in the Canadian market, broadcasters write off the loss.<\/span><\/p>\r\n

International trade agreements were deployed to protect the policy framework. In 1988, the Free Trade Agreement (FTA) between Canada and the U.S. included a sovereign right to protect Canada\u2019s cultural industries, education, health care, and water.177<\/sup> On January 1, 1994, when FTA was superseded by North American Free Trade Agreement (NAFTA), the cultural exemptions were maintained and it was underscored that simultaneous substitution would not be construed as signal theft. In 2019\u2019s United States-Mexico-Canada-Agreement (USMCA), cultural exemptions were again preserved.178<\/sup><\/span><\/p>\r\n\r\n

1999: A landmark CRTC decision\/Trouble ahead<\/span><\/h1>\r\n

As the 20th<\/sup> century was winding down, the Internet was winding up. CRTC made a landmark decision. The new media exemption order of May 17, 1999 made CRTC one of the world\u2019s first regulators to exempt the Internet from regulation, a position that flowed, at least in part, from the The Act<\/i>\u2019s requirement that the Canadian system stay technologically current: <\/span><\/p>\r\n\r\n

\r\n

\u201cCRTC will] not regulate new media activities on the Internet under the <\/i>Broadcasting Act\u201d179<\/sup><\/i><\/span><\/p>\r\n<\/blockquote>\r\n

This decision brought the world to Canadians\u2019 doorstep. CRTC\u2019s rationale was that it had found no evidence that the Internet, largely text based at the time, posed a threat to advertising or the traditional TV model. Ironically, history has shown that almost immediately thereafter, Internet advertising revenues began to leap. By 2018, Internet advertising had cannibalized more than half of global advertising revenue, and significantly for this book, the half that was not<\/i> TV. While the Internet decimated advertising in print media, the impact on traditional TV was relatively slow, even after the launch of streaming services. ThinkTV<\/i>\u2019s ten-year review of advertising in Canada (2008-2018)180<\/sup> shows overall growth of all advertising to be 16% (from $11.3B in 2008 to $13.6B in 2018). During this same decade, broadcast TV advertising decreased by only 1.4% (from $3.39B to $3.20B). Internet advertising leaped from $1.6B to $6.8B, to about a 50% share of all Canadian media advertising. Legacy broadcasting fared relatively well due to entrenched consumer habits, stable delivery technologies and long-lasting devices (TV sets). The sunset of linear broadcasting\u2019s half a trillion global revenues has been slow and is ongoing as streaming services compete for dominance in the online era. <\/span><\/p>\r\n

Despite challenges to its new media exemption order, CRTC held firm in its decision. Zooming forward for a moment, the new media exemption continued to spark heated debate during the 21st<\/sup> century\u2019s four federal inquiries into media disruption. Stakeholders called for extending regulation to exempted online distributors, especially Netflix and other \u201cforeign giants.\u201d The most significant challenge may be the one implied in the recommendations by the BTLR, tabled January 29, 2020, to expand CRTC powers to register and regulate the entire Internet. Critics, including myself, observed this recommendation betrayed the 1999 promise to Canadians of an open Internet and seemed a covert way to find new money to finance production: <\/span><\/p>\r\n\r\n

\r\n

\u201cWhile appearing to empower CRTC to break promises to Canadian consumers, is the real purpose to empower CRTC to seek subsidies to content makers according to policies that don\u2019t achieve 21st<\/sup> century goals? Very crudely: A money grab?\u201d<\/i>181<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

Back to the history. In 2003, a federal broadcasting inquiry delivered a 1,000-page report from the Department of Canadian Heritage, Our Cultural Sovereignty<\/i>, known as the Lincoln Report after its chair, House of Commons member Clifford Lincoln. A key theme was the worry that Canada\u2019s framework would be felled by an approaching creative destruction that would disrupt the source of Canadian content financing as it transformed media markets to online and global. The report observed that Canadian content, then with a 50% subsidy level (close to today\u2019s 40%), had not evolved into a self-sustainable sector:<\/span><\/p>\r\n\r\n

\r\n

\u201cSince the beginning of private broadcasting in Canada, the regulatory framework has required Canadian private broadcasters to contribute to the development of Canadian programming. To do this, private broadcasters have used revenues generated from profitable foreign shows to produce or purchase less profitable Canadian programs\u2026 Even after subsidies and advertising revenues are taken into consideration, an English-language Canadian broadcaster averages a net loss of about $125,000 for each hour of Canadian drama, and a net profit of about $275,000 for each hour of American-made drama.\u201d<\/i>182<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

It joined with other reports of the time in criticizing Canadian content rules183<\/sup> and bemoaned the \u201cbewildering and exasperating bureaucracy:\u201d184<\/sup><\/span><\/p>\r\n\r\n

\r\n

\u201cThe rules\u2026 are contradictory, produce absurd results, and do not make creative sense\u2026 the system would be easier for all if the definitions of \u2018Canadian content\u2019 assumed that a production made by Canadians is Canadian. Canadian content\u2026 has a set of contradictory definitions that do not necessarily allow creators to create. They are dealing with a mountain of paperwork... But even this does not scratch the surface of the system\u2019s complexity\u2026 The rules governing what is or is not Canadian have become so complex that they defy easy description or explanation\u2026 Michael Ondaatje\u2019s, <\/i>The English Patient<\/em>, an internationally successful movie and film, does not qualify as Canadian even though it is a Canadian story, has many visible Canadian elements, and won nine Academy Awards.\u201d185<\/sup><\/i><\/span><\/p>\r\n<\/blockquote>\r\n

There are numerous examples of the \u201cexasperating bureaucracy.\u201d\u00a0 Still today, each of the three types of Canadian content is certified by a different government authority. Canadian productions report to Canadian Audio Visual Certification Office (CAVCO). TV treaty co-productions are approved by CAVCO, pending recommendation by CMF. Co-ventures depend directly on CRTC for approval. All three certification bodies (CRTC, CAVCO, CMF) require legal proof of Canadian control of production and ownership of intellectual property (IP), an issue that has been controversial due to the practical implications of a financier acquiring exploitation rights -- so as to allow monetization -- versus a more theoretical concept of IP.\u00a0 A notable feature is that there is no such thing as privately financed, commercial Canadian content, even if a production theoretically meets all 10 points. In order to be certified, a production must make use of some public funding benefit, such as tax credits or Canadian broadcaster investment.\u00a0<\/span><\/p>\r\n

Other troubling analyses emerged regarding Canadian TV. Media economists Colin Hoskins, Stuart McFayden, and Adam Finn argued against market intervention, suggesting that the cost of government intervention outweighs the benefits yet does little to prevent so-called market failure. Moreover, while jobs do increase in a protected sector they do not increase in the aggregate.187<\/sup> Cluster expert Michael E. Porter observed that protection actually weakens clusters: <\/span><\/p>\r\n\r\n

\r\n

\u201cGovernment policies often unwittingly work against cluster formation... Protecting local companies from competition leads to... excessive integration and blunted pressure for innovation\u2026 Companies have to spread activities globally to source inputs and gain access to markets. Failure to do so will lead to a competitive disadvantage.\u201d<\/i>188<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

Along with the rise of iphones, itunes, YouTube, Facebook, and Twitter came widespread predictions that social media would be the end of demand for long form TV. Some years later, Netflix would be the first service to prove this prediction wildly inaccurate. <\/span><\/p>\r\n

But before the arrival of Netflix, reports addressed Canada\u2019s \u201cdrama crisis.\u201d189<\/sup>\u00a0 Distinguished telecommunications lawyer Peter Grant's 2004 book, Blockbusters and Trade Wars <\/em>(with Chris Wood), set out a TV policy tool-kit for the pre-streaming era; Grant continued to address globalization with Programs of National Interest (PNI).\u00a0 Industry luminary Trina McQueen's Dramatic Choices <\/i>cited the demand-driven Hollywood model as inspiration and suggested that Canadian funding be tied to market performance. This led to a 2004 policy tweak, when CRTC defined a Canadian hit as a show with an audience of one million.191<\/sup> It was a critical nod to the role of popularity, but 1 million viewers could not generate sufficient advertising revenue to deliver sustainability, much less profitability. It was too soon for the financial potential of a global audience to be contemplated. Online video was in its infancy. YouTube had not been launched. Netflix was a DVD mail-order business operating in the U.S. only. <\/span><\/p>\r\n

