Last week, as most North American readers will know, the Super Bowl was played in Miami with the Kansas City Chiefs beating the San Francisco 49’ers in a tight, hard fought game to win the National Football League (NFL) championship. Great, but what, (you may ask,) does this have to do with copyright, content, and culture? Well, quite a bit if you are the Canadian broadcaster (Bell Media) that holds the Canadian broadcast rights to the game. For the past couple of years I have written blogs (here and here) on how the rather arcane simultaneous substitution (simsub) rules that govern Canadian broadcasting affect the Super Bowl broadcast in Canada, and what impact those rules have on Canadian broadcasting and, from a broader perspective, the funding that goes into the production of Canadian content. In understanding the issue, non-Canadian readers need to know that US networks are widely available to audiences in Canada, either over-the-air in border areas or more commonly carried by cable, fibre and satellite systems under a compulsory retransmission licence issued by the Canadian broadcast regulator, the Canadian Radio-Television and Telecommunications Commission (CRTC).
While some US border stations object to the retransmission system, in most cases they benefit because they can reach a larger (Canadian) audience, and in many cases pitch their ads to cross-border shoppers. However, when a Canadian broadcaster has purchased the Canadian rights to a program that a US network is also showing, and where the Canadian broadcaster schedules the broadcast of the program to coincide exactly with the timing of the US broadcast (which they almost always do, for reasons that will be obvious in a minute), the Canadian broadcaster, under regulations laid down by the CRTC, can require the cable or satellite carrier in Canada to substitute its Canadian ads for those of the originating US signal. This is the essence of simsub. Simsub is intended to allow the Canadian broadcaster that has purchased the Canadian rights to a US program to reap the full benefit of the Canadian advertising revenue rather than having some of the potential audience bled off by viewers watching the US feed with its ads sold by the US network. Under simsub, even if Canadian viewers watch the program on the US station, they see only the local Canadian ads, and the Canadian broadcaster can assure its advertisers that the program will deliver the full anticipated audience. Generally this works pretty well for all concerned—except if you are a Canadian viewer who specifically wants to see the US ads. Enter the Super Bowl controversy.
Unless you are a rather unusual individual, normally viewers don’t actually want to see ads. They have to be pretty compelling to keep people glued to the screen, and this of course is where the Super Bowl has excelled. The high-quality and creative ads themselves have become part of the attraction of watching the game and this led the CRTC to determine three years ago, after public hearings, that the simsub regulations would not apply to the Super Bowl broadcast. As a result Bell Media, who had acquired the Super Bowl broadcast rights in Canada, suddenly faced the prospect of losing a big chunk of its advertising audience for the game since Canadian viewers, for the most part, would prefer to tune in to the US signal in order to catch the US ads. Bell appealed the CRTC ruling to the Federal Court, lost, and then took the case to the Supreme Court of Canada. Meanwhile the NFL as the vendor of the rights was also not happy since its licensee, Bell, would no longer be in a position to offer top dollar for the Canadian rights as it would be getting only part of the audience. And the NFL has clout.
The negotiation of the new NAFTA (aka USMCA/CUSMA in Canada) was the perfect vehicle to address the issue from the NFL’s (and presumably from Bell’s) perspective. Many weighty economic issues were on the Canada-US negotiating table but among the discussion of steel and aluminum quotas, auto tariffs, dairy access, and dispute settlement mechanisms, the issue of simsub regulations and the Super Bowl ads crowded its way on to the agenda. Canadian negotiators were not going to surrender larger gains in order to defend the CRTC decision on football ads, and so as part of the USMCA, Canada agreed to treat the Super Bowl no differently from other content subject to the simsub regulations. As long as simsub lasts, the Super Bowl broadcast will be treated in the same way as other US content covered by the regulation, according to Annex 15-D[i] of USMCA/CUSMA.
