The Ford government is dissolving the independent agency responsible for classifying films screened in Ontario movie theatres.

The Ontario Film Authority (OFA) will no longer issue film ratings starting next Tuesday, according to a Ministry of Government and Consumer Services memo obtained by CBC News.

"The Ontario Film Authority will be winding down its operations and the ministry will look to the industry to consult on ways to better reflect today's film market," says the memo from Michele Sanborn, the assistant deputy minister.

In the short term, says the memo, films screened in Ontario theatres must use the rating issued by British Columbia's film classification body. Longer-term changes are expected next spring. Dissolving the OFA will save the industry $1.5 million to $2 million a year in licensing and classification costs, according to the memo.

Films that go straight online and are never shown in cinemas don't require a rating from the OFA. The trend toward streaming means the agency approved 1,000 fewer films in 2018-19 compared with the previous year.

The OFA was designed to operate on a cost-recovery basis, charging filmmakers fees for issuing ratings such as PG, 14A or Restricted. Its most recent annual report shows the agency brought in $2.2 million in revenue, but ran a shortfall of $130,000.

"This fiscal year has been a challenging one from a revenue standpoint, primarily due to the 20 per cent decrease in minutes viewed for English/French language films; and 35 per cent decrease in minutes viewed for adult sex films," the agency's 2017-18 annual report said.

A spokesperson for Government and Consumer Services Minister Lisa Thompson confirmed Friday the Ontario Film Authority is being dissolved, attributing the decision to a 'rapidly changing film market.' (Getty Images)

A spokesperson for Government and Consumer Services Lisa Thompson confirmed Friday the agency is being scrapped, with a "rapidly changing film market" as the reason.

"The major shift to digital platforms and streaming services has significantly changed viewers' behaviour and impacted the OFA's business and revenues, making it unsustainable," said Thompson's spokesperson in an email to CBC News.

The government says it intends to modernize the legislation governing film ratings in Ontario.

In a consultation paper published Friday, the government asks the public and the film industry to weigh in.

"Canada is one of the few countries in the world without a national film classification system," says the document. It says the current regime "requires a distributor wishing to distribute a film across Canada to submit films to five classification bodies and pay seven sets of fees."

The Wynne government floated the idea of forming a national film rating agency back in 2015, but made no progress on the issue.