ARCHIVED - Transcript, Hearing 7 April 2011
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Volume 4, 7 April 2011
TRANSCRIPT OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION
To consider the broadcasting applications for the group-based licence renewals for English-language television groups listed in Broadcasting Notice of Consultation CRTC 2010-952, 2010-952-1, 2010-952-2 and 2010-952-3
140 Promenade du Portage
In order to meet the requirements of the Official Languages Act, transcripts of proceedings before the Commission will be bilingual as to their covers, the listing of the CRTC members and staff attending the public hearings, and the Table of Contents.
However, the aforementioned publication is the recorded verbatim transcript and, as such, is taped and transcribed in either of the official languages, depending on the language spoken by the participant at the public hearing.
Canadian Radio-television and Telecommunications Commission
To consider the broadcasting applications for the group-based licence renewals for English-language television groups listed in Broadcasting Notice of Consultation CRTC 2010-952, 2010-952-1, 2010-952-2 and 2010-952-3
Konrad von Finckenstein Chairperson
Leonard Katz Commissioner
Rita Cugini Commissioner
Suzanne Lamarre Commissioner
Peter Menzies Commissioner
Tom Pentefountas Commissioner
Stephen Simpson Commissioner
Jade Roy Secretary
Joshua Dougherty Legal Counsel
Sheehan Carter Hearing Manager
140 Promenade du Portage
April 7, 2011
- iv -
TABLE OF CONTENTS
PAGE / PARA
Canadian Media Production Association 563 / 3366
Quebec-English-language Production Committee 629 / 3769
English-Language Arts Network 638 / 3819
TELUS Communications Company 670 / 4007
Independent Broadcast Group 687 / 4101
Première Bobine 709 / 4209
- vi -
PAGE / PARA
Undertaking 615 / 3681
Undertaking 626 / 3748
Undertaking 628 / 3763
--- Upon commencing on Thursday, April 7, 2011 at 0900
3346 THE CHAIRPERSON: Good morning.
3347 Commençons, Madame la Secrétaire.
3348 THE SECRETARY: Thank you, Mr. Chairman.
3349 Before we start the intervenor phase we would like to announce that the abridged transcript of the CTV in camera session is available in the examination room for consultation and will be posted on the Commission's website at 11:00 a.m. today.
3350 Also, we would like to announce that the deadline for the intervenor's final submission will be May 4th and the reply by applicant to those final submissions will be May 11th.
3351 Before we start, legal counsel would like to state on the record undertakings that have been asked yesterday of the four group applicants.
3352 THE CHAIRPERSON: Madam...?
3353 MS DIONNE: Thank you, Madam Secretary.
3354 Yesterday, we asked the four groups to file the following information prior to their reply phase:
3355 expenditures made on Canadian drama back to 2008 and the percentage of previous PNI spending that was made on Canadian drama;
3356 profit or loss on Canadian programming expenditures, including direct and fixed costs on a station-by-station basis;
3357 numbers showing the profit or loss on Canadian drama; and
3358 finally, aggregate forecast expenditures on U.S. programming for each year of the next license term.
3359 Thank you.
3360 THE SECRETARY: Thank you.
3361 We will now proceed to Phase II in which intervenors appear in the order set out in the Agenda to present their intervention.
3362 For the record, the intervenor Shaw Media Inc. listed in the Agenda has informed us that they will not be appearing at the hearing as intervenors.
3363 We will begin with the presentation by Canadian Media Production Association.
3364 Please introduce yourself for the record, after which you will have 10 minutes for your presentation.
3365 Thank you.
3366 MR. BOLEN: Good morning, Mr. Chair, Vice-Chairs, Commissioners and CRTC staff.
3367 My name is Norm Bolen and I'm the President and CEO of the Canadian Media Production Association. I'm pleased to have with me here today from the CMPA, to my left, John Barrack, Chief Operating Officer and Chief Legal Officer; and to my right, Jay Thomson, Vice-President Broadcasting Policy and Regulatory Affairs.
3368 Mr. Chairman, we would like to start by thanking the Commission for the role you have played in helping us to get to a Terms of Agreement with the major private broadcasters. We truly believe that this will usher in a new era of collaboration and cooperation.
3369 The Terms of Trade Agreement addresses the terms of our trade with broadcasters, but it's Canadian content -- the trade itself -- that makes those terms meaningful.
3370 The Commission's new Group Licensing Policy will generate that Canadian content and the CMPA fully supports the policy. It will ensure more and better and more diverse Canadian programming gets made and gets broadcast.
3371 We see the new Group Licensing Policy as having four pillars. They are:
3372 a minimum 30% Group CPE;
3373 a minimum PNI spending higher than 5 percent;
3374 Canadian content exhibition requirements; and
3375 obligations supporting independently-produced programming.
3376 Over the last three days, you have reinforced that the policy establishes a minimum 30 percent CPE for each broadcaster group. Thirty percent is therefore the floor.
3377 The policy also establishes that the Group PNI CPE should be at least 5 percent. Five percent is only the starting point for the discussion because it represents historical spending on drama alone. Once you factor in historical spending on the other PNI categories, documentaries and awards shows, the 5 percent figure has to become something higher.
3378 We are not in a position to tell you how much higher it should be -- you have the relevant financial data and the information from the in-camera sessions, and we don't -- but we did hear that at least one of the broadcaster groups is already spending more than 9 percent on PNI.
3379 The third pillar of the new policy is Canadian content exhibition. While we support the policy's new focus on program creation, exhibition requirements are also still important. They ensure that what gets made gets shown and they also ensure that it gets shown at times when most Canadians still watch television.
3380 Mr. Chairman, there are at least 12 specialty services seeking reduced Canadian programming exhibition obligations. In most cases, however, there is no rationale or justification for these proposed reductions, beyond a broad request for parity.
3381 These requests for parity ignore the Group Licensing Policy. The policy confirmed that specialty services would retain their own, tailored exhibition obligations.
3382 Taken together, the proposed exhibition reductions would mean a decrease of 170 hours per week of Canadian programming. That's at least 9,000 fewer hours of Canadian programming per year! That means 9,000 more hours of foreign programming in the system. In our view, that cannot be the objective of the Group Licensing Policy.
3383 Jay ...?
3384 MR. THOMSON: The fourth pillar of the new policy is support for independently-produced programming. This support ensures a diversity of programming in all genres, both PNI and non-PNI.
3385 All of the broadcasters accept the obligation established in the policy to allocate at least 75 percent of their PNI spending to independently-produced programs.
3386 The policy also states, however, that specialty services that currently have individual requirements relating to independent production will retain those requirements. Therefore, retention of those individual requirements is not contrary to the policy; it is the policy.
3387 The CMPA appreciates that the 75 percent PNI spending requirement will contribute substantially to promoting creativity and a diversity of voices in the PNI genres. That is very important.
3388 There should also be diversity in non-PNI genres, like factual entertainment programming. The current individual requirements relating to independent production help to promote that diversity too, by ensuring that the production of non-PNI shows will not all move in-house.
3389 In this hearing, the Commission has raised a non-PNI spending obligation as another possible means to achieve the same objective. We understand you have had those discussions with some of the broadcasters already, we would be happy to discuss that alternative proposal as well.
3390 MR. BOLEN: Mr. Chairman, we support the new Group Licensing Policy and urge you to implement it as it is. At the same time, we also must acknowledge that the policy could lead to unintended consequences. The CMPA is fully committed to embarking on this new journey, none of us, however, can see where it will ultimately take us.
3391 For example, we are very concerned about how the policy will impact traditional support within the system for Canadian feature film. That's why we argued in our written submission that pay TV services should be excluded from the policy, otherwise the unintended consequence is that, with spending flexibility, pay TV spending on Canadian feature films will go elsewhere.
3392 Frankly, our concerns about the future of broadcaster support for Canadian feature films go well beyond the pay TV issue. The Canadian feature film industry is facing a funding crisis because broadcasters in general no longer support Canadian feature films as they once did.
3393 Our feature film industry has had some great success as of late. Think of "Barney's Version" and "Incendies", for example. These movies would not have been made without broadcaster support. If current trends continue, however, that support will disappear, and then so will those feature film success stories.
3394 It is for this reason that we are taking this opportunity to urge the Commission to initiate a separate policy proceeding to consider how our broadcasting system will continue to support Canadian feature films.
3395 MR. BARRACK: Mr. Chairman, Norm began by highlighting the fact we have reached an agreement on Terms of Trade. I would like to speak further on that matter.
3396 First of all, I would like to reiterate our thanks to the Commission for recognizing a long time ago that Terms of Trade would further the objectives of the Broadcasting Act and for setting these hearings as a hard deadline to get a deal done.
3397 I would also like to acknowledge and thank the private broadcasters for their diligence and good will.
3398 As the Commission is aware, the CMPA has asked that the broadcasters be required to adhere to the Terms of Trade Agreement as a condition of their licences. At the same time, we have proposed that the application of this COL be suspended as long as the licensee remains a signatory to, and agrees to be bound by, the Agreement. In this way, we mirror the language the Commission has successfully employed in COLs requiring the broadcasters' adherence to the various codes administered by the CBSC.
3399 We have asked for this COL because we believe it is necessary to ensure the stability and clarity regarding the broadcasters' adherence to the Terms of Trade Agreement. This Agreement does a lot to help level the playing field between independent producers and broadcasters during rights negotiations. If a broadcaster were to unilaterally walk away from the agreement, however, we would have little or no recourse. Therefore, we need the Commission to ensure, by COL, that that does not happen.
3400 A last point. All the signatories have agreed on a new definition of what constitutes "independent production" for the purposes of the agreement. Specifically, we agreed that only programs falling within that new definition will count toward the Commission's independent production expenditure requirement, as established in the Group Licensing Policy.
3401 In light of that agreement, we ask that the Commission also adopt the agreed-upon definition of "independent production" and incorporate it into the decisions flowing from this hearing and, where relevant, in all future decisions.
3402 MR. BOLEN: Mr. Chairman, we support the fact that this hearing is not about setting the Group Licensing Policy, the Commission did that a year ago. This hearing is about applying the policy so that it achieves its objective of supporting Canadian programming into the future.
3403 We agree that flexibility to adapt to the changing broadcasting environment is a fundamental aspect of the new policy. We think that's good, but the increased flexibility for broadcasters should be a tool to achieve the goal of increased support for Canadian programming. It should be a means to an end; it should not be an end in itself.
3404 The new Group Licensing Policy is not about less support for Canadian programming, it's not about less support for independent production and less programming diversity; it's about strengthening Canadian programming for the future.
3405 Thank you for the opportunity to be here today. We would be pleased to answer any of your questions.
3406 THE CHAIRPERSON: Thank you.
3407 You want us to adopt the definition that you have in terms of "Trade Agreement". What would be the impact of that? What's the difference?
3408 MR. BOLEN: John will speak to that.
3409 MR. BARRACK: To distil it down -- and I will admit the language that is before you isn't exactly pretty and hopefully we will clean it up in drafting, but essentially what we are taking is the CAVCO definition of "independent producer" and carving out what we call service production.
3410 Essentially what we didn't want to see happen was programs that truly aren't independently produced count as independent production for the purpose of spend.
3411 A very simple example is what we call service production, where a broadcaster effectively develops fully a project and then assigns the project to an independent producer. That's not independently produced. It's manufactured by an independent producer, but it's not independently produced.
3412 THE CHAIRPERSON: Okay.
3413 What is your point on feature film? I must say, I have listened to you carefully and I looked at the wording and I don't quite understand what you are trying to do.
3414 Can you walk me through the feature film aspect again?
3415 MR. BOLEN: Well, the 100 percent spending flexibility under the policy if applied to pay TV would allow pay TV to shift significant amounts of its spending out of pay TV and away from feature film and that is the danger.
3416 Now, beyond that there is a general danger, but specifically pay TV is fundamental to the financing of feature film.
3417 THE CHAIRPERSON: But you say it should be excluded from the policy.
3418 MR. BOLEN: Yes. If you exclude pay TV from the policy then pay TV will continue to have its spending requirement, it will not have the flexibility to move its Canadian expenditures to other services within the group.
3419 THE CHAIRPERSON: I'm sorry, I'm missing something.
3420 The idea is to catch all the Canadian spending in the policy, right, as a group. Surely the money they spend on feature film is also spending on Canadian content.
3421 MR. BOLEN: Yes.
3422 THE CHAIRPERSON: Is there a separate one right now that gets swept in that you want to keep separate?
3423 Is that the idea?
3424 MR. BOLEN: Pay TV has a significant CPE spending requirement, within the flexibility rules of the group licensing policy that money could be moved away from pay TV into other services. If that were to happen, there would be less money spent on Canadian feature film. That's the danger.
3425 THE CHAIRPERSON: I know, but to start of, we exclude it first of all in order to determine the CPE levels for the group, so you want it to count for that purpose or not?
3426 MR. BOLEN: No.
3427 THE CHAIRPERSON: Not for the calculation?
3428 MR. BOLEN: No.
3429 THE CHAIRPERSON: So you are basically trying to change the policy?
3430 MR.BOLEN: No
3431 THE CHAIRPERSON: I thought the policy means you would take all the spending that the group does on Canadian content, we then determine through the formula what should be the portion that goes to OTA and then we provide for flexibility. Now you are trying to cut pay TV out of the original total?
3432 Is that what you are doing?
3433 MR. THOMSON: That's exactly right. We are trying to separate the pay TV because it's a beast unto itself. Pay TV is very different from specialty services and from over-the-air services because it has a different financing model and has a different programming mandate which has a broader focus on feature films.
3434 If you remove pay TV out of the equation it doesn't count for setting the overall CPE, it doesn't count for a broadcaster's ability to move its expenditures around, it just sits outside of the system and is dealt with separately.
3435 We think that's more of an implementation matter than a policy matter. We still support the policy writ large and how it is applied to the remaining broadcasters, but if we don't deal with pay separately now then a few years down the road when it crisis that we are talking about in terms of feature film financing really comes to a head, it may be too late to address pay TV's role in it.
3436 THE CHAIRPERSON: I quarrel with your assumption that there is an implementation issue.
3437 We started off with very simply let's treat you as a group, let's treat all your expenditures on Canadian content as one and you are saying "all but" right now.
3438 MR. THOMSON: I mean Corus itself, the way we read the Corus application, they seem to also have a little bit of trouble understanding how pay TV would actually fit within the group licensing framework. Now, they have obviously come and supported its inclusion at this point, but we read into their application that they have some questions that we share about how it should fit in and so we went a step further and suggested that because of those questions, because of the other issues associated with pay TV and film that the best thing going forward would be actually to exclude it for now.
3439 MR. BOLEN: We raise this as a general caution and we are afraid that two or three years from now we will look back at this proceeding and wonder about the consequences we created.
3440 We understand that it's a bit of a change in how this thing could be looked at, but other intervenors have raised this issue with regard to pay TV as well. It is really a special case.
3441 We have a crisis in feature film, that's why we have suggested another proceeding to actually look at that in a broader sense, because it's not just pay TV -- pay TV is the issue on the table today in our view -- but there is a general moving away from feature film and the PNI rules themselves are not doing anything to necessarily ensure that feature film continues to get supported by broadcasters.
3442 So this is a general issue. We raise it really in good faith as a caution. We are hearing from feature film producers loudly that this is a very significant issue for the industry, including the producers of big successful Canadian films, they are telling us that they are going to be unable to finance those films and that this change in broadcaster support is critical.
3443 THE CHAIRPERSON: You have been here and listening to us for the last three days I assume, there has been a lot of talk about genre protection. Your submission is notoriously silent on that point, but I assume you have some views on that.
3444 MR. BOLEN: Well, we very much agreed with what Mr. Robertson from Shaw said yesterday about genre protection. We think he made excellent points.
3445 Under the policy genre protection would remain and there is a good reason for that. It has meant significant diversity in the system and it has led to a very successful specialty sector.
3446 I think the concern is that too many changes at once are challenging for the system to absorb and under the group licensing policy there will be very significant changed. As Mr. Robertson said, let's get through that first and then go to this other layer of questions about genre protection and so on.
3447 So he suggested a separate proceeding. We agree with that. We think there has to be a discussion about genre protection. We suspect there will be significant changes, but we would like to have an opportunity to look at that carefully, for everyone to have input, for evidence to be put on the table and for us to make a considered decision.
3448 THE CHAIRPERSON: We can't do it in this hearing anyway. Relax, it can't. It wasn't put in the notice, but we got into the discussion of it because of what is happening in the industry and trying to look forward rather than backward at seeing the problems. It was raised by me and picked up by several others.
3449 Mr. Robertson basically suggests this would be the last time we have a licensing hearing with -- I don't want to put words in his mouth, but that's what I understood, that in effect before we do a renewal we will have to have a look at the genres, if we want to reinvent it or change it or whatever.
3450 Are you in agreement with that?
3451 MR. BOLEN: We agree with that. We would like to be part of that discussion.
3452 THE CHAIRPERSON: Okay. Thank you.
3453 Tom, you have some questions?
3454 COMMISSIONER PENTEFOUNTAS: Yes.
3455 Thank you for your presentation, Mr. Bolen.
3456 Would you see any reason why we would apply the GPL in an asymmetrical fashion, given different asset mixes amongst the players that we heard earlier this week?
3457 MR. BOLEN: No. We think the heart -- the very heart of the policy is to apply these minimum spending levels and spending requirements across the board to all of these corporate groups. That to me is the fundamental principle.
3458 We have heard that asset mix should make a difference. Asset mixes change all the time and can change tomorrow, change next week. The principle is what is important and I think we should stick to it.
3459 COMMISSIONER PENTEFOUNTAS: Are broadcasters that have conventional at 90 percent as opposed to others that have specialty 90 percent, are they at a disadvantage under these terms?