In 2009, the Canada Television and Cable Production Fund (CTCPF), a public\u2212private partnership that had been founded in 1996 and rebranded as Canadian Television Fund (CTF) in 1998, became the Canada Media Fund (CMF).\u00a0 In mandating CMF, the Department of Canadian Heritage (DCH) underscored the role of demand for high-budget, scripted TV and therefore the appropriateness of prioritizing funding for this genre: <\/span><\/p>\r\n\r\n

\r\n

\u201cBecause Canadians support the Fund through their cable, satellite and tax dollars, it will focus on the programs that viewers watch. The Fund will put particular emphasis on drama, including comedy and children\u2019s programming.\u201d<\/i>192<\/sup><\/span><\/p>\r\n<\/blockquote>\r\n

Today\u2019s CMF spends 60% of its funds on high-budget TV, with the stipulation that to be eligible for funding the project must be \u201c10 out of 10\u201d on the point scale. To orient more towards the audience, CMF implemented \u201cperformance envelopes\u201d per broadcaster that are tethered, in part, to domestic audiences. However, the disconnect is that the gatekeepers to these funds have little need to succeed with audiences, which handicaps the policy intention.193<\/sup><\/span><\/p>\r\n

By the end of the 20th<\/sup> century, the global TV industry had experienced a half-century of stability and profitability. As is often the case across industries, complacency had set in and the global TV industry failed to see the ample scope for improvement. The industry's blind spots included how expensive cable had become and how complicated it was just to find a show. A TV remote was a dinosaur compared to the ease and speed of online search.\u00a0 The industry didn\u2019t see that consumers couldn\u2019t care if a program floated in a cloud, which it would soon do. <\/span><\/p>\r\n

A scrappy startup was about to offer the world a cheap, fast, easy way to watch TV. Founded in 1997 by Stanford University software pals, Wilmot Reed Hastings Jr. and Marc Randolph, Netflix had started in the DVD rental business. In 2007, the same year Apple launched iphone, Netflix launched SVOD (Subscription Video On Demand). Few will remember that this space was already inhabited by Amazon Unbox and Hulu but unlike the other two SVODs, Netflix was not linked to any legacy service. With a monthly subscription of about ten dollars for all the TV you could watch anytime, on any screen, it is easy to understand why this \u201cicon of simplicity.\u201d194<\/sup> was wildly embraced by consumers and grew exponentially. <\/span><\/p>\r\n

Netflix launched in Canada in 2010, its first international expansion. The trajectory continued. By 2014, nearly 40%195<\/sup> of English-speaking Canadian households subscribed, which set off the alarm for Canada\u2019s first federal inquiry into media disruption, Let\u2019s Talk TV.<\/i> <\/span><\/p>\r\n

Netflix\u2019 first superpower was to disrupt content delivery with online technology that threatened linear broadcasting and cable. Its second was to disrupt linear broadcasting\u2019s territorial monetization model with a subscription model that was on the order of 10 times cheaper than the average cable subscription. Netflix\u2019 always-on, instant search, and infinite shelf-space chilled consumers\u2019 appetite to struggle with the dinosaur TV remote. Netflix met the demand for commercial-free, on-demand viewing with far more convenience than could be had with such devices as VCRs and TIVOs (remember them?). With these superpowers, Netflix achieved global scale, but soon there was pressure for more: Must-see content. Netflix upgraded to add a third superpower: Original content production. This superpower famously debuted with the expensive hit series, House of Cards<\/i> (2013-2018). From then on, Netflix became a vertically integrated studio and distributor that developed, produced, and globally distributed popular TV. <\/span><\/p>\r\n

In 2011, a Canadian policy called Programs of National Interest (PNI), partly in response to globalizing markets, was purposed to focus legacy broadcasters on what were deemed to be priority genres. Seemingly somewhat arbitrary, the categories include long-form documentary, drama and comedy, French-language variety, and English-language awards shows. But PNI did not increase broadcasters\u2019 interest in developing entertainment assets that were globally competitive simply because the financiers simply didn\u2019t need to achieve this outcome. The system wasn\u2019t rigged that way and still isn\u2019t. <\/span><\/p>\r\n

Meanwhile, Canadian consumers continued to love Netflix even as it became clear that the three-alarm fire of TV disruption would decimate the financial foundations of Canada\u2019s policy framework: (1) content distribution by linear broadcasting; (2) cable delivery; and (3) territorial advertising markets for premium TV. The industry turned to the government for help. In the next five years, there would be four federal inquiries on the same question: how to respond to the impact of digital disruption?\u00a0<\/span><\/p>","rendered":"

\n

CHAPTER 5<\/span><\/h2>\n

BRILLIANT INNOVATION<\/span><\/h2>\n<\/div>\n
\n

\u201cWhat constitutes merit is contextual to the particular country and will vary greatly. Americans worry about sex more than the French. Swedes fret about violence. Germans are sensitive about racist incitement. \u2026 Each country has its concerns, problems, issues, traditions, priorities. Canada is concerned about a weakening of its national identity. Whether these concerns are justified, or in their own public\u2019s interest, is not the main question. What is important is that governments act<\/span> on<\/span> them. The main purpose of television regulation is to advance such goals.\u201d<\/span><\/i>132<\/sup><\/span><\/p>\n<\/blockquote>\n

How did Canada arrive at the present policy moment? For nearly five decades, a majority of TV public funds have been spent on high-budget, scripted TV, the genre that is the financial driver of the global TV industry. The question remains: Why has Canadian TV not achieved financial sustainability? The short answer is that financial sustainability was never the goal. Industry and government collaborated more than 50 years ago with a goal to build two infant TV sectors: broadcasting and production. They succeeded brilliantly. <\/span><\/p>\n

While the impact of digital shift is largely a case of unintended consequences, the Canadian government has not been without foresight regarding the framework\u2019s vulnerability to disruption. In 1986, a federal broadcasting commission worried about the impact of cable technology and posed a prescient question:<\/span><\/p>\n

\n

\u201cWill technology be the ultimate de-regulator?\u201d<\/i>133<\/sup><\/span><\/p>\n<\/blockquote>\n

Fears about cable did not materialize, rather the opposite. Cable technology facilitated a policy innovation, namely simultaneous substitution, that literally built both the broadcasting and production sectors. More than fifteen years later, in 2003, with the framework expanded, another report predicted a policy fail: <\/span><\/p>\n

\n

\u201c[The Committee] is very worried that the existing programming model\u2014which has become overly reliant on cross-subsidization of Canadian revenues through revenues generated by American programming\u2014will eventually collapse.\u201d<\/i>134<\/sup><\/span><\/p>\n<\/blockquote>\n

Another decade passed. Nearly thirty-years after the first warning, technology did become the ultimate de-regulator, not just of Canadian TV, but throughout the world. While creative destruction was thrilling elsewhere, digital disruption threatened the Canadian framework\u2019s three financial pillars: territorial market monetization, linear broadcasting and cable delivery. The industry panicked: Where would their money come from? The purpose of this chapter is to examine the history of Canadian electronic media policy because understanding the chronology is essential to future-proofing the framework for the global, online era. <\/span><\/p>\n

All paths to decoding the history of Canadian TV lead towards a single prevailing assumption, whether true or not: neither the broadcasting or production sector would exist without cultural policy and protective regulation. Exactly what<\/em> is being protected (Canadian culture) has always been somewhat vague. However, from whom<\/em> Canada is being protected has always been clear: the U.S.\u00a0 All Canadian TV policy has been a response to the position that U.S. electronic media is a threat to the economics of Canada\u2019s electronic media industry and more fundamentally, to the nation\u2019s cultural sovereignty. This double threat has long rationalized the need for policy intervention to protect Canada. So it is not possible to understand Canadian media policy without delving into the relationship between Canada and the U.S. Many books have been devoted to this,135<\/sup> but it can be essentialized to one sentence. A paradoxical, love\/hate relationship with the U.S. is embedded in every policy since the beginning of electronic media nearly a hundred years ago. <\/span><\/p>\n

This observation is deepened with the understanding that Canadians have a tolerance, even a comfort, with irresolvable paradoxes.136<\/sup> This is visible in the quixotic Canada-U.S. relationship. On the surface, the two countries\u2019 similarities and alliances are numerous. The neighbors share similar forms of democratic governance and the planet\u2019s longest undefended border of 8,891 kilometres. They trade more than a billion dollars a day. The U.S. is the destination of 75% of Canada\u2019s exports, and is, by far, Canada\u2019s largest trading partner. English is the most common language in both countries, spoken by 75-80% of both populations. Most significantly for this book, Canadian and U.S. audiences share very similar tastes in entertainment. Yet, for Canadians, there is an undertow. Canadian literary theorist, Northrop Frye, pinpointed the Canadian weltanschauung <\/i>as a north-south conundrum. He wrote that gazing north, Canadians see vast emptiness. When facing south\u2026<\/span><\/p>\n

