The Case Against the Bell Coalition’s Website Blocking Plan, Part 1: Canada’s Current
micheal geist
Dr. Michael Geist is a law professor at the University of Ottawa where he holds the Canada Research Chair in Internet and E-commerce Law. He has obtained a Bachelor of Laws (LL.B.) degree from Osgoode Hall Law School in Toronto, Master of Laws (LL.M.) degrees from Cambridge University in the UK and Columbia Law School in New York, and a Doctorate in Law (J.S.D.) from Columbia Law School. Dr. Geist has written numerous academic articles and government reports on the Internet and law and was a member of Canada’s National Task Force on Spam. He is an internationally syndicated columnist on technology law issues with his regular column appearing in the Toronto Star, Ottawa Citizen, and the BBC. Dr. Geist is the editor of In the Public
Interest: The Future of Canadian Copyright Law, published in 2005 by Irwin Law, the editor of several monthly technology law publications, and the author of a popular blog on Internet and intellectual property law issues. Dr. Geist serves on the Privacy Commissioner of Canada’s Expert Advisory Board, on the Canadian Digital Information Strategy’s Review Panel, the Electronic Frontier Foundation Advisory Board, and on the Information Program Sub-Board of the Open Society Institute. He has received numerous awards for his work including the Les Fowlie Award for Intellectual Freedom from the Ontario Library Association in 2009, the Electronic Frontier Foundation’s Pioneer Award in 2008, Canarie’s IWAY Public Leadership Award for his contribution to the development of the Internet in Canada and he was named one of Canada’s Top 40 Under 40 in 2003.
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The Bell coalition’s website blocking proposal has sparked a huge public outcry, with thousands of Canadians submitting interventions to the CRTC opposing a plan premised on website blocking without direct court involvement. I have written several posts on the issue – a general assessment on why it is a terrible idea, a closer look at the economic reality of the Canadian film and television sector, and a discussion of Bell’s inconsistent comments to the CRTC vs. business analysts – but the case against the radical plan merits a closer look at both the evidence and the legal arguments. With this post, I begin a new series that will make the case against the Bell coalition’s website blocking plan.
The series begins with the initial response to the plan from Innovation, Science and Economic Development Minister Navdeep Bains, who stated:
We understand that there are groups, including Bell, calling for additional tools to better fight piracy, particularly in the digital domain. Canada’s copyright system has numerous legal provisions and tools to help copyright owners protect their intellectual property, both online and in the physical realm. We are committed to maintaining one of the best intellectual property and copyright frameworks in the world to support creativity and innovation to the benefit of artists, creators, consumers and all Canadians.
Bains was right to note that Canada already has many legal provisions designed to assist copyright owners. In fact, Canada has some of the world’s toughest anti-piracy provisions, which Bell and others have actively used in recent years. This includes lawsuits against set-top box distributors, mod-chip sellers, and websites such as TVAddons. Some of these lawsuits have resulted in massive damage awards running into the millions of dollars.
Further, Canadian copyright law has also been used to shut down websites whose primary purpose is to enable infringement with rights holders relying on an “enabler provision” contained in the 2012 copyright reforms that can be used to target online sites that provide services primarily for the purpose of infringement. It states:
It is an infringement of copyright for a person, by means of the Internet or another digital network, to provide a service primarily for the purpose of enabling acts of copyright infringement if an actual infringement of copyright occurs by means of the Internet or another digital network as a result of the use of that service.
The factors to determine whether the provision applies include:
whether the person expressly or implicitly marketed or promoted the service as one that could be used to enable acts of copyright infringement;
whether the person had knowledge that the service was used to enable a significant number of acts of copyright infringement;
whether the service has significant uses other than to enable acts of copyright infringement;
the person’s ability, as part of providing the service, to limit acts of copyright infringement, and any action taken by the person to do so;
any benefits the person received as a result of enabling the acts of copyright infringement; and
the economic viability of the provision of the service if it were not used to enable acts of copyright infringement.
This powerful legal tool is made even stronger by the existence of statutory damages in Canada that can lead to millions in liability for infringement. In fact, Canada is in the minority of countries that even has statutory damages as most require evidence of actual damages. The combination of specific provisions to target sites that facilitate infringement with the possibility of enormous damage awards means that Canada already has tough copyright laws in place to combat piracy.
Yet the Bell coalition is effectively arguing that it needs more laws or legal tools to target non-Canadian sites that may be accessed by Canadians. However, Canadian law already provides for injunctive relief in appropriate circumstances with the Supreme Court of Canada’s Equustek decision one of the more recent manifestations of courts issuing orders to non-parties in support of intellectual property rights.
There is no guarantee that courts will issue such an injunction – courts around the world have consistently identified the challenge of balancing protection of intellectual property rights with the implications of site blocking on freedom of expression – but a comprehensive, impartial court review with full due process is precisely what should be required before the power of the law is used to block access to content on the Internet. Copyright owners are seeking to create their own system at the CRTC without direct court involvement or policy review by Parliament. Before entertaining such a possibility, they should surely be required to test the effectiveness of existing law.
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The case against the Bell coalition’s website blocking plan continues with an examination of the state of new digital business models and Canadian content production (earlier posts looked at Canadian copyright law and weak evidence on Canadian piracy). Given the high threshold needed to gain CRTC support for website blocking (which requires exceptional circumstances), the coalition proposal must not only make the case that there is a significant Canadian piracy problem, but also that piracy is having an enormous impact on the business and creative sectors.