3460 MR. BOLEN: No, we don't think so.
3461 If you have services that under their nature of services are able to run PNI programming, and all the broadcast groups have those services, then they should be doing that programming.
3462 We think it is fundamental to the system that all major broadcasters -- as it's part of the regulatory bargain, in exchange for the privileges and flexibility that comes under the group licensing policy, the minimum obligation should be that across the board all of them have the same spending requirements.
3463 COMMISSIONER PENTEFOUNTAS: When certain applicants come before us and tell us that we are fundamentally a conventional broadcaster, you don't see any distinction between people that are heavily conventional as opposed to specialty?
3464 MR. BOLEN: Well, they all have conventional assets and those assets mixes can also change and over time I think it's important that we see all broadcasters with specialty assets making a contribution to PNI.
3465 PNI is very important. These are the under represented categories that the Commission wants to see encouraged and I think all broadcasters with conventional assets should be applying, applying these rules, applying the PNI spending.
3466 Also, even those who don't have conventional assets, if they have significant broadcast licences that allow them to -- that have nature of service that allows them to do PNI they should be doing PNI. PNI is the heart of what the Commission is about. It's what we have always been trying to get more of and put into the system.
3467 COMMISSIONER PENTEFOUNTAS: We had the broadcasters come before us and offer various figures, but their impression is that Canadian drama is a loser, constant and continual loser.
3468 Is there a reason for that?
3469 MR. BOLEN: We don't believe that Canadian drama is a loser. We believe Canadian drama increasingly is a success story and has the potential to be even more successful.
3470 As we have said that other proceedings over the last several years, Canadian drama in prime time on our broadcasters has been getting picked up around the world and picked up in particular in simulcast -- on the United States on major networks and then it has been simulcast into Canada. This is incredible and we need to encourage more of this.
3471 Now, the old argument is how come Canadian shows don't do as well as American shows. Well, let's just -- in terms of audience, which translates theoretically into bringing in less revenue.
3472 Well, the budget of an American drama is four times the budget of a Canadian drama. American dramas are accompanied with that vast American publicity machine that seeps across our borders. So of course those shows do very, very well, but Canadian shows also do extremely well and they have been doing very well and we think by supporting PNI and encouraging the broadcasters to spend on PNI we will see even more investment in Canadian drama going forward and that will be a success story for us.
3473 Also, an interesting side bar to this, the whole Over the Top Services issue and the Netflix issue which is occupying a lot of attention these days, and we have certainly been trying to help the sector understand what these services mean for our system, and going forward if American programming is going to become harder to get, it's going to mopped up more and more by these Over the Top Services, it's going to become less available to Canadian broadcasters, how are we going to compete?
3474 The Canadian broadcasters say reduce the Cancon obligations; we say the ultimate consequence of reducing Canadian content obligations is that you will have a significant problems in the system because as American programming becomes harder to get, potentially more expensive, scarcer, a rare commodity and harder to get to drive the heart of the Canadian schedule, what are we going to do to get audiences? We should be investing more in Canadian programming to differentiate our services from those American broadcasting services.
3475 This is a fundamental part of the discussion, it's a lot to get into here today but we should be thinking very carefully about that going forward. So we need more emphasis on Canadian, not less.
3476 COMMISSIONER PENTEFOUNTAS: Somehow the broadcasters don't seem to agree with you and there is a total disconnect. We have your point of view and we have their point of view and they are telling us they are bleeding themselves dry on Canadian works of drama. It's a financial nightmare for them. You are telling us that Canadian works of drama are successful financially.
3477 MR. BOLEN: It's not necessarily about a straight line profit calculation. Of course it's easier to go buy a program made somewhere else that already has a track record and a big publicity machine behind it and put it on the schedule and sell it to advertisers, but is that what the Canadian broadcasting system is about? Is that what we want the Canadian broadcast system to constantly put its major focus on?
3478 We understand that that's an economic driver, we want the broadcasters to be healthy, but how long is that model sustainable going forward with the threats we are seeing coming into this country?
3479 What is the answer to the threat? The answer to the threat is to do more and better Canadian and we do not believe in the defeatist position that Canadian programming is somehow a disaster for broadcasts. That just doesn't work for us.
3480 If you accept that conclusion, then why have Canadian programming at all, just let the Canadian broadcasters run 100 percent foreign until that model completely drains away, because that is what's going to happen to it. It's going to drain away.
3481 COMMISSIONER PENTEFOUNTAS: We have asked that question.
3482 But in selling to the Americans and to international markets there is a revenue stream there. You agree with me on that?
3483 Broadcasters tell us that they have no access to those funds.
3484 MR. BARRACK: Specifically under our Terms of Trade Agreement you're right, they don't; the independent producers do.
3485 But let's keep in mind what tools they do have in their toolshed now that they didn't before. They now have incredible flexibility to spend. So under the new policy if they wish to spend up or focus or concentrate funds to make what in their view will be a winner, they have the flexibility to do that.
3486 In at least two cases where you combine the benefits money that is now in the system there is a real opportunity to invest in programming and take it forward.
3487 They further have an opportunity, if they put in what I will call an extraordinary contribution into that production, to profit participate under the new Terms of Trade Agreement, so then in that case they do have an opportunity to see some of that revenue and share at a partnership with the independent producer.
3488 So we have created, between the Commission and ourselves as a group, some real fundamentals that create the most winning conditions, if I can put it that way, for Canadian programming to sell internationally and at home.
3489 MR. BOLEN: Could I just add one thing?
3490 COMMISSIONER PENTEFOUNTAS: Sure.
3491 MR. BOLEN: Unfortunately for us, since we don't have access to the detailed financial information, it's harder for us to be granular about this stuff, so please understand. It's hard for us to make really firm, concrete numbers-based arguments about this, but I would be very careful about analyzing broadcaster suggestions that Canadian content is across the board a big loser for them.
3492 COMMISSIONER PENTEFOUNTAS: We have also heard that there is so much money in the system right now for production that you just can't keep up. You don't have the writers, don't have the directors, don't have the producers.
3493 MR. BOLEN: The entire creative community will tell you that that is absolutely not the case. Every time a producer goes to a broadcaster these days with a budget, the first thing the broadcaster says is: It's too expensive, our resources are limited, we don't have enough money, please go out and scrape up some money to finance this production, make the budget smaller.
3494 We are not hearing broadcasters saying: Oh, we have so much money in the system we are going to give you -- we are going to pay for your whole production, we are going to give you everything you need. Go right ahead, yes, put that in the budget, have a bigger budget.
3495 COMMISSIONER PENTEFOUNTAS: They would like to, but you can't keep up.
3496 MR. BOLEN: That's not at all the case.
3497 COMMISSIONER PENTEFOUNTAS: You can't keep up.
3498 MR. BOLEN: That's not at all the case.
3499 There is excess capacity in the production system absolutely. The production system is able to deal with any demand that comes from the broadcasting system. There is absolutely no question about that.
3500 COMMISSIONER PENTEFOUNTAS: As a matter of fact, they told us that if a production falls through they have nothing in the pipeline to come in and replace that.
3501 MR. BARRACK: That's a development issue on their part.
3502 COMMISSIONER PENTEFOUNTAS: Okay.
3503 MR. BARRACK: That's not a lack of capacity issue.
3504 COMMISSIONER PENTEFOUNTAS: I understand that.
3505 MR. BARRACK: There is tremendous capacity in the system. So to the extent that they are taking a business decision to ensure that if one project goes down there are others that can fill, that's just good planning. That is fairly low cost for them.
3506 COMMISSIONER PENTEFOUNTAS: Yes.
3507 MR. BARRACK: I think you will hear from the various unions and so forth as well that there is absolutely no lack of capacity.
3508 COMMISSIONER PENTEFOUNTAS: Following some recent transactions, just off the top of my head I see about $200 million that has been pumped into production as a consequences of these transactions. It could be Bell, it could be Shaw, it could be Alliance Atlantis.
3509 Are you telling us there still isn't enough money in the system, and that there won't be over the term of this licence agreement?
3510 MR. BOLEN: In our view, there can never be enough money in the Canadian content creation system.
3511 Canadian content is what Canadian independent producers are all about. That's what we do. That's our trade. We make Canadian shows, and we make them because we are proud of making them, and we make them because we think they are good for the system and they are what Canadians want to watch, and want to watch increasingly as the quality improves.
3512 We can do a lot with putting dollars into Canadian content. It's not just a volume issue, it's a quality issue, and let's face it, dollars translate into quality on the screen.
3513 A lot of our programs could be better financed. They could have larger budgets. They could put more on the screen if we put more emphasis on them.
3514 That's why we support this policy, because this policy, at its very heart, is about supporting the creation of Canadian content, and the PNI rule is at the heart of supporting drama, primarily, as well as documentary and award shows.
3515 That is what the Commission has always put its focus on and should continue to put its focus on.
3516 COMMISSIONER PENTEFOUNTAS: Would you agree that this policy calls for a pooling of resources to create fewer productions perhaps, but of a much higher quality?
3517 Would you have a problem with that?
3518 MR. BOLEN: These are decisions that the broadcasters have to make about how they want to allocate their resources and what programs they want to support.
3519 We can't be sure exactly how that will play out. It may mean that there would be significantly better financed productions in some cases, it might mean a reduction in volume, we don't know. We don't control that.
3520 But it does ensure that there will be, at least, the historical spend on these programs in the system going forward, and at the very minimum, we need to ensure that historical spend is not eroded in any way.
3521 It is hard to predict how it will play out. We don't control that. We just want to make sure that we invest in Canadian programming. Whether it's more volume, less volume, higher quality, lower quality, that's really not our decision.
3522 COMMISSIONER PENTEFOUNTAS: You would agree that if we had higher quality productions, we would probably get better ratings.
3523 MR. BOLEN: We agree. As I have said, this is why it's a fallacious argument to suggest that there is too much money in the system.
3524 Any money in the system can be applied toward improving the quality. That would be my preference, but we don't control that.
3525 The broadcasters can choose to do fewer productions with higher quality, or they can do more volume, it's up to them, and reduce their repeats. We don't really control that.
3526 But, of course, a higher quality program is going to resonate better with Canadians, and anything you can do to encourage that we support.
3527 COMMISSIONER PENTEFOUNTAS: Even if that means fewer productions. You wouldn't have a problem with that.
3528 MR. BOLEN: Yes, we are fine with that.
3529 COMMISSIONER PENTEFOUNTAS: Now, back to feature films briefly. I just want to understand what the policy is now. I understand where your problem is with the new policy, but presently are there specific requirements that the pay channels invest a certain sum of revenue?
3530 Explain to us where the change troubles the CMPA.
3531 MR. THOMSON: The pay services have CPE obligations overall, and then they have a mandate to invest in and show feature films. I am not aware that they have a specific CPE that is tied to feature films, but it is still within their key mandate, and there are other services, such as the City services, that have specific obligations with respect to feature films.
3532 COMMISSIONER PENTEFOUNTAS: But are you asking specifically that a certain CPE be allocated toward feature films for the pay channels -- for the pay services?
3533 MR. BOLEN: We are saying: Keep the pay channels the way they are. Keep their existing obligations. Keep them out of the Group Licensing Policy.
3534 In other words, take them out of the flex equation. That's basically it.
3535 COMMISSIONER PENTEFOUNTAS: We have some preliminary numbers on PNI. You mentioned that one of the broadcasters spends, traditionally, 9 percent. Would you be surprised to know that when they did PNI according to the new criteria for PNI, they, too, were at 5 percent?
3536 MR. BOLEN: I am finding that hard to understand. Again, I don't have access to the numbers, but in my view that's impossible, because the starting point for PNI is drama alone. So drama alone gets you to 5 percent.
3537 In order for 5 percent to be the total PNI number, including documentaries and award shows, there would have to be no documentaries or award shows in the equation. So it has to be north of 5 percent.
3538 All of these services have been running documentaries. Some of them have been running award shows. So I can't imagine how PNI could be anything less than more than 5 percent.
3539 COMMISSIONER PENTEFOUNTAS: Would you specifically like to see a part of PNI go toward drama?
3540 MR. BOLEN: No, we are happy with the PNI definition as it exists -- drama, documentaries and award shows.
3541 We assume, and I think correctly, that the majority of the money will go into drama.
3542 There has been a decline in the focus on documentaries in the broadcasting system generally, and we believe that most of the money will continue to go into drama.
3543 COMMISSIONER PENTEFOUNTAS: That's fine. Thank you.
3544 THE CHAIRPERSON: Len...
3545 COMMISSIONER KATZ: Thank you, and good morning.
3546 Do you agree or disagree with the proposition that there is more revenue derived from the advertising of American programming than Canadian programming?
3547 MR. BOLEN: Are you speaking about an individual program or an aggregate?
3548 COMMISSIONER KATZ: I am speaking in the aggregate.
3549 MR. BOLEN: I don't have access to the numbers, so it's very hard for me to give you an informed response to that.
3550 I guess I have to leave that to your judgment to determine.
3551 COMMISSIONER KATZ: The difficulty that I am having is, if that premise is true, and if our model is based on revenue of the previous year times a certain percentage, the less revenue that is coming in from American programming, the less investment there will be in Canadian programming in future years, and it will be a declining balance as opposed to an increasing balance, and I can't sort of balance those.
3552 MR. BOLEN: As long as we increase the dependency on American programming, which is what we do by reducing Canadian, and increase the investment on American programming, we are kind of contributing to a long-term losing proposition, because the end result of all of this is that you, effectively, become nothing but a foreign service.
3553 The logic of that argument is: Well, let's just keep doing more foreign, because that's what generates revenue, revenue, revenue.
3554 COMMISSIONER KATZ: Where you come to this at the end of the day is, you try to optimize the model so that -- you want to make sure that the broadcasting system is strong and vibrant and can survive -- because we went through the last couple of years where it couldn't -- and on the other hand, you want to keep the creative industry and the production in Canada vibrant as well.
3555 So you end up with this optimization where there is, like, one small, little range where everybody can survive and be successful, but it's a very small, narrow range.
3556 My concern is, if we continue to accept the premise -- and that's why I am asking you the question -- that revenue from Canadian productions is less than revenue from American productions, it is going to be a declining number.
3557 MR. BOLEN: Ultimately -- I have talked before about the heroin drip of American programming, and I think that as long as we continue to feed the addiction, we are actually doing more to accelerate this hurtling toward oblivion of the Canadian broadcasting system, if I can put it that way.
3558 If the argument just continues to be the argument, let's just allow more foreign, more foreign -- more emphasis on foreign, because that's what ultimately brings in the revenue that drives Canadian.
3559 Our emphasis is wrong. We need to find a way to put more emphasis on ensuring that the Canadian programming is better financed, more successful, attracts more audiences.
3560 That's why the Canada Media Fund and Telefilm right now are launching a sort of Own the Podium program for Canadian programming.
3561 We need to overcome this defeatist attitude about Canadian programming. We need to put more emphasis on it.
3562 I have said this before: When I was a broadcaster -- and my colleagues at Shaw have continued in this tradition, and others have continued -- we put the focus on Canadian programming, and the CPE and exhibition requirements drove that.
3563 We had five, six broadcasters talk this week about five and six of their top shows in their schedules being Canadian shows. That model is a good model, and we should be encouraging that model, and the CPE and exhibition requirements of conventional do that.
3564 Let's see if we can't make Canadian programming more successful and more profitable on our Canadian conventional services.
3565 COMMISSIONER KATZ: That goes back to what my colleague said, that is, quality over quantity or quantity over quality, and you are saying that it sits in the bailiwick of the broadcasters to decide that.
3566 MR. BOLEN: They determine the programming mix because they make the decisions about which programs get green-lit and which programs get developed and which don't. So it's in their hands.
3567 But it is in their power to invest more in specific programming, to do fewer programs, to do higher quality, bigger budget programs, to have more successes in the marketplace, and to have Canadian programming that competes even better against foreign programming.
3568 COMMISSIONER KATZ: On a related note, I think it was yourself who appeared here a couple of years ago, when you first came in, and the issue of the long tail was discussed, and the issue of profitability of Canadian programming. At that time we were presented with all sorts of suggestions that Canadian programming doesn't recover its costs, direct or indirect, as the case may be.
3569 I think it was you folks -- the CFTPA that basically said: There is a failure to recognize the long tail and the value that comes in later on, as well, in the equation.
3570 Do you have any more statistics or updated information to validate the fact that maybe the analysis isn't as comprehensive and as complete as what we are led to believe?
3571 MR. BOLEN: Again, what I would say first of all is that, with these large vertically integrated groups, the long tail within each group is even more important, because they have more channels to play this programming on, and it's getting audiences over time.
3572 They play Canadian programming repeatedly on all of these channels, and it gets an audience, and it generates revenue. So there is significant value there.
3573 The broadcasters tenaciously want to hang onto the ability to be able to play those Canadian programs across multiple services, without any limitation on number of plays, because it's obviously performing some important function within their programming schedules.
3574 John will add something else on that.
3575 MR. BARRACK: What was really interesting in our Terms of Trade negotiations was, when we started the negotiations, the independent producers were in a place where we were looking to license content to a particular broadcaster for certain programming services, and then looking for step-up fees for, for example, if you wanted to put it on your whole service.
3576 Where we came to was an agreement to give to the broadcasters that content for all of their services. So their licence fee buys it right across the board now.
3577 There is a tremendous opportunity now to leverage that content. It is completely in line with the policy. Your policy drove so much of what we did in these negotiations, because it was all premised around that flexibility and the ability of the broadcaster to monetize its system, to see maximum value, because, frankly, we do think there is value in Canadian programming.
3578 They see value in Canadian programming, or they wouldn't have wanted these rights. They insisted on these rights, quite frankly.
3579 So there is value in programming decisions that can do that.
3580 Beyond the broadcaster, there is value to the system when those Canadian producers can then take that programming and resell it to other broadcasters, or internationally, bringing that money back to Canada and putting it back on the screen.