Last year I thought this would be the reason that 2019 would be the last year that Canadian viewers would get to see the US Super Bowl ads in Canada, but I was wrong. They did not get to watch the ads, but not because of the trade agreement, which is not yet in force. Even though ratifying legislation has been passed in Mexico and the US (and President Trump has even signed it into law in the US), Canada’s Parliament has yet to pass the necessary legislation. That is a work in progress and the CUSMA ratification Bill (C-4) was introduced only in late January. But all this is moot (with respect to the Super Bowl ads) since the Supreme Court upheld Bell’s appeal and in late December 2019 ruling that the CRTC had exceeded its mandate by disallowing simsub for the ads.
The decision came just in time for Bell to be able to guarantee to its advertisers that they would get the full Canadian audience, estimated to be in excess of five million viewers, still a small fraction of the estimated 102 million viewers in the US, but significant in a Canadian context. The difference in the ad revenues in 2020 compared to the last couple of years when simsub of the ads was not required is reported to have been worth over $10 million to Bell. This outcome of course will help its bottom line and make Bell shareholders happy but also, tangentially and somewhat strangely, it will support Canadian content. This is because Bell–like other Canadian broadcasters–is required to invest a certain percentage of its revenues (currently five percent) into Canadian production under the terms of its TV licence from the CRTC.
It is ironic therefore that the CRTC decision to exempt the Super Bowl ads from the simsub regulations had the perverse effect of directing funds away from Canadian production, given that encouraging production of Canadian content is one of the key mandates of the Commission. The CRTC may have been shot down by the Supreme Court regarding its exemption of the Super Bowl ads from simsub, but the Commission has a lot more on its plate these days—and may get even wider powers.
The Broadcasting and Telecommunications Legislative Review Panel, a review body charged by the government to review the legislation that governs broadcasting and telecoms, has just reported out. Its report, “Canada’s Communications Future: Time to Act” contains a number of far-reaching (and controversial) recommendations that if adopted could have a major impact on the role of the CRTC. These recommendations include everything from changing the name of the Commission (to the Canadian Communications Commission) to granting it wide new powers to monitor markets, gather information, conduct investigations and levy fines. If the recommendations are accepted “media content undertakings”, including those based outside Canada, would be required to register with the CRTC which would have the power to impose spending requirements or levies to fund Canadian news content. This would cover entities like Facebook and Google. Non-Canadian streaming content platforms would be required to collect and remit sales taxes, and there would be an emphasis on requiring more Canadian production, rather than just production in Canada. In addition, the Panel recommends that the Canadian Broadcasting Corporation’s (CBC) TV-service become ad-free (CBC Radio is already free of ads).
Many of the recommendations have provoked strong reaction; Prime Minister Trudeau was forced to clarify that the government had no intention of regulating news providers, seen as a freedom of speech issue. For the CBC to go ad-free would require substantial additional public funding, which is unlikely to happen. Other recommendations will take more time to consider.
Whether it changes its name or continues on as the CRTC, the Commission will have many issues to address as traditional, national, regulated broadcasting models are increasingly challenged by new international internet-based platforms. The regulatory tools that it has used in the past, like simsub, designed to protect local broadcasters and by extension to fund Canadian content, will probably become increasingly irrelevant–although for now the Super Bowl is safely back in the fold. It remains to be seen whether the Legislative Review Panel’s proposals to extend the Commission’s regulatory reach to content businesses based outside Canada but delivering content to Canadians will get much traction. But there is one issue that the Commission will no longer have to worry about—Super Bowl ads! Issue resolved. And hopefully this is the last blog I’ll be writing on this topic.
© Hugh Stephens 2020. All Rights Reserved.
[i] Canada shall rescind Broadcasting Regulatory Policy CRTC 2016-334 and Broadcasting Order CRTC 2016-335. With respect to simultaneous substitution of commercials during the retransmission in Canada of the program referenced in those measures, Canada may not accord the program treatment less favorable than the treatment accorded to other programs originating in the United States retransmitted in Canada.