Unravelling the Complexities of the Canadian Content (Cancon) Conundrum

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Feds to modernize definition of a Canadian film and TV program” screamed the headline. The Canadian Press story, repeated in newspapers across the country early last month, was based on comments by Canadian Heritage Minister Pablo Rodriquez who declared that as part of the process of enacting Bill C-11, now known as the Online Streaming Act, he wants to modernize the definition of Canadian content and is “open to all kinds of suggestions and ideas.” If this is really true, he will get an earful. The Canadian Content rules (Cancon for short) are one of the most complicated and convoluted aspects of Canada’s broadcasting and audio-visual policy, with multiple stakeholders engaged, many of whom have divergent, or at least not fully aligned, interests. It is a policy that is difficult enough to explain, let alone to find the secret formula to untie the Gordian knot that Cancon has become. But first, let me attempt to explain the policy.

Cancon regulations go back to the 1970s and are designed, in theory, to promote Canadian culture and identity through the production of more Canadian content, basically to help offset the cultural tsunami existing next door in the United States. They apply to audio-visual (AV) productions (movies and TV shows), as well as music, but I am restricting my comments here to Cancon regulations applicable to the AV sector.  How do the Cancon regulations work, and do they in fact achieve their professed goal? Cancon requirements are implemented in two ways; by requiring that a certain percentage of content broadcast on television stations based in Canada meets minimum Canadian content quotas and by increasing production of Cancon by providing financial subsidies to productions that qualify as Canadian. Some of these funds come from mandatory contributions (a percentage of revenues) imposed on broadcasters and cable distributors by the Broadcasting Act as a condition of licence. The intent of C-11 is to extend the reach of the Broadcasting Act to encompass online streaming services, making them subject to oversight by the broadcast regulator, the CRTC. Among other things, the Bill would empower the CTRC to apply Cancon requirements or other “discoverability” obligations to online streamers, whether they are based in Canada or not. Europe has already taken similar measures. Thus, what qualifies as Cancon is a critical piece of the puzzle. 

Most Canadians would probably think the objective of the Cancon policy is to create more productions that tell Canadian stories–stories written by Canadian writers, stories set in Canada, stories featuring Canadian actors, stories that reflect Canadian realities, and so on. But they would be wrong, as is frequently pointed out by the media when running stories on Canadian content. The current poster child for this anomaly is the Disney animated feature Turning Red, set in Toronto, featuring the story of a young Chinese-Canadian girl growing up in the city, and starring Canadian actor Sandra Oh. It may look and feel Canadian, but it does not qualify as Cancon because it was made by Disney, a non-Canadian entity. Disney financed it and holds the copyright. Nor did the adaptation of Margaret Atwood’s Handmaid’s Tale (filmed in Cambridge, Ont.) or Amazon Prime’s recent series on the Toronto Maple Leafs qualify. This is because there are complex financial, management, creative and intellectual property formulas that govern what is considered Canadian content. On the other hand, some obscure co-production with another country that has no distinguishable Canadian features at all can qualify. The varying requirements to be Cancon-certified are overseen by three different organizations, the Canadian Audio-Visual Certification Office (CAVCO), a unit of the Department of Canadian Heritage, the broadcast regulator, the CRTC, and Telefilm Canada, a government corporation, which certifies treaty co-productions. There are common features but not all certification requirements are the same.

For CAVCO, there are four key elements that are taken into consideration; production control, copyright and distribution rights, creative positions and production spend. The producer must be the central decision maker and must be Canadian. With regard to the intellectual property, unless the film is a treaty co-production, the Canadian production company must be the copyright holder for all commercial exploitation purposes for a minimum of 25 years. As for distribution, the producer must control the initial licensing of all commercial rights and there must be an agreement with a Canadian distributor or a CRTC-licensed broadcaster to show the production in Canada within the first two years of release. Now we come to the creative positions and the (in)famous points test.