\n

\u201cA Canadian becomes either hypnotized or repelled by the United States; either he thinks up reasons for being different and somehow superior to Americans or he accepts being swallowed up by the United States as inevitable.\u201d137<\/sup><\/i><\/span><\/p>\n<\/blockquote>\n

Over time, Canada\u2019s cultural vulnerability to the U.S. became paired with its national identity. Well before the online era, it was observed that separating these two concepts would be essential for Canada to compete in a global ecosystem: <\/span><\/p>\n

\n

\u201cFederal bureaucrats need to come to terms with the fact that… industry growth does not equate with opportunities for national discourse. \u2026 [Until these concepts are decoupled] citizens will continue to be bound to a paradigm of Canadianization at odds with their best interests.\u201d<\/i>138<\/sup><\/span><\/p>\n<\/blockquote>\n

An outcome of this worldview has been TV policy that reflects Canada\u2019s obsession with its national identity. The chronology of Canadian electronic media policy can be seen as a sequence of choices in response to the perceived threat of U.S. dominance. This quote bears repeating:<\/span><\/p>\n

\n

\u201cCanada is concerned about a weakening of its national identity. Whether these concerns are justified, or in their own public\u2019s interest, is not the main question…\u00a0 The main purpose of television regulation is to advance such goals.\u201d<\/i>139<\/sup><\/span><\/p>\n<\/blockquote>\n

1929: Aird Commission\/Seeds sown<\/span><\/h1>\n

Canada\u2019s first federal commission on electronic media concerned radio. Known as the Aird Commission, per Chairperson Sir John Aird, it set the stage for a century of policy to come. Both the approach and findings of the 1929 Royal Commission on Radio Broadcasting<\/i> turned on the perception that U.S. radio threatened the economics of Canadian radio and the country\u2019s cultural sovereignty. Back then, it was already clear that English-speaking Canadian and U.S. audiences had similar media preferences. A fledgling radio station, CNR Radio (run by Canadian National Railways) had acquired some popular U.S. radio shows like Bob Hope<\/i> and Jack Benny <\/i>to maintain an audience.140<\/sup> This consumption pattern worried the government and led, in December 1928, to Prime Minister William Lyon Mackenzie King appointing banker Sir John Aird to lead an inquiry into the new radio business. Commissioners travelled across Canada, Europe and the U.S. where they received 164 oral presentations and 124 written submissions; and thus established a pattern of Canadian media inquiry, a component of the mediaucracy still used today. <\/span><\/p>\n

The Aird report is notable not only for its brevity. At 14 pages, it is teensy by the standards of policy tomes in subsequent decades that would evolve to hundreds, even a thousand pages. Most notable is that the Aird report evidences a dichotomous response to the U.S. Despite the popularity of U.S. radio with Canadian audiences, the commission did not regard the U.S. as an advisable model for radio broadcasting. As the document is not readily available to the reader, enclosed are a few screenshots. Notably, the paragraph on page 4 about \u201cmethods in other countries\u201d does not mention the U.S. Perhaps the strongest indication of its perspective is in the Appendix, which details 26 countries studied by the Commission. It features detailed descriptions of how broadcasting works in countries such as Estonia, Finland, Sweden, Switzerland, Turkey, the United Kingdom, and the Union of South Africa. The U.S. blurb is shortest of all, just two lines about an industry that had already captured the attention of Canadian audiences: <\/span><\/p>\n

\n

\u201cUnited States of America: Broadcasting in the United States is carried on by private enterprise under licence of the Federal Radio Commission. There are 604 stations licensed. There is no licence fee for listeners.\u201d<\/i>141<\/sup><\/span><\/p>\n<\/blockquote>\n\n\n\n\n
\"Figure<\/a><\/a><\/td>\n\"Figure<\/a><\/td>\n<\/tr>\n
Source: Royal Commission on radio broadcasting (Aird Commission), 1929 143<\/sup><\/em><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

In hindsight, the Aird recommendations inaugurate the policy practice of selling industrial strategies to the Canadian public via rhetoric of cultural protection:<\/span><\/p>\n

\n

\u201cThere has, however, been unanimity on one fundamental question \u2014 Canadian radio listeners want Canadian broadcasting,… the majority of programs heard are from sources outside Canada\u2026 broadcasting will undoubtedly become a great force in fostering a national spirit.\u201d144<\/sup><\/i><\/span><\/p>\n<\/blockquote>\n

The Aird Commission recommended launching a national broadcasting system and this recommendation was taken up. In 1932, the Canadian Radio Broadcasting Commission (CRBC) was established, in 1936 becoming the Canadian Broadcasting Corporation (CBC). By then, it was CBC radio broadcasting Jack Benny<\/i>\u00a0in order to capture an audience.<\/span><\/p>\n

While radio thrived, TV was coming soon. In the U.S., TV\u2019s breakthrough year was 1939, the same year that Gone with the Wind<\/i> and The Wizard of Oz<\/i> were theatrical hits. TV sets were demonstrated at the 1939 New York World\u2019s Fair and President Roosevelt\u2019s opening speech was broadcast. NBC broadcast its first baseball game, played between the Cincinnati Reds and the Brooklyn Dodgers. By 1950, there were more than 10 million TVs in the U.S.145<\/sup> Compared to the explosive start of the U.S. industry, the Canadian TV startup was modest. TV technology was demonstrated at the 1939 Canadian National Exhibition in the same year of the U.S. debut. Yet, the first Canadian broadcast did not come till nearly a decade later with one received \u2014 rather than sent \u2014 in Windsor from a Detroit station.146<\/sup><\/span><\/p>\n

1951: Massey Commission\/Invasion metaphor<\/span><\/h1>\n

Canada\u2019s most famous broadcasting inquiry kicked off in 1949, at the dawn of the Canadian TV era. Similar to the Aird Commission, The Royal Commission on National Development in the Arts, Letters, and Sciences<\/i> became known by the name of its Chair, Vincent Massey. By 1949, TV was already a wildly embraced and profitable entertainment innovation in the U.S. There were TV hits in similar genres as today. Top ten shows included The Lone Ranger <\/i>(drama), You Bet Your Life<\/i> (reality\/game), and Arthur Godfrey\u2019s Talent Scouts<\/i> (talent search). The iconic hit, I Love Lucy<\/i> (sitcom), debuted a few months before the Massey report was tabled in 1951 and on average, attracted more than half the audience.147<\/sup> Perhaps most significantly, hit shows spectacularly monetized TV advertising, a new sector that had begun with a 10-second Bulova watch commercial that delivered a $7.00 profit.148<\/sup><\/span><\/p>\n

The Massey report, in its process and results, cemented the idea of Canadian victimization by U.S. media. The lead-up included 114 public hearings across Canada. Twelve hundred witnesses testified. Additionally, there were 462 formal submissions and hundreds of letters from Canadian citizens. However, history may have obscured a few salient details. A nuance centres on the Chair, Vincent Massey. Known to be a passionate anglophile, he was the older and reportedly less handsome brother of actor Raymond Massey who had emigrated to Hollywood and had been nominated for an Academy Award as Best Actor for his starring role in the very American movie, Abe Lincoln in Illinois <\/i>(1940). Is it plausible to wonder: Did sibling rivalry play a role in the findings of the Massey Commission? <\/span><\/p>\n

Similar to the Aird report, Massey\u2019s comparative studies of other countries had a defensive, dismissive tone. Notes by the Saskatchewan commissioner state the following:<\/span><\/p>\n

\n

\u201cWhile in New York, Neatby [Commissioner who examined the U.S.] talked informally with television viewers and an actor from Canada who worked in television, watched fifteen hours of television herself, an experience she described as personally \u2018an unrewarding occupation\u2019\u201d<\/i>149<\/sup><\/span><\/p>\n<\/blockquote>\n

Despite Neatby’s claim, arguably, TV was not unrewarding for audiences seeking entertainment or for the exploding economics of the TV industry that turned on one factor: popularity. The hit variety series, The Texaco Star Theatre<\/i>, was watched by more than 62% of homes owning TV\u2019s. This program alone is said to have increased the number of U.S. TVs nearly 11,000% during its run from 1948-1956.150<\/sup><\/span><\/p>\n

