Month: June 2023

When an “irresistible force” meets an “immovable object”, the result is a classic paradox. That is, unless one of the two—or both—give way. If we assume the irresistible force is the Government of Canada in the form of Bill C-18, the Online News Act, and two giant internet platforms (Meta and Google) are the immovable object, then something has got to give. Right now, a massive game of “chicken” is underway between the two, as the Government of Canada has kept the irresistible force moving forward by rejecting amendments proposed by the platforms that would have significantly altered the implementation of the legislation. C-18 has been enacted into law– without the amendments. The platforms have responded by doubling down on their threats to block access by Canadians to Canadian news content on their services. They are carrying out blockages of news for some Canadian subscribers to “test the feasibility” of complying with the legislation by ceasing to use or link to news content, rather than entering into negotiations to compensate news outlets for using their content on their online services. Blocking news content would technically put them in compliance with the Online News Act although it would defeat the intent of the legislation, which is to establish a framework for commercial negotiations—bearing in mind the enormous and disproportionate market power of the internet giants– between Canadian news outlets and the platforms when the latter use (make available) news content to attract or retain viewers. 

Meta (Facebook and Instagram) has been the most strident stating on June 22, the day C-18 became law, “Today, we are confirming that news availability will be ended on Facebook and Instagram for all users in Canada prior to the Online News Act (Bill C-18) taking effect.” Google also noted its displeasure but indicated it would continue to have dialogue with the government in hopes of reaching an acceptable compromise. For his part, Heritage Minister Pablo Rodriguez, who is responsible for the legislation, has reiterated that he is open to discussion but will not give in to “threats”. While the Bill has passed Parliament and received royal assent, it will not come into effect until implementing regulations are drafted by the Canadian Radio-Television and Telecommunications Commission (CRTC), which will take about six months. This is where the paradox will likely be resolved.

Rodriguez has repeatedly referred to what happened in Australia, where a News Media Bargaining Code was created requiring major internet platforms (the same two, Google and Facebook) to reach content deals with Australian media, failing which the Australian Competition and Consumer Commission (ACCC) would oversee a process of binding arbitration. Google, which also faced and resolved similar demands in France, played hardball by trying to rouse Australian consumers against their own government by threatening to leave the Australian market. Facebook blacked out news feeds, a tactic that backfired. Australian ministers accused the companies of threats and blackmail, but in the end both platforms reached satisfactory agreements with Australian media, and both companies continue to operate Down Under. There are, however, some difference between the Australian situation in 2021 and the Canadian situation in 2023.

The first is that the platforms were able to avoid “designation” by the Australian authorities by coming to agreements with most Australian news outlets without being forced into government managed arbitration. This is important for the platforms who want to maintain that any agreements they reach are “voluntary”. In the case of the Canadian legislation, they are required to self-designate and if they do not–assuming they use news content–they will have to answer to the CRTC. The Commission could issue an exemption order if it was satisfied that the platforms had reached a sufficient number of voluntary and fair agreements, but Google and Meta want to keep the bargaining power in their hands. The Australian government blinked just a bit by allowing them to avoid designation. To this day, the News Media Bargaining Code has not been invoked for either company.

The other big difference is the economic position of both platforms which has changed somewhat since Australia brought in its legislation. Both are still extremely profitable, but both are facing some headwinds. In the case of Google, it is facing–for the first time in many years–some competition for its search engine as Microsoft launches AI-enabled search through Bing. For its part Meta, Facebook’s parent company, has just gone through two rounds of major layoffs, reducing its workforce by over 20,000 positions, and growth has slowed although Facebook continues to generate ad revenues well in excess of $100 billion.

Combined with some retrenchment and increased competition, the platforms are also facing the possibility that after Canada, other jurisdictions will come knocking at their door. Already there is draft legislation in California and at the federal level in the US, the Journalism Competition and Preservation Act, (JCPA) which would “allow news organizations to jointly negotiate fair compensation for access to their content by Google, Facebook, and other dominant platforms” has been re-introduced into Congress after almost passing last year. Whatever deal is struck in Canada, if there is one, will have an impact on how the platforms respond to US developments. (Meta has also threatened to pull its news content in California if that state law passes—but would they really take on California?).