A production must achieve a minimum of 6 out of 10 points to be considered Canadian under both CAVCO and CRTC rules. Under this system, the writer gets 2 points; the director gets 2 points. Either the writer or the director must be Canadian. The highest and second highest paid performers each get 1 point and one of these two must be Canadian. For live action productions the other 4 points go to the Director of Photography, the Production Designer; the Music Composer and the Picture Editor. Those people born in Canada who have made it big in Hollywood, and who have retained Canadian citizenship, are invaluable for their points! Some sources of funding, like the Canada Media Fund, require a full 10 points out of 10. Finally, there is the production spend. Seventy-five percent or more of all cost for production services must be payable to Canadians and a similar percentage of all post-production costs must be incurred for services provided in Canada. If a production is CAVCO certified, it qualifies for Cancon tax credits (a straight financial subsidy).

CRTC certification is different and is not quite so stringent. It does not qualify a production for CAVCO Cancon tax credits but does provide access to less generous Production Services Tax Credits. Under CRTC certification a minimum of 6/10 points is required, the producer must be Canadian and 75% of the cost of production must be spent in Canada or on Canadian services. The CRTC also imposes Cancon quotas on Canadian broadcasters, a percentage of on-air time and a percentage of revenues dedicated to Canadian production.

Then there is Telefilm Canada, the agency that administers the co-production agreements that Canada has with more than sixty countries, but, significantly, not the United States. The US does not need co-production agreements. It has Hollywood. Depending on the amount of financing from each of the co-production partners, the copyright ownership, per country budget spend, split of creative and key crew roles, the production activity allocation and the distribution rights are roughly divided according to the respective share of financing from each partner. To the uninitiated Cancon is, (as Winston Churchill famously said when referring to Russia prior to WW2), “a riddle, wrapped in a mystery, inside an enigma”. As I have noted above, qualifying as Cancon is important for two key reasons; to meet regulatory requirements (spending and airtime quotas) for broadcasters–and potentially for online streaming services if the Online Streaming Act passes in its current iteration–and to be able to access financial subsidies, aka tax credits.

That is what Cancon is.[i] What it clearly is not, is a system designed to encourage the telling of Canadian stories or stories by Canadian authors through film and television. The fact that Atwood’s Handmaid’s Tale, Life of Pi written by Canadian author Yann Martel and The English Patient written by Michael Ondaatje did not qualify as Cancon demonstrates this, although there is nothing particularly Canadian about any of these stories. The fact that the films were made without any need for CAVCO tax credits perhaps illustrates that good stories will get made, regardless of the nationality of the author.

So what is a Canadian story? According to retired media executive Richard Stursburg in his recent book The Tangled Garden (A Canadian Cultural Manifesto for the Digital Age), productions funded with Canadian money should look Canadian. He laments the fact that many Canadian productions are “Americanized” to make them more attractive to US audiences, and thus more commercially valuable. The cops don’t look like Mounties, the cityscapes look like any random North American city with all distinguishing Canadian features excluded, even the accents are the same. Contrast this to British productions that are clearly British. There is no mistaking Line of Duty for FBI. I guess part of Canada’s problem is that so much of it looks like parts of the US. And except for the Newfies, it is pretty hard to distinguish a Canadian accent from a middle-of-the-road US accent. The Brits have no such problem. (By the way, have you noticed how villains almost always talk with a British accent—at least Canadians don’t have that cross to bear!)

But does a production have to look Canadian to be Canadian? Not all productions lend themselves to portraying Canada. What about Sci-fi? Do the aliens have to end every second sentence with, eh? And then there are the kids shows. Kids really don’t care much about the national origins, accents or behaviour of the animated characters they are watching, as long as they are entertained. Look at the success of Peppa Pig in North America, plummy British accents and all. And Bugs Bunny’s Brooklyn/Flatbush accent has gone around the woild. Then there is Caillou, the misbehaving little boy that many parents apparently blame for their own kids temper tantrums. Caillou is one of Canada’s contributions to the world of children’s cartoon characters, for better or for worse. His two authors, Christine L’Heureux and Hélène Desputeaux, have spent most of the past two decades legally scratching each other’s eyes out over ownership of the character’s copyright, as I noted in a blog post about a year ago. (“Caillou: Did the Little Boy’s Bad Temper Spill Over to the Copyright Squabble between his two “Mothers”?) The kid’s bad behaviour is apparently contagious.