During the November 1949 Massey Commission hearings in Western Canada, there was a pivotal policy moment. An executive from the fledgling CTV network, Kent Cooke, made an impassioned pitch for open competition with, rather than protection from, the U.S. as the way to strengthen Canadian media:<\/span><\/p>\n

\n

\u201cAn American is basically the same as a Canadian\u2014motivated by the same impulses, exposed to the same influences of literature, music, the theatre, movies and radio… By \u2018non-Canadian material,\u2019 the CBC is obviously referring to American material. In the first place, what is wrong with American material? If we are ever to have a Canadian culture, it will come as a result of exposure to what is undoubtedly the fastest rising culture in the world today\u2014that of the U.S.A.\u201d<\/i>151<\/sup><\/span><\/p>\n<\/blockquote>\n

Reportedly, Cooke was admonished by the Chair for his remarks. When the Massey Commission tabled its report of more than 500 pages on June 1, 1951, it was clear that Cooke\u2019s pleas had fallen on deaf ears. A fork in Canada\u2019s TV policy road had been taken. The Massey prose was consistent with the tone established by the Aird report twenty years earlier, yet more powerful and effective. The Massey prose demonizes U.S. TV, describing it as emanating from \u201can alien source.\u201d152<\/sup> It criticizes the U.S. industry that had already produced talents like Carl Reiner, Mel Brooks, and Lucille Ball. The Ed Sullivan Show<\/i> (CBS and CTV, 1948-1971) would soon welcome Canadians Wayne and Shuster for their first 58 appearances,153<\/sup> all of which were broadcast by CTV. Yet, here is Massey:\u00a0<\/span><\/p>\n

\n

\u201cTelevision in the United States is essentially a commercial enterprise, an advertising industry. Thus sponsors, endeavouring to give the majority of people what they want, frequently choose programmes of inferior cultural standards.\u201d<\/i>154<\/sup><\/span><\/p>\n<\/blockquote>\n

The report\u2019s most famous line concerns the American \u201cinvasion.\u201d In Chapter II, \u201cThe Forces of Geography,\u201d it makes a dagger-like turn on the hand already feeding Canadian TV and intones the once-uttered, never-forgotten, passive-aggressive invasion metaphor that belied the underlying love-hate for the U.S. (my bold):<\/span><\/p>\n

\n

\u201cWe are thus deeply indebted to American generosity… Many institutions in Canada\u2026 could not have been established or maintained without money provided from the United States\u2026 Every intelligent Canadian acknowledges his debt to the United St<\/i>ates for excellent films, radio programmes and periodicals but\u2026 the price may be excessive\u2026 the American invasion by film, radio, and periodical is formidable.\u201d155<\/sup><\/strong><\/em><\/span><\/p>\n<\/blockquote>\n

There was never an invasion. Canadian audiences embraced “good stories, well told” then, as they do today. Canadian Robert Fulford observed that Massey\u2019s prose gave permission, if not imperative, for Canadians to expect government support for a media industry via funding that would masquerade as cultural protection. Fulford called the report \u201cthe most important official document in the history of Canadian culture\u201d because it \u201cgot us going in the wrong direction.\u201d He critiqued its central argument:<\/span><\/p>\n

\n

\u201cThe nation should support the arts so the arts could support the nation\u2026 All nonsense. The argument needed something more, an outside enemy. Massey, whose sympathies lay entirely with English culture, knew where to direct negative attention\u2026 The U.S. emerged as a bad example and menace. Worse, they were monstrously popular\u2026 We were to support culture not for its own sake but to save us from Americanization. Since 1951, that idea has haunted the discussion of the arts in Canada\u2026 Making survival the focus hardly encourages a vibrant cultural atmosphere. It\u2019s a downer.\u201d<\/i>156<\/sup><\/span><\/p>\n<\/blockquote>\n

Seventy years later, Massey\u2019s influence could be felt in recommendations of the BTLR report of January 29, 2020, the final report of Canada\u2019s fourth federal inquiry on the impact of digital shift.\u00a0\u00a0<\/span><\/p>\n

1958: The Broadcasting Act<\/em>\/A supply-driven system<\/span><\/h1>\n

Reflecting the spirit of the Massey report, the government moved to protect Canadian TV. It established the first Canadian content quotas in 1959157<\/sup> and codified them in 1958 by updating the 1936 Broadcasting Act (The Act)<\/i>. The Act<\/i> deftly blended cultural and industrial goals; key sections are still preserved in the 1991 extant version. Fundamentally, Canadian broadcasting owes its existence to the ownership regulations set out in a direction issued under Section 26(1)(c),158<\/sup> which stipulates that Canadian broadcasters and cable companies must be majority Canadian owned.\u00a0<\/span><\/p>\n

Additional Canadian laws complement The Broadcasting Act<\/i>. The Telecommunications Act<\/i> dates back to 1919, when it was called The Railroad Act<\/i>, purposed to connect Canadians physically then retooled for electronic connectivity in 1993. A triumvirate of communication laws includes the 1921 Copyright Act, <\/i>revised in 2019.159<\/sup> <\/span><\/p>\n

In 1968, an arms-length agency to implement the tenets of The Broadcasting Act<\/i> (The Act<\/em>) was established. Originally known as the Canadian Radio-television Commission (CRC), today\u2019s Canadian Radio-television and Telecommunications Commission (CRTC) has about 500 employees and a 74M annual budget to preside over the broadcasting and telecommunications acts and related initiatives.160<\/sup> Federal oversight and funding organizations include the Canadian Audio-Visual Certification Office (CAVCO); Canada Media Fund (CMF); Telefilm Canada, and more. Interlocking provincial organizations comprise a complex mediaucracy to ensure that Canada has an economically viable broadcasting industry, knit together with the rhetorical goal to protect Canada\u2019s cultural sovereignty and especially to protect the nation from U.S. media. <\/span><\/p>\n

While Hollywood TV grew organically in response to audience demand, Canadian TV evolved in response to a legal obligation in The Act<\/i>\u2019s most quoted language, the Broadcasting Policy for Canada. The thrust of the key Section (3) in The Act<\/i> is to ensure a supply<\/i> of programming and jobs for Canadians, but it could not, of course, require that Canadians watch that programming. Policies were created to fulfill the requirements of The Act<\/i>, but these did not much concern the audience. Theoretically, such focus could have been an interpretation of clause (iii) that includes \u201cserve the needs and interests,\u201d but it wasn’t to be. (Remediating this problematic outcome of regulatory policy could have been a key recommendation of the 2020 BTLR report, but it wasn\u2019t addressed.) The supply-driven thrust of regulatory policy became both a defining strength and a resistant weakness of Canadian TV.<\/span><\/p>\n

\n

Canada Broadcasting Act<\/em>, Section (3)<\/span><\/p>\n

\u201c(d) the Canadian broadcasting system should<\/span><\/p>\n

(i) serve to safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada,<\/span><\/p>\n

(ii) encourage the development of Canadian expression by providing a wide range of programming that reflects Canadian attitudes, opinions, ideas, values and artistic creativity, by displaying Canadian talent in entertainment programming and by offering information and analysis concerning Canada and other countries from a Canadian point of view,<\/span><\/p>\n

(iii) through its programming and the employment opportunities arising out of its operations, serve the needs and interests, and reflect the circumstances and aspirations, of Canadian men, women and children, including equal rights, the linguistic duality and multicultural and multiracial nature of Canadian society and the special place of aboriginal peoples within that society, and<\/span><\/p>\n

(iv) be readily adaptable to scientific and technological change;<\/span><\/p>\n

(e) each element of the Canadian broadcasting system shall contribute in an appropriate manner to the creation and presentation of Canadian programming;<\/span><\/p>\n

(f) each broadcasting undertaking shall make maximum use, and in no case less than predominant use, of Canadian creative and other resources in the creation and presentation of programming, unless the nature of the service provided by the undertaking, such as specialized content or format or the use of languages other than French and English, renders that use impracticable, in which case the undertaking shall make the greatest practicable use of those resources;<\/span><\/p>\n

(g) the programming originated by broadcasting undertakings should be of high standard;<\/span><\/p>\n

(h) all persons who are licensed to carry on broadcasting undertakings have a responsibility for the programs they broadcast;<\/span><\/p>\n

(i) the programming provided by the Canadian broadcasting system should<\/span><\/p>\n

(i) be varied and comprehensive, providing a balance of information, enlightenment and entertainment for men, women and children of all ages, interests and tastes,<\/span><\/p>\n