3581 COMMISSIONER KATZ: Thank you.
3582 THE CHAIRPERSON: Steve...
3583 COMMISSIONER SIMPSON: Thank you very much.
3584 I would like to drill down on a few big concept questions.
3585 Going back to your comments about service productions for a second, I had asked questions of the broadcasters the other day in terms of why I am seeing in markets like Vancouver -- I can't speak for other metro markets -- post houses, in particular, but a lot of the technical facilities within the line of production having a heck of a time making ends meet. The work is there, but the bucks aren't.
3586 I am wondering if you could give me a sense of what you are seeing. Is this consistent in other markets, or is this an anomaly?
3587 MR. BARRACK: Let's be clear that the Vancouver market is a pretty unique market in this country. It is very much -- if there is a Hollywood North, it's Vancouver, not Toronto.
3588 There is a very robust service production -- U.S. service production community in Vancouver, which is completely outside of our broadcasting system, completely apart from that.
3589 There has always been a tension in those productions as to whether post production, in particular, is done on the ground, where the principal photography is done, or whether it is done back in Los Angeles.
3590 Really, since September 11th there has been a huge reluctance of Americans to travel. It's just a fact, and the desire to do post away from home, if I can put it that way, has plummeted.
3591 So although there are great facilities, and often price points will drive foreign producers to stay in Canada, it's not necessarily in their immediate interest to do so. It's just a flat business reality in that sense.
3592 MR. BOLEN: I might add that the Canadian dollar, at $1.04 U.S., is not helping the equation.
3593 COMMISSIONER SIMPSON: Yes, I can totally understand that.
3594 Does the same condition that you describe with respect to productions that are on the road from the U.S. also apply to eastern producers?
3595 We are seeing the revenue and the actual productions flowing more and more to Toronto, and I am wondering if you could comment on that, as to why, if there is such capacity in Vancouver.
3596 MR. BARRACK: As to why, I can tell you this. I think you are increasingly seeing a trend back to cities like Vancouver.
3597 But, again, it ties to your first question. Vancouver is a very expensive city, and it's an expensive city because of the volume of U.S. productions.
3598 Wage expectations, location costs -- all of those things are driven by the U.S. market, whereas in Calgary, for example, that is not the case. There isn't that same driver.
3599 If you do a cost-to-cost comparison or budget a Canadian show for Vancouver even, as opposed to Toronto, let alone Calgary or Halifax, Vancouver tends to come out to be a little more expensive as a result of those foreign pressures.
3600 COMMISSIONER SIMPSON: Thank you, that's very helpful.
3601 When asked the other day -- and I can't recall which group it was, but let's pretend that all groups have the same answer. The question was: When a production gets amply funded and gets into production and exhibition, when it comes to the potential of exporting that production, the groups -- or at least the group that I recall from earlier in the week, said that their involvement as the prime exhibitor doesn't involve participation in the proceeds as the product gets marketed.
3602 Is that an impediment to getting them more involved in productions that, as you said, Mr. Bolen, start to compete on a bigger budget basis with the product coming out of the United States? If so, where is the breakdown in that relationship?
3603 MR. BOLEN: Are you referring to the broadcaster's share of whatever happens downstream?
3604 COMMISSIONER SIMPSON: Yes, absolutely.
3605 MR. BOLEN: As John said in his previous answer, under the Terms of Trade Agreement, depending on how the broadcasters invest in a particular production, they can participate in that downstream international revenue.
3606 Also, it should be kept in mind that in many cases, particularly in the non-PNI area, foreign presales of programs are factored into the budgets from Day 1.
3607 For instance, if you are doing a lifestyle show on a Canadian channel, you may go out into the American market prior to the creation of that programming and get a piece of your financing from the American market.
3608 That means two things: you can have a larger budget for the production, which benefits the Canadian system and the Canadian broadcaster, and the Canadian broadcaster will put in a smaller licence fee as a percentage of the total budget.
3609 That kind of presale activity goes on a lot, and that international revenue does not accrue to the producer, that is part of the financing of the budget of the production. That is very, very common.
3610 COMMISSIONER SIMPSON: But is it potentially possible to whet the appetite of the broadcaster to bite a bigger chunk of the production in terms of a partnership?
3611 MR. BARRACK: That is precisely what we have done in the Terms of Trade Agreement.
3612 COMMISSIONER SIMPSON: I understand that, but I get the feeling that there still is a prime preoccupation, as Mr. Pentefountas indicated earlier, that there is this hesitancy that they have to control losses rather than make profits, and I am wondering if that mindset has to be shifted, or if it can be shifted, to get them to be more courageous in their participation.
3613 MR. BARRACK: I think that Norm said it perfectly earlier, which is that there has to be a mind shift, and I think your policy gives them that opportunity.
3614 They now have a much broader toolkit. There is money in the system. This is the opportunity to have that fortitude, to have that courage.
3615 This is an opportunity. There is a real opportunity. This policy creates an opportunity, the recent transactions create an opportunity, and there now needs to be the self-confidence, quite frankly, to say: We are going to do that in partnership with independent producers.
3616 COMMISSIONER SIMPSON: Great.
3617 MR. BOLEN: It is our determination -- it's our intention to do everything we can to take advantage of the fact that we have a Group Licensing Policy with a CPE spend on conventional now factored into the equation, which we didn't have before.
3618 We do have a couple of hundred million dollars of benefits money over the next five years.
3619 This is an opportunity for us to take the momentum of that and work with it to put more emphasis on making better quality Canadian programming, promoting it and marketing it, which is another important factor that requires investment, cherishing it, championing it, not just at the broadcasters, but all through the system, and using other mechanisms in the Canadian system, like the CMF, like Telefilm, like the Heritage Department, to push the idea of the quality of Canadian content, to build momentum for more consumption of Canadian content, if I can put it that way, and more revenue support for Canadian programming.
3620 COMMISSIONER SIMPSON: Thank you, Mr. Bolen, you just answered my last question, which had to do with moving more to expenditure and less to exhibition, because it ultimately moves the dollars more toward production and promotion.
3621 MR. BOLEN: I appreciate that, but exhibition is still critical. Dollars in the system mean that you are going to see expenditures on programming, but you need shelf space as well, right?
3622 You can't just put money into the programming and then remove the shelf space.
3623 As we said in our earlier presentation, do we really want to take up to 9,000 hours out of the schedules of our broadcasters? Is that good?
3624 That encourages them to invest more in American. That puts more American into the schedule. That increases their reliance on American.
3625 So exhibition requirements are still a very important part of this equation. It's one of the pillars. If you take that pillar out, you do harm to the system.
3626 THE CHAIRPERSON: Well, that's not before us right now, so...
3627 Suzanne, do you have some questions?
3628 COMMISSIONER LAMARRE: Yes, thank you, Mr. Chairman.
3629 Just to be clear, on page 7 of your presentation this morning you talk about the Terms of Trade Agreement and you say:
"In light of that agreement, we ask that the Commission also adopt the agreed upon definition of independent production and incorporate it into the decisions flowing from this hearing and, where relevant, in all future decisions."
3630 To be clear, you are not suggesting that this applies to French productions or the French market, are you?
3631 MR. BARRACK: Not at all. This is exclusively to English-language productions.
3632 COMMISSIONER LAMARRE: Okay. Some things are better put on the record than just left up in the air.
3633 MR. BARRACK: Absolutely.
3634 COMMISSIONER LAMARRE: Thank you.
3635 THE CHAIRPERSON: Rita...
3636 COMMISSIONER CUGINI: Thank you.
3637 Mr. Thomson, in the oral presentation this morning you talked about non-PNI genres on page 4, and you said that the current individual requirements relating to independent production help to promote the diversity, too, by ensuring that the production of non-PNI shows will not all move in-house.
3638 Are you suggesting that we should prescribe, first of all, what those genres of non-PNI programming should be, and how much should be spent, and what percentage of those shows should go to independent producers?
3639 MR. THOMSON: Our going in position is that the policy says that the individual conditions of licence that exist now, or the individual requirements that exist now with respect to independent production are to be retained. If that aspect of the policy is maintained, then our issue is addressed, and we are not looking at any of those specific kinds of micro-regulation issues.
3640 Now, there have been discussions of alternatives to maintaining those existing conditions of licence, to ensure that diversity remains in the system, and we are certainly willing to talk about those alternatives, but we are not suggesting the kind of micro-regulation that you have put to me.
3641 COMMISSIONER CUGINI: Okay. Because whatever we establish as a PNI percentage, the balance, of course, will go to non-PNI programming. That will be the simple math, but --
3642 MR. THOMSON: Yes, it will go to non-PNI programming, not necessarily to independently produced non-PNI programming, and that's our issue.
3643 COMMISSIONER CUGINI: Okay. I just wanted to make sure that you weren't asking us to prescribe how and where and who.
3644 MR. THOMSON: No, we are not.
3645 COMMISSIONER CUGINI: Thank you very much. That's all.
3646 THE CHAIRPERSON: Peter...
3647 COMMISSIONER MENZIES: I just wanted to touch on a couple of quick points. If PNI goes up, who loses?
3648 MR. BOLEN: No one loses. There inevitably will be shifts in the mix of programming within the overall basket of spending, but it's not a win-or-lose situation. The system wins, because drama programming is very important to the system.
3649 COMMISSIONER MENZIES: If it goes down, who loses?
3650 MR. BOLEN: If PNI goes down, the system loses, because we are going to see less drama, less documentary, and less award show programming, which is at the heart of the system.
3651 COMMISSIONER MENZIES: Why is it at the heart of the system?
3652 MR. BOLEN: Drama is still, by and large, the most popular form of programming. It's the most expensive programming. It's the most engaging programming. It gets the largest audiences in primetime. It is still the driver of television, and it's very, very important to the system, and it has always been seen as that by the Commission.
3653 COMMISSIONER MENZIES: So why do we have to fix a percentage on it if it's the driver to the system?
3654 Is it the regulatory driver to the system or is it --
3655 MR. BOLEN: To ensure that it gets made.
3656 COMMISSIONER MENZIES: -- the commercial driver to the system?
3657 But if it's the driver to the system, why wouldn't people make it?
3658 MR. BOLEN: It's the driver to the Canadian component of the system, absolutely.
3659 Why wouldn't they make it? This goes back to the old policy in 1999, where we loosened the rules on priority programming -- we created the priority programming category, which is the same as saying: We don't have spending requirements with regard to drama.
3660 What we saw was a decrease in drama production by the broadcasters, because they didn't have a requirement to do it.
3661 I am not sure that I fully understand exactly where we are going with this. Please, help me.
3662 COMMISSIONER MENZIES: The Act says, no matter how you word it, that drama has to be part of the package, right? So that's there.
3663 There are hundreds of millions of dollars in funding, outside of this, to produce this programming, which, I would think, sensible operators would want to access in order to do it.
3664 And I am struck by the fact that we don't regulate at all foreign content. We don't dictate whether people buy reality shows or drama or documentaries -- or whatever -- citizens make those choices. Whatever they want to watch the most, they make those choices.
3665 It always strikes me in these conversations that we talk about the producers and we talk about percentages and we talk about the broadcasters and we talk about actors, but we never talk about people who watch TV. Why couldn't we just let people who watch TV decide what they want to watch?
3666 MR. BOLEN: Go back to the policy that the Commission has put in place. At the heart of the policy is the requirement for PNI spending, and my assumption is -- and I think it's probably a correct one -- that the Commission, in its wisdom, put that in there because they felt it was important to ensure that that kind of programming gets made, and gets made in sufficient quantity to have traction and weight within the Canadian broadcasting system. We support that.
3667 COMMISSIONER MENZIES: I know, but that's a regulatory argument, and I am completely sympathetic with what you said about -- that we have to get over this defeatist attitude about Canadian programming. I share that, but I am a practical man, and at the end of the day, it seems to me -- I understand the regulatory obligations, but it seems to me that allowing people to choose what they want to watch might be the best way to inspire interest in the system.
3668 MR. BOLEN: You know what? We don't want to forget the audience. The audience actually has a choice to make. They do make the choice. They choose what they are going to watch. They have an infinite variety of choice. We have a hugely fragmented marketplace, we have over-the-top services coming in, and consumers have the option of choosing what they want to watch.
3669 If we want them to watch Canadian programming, and particularly want them to have an opportunity to watch Canadian drama programming and documentary programming that can compete with the foreign programming that is so popular, then we need to invest in it and put an emphasis on it.
3670 That's very, very important.
3671 COMMISSIONER MENZIES: It would be helpful if you had any data that showed the popularity of Canadian programming in these various genres -- how many people watch drama, how many people watch reality shows, how many people watch documentaries -- what the ratings are for various types of Canadian shows.
3672 If you have anything like that and can pass it on --
3673 MR. BOLEN: We would be happy to provide some data. There is significant data available. The Canada Media Fund has amassed a terrific amount of data on the success of the programs they have financed, and they would argue, and, I think, argue very convincingly, that the Canada Media Fund has been a huge success story in terms of increasing the quality and quantity of Canadian programming in the system, and the audiences that those programs attract.
3674 COMMISSIONER MENZIES: Okay. The last question: How much more Canadian programming is being done today than ten years ago, or is there less -- throughout the system.
3675 MR. BOLEN: The exhibition levels are the same -- have remained the same over that period, so --
3676 COMMISSIONER MENZIES: I know, but there are, like, 67 Category A's and this sort of --
3677 There are lots of channels out there, right? So is there more stuff being made or less?
3678 MR. BOLEN: It's hard for me to answer that question right off the top of my head, but --
3679 THE CHAIRPERSON: Do you want them to file that?
3680 COMMISSIONER MENZIES: Yes, you can file it.
3681 MR. BOLEN: Yes, we will give you some background on that.
3682 THE CHAIRPERSON: You will have an opportunity to file with us additional information, so why don't you --
3683 MR. BOLEN: We will do that. I don't want to give just an off the top of my head reaction to that.
3684 COMMISSIONER MENZIES: That's fine. The more data, the better. Thanks.
3685 THE CHAIRPERSON: Tom, you have a quick follow-up?
3686 COMMISSIONER PENTEFOUNTAS: At the end of the day, Mr. Bolen, has the CMPA failed in getting broadcasters excited about Canadian content?
3687 MR. BOLEN: Well, we are just one part of the entire system, and we have always advocated Canadian programming. We have helped our members to make better programming. We run a number of programs to ensure that the skills and capabilities of the Canadian production sector are improving.
3688 For instance, we run a mentorship program where young people come out of school and go into production companies and learn on-the-job how to make better programs. We do everything we can to educate and support the skills development in our industry.
3689 We promote Canadian broadcasting passionately at every Commission proceeding. As the rest of the commissioners will tell you, we have probably driven them crazy with our arguments over the years because we are just passionate about this.
3690 But in the end we don't control the fundamental lever. The broadcasters are the ones who license the programming, they promote the programming, they market the programming, they control the schedules and it's in their hands to decide how they want to deal with Canadian programming.
3691 COMMISSIONER PENTEFOUNTAS: I understand that, but I didn't see a lot of excitement, and you were here earlier this week. I didn't -- you know, that defeatist attitude you spoke of, I saw it come to the fore on a daily basis and I am just wondering what it's going to take.
3692 I understand the importance of drama. I understand that it reflects who we are, and if we don't get to see who we are on the small screen in the past and on other platforms in the future, there's a chance we might lose who we are.
3693 What's it going to take to get broadcasters excited?
3694 You mentioned 5 percent as a floor. It's going to take a herculean effort to get 5 percent as a ceiling.
3695 MR. BOLEN: Clearly, we would like to see -- I would be very disappointed if we saw 5 percent as a ceiling. That would be very, very disappointing and I think it would be the wrong public policy decision.
3696 The policy that you have put in place is a good start. The four pillars of the policy that we have outlined are fundamental to ensuring that what you are talking about starts to happen and happen more.
3697 Look, I was a broadcaster. I understand. There's no malice in this. I understand why broadcasters put so much emphasis on foreign and why they feel sometimes defeatist about Canadian.
3698 Any typical sales department of any broadcaster -- and I was involved in this struggle as a programmer myself -- what do they like doing? Selling American programming into the advertising marketplace. Why? Because it's easy to do.
3699 It's easier as a broadcaster, much simpler, to just put your focus on American programming. Half the job is done for you. But making Canadian programming requires a lot more commitment and a lot more work and it's a tougher slot. Advertisers love to just buy American shows.
3700 You have to work it and the broadcasters that have worked at it, and some have done better than others, have been very, very successful with their Canadian shows and they should be -- the ones who have been successful with the Canadian shows should be the model for the other broadcasters who have been less successful. They are not all defeatist all the time about Canadian shows.
3701 THE CHAIRPERSON: Okay. Let me take you back.
3702 First of all, I forgot at the beginning I lauded all the broadcasters and I should laud you for getting the terms of trade. It takes two to tango and I realize you had to make very painful concessions to get there.
3703 We are delighted as a Commission that you have a goal often stated as it should be done, before this hearing was done.
3704 Getting on to the thing, my colleagues talked to you on the PNI and asset mix and the CPE and asset mix.
3705 Now, you were here. You heard Rogers and they put their -- they are different, according to them, than Shaw or Bell because they predominantly have conventional channels. They have three specialty channels. So therefore their ability to show the same show on several platforms is severely limited.
3706 You said in answer to my Vice-Chair's question that the ceiling should be the same, 30 percent. What about the PNI?
3707 I mean we were -- on the PNI we were quite clear that we thought the minimum should be 5, but we wanted to actually look at whether there is some flexibility that you go into the 5 or that you start off at the 5.
3708 Is there some legitimacy to the argument that we should, given the asset mix, give them different treatment than the others?
3709 MR. BOLEN: We think it guts the heart of the fundamental principle of the group-licensing policy if we start making accommodations based on asset mix.