The proposal tries to meet that standard by claiming that Canadian piracy “makes it difficult if not impossible to build the successful business models that will meet the evolving demands of Canadians, support Canadian content production, and contribute to the Canadian economy.” Yet as with the actual data on Canadian piracy, which firmly rebuts claims that Canada is a piracy haven, the Canadian data on the digital economy and Canadian creative sector show a thriving industry.
Supporting Canadian Content Production
As I noted in a recent post on the latest data from the Canadian Media Producers Association, the total value of the Canadian film and television sector exceeded $8 billion last year, over than a billion more than has been recorded over the past decade. In fact, last year everything increased: Canadian television, Canadian feature film, foreign location and service production, and broadcaster in-house production.
If the standard the CRTC is to consider involves support for Canadian content production, the situation has never been better. Canadian content production hit an all-time high last year at $3.3 billion, rising by 16.1%. Notably, the increased expenditures do not come from broadcasters, who lead on the website blocking proposal and whose relevance continues to diminish year-by-year. In fact, the private broadcasters (led by Bell) now contribute only 11% of the total financing for English-language television production. Their contribution is nearly half of what it was just three years ago (now standing at $236 million) in an industry that is growing. Yet despite the private broadcaster decline, money is pouring into the sector from distributors (who see benefits of global markets) and foreign financing (which has grown by almost $200 million in the past four years) leading the way. The sector remains heavily supported by the public, with federal and provincial tax credits now accounting for almost 30% of financing.
The increase in foreign investment in production in Canada is staggering. When Netflix began investing in original content in 2013, the total foreign investment (including foreign location and service production, Canadian theatrical, and Canadian television) was $2.2 billion. That number has doubled in the last five years, now standing at nearly $4.7 billion. While much of that stems from foreign location and service production that supports thousands of jobs, foreign investment in Canadian television production has also almost doubled in the last five years
The increasing irrelevance of private broadcasters for financing Canadian television production is particularly pronounced in the fiction genre (ie. drama and comedy shows). This is easily the most important genre from an economic perspective, with $1.29 billion spent last year. Private broadcasters only contributed $59 million or five percent of the total. By comparison, foreign financing was $285 million. In sum, the data confirms that there has never been more money invested in film and television production in Canada.
Supporting Digital Business Models
The Canadian data on digital business models also points to a steady stream of success stories that refute claims that it is difficult if not impossible to create successful business models in Canada. Online video services, which the Bell coalition suggests are harmed by streaming sites, are experiencing rapidly expanding revenues, now generating more than $1 billion per year. In fact, two Canadian online video services – CraveTV and Club illico – are estimated to have earned $373 million last year, up from just $13 million four years earlier.
Bell CEO George Cope confirmed the success during a recent quarterly conference call, stating:
Crave strategy continues to work for us number of customers up 22% year-over-year, allowing us to have a product that you can view through traditional linear TV or and over-the-top environment.
The positive data sparked a question from Drew McReynolds about the rate of cord cutting:
on cord cutting, cord shaving trends overall, you are obviously doing quite well on Crave and Alt TV, wondering if you’re seeing in the TV market a real structural acceleration, let’s say over the last 6 to 12 months or is it more of a steady acceleration or steady kind of rate of cord cutting, cord shaving?
Cope’s response:
It seems steady to me – clearly we have not seen some acceleration, but we notice a growing share and we got to be in, you know we absolutely have to be in that space in the market place, so we actually saw some growth and you know from a pay sub perspective, but we haven’t seen a sudden acceleration and you can – the industry will now take the total TV net adds and be able to see that you know the decline in, and I don’t think that rate has accelerated
Simply put, Canada is now one of the world’s leading markets for online video services. According to the Reuters Institute Digital News Report 2017, Canada ranks among the top countries for consumers paying for online video services. There are now approximately 20 subscription streaming services in Canada and surveys indicate that more than half of all English-language households subscribe to Netflix. In fact, the data indicates that a higher percentage of Canadians pay for online video services than consumers in countries with site blocking such as Australia and the U.K.
That is not a market where digital business models can’t succeed due to piracy. Rather, the data confirms Canadians’ willingness to pay for well-priced, convenient services, which has presumably prompted CBS to expand its streaming service to Canada, following on Amazon’s recent streaming video entry. Record earnings, a top tier global ranking for subscribers, and new market entrants are the sign of a thriving market, not one struggling to survive due to claims of piracy.
The Canadian success story is not limited to online video as the online music market has experienced similar growth. According to industry data, the Canadian music market is growing much faster than the world average (12.8% in 2016 vs. 5.9% globally), streaming revenues more than doubled last year to US$127.9 million (up from US$49.82 million) growing far faster than the world average, the Canadian digital share of revenues of 63% is far above the global average of 50%, and Canada has leaped past Australia to become the 6th largest music market in the world. The numbers are big for music creators as well. SOCAN, Canada’s largest music copyright collective, recently reported that its Internet streaming revenues rose 46% last year, nearly hitting $50 million annually. In 2013, that number was only $3.4 million.
Nordicity recently issued a detailed look at trends in the creative industries, summarizing the situation in the following manner:
In 2016, it was noted that OTT (over-the-top video) takes a piece of subscriber revenues from BDUs, as well as from pay/specialty broadcasting services. Newly recognized is both the disruptive impact on television and also the opportunity for content producers.
The opportunity for creators is the theme of Canadian Heritage Minister Melanie Joly’s vision for the sector, which focuses on encouraging investment in Canada and sales to foreign markets. The data suggests great success in this regard, demonstrating that the Bell coalition’s claims about the impossibility of building successful business models due to piracy bear little resemblance to the reality of the Canadian market.