So, where does that leave us with respect to our paradox and events in Canada? Will Pablo Rodriguez prove to be not entirely an “irresistible force” and/or will the platforms fall short of being totally “immovable”? While Rodriguez has received wide support from some parts of the Canadian media for the way he has handled C-18, the media does not all speak with one voice (as one would expect), resulting in some criticism of the minister. In particular, the Globe and Mail, which bills itself as Canada’s national daily, is a lukewarm supporter of the pro C-18 position taken by the news media’s industry association, News Media Canada. One of the Globe’s prominent columnists, Andrew Coyne, has taken particular delight in trashing the legislation. The fact that the Globe has reached a content deal with Google and Facebook is not immaterial.

Bell Media not coincidentally announced earlier this month that it was laying off 1300 journalists, closing six radio stations, eliminating all of its foreign bureaux but Washington, and consolidating news reporting, in effect gutting news coverage at most of its local TV and radio outlets. It attributed the cost-cutting measures to “unfavourable public policy and regulatory conditions that it can no longer wait out“, launching speculation that Bell had decided that there will be no funding coming from Google and Facebook. This week it was revealed that two of the other major press organizations, Postmedia, publisher of the National Post and Nordstar, publisher of the Toronto Star, are in merger talks. Rodriguez and the Trudeau government are under considerable pressure to deliver some relief for hard pressed news organizations as a result of C-18. What can Rodriguez do? The lever of pulling government advertising from the platforms is a thin reed. According to the Globe, the Canadian government spent just over $11 million on advertising on Meta last year. For a company whose ads sales top $100 billion, this amount is a rounding error. Spending on Google was even less at $8 million. More important for the platforms, however, is the reputational damage. It is not a good idea in the end to headbutt the government of a wealthy G7 country of 40 million. Not smart in the long run. Do the platforms really want to antagonize the people and government of Canada if there is a better way?

I have no crystal ball or inside sources, but my hunch is that this is not over. In fact, it’s never over ’til it’s over. (Did Yogi Berra really say that?) As much as Meta says there is nothing to negotiate, there is surely an elusive landing zone somewhere between the immovable object and the irresistible force, and both sides have around six months to find it. It’s not as if the Australian government refused to negotiate with the platforms. Australia did not back down from its overall objectives, but it agreed to modify the process, to the platform’s satisfaction. In drafting its regulations, the CRTC can surely find some wiggle room or ministerial discretion without amending the legislation. (Introducing amendments to water down the Act would open the government to charges of caving in to “US tech giants”). The estimated cash bonanza may be somewhat less than originally expected and perhaps not every news outlet in the country will benefit to the extent that they would like but at the end of the day, I believe it is still possible that a compromise will be reached allowing both the companies and the Government of Canada to claim victory. (Part of the problem in Canada is that in their zeal to be all-encompassing, Parliamentarians added amendments to widen the scope of those eligible for payments including campus and community radio stations that may not even produce news. This has weakened rather than strengthened the legislation).

The bottom line, however, is that the platforms derive value from news content, and they should be paying for it. Meta in particular has complained that it should not be required to pay news content providers for content that these same providers post to the Facebook platform. There is logic to this position. If one looks at just these transactions, it is illogical to expect payment for every post when the posts are being put up by the news organizations themselves. If that were the case, as David Common of the CBC observed when interviewing Mr. Rodriguez on this point, the CBC could simply hire staff whose sole job was to post news items to Facebook in order to claim compensation from Meta. Moreover, the news organizations themselves benefit from the exposure provided by Facebook. But no-one is arguing that the compensation be based entirely on these one-way transactions. It all has to do with commercial negotiations over what constitutes “fair compensation”, as laid out by the legislation. As I pointed out in an op-ed back in September of last year;

“Fair compensation negotiations will take into account the benefit that news publishers gain by posting links to the platforms. That benefit will be offset against the greater benefit the platforms gain by using news content to attract viewers and advertisers. That trade-off will normally be worked out during bilateral negotiations between the publishers and the platforms, with the government stepping in only if there is a failure to reach agreement.”