(ii) be drawn from local, regional, national and international sources,<\/span><\/p>\n

(iii) include educational and community programs,<\/span><\/p>\n

(iv) provide a reasonable opportunity for the public to be exposed to the expression of differing views on matters of public concern, and<\/span><\/p>\n

(v) include a significant contribution from the Canadian independent production sector\u2026\u201d161<\/sup><\/span><\/p>\n<\/div>\n

 <\/p>\n

Numerous regulatory and policy instruments were established from 1959-1979 in order to achieve The Act<\/i>\u2019s requirements. Following from the requirement that a Canadian broadcaster must obtain and maintain a valid licence from the CRTC, an exhibition quota was imposed. Additional instruments to ensure a supply of Canadian TV included Canadian Production Expenditures (CPE), levies on the cable sector, and various public funds and tax incentives, all including the requirement for regular reporting to CRTC. A definition of what would become known as \u201cCanadian content\u201d was debated but remained informal. CRTC faced a more urgent question: How to finance a supply of Canadian programs?<\/strong> Two remarkable policy innovations made it happen: simultaneous substitution and the production point system.<\/span><\/p>\n

1970: Simultaneous substitution\/AmCon for CanCon <\/span><\/h1>\n

Throughout the 1950\u2019s and 1960\u2019s Canadians continued their love affair with Hollywood hits, turning rooftop antennas, called yaggis, southward to capture U.S. TV signals. This consumer practice made it nearly impossible for Canadian networks to attract audiences and consequently, advertisers. However, in 1969 Canadian broadcasting entrepreneurs figured how to take financial advantage of this pattern of audience consumption. They innovated an existing U.S. broadcasting instrument in response to their need for a business model. Its name is simultaneous substitution. <\/span><\/p>\n

The policy innovation process began when CRTC issued Decision 70-03 on April 10, 1970, which prohibited simultaneous substitution. This meant that Canadian stations could not <\/i>play a U.S. program at the same time it was airing on a U.S. border station. Canada was not (yet) a broadcasting market. CRTC\u2019s reasoning was that since U.S. advertisers had purchased rights to these shows, CRTC would ensure respect for those territorial advertising rights:<\/span><\/p>\n

\n

\u201cThe non-Canadian programs broadcast by Canadian broadcasting stations shall not be duplicated on a cable system simultaneously or during the week prior to and the week subsequent to the date of airing\u201d<\/i>162<\/sup><\/span><\/p>\n<\/blockquote>\n

Less than a year later, on February 26, 1971, CRTC acknowledged objections to the 1970 decision. More remarkably, in July 1971, the CRTC policy was completely reversed and simultaneous substitution was made obligatory<\/i>. Canadian cable distributors, called Broadcast Distribution Undertakings (BDUs), would thereafter be obliged to remove U.S. commercials from border stations when they were being watched by Canadians and substitute Canadian advertisements — whenever the U.S. programs were broadcast simultaneously:<\/span><\/p>\n

\n

\u201cIn its first public announcement on cable television policy of May 13, 1969, the Commission accepted, for the time being, the long-standing Department of Transport policy that cable television systems should not alter the signals received from broadcasting stations. Since then, the Commission has carried out extensive studies, which demonstrate that the unaltered carriage of some of these signals disrupts the ability of Canadian television stations to fulfill their mandate. The Commission is concerned to restore the licensing logic of the Canadian broadcasting system, and to strengthen Canadian television service.\u201d<\/i>163<\/sup><\/span><\/p>\n<\/blockquote>\n

What happened? The invention of simultaneous substitution had begun in Hollywood at the May 1970 upfronts, the annual preview market for U.S. network shows, attended by all North American TV programming executives where, for decades they secured their Fall TV line-up to be sold to advertisers. The key point here is that Canada was not yet a TV market. Canadian broadcasters were having difficulty attracting audiences, much less advertisers, because Canadians were already in the habit of watching border stations that broadcast the Hollywood hits they wanted to watch. In a room at the confab, a group of CTV executives saw things differently. They saw gold in Canada\u2019s small population huddled close to a broadcasting powerhouse. Just as they had already invested in hardware, such as towers, to build their broadcasting business, they conceived an idea to spend on software for the same reason. The broadcasters proposed making the entire country of Canada into one TV market and paying for the rights to broadcast Hollywood hits in Canada, rather than just let them be captured by southward-facing yaggis. There\u2019s more. Canadian cable companies would still allow Canadians to tune to those border stations, but since the advertising rights would no longer cross the border, cable companies would replace the advertisements with Canadian ads. Then and there, a Canadian broadcasting model was born. It was then <\/span>and still is — based on the exploitation of content popularity, specifically Hollywood hits. Its official name is simultaneous substitution. I call it AmCon for CanCon. <\/span><\/p>\n

This single policy innovation gave Canadian broadcasters a business model exactly per local U.S. broadcasters in the 210 U.S. TV geographic markets. Due to Canada\u2019s unique geography, whereby most of the population lives near a U.S. border station, simultaneous substitution increased the Canadian audience \u2014 and advertising revenue \u2014 by 30%. The new regulation allowed Canadian broadcasters to count the entire Canadian audience for a program, regardless of whether the consumer was tuned in to the Canadian station or a border station such as Buffalo, Rochester, or Seattle. It was a four-way win for broadcasters, advertisers, program rights holders, and Canadian audiences. It was non-controversial. Canadian broadcasters got an audience. Advertisers got a new territory to exploit. Program rights holders got paid for a new market. Canadian audiences got their favourite shows.\u00a0<\/span><\/p>\n

As in 1949, it was CTV who led the 1970 innovative thinking, but this time their idea prevailed. Here’s how a CTV executive, who was in the room, recalled the invention of simultaneous substitution: <\/span><\/p>\n

\n

\u201cNo one is specifically named as the \u2018father of simultaneous substitution;\u2019 it was the environment of the day. We were down in Hollywood arranging the American buy. Pre-release had been the first step which broadcasters negotiated with the Americans. With changes in network schedules between May and September, we would find we had two programs from competing networks, scheduled at the same time. At first the Americans were terribly nervous about pre-release, until we were able to guarantee this would not interfere with any of their program rights in the U.S. Simultaneous substitution was the next step.”\u00a0<\/i><\/span><\/p>\n<\/blockquote>\n

But there\u2019s still more. A fifth win turned out to be a game changing spin-off from simultaneous substitution.\u00a0 Some of the profits derived from the new regulation could be mandated by CRTC to cross-subsidize Canadian production in order to fulfill The Act\u2019<\/i>s legal requirements for a supply of Canadian TV. Financing problem solved! Thereafter — and still today — in return for the 30% revenue boost, Canadian broadcasters have been obligated, via conditions of licence, to spend 30% of revenues to commission original programming.165<\/sup> This payback became known as the regulatory bargain. <\/span><\/p>\n

Zooming ahead for a moment, today the regulatory bargain remains a key element in heated arguments over levelling the \u201cplaying field\u201d between linear broadcasters and online services. When linear broadcasters complain about their obligation to support Canadian content and insist that online services should contribute fairly to the system, they omit the regulatory bargain. Linear broadcasters\u2019 contribution to the system is net zero because they receive a 30% audience boost from a regulatory benefit, and then contribute that benefit. As I observed in my response to the 2020 BTLR report, online services receive no such benefit. Streamers get only the audiences they get: <\/span><\/p>\n

\n

\u201cThere also seems a conceptual error in recommendation #60, which suggests all media content undertakings that benefit from the Canadian media communications sector should contribute to it. Legacy broadcasters benefit from the regulatory bargain whereby a 30% audience boost from simultaneous substitution is granted in return for a 30% spend on Canadian content. This renders legacy contribution a net zero while brilliantly delivering cross-subsidization of Canadian content \u2013 thanks to the popularity of Hollywood hits. In comparison, OTTs compete for Canadian audiences with zero regulatory benefit.\u201d<\/i>166<\/sup><\/span><\/p>\n<\/blockquote>\n

Returning to the history, simultaneous substitution was further embedded into the policy framework with a 4+1 rule for consumer cable packages that oblige Canadian cable companies to include access to U.S. networks even in their lowest tier packages. This perhaps reflected two clauses in section 3 of The Act<\/i>: stipulating that programming \u201cserve the needs<\/i>\u201d of Canadians and \u201dbe drawn from local, regional, national and international sources.<\/i>\u201d The overall result has been to expand the four-way win of AmCon for CanCon to a five-way benefit including linear broadcasters, cable companies, advertisers, Canadian audiences, and the production community. Linear broadcasters get the audience boost from the simulcast of hits, which raises advertising rates. Canadian cable companies get the customers they need by offering Hollywood hits. Canadian advertisers get a new TV market. Canadian audiences get to watch the popular Hollywood hits they demand. The production community gets to share in the profits from Hollywood hits in order to help produce Canadian TV.\u00a0<\/span><\/p>\n