3710 We fundamentally believe that all these major broadcast groups, despite whatever asset mix they have today -- which, as I said, can change -- have a minimum contribution to make in exchange for the flexibility and privilege of being part of the group-licensing process and we do not want to see that fundamental principle gutted.
3711 It might be different and harder for some of them to get there. Some of them might have to do less, some of them might have to do more, but ultimately this will be for the benefit of the system overall and will ensure that all broadcasters make a significant contribution to PNI, which has to be a fundamental objective of this policy.
3712 THE CHAIRPERSON: But surely it's counterproductive if we push them into a business model that works counter and it impacts negatively on their sustainability?
3713 MR. BOLEN: Well, you know, they could have asked to be taken out of the group process, I guess, if they didn't want to have the benefits of the group-licensing process.
3714 But it seems to me that making a 2-percent contribution when you're a significant broadcaster and you're going to be launching new --
3715 THE CHAIRPERSON: I am not talking about numbers, I just --
3716 MR. BOLEN: I accept that.
3717 THE CHAIRPERSON: If I come to -- end up saying, you know, 5 percent is the target but given your asset mix I can see you have to grow into it rather than being there right on day one. It depends where we start. There's a floor to get you there later on.
3718 MR. BOLEN: We believe that all broadcasters have to be there. When they get there? We think they should be there as soon as possible.
3719 If in your wisdom you decide you want to have a different approach in terms of how -- when they get there, that's your choice, but our core argument is that it's the heart of this policy that all broadcasters, whatever their asset mix, end up in the position of making the same contribution, minimum contribution to the system, and that includes PNI.
3720 THE CHAIRPERSON: Now, we asked this morning all broadcasters to give us restated or verified numbers for the PNI because we understood that PNI, according to them, may have been overstated for the figures they gave us for this hearing because as part of documentaries were reality shows.
3721 Somehow in their ingenuity they managed to have reality shows being classified as documentaries, therefore they got CMF funding, and so they became a part of the numbers that they sent us originally.
3722 But now that we have made it clear in our November add-on decision that what is a documentary was not -- a reality show clearly is not a documentary, those numbers actually are -- according to them seem to be inflated or could be inflated.
3723 Were you aware of this issue?
3724 MR. BOLEN: Yes, we are aware of it. I mean I think the fundamental principle here is to ensure that going forward the PNI starting point is 5 percent and you factor in documentary and award show, however you define those. We don't have the numbers, so it's hard for us to analyze. So that's the starting principle.
3725 And within PNI there have been independent production rules about how much PNI gets done by independent producers. So that programming that now gets extracted, because of the redefinition, from PNI, the obligation to do that program with independent producers is also lost in that equation. So that's something that needs to be addressed.
3726 We heard yesterday the idea of perhaps a spending requirement for non-PNI. We think that's a good idea worth looking at more closely.
3727 THE CHAIRPERSON: I presume you agree with our basic approach that reality shows are not documentaries?
3728 MR. BOLEN: Yes. That is the case, yes.
3729 THE CHAIRPERSON: Yes. And our PNI numbers -- our whole policy was based on the only figures that we had, which was drama.
3730 And so I agree with you, it should be drama plus now because, after all, you are adding documentaries and award shows. Where that comes out, we will see.
3731 MR. BOLEN: The problem is -- we actually were against this new definition, along with most of the industry, and the reason we were against it is because it creates some confusion, because some of the programming that you now no longer qualify as documentary actually still does qualify as documentary under the CMF. That's the confusion that was created.
3732 So not all reality programming is not considered documentary by the CMF. So now we have quite a bit of confusion.
3733 THE CHAIRPERSON: But aren't they going to adopt -- wrap themselves around our definition, the CMF?
3734 MR. BOLEN: Not that I'm aware of. That would be a new development. We haven't discussed that.
3735 THE CHAIRPERSON: I don't know the CMF. You do.
3736 MR. BOLEN: Not at all. Not at all, no. We're a bit part of the CMF national focus group, as are the broadcasters, and we were concerned about changing this definition for this very reason, because it confuses the whole discussion about documentary and reality programming and we never did understand the reason for it.
3737 THE CHAIRPERSON: So you're telling me that we have now two types of documentaries, CRTC qualifying documentaries and CMF qualifying documentaries?
3738 MR. BOLEN: Yes, that is the result. Yes. We pointed that out in our intervention in that discussion.
3739 THE CHAIRPERSON: I am sure you did but obviously either not forcefully enough or we were too deaf. It did not come to really our --
3740 MR. BOLEN: I think you were looking for simplicity, but actually we ended up with complexity.
3741 THE CHAIRPERSON: Right. Okay.
3742 Rita, you have a follow-up on this?
3743 COMMISSIONER CUGINI: I would like to clarify this because I have the CMF definition here and their note says:
"Although the CMF recognizes that there is market demand for factual programming that contains elements of lifestyle or reality, this type of program will not be eligible for CMF funding because it does not qualify as a documentary." (As read)
3744 So can you clear up for me where you think the confusion is?
3745 MR. BARRACK: We will do it more formally in reply, but I think effectively there's three categories, if I can put it this way.
3746 There is for CMF purposes what is clearly offside or considered pure fact-based programming; there is then documentary program that would qualify for the CMF but wouldn't qualify under the CRTC definition; and then there's the narrowed CRTC definition.
3747 COMMISSIONER CUGINI: All right. And so you will submit something in reply?
3748 MR. BARRACK: Yes, we will.
3749 COMMISSIONER CUGINI: Excellent! Thank you.
3750 THE CHAIRPERSON: Okay, I think those were all our questions.
3751 Again, congratulations on getting this deal done and I look forward to the additional information, essentially on the definition now because this is -- the last thing we want to do is create more complexity.
3752 MR. BOLEN: If I could congratulate the Commission as well for its support for the idea of a negotiated terms of trade agreement. It's that support for the idea of a negotiated terms of trade agreement that got everybody focused on getting an agreement and it wouldn't have happened without the Commission's insistence that there be one. So thank you and congratulations to you for your encouragement.
3753 THE CHAIRPERSON: Thank you.
3754 I believe our next intervener is by video, so we will take a five-minute break so that the technician can set things up.
--- Upon recessing at 1012
--- Upon resuming at 1021
3755 THE SECRETARY: Please take your seats.
3756 LE PRÉSIDENT : Madame, on me dit qu'il y a des undertakings de la dernière présentation qu'on doit lire publiquement.
3757 Monsieur Dougherty, voulez-vous faire ça, s'il vous plaît?
3758 MR. DOUGHERTY: Thank you, Mr. Chair.
3759 There were three undertakings asked of the CMPA.
3760 The first one was data showing the popularity of Canadian programming in various program genres.
3761 The second one was how much Canadian programming is currently in the broadcast system versus the amount found 10 years ago.
3762 And third, to clarify what the confusion is between the CRTC and CMF definition of documentary programming.
3763 We would ask that those be filed with the final interventions or replies.
3764 LE PRÉSIDENT : Allons-y.
3765 THE SECRETARY: Thank you.
3766 We will now proceed with the presentations by Quebec English-language Production Committee and English-Language Arts Network, ELAN, who are appearing via videoconference from Montreal.
3767 These two interveners are appearing as a panel to present their interventions. We will hear each presentation, which will then be followed by questions from the commissioners to the panel.
3768 I would now invite Quebec English-language Production Committee to begin. Please introduce yourself and you have 10 minutes for your presentation. Thank you.
3769 MR. FINKELSTEIN: Thank you.
3770 Ladies and Gentlemen of the Commission, can you hear us?
3771 THE SECRETARY: Yes.
3772 THE CHAIRPERSON: Very clearly, thank you.
3773 MR. FINKELSTEIN: Thank you.
3774 Thanks for giving us this opportunity to speak to you via videoconference from Montreal. I would like to introduce our team sitting with me.
3775 My name is Jonathan Finkelstein. I have been an independent producer in Montreal since 1997 and I am the founder and president of Apartment 11 Productions. I am a member of the Quebec English-language Production Committee, which represents about 80 percent of the people working in the independent English-language industry in Quebec.
3776 I am here today with Kirwan Cox, who is on the far side over here, who is a researcher and consultant working for the Committee; and Gary Saxe, the national organizer for ACTRA-Montreal and Co-chair of the Committee.
3777 Our other Co-chair is Janis Lundman, co-creator and executive producer of the dramatic series "Durham County." She is attending the MIP television market in France and is not with us for that reason.
3778 If you have kids or grandkids, they are likely to know Apartment 11's series, my shows, or maybe they've even appeared on our shows. They all certainly wish they could -- shows like "Prank Patrol," "In Real Life," "Mystery Hunters," to name a few, or "Popular Mechanics for Kids," which I produced for another independent production company in Quebec.
3779 I had the benefit of hearing much of the CMPA's questioning and these shows that I have just named, by the way, which would have aired -- well, "Popular Mechanics" on Global and the others on YTV, if you ask the people at YTV and Corus they would probably tell you that they compete and indeed exceed in audience numbers a lot of the American programming that they buy. I just wanted to add that off speech.
3780 Some classic enduring kids' television that travels well internationally has been conceived and produced in Montreal in the 14 years I have been making television here. That's the good news.
3781 The bad news is that this is an industry which has contracted almost in half, from about $300 million in domestic production 10 years ago to about $175 million today -- or recently, in 2008-2009. Those are the statistics.
3782 The real meaning of them is felt every time I try to get a new production off the ground. In spite of our success as a company, it has become more expensive to produce world-class television here because I have to reach out to other parts of the country to recruit the talented performers and experienced writers, researchers, creative producers, directors and editors who are key to creating a successful program in the English language.
3783 I have lost several of my best people to Toronto because that's where the work is, and in an industry where the vast majority of people work freelance, contract to contract, the availability of regular work is key to where people choose to live.
3784 Currently, I have been trying to decide whether it makes sense to run my company from Montreal, where I was born and grew up, or join several of my colleagues in Toronto, where all of my clients are. If we leave town, then more than 100 Montrealers in the industry won't have our door to knock on anymore.
3785 Compounding this, English-language production faces a more challenging financing environment than French-language production, with a 10 per cent lower provincial tax credit. There is also a SODEC cap on investment funding of English production.
3786 Also, we have completely inadequate access to television. There is no regional English-language television broadcaster, no local broadcaster that reflects our community back to itself, not an educational channel like TFO, not even a community television channel.
3787 While we continue to produce and co-produce popular TV programming seen around the world, we do not see ourselves on our TV screens. There is no regional reflection in English in Quebec outside the local news, weather and sports.
3788 According to the Montreal Gazette, the last major network TV series identifiably set in Montreal was "Urban Angel," broadcast 20 years ago.
3789 And so our community is hurt both on a cultural level and economically as our local industry shrinks. I'm not sure which decline fed the other, but what's clear is that it's become a vicious cycle.
3790 We would ask for your help now to change this downward spiral. We ask that the Commission, at this hearing, help us revitalize the official-language minority production environment and give us back access to our television screens.
3791 We have some ideas as to how to do that and my colleague Gary Saxe will share them with you.
3792 MR. SAXE: Thank you.
3793 As Jonathan pointed out, our industry and our community is in decline. This situation is entirely reversible with the right tools and a supportive regulatory framework.
3794 I would like to begin by mentioning something that I am sure many other interveners have mentioned, which is that the production information collected and made publicly available by the CRTC is inadequate for the work you expect from your interveners.
3795 That is the reason we aren't able to deal with the Bell Media and Shaw specialty channels in our brief and it is the reason we may not be able to deal with the CBC licence renewals in the fall unless more information is available.
3796 Regarding our principal concerns, we believe that the status of English-language production within 150 kilometres of Montreal must be changed from a centre to a region as we requested last August. At that time, the CRTC said that such matters would be resolved in the next licensing hearings.
3797 So again, in the context of the licensing renewal process, we request that you change the CRTC status of English-language production in Montreal to a region.
3798 Broadcasters in Montreal are not eligible for the Local Programming Improvement Fund, the LPIF, because the CRTC defines the official language minority in Montreal as anyone with a "knowledge of English." By this definition, nearly everyone in Montreal is an Anglophone.
3799 We request that the CRTC's definition of an Anglophone in Quebec be changed from "knowledge of English" to "first official language spoken." This would put the population of English-speaking Montreal under one million people, as it is, and make English-Quebec stations eligible for the LPIF under your current rules, as they should be.
3800 Regarding the conventional networks with stations in Montreal, our comments focus on CTV and Global.
3801 As the Commission has stated going back to the 2001 CTV licensing decision, these networks should invest in local production at a rate commensurate with their market presence.
3802 Above and beyond this minimum market presence threshold, we believe broadcasters must also be required to provide additional support that enhances the vitality of the official language minority communities. In Quebec, the English-language production community qualifies for this additional support.
3803 The CTV network dominates the English market in Montreal with 64 percent of hours tuned and 49 percent of audience reached each week. CFCF Montreal has 11 percent of the national CTV network audience.
3804 Yet, based on the available public data, it looks like CTV is only producing about 2 percent of their independent production here in Montreal and spending less than $1 million per year in licence fees here.
3805 Based on its market presence, we request that CTV spend at least $4 million annually in licence fees in Quebec.
3806 In addition, to provide support to the Official-Language Minority Communities, we request another $2 million be commissioned annually for regionally reflective English production in Quebec.
3807 Finally, a local development fund of $250,000 should replace the $50,000 annual fund established at the last CTV licence renewal hearing 10 years ago.
3808 That would mean that we are requesting as a condition of licence a total of $6.25 million per year in independent Quebec production expenditures by CTV for its conventional network. Their specialty channels are a separate and additional matter.
3809 Using the same market presence metric, Global's CKMI audience reach is 18 percent of the English Montreal market and 5 percent of its national network audience. Global has averaged $1.9 million per year in Quebec licence fees over the last decade or about 9 percent of its national independent production.
3810 We are not asking for more investment in market presence but we are asking for some regional reflection and a development fund to support the Quebec Official-Language Minority Communities.
3811 Therefore, we request a minimum of $1 million per year in Global licence fees for independent Quebec production -- this would be equivalent to 5 percent of Global's total independent expenditures -- plus $500,000 for regional reflection licence fees and $100,000 for a development fund.
3812 This would mean a condition of licence requiring a minimum of $1.6 million per year for English-language independent Quebec production on its conventional network.
3813 Once again, we don't have the information to discuss OLMC production on the specialty channels.
3814 If these two broadcast groups claim that they can't afford to spend a minimum of $8 million per year on independent English-language production in Quebec, we point out that CTV and Global spent $600 million on foreign programming last year.
3815 They should be able to take the modest amount we are requesting out of future spending in Los Angeles and invest it here to strengthen our presence on our screens.
3816 Thank you very much.
3817 THE SECRETARY: Thank you.
3818 I would now invite English-Language Arts Network, ELAN.
3819 MR. RODGERS: Ladies and Gentlemen of the Commission, thank you for giving me the opportunity to speak to you today via videoconference from Montreal.
3820 My name is Guy Rodgers. I'm the Executive Director of the English-Language Arts Network of Quebec. ELAN works with the Quebec Community Groups Network to represent the interests of the English speakers who live in Quebec and who watch local television for local information and perspective.
3821 My colleagues with the Quebec English-language Production Committee have presented many statistics and numbers, most of them declining. Some of this decline they attribute to decisions taken or avoided by the CRTC.
3822 I can categorically state that the CRTC takes full credit for one astonishing increase in numbers. Thanks to your unprecedented definition of "knowledge of English language" to define the size of the Anglophone community in Quebec, our population has exploded.
3823 The CRTC language definition is as surprising to our francophone neighbours as it is to us, and even more unacceptable. Céline Dion, while refusing to accept an award as anglophone artist of the year made her position clear. She said: "Je ne suis pas anglophone."
3824 Well, we are. We are English speakers as defined by first official language spoken. As my colleague said, that places our numbers at around 900,000. If we use the definition of mother tongue, our population would be around 600,000.
3825 The Shaw Media Group in its reply to comments on CRTC 2011-952 agreed with ELAN's position on LPIF and quoted paragraph 39 from our brief. We are going to keep repeating this until you fix it.
"39. Global and ELAN agree that the language definition the CRTC is using for the LPIF is meaningless at best and deliberately dishonest at worst. Mother tongue - or first official language spoken - are the two meaningful and useful language definitions employed in Canada."
3826 ELAN pointed out to the CRTC in its intervention dated September 14th, 2009 that the CRTC's decision that English-Montreal was ineligible for the LPIF based on the linguistic definition "knowledge of English" conflicted with the federal official language policy.
3827 We have heard official and unofficial explanations for this unprecedented and otherwise inexplicable definition. Whatever the reasons, the CRTC must find another measure to achieve their ends and employ one of the recognized definitions of language use for LPIF.
3828 I realize that LPIF will be reviewed in 2012, but this is all part of a larger issue of regional reflection. ELAN and QCGN have on several occasions defended the need for regional reflection in Quebec.
3829 In the global, multiplatform cable and Internet universe, we do not lack content in English but we do lack productions that speak to us and about our reality. We do not have an educational channel like TFO. There is no community television channel, although we have entered into discussions with Vidéotron to correct that lack of service.
3830 We will discuss the situation with CBC when their licence renewal comes up. Today we are discussing CTV and the Shaw Group. One has a large market share and does little. The other has a small market share but does more.
3831 However, the net result is disappointing. Regional reflection within Montreal is almost limited to local news, while the lack of regional reflection outside Montreal is lamentable.
3832 The Commissioner of Official Languages raised the issue of regional reflection in his November 20, 2008 intervention to CRTC's review of official-language minority broadcasting. In our brief we quoted this policy statement by Mr. Fraser in its entirety.
3833 The key paragraph that I want to bring to your attention today is the following:
"The CRTC must therefore clarify the notion of 'regional reflection' by developing a specific policy on this matter. The new policy should clearly distinguish between regional production in the majority official language and regional production in the minority official language. Moreover, when individual licences are renewed, the CRTC should insist that license conditions are obligations rather than mere expectations."