Engaging with news content encourages Facebook users to stay on the platform longer, which is what it is all about from Meta’s perspective, because this promotes greater exposure to ad content. That content had to be produced by someone. Meta (and Google) should not be getting a free ride. Exactly how much they should pay, however, is complex and is best determined through commercial negotiations, with the government (the CRTC) preferably staying very much in the background. It is in the interest of all parties to find the sweet spot. While playing “chicken” is one way to negotiate, it is a risky, high-stakes strategy. The sooner both sides get down to finding that sweet spot, the better it will be for all concerned—journalism, advertisers, social media platforms, search engines, government and most of all, consumers.

© Hugh Stephens, 2023. All Rights Reserved.

Update: This issue continues to evolve, almost daily. Since this blog was posted, Google has announced that it too will block news in Canada by removing links to Canadian news sites. Sites such as the New York Times, which maintains a news bureau in Canada, will also likely be blocked. Facebook, and now Google, have also served notice to those news sites with whom it has reached deals to provide financial support or compensation for news content, that it will terminate these arrangements. This is clearly an attempt to split the Canadian media and turn the “haves” (those who have already reached deals with the platforms) against the rest. If Google blocks Canadian news, it will be shooting itself in the foot as this will only encourage users to turn to alternative search engines, and is a dramatic escalation of the game of chicken that is being played. Pedro Rodriguez has called the platforms “deeply irresponsible” and “out of touch”. The outcome of this tussle is of enormous importance for the viability of responsible journalism in many countries.

Is this the final turn of the wheel? Stay tuned. Yogi Berra was right!

Whether the decision against Internet Archive in the U.S. will have a chilling effect on controlled digital lending practices in Canada remains to be seen.

Earlier this year, a U.S. district court ruled that San Francisco–based non-profit Internet Archive (IA) infringed the copyright of four international publishing houses when it loaned unlicensed digital copies of books online, a practice known as controlled digital lending (CDL). CDL is based on the premise that once a library has purchased a physical book it is free to make a digital copy of the work and loan that copy, provided the original work is removed from circulation. If two digital copies are loaned, there must be two books kept out of circulation by the library, a limitation called the “owned-to-loaned” ratio. Only one user may be given access to a single digital copy at any one time, and a separate digital copy is not loaned until the first one is “returned.” For publishers and authors, CDL amounts to blatant copyright infringement leading to the destruction of e-book markets and licensing. Many libraries see the issue differently, and the Canadian Federation of Library Associations has provided its members with guidelines for pursuing CDL. Until the recent U.S. decision, the CDL theory had not been tested in court.

Several arguments have been advanced to justify CDL, even though all concerned acknowledge that it requires making a full, unauthorized copy of the work. Its proponents argue they are simply bringing library lending into the digital age, and that digital lending is an extension of the first sale or exhaustion doctrine through other means (once a book has been purchased it can be loaned or resold multiple times without recourse to the original seller). This, and the fact that CDL is claimed to be a “transformative use” (along the lines of the Google Books online index case in the U.S.), constituted the essence of the fair-use defence presented by the Internet Archive. Transformative use is a U.S. legal concept under which use of a work is more likely to be considered fair if it adds something new, with a further purpose or different character, and does not substitute the original use of the work.

While the March decision has no direct applicability to Canada, and U.S. fair-use interpretations, while similar to Canada’s fair dealing laws, are not identical, had the decision gone the other way, it is very likely that CDL advocates in Canada would be citing the American precedent to argue for legality in Canada. The U.S. decision applies only to the practices of Internet Archive and is limited to the 127 works named in the suit (all of which are available in licensed e-book editions). The judge noted that Internet Archive remains free to scan and distribute all public domain works in its collection. The IA says it has digitized more than 675,000 unique texts from Canadian libraries. While it is not possible to know how many of these works are Canadian titles, a good proportion undoubtedly fall into this category. Likewise, it is impossible to know how many of these works are still protected by copyright. The fact that a book does not have a digital edition does not constitute grounds for making an unauthorized digital copy, although there is less likelihood of a legal challenge if an older, out-of-print but still copyright-protected work is digitized and loaned.

