Communications Monitoring Report 2017: Broadcasting sector overview

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4.0 Broadcasting sector overview

The Canadian broadcasting sector consists of radio (private and CBC), conventional television (private and CBC), and discretionary and on-demand television services (pay, pay per view (PPV), video-on-demand (VOD) and specialty services) and broadcasting distribution undertakings (BDU) (cable, satellite and IPTV).^{Footnote 1}

In 2016, revenues reported by the Canadian broadcasting sector ($17.85 billion) decreased by 0.5% relative to 2015 revenues, which totalled $17.95 billion. Broadcasting revenues represented 26.8% of all Canadian communications revenues. From 2012 to 2016, overall broadcasting revenues decreased by 0.14%, the equivalent of an average annual decrease of 0.04%.

Total television revenues increased by 1.7% from 2015 to 2016. The discretionary and on-demand sector was the main source of the growth, with reported revenues of $4.4 billion and a PBIT margin of 21.0% in 2016, representing a 2.9% or $126-million increase in revenues from 2015 to 2016.

CBC conventional television also contributed to television revenue growth from 2015 to 2016, reporting revenues totalling $1,185 million in 2016, a 7.0% or $78-million increase over 2015.

While the profitability of the private conventional television sector improved slightly, reaching -6.7% in 2016 compared to -8.0% in 2015, revenues decreased 4.5% over the same period, totalling $1.7 billion in 2016.

Discretionary and on demand services rely primarily on subscriber revenues while conventional broadcasters rely essentially on advertising revenues. In 2016, approximately 92% of private conventional broadcasters’ revenues and 31% of discretionary and on demand services’ revenues came from advertising revenues.

In 2016, the top 5 companies, in terms of revenues, generated $14.5 billion in broadcasting revenues and accounted for approximately 81% of total broadcasting revenues. The remaining entities reported combined revenues of $3.4 billion, or 19% of total broadcasting revenues.

Companies operating in all broadcasting segments (i.e. radio, conventional television, discretionary and on demand television and BDU) generated approximately 64% of total Canadian broadcasting revenues in 2016. In comparison, companies operating in only one market sector generated 5% of total Canadian broadcasting revenues. The remaining 31% of revenues were reported by companies operating in two or three market sectors.

i) Revenues

ii) Industry characteristics

The broadcasting industry comprises four sectors: radio (1); conventional television (2); discretionary and on demand television (3); and BDUs including cable, satellite and IPTV (4). (Internet radio and Internet television services are not included.) While most companies operate in only one sector, several operate in all four. This table shows the number of companies that operate in different numbers of sectors, and the percentage of total revenues generated by those companies according to the number of sectors in which they operate. Taken together, the data illustrate that the small number of companies operating in multiple sectors earned about two-thirds of total industry revenues. Affiliated companies are included with their parent company.

Figure 4.0.1 Percent of total broadcasting revenues, by ownership groups

Figure 4.0.2 Percentage of total commercial radio revenues by broadcaster, 2016

Figure 4.0.3 Percentage of television revenues by broadcaster, 2016

iii) Financial performance

Figure 4.0.4 Total broadcasting revenues by type of service ($ billion)

Figure 4.0.5 PBIT/EBITDA margins by type of service (%)

4.1 Radio sector

In 2016, private commercial radio stations reported $1,551 million in revenues and a profitability margin of 18.6%. Commercial radio is profitable overall. However, this can vary significantly depending on region, language and format.

There are 711 private commercial radio stations in Canada. They operate in hundreds of different markets and account for over three-quarters of all radio stations in operation in Canada. From 2012 to 2016, commercial radio stations reported an average annual revenue decrease of approximately -1.1%. Over the same period, revenues reported by AM radio stations dropped from $306 million to $284 million. This can be attributed in part to faltering advertising revenues. FM stations reported an annual revenue decrease of 0.9% over the same five year period.

Canadians continue to have access to a wide variety of musical choices and local, regional and national news platforms with over 1,100 radio and audio services broadcasting across the country. Over 75% of all private commercial radio stations in Canada are located in Ontario, Quebec, Alberta or British Columbia.