3834 Well, it is licence renewal time now. Once again, English-Montreal is being treated as a powerful population centre when we are in fact a beleaguered and increasingly marginal fringe.
3835 The CRTC responded in its March 30, 2009 "Report to the Governor in Council on English- and French-language broadcasting services in English and French linguistic minority communities in Canada."
3836 In it the CRTC pointed out the overwhelming importance OLMC (Official Language Minority Community) interveners placed on regional reflection at this hearing:
"All of the official-language minority community representatives who participated in the hearing... [There is a lengthy list here of anglophone and francophone groups across Canada] ...consider regional reflection to be the barometer for the quality of minority television services available to minority communities. They demanded that measures be implemented to expand the representation of these communities within the Canadian broadcasting system, in news and in all other types of programming, and to better meet their needs in terms of local and regional programming."
3837 How do we better meet our needs in terms of local and regional programming?
3838 The CRTC said in its CTV decision 2001-457 that it wanted to "set out a flexible, incentive-based approach" to better reflect Canada's regions.
3839 In Quebec, this flexible approach has not provided programming that reflects the interests and identities of the region.
3840 What kind of incentives will be offered?
3841 Unfortunately, the CRTC says in its current broadcast group decision, BRP 2010-167, that it wants to give licensees greater flexibility.
3842 We can anticipate more failure unless the CRTC provides firm minimum conditions of licence for independent Quebec production and monitors those conditions of licence annually.
3843 We also want to stress that linguistic data is essential to evaluate the progress of regional reflection in Quebec.
3844 We request that in the new annual reports the broadcast groups will have to file, production information be broken down by language and region for all their platforms, including non-Canadian and Canadian production.
3845 Every study and survey confirms that Quebec's English-speaking community suffered turmoil and decline during the 70s and 80s and is only in the past decade showing signs of stability in numbers, although we no longer have a large enough population to support key institutions in education and culture.
3846 Our situation can be compared to global warming. Inside Quebec, our alarm is met with scepticism and indifference. Anglos in Quebec do not have the cuddle factor of polar bears or caribous.
3847 The public image of our community is comparable to ice: cold and square or as we say here, carré. Even if the worst-case scenario is true, who's going to miss some ice blocks or ice blokes?
3848 At some point, our film and television industry will be so badly decimated that it will be too late to do anything about it. For the moment, it is not too late to take decisive action.
3849 Thank you for listening to us today and we are happy to answer any questions you might have for us.
3850 THE CHAIRPERSON: Thank you very much for your interventions.
3851 First of all, the Quebec English-language production Committee.
3852 Explain to me what you are talking about at the bottom of page 3 when you say:
"Global has averaged $1.9 million per year in Quebec licence fees over the last decade..."
3853 What licence fees are we talking about?
3854 MR. COX: We are talking about the licence fees that they pay for production.
3855 In our brief to you, on Table 4, page 16, we show the results of the annual independent production reports that they have submitted to you, and all the data is there -- number of projects, number of hours, production budgets and licence fees -- for Quebec and for Canada for each of those years, and the total are the numbers that we gave you.
3856 THE CHAIRPERSON: So they basically paid $1.9 million in licence fees for productions which obviously came from Quebec.
3857 And you say we are not asking for more investment and market presence but we are asking some regional reflection and a development fund to support.
3858 So are you telling me they are buying stuff from Quebec but they are not showing it in Quebec?
3859 MR. COX: No. They are buying stuff from Quebec but it's not stuff that is identifiably recognizable as having been made in Quebec.
3860 For example, CBC has a TV series called "18 to Life," which is made by a Quebec producer, but if anybody watches it you have no idea that it's set in Montreal or anywhere else.
3861 So therefore, there is one issue, which is the minimum amount of production that Global and CTV should be supporting made by Quebec producers, and there's a second issue which we're raising, which is one of regional reflection, meaning what is identifiable.
3862 Those are two different issues and in the case of Global, on an annual basis they in fact have been doing more than their market presence. CTV is a completely different issue.
3863 THE CHAIRPERSON: Let's say with Global, so you are asking us to basically go in a totally field now, not only tell them how much to spend and how much to show but what to show or how to show it? You are trying to get us into programming.
3864 MR. COX: We are trying to say that regional reflection, something that is identifiably from a certain place, is important to the official-language minorities and that in fact not -- we are not asking you to tell them they should make particularly this program or that program, but rather that it shouldn't be so difficult for them to show Montreal or Quebec on television.
3865 Because that is the reason that we have a television system and that, I think, is the underlying point of the Broadcasting Act, to show Canadians to themselves, and in our case to show the official-language minority to itself.
3866 THE CHAIRPERSON: Yes, but you are now getting into an area that we have never gone in, to tell them what to show. We are telling them what to invest. We are telling them what percentage has to be Canadian and non-Canadian, et cetera. We have never gone so far as saying you have to have shows that reflect the reality of Montreal, in your case, or something like that.
3867 I don't know how you would measure if a show does that or not. I mean you are getting into very much a subjective area, whether something is reflective of Montreal or not.
3868 Sure, you can show some pictures of Montreal or something like that, but that's not what you are after. You want -- if I understand it, you want them to reflect the reality of life of the Englishman out in Montreal.
3869 MR. COX: If they were to just show -- set a program located in Montreal that would be an immense step forward. Right now, as you know, what they do, what most broadcasters do, is set programs in a never-never land that doesn't really exist.
3870 So we are trying to say, no, they shouldn't be hiding the fact that a program is shot in Montreal or it's about a Montreal subject.
3871 MR. FINKELSTEIN: I think we are also -- sorry -- I think we are also trying to say that you know with healthy investment in our communities it's likely that those types of shows are going to get more developed to begin with.
3872 Yes, there is two things of obligation --
3873 THE CHAIRPERSON: Excuse me. You can't talk out of both corners of your mouth. You just told me that Global does enough investment in Montreal. So then you can't tell me that it's good enough investment -- it's good enough. And your colleague tells me it has to be reflecting Montreal. It's one or the other.
3874 MR. SAXE: Okay. I think we need to clarify something.
3875 There is two different types of requests that we are making. One is based on commitments to the Official Language minority which goes above and beyond commitments towards investing in production that's commensurate with our market presence.
3876 So what we are saying for Global, according to any figures that we can get, which are limited, it seems that they are meeting the requirements and the obligations towards investing in local production commensurate with their market presence.
3877 We are asking above and beyond that. That's true of any region of Canada.
3878 Since we are an Official Language minority community we hope that there could be extra investments, some extra benefit to increase the vitality of -- in our case the English language minority community, linguistic minority community -- that goes beyond the obligations that are required everywhere else in the country except for the French-language official minority community in the rest of Canada.
3879 So that's why we had to bring down what we were requesting you, two different types of requests from the Commission.
3880 THE CHAIRPERSON: Okay. So taking that line, you have two separate requests.
3881 If I understand it, Global meets one of those two requests. CTV falls short on both. That's what you are saying?
3882 MR. SAXE: Exactly.
3883 THE CHAIRPERSON: Okay.
3884 MR. SAXE: Exactly.
3885 THE CHAIRPERSON: Okay, ELAN, you mentioned in your presentation that you are talking about Videotron regarding the community channel.
3886 I'm delighted to hear that because when we had the community TV hearing we had a considerable conversation about that issue with them. And I actually think I quoted you saying that here was some other English-language group in Quebec trying to even talk to them and they told me that their phone calls weren't returned.
3887 Are you now in negotiations with Videotron to make sure that on the community channel there is an adequate representation of reflection of the English community in Montreal?
3888 MR. RODGERS: Well, I would like to begin by thanking the CRTC. Without the CRTC I don't think we would be having any discussions at all with Videotron. I think it's an excellent example of where a council intervenes and causes the system to work properly and to reflect the interests of viewers.
3889 That being said, we are still at a very early stage in our discussions but there is an open door and we have had two meetings with them. I am hopeful that it is actually going to result in the short term some limited amount of production and perhaps, eventually, a full English-language channel.
3890 Don't worry. We will keep you posted on our progress.
3891 THE CHAIRPERSON: Okay, wonderful, thank you.
3892 I believe my colleague, Peter Menzies, has some questions for you.
3894 COMMISSIONER MENZIES: Yes, thank you. First of all, could you take me through the 150 kilometer issue, please, just to explain why that's so important to you?
3895 MR. COX: It's important because the Canadian Media Fund has a formula that benefits regional production and if you are considered a centre, as Montreal is from the standpoint of both the CMFM and the CRTC, then you don't get that benefit in their formula which is called a factor weighting for regional production.
3896 So therefore, we are alone in terms of the CMF with Toronto as being the two English-language centres, which is ridiculous because we have a lot less production than Vancouver, not to mention Toronto. However, there is that battle.
3897 The CRTC has its own regional definition which again puts Montreal as a centre and so we are hoping that you will say, you know, "We agree that Montreal should be a region and if there are any benefits for regional production then they should accrue to English-language production in Montreal. French-language production in Montreal should be a centre. English-language production in Toronto should be a centre".
3898 MR. SAXE: And in the regional definition we believe that -- we believe that there should be a distinction between the Official Language majority and minority so in that we are lumped together with the much larger French-language industry.
3899 We have -- we are fighting an uphill battle that we are considered basically the same size as Toronto.
3900 COMMISSIONER MENZIES: Okay.
3901 I'm curious just on your issue regarding LPIF and the definition of Montreal's Anglophone community. If Montreal were to qualify there is only so much money there. So who gets the less if Montreal gets some?
3902 MR. RODGERS: What is the point of the question?
3903 COMMISSIONER MENZIES: The point is that there is a limited amount of money out there and if you get some, somebody else gets less.
3904 MR. RODGERS: No, the point of the question is that you set a definition and you have deliberately tweaked it to make this community ineligible. You can't just make up a definition and then say, "Oh, well, you know, if we took -- if we change that definition to reflect reality there would be consequences in a real world".
3905 I mean this community is defined in size by certain definitions. If you want to set your level at 900,000 to exclude us, fine, do that. If you want to set at 800,000, fine, do that. But use a definition that makes sense.
3906 COMMISSIONER MENZIES: Okay. If I use your definition and say that below a million English-speaking, English-mother tongue population, were you aware that that means Calgary and Edmonton also qualify for LPIF?
3907 Are you aware that Vancouver almost qualifies for LPIF, if we use those definitions, which basically leaves Toronto feeding the entire country?
3908 MR. RODGERS: Well, then maybe you need to think about what you are trying to do and what definition you want to use.
3909 But to bogusly change the definition of Montreal makes no sense. It is blatant discrimination.
3910 COMMISSIONER MENZIES: No, but I am not going to argue with you about that because, like I said, the English-speaking population of Calgary is 797,000 people even though there is 1.1 million people live there; the same for Edmonton.
3911 Vancouver has 2.5 -- 2.2 million people living in it, about 1.2 their mother tongue is English.
3912 So it's not like that situation doesn't exist in other parts of the country and sooner or later, you know, if you start poking around with those definitions you run into certain problems though. So I don't think there is much to support the idea that you have been singled out.
3913 MR. RODGERS: We are not poking around with definitions. We are using definitions that are commonly accepted within Canada. It's as if you decided to --
3914 COMMISSIONER MENZIES: No. I'm -- hey, I am not arguing with you about that. I mean if we want to use your definition -- if we want to use your definition we can.
3915 Just the problem is, there is really only Vancouver and Toronto left in terms of people who have English-speaking populations of over a million, their mother tongue at least, if that's the definition we are using.
3916 MR. COX: Wait a minute. What you were saying --
3917 COMMISSIONER MENZIES: So and then it becomes -- I don't know. How much does LPIF have to go up?
3918 Anyway, it gets complicated. I just thought I would throw that out there and let you ponder on that maybe.
3919 MR. COX: Interject a second. There is a difference between "mother tongue" and "first official language spoken". So if you are talking -- if you are using mother tongue in Vancouver or Calgary or somewhere and saying, "Oh, there is only 100,000 people that live in Vancouver with a mother tongue of English, I don't know. Maybe that's true.
3920 But the point that we are trying to make is that first official language spoken, using that as a definition means that Montreal has about 700,000 -- a population of about 700,000 people. It is not a large city. It is a medium-sized city and, therefore, I think that first official language spoken as opposed to mother tongue is more appropriate.
3921 COMMISSIONER MENZIES: No, that's true. It works both ways.
3922 I mean first official language spoken is English and in Calgary it's 797,000 out of 1.07 million people. So Calgary gets it. I'm okay with that. I mean Calgary has been paying a lot into that fund and getting nothing out of it. So you guys want to go with that, I'm good with it -- and Edmonton too, for that matter.
3923 But anyway, the other thing -- and I liked your presentation regarding the 150 kilometres range. Konrad touched on the setting issue.
3924 I didn't really get an answer. I wouldn't mind because it's in your -- I believe it's in Mr. Finkelstein's presentation as well -- just let me check -- regarding LPIF.
3925 LPIF was -- just give me a moment. I didn't really get an answer -- yes, you did. The English-language Production Committee mentioned LPIF using that definition a well.
3926 But I still wanted to know how -- if that were to happen with LPIF how you see it being redistributed because obviously if we use your definition from what I had said, I mean, Calgary and Edmonton would qualify which means we just put a lot more water into the whisky so everybody gets a little less.
3927 Are you suggesting then that the LPIF should go up, the percentage that's charged in order to fund LPIF, because in order for you -- yeah, otherwise some of the very small communities like Medicine Hat or even larger centres like Regina and Winnipeg that currently qualify they would have to get less which would mean there would be local news production -- less local news production in those areas in order to support you.
3928 MR. COX: I think if you were to think that the broadcasters appear to be doing better now than they were doing one and a half or two years ago.
3929 It was quite revolutionary to provide this kind of subsidy for the conventional broadcasters to support local news. That had never happened before to my knowledge in the history of Canadian broadcasting.
3930 So they have had a subsidy which is brand new for the past year and a half. Now, they are better. Now, they are profitable again.
3931 And I think that maybe a review of the LPIF is a great idea, as you are doing. I think the question of what should be the purpose, whether it should only be used for local news, whether it maybe should be used for other things as well, should be on the table, and I think we should take a look at who the beneficiaries are and what the definitions are.
3932 The argument that you are getting from us is that the way the CRTC designed the eligibility rules for the LPIF contradict all the linguistic rules and regulations in Canada. You maybe didn't realize that.
3933 And if you wanted to have a consistent linguistic definition then maybe a million is the wrong number. Maybe you want 900,000 as your cut-off point or some other kind of population number in order to deal with this immense problem in Calgary.
3934 COMMISSIONER MENZIES: Okay. I will take that as your answer.
3935 I wanted to know a little bit more about the decline outlined in Mr. Finkelstein's remarks regarding the industry's decline from 300 million in domestic production 10 years ago to about 175 million.
3936 I would like to know the extent to which you think that's part of a -- is there a trend in overall economic decline in Montreal in this area or is the Francophone sector doing better or is it troubled as well or is it doing -- is its industry growing one of your strengths, I guess is the best way to put it?
3937 MR. FINKELSTEIN: I can't speak at all to the Francophone industry.
3938 I can really speak as a producer who in the last 13, 14 years that I have been in Montreal, have seen a lot of people drive down the 401 and move to Toronto who I have relied on to make television.
3939 You know we don't have to be doing it here. The kind of television I do, I don't have to be doing here, and in many respects it would be -- in probably every respect except some very limited ones, it would be easier to do my job in Toronto.
3940 As far as the statistics go, you know, whether I'm a victim of that or not, I can let Kirwan perhaps address the statistics.
3941 MR. COX: The French production has not shrunk. It's not gone down. It's been increasing at a relatively modest pace but it's an increase.
3942 English production in Montreal has gone completely contrary to the French --
3943 MR. FINKELSTEIN: The other thing that makes it more difficult to produce in English is, you know, the French side here has decision makers. We have none on the English side, and I'm speaking about clients and broadcasters.
3944 And then the talent in Montreal is just much -- there is a greater dearth of talent in Montreal overall, not certain kinds of talent obviously; very highly trained technical crews, set design, that type of thing.
3945 But when you start getting into the editorial side, the creative side, the scripting side of production, it gets a lot tougher. Then of course it's just you know, you have to be in Toronto so often to make your business work. So I guess that's the reality of it.
3946 COMMISSIONER MENZIES: Sure. So how would providing you with -- sorry. Go ahead.
3947 MR. FINKELSTEIN: I was just going to say that's a reality of many of my colleagues in other parts of the country too, but it's a reality in Montreal as well.
3948 COMMISSIONER MENZIES: Okay, and that is difficult like I, you know, sympathize. It's not easy to see all that business disappear in a short period of time and that sort of stuff. So I'm not unsympathetic to that sort of personal reality.
3949 However -- so why don't you move to Toronto?
3950 MR. FINKELSTEIN: Well, you know --
3951 COMMISSIONER MENZIES: Like you said all the business -- all the business is going there. What is the point of sending a subsidy to Montreal when all the business is going to Toronto, right?
3952 I mean I live in Calgary. If I want to be a salmon fisherman I have got to go to Vancouver, right? You have got to go where the fish are.
3953 MR. FINKELSTEIN: Well, that is certainly a position, yeah.
3954 COMMISSIONER MENZIES: It is. I mean, I'm just -- you know there is probably some sort of cultural difference that I don't understand, because I come from a place where everybody has come from someplace because the opportunities that they wanted didn't exist where they were. So we went someplace else. We didn't -- like we didn't grow out of the ground like trees, right?
3955 So it's just a little harder for me to understand. I can certainly understand the emotional attachment to the place that you come from and that sort of stuff. I get that.