The importance of simultaneous substitution as a cross-subsidy instrument was reconfirmed in the 1976, l986, and l997 revisions of Canada\u2019s Broadcast Distribution Regulations.167<\/sup> Its financial bottom line was reaffirmed in 2015 by a study commissioned by the country\u2019s major broadcasters in preparation for Let\u2019s Talk TV<\/i>, Canada\u2019s first inquiry into the impact of digital disruption. This study estimated the boost was about 400 million dollars on revenue of 1.2 billion, still about 30%.168<\/sup><\/span><\/p>\n

In summary, a singular policy innovation gave rise to a national broadcasting sector, a TV advertising sector, and a TV production sector by exploiting a globally unique market quirk: Canada’s proximity (culturally and geographically) to the U.S. To be clear, the power of simultaneous substitution is entirely due to geo-cultural proximity between Canada and the U.S. and the affection of audiences in both countries for the same TV. AmCon for CanCon underscores cultural theories regarding Canada\u2019s predilection for paradox because of the regulation\u2019s remarkable dissonance between rhetoric and regulation. <\/span><\/p>\n

Contrary to rhetoric<\/em> about saving Canada from<\/i> U.S. TV, Canadian TV regulation<\/em> depends on the enduring affection of Canadian audiences for<\/i> U.S. TV!<\/b><\/p>\n

1984: Point system\/A mediaucracy is greenlit<\/span><\/h1>\n

With the simultaneous substitution regulation in place to deliver the money for original Canadian production, there was still a missing piece to the puzzle of how to fulfill The Act\u2019<\/i>s requirements. Who would produce the programs? Canada\u2019s independent production sector was a fledgling community without the capacity to fill a content quota of 50% in a broadcast schedule. But a second policy innovation was coming; it would build a world-class workforce and as a consequence, a world-class production infrastructure. This would become the ten-point system. <\/span><\/p>\n

This policy innovation took a four year collaboration between industry and government, 1980-1984.169<\/sup> Charles Falzon led a number of those meetings in the role as founding president of CMPA (then Canadian Film and Television Producers Association\/CFTPA): <\/span><\/p>\n

\n

\u201cWe were pioneers… We knew even then the market would eventually be global and we needed a system that would make us competitive. I don\u2019t think back to those days as being protectionist. I think of them as the start of an export era based on talent. Seeds were planted for what would inevitably be a very competitive future. People don\u2019t remember that the point system was supposed to be flexible and nimble, giving Canadian talent an advantage while we catch up to the needs of a global milieu. Yes, it was about having Canadian content, but\u00a0 Canadian talent that would eventually be world class and competitive. Revising history, people think of it as about protecting Canadian culture. It was not. It was about ensuring as much money as possible stays in the Canadian system so content and talent could evolve. Content would rule. Culture would be a by-product of Canadian voices and perspectives.\u00a0 Competition would lead to better talent, which would lead to better content and so on.”170<\/sup><\/span><\/i><\/span><\/p>\n<\/blockquote>\n

Consultations culminated in 1984 with the ten point system still in place today.\u00a0The point system brought functional precision to the term Canadian content. To qualify for funds, productions would be required to meet the CRTC definition.<\/span><\/p>\n

\n

Canadian 10 point certification:<\/p>\n

(a) Producer must be Canadian citizen or permanent resident; <\/span><\/p>\n

(b) A live action production must have minimum of 6 out of 10 points performed by Canadians, based on the key functions below with the condition that either director or screenwriter of each episode and 1 of 2 lead performers is Canadian:<\/span><\/p>\n

Director \u2013 2 points<\/span><\/p>\n

Screenwriter \u2013 2 points<\/span><\/p>\n

Lead Performer \u2013 1 point<\/span><\/p>\n

Second Lead Performer \u2013 1 point<\/span><\/p>\n

Production Designer \u2013 1 point<\/span><\/p>\n

Director of Photography \u2013 1 point<\/span><\/p>\n

Music Composer \u2013 1 point<\/span><\/p>\n

Picture Editor \u2013 1 point<\/span><\/p>\n

(c) At least 75% of all below the line costs, with certain exceptions must be paid to Canadians;<\/span><\/p>\n

(d) At least 75% of all post production\/laboratory costs must be paid for services provided in Canada by Canadians or Canadian controlled companies.171<\/sup><\/span><\/p>\n<\/div>\n

 <\/p>\n

The 10 point model gave rise to three categories of Canadian content (10 point productions; co-productions; co-ventures) and one non-Canadian content category, called foreign or service productions. <\/span><\/p>\n

10 point productions<\/strong> are the only ones eligible for a \u201cC\u201d number from CRTC and the only category eligible for funding from CMF, the main funding organization. These TV series tend to be the high-budget shows that today utilize more than 60% of CMF funding. They are CMF\u2019s top performing English-language programs but have always lost money for broadcasters.<\/span><\/p>\n

Co-productions<\/strong> are treaty partnerships with more than 50 countries but not the U.S., which has no need to formally partner to finance TV. Co-production treaties set terms for international cooperation on TV and film projects to ensure regulatory requirements of both countries are met. For certification purposes, the Canadian portion qualifies as a 100% Canadian production and as such, for 10 point financing. As Falzon observed, co-productions were conceived as an instrument to focus the fledgling industry on the global market:<\/span><\/p>\n

\n

\u201cThe international co-production treaties basically were saying this: We have a Canadian cultural agenda but we can\u2019t afford to do it on our own\u2026 If we partner with other countries other than the U.S. that aren\u2019t going to suffocate us, maybe we can be part of more than one cultural agenda\u2026 Those really helped create international commerce big time.\u201d<\/i><\/span><\/p>\n<\/blockquote>\n

Co-ventures<\/strong>, so named in 1987, were popular during the 1980\u2019s and 1990\u2019s because they allowed Canadian producers to partner with non-treaty countries, by default the U.S.172<\/sup> The timing suggests their purpose was to loosen restrictions to encourage Canadian producers to partner with Hollywood. Co-ventures counted as official Canadian content for quota purposes, but due to a reduced requirement of only 6 points (of the 10), they received a different designation from CRTC, an SR rather than a C number. Co-ventures have become rare because Canadian producers have since learned how to structure high-budget series as 10 point productions when partnering with U.S. studios, a strategy that maximizes public funding.<\/span><\/p>\n

Service productions<\/strong> are the fourth category of long form TV.\u00a0 While they do not qualify as Canadian content, they do comprise nearly half of all Canadian film and TV production. This percentage is attributable to Canada\u2019s expert crews, North American location, generous, well-managed tax incentives, and additional Canadian advantages including an often discounted currency. Canada was a first mover in a controversial exodus from Hollywood during which these productions were known as runaways. Today, Canada wins production business over competitive destinations in North America such as Arizona, Florida, Michigan, and international locations. Service productions have continued to be a win for Canada even when the Canadian dollar has been stronger than the U.S. dollar, such as 2009-2014.173<\/sup> Moreover, production excellence incentivized Netflix to open their first studio outside of the U.S. in Canada in 2016 and to expand their investment, announced in September 2020. <\/span><\/p>\n

With key building blocks in place including the CRTC, simultaneous substitution and the production point system, a proliferation of supporting policy organizations and instruments followed. As a supply-driven bureaucracy strengthened, the market orientation of Canadian producers weakened. As recalled by Charles Falzon, entrepreneurial spirit gave way to dependence on the mediaucracy and its entitlements: <\/span><\/p>\n

\n

\u201cIn my opinion, investments by government started clouding the issue. Bureaucracy and policy overshadowed creativity and the passion to reach an audience. People were asking \u201cWhat does it mean to be Canadian?\u201d and \u201cWhat will get funding?\u201d rather than \u201cWhat works?\u201d and \u201cHow do I connect with the audience?\u201d What emerged was a bureaucratic agenda versus an audience agenda. Success was measured by \u201cCan you get something funded and can you get it produced?\u201d rather than audience satisfaction and commercial success.\u201d<\/i>174<\/sup><\/span><\/p>\n<\/blockquote>\n