The Canadian Broadcasting Corporation/Société Radio-Canada (CBC/SRC), Canada’s public broadcaster, operates 67 English- and French-language radio stations across Canada. Revenues for CBC/SRC’s radio unit have steadily declined from $326 million in 2012 to $291 million in 2016.

Community, campus and Aboriginal radio stations play an important role in the communities they serve and in the broadcasting sector as a whole. These radio stations numbered 180 and reported $58 million in revenues. In 2016, the Commission issued 15 new licences, 11 of which were to non-commercial entities.

Country and contemporary music formats continue to garner the largest national listener share. The popularity of these genres on Canadian radio has been steadily increasing over the last few years.

Canadians are increasingly using a range of audio content services in addition to over-the-air radio. According to the Media Technology Monitor (MTM), 22% of Canadians (18+) stream AM/FM radio online and 55% of Canadians (18+) stream music videos on YouTube, consistent with last years findings. National satellite subscribership is unchanged over the past three years, as MTM again estimates 16% of Canadians (18+) subscribe to satellite radio.

i) Revenues

In 2016, the 711 commercial radio stations in operation generated total revenues of $1,551 million, down 3.2% from 2015. There were 7 additional FM services in operation in 2016 relative to the previous year, bringing the total number of FM station to 587 services. They reported combined total revenues of $1,267 million. Revenues for FM services have decreased on average by 0.9% each year since 2012.

By contrast, the number of AM radio stations has decreased by 5 stations since 2012, for a total of 124 AM services in 2016. AM radio stations struggled relative to FM stations over this period: their revenues dropped 1.8% per year on average since 2012 (to $284.4 million in 2016), twice the rate of FM stations.

A total of 24 radio services were offering third-language programming in 2016, half of them on the AM band and the other half on the FM band. These services generated a combined $46.3 million in revenue in 2016, down 0.7% from 2015. Total revenues for ethnic radio services have recorded an average growth rate of 0.5% per year, those for French 0.3% per year, while English-language services have declined by an average rate of 1.4% per year, over the 2012 and 2016 period.

The Canadian Broadcasting Corporation (CBC), Canada’s public broadcaster, operates a total of 14 AM and 53 FM radio stations across Canada. These services’ total revenues have declined from $326 million in 2012 to $277 million in 2015. From 2015 to 2016, reported revenues increased 5.1% to reach $291 million. The majority of this increase is attributable to an increase in Parliamentary Appropriation.

2016 marked the 3rd year of eligibility for the CBC to generate national advertising revenues on ICI Musique and Radio 2. A total of $1.1 million in advertising revenue was generated, down 22.6% from 2015. Nonetheless, advertising revenues remain a modest source of income for the CBC’s radio services – it accounted for 0.4% of the broadcaster’s total radio revenues in 2016.

The number of radio stations operated by the CBC declined by 13 between 2014 and 2015 to 69. This is explained by the fact that the CBC ended a pilot project whereby it was airing local content on these 13 stations, which have since reverted back to rebroadcasters.

Figure 4.1.1 Revenues ($ millions) of ethnic commercial radio stations, by province

The data in the four following figures present the revenues of private commercial English, French, and third-language AM and FM radio stations. The data on average annual revenues are compared to profit before interest and taxes (PBIT) to indicate the financial health of groups of radio stations. The data for AM and FM stations, as well as the language of broadcast, are segmented to show the variations for each of these criteria.

Figure 4.1.2 Revenues of private commercial radio stations and number of reporting undertakings

The data in figures 4.1.2 through 4.1.4 include network results, but exclude pay and specialty audio programming services, as well as multi-channel subscription audio services.

Figure 4.1.3 Revenues of English-language private commercial radio stations and number of reporting undertakings

Figure 4.1.4 Revenues of French-language private commercial radio stations and number of reporting undertakings

Figure 4.1.5 Revenues of Ethnic private commercial radio stations and number of reporting undertakings

ii) Financial performance

Overall, the average profit before interest and taxes margin (PBIT margin) of the commercial radio industry has remained in the 18-20% range over the past 5 years as expenses remained relatively constant in response to stagnating revenues. In 2016, the sector reported an average PBIT margin of 18.6%, down 0.3% percentage points from 2015.

