Speech by Leonard Katz, Acting Chairman, Canadian Radio-television and Telecommunications Commission
To the Banff World Media Festival
June 11, 2012
Check against delivery
This speech was delivered by Peter Menzies, Regional Commissioner for Alberta and the Northwest Territories.
Thank you very much. I'm delighted to be here at Banff. It's a real treat to join all you glamorous people from such a creative industry.
Last Friday, the government announced the appointment of Jean-Pierre Blais as the new Chairman of the Canadian Radio-television and Telecommunications (CRTC). I look forward to working with him upon his arrival next week.
This morning, I’d like to reflect on our activities during the last six months or so.
A good year
But first of all, I'm glad to say that broadcasting in Canada is in a healthy state. Proof of that is the increase last year in total investment in Canadian programming.
- In 2011, private broadcasters and the CBC/SRC invested a total of $2.57 billion compared to $2.48 billion in 2010. This represented a gain of $90 million.
- In fact, 2010 was the year of the Winter Olympics. If you set aside the exceptional spending on sports in that year, you find that the private conventional broadcasters spent 4.2% more on Canadian programming in 2011. That’s an increase of almost $23 million. Meanwhile, they reduced their expenditure on foreign programming by 5.8%, or almost $45 million.
- Canadian independent producers did well last year. In 2011, broadcasters spent a total of $713 million on independent production against $655 million in 2010—a gain of $58 million.
- Meanwhile, in 2011, broadcasting distributors contributed $489 million to the various funds that support Canadian programming, as well as to cable community channels. This was $20 million ahead of the $468.6 million in 2010.
- That increase reflects the sustained growth experienced by the television distribution sector. Distributors saw a jump in total revenues from $12.5 billion to $13.5 billion in one year, including certain telecom revenues.
- As for the broadcasters: The 2011 revenues for private conventional TV stations were still slightly below pre-recession levels, but they held steady from the previous year at around $2.15 billion. Meanwhile, reductions in operating expenses produced a gain in profitability.
- Revenues for the pay and specialty sector, including pay-per-view and video-on-demand, grew by $200 million to reach $3.7 billion. This sector maintained the very strong profitability that it's enjoyed in recent years.
- While on the topic of financial performance, I wouldn’t want to overlook our friends in commercial radio. This sector showed steady growth and continuing confidence as revenues came back up to pre-recession levels. They were up by about 4% over the previous year, coming in at $1.6 billion, and there was a moderate increase in profitability.
I think the industry as a whole deserves to be congratulated on these results, especially in times that are as challenging as these.
I'll now turn to some of the CRTC's activities.
We're currently working on a review of the Local Programming Improvement Fund (LPIF). The Fund was created in 2008, when private broadcasters' spending on local programming was stagnant. The aim was to ensure that viewers in smaller markets continued to receive local programming, especially local news. It also aimed to improve quality and diversity at the local level, and to ensure a level of parity in French-language markets.
The LPIF is financed by cable and satellite distributors, who are required to contribute 1.5% of their gross broadcasting revenues. In 2011, 80 stations received more than $106 million from the Fund.
When we created the LPIF we said we'd conduct a review in the third year of its operation. We held a hearing this April to discuss every aspect of the Fund including objectives, performance, conditions, criteria and the level of contributions.
We're now considering the options: Should the LPIF be maintained, modified or discontinued? We will likely be announcing our decision this summer.
Our new group-based licensing system reflects the high priority we give to Canadian programming. In the past, a broadcaster’s spending on Canadian content was part of a pie that had to be shared with spending on foreign content. But now, for the large ownership groups, the Canadian content spending obligations are fixed by the CRTC as a percentage of their annual revenues.
The more successful the ownership groups are, the more they will invest in new Canadian programming.
We applied the group-based approach to the English-language market last year. As a result, Bell, Corus and Shaw are expected to invest about $774 million in Canadian programming during the 2011-2012 broadcast year.
And as you know, BCE is seeking to acquire Astral’s television and radio properties. Under our policy governing such ownership transfers, a deal of this size, if approved, would involve sizable tangible benefits to the broadcasting system. We are presently examining the application and a public process should be announced in due course.
Earlier this year, we renewed the licences of most of the French-language private television services. There are unique opportunities for home-grown programming in that market, because viewers demand it.
Over the past three years, TVA invested an average of 45% of its gross annual revenues in Canadian program production—including drama, documentary, music and variety. With that level of performance, we felt justified in removing most requirements as to the type of programming TVA broadcasts. We will require that 80% of TVA's programming expenditures be spent on Canadian shows. This works out to an annual average of over $110 million.
