The music industry wants CanCon regulations applied to on-demand streaming, but that’s a lot easier said than done.
This article originally appeared in the May/June 2019 issue of Canadian Musician magazine.
By Michael Raine
If the major music streaming services like Spotify and Apple Music want to be in Canada, they need to support Canadian music. The same applies for Netflix and its video streaming counterparts. That is how the Canadian cultural industries feel and they’re increasingly talking about how to apply an evolved version of Canadian content (CanCon) regulations to these on-demand services. The problem is, it’s a lot easier to say that it should be done than it is to say how it should be done. Really, the only clear thing is that it can’t mirror the quota system applied to traditional media.
In 2016, I wrote an article in Canadian Musician examining whether the traditional CanCon quota system for radio and TV was still needed, or if it at least needed to evolve and redefine its objectives. When it was introduced to radio in 1971, the CanCon system’s purpose was to boost support for, and the economic viability of, the then-weak Canadian music industry. It succeeded far beyond most expectations. It’s not the only reason Canada is now one of the leading exporters of music in the world and boasts a very healthy music industry, but that 35 to 40 per cent CanCon quota on radio played a vital role.
“Streaming is the multi-billion-dollar elephant in the room. By arguing over radio, do we risk fighting over crumbs while the elephant takes the peanut sack?” I wrote three years ago. The article concluded: “As an industry with a common goal in exposing Canadians to Canadian music, how do we move forward? … CanCon has been a tremendous success story and the system is not broken, but it needs adjusting. That much most people agree on. But exactly what those adjustments should be – and even what the end goal should be – elicits a lot of conflicting opinions. At some point in the near future, we’ll need to come to a consensus.”
In 2019, consensus remains elusive – especially when it comes to streaming – but increasingly, the necessary conversations are happening.
Last year, the federal government launched reviews of the Broadcasting Act and Telecommunications Act and a central focus has been how government regulations, laws, and support systems should adapt to the new era of music and video streaming dominance. Stakeholders and experts from all corners of the cultural industries submitted feedback and ideas to the Ministries of Canadian Heritage and of Innovation, Science and Economic Development. Much of it was about copyright and fair remuneration for creators, but some broad ideas also emerged about how CanCon may be applied to these on-demand streaming services.
But before we can talk about how CanCon could be applied to streaming, it’s necessary to ask the fundamental question: is CanCon needed in the streaming era?
“Our position has been and continues to be that digital companies, for all intents and purposes, should and must be considered as broadcasters,” says Stuart Johnston, president of the Canadian Independent Music Association (CIMA), describing his organization’s submission to the government. Since the 1990s, the CRTC, which enforces CanCon regulations, has said it has the power to regulate internet-based entertainment services but has chosen to exempt them from regulation. The government’s reviews ask, in part, whether that exemption should end.
“Our position is ‘yes,’” continues Johnston. “We believe that with digital companies, the basis of their business is to commercialize and broadcast intellectual property created by the cultural industries and, in my world, music. So, therefore, there is a responsibility for government, businesses, and these companies to work in partnership together to ensure that they are operating within the commercial cultural sphere on a level playing field with everyone else who is operating in that world.” CIMA’s position is shared by other music organizations, including SOCAN and Music Canada.
For Johnston and his music industry colleagues, it’s a pretty obvious political, ethical, and economic argument. That of course streaming services should have the same obligation to support Canada’s arts industries as traditional broadcasters have. But remember, the reason CanCon came into existence all those years ago is because broadcasters weren’t supporting Canadian music and, therefore, had to be forced to. Michael Geist, the Canada Research Chair in Internet and E-Commerce Law at the University of Ottawa, argues that the same conditions don’t exist in today’s streaming world.