FM radio services report higher-than-average PBIT margins. In 2016, their combined profitability stood at almost 21.6% (or $273 million), while that of the AM services was of 5.3% ($15.1 million).

The data presented in figures 4.1.5 through 4.1.12 include network results, but exclude results for pay and specialty audio programming services, as well as for multi-channel subscription audio services.

Figure 4.1.6 Average per-station annual revenues and PBIT of private commercial radio stations

Figure 4.1.7 PBIT and PBIT margins of private commercial radio stations

Figure 4.1.8 Average annual revenues and PBIT per station of English-language private commercial radio stations

Figure 4.1.9 PBIT and PBIT margins of English-language private commercial radio stations

Figure 4.1.10 Average annual revenues and PBIT per station of French-language private commercial radio stations

Figure 4.1.11 PBIT and PBIT margins of French-language private commercial radio stations

Source: CRTC data collection

Figure 4.1.12 Average per-station annual revenues and PBIT of Ethnic private commercial radio stations

Figure 4.1.13 PBIT and PBIT margin – Ethnic private commercial radio stations

iii) Availability of radio and audio services

Canadians have access to a number of different audio services such as private AM and FM commercial radio, non-commercial AM and FM radio, Satellite subscription radio services and pay and specialty audio services.

In 2016, a total of 1,112 services were authorized to broadcast in Canada, a decrease of 8 over-the-air services over 2015. Private commercial radio stations account for almost two thirds of all the audio services in Canada, while community stations, the second most numerous type of audio service, represented 12% of all audio services in 2016.

Figure 4.1.14 Types of radio and audio services authorized to broadcast in Canada, as a percentage of all such services, 2016

Figure 4.1.15 Percentage of Canadians accessing online streamed audio services monthly, by language group

Figure 4.1.16 Satellite radio subscriptions, by language group

iv) Audience measurement

Audience measurement data is important not only to industry stakeholders, who use the data to help sell air time to advertisers, but also to the CRTC, which uses the data to assess the effectiveness of its policies by understanding the reach of programming across the country and across various demographics.

• Audience measurement data is compiled by Numeris through the use of portable people meters (electronic devices that records listenership data) and diary surveys (written logs of listenership). National figures are based on diary surveys only. All Numeris-related data for previous years have been restated to align with methodological changes.
• Audience measurement data is based on Numeris radio diary data from the fall surveys across Canada, Monday to Sunday from 5 am to 1am, with participants aged 12 or older.
• NEW TO FALL 2016: Online Radio Diary (ORD) was implemented in all radio diary markets^{Footnote 3}. For the first time, participating households were provided the choice of completing the day diary by using either the traditional paper form or the new online form. The introduction of ORD affects the data collection methodology and therefore, fall 2016 results may not be comparable to previous years with high precision.

Four ownership groups garner over 50% of all tuning in Canada across all English-language stations in 2016.

Figure 4.1.17 Radio tuning by station type in diary markets, 2016

Among Canadians listening to English-language radio stations, over 46% of listening hours went to CBC Radio One, country, and adult contemporary formats. Among French-language radio station listeners, almost 40% of listening hours went to the adult contemporary formats. Audiences tune in much more to News/Talk radio in the French-language markets (18%) than in the English-language markets (9%).

v) Programming contributions and expenditures

The CRTC uses a number of approaches to achieve the cultural, social, and economic objectives set out in the Broadcasting Act. One such instrument has been the establishment of various contribution and expenditure regimes.

In the 2015-2016 broadcast year, commercial radio operators contributed 3 cents per revenue dollar to support Canadian Content Development (CCD). Collectively, they contributed nearly $47 million to the development of Canadian content. On average, the fund has decreased 3.9% annually over the past 5 years. Approximately 50.7% of the funds were a direct result of the conditions of licence issued to new radio stations and tangible benefits paid following a change in ownership or control of radio stations, the other half was garnered through licence renewals.