Part of the problem for CDL advocates is the way that Internet Archive made itself a ready target for publishers through some of its lending practices, including suspending the owned-to-loaned ratio for a few months, as well as questions relating to whether it can be considered a true library. Publishers are understandably reluctant to take legal action against bona fide libraries, yet there is no doubt that the CDL theory has been dealt a setback, if not legally undermined. The implications for Canadian libraries are still being assessed.

The Internet Archive established a Canadian branch in 2016, and since scanning began in Canada in 2004, it has worked with more than 250 Canadian institutions and libraries. Almost 80 Canadian schools, universities, and government entities are listed as partner libraries and have contributed part or all of their collections for digitization. CDL’s supporters claim that if CDL is not legal in Canada, it should be. As several Canadian librarians have argued in a recent paper in the Canadian Journal of Library Practice and Research, “CDL offers the opportunity for libraries to continue to meet their mandates of providing free and equitable access to knowledge in the digital environment.”

Jonathan Bengtson, chief librarian of the University of Victoria Library, says that while his university does not engage in CDL and has no immediate plans to do so, they will continue to work with the Internet Archive. CDL is only one aspect of Internet Archive’s work; their other projects include providing open access to a wide range of materials, notably the Wayback Machine, which allows users to see how specific websites appeared in the past. Susan Haigh, executive director of the Canadian Association of Research Libraries (CARL), believes the decision won’t change much in Canada in the immediate term. CDL has its limitations, and the use of CDL by CARL members within the Canadian legal framework has been “cautious,” she says. Nonetheless, Canadian libraries that have contributed their collections to the IA for digitization are indirectly supporting CDL by allowing their holdings to increase the number of physical copies on which the Archive bases its owned-to-loaned ratio. Canadian works sold in the U.S., including those with e-editions, will continue to be vulnerable to the IA’s CDL practices. At the same time, publishers in the U.S. feel vindicated by the decision, since their right to control the exploitation of works to which they hold the rights has been upheld in accordance with well-established U.S. legal principles. These same basic principles of copyright law exist in Canada.

Whether the decision against Internet Archive in the U.S. will have a chilling effect on CDL practices in Canada remains to be seen. Legally acquiring licences is still the best ethical and legal strategy to avoid unnecessary risk, while limiting digital scanning to out-of-print books used for research, thus avoiding direct competition with the marketplace. At the same time, publishers need to continue to work to make e-books as accessible as possible by licensing to libraries on terms that are not unduly restrictive in terms of distribution or cost.

This blog post first appeared as an Opinion piece published in Quill and Quire on June 7, at https://quillandquire.com/omni-category/opinion/

© Hugh Stephens, 2023

Roughly a month after the CRTC charged out the gate by launching public consultations on the regulations it will issue to implement Bill C-11, the Online Streaming Act, (Implementing Canada’s Online Streaming Act: The CRTC is Fast Out of the Gate), the government has finally issued the promised Policy Directive that is to guide these consultations. The Bill itself was finally passed in late April. (Canada’s Online Streaming Act (Bill C-11) is Now Law: What Happens Next?)

It was unusual for the broadcasting and telecoms regulator, the Canadian Radio-television and Telecommunications Commission (CRTC) to have begun the public consultation process before receiving the government’s Policy Directive, but time is of the essence given the long delays in getting C-11 through Parliament. The current government has approximately 24 months to get the legislation implemented before the next general election, assuming it can maintain its hold on power in the current Parliament given its minority status. Timing will be tight given the need for public consultations and hearings. One cannot help but wonder why the Policy Directive could not have been issued earlier, at the same time the Commission launched its public consultations, but clearly some finetuning was required. The Directive gives “binding, high-level instructions” to the CRTC, supposedly an arms-length regulator. But to be fair, the Directive tells the Commission what to do, but not exactly how to do it.