“I think, quite frankly, that what we see taking place in Canada is that there is interest in Canadian content and there is real demand for Canadian content. I think in many ways that tells you precisely what you need to know, which is that if the market wants to see Canadian programming, then services that are dependent upon getting subscribers through the market are going to provide them with Canadian programming,” says Geist, arguing that because there is market demand for Canadian content, there is simply no need for the government to get involved. “I think what we’ve seen today, especially with a service like Netflix, which has become a heavy investor in Canadian content, sometimes taking that Canadian programming and making it available in a global way and sometimes bringing it just back to Canadians, but either way, they’re responding to their perception – and I’d imagine backed up by the data – that there is an interest amongst Canadian subscribers and potential Canadian subscribers in being able to access Canadian content; therefore, the idea that you need to regulate or mandate that they need to provide that as an option seems to run counter to a business whose entire success is dependent on meeting market demand.”
As evidence for Geist’s market-based argument, look at Netflix’s investments in Canadian content. In 2017, the video streaming giant committed to spending $500 million over five years on Canadian films and shows and has since said it may exceed that amount. The music streaming services like Spotify, however, do not invest in Canadian music, unlike radio broadcasters that must contribute to FACTOR and Musicaction through Canadian Content Development (CCD) investments.
Remember, too, that the argument for CanCon is not just about financial support for cultural industries. CanCon’s other objective is to foster and grow a market for that content by ensuring Canadians are exposed to and consuming Canadian art. With music streaming services, nearly every song is available, but availability is not the same thing as exposure or consumption.
“We’re working to get the message forward that the way it’s shaking out so far is not looking good for the levels of consumption of Canadian culture and content in the digital space,” says Michael McCarty, SOCAN’s chief membership and business development officer. “So, step one is ensuring that the government and everybody else is aware of the situation and how dire it can be for Canadian culture and content in those spaces.”
Using data from its licensees, SOCAN’s internal figures show that consumption of Canadian content on streaming services is “a fraction of what it is in the traditional media space” and that “the screen world is twice as bad as the audio world,” according to McCarty. “That tells me the availability problem is dramatically exacerbating the consumption problem. But it probably still has a discovery problem, as well.”
That said, it’s not reasonable to expect that consumption of Canadian music would be equal on streaming services and radio. Within its limited air time, radio can ensure 35 to 40 per cent of the music played is Canadian. On-demand streaming can’t force anyone to listen to anything and listeners get to choose from the entire history of modern music. Unless Canada miraculously produced 35 to 40 per cent of all music, both now and throughout history, you wouldn’t logically expect those numbers to be very close. But regardless, if you’re reading this, you probably want Canadian music to be streamed as much as possible. So, how can those numbers be improved?
For starters, it would require the CRTC to lift its self-imposed regulatory exemption on streaming services, which it’s open to. A report from the CRTC in May 2018 actually recommended the federal government begin regulating video or music services and have them pay for the creation of and/or promote Canadian content. With streaming services, the CRTC lacks the leverage it has over traditional broadcasters. With broadcasters, it controls the broadcast licenses. Obviously, that is not the case with streaming services; instead, the CRTC report suggested streaming services sign binding agreements that outline obligations and standards and face fines if they don’t comply. Even within the music industry, though, more focus is on mandating promotion than payment. In part it’s about politics because no one – government or industry – wants to take the blame for higher subscription prices that may result from services passing extra costs onto consumers if they’re forced to pay into media and music funds. But even mandating promotion and exposure runs risks if it’s too burdensome on services.
“These streaming services can always decide to not operate in Canada,” warns Catherine Moore, a professor of music technology and digital media at the University of Toronto. As she says, any CanCon regulation meant to boost promotion and exposure for Canadian content needs to be concerned with the user experience. A bad user experience turns off consumers and hurts the services’ attractiveness. “Governments aren’t good at creating good user experiences for entertainment – it’s not their job and you can’t really regulate that. So, for me, that’s where I struggle with this whole question and I don’t see an answer to that. That’s the problem, because it has to be something that the services will embrace. You can say, ‘OK, it’s going to be regulation, so it’s not up to them whether they embrace it or not,’ but because the services offer up music in different ways, it would have to be customized to different services.”
That is part of the problem with this conversation – the deeper into the weeds you get, the murkier it becomes. Nonetheless, there are some broad ideas guiding the conversation about applying CanCon to streaming.
