Streaming Companies and Labels Challenge Proposed Canadian Tax

The 5% levy would fund locally produced culture, but record labels argue that the tax will hurt smaller artists

The Canadian government recently proposed the introduction of a new 5% on the revenues of streaming services for both music and video. The funds will be used to fund locally produced culture, such as music, TV shows, and films. Government projections show that the tax will generate more than $25 million for the Canadian economy.

However, a number of digital service providers (DSPs) and record labels are strongly opposed to the idea, saying that the tax will hurt small, local artists who rely on streaming services to get their work out to a larger audience.

Music Canada and the Digital Media Association (DIMA) have sent a joint letter to the Canadian Radio-television and Telecommunications Commission (CRTC) arguing that the proposed tax is "unfair" and "ill-conceived."

The letter's principal argument is that streaming services are not directly comparable to traditional broadcast media such as radio. In some ways, streaming services are serving minority artists better: for instance, women and racially diverse artists tend to get significantly more playtime on streaming services than they would on state-funded radio.

There is also a concern that streaming services will pass on the cost of the tax to their users through higher fees — which was exactly how streaming services in France chose to react to the introduction of a comparable levy there.

"Today’s radio regulations were carefully crafted for Canada’s radio environment — one that is shaped by our vast geography, linguistic duality, and a willingness in an analogue system to make decisions about what is available to Canadian listeners," the letter reads. "They also reflect the limitations of the medium: a finite number of hours, increasingly centralized programming, and a live broadcast format, and relatively small number of recordings that radio broadcasts."

"Streaming is none of these things. Being driven in terms of each consumer’s individual interest and activity, it represents nearly infinite hours of listening, a vast catalogue of recordings, a plethora of languages, and has broken down not just physical geography but international borders as well. Three of the top 10 songs streamed in India in 2022 were by Canadian artists —  a fact that would be inconceivable to the founders of our terrestrial broadcasting system."

"Not only has streaming allowed Canadians to reach the world in ways previously unimaginable, streaming has allowed Canadian artists with no home in the traditional radio system to be found by their Canadian and international fans. This has led to higher levels of play on streaming for women and racially diverse artists compared to Canadian radio."