3956 But, like just from practical considerations, if there was a downturn or something that some sort of temporary subsidy or uplift or something like that could provide, I would see some sense in it. But what you described was so much of the business moving away to Toronto. It's not like the business is dying. It's just moving.
3957 If there was something we could do that made sense to make it move back I would be open to that, but if it's going to Toronto, it's going to Toronto and maybe so should you.
3958 MR. COX: There is a point here that we tried to make clear in the CTV statistics. The market presence of CTV in Montreal is quite large. CFCF is dominant in the English market here. And, yet, they don't seem to feel that there is any need for them to produce here.
3959 MR. SAXE: Now, that is not -- their national market is here in Quebec.
3960 MR. COX: So, what we are saying is it would be really nice if CTV were actually to produce in Montreal within a realm of the amount of viewing that's done here, of the amount of money that they earn here and out of the other elements, the other market presence elements that are here.
3961 So we are not saying "Well, gee whiz, no one is here. No one is watching television in English in Montreal". That's not the case.
3962 We are just not getting an equivalent share of the production compared to the viewing and compared to the advertising revenues generated out of Montreal. That's contrary to the issues that you have raised in your various documents, but it also raises a question from the official point of view of the Official Languages Act which of course you are subject to.
3963 So we are trying to point these out. And as the Commission has said on several occasions on other hearings, you can't talk to us about the Official Languages Act or this other stuff because it all comes down now to a case-by-case review per licensee. You have to talk to us only at a licence hearing.
3964 So that's what we are doing. We are here. We are before you. We are raising the question that's particularly at CTV and the fact that they make a lot of money here and they don't plough it back into independent production or national production here.
3965 COMMISSIONER MENZIES: Okay. I understand better. You make a very legitimate point there and I accept that. Thanks very much for explaining on that.
3966 Those are my questions.
3967 THE CHAIRPERSON: Thank you.
3968 Tom, you had a follow up?
3969 COMMISSIONER PENTEFOUNTAS: Yes, very briefly.
3970 Mr. Finkelstein, how would LPIF money help you in your production company?
3971 MR. COX: As it is currently designed, it wouldn't help him at all because it would only go for in-house news production and we are hoping at the review next year that LPIF will be broadened to include independent production as well.
3972 COMMISSIONER PENTEFOUNTAS: So there is two things you are asking for then, Montreal get LPIF money and that we change the definition of where LPIF money would go. Is that correct?
3973 MR. COX: That's right. That's right.
3974 COMMISSIONER PENTEFOUNTAS: Mr. Finkelstein, back to you.
3975 Yeah, I'm sorry? I didn't hear your last comment.
3976 MR. FINKELSTEIN: I think we have made all our comments.
3977 COMMISSIONER PENTEFOUNTAS: Okay, Mr. Finkelstein, how do your shows that you produce reflect Montreal?
3978 MR. FINKELSTEIN: They do not. I'm trying to think if there is one that has, but they don't.
3979 MR. SAXE: Well, I recognized -- I have seen some of Mr. Finkelstein's shows because I have an 11-year old son who likes them very much.
3980 I recognize some of the places, you know, some shopping centres that I can add that Prank Control has been recorded in. You know, my son jumps up and says, "I know that store. I have walked by it".
3981 So in some ways, some of the scenes, maybe not on purpose but just because it's located and something has happened in parts that we have actually been through. Some things happen in shopping malls that we have been to. It is recognizable to us as local Montrealers.
3982 MR. FINKELSTEIN: I can add that we are place-specific in some of our shows because some of them are documentary-style series. They are heavily scripted.
3983 But it just means that because of where we are based, because of what our budgets are, it makes sense to do as much shooting as we can in Montreal. And there are times on the programs and the series where we do identify place.
3984 And this might be on a series where we travel around the world sort of in many places. You might have a disproportionate number of those locations take place in Montreal.
3985 We are not always adverse to identifying where we are. It really depends on the program's concept.
3986 COMMISSIONER PENTEFOUNTAS: In other words, you could move to Toronto and it wouldn't change anything in how we feel that we are in Montreal in your productions?
3987 MR. FINKELSTEIN: That is --
3988 COMMISSIONER PENTEFOUNTAS: I.E., they don't reflect your -- Montreal is not reflected in your programming?
3989 MR. FINKELSTEIN: Correct.
3990 COMMISSIONER PENTEFOUNTAS: Thank you.
3991 MR. FINKELSTEIN: There is a show we developed for CTV using the local development money; the $50,000 that I don't believe exists anymore. They have since gotten rid of their development representative here.
3992 But we developed a show for them in a dramatic series quite far along the line in terms of scripting and a show Bible and it was squarely set in Montreal in a team crisis centre. Anyway, they passed on the show. It didn't get picked up. But that would have been showcasing Montreal very, very much culturally.
3993 MR. COX: I think it is important to keep in mind that the broadcasters call the shots. If a broadcaster were to say to people in Montreal or anywhere, "We want to produce a television series that's located in Montreal. You guys come up with ideas and we are going to pick the best idea" well, then that's what you would get.
3994 But right now that's not what broadcasters are saying and that's not what the economics is pointing people towards.
3995 So there -- as a matter of fact, I am always amazed at the fact that Flashpoint has a modicum of Toronto there, because I remember a previous program where there was an advertising representative sent from the United States to the Toronto program to make sure that no Canadian flags accidentally were seen, no post office boxes were accidentally shot, no licence plates were accidentally seen.
3996 So we are trying to move beyond that kind of approach but it's the broadcasters that call the shots.
3997 THE CHAIRPERSON: Okay. Well, thank you very much for your presentation. I think we understand your point of view very well now.
3999 We will take a 10-minute break before we go on with the next intervenor.
--- Upon recessing at 1110
--- Upon resuming at 1125
4000 THE CHAIRPERSON: Let's resume.
4001 Mr. Stursberg, since we first met you were ADM of the Department of Communications, I think we have met in about 10 different positions.
4002 MR. STURSBERG: Well, I am continuing my tour of all the large communications companies in the country.
4003 THE CHAIRPERSON: I see. Okay, let's start. Welcome.
4005 THE SECRETARY: We will now hear the presentation of TELUS.
4006 Please introduce yourself and you have 10 minutes for your presentation.
4007 MS MAINVILLE-NEESON: Thank you.
4008 Mr. Chairman, Commissioners, thank you for the opportunity to highlight some important issues for the Commission to consider in this first licensing hearing occurring after the massive acquisitions in the broadcasting industry.
4009 My name is Ann Mainville-Neeson and I am Director, Broadcast Regulation at TELUS. With me today are, on my right, Richard Stursberg, Senior Advisor on Media and Entertainment Strategy; and on my left, Lecia Simpson, Senior Regulatory Advisor.
4010 In the policy decision leading to this group licensing hearing, the Commission established a framework for the payment of subscriber fees for over-the-air television broadcasters. The new regime was called "value for signal". The concept of BDUs paying for the distribution of over-the-air signals had been rejected many times before by the Commission. Last year however the Commission finally gave in after the broadcasters threatened to close down stations claiming financial hardship.
4011 A lot has changed since then, including the recovery of Canada's economy and the significant improvement of the outlook of the television services. More importantly, there has been massive consolidation in the broadcasting industry with billions being spent by distributors to acquire content services. These two shifts in the industry are significant because the Commission's rationale for establishing the value for signal regime was predicated on, one, the perceived financial need of the conventional television broadcasters; and, two, the ability for these fees to be negotiated in a free market.
4012 With respect to the first rationale, clearly there is no need for money to change hands amongst the largest broadcast distributors. It is relevant to note that neither of the parent companies of Citytv nor Global TV, the two financially weakest television networks, are not in favour of value for signal. Only Bell and its CTV network have decided to continue to push for it. Why?
4013 At a hearing here just two months ago we heard CTV's former CEO Mr. Yvan Fecan boast of CTV having recovered well from the recession, showing profitable growth and an excellent outlook.
4014 It is clear that Bell and CTV are pushing for value for signal because they stand to profit enormously from such a regime. By our calculations, Bell stands to collect two to three times what it would have to pay to the other networks in value for signal. We would be pleased to go through the numbers with you.
4015 As for the second element of the Commission's value for signal regime, the ability to negotiate "the fair market value" for television signals, it is no longer possible where the broadcasters are owned by distributors. Big incentives exist for Bell to over-inflate the fee proposed to be charged for CTV. Bell stands to gain if the competing BDUs balk and don't agree to pay the price offered because a blackout of the popular CTV service would merely lead to a migration of subscribers to Bell TV.
4016 Bell's acquisition of CTV already puts it squarely in a dominant position in the Canadian broadcasting industry as we will discuss at greater length in the vertical integration hearing.
4017 Implementing a VFS regime now would merely exacerbate this market dominance and further add to their market power.
4018 There are already many difficult issues to resolve post vertical integration. At least with respect to the negotiation of rates for specialty services we have access to some historical data and to the outcome of negotiations with the remaining independent services all to serve as a baseline. None of that would be available with respect to the negotiations of value for signal.
4019 Accordingly, it would be extremely unwise to implement a new fee based on "open market" negotiations when no such open market exists any more and there are many anti-competitive incentives at play.
4020 All in all, the implementation of VFS now would lead to spiralling fees -- to fund in part the recent billion dollar acquisitions -- and it would also lead to potential blackouts of programming as vertically integrated parent companies weigh the benefits of foreclosing the market on their competitors. These would be extreme consumer irritants, coming at a time when consumers are increasingly considering "cutting the cord" with the traditional broadcasting system in favour of other unregulated options.
4021 Accordingly, TELUS urges the Commission to abandon its proposed regime for value for signal now as part of this proceeding. There is no need to push a determination on this into the vertical integration hearing. It is quite clear on its face that this is not the time to introduce an unnecessary and contentious new fee.
4022 TELUS notes, however, that the potential for anti-competitive behaviour is not restricted to value for signal.
4023 Moving on to another issue, there is some urgency for the Commission to take action with at least one other thing and that is with respect to the potential for the Category "C" services to withhold their signals in the event of a dispute.
4024 As a result of the policy to open up certain genres to competition, namely sports and news, specialty services operating in these genres would no longer be subject to the requirement in section 11 of the Specialty Services Regulations to continue to provide their signal during a dispute. This means that an incumbent popular service such as TSN or Sportsnet would be able to strong arm a deal with the threat of withholding its signal.
4025 As we have noted in the context of VFS, blackouts of popular programming services actually provide a net benefit to the distribution arm of the vertically integrated company because subscribers migrate to their service. This is of particular concern with respect to Bell which operates a national satellite service and therefore competes with all BDUs across the country.
4026 While TELUS applauds the Commission for opening up certain programming genres to competition, it considers that the Commission must implement some interim measures via conditions of license to protect the integrity of its intent to promote and foster competition.
4027 TELUS has proposed in its written comments a condition of license which should be applied to all vertically integrated programming services and TELUS urges the Commission to implement this condition of licence as soon as possible as part of this proceeding, without waiting for the vertical integration hearing. There is urgency to this request because negotiations for some of these services are occurring now.
4028 Thank you for your attention to these matters.
4029 We would now be pleased to answer your questions.
4030 THE CHAIRPERSON: Thank you.
4031 Why are you talking to me about VFS at the time we are talking about license renewal? As you know, VFS is in court, the Supreme Court is going to hear it, we don't know yet whether they will agree with the Federal Court of or not. Even if they do, as we have made clear, apparently there would have to be another hearing on the modalities of implementation.
4032 So aren't you way ahead of your time?
4033 MS MAINVILLE-NEESON: Well, at this point while the issue is before the courts from a policy perspective you could abandon the regime at this point and a lot of the modalities have been put in place.
4034 THE CHAIRPERSON: This is not a policy hearing, this is a license renewal hearing and the issue before us is license renewal.
4035 MS MAINVILLE-NEESON: And the VFS regime did come out of the determination for this group licensing hearing so we considered it appropriate. However, we may --
4036 THE CHAIRPERSON: Would I not be violating due process if as a result of this hearing and your submissions I would say VFS is dead, which is what you want me to say, notwithstanding it wasn't part of the discussion, it wasn't on the table, I haven't heard submissions from anybody except TELUS on this right now?
4037 MS MAINVILLE-NEESON: No, I don't believe you would, because many of the other issues brought up by other parties we submitted it in our comments and all of the intervenors, all of the licensees had an opportunity to comment but chose not to do so.
4038 Actually, Rogers did comment as well and they are also opposed to value for signal.
4039 MR. STURSBERG: Chairman, if you don't mind, I think that in fairness these are, as you point out, license renewal hearings, but these are license renewal hearings for broadcasters that are now part of these very large integrated groups. Certainly it is true that many of the issues that have to deal with these integrated groups will come up in the June hearings, nevertheless the setting of license conditions for these particular licensees, given the structure of the companies they are now parts of, I think it not inappropriate that we think about the whole question of value for signal once again because the incentives that are available given the structure of the industry now to abuse a value for signal regime are completely different from what those incentives were when the Commission first established it.
4040 THE CHAIRPERSON: Definitely the landscape has changed, nobody can argue that, and we have to take that into consideration. We can do it as at the vertical integration clearly, we can do it -- assuming the Supreme Court says yes, you have the power to do it we would have to have a hearing on the modalities of how to do the VFS and obviously some people would come up and say exactly what you are saying right now, never mind the modalities, you don't need it any more, the time has passed, et cetera.
4041 This is not the hearing for it. Doing it right now would just be a violation of due process because it is not part of the notice for this hearing and therefore I have no -- you have chosen to put it on the table, you can, I'm just telling you I'm not entertaining VFS at this hearing.
4042 Let's go to the second point which you made which interests me, the section 11 of the Specialty Services Regulations.
4043 Your point that I don't quite understand, you are saying the channels are now competitive and therefore the regulations no longer apply to them?
4044 MS MAINVILLE-NEESON: That's correct.
4045 The wording of section 11 of the Specialty Services Regulations indicate that in the event of a dispute services which are -- and this is the wording that's used -- which are required to be distributed. However, now with the new Category "C" services -- so the public notice that went out with respect to the news and sports services -- created a new category, the Category "C"s, which no longer have distribution requirements, which means that if they are no longer required to be distributed their signals could be withheld during a dispute.
4046 THE CHAIRPERSON: Okay.
4047 MS MAINVILLE-NEESON: With respect to services, incumbent services like TSN and Sportsnet and Newsnet, these are services which should not be withheld in the event of a dispute.
4048 THE CHAIRPERSON: Okay. So let's play this out.
4049 TSN and TELUS have a dispute, you cannot come to an agreement so you are worried that TSN will say, "Well, sorry, you cannot carry my" -- so TELUS customers suffer, but it will still be shown on Bell TV.
4050 MS MAINVILLE-NEESON: That's correct.
4051 THE CHAIRPERSON: And you are afraid that people will migrate to Bell satellite --
4052 MS MAINVILLE-NEESON: That's correct.
4053 THE CHAIRPERSON: -- which you resell as TELUS satellite?
4054 MS MAINVILLE-NEESON: Well, we complete with Bell on the satellite as well.
4055 THE CHAIRPERSON: But you sell Bell's satellite service under your label.
4056 MS MAINVILLE-NEESON: We also do sell Bell satellite, yes.
4057 THE CHAIRPERSON: Yes. Wouldn't that satellite service still contain TSN, and since you get the program from TSN, wouldn't you be offering the same thing as Bell TV is offering -- Bell satellite, or whatever they call. They keep changing their name.
4058 MS MAINVILLE-NEESON: There would still be the incentive to harm our IPTV service however, which is our main broadcasting service. We resell Bell satellite services as an agent.
4059 MR. STURSBERG: As an agent.
4060 I think in fairness, the resale opportunity for Bell ExpressVu is a nice opportunity, but it was a stopgap measure until such time as TELUS could roll out a really high quality Internet-based television service, which is what it's in the process of doing.
4061 We know that these channels like TSN, TSN is an extremely important, extremely attractive sports channel, in fact it commands shares that in some cases are even as large as or large than the shares of conventional television networks.
4062 THE CHAIRPERSON: I understand that, but --
4063 MR. STURSBERG: So if you pull it -- my only point is that if they were to pull it in a situation where they were unaffiliated with a BDU that would be one thing, but when they pull it in a situation where they are affiliated with the BDU the incentive is not just simply to get a good price for TSN, it is also to advantage the BDU with whom they are associated in the vertically integrated group.
4064 So the only point about all this is that until such time as we settle down how to deal with the rules associated with the vertically integrated groups, we think it unwise that they be allowed to pull their signals while negotiations are going on, because inevitably we are going to have to address these questions in the June hearings.
4065 THE CHAIRPERSON: Yes. Thank you. That's exactly what I thought of vertical integration.
4066 Are there negotiations on right now? Is this basically you are worried that people are trying to take advantage of the interim in order to gain --
4067 MR. STURSBERG: The answer is yes.
4068 We have proposals from Bell/CTV with respect not just to TSN and the repricing of TSN but the repricing of a whole host of -- all of their specialty services. We have proposals for them with respect to access to their services for the mobile platforms.
4069 We are, I think it's fair to say, very, very, very concerned about these proposals. We would welcome an opportunity to sit down and talk to the Commission about these proposals. We think they are anti-competitive and we think they are destructive.
4070 Obviously we can't talk about them here because we are subject to confidentiality constraints associated with our negotiations with CTV but we are very concerned about it.
4071 THE CHAIRPERSON: Okay. Thank you.
4072 Peter, you have some questions?
4073 COMMISSIONER MENZIES: Thank you. Really just one or two.
4074 Just on the Category "C" point, I would just like your comment on the possibility of at some point having a regime in which people were able to -- let's take TSN for example because it's kind of popular right now in terms of examples, but is it possible or desirable to have a regime in which people could then offer a "with TSN" package and a "without TSN" package and that way the rate that people were willing to pay for TSN would be negotiated directly between TSN and the consumer? If you want to pay $20 a month for TSN you can pay for it; if you don't, you don't. Or $5.00 or $2.00 or $0.50, whatever. And you would just be carrying the fee, flowing the fee through. People would have perfect choice and TSN is much loved by many and not loved at all by some. That would give them that choice.