However, let’s get back to defining Canadian content. One idea is to provide tax credit incentives to shows that look more Canadian or tell Canadian stories, regardless of the source of the money. That is what is done in Britain where there is a broader definition of what is British. There has to be a minimum amount of production done in Britain, as in Canada, but the “Britishness” of stories is a positive factor, and foreign financing is not a disqualifying factor. Thus, the Harry Potter films, made by Warner Bros. qualify. And why not? What is more British than Hogwarts?

This is part of the dilemma that Minister Rodriguez is facing. How to define Cancon, and how to support Canadian producers, while encouraging foreign producers to undertake more production of Canadian stories. It is worth noting that Cancon aside, foreign filmmakers have made Canada one of the prime locations for movie production outside the US, bringing plenty of good jobs to the industry. There is lots of “Foreign Location Shooting” (FLS) taking place in Canada that benefits from Canadian provincial tax credits, but which makes no pretence of representing Canada or Canadian stories in any way. FLS does not seek to access Cancon subsidies. Foreign, mostly US, studios film in Canada because Canada offers tax incentives, skilled crews, good locations and lower costs while being close to US centres. They churn out product for the US market using US stars and Canadian crews. The recent Nordicity study shows that almost twice as much is spent in Canada on FLS than on Cancon productions. This FLS production is good news for those Canadians engaged in the film and TV industry, but apart from building and maintaining production capacity, does nothing to promote Canadian content.

Netflix, for example, is one of the largest producers of content in Canada through its FLS productions but no matter how Canadian it makes its stories, under the present rules its product will not qualify as Cancon because the producer (Netflix) is not Canadian, and the copyright is not held by a Canadian. If the CRTC imposes a “compulsory contribution” of a percentage of revenues generated in Canada on streaming services, the foreign streamers will be helping to finance Cancon production with no guarantee of getting distribution rights, while still possibly having to meet some kind of Cancon quotas (which are more difficult to implement with regard to on-demand streaming services as opposed to linear broadcasters). They could, of course, seek to license productions from the Canadian producers, who are eager to tap into the resources of the big streamers to help finance their own productions. But again, depending on what definition of Cancon emerges from this process, the end result may not look or feel any more Canadian than any other production. As for the Canadian public, a recent poll from Nanos Research indicates that two-thirds of Canadians support or somewhat support foreign streaming services financially supporting the creation of Canadian content in the same way that Canadian broadcasters do. That’s assuming that the Canadian public actually understands how Cancon works and what Cancon is.

What will the solution be? Does Cancon have to be recognizably Canadian? To promote Cancon, does the content have to be produced by Canadians and the copyright held by Canadians? Is the goal to promote jobs and grow the industry or to promote content that strengthens Canadian identity? Is it possible to do all of the above? I don’t have the answers. Minds greater than mine have laboured over this question for years and many recommendations have been brought forth. If the legislation passes, (and I assume it will after review in the Senate now that it has been voted out of Committee in the Commons), it will still take some time for the definition of Cancon to become clear as the Bill requires the CRTC to come up with a definition, after public hearings. However, the CRTC will also be required to take into account guidance provided to it by government which includes, among other things, an obligation to consider copyright ownership and distribution control by Canadians. It is going to be a long process.

It is easy to throw stones at the present system because it is open to question as to whether it has achieved its desired policy goals, although what those policy goals actually are is part of the question. One thing is certain; change is coming. Whether Rodriguez will be able to thread the needle to satisfy Canadian cultural nationalists, the Canadian film industry, the film industry in Canada (not the same thing) as well as the foreign studios and streamers remains to be seen. Cancon is not going to go away. Whether it can be adapted to the realities of the digital age is another question.

© Hugh Stephens, 2022. All Rights Reserved.


[i] My thanks go to Peter Grant for providing background materials, including a presentation by Doug Barrett and Erin Findlay prepared for the DM@X-tra conference in March of this year.

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