Objectives of the Legislation

A ”Highlights” document issued by the Department of Canadian Heritage outlines a number of policy objectives for the legislation that cover the waterfront of the government’s social policies;

• Ensure meaningful participation of Indigenous persons in order to address the underrepresentation of Indigenous stories and Indigenous-owned broadcasting undertakings in Canada;
• Exclude social media creation to ensure that individual users’ and social media creators’ content cannot be regulated;
• Support diversity and inclusion (black and racialized communities, official language minority groups; e.g. francophone communities outside Quebec);
• Support Canadian creators and media by maximizing use of Canadian creators and strongly supporting the creation and discovery of diverse Canadian programming;
• Implement discoverability and showcasing for Canadian programs, focusing on outcomes;
• Redefine Canadian programs, i.e. what will count as Canadian Content (Cancon), by recognizing the crucial relevance of Canadian creative personnel having a high degree of creative control or visibility, and;
• Create an equitable, flexible and adaptable regulatory framework by ensuring clear rules for broadcasters, including online broadcasters.

This list encapsulates the objectives found in a much longer document (the Directive itself) which is in turn subject to a 45 day public comment period.

The Directive picks up much of what was already outlined by the CRTC in its preliminary consultation documents, making it explicit (if there was any lingering doubt) that user generated content on social media platforms will not be regulated. This issue became a major distraction during the legislative process, resulting in wild and unfounded accusations that the Bill would impose censorship on Canadians. Also important is the explicit recognition that discoverability and showcasing of Canadian content can be achieved by many means, not just through manipulation of algorithms. In fact, the Directive states that the CRTC shall “implement discoverability in a way that respects and, where possible, increases choice for users, while also minimizing the need to alter algorithms of broadcasting undertakings.” (emphasis added).

International Commitments

So far so good but, in my view, a couple of key elements are missing from the directives given to the Commission. The first relates to what the document describes as “contextual factors” that need to be considered when implementing the Act. These include the UN Declaration on the  Rights of Indigenous Peoples (UNDRIP), Canada’s official languages policy of English-French bilingualism and support for Indigenous languages, the need to serve all Canadians including “equity-seeking groups”, digital transformation, and international commitments. It is this last factor I have difficulty with. It is a given that any modification of domestic policy must take into account commitments Canada has made internationally through bilateral or multilateral treaties. However, the only international treaty mentioned and thus considered relevant is the 2005 UNESCO Convention on the Protection and Promotion of Diversity of Cultural Expressions.

While a worthy document outlining the importance of cultural expression, this is a non-binding treaty. Although declared to be complementary to other treaties, the UNESCO Convention does not override or modify them. In other words, if it conflicts with other binding obligations such as WTO or bilateral trade commitments, the latter prevail. In my judgement, it is a gross and probably deliberate omission to ignore mention of any other commitments that Canada may have that could be impacted by the implementation of C-11, such as the new NAFTA (CUSMA), the Canada-EU Agreement (CETA) or bilateral agreements that Canada has with countries such as the UK. I have submitted comments to this effect, and I hope that this omission will be addressed when the final version of the Directive is released.

Defining Canadian Content

A second missing element comes into play with respect to the redefinition of Canadian content. The CRTC is directed to support Canadian creators and media, and to maximize the use of Canadians in the creation, production, and presentation of programming. This by itself is an unobjectionable, even laudable, policy objective. The question is how will it be done? The Commission is also directed to examine how it defines Canadian programs, in both the audio and audio-visual sectors, taking into account “the crucial roles played by Canadian independent producers and production companies, and the crucial relevance of Canadian creative personnel that have a high degree of creative control or visibility — such as actors, writers, directors, and showrunners — being used by both Canadian and foreign broadcasting undertakings.” This appears to be code for restricting the definition of Canadian programs to those produced and owned (in terms of copyright) by Canadians. This wording has to be read in conjunction with the section on Regulations, where a number of criteria are listed;

In its determination of what constitutes Canadian programming, the Commission is directed to;

(a) consult Canadians, the creative and production sectors and other interested parties;

(b) support Canadians holding a broad range of key creative positions, in particular those with a high degree of creative control or visibility;

(c) support Canadian ownership of intellectual property;

(d) recognize the distinctions between broadcasting undertakings that distribute audio programs and those that distribute audio-visual programming;

(e) recognize that the Act applies to foreign broadcasting undertakings;

(f) consider, as it relates to audio-visual programming, the vital role of Canadian independent producers and of the Canadian creative resources that are being used by both Canadian and foreign broadcasting undertakings; and

(g) consider whether its determination of what constitutes a Canadian program complements other Canadian content policies that are applicable to the Canadian broadcasting system, including those pertaining to audio-visual tax credits or government funding.