Chart 4.1.1 Radio CCD contributions structure

Figure 4.1.18 CCD contributions by regulatory measure ($ millions)

Figure 4.1.19 CCD contributions by regulatory measure (percentage)

vi) Tangible benefits

In 2016, 4 transactions were approved for both English and French language services resulting in total tangible benefits of $1.4 million.

vii) Programming of high standards

The Broadcasting Act sets out that programming provided by broadcasting undertakings should be of high standard. In addition to the CRTC, two bodies deal with programming complaints relating to public and community broadcasters, as well as non-members of the Canadian Broadcast Standards Council (CBSC). The CRTC also deals with issues that are outside the parameters of the codes administered by the CBSC.

The CBSC administers specific codes of broadcast conduct and provides a means of recourse for members of the public regarding the application of the standards set out in the following codes:

• Canadian Association of Broadcasters (CAB) Code of Ethics;
• CAB Violence Code;
• CAB Equitable Portrayal Code; and
• Radio Television Digital News Association of Canada (RTDNA Canada) Code of Ethics.

The CBSC is an independent organization created by the CAB to administer codes established by Canada’s private broadcasters. The CBSC’s membership includes more than 790 private-sector radio and television stations, specialty services, pay services, and networks across Canada. Membership includes broadcasters broadcasting in English, French, and third languages. For more information, visit www.cbsc.ca.

The Advertising Standards Canada (ASC) is a national, not-for-profit advertising self-regulatory body that responds to complaints by consumers and special interest groups regarding advertising with respect to all media subject to the Canadian Code of Advertising Standards, the principal instrument of advertising self-regulation.

The ASC also undertakes pre-clearance functions in five industry categories, which consist of reviewing advertisements based on applicable legislation, regulations, and/or industry codes and guidelines.

Additional information on the ASC can be found at: www.adstandards.com/en/

viii) Ownership groups

Between 2014 and 2016, Canada’s six largest commercial radio operators together accounted for nearly 65% or $1.1B of the commercial radio industry’s revenues. They also accounted for nearly 40% of the total number of radio undertakings in the country.

4.2 Television sector

Canadians have access to over 600 Canadian and non-Canadian television services. Most still watch television by traditional means, whether it be over-the-air, or via cable, satellite or IPTV. However, Canadians are also turning to new platforms and devices connected to the Internet for their video content consumption.

According to 2015-2016 audience measurement data, Canadians two years of age and older are watching an average of more than 26 hours of television each week. However, teens and young adults tend to watch less television through traditional means. From 2014-2015 to 2015-2016, traditional television viewership in the 12-17 age demographic decreased the most, reaching 16.4 hours per week, a 13% decrease relative to the 2014-2015 average of 18.8 hours per week.

While traditional viewership is decreasing, Canadians are supplementing their viewership with Internet television.^{Footnote 4} According to MTM, Canadians 18 years of age and older are now watching an average of 3.1 hours per week of Internet TV compared to an average of 0.5 hours per week in 2010.

In 2016, the private conventional television sector reported $1.68 billion in revenues, compared to $4.42 billion for discretionary services (pay, pay-per-view, video-on-demand and specialty services). The television industry’s five large ownership groups reported 89% of all television revenues.

The English-language private conventional television sector includes three major ownership groups: BCE, with a 42% revenue share of the private conventional television sector; Corus, with a 23% revenue share; and Rogers, with a 12% revenue share. The French-language private conventional television sector has two major players: Quebecor, with a 12% revenue share of the private conventional television sector; and Remstar, with a 4% revenue share.

In 2016, the CBC, Canada’s national public broadcaster, reported $1.19 billion in revenues, 69% of which were parliamentary appropriations.

Collectively, broadcasters contributed over $3 billion to Canadian programming expenditures (CPE), 22% of which was spent on Programs of National Interest (PNI) in 2016. For each dollar earned, television services invested 41 cents in support of Canadian programming during the 2015-2016 broadcast year.

i) Revenues

Total revenues generated in the television industry^{Footnote 5}—private and CBC conventional television and discretionary services combined—increased by 1.7% from 2015 to 2016, reaching $7,279 million in 2016.

Revenues generated by discretionary services (all types of services combined) increased 2.7% per year on average between 2012 and 2016, attaining $4,416 million in 2016. While discretionary services reported only a modest increase of 0.96% in revenues between 2014 and 2015, their revenues increased by 2.9% or $126 million from 2015 to 2016.