The policy of broadcast exhibition quotas further entrenched a supply dynamic because delivery of productions became the priority, not market performance. By the early 1980\u2019s, 60% of the overall broadcast schedule was required to be Canadian and within that, 50% Canadian from 6 p.m. to midnight, called \u201cevening hours.\u201d 175<\/sup> The evening hour strategy allowed broadcasters to fulfill Canadian content requirements yet minimally impact conventional primetime (8-11 pm) when the Canadian lineup was almost entirely Hollywood hits and audiences and revenue were largest.176<\/sup><\/span><\/p>\n

There was an unforeseen but positive consequence of the evening hours policy designation, namely Canadian capacity in family drama. Canadian broadcasters adapted to the evening hours quotas by licencing live-action dramas for the prime-access 7-8pm time slot that was normally reserved for syndicating low-cost daytime shows. This strategy kept prime time clear for Hollywood hits and minimized the financial sacrifice associated with Canadian content. A 2019 study that I led suggests that the potential global audience for this evergreen genre may not be yet calculated. The YouTube channel, Encore+ rebroadcasts full episodes of Canadian content on the platform. These shows do well on YouTube\u2019s global platform. Long-running, award-winning series like DeGrassi Street<\/i> (CBC, 1979-1986 and CTV, 2001-2015) also launched the global careers of Canadian global celebrities, for example Drake. Shows such as Anne of Green Gables<\/i> (CBC, 1985); Ready or Not<\/i> (Global and Showtime, 1993-1997 and Disney, 1996-2000); My Secret Identity<\/i> (CTV, 1988-1991) got international attention for their representation of teenage life. Netflix did a spin-off of the Anne franchise, Anne with an E<\/i> (CBC and Netflix, 2017-2019). Fairly unique as a genre, this Canadian capacity was an unintentional positive consequence of the policy framework. <\/span><\/p>\n

Over the years, Canadian content requirements for broadcasters fluctuated between combinations of exhibition and expenditure quotas, but notably, not <\/i>direct audience quotas. One financial dynamic of the policy framework remained stable. This is that broadcasters paid inflated fees for Canadian content that were well above market value. For example, if they spent $50,000 per hour for a Hollywood hit, they might commit $150,000 per hour for Canadian content. The purpose was, and is, to fulfill CRTC requirements with a minimum of managerial oversight and achieve the broadcaster’s corporate goal, which is renewal of their CRTC licence to continue their business model, which is broadcasting Hollywood hits. When Canadian shows inevitably lose money in the Canadian market, broadcasters write off the loss.<\/span><\/p>\n

International trade agreements were deployed to protect the policy framework. In 1988, the Free Trade Agreement (FTA) between Canada and the U.S. included a sovereign right to protect Canada\u2019s cultural industries, education, health care, and water.177<\/sup> On January 1, 1994, when FTA was superseded by North American Free Trade Agreement (NAFTA), the cultural exemptions were maintained and it was underscored that simultaneous substitution would not be construed as signal theft. In 2019\u2019s United States-Mexico-Canada-Agreement (USMCA), cultural exemptions were again preserved.178<\/sup><\/span><\/p>\n

1999: A landmark CRTC decision\/Trouble ahead<\/span><\/h1>\n

As the 20th<\/sup> century was winding down, the Internet was winding up. CRTC made a landmark decision. The new media exemption order of May 17, 1999 made CRTC one of the world\u2019s first regulators to exempt the Internet from regulation, a position that flowed, at least in part, from the The Act<\/i>\u2019s requirement that the Canadian system stay technologically current: <\/span><\/p>\n

\n

\u201cCRTC will] not regulate new media activities on the Internet under the <\/i>Broadcasting Act\u201d179<\/sup><\/i><\/span><\/p>\n<\/blockquote>\n

This decision brought the world to Canadians\u2019 doorstep. CRTC\u2019s rationale was that it had found no evidence that the Internet, largely text based at the time, posed a threat to advertising or the traditional TV model. Ironically, history has shown that almost immediately thereafter, Internet advertising revenues began to leap. By 2018, Internet advertising had cannibalized more than half of global advertising revenue, and significantly for this book, the half that was not<\/i> TV. While the Internet decimated advertising in print media, the impact on traditional TV was relatively slow, even after the launch of streaming services. ThinkTV<\/i>\u2019s ten-year review of advertising in Canada (2008-2018)180<\/sup> shows overall growth of all advertising to be 16% (from $11.3B in 2008 to $13.6B in 2018). During this same decade, broadcast TV advertising decreased by only 1.4% (from $3.39B to $3.20B). Internet advertising leaped from $1.6B to $6.8B, to about a 50% share of all Canadian media advertising. Legacy broadcasting fared relatively well due to entrenched consumer habits, stable delivery technologies and long-lasting devices (TV sets). The sunset of linear broadcasting\u2019s half a trillion global revenues has been slow and is ongoing as streaming services compete for dominance in the online era. <\/span><\/p>\n

Despite challenges to its new media exemption order, CRTC held firm in its decision. Zooming forward for a moment, the new media exemption continued to spark heated debate during the 21st<\/sup> century\u2019s four federal inquiries into media disruption. Stakeholders called for extending regulation to exempted online distributors, especially Netflix and other \u201cforeign giants.\u201d The most significant challenge may be the one implied in the recommendations by the BTLR, tabled January 29, 2020, to expand CRTC powers to register and regulate the entire Internet. Critics, including myself, observed this recommendation betrayed the 1999 promise to Canadians of an open Internet and seemed a covert way to find new money to finance production: <\/span><\/p>\n

\n

\u201cWhile appearing to empower CRTC to break promises to Canadian consumers, is the real purpose to empower CRTC to seek subsidies to content makers according to policies that don\u2019t achieve 21st<\/sup> century goals? Very crudely: A money grab?\u201d<\/i>181<\/sup><\/span><\/p>\n<\/blockquote>\n

Back to the history. In 2003, a federal broadcasting inquiry delivered a 1,000-page report from the Department of Canadian Heritage, Our Cultural Sovereignty<\/i>, known as the Lincoln Report after its chair, House of Commons member Clifford Lincoln. A key theme was the worry that Canada\u2019s framework would be felled by an approaching creative destruction that would disrupt the source of Canadian content financing as it transformed media markets to online and global. The report observed that Canadian content, then with a 50% subsidy level (close to today\u2019s 40%), had not evolved into a self-sustainable sector:<\/span><\/p>\n

\n

\u201cSince the beginning of private broadcasting in Canada, the regulatory framework has required Canadian private broadcasters to contribute to the development of Canadian programming. To do this, private broadcasters have used revenues generated from profitable foreign shows to produce or purchase less profitable Canadian programs\u2026 Even after subsidies and advertising revenues are taken into consideration, an English-language Canadian broadcaster averages a net loss of about $125,000 for each hour of Canadian drama, and a net profit of about $275,000 for each hour of American-made drama.\u201d<\/i>182<\/sup><\/span><\/p>\n<\/blockquote>\n

It joined with other reports of the time in criticizing Canadian content rules183<\/sup> and bemoaned the \u201cbewildering and exasperating bureaucracy:\u201d184<\/sup><\/span><\/p>\n

\n

\u201cThe rules\u2026 are contradictory, produce absurd results, and do not make creative sense\u2026 the system would be easier for all if the definitions of \u2018Canadian content\u2019 assumed that a production made by Canadians is Canadian. Canadian content\u2026 has a set of contradictory definitions that do not necessarily allow creators to create. They are dealing with a mountain of paperwork… But even this does not scratch the surface of the system\u2019s complexity\u2026 The rules governing what is or is not Canadian have become so complex that they defy easy description or explanation\u2026 Michael Ondaatje\u2019s, <\/i>The English Patient<\/em>, an internationally successful movie and film, does not qualify as Canadian even though it is a Canadian story, has many visible Canadian elements, and won nine Academy Awards.\u201d185<\/sup><\/i><\/span><\/p>\n<\/blockquote>\n

There are numerous examples of the \u201cexasperating bureaucracy.\u201d\u00a0 Still today, each of the three types of Canadian content is certified by a different government authority. Canadian productions report to Canadian Audio Visual Certification Office (CAVCO). TV treaty co-productions are approved by CAVCO, pending recommendation by CMF. Co-ventures depend directly on CRTC for approval. All three certification bodies (CRTC, CAVCO, CMF) require legal proof of Canadian control of production and ownership of intellectual property (IP), an issue that has been controversial due to the practical implications of a financier acquiring exploitation rights — so as to allow monetization — versus a more theoretical concept of IP.\u00a0 A notable feature is that there is no such thing as privately financed, commercial Canadian content, even if a production theoretically meets all 10 points. In order to be certified, a production must make use of some public funding benefit, such as tax credits or Canadian broadcaster investment.\u00a0<\/span><\/p>\n