Among the listed objectives, (b) (c) and (f) would appear to lean toward exclusionary measures restricting opportunities for non-Canadian players. While the CRTC has not yet determined if Canadian ownership and retention of intellectual property will constitute an a priori essential condition for determination of Canadian programming, the Policy Directive seems to be pushing the Commission in that direction. The Commission should be allowed the flexibility to weigh these factors against other considerations, such as promoting the telling of Canadian stories.

Unfortunately, there is no mention of the inclusion of identifiable Canadian content among the criteria to be considered when defining what constitutes Canadian programming. This comes back to the ongoing debate, which I described in a blog post last year (“Unravelling the Complexities of the Canadian Content (Cancon) Conundrum”) as to what qualifies as Canadian content for tax credit and broadcast quota purposes. One result of the current policy is that film productions that bear almost no relationship to Canada in terms of content, recognition or storyline can qualify as Cancon, whereas quintessential Canadian stories and productions do not qualify if produced by the “wrong people” (non-Canadians) or with “foreign money”. If the policy objective is to promote the production of more Canadian stories for domestic and international audiences in order to meet political, cultural and social policy objectives, it has largely been a failure. I would like to see Canadian stories, including those that are Indigenous based and produced, and those that represent the rich diversity of Canada’s cultural and linguistic fabric, distributed around the world. And who best to do that than the international (mostly US-based) platforms that operate in Canada? But this is not going to happen if international platforms are handicapped when it comes to investing in and acquiring Canadian content for distribution.

There is also a question of fairness. Given that C-11 will require foreign online platforms to contribute to the creation of Canadian content, it seems to me it is inherently unfair to deny them the opportunity to reap the rewards of their investments by retaining or obtaining the rights for productions they have funded. Besides, the obstacles imposed will obstruct rather than facilitate the international distribution of Canadian content. Yes, the platforms could always try to license the content from the Canadian rights-holder, but that is generally not the way the business model of international content producers works, nor is it the norm in most countries that want to encourage more production of domestic content.

For example, the Motion Picture Association recently released the results of a study (“Defining Canadian Content: Approaches Taken in Other Jurisdictions and Lessons Learned for Canada”) demonstrating that in a study of ten national jurisdictions, most do not require the production company to own the copyright beyond the production stage. The study goes on to argue that this encourages global producers to invest and create content in those countries, employing national talent, which can be shared with audiences around the world. It points out that the Canadian system for defining national content is unusually narrow, providing no room for consideration of broader cultural criteria. By using such a narrow definition, Canada is losing opportunities to promote Canadian stories and culture to the world. The MPA study concludes that “More flexibility in the Canadian content system would support a helpful evolution of business and financing models in Canada, which would be more in keeping with the maturity of the sector and matching the level of sophistication of its production companies.”

The Policy Directive has an opportunity to fix this blind spot by giving the CRTC more room to manoeuvre when it comes to defining Canadian content and programming. The Directive is open for public comment (until July 25). If the definition of Canadian content was widened by incorporating additional factors, such as the nature of the content produced and its impact on promotion of Canadian identity and culture, this could result in a more flexible implementation of the Canadian content and programming definitions. It would be to Canada’s overall benefit for the government and CRTC to opt for a broader and more inclusive definition rather one that is narrow and exclusive. Walled gardens of content do not work. The audience is world-wide. The international platforms have the infrastructure to deliver and export Canadian content globally. Why not encourage them to invest in Canadian content and distribution rather than “tax” them while tying their hands?

I have submitted my views to the government via the Canada Gazette website. I encourage others to do the same.

© Hugh Stephens, 2023. All Rights Reserved