Conventional television services owned by both private operators and the CBC generated $2,863 million in revenues in 2016, a $1-million decrease compared to 2015 levels.

The 93 privately owned conventional stations in operation in 2016 garnered $1,678 million, down 4.5% or $79 million from 2015. However, the 27 CBC conventional television stations reported total revenues of $1,185 million in 2016, a 7% or $78 million increase from 2015.

Figure 4.2.1 Television services revenues, by type of service ($ millions)

Figure 4.2.2 Private conventional television revenue sources (%), 2016

Figure 4.2.3 Advertising revenues of conventional television stations owned and operated by the CBC

Figure 4.2.4 Ranking by revenue of individual discretionary services, in descending order, 2016

Figure 4.2.5 Revenues of English-language private conventional television and discretionary services

Figure 4.2.6 Revenues of French-language private conventional television and discretionary services

Figure 4.2.7 Revenues of ethnic and third-language discretionary services

Figure 4.2.8 Collective revenues of top three English-language private conventional television ownership groups

Figure 4.2.9 Collective revenues of top two owners of French-language private conventional stations

ii) Internet-based video services

Revenues for Internet-based services are new to this year’s report. Different types of Internet-based services are available to Canadians. Depending on their business model, they can be categorized into the following three types of services:

• Subscription video-on-demand (SVOD) refers to an Internet-based service model in which a client pays a subscription fee to gain access to a library of content. Examples of SVOD services are Club illico, Crave, and Netflix.
• Transactional video-on-demand (TVOD) refers to an Internet-based service model in which a client pays only for the specific content watched. The client usually does not pay to access the service itself. Examples of this type of service are iTunes, Microsoft Movies & TV, and the PlayStation Network.
• Advertising video-on-demand (AVOD) refers to an Internet-based service model in which a client typically has free access to content but is exposed to advertisements. YouTube is an example of this service type.

Estimated revenues for Internet-based video services in Canada grew by 17.8% from 2015 to 2016, reaching almost $2 billion in 2016^{Footnote 6}. Some services, such as AVOD services, rely heavily on mobile platforms for their revenues; for these, mobile platforms represent approximately one third of their AVOD revenues.

Please note that information found in this section has been sourced from an external research firm and is not based on data collected by the Commission.

SVOD revenues represent over half the total revenues of Internet-based services. While TVOD services have shown the steadiest growth over the past five years, both AVOD and SVOD have grown rapidly over this period. Netflix is the largest SVOD player in Canada, with their 2016 revenues being estimated at $766 million, or 70.8% of total SVOD revenues, up from an estimated $156 million in 2012.

In Canada, iTunes is the largest service in terms of revenues, earning more than two thirds of total TVOD revenues in 2016, followed by Microsoft’s service (12.5%) and the PlayStation Network (8.5%). Overall, the annual growth of TVOD revenues are more moderate than SVOD and AVOD revenues, with the PlayStation Network growing at the fastest pace over the past five years.

While non-mobile AVOD revenues continue to outpace mobile revenues, representing approximately two thirds of total AVOD revenues in 2016, mobile AVOD revenues have increased twentyfold from 2012 to 2016, significantly narrowing this gap.

Figure 4.2.10 Estimated AVOD revenues of Facebook and YouTube in Canada ($ millions)

In both 2015 and 2016, YouTube’s estimated AVOD revenues represented approximately one quarter of total AVOD revenues, although they grew at a slower pace than total AVOD revenues. Conversely, Facebook’s estimated AVOD revenues went from representing a 6% share of AVOD revenues in 2015 to a 14% share in 2016, increasing by 176% year over year. Please note that Facebook’s AVOD revenues exclude revenues from Instagram.

iii) Financial performance

Although private conventional television stations did not achieve profitability in 2016, their losses nonetheless decreased, reporting a -6.7% Profit Before Interest and Taxes (PBIT) in 2016, compared to the -8.0% PBIT reported in 2015. 2016 marked the fourth consecutive year of financial losses for the private conventional television stations.

Discretionary and On-Demand services reported an average PBIT margin of 21% in 2016, similar to 2015’s 21.5%. Category A services with a 32% PBIT margin, were the most profitable of all types of services. PPV managed to attain a 10.8 PBIT margin but Video-on-demand slumped to -11.5. As a result, Pay, PPV and VOD service together recorded an overall PBIT margin of 0.1%, down from the previous year’s 4%.