Other troubling analyses emerged regarding Canadian TV. Media economists Colin Hoskins, Stuart McFayden, and Adam Finn argued against market intervention, suggesting that the cost of government intervention outweighs the benefits yet does little to prevent so-called market failure. Moreover, while jobs do increase in a protected sector they do not increase in the aggregate.187<\/sup> Cluster expert Michael E. Porter observed that protection actually weakens clusters: <\/span><\/p>\n

\n

\u201cGovernment policies often unwittingly work against cluster formation… Protecting local companies from competition leads to… excessive integration and blunted pressure for innovation\u2026 Companies have to spread activities globally to source inputs and gain access to markets. Failure to do so will lead to a competitive disadvantage.\u201d<\/i>188<\/sup><\/span><\/p>\n<\/blockquote>\n

Along with the rise of iphones, itunes, YouTube, Facebook, and Twitter came widespread predictions that social media would be the end of demand for long form TV. Some years later, Netflix would be the first service to prove this prediction wildly inaccurate. <\/span><\/p>\n

But before the arrival of Netflix, reports addressed Canada\u2019s \u201cdrama crisis.\u201d189<\/sup>\u00a0 Distinguished telecommunications lawyer Peter Grant’s 2004 book, Blockbusters and Trade Wars <\/em>(with Chris Wood), set out a TV policy tool-kit for the pre-streaming era; Grant continued to address globalization with Programs of National Interest (PNI).\u00a0 Industry luminary Trina McQueen’s Dramatic Choices <\/i>cited the demand-driven Hollywood model as inspiration and suggested that Canadian funding be tied to market performance. This led to a 2004 policy tweak, when CRTC defined a Canadian hit as a show with an audience of one million.191<\/sup> It was a critical nod to the role of popularity, but 1 million viewers could not generate sufficient advertising revenue to deliver sustainability, much less profitability. It was too soon for the financial potential of a global audience to be contemplated. Online video was in its infancy. YouTube had not been launched. Netflix was a DVD mail-order business operating in the U.S. only. <\/span><\/p>\n

In 2009, the Canada Television and Cable Production Fund (CTCPF), a public\u2212private partnership that had been founded in 1996 and rebranded as Canadian Television Fund (CTF) in 1998, became the Canada Media Fund (CMF).\u00a0 In mandating CMF, the Department of Canadian Heritage (DCH) underscored the role of demand for high-budget, scripted TV and therefore the appropriateness of prioritizing funding for this genre: <\/span><\/p>\n

\n

\u201cBecause Canadians support the Fund through their cable, satellite and tax dollars, it will focus on the programs that viewers watch. The Fund will put particular emphasis on drama, including comedy and children\u2019s programming.\u201d<\/i>192<\/sup><\/span><\/p>\n<\/blockquote>\n

Today\u2019s CMF spends 60% of its funds on high-budget TV, with the stipulation that to be eligible for funding the project must be \u201c10 out of 10\u201d on the point scale. To orient more towards the audience, CMF implemented \u201cperformance envelopes\u201d per broadcaster that are tethered, in part, to domestic audiences. However, the disconnect is that the gatekeepers to these funds have little need to succeed with audiences, which handicaps the policy intention.193<\/sup><\/span><\/p>\n

By the end of the 20th<\/sup> century, the global TV industry had experienced a half-century of stability and profitability. As is often the case across industries, complacency had set in and the global TV industry failed to see the ample scope for improvement. The industry’s blind spots included how expensive cable had become and how complicated it was just to find a show. A TV remote was a dinosaur compared to the ease and speed of online search.\u00a0 The industry didn\u2019t see that consumers couldn\u2019t care if a program floated in a cloud, which it would soon do. <\/span><\/p>\n

A scrappy startup was about to offer the world a cheap, fast, easy way to watch TV. Founded in 1997 by Stanford University software pals, Wilmot Reed Hastings Jr. and Marc Randolph, Netflix had started in the DVD rental business. In 2007, the same year Apple launched iphone, Netflix launched SVOD (Subscription Video On Demand). Few will remember that this space was already inhabited by Amazon Unbox and Hulu but unlike the other two SVODs, Netflix was not linked to any legacy service. With a monthly subscription of about ten dollars for all the TV you could watch anytime, on any screen, it is easy to understand why this \u201cicon of simplicity.\u201d194<\/sup> was wildly embraced by consumers and grew exponentially. <\/span><\/p>\n

Netflix launched in Canada in 2010, its first international expansion. The trajectory continued. By 2014, nearly 40%195<\/sup> of English-speaking Canadian households subscribed, which set off the alarm for Canada\u2019s first federal inquiry into media disruption, Let\u2019s Talk TV.<\/i> <\/span><\/p>\n

Netflix\u2019 first superpower was to disrupt content delivery with online technology that threatened linear broadcasting and cable. Its second was to disrupt linear broadcasting\u2019s territorial monetization model with a subscription model that was on the order of 10 times cheaper than the average cable subscription. Netflix\u2019 always-on, instant search, and infinite shelf-space chilled consumers\u2019 appetite to struggle with the dinosaur TV remote. Netflix met the demand for commercial-free, on-demand viewing with far more convenience than could be had with such devices as VCRs and TIVOs (remember them?). With these superpowers, Netflix achieved global scale, but soon there was pressure for more: Must-see content. Netflix upgraded to add a third superpower: Original content production. This superpower famously debuted with the expensive hit series, House of Cards<\/i> (2013-2018). From then on, Netflix became a vertically integrated studio and distributor that developed, produced, and globally distributed popular TV. <\/span><\/p>\n

In 2011, a Canadian policy called Programs of National Interest (PNI), partly in response to globalizing markets, was purposed to focus legacy broadcasters on what were deemed to be priority genres. Seemingly somewhat arbitrary, the categories include long-form documentary, drama and comedy, French-language variety, and English-language awards shows. But PNI did not increase broadcasters\u2019 interest in developing entertainment assets that were globally competitive simply because the financiers simply didn\u2019t need to achieve this outcome. The system wasn\u2019t rigged that way and still isn\u2019t. <\/span><\/p>\n

Meanwhile, Canadian consumers continued to love Netflix even as it became clear that the three-alarm fire of TV disruption would decimate the financial foundations of Canada\u2019s policy framework: (1) content distribution by linear broadcasting; (2) cable delivery; and (3) territorial advertising markets for premium TV. The industry turned to the government for help. In the next five years, there would be four federal inquiries on the same question: how to respond to the impact of digital disruption?\u00a0<\/span><\/p>\n","protected":false},"author":2,"menu_order":1,"template":"","meta":{"pb_show_title":"","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-134","chapter","type-chapter","status-publish","hentry"],"part":115,"_links":{"self":[{"href":"https:\/\/pressbooks.library.torontomu.ca\/mediaucracy\/wp-json\/pressbooks\/v2\/chapters\/134","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.library.torontomu.ca\/mediaucracy\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.library.torontomu.ca\/mediaucracy\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.library.torontomu.ca\/mediaucracy\/wp-json\/wp\/v2\/users\/2"}],"version-history":[{"count":82,"href":"https:\/\/pressbooks.library.torontomu.ca\/mediaucracy\/wp-json\/pressbooks\/v2\/chapters\/134\/revisions"}],"predecessor-version":[{"id":1760,"href":"https:\/\/pressbooks.library.torontomu.ca\/mediaucracy\/wp-json\/pressbooks\/v2\/chapters\/134\/revisions\/1760"}],"part":[{"href":"https:\/\/pressbooks.library.torontomu.ca\/mediaucracy\/wp-json\/pressbooks\/v2\/parts\/115"}],"metadata":[{"href":"https:\/\/pressbooks.library.torontomu.ca\/mediaucracy\/wp-json\/pressbooks\/v2\/chapters\/134\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.library.torontomu.ca\/mediaucracy\/wp-json\/wp\/v2\/media?parent=134"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.library.torontomu.ca\/mediaucracy\/wp-json\/pressbooks\/v2\/chapter-type?post=134"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.library.torontomu.ca\/mediaucracy\/wp-json\/wp\/v2\/contributor?post=134"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.library.torontomu.ca\/mediaucracy\/wp-json\/wp\/v2\/license?post=134"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}