There are obvious similarities between video and music streaming, but there are also significant differences. For instance, a volume-based quota system like that applied to traditional media is at least feasible in the video streaming sphere. That’s because services like Netflix and Amazon Prime Video have exclusive and limited libraries, meaning there is little overlap in their content. In music, it’s the opposite. Record labels and publishers have licensed their catalogs to everyone, meaning Spotify, Apple Music, etc., generally have the same 40+ million songs. Like we said, if everyone has everything, a quota system doesn’t work unless Canada produced and continues to produce X percentage of everything.
What then could a CanCon mandate look like in music streaming? The ideas generally focus on three related things that greatly influence users: recommendations and automation, screen real estate (particularly on the home screen), and playlists. The services’ algorithm-based recommendation tools have a major influence on what people listen to. That could mean what it recommends on the home screen when you open the app; it could also mean, for example, what artists it recommends in the “you might also like” section when you search for a specific artist or album.
“Perhaps there are ways within algorithms to add more Canadians to that list, too,” says Johnston. “So, you’re not taking anything away from the discoverability or the usability of the service, but you’re just putting some Canadians up front that would legitimately be there because that listener is listening to X and not Y.”
That raises a key question for McCarty and his colleagues at SOCAN – that being, what data is feeding the algorithm? “Is it based around the style of the artist and it’s irrelevant to the algorithm where they’re from? Is it being fed by American data that is swamping the Canadian consumer data?” he asks. McCarty suggests a study be done on what determines those algorithmic suggestions. “What are the mechanisms that get that music in front of their face and is there a disproportionate chance that it won’t be Canadian music? If that is the case, then why is it and how do we fix it? I think the way we fix it is we have to have a goal of making it better and we have to have, ideally, some sort of numeric target and we say, ‘At the very least, your services can’t bias your systems against our music. But we want to do better than that. We want Canadians to have a good chance of finding Canadian music, so we want you to tweak your algorithms so you are more likely to get Canadian music recommended to you than you used to be.’”
With regards to playlists, some form of modified quota system could theoretically work, but it would be a hard thing to define. Are we talking about X percentage of playlists be all-Canadian, or X percentage of songs on an X percentage of playlists be Canadian, etc.?
“There is nothing stopping Spotify Canada, as an example, from creating Canadian playlists,” says Johnston at CIMA. (It’s worth pointing out that the big music services already do offer many Canada-focused playlists.) “When I say Canadian playlist, I don’t necessarily mean that the entire playlist consists of Canadian music, but a playlist that is created by the people here at Spotify Canada that is then available on Spotify UK, Spotify US, Spotify Israel, Spotify Australia, etc. It is those kinds of ways that discoverability grows. And vice versa, too. Playlists created in Australia would be very strong offerings in Canada, as well.”
The danger of getting too focused on playlists, McCarty points out, is that “they’re changing all the time, so it would be a mistake to say ‘we want playlists to be tweaked’ and then what if next year playlists fall by the wayside in terms of being a main driver of discovery and instead it’s smart speakers?” That is very conceivable. The popularity of smart speakers is growing rapidly and, in turn, is altering music listening habits. For example, with smart speakers, which work in tandem with streaming services, users commonly ask it to play a specific song. The speaker then follows up that song with an auto-generated playlist based on the genre, era, and mood of the requested song. That means those spontaneous auto-generated playlists also need to be considered in this conversation.
As mentioned, another focus is on home screen real estate, which, of course, is also about recommendation. What first appears on the screen when you open Spotify, Apple Music, or YouTube Music has a definite impact on what you decide to listen to. Often, people don’t want to consider unlimited options. They want to be given a handful of personalized options, choose one, and press play.