The licence term will be limited to three years so we can have a chance to assess how TVA has responded to the new flexibility it's been granted.
The Astral Media group offers both French- and English-language services. We've taken the group-based approach to Astral's Canadian content spending obligations. They can allocate resources among all their TV services regardless of language. Their obligations will require them to invest more than $150 million into Canadian programs next year. The Astral licences will run until 2017.
CBC/SRC licence renewal
Turning to our national public broadcaster, on November 19 we will begin the licence renewal hearing for the radio and television services of the CBC and Société Radio-Canada.
One of the issues that came up during the last few months is the CBC’s application for amendments to the licences of Radio 2 and Espace Musique to permit national advertising. This change could affect the way CBC radio implements its mandate, so we announced our intention to explore these plans at November hearing.
Independent TV licence renewals
As many of you are aware, the licences of the independent TV channels will expire on August 31, 2013. We will likely be announcing later this year the time and place for the hearings.
I know that some of you will be wondering about our plans to deal with applications for mandatory carriage on the basic service—a status that we refer to affectionately as 9(1)(h).
In 2010, we noted that the transition to digital television would bring with it some major changes in the economic, technological and regulatory environment. The industry would need some time to adapt, and we did not want to complicate things any further by issuing new mandatory distribution orders.
We therefore announced that we wouldn't consider any new 9(1)(h) applications until soon after June 1, 2012. That moratorium is now over. We have received a number of applications, and we will launch a proceeding to consider them in due course.
Over-the-top programming services
Before I finish I'd like to raise a couple of issues. The first is about the over-the-top (OTT) programming services.
The Internet and smartphones and tablets have given Canadians access to a globalized marketplace of all kinds of information and entertainment. They love it. For the most part, we have chosen not to regulate OTT programming services.
There's been some concern that OTT could draw audiences away from our existing world of regulated broadcasting, and undermine the system that supports investment in our own Canadian content.
We have been monitoring the effect of these services. So far they seem to be complementary to the existing system. They don't appear to have led Canadians to cancel or cut back on their cable and satellite subscriptions.
But, if I can share with you my personal view, I think these concerns should be turned around. OTT is an exciting new way to reach out to people. Let's not think of it as a threat to Canadian content. Let's think of it as an opportunity for Canadian content—an opportunity to export and promote it around the world. Canadians have the talent and creativity to produce programming that can connect with audiences around the globe: our documentaries, our drama, our comedies, our variety and children’s programming.
We have been relying on a subsidized regime to support our own programming so that it can compete with programming supported by a much larger audience base. This model is becoming less and less relevant.
Let's take advantage of these great new digital media to promote and export our Canadian content to the world. Let's develop innovative new content and products, find ways to monetize them, and get them out to worldwide audiences.
Now who is going to lead this wave of Canadian innovation? It's got to be you. The regulator and the government can help by creating a favourable environment. But ultimately it's the industry that's got to drive the changes and the initiatives, and bring them to the marketplace.
And that brings me to my final point.
Organizing the industry
This is a volatile time in the communications industry. Actions taken now will set directions for the future. I believe that the Canadian industry needs to speak up on key issues and take an activist role in shaping that future.
In the United States, the National Cable TV Association is working with other public and private partners in a program called Connect-to-Compete, which will help low-income families get low-cost computers, Internet service and digital literacy training. In the U.S., 1 in 3 homes does not have access to a computer.
The Canadian industry has quickly transformed itself through large-scale vertical integration. But it's been losing its ability to speak with an integrated voice as an industry. At one time it could speak through the Canadian Cable Television Association, the Specialty and Premium Television Association, and the Canadian Association of Broadcasters. But these groups are now playing a diminished role or have disappeared completely. It would be good to see the industry find its collective voice by organizing itself once again. Perhaps they could create a Canadian program to increase the number of Canadian homes with computers, which currently sits at 83%.
I am glad to say that the creative production community has maintained its own strong voices: the Canadian Media Production Association (CMPA) and l’Association des producteurs de films et de télévision du Québec.
And I'd like to congratulate Norm Bolen at the conclusion of his term as President and CEO of the CMPA. He’s done a great job in challenging times, and especially in leading the CMPA through the negotiations that resulted in the terms of trade agreements with the broadcasters. Well done, Norm!
I also congratulate his successor, Michael Hennessy, who will be taking over a week from today. Michael has had an extraordinary career in broadcasting and telecommunications, in both the private and the public sectors.
In fact, we all owe him our gratitude for his work as a current Director and a past Chair of this great international festival.
My thanks to the Festival for inviting me to join you here today.
Thank you very much.
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