4075 MS MAINVILLE-NEESON: Certainly, the notion that TSN is being sold as a premium sports station, because many sports stations -- or many stations are offered "à la carte", which is essentially what you are suggesting.
4076 COMMISSIONER MENZIES: Right.
4077 MS MAINVILLE-NEESON: We would certainly welcome that kind of choice for our subscribers, but that decision does not rest with us, it does rest with CTV.
4078 MR. STURSBERG: I should just add to that because this is part and parcel of the issue that confronts us vis-à-vis CTV.
4079 First of all, we agree with you that we should create as much choice as possible for our subscribers and our customers. So that TELUS optic offer right now does not include TSN or Sportsnet in the basic package to try to make sure the basic package is priced as low as possible and then if customers would like to have a sports package they can subscribe to the sports package independent of the basic service. That is the way it's structured now.
4080 The difficulty with many of these negotiations with the specialties is that they are not uniquely about price. They are also about conditions. So in certain cases the specialities will say you have to package me in a certain way, eg., you have to put me in basic or you have to guarantee a certain percentage of the total subscriber base.
4081 So when we say to you we have concerns it's not just about price, it's also about conditions which are inimical to being able to create choice for our customers.
4082 COMMISSIONER MENZIES: Yes, I understand and that's kind of what I was getting to regarding that. That is a structure that is within our realm.
4083 I just had one other thought here, although I must say that when you mentioned value for signal I had this kind of Groundhog Day moment that --
4084 MR. STURSBERG: I think we all did.
4085 COMMISSIONER MENZIES: Don't I recognize that guy in value for -- yes.
4086 When you talk about economic stability I know you are quoting from others in terms of that, but Portugal has just applied for a bailout and it does seem to be that there is some economic instability out there in the world.
4087 Do you think it would be prudent really to sort of declare peace in our time right now in terms of the economy and in terms of that are there any indicators you can give us that show that the recovery that we have right now is stable?
4088 MR. STURSBERG: Well, I don't pretend to have a crystal ball, but I can certainly tell you that if we compare where we were in 2008-2009 in terms of the advertising markets for conventional services, I know having lived through it, the collapse that we saw in the advertising markets was certainly the most precipitous and the largest that anybody had seen in the post-war period. Now where we are, what appears to be the case, that we have in very large measure completely covered.
4089 Now, will that continue for the foreseeable future, I don't know, but certainly the feeling in the market right now in Canada is very positive.
4090 COMMISSIONER MENZIES: Thank you.
4091 I don't really have any other questions.
4092 THE CHAIRPERSON: Okay. Those are our questions. I'm sure I will see you at vertical integration.
4093 Mr. Stursberg, I am delighted to see you again. You are a true renaissance man. I'm sure we will meet on many other occasions.
4094 MR. STURSBERG: It's always a pleasure to see the Commission.
4095 Thank you, Chairman.
4096 THE CHAIRPERSON: I think we are ahead of schedule. We will break for lunch now and we will resume -- let's make it 1:30 so we don't have to rush.
--- Upon recessing at 1146
--- Upon resuming at 1327
4097 LE PRÉSIDENT : O.K., commençons.
4098 THE SECRETARY: We will now proceed with the presentation by the Independent Broadcast Group, Le groupe de diffuseurs indépendants.
4099 Please introduce yourselves for the record, after which you will have 10 minutes for your presentation.
4100 Thank you. Please turn on your microphone.
4101 MR. ROBERTS: Thanks for the cue.
4102 Bonjour, Monsieur le Président, et soyez le bienvenu, Monsieur Pentefountas, notre nouveau vice-président de la Radiodiffusion, et bonjour aux autres membres du Conseil présents ici.
4103 We are here today representing the Independent Broadcast Group, Le groupe de diffuseurs indépendants.
4104 I am Bill Roberts, President and CEO for ZoomerMedia, Television Division and I am happily joined here today by Naomi Zener, Director, Business and Legal Affairs at Channel Zero; and Monique Lafontaine, on my right, Vice-president Regulatory Affairs from ZoomerMedia, again our Television Division; and by Joel Fortune, on my far left, IBG's legal counsel.
4105 The IBG is an association that represents the interests of small and independent television broadcasters, meaning television broadcasters that are not owned by companies that also own cable or satellite distribution companies. Our members operate over-the-air television and specialty broadcasting services and are increasingly active in new and emerging forms of digital media.
4106 We operate some of Canada's longest established specialty broadcasters, such as VisionTV and TV5, and some of the newest, such as Ethnic Channels Group's new Arabic services. We have attached to this presentation a list of our member companies and the services they operate.
4107 There are three main points that we want to address today:
4108 First, we support the group licensing model for the larger broadcast groups. However, this model has serious competitive implications for all other television broadcasters.
4109 Second, the group licensing model illustrates, in a very compelling way, a point that we have made before to the Commission: When it comes to CRTC regulation, one size does not fit all. To fulfil the broadcasting policy for Canada set out in the Broadcasting Act, the regulatory framework has to accommodate the circumstances of diverse broadcasting interests: larger and smaller; affiliated and unaffiliated.
4110 Third, in this hearing you obviously cannot resolve all issues. The question of genre protection for example raises critical issues for independent broadcasters and they go well beyond the renewal of the licences for the biggest station groups. The role of genres, if we are going to re-examine that question, requires its own dedicated public process and hearing.
4111 The group renewal framework will create significant flexibility for the largest vertically integrated English-language television broadcast groups.
4112 The CRTC's stated objectives for the group licensing policy is:
"... to provide private broadcasting groups with greater flexibility in the allocation of resources amongst their various television platforms [to allow them] to respond quickly to changes in viewer behaviour". (As read)
4113 The CRTC also said that this greater flexibility:
"...should have a positive impact on the viability of the Canadian television industry". (As read)
4114 Well, we agree in part with this statement. It's important to point out -- and I do so most respectfully and although it may seem obvious -- that the largest broadcast groups do not represent the entire Canadian television industry -- at least not yet.
4115 MS LAFONTAINE: At its most basic level, smaller broadcasters are now faced with an environment in which their biggest Canadian competitors will have much greater flexibility to acquire Canadian and non-Canadian programming for individual programming services.
4116 Smaller broadcasters that are not part of the biggest groups do not have this ability. However, they continue to have minimum spending and exhibition obligations that are often much higher than the 30 percent group CPE. For example, our VisionTV's CPE is 47 percent. One: The Body, Mind and Spirit Channel has a CPE of 41 percent.
4117 Consequently, group licensing creates regulatory disadvantages for small independent broadcasters in one of the key areas in which we compete with other, larger broadcasters: acquiring Canadian and non-Canadian programming.
4118 The regulatory disadvantage exacerbates the even bigger problem our entire industry faces due to the common ownership of the largest broadcast groups by the largest distributors. We will leave that discussion however for the vertical integration proceeding.
4119 The point that we want to make here, is that group licensing, on its own, will not ensure the viability of the Canadian television industry. It places the largest broadcast groups in an even stronger competitive position against smaller broadcasters. It intensifies the trend towards fewer and larger ownership groups.
4120 This is a problem because neither the broadcasting system nor the future of Canadian innovation and economic growth in the global digital economy will be well served by the creation of a market that is among the most concentrated in the developed world, dominated solely by a few, large consolidated media companies. Such a regime would result in less competition, reduced consumer choice and less diversity in terms of ownership, programming and editorial points of view.
4121 The answer to this problem is to work on flexible regulatory responses that recognize that there need to be different rules for different sectors of the industry, large vertically integrated players on the one side and smaller independent players on the other.
4122 The group licensing policy already recognizes this difference because by its nature it applies only to the largest broadcast groups. What the system is missing, however, is a comparable regulatory framework that recognizes the circumstances and creative contribution made by smaller broadcasters and the independent broadcasting sector.
4123 All of the regulatory elements being looked at in this hearing -- the appropriate CPE levels, how CPE's are calculated, flexibility in spending from year to year, support for programs of national interest, the contribution of the independent production sector -- are just as relevant to the regulatory obligations independent broadcasters face.
4124 These obligations go to the heart of the television sector's role in the broadcasting system. On the one hand, more flexibility for independent broadcasters would be welcome; on the other hand, we urgently need a regulatory framework that provides space for independent broadcasters so that we can make meaningful contributions to Canadian broadcasting.
4125 MS ZENER: The outcome of the vertical integration hearing -- and this cannot be overstated -- will determine whether independent broadcasters will be viable as going concerns and competitors in the future.
4126 For now, we ask that the Commission recognize that once the group licensing framework is finalized and the Commission decides whether there should be independent television broadcasters in Canada, then the CRTC should to be prepared to address the further regulatory imbalance created through group licensing of the largest broadcasters.
4127 Among other things, the new flexible group licensing regime will come into effect for the largest broadcasters on September 1 of this year. The CRTC needs to be prepared to provide similar or greater flexibility to independent broadcasters within months of this happening to at least maintain some competitive parity in the short term.
4128 The final area we would like to address today involves the question of genre protection for Category "A" services.
4129 The broad policy question of the future of genre protection is different than the question of defining the nature of service for individual Category "A" services. For example, my company, Channel Zero, opposes Bell Media's application to change its nature of service for CP24. It is our understanding that Bell Media has now withdrawn its request to expand the scope for CP24. This is appropriate.
4130 However, we continue to oppose Bell Media's claim that it is permitted, without CRTC authorization, to drop in local inserts into CP24. These inserts would turn CP24, in effect, into a local information service in competition with local conventional broadcasters.
4131 But, the broader policy question of the continuation of genre protection raises issues that go well beyond the scope of this licensing hearing and should not be up for review here.
4132 It is not just a question of how the large vertically integrated groups compete with each other. The CRTC also has to consider the impact on smaller independent broadcasters. Removing genres has serious implications for smaller broadcasters.
4133 First, how can small independent broadcasters compete in the same genres with the large vertically integrated groups? The "big 4" have the deep pockets and distribution platforms to obliterate all IBG services, in effect, if they so choose.
4134 Second, even looking for opportunities to establish new programming genres will become a futile exercise. If an independent broadcaster finds a new genre to develop to meet the ever changing demands of Canadians audiences there will be nothing to stop one of the large companies from immediately occupying the same programming space.
4135 Third, the CRTC hasn't yet looked at how to treat "free range" specialty services without genres, but with access rights that are owned by the large vertically integrated groups.
4136 Among other things, if genre protection were removed and if services were permitted to change their formats, which seems to be part of the idea, then this would result in the largest broadcast groups owning the overwhelming preponderance of services with access rights to BDU channels, but with no requirement for those services to offer specified genres of programming.
4137 The implications of such a fundamental change could well be as dramatic as the demise of independent ownership of television broadcasting services.
4138 MR. ROBERTS: Thank you, Naomi.
4139 At the beginning of the CRTC's group licensing policy document, the Commission recognized that the previous licensing model had served Canadians quite well. That model resulted in a system that offered "new services and new platforms" and "a world leading diversity of both Canadian and foreign content".
4140 The Commission should have the same objective for the new regulatory environment it is now creating. We should settle for nothing less than world leading diversity for Canadian and non-Canadian content.
4141 When you look at diversity of content and ownership in the broadcasting system, plus the CRTC's own policies, especially in television, there can be no doubt that independent broadcasters lead the way.
4142 That is why it's so important for the CRTC to consider the implications of its group licensing model for the independent sector and for the Commission's own established policies. As it stands now, group licensing is but one part of the new regulatory framework, and it puts the largest vertically and horizontally integrated broadcast groups in a still more powerful position.
4143 Thank you for allowing us as the IBG to appear here today and we would be pleased to answer any questions you may have.
4144 Thank you.
4145 THE CHAIRPERSON: Thank you.
4146 I am somewhat perplexed by your presentation. You say first of all general protection requires a separate hearing and then you go on for four pages about genre; you say there should be a special regime for small independents, but you don't specify what it is. Then you end on a note saying "there can be no doubt that independent broadcasters lead the way" in terms of creating world leading diversity for Canadian and non-Canadian content.
4147 Where is the bottom line? What do you want?
4148 MR. ROBERTS: Thank you, Mr. Chair.
4149 Well, I guess the bottom line is that as we proceed through group licensing and towards vertical integration and towards September 1st, we would like to remind you that we are still here as small and independent broadcasters.
4150 On genre protection, we currently get it both ways. It's clear to us in our day to day business that BDUs without us having genre protection could very easily move into our more lucrative content spaces and occupy those. Even today we are under a lot of pressure from BDUs to actually desert our nature of service and our mandates to get more eyeballs or be moved to different channel placements.
4151 With regard to the issue of flexibility, if the big guys are going to get flexibility then I think there is a consideration of fairness that the little guy should get flexibility as well.
4152 THE CHAIRPERSON: You are in no danger of being forgotten, you have a very effective way of reminding us that you exist and you have done that in the past and I'm sure you will do it in the future.
4153 So if I understand, this is essentially a shot across the bow saying "Don't forget about us"? Because I don't see anything specific here. We obviously are going to talk about independents a lot at vertical integration.
4154 As I have said at least twice already, genre protection is not part of this hearing. I am just setting the seeds for getting some thinking on genre protection because it is clearly a tool that while it worked well in the past it is becoming increasingly frayed at the edges and I see, frankly, no future in continuing it in the present format ad infinitum. We have to change it, we have to adjust it, et cetera. I think the objectives remain the same, but the tool, the way we used it in the past was all based on access control, which we are losing more and more.
4155 So yes I hear you on genre protection. We will have to deal with it and we will have to decide how and when. Obviously there is an urgency.
4156 Then you say a special regime for independents. Are you sort of thinking along -- telephones for instance, we have a regime for ILECs which is incumbent and now we have something called SILECs which is small where we give them certain regulatory breaks essentially.
4157 Is that what is on your mind?
4158 MR. ROBERTS: I'm sure my colleagues on the panel will add to my comments if not correct them, but it's clear that the big four know that they are going to have some kind of framework coming out of this hearing and I think it's fair to expect that the small and independents will be very much interested in what that framework for the big four is going to be and then we will have a great deal to say about what kind of framework we end up proposing or engage with the Commission in terms of dialogue.
4159 THE CHAIRPERSON: Okay.
4160 MR. ROBERTS: But in our own particular situation as VisionTV it's a huge dominoes effect. We have a group licensing hearing that when do we expect the results of that to be, some time in the summer perhaps; we have a vertical integration hearing, the results of that sometime in October, and yet we are supposed to prepare our license renewal for the spring of 2012 in October.
4161 It's a very uncertain environment for the little guys, but it seems to be an increasingly predictable environment for the big guys.
4162 THE CHAIRPERSON: Okay. Whether I agree with your submission or not is irrelevant, it's key that I understand it.
4163 Assume we switch seats, I sit over there and you sit over here, what would you be asking and what would you be granting here? What would I be asking and what will you be granting to keep you happy?
4164 MS LAFONTAINE: Sort of the bigger picture is that we would like to see a regulatory framework for the smaller players because right now we know there was two to three years spent on developing a framework for the larger players and here we are applying that framework that is going to continue to be tweaked. As my colleague is saying, we are going to be filing our license renewal applications in the fall and there is no framework for that.
4165 So what we are saying is, this group licensing approach or the policy doesn't take into consideration us, but ultimately at a minimum we want what they are having.
4166 THE CHAIRPERSON: Okay. I hear the complaint, I am waiting for the remedy.
4167 MS LAFONTAINE: Yes. I know. So ultimately --
4168 THE CHAIRPERSON: So you are telling me between now and fall put in place a regulatory form for small independent broadcasters so that when we file in the fall we know what the rules of the game is.
4169 MS LAFONTAINE: Yes, essentially that. And what we would want is at least the amount of flexibility that they have, if not greater given our competitive disadvantage.
4170 So we are here to talk about that. If I can just make a couple of -- so we are here to talk about that, we are also here to talk about timing. I mean it will take time to do a framework for the smaller players so an issue for us is that the flexibility that gets granted to these larger players, we would also like to be able to come in, within weeks, once that is determined, to have that applied to our licences -- to our services.
4171 THE CHAIRPERSON: You want to amend your existing licences in light of the group licensing issue at the conclusion of this hearing?
4172 MS LAFONTAINE: If there are more advantageous policies or licensing requirements that are given to the larger players, and we are left with our existing licences for a year or two, at least, then they will have yet another competitive advantage over us, if they are granted the flexibility.
4173 THE CHAIRPERSON: Okay. Let's bring it down to brass tacks, so that I am sure I understand you.
4174 For instance, Bell has asked for an amendment to the various specialty groups that they own, the speciality licences. On some of them they want to be able to broaden the category, and on some of them they want to lower certain exhibition requirements, or whatever. Assume that we granted Bell everything they asked for. Then what would you ask for?
4175 MS LAFONTAINE: We would probably ask for reduced CPE. We would ask for our licence to be topped up to apply to our Canadian programming expenditures. We would ask for LPIF, for example, as one of the only, probably, OTA broadcasters that does local programming that doesn't have access to LPIF.
4176 These are the kinds of things that we would be interested in.
4177 THE CHAIRPERSON: Okay. Thank you.
4178 MR. ROBERTS: Mr. Chair, if I could just add one more point; in the absence of the ability for these things to be coordinated with regard to the timetable for the small and independents, it may not be unfair to consider at least a standstill, or be held harmless in the interim, until we do have the time to digest exactly what the implications are of these flexible measures being visited on the big broadcasters.
4179 THE CHAIRPERSON: And administrative renewal, too, I presume.
4180 A standstill and administrative renewal, to give you more time.
4181 MR. ROBERTS: Exactly.
4182 THE CHAIRPERSON: Okay. I understand it, I just don't know why I had to drill it out of you, why you couldn't put it on the table.