Figure 4.2.11 Aggregate PBIT margins for private conventional television and discretionary services

Source: CRTC data collection

Figure 4.2.12 Aggregate PBIT margins for English-language private conventional television and discretionary services

Figure 4.2.13 Aggregate PBIT margins for French-language private conventional television and discretionary services

Figure 4.2.14 Aggregate PBIT margins for ethnic and third-language discretionary services

iv) Availability of television and video services

Canadians enjoy multiple sources and means of accessing content, from conventional over-the-air linear broadcasting to digital media provided over the Internet. The following chart shows the various categories and types of programming sources and platforms.

Chart 4.2.1 Programming sources and platforms

For figures and tables with the Media Technology Monitor (MTM) as a source, note that:

• “Internet video” is defined as watching or streaming video available over the Internet (e.g. video clips on YouTube, television programs, sports, movies, etc.); and
• “Internet TV” is defined as watching or streaming television programs or clips available over the Internet.

Figure 4.2.15 Percentage of Canadians who viewed television and Internet video services and programming in the past month, by language and platform, 2016

v) Audience measurement

Audience measurement data is important not only to industry stakeholders, who use the data to help sell air time to advertisers, but also to the CRTC, which uses the data to assess the effectiveness of its policies by understanding the reach of programming across the country and across various demographics.

Unless otherwise specified, audience measurement data sourced from Numeris was collected by portable people meter (PPM) devices;

The Numeris data presented by linguistic market divides Canada into two sections: (1) all of Canada, excluding Francophone respondents in Quebec; and (2) exclusively Francophones respondents in Quebec;

The television seasons used by Numeris were the following:

• 29 August 2011 to 26 August 2012, includes all persons 2+, Monday to Sunday, 2 a.m. to 2 a.m.;
• 27 August 2012 to 25 August 2013, includes all persons 2+, Monday to Sunday, 2 a.m. to 2 a.m.;
• 26 August 2013 to 31 August 2014, includes all persons 2+, Monday to Sunday, 2 a.m. to 2 a.m.;
• 1 September 2014 to 30 August 2015, includes all persons 2+, Monday to Sunday, 2 a.m. to 2 a.m.; and
• 31 August 2015 to 28 August 2016, includes all persons 2+, Monday to Sunday, 2 a.m. to 2 a.m.

For figures and tables with the Media Technology Monitor (MTM) as a source, note that:

• “Internet video” is defined as watching or streaming video available over the Internet (e.g. video clips on YouTube, television programs, sports, movies, etc.); and
• “Internet TV” is defined as watching or streaming television programs or clips available over the Internet.

For tables with data by ownership groups:

• Where ownership transactions were in progress at the time of data collection, ownership was based on the date of the approval decision, not the official closing date of the transaction.
• Viewing for the entire television season was attributed to the ownership group holding direct and indirect voting interests greater than 50% on 31 December of each year.

Figure 4.2.16 Average number of hours Canadians watched traditional television (2011-2012 through 2015-2016 broadcast years) and Internet television (2010 to 2016)

Whereas weekly viewing of traditional television has decreased by approximately 1 hour over the last 5 years, weekly Internet television viewing in the total population increased by approximately 2.5 hours and by approximately 4 hours for typical Internet TV weekly users over the same period.

Average weekly viewing declined across all age groups except for the 65+ age group which saw little movement over the same timeframe.

Relative to the total viewing hours, viewership has slightly declined or has remained stable across the different services over the past five years. The total hours for all services has diminished by over 30 million hours from 2011-2012 to 2015-2016.

In contrast to the English-language market, which has seen its total viewing hours diminish in the past five years, the French-language market has experienced a growth in total viewing hours of 12.4 million hours.

Drama and comedy exhibits the highest viewing percentage of any category for both French- (39.1%) and English-language (36.6%) markets, yet only 27% of this type of programming for the French-language market and 18.7% for the English-language market is produced in Canada. News and Sports programming are 98.3% and 64.3% Canadian-made in the French-language market, while 99.7% and 72% of these types of program respectively are made in the English-language market.