“One of the things I keep thinking of in this conversation is, how are users accessing music? Increasingly it’s mobile, which has a very small screen. That, in terms of having anything prioritized over other things, is difficult,” says Moore. “For the video side, yes people are looking on phones, but they’re more likely to want to enjoy the experience on a larger screen, so you’re at least looking at tablet-size screens and then up to enormous home televisions. So, I think for video, just because of the way users are looking at the services, there is a larger area to play with to have some sort of featured Canadian real estate there. The way to do it when you have a small screen is not space, but time, so that the first thing that comes up is always something Canadian. But that then goes against the concept of on-demand. So, it would need to be something like whenever you switched on your streaming service, you would be given the option to listen to Canadian things first or other things first. Now, that is not a great user experience. It’s another step to go through, unless you make it silly and funny.”
What Moore means by “silly and funny” is something like Spotify’s playful but limited-time Canadify app from 2014. You could enter any non-Canadian artist and it would offer up a fully Canadian playlist of similar music. It also offered a playlist of 100 songs Canadians disproportionately prefer. Spotify called it a “’fun with data’-style web app” that could “lead to some interesting listening and certainly shows the range and depth of great music coming from Canada.”
If streaming services are going to be forced to suggest more Canadian content on their valuable home screens and through their recommendations, Moore believes it can’t be done in an eat-your-vegetables kind of way. The music services share the same library of music, so they live and die by the user experience they offer. “If you say, effectively, the ‘Government of Canada wants you to listen to…,’ that is a huge turnoff,” Moore adds.
Even as we just scratch the surface of this conversation, it’s obvious there are many variables to consider – exponentially more than in traditional radio and television – and answers become less clear as you get into specifics. One benefit for Canada is that we’re not the only country dealing with these questions.
Currently, the E.U. is attempting to implement a 30 per cent European content quota for on-demand video services like Netflix. The problem has been in defining “30 per cent of what?” Approved amendments to the E.U.’s audiovisual media services directive state that “on-demand audiovisual media services under their jurisdiction secure at least a 30 per cent share of European works in their catalogues and ensure prominence of those works.” But how that percentage is calculated hasn’t been determined. Is it 30 per cent of titles or hours, for example? And if they must “ensure prominence of those works,” what exactly does that mean and how is it measured? There is no doubt Canada’s arts industries are closely watching how those questions get answered.
Within the music industry, consensus appears to be emerging that government has a role to play in protecting and fostering Canadian content in a globalized and streaming-dominated entertainment world. What that should look like, though, no one is sure, and outside of the music industry, there is less agreement.
After all, when it comes to CanCon and streaming, maybe it’s a fix looking for a problem. Geist points out that when CanCon first emerged, Canadians didn’t control what was on their TVs and radios and so CanCon was needed to ensure they were given access to their own art. With on-demand streaming, “Canadians do have control over what they want to watch and the question then, from a policy perspective, should be, ‘Is there Canadian content available for them if they want to watch it? And is it discoverable? Can they find it if they want to access it?’ At least from an anecdotal basis and the kind of data that is available based on taking a look at what’s available on those services, it suggests that the answer is yes. There is Canadian content out there and we know it’s being produced and we know that those who want to find it can find it.”
For many whose livelihoods depend on the health of the Canadian music industry, or who believe in its intrinsic cultural value, that isn’t good enough.
“Countries around the world furiously protect their culture, and rightfully so… Holding on to that little niche of who you are, culturally speaking and with language, it’s very important. So, government does indeed have a role to ensure that everyone pays attention to that while looking at the bigger picture and operating in a global market,” says Johnston. “Really good discussions must occur, not only with government, but with industry and these digital services to talk about discoverability and marketing opportunities. And not only in Canada, but in markets around the world. I think it serves these companies’ best interests in order to commercially exploit, in a positive way, the indigenous culture of all the countries that they are in.”
So, if done right, everybody could win. But that’s a big if.
UPDATE: On May 16, 2019, after this article was published, the the federal government’s Standing Committee on Canadian Heritage tabled in the House of Commons its Shifting Paradigms report as part of its study on Remuneration Models for Artists and Creative Industries. The report offered 22 recommendations, the second of which was "That the Government of Canada develop mechanisms by which streaming services will develop and promote Canadian content." Read more on the report HERE.
Michael Raine is the Senior Editor of Canadian Musician