4183 Steve, over to you.
4184 COMMISSIONER SIMPSON: Thank you very much, Mr. Chair.
4185 I don't have a lot to add to this by way of questioning that will shed any more clarity than perhaps your discussion with the Chair has already done, but I would like to say that I, for one, am very interested in your plight.
4186 Initially, from the standpoint of the 9(1)(h) decision, which I think was, from the Commission's standpoint -- and this is a personal view -- very justifiable, given our need to take a breath and really look at what digital transition was going to mean, in terms of affecting the entire industry --
4187 I am very aware that you have been repeatedly hit by an increasing number of events that have become your own version of a perfect storm; not the least of which is vertical integration, which I don't think any of us saw coming, and more recently the discussions that are creeping into our dialogue with respect to genre, all of which, I think, go to the exact reason why it was felt initially that we had to take a breath on 9(1)(h).
4188 But what I am getting out of all of this -- and I would like you to comment on it, to see if my view is similar to yours -- is that in instances like the ones we experienced in the value for signal issue, and the ultimate demise of Canwest, which threw assets potentially into the fire, from which Channel Zero was able to recover and, out west, CHEK-TV, Channel 6 was able to do on their own, it gave me a whole different lens through which I am looking at your argument, because you are saying, as the Chair has picked up, that before you were just independent, now you are small. The Channel Zero assets and the CHEK assets are small.
4189 But what I find really interesting is that I don't think there is an individual in the country who isn't cheering for these small OTA assets to survive, because the one thing that they have really managed to remind us all about is the importance of, in their instance, under their mandate, the locality of local television and what it adds to the broadcast system.
4190 To conclude -- and I would like to hear your comments -- I think what you are trying to say is that you have a different type of locality, in that you are wanting that part of the opportunity in 9(1)(h), but it may be an island that you are swimming to that doesn't exist in the future, we just don't know. But the issue is, where do you fit in, and if there is such a thing as Terms of Trade, is there a need for things like Terms of Carriage in the future.
4191 Would you comment on that dissertation and tell me if I am getting close?
4192 MR. ROBERTS: I think it's an excellent dissertation, and between the Chair and yourself, I think you have made our case.
4193 I don't want to dwell too much on 9(1)(h). That may have become the regulatory instrument that dare not speak its name. But I do want to underline that in my time here, over the last couple of days, I have heard members of this panel speak to the need to find an environment where the sustainability of the big broadcasters is possible going forward. And we are here to say that if you are concerned about the sustainability of the big broadcasters, then you should be, in an ecological and environmental sense, and a balance sense, and where the creativity comes from sense, concerned about the small and independent broadcasters.
4194 There is a Broadcasting Act that has a section 3, and there are TV regs, and there are your own policies that speak to diversity of voices and ownership, and we want to do that stuff. We really want to do that stuff.
4195 I was struck by conversations in this room about drama and documentaries. We love doing it. We have She's the Mayor, which is pulling in a strong, six-figure audience for us in primetime. We want to do that stuff.
4196 We don't shy away from doing documentaries. We are doing a joint venture right now with APTN on A Fair Country, John Ralston Saul's very influential book for this country.
4197 We have won numerous Gemini Awards, Canada Awards, for the excellence in the standards of our programming. Some of us have been named employers of the year in our industry.
4198 We are here to do a good job, we just need the business opportunity to get it done.
4199 COMMISSIONER SIMPSON: Thank you. I think -- again, I am speaking for myself, but I truly believe that the cascading set of circumstances has focused everyone's attention on the issue you are bringing up with a different clarity.
4200 With that said, at the risk of repetition, this isn't a policy hearing, but the vertical integration hearing is going to be probably the best place to make your case, and I would be getting busy, because it is definitely going to be a very interesting part of the whole mix that you bring to the table that will help us in that instance, and all I can say is thank you.
4201 MR. ROBERTS: Thank you, Commissioner.
4202 THE CHAIRPERSON: Okay. I think you made your case.
4203 By the way, I repeated your case, that didn't necessarily mean that I accepted it. I just wanted to understand clearly what you were saying.
4204 MR. ROBERTS: Understanding is very welcome.
4205 THE CHAIRPERSON: Good. Thanks very much.
4206 Madam Secretary, let's go on to the next intervenor.
4207 THE SECRETARY: Thank you. We will now proceed with Première Bobine.
4208 THE SECRETARY: Please introduce yourselves for the record. You will have ten minutes for your presentation.
4209 MR. BERRY: Good afternoon, Mr. Chairman and Commissioners.
4210 I am Tom Berry, the president, founder and principal shareholder of Première Bobine, also known as Reel One Entertainment.
4211 I am joined by Sheridan Scott of Bennett Jones LLP.
4212 Première Bobine is a company headquartered in Montreal, with offices in Vancouver and Los Angeles. We are active in the production, distribution and financing of Canadian television programming. Most of this programming has been movies for television, with the bulk of our production done in Vancouver.
4213 I have also owned and operated post-production facilities.
4214 In Canada, for many years, Pay Television has been our most significant source of licensing revenue.
4215 Let me begin by thanking the Commission very much for the opportunity to address you today. It is not my custom to be a regular participant in regulatory proceedings. However, I now find myself here before you for the second time in less than a year. I think this is for one reason -- the changes that have been transforming the Canadian broadcasting sector and the changes which are clearly visible on the horizon have the potential not only to undermine our business models, but to threaten the foundation of the Canadian broadcasting system itself.
4216 Not only are cable and broadcasting corporations at risk, those people whose work lies at the heart of the Canadian broadcasting system -- Canadian writers, Canadian actors, Canadian directors and Canadian producers -- may all see their livelihood put in jeopardy.
4217 For this reason, I felt that I would not be fulfilling my responsibilities as an independent producer of Canadian dramatic programming if I did not ask to address you directly as you prepare to set the operating conditions for the major English-language broadcasters over the next five years, and, in particular, for Corus Entertainment Inc., one of Canada's biggest supporters of feature length film.
4218 Mr. Chairman, you mentioned this morning that the hearings are also an opportunity to try to anticipate future developments. Please forgive me if I am misquoting. The arrival of Netflix, Inc. presents a clear threat to our industry, and it may be the first of many.
4219 When I started in this industry, virtually all television was conventional, advertising-supported and over-the-air. I have lived through several seismic shifts -- the arrival of video, DVD, Pay TV, specialty, and the increasing prominence of the market outside Canada and the United States.
4220 In each case we have had to anticipate those shifts, and we have survived. Many have not.
4221 My days are spent producing, financing and selling Canadian programming. My company is the biggest supplier of TV movies for the slots of two U.S. cable networks. These movies are all Canadian content. These movies would not be sold if we did not get good ratings. These Canadian content TV movies get strong ratings in the U.S., in Canada, in Spain, in France, and in many other countries.
4222 The choice between Canadian content and ratings is a false choice.
4223 It is clear to me that it has always been about the content and not about the distribution systems. I am saying here publicly that we are on the cusp of another seismic change. This change will happen during the licence period of Corus and the other applicants, and it will happen closer to the start than to the end of that period.
4224 If I am wrong about this, I promise to reappear and offer myself for public ridicule.
4225 I am an aging producer and I am still standing. I must have been right a few times before.
4226 Since our written intervention, there have been several significant developments in the over-the-top broadcast sector. A few days ago Dish Network purchased Blockbuster, and it appears that this will facilitate the entry of another well-financed player. Netflix, and perhaps others to arrive shortly, provides an unregulated alternative to the content provided by Corus and other CRTC licensees, while making no contribution to the Canadian broadcasting system.
4227 Netflix has clearly set its sights on Pay TV in the U.S., and it is now moving quickly into the Canadian market. It currently shares pay windows for Twentieth Century Fox titles with Super Channel, and has approached a number of suppliers, both foreign and Canadian, about acquiring exclusive pay windows for movie packages in Canada.
4228 Most recently, it has acquired Paramount's Canadian pay windows, following the studio's unsuccessful attempt to renew with TMN.
4229 And to hasten their transformation into a major provider of Pay Television services, Netflix is now acquiring unique and premium content. In a move that Canadian-owned Reuters has characterized as a game changer for traditional television programming, Netflix has recently purchased the exclusive rights to stream 26 episodes of a remake of the British political drama "House of Cards" starring Kevin Spacey.
4230 And there is no doubt that they have significant buying power to pursue all of these goals aggressively. Netflix already has more U.S. subscribers than Showtime, Starz and Epix. Only HBO/Cinemax has more paying subscribers.
4231 Meanwhile, after only one year in Canada, Netflix has close to 1 million subscribers, a number which took Canadian Pay TV over a decade to accumulate.
4232 So, why is this particularly relevant to Corus' application to renew licences for its programming services, and especially Movie Central? I believe that Canadian companies will need all the flexibility that they can get to respond to this attack, and I believe that they will need this flexibility during the term of their licence.
4233 In this context, I applaud the CRTC's decision to introduce a group licensing approach for major English-language television groups, and would call upon you to extend similar flexibility to Corus Entertainment, including its Pay Television services. The more flexibility Corus has, the greater its chances for earning revenues, and the more funds will flow into dramatic programming as part of its requirement to spend a percentage of these revenues on programming of national interest.
4234 Moreover, the flexibility that Corus is seeking should provide it with the additional agility needed to compete against the over-the-top services by changing direction quickly, if needed, to respond to the onslaught of foreign programming.
4235 In the case of Pay Television, the regulatory framework should also encourage Corus to license content during their first production cycle. One of the key mechanisms to encourage the licensing of dramatic programming during this cycle has been the 150 percent drama credit for feature length productions. We believe that this credit represents an important incentive for Corus to continue to license such programming and urge the CRTC to maintain this feature, specifically as it pertains to long-form drama.
4236 I do not believe that this is inconsistent with the flexibility that group ownership provides. It is an additional incentive to do something particularly challenging and essential.
4237 The importance of feature length drama for developing Canadian talent and telling Canadian stories cannot be stressed enough. This programming offers employment opportunities for the full range of skills needed to produce television programming, including costume and set design, detailed lighting work and sound post-production. It is often the most exportable form of Canadian content, and it represents the strongest form of library for Canadian producers, providing some additional revenues in the second cycle.
4238 We also support changing the exhibition requirements for Pay Television from semester to annual calculations, since we believe that this will have several positive impacts on Pay Television, with no adverse consequences for the scheduling of Canadian content.
4239 Given our strong support for the group licensing approach for Corus and for a number of the changes it has proposed to its conditions of licence, you may wonder if I support the submission of the Canadian Media Production Association, an important association that I am very proud to be a member of. Let me provide you with a little context.
4240 In my view, the CMPA has done an excellent job in its submission, outlining the critical importance of Pay Television in the support of long-form drama, and I completely agree with their general observations on this front.
4241 My particular perspective is a direct reflection of multiple and constant reminders in my workplace that the Canadian Pay Television industry is facing real and immediate threats, and that my business and the livelihood of the Canadian writers, actors and directors who rely on that business will consequently be under siege as never before.
4242 I am also all too aware that broadcast licences are not only a licence to print money, in the words of the greatest Canadian mogul of them all, Roy Thomson. Three Canadian broadcasters recently went bankrupt while printing money, and we all deal with a number of prominent broadcasters in major territories worldwide whose financial statements do not motivate our bankers.
4243 In this context, the threat from the over-the-top broadcasters is real, and while it could be addressed through some targeted action by government, it is not obvious to me that the government will be taking steps anytime soon to develop an effective mechanism to deal with unregulated participants.
4244 If there were an effective mechanism in place to address these threats to the Canadian broadcasting system, I don't think I would be compelled to voice my own views in a regulatory proceeding. However, this is not the situation we are in. We are faced with foreign entrants who are able to avoid obligations to the Canadian broadcasting system, and who will put the full force of their expertise, buying power and financial strength behind their actions to compete against Canadian licensees.
4245 In these circumstances, I believe we must be very careful not to reduce the flexibility of our media companies.
4246 We cannot predict exactly how the challenge from the new over-the-top broadcasters will evolve, and therefore it does not make sense to reduce the options that the Canadian regulated broadcasters will have available to respond.
4247 Thank you again for the opportunity to speak with you today. If you have any questions, I will do my best to respond to them.
4248 THE CHAIRPERSON: Thank you.
4249 If I understand correctly, your divergence with the CMPA is really on one point, which is whether Pay TV revenues should be excluded or included in the CPE obligations.
4250 MR. BERRY: I think you have cut to the heart of it.
4251 The other thing is, I listened to the CMPA presentation this morning, and I found the defence of the ratings of Canadian programming to be a little bit lacking. I thought they had maybe been caught on the back foot, so I thought I would offer the Commission the opportunity to take this issue up more, if you so desire.
4252 THE CHAIRPERSON: Secondly, on the issue of Netflix, I found it fascinating that you pointed out that you are selling your product to two U.S. cable systems. So you are clearly producing something which is desirable in the States, et cetera. Why do you see Netflix as a threat to you, as a producer, and not an opportunity to basically sell your product to them the same way as you are selling it to U.S. cable companies?
4253 MR. BERRY: This is obviously going to play out differently in different markets, and we are trying to anticipate how that will evolve.
4254 Certainly, in the Canadian market, it appears to be a negative for us, and probably a substantial negative. Will additional revenue or a new buyer in the U.S. more than compensate -- or in Europe -- more than compensate for whatever losses we have in Canada? That's an excellent question.
4255 I doubt it, frankly, but it's a good point.
4256 THE CHAIRPERSON: So for you, basically, you have a good market with Movie Central right now, which is in jeopardy from Netflix.
4257 MR. BERRY: Yes, and TMN as well.
4258 THE CHAIRPERSON: Of course, I didn't mean to exclude TMN.
4259 Okay. I appreciate your presentation, and also you putting some new facts before me that I was not aware of; for instance, that Netflix currently shares pay windows for Twentieth Century Fox titles with Super Channel.
4260 I know they have bought exclusive content from Paramount. So they are basically following two different strategies, sharing it with the distributors or taking the whole thing, depending on, presumably, under which model they can make more money.
4261 MR. BERRY: And perhaps under which conditions the product is available.
4262 THE CHAIRPERSON: Oh, you mean at the other end, if Super Channel loses Twentieth Century Fox -- playing it safe and having two outlets.
4263 MR. BERRY: Exactly. The copyright owners may have maximized their revenue by doing it that way, but the driver -- as I am sure most people are aware, the driver of Pay Television is not nearly what it was ten years ago, when Pay Television started.
4264 I think if they started the Movie Network today, they might call it the Series Network, because the movies -- as my colleagues in Pay Television tell me often, the movies are something that subscribers expect, but it isn't the movies that bring them to subscribe, it's those high-profile series on HBO or Showtime.
4265 So the really interesting thing was the rapid Netflix learning curve, and it didn't -- and this is a very successful company, and I think they have to be really admired in many ways, but they very quickly made the jump from studio movies to unique and premium content.
4266 THE CHAIRPERSON: It's interesting because last month I was, together with Commissioner Cugini, in Hollywood, and we spoke to the major studios, and we talked a lot about Netflix, and they all at that point in time said: We don't see that happening. We see it being a niche for old movies. We don't see them -- because they don't bring to us what the rest of the networks bring, which is exposure, advertising, marketing and all of this. After all, they are just servers.
4267 Clearly, there is sort of a trial period that they are going through. They are rethinking it and they are doing some test marketing, et cetera.
4268 Like you, I am surprised at the speed that this thing is developing.
4269 MR. BERRY: The other thing is, from a purely commercial standpoint, in the kind of expression in the financial industry, Netflix has access to very cheap money. They have a stock multiple of something like 60 or 70 times. That means that they can raise a lot of money to commission programming.
4270 Now, I think that one of the interesting questions is: Is Netflix, and over-the-top services like them -- are these services going to completely replace existing services?
4271 Well, they targeted the DVD market and, in many ways, the bankruptcy of Blockbuster is a result of that targeting.
4272 Will the same thing happen in television? I don't think we know. We will see how it plays out.
4273 There are some people who believe that, to some extent, it will be additive. It's like the cost of Montreal Canadiens tickets, nobody has ever found the point of supply and demand. Nobody has ever determined the amount which a Montreal Canadiens' fan would not pay for a season ticket.
4274 So we have never really figured out how much people are prepared to spend on media. Could there be room for these -- will people continue their Pay TV subscriptions and use Netflix? We will find out.
4275 THE CHAIRPERSON: What do you mean by saying that Dish Network purchased Blockbuster, and it appears that this will facilitate the entry of another well-financed player? I am not sure that I get what you are trying to say.
4276 MR. BERRY: Again, I had a meeting, actually, with one of my colleagues who happened to be in Ottawa last night, who is very active in the U.S. media business, and we discussed the purchase, and it is pretty clear that Dish Network is not buying Blockbuster to inherit those store leases. I would guess that the store leases will probably be discharged in the bankruptcy anyway. So what are they buying, exactly? Nobody in their right mind would be plunging into the DVD business.
4277 Well, Blockbuster has rights, it has relationships, and it has a streaming VOD system.
4278 THE CHAIRPERSON: Oh, it does.
4279 MR. BERRY: So the feeling is that that is the only -- and they paid $300 million, I believe, for Blockbuster. That's not a huge amount for a company that size, but enough that they should certainly give it some thought and talk about it.
4280 The view of the people in the U.S. business that I have spoken to is that they are seeing this as part of their development of a Netflix-type platform, and it is pretty obvious that you need a lot of money to get into that business, as you needed a lot of money to get into the Pay Television business originally.
4281 Certainly, the feeling initially, when Netflix began to go into this area -- the feeling of the Pay TV people, I think, on both sides of the border, was that they simply would not have the financial muscle, and I think that that confidence is beginning to ebb away.
4282 THE CHAIRPERSON: Len?