In French-language markets, drama and comedy garnered the highest percentage of total CBC viewing (30.5%), followed closely by the General entertainment/Human interest/Reality category at 28%.

English-language markets shared an interest for drama and comedy, with 26.6% of total viewing, yet preferred the Sports category (37.8% of total viewing) to the General entertainment/Human interest/Reality category (5.8% of total viewing).

The News category reaches almost 100% Canadian production across the English- (99.3%) and French-language (100%) markets, while the percentage is much lower for the Sports category (English 14.7%; French 7.1%) and Drama and comedy category (English 8.6%; French 19.9%).

Drama and comedy is the most viewed discretionary service category, but only 20.2% is made in Canada in the English-language market and 23.1% is made in Canada in the French-language market.

vi) Programming expenditures

The policy objectives of the Broadcasting Act include encouraging the development of Canadian expression and ensuring that each element of the Canadian broadcasting system contributes in an appropriate manner to the creation and presentation of Canadian programming. As such, Canadian broadcasters are required to allocate portions of their annual broadcasting revenues to expenditures on Canadian programming. These expenditures are used to create Canadian programming and to ensure that a diversity of voices and interests are represented in our national broadcasting system.

Television service providers contributed 43 cents per revenue dollar in support of Canadian programming during the 2015-2016 broadcast year. Canadian programming expenditures (CPE) totalled $3 billion, 22% of which was spent on program of national interest (PNI).

Spending on non-Canadian programming by private conventional television stations decreased by $46 million (-7%) to $610.3 million in 2016.

The CRTC has defined programs of national interest (PNI) as including drama and comedy, long-form documentary, and specific Canadian award shows that celebrate Canadian creative talent. For French-language broadcasters, PNI also include music video and variety programs.

For the purposes of this report, PNI expenditures include expenditures in any of the following program categories:

• long-form documentary (category 2b);
• drama and comedy (category 7);
• French-language music, dance, and variety programming (categories 8 and 9); and
• English-language award shows (subset of category 11).

The PNI data presented in this section include all PNI expenditures reported by broadcasting undertakings, regardless of conditions of licence requiring such expenditures.

Chart 4.2.2 illustrates the flow of funding to the creation of Canadian programming. A percentage of BDU subscriber revenues is used to fund Canadian discretionary (pay, specialty, PPV and VOD) services, as well as local expression (community television), the Canada Media Fund (CMF), the LPIF, and various independent funds. Commercial television services (specialty, pay, and private conventional OTA) and the CBC rely on funds generated by advertising. Government funding is also provided to the CMF, the CBC (via parliamentary appropriations), and various independent content providers.

Chart 4.2.2 Canadian programming funding ecosystem

Figure 4.2.17 CPE on television, by type of service, 2016 ($ millions)

In 2016, discretionary and on demand services (specialty, pay, PPV and VOD) spent $1,707 million in CPE, an increase of $108 million (6.8%) over 2015. Historically, specialty services has accounted for more than half of CPE spending.

Figure 4.2.18 Television programming expenditures ($4.3 billion total), PNI vs. Canadian vs. non-Canadian, 2016

Almost 70% of the spending went to Canadian programming (PNI included).

Figure 4.2.19 Programming expenditures per revenue dollar

Discretionary services spend the most on PNI (54.3%) with 37% going towards drama. Spending in the drama category grew by a more than 22% between 2015 and 2016 while total PNI grew by 5.3% in 2016.

The 4 largest private ownership groups and CBC contributed almost 500 million dollars to programs of national interest in 2015-2016. The drama category benefitted the most with a total 358.9 million dollars. Its main benefactors were CBC (164.2 M), Corus (99 M), and BCE (89 M).

2016 private conventional television CPE is equivalent to 38% of this sector’s revenues.

Figure 4.2.20 Distribution of CPE for private conventional television services, by program category, 2016

More than half of the expenditures were made on news programming. Other significant investments were made in general entertainment (including human interest and awards shows), and drama and comedy progr

From 2015 to 2016, the decrease in Non-Canadian programming was most prominent in the “Drama” programming category, which reported a year over year decrease of $36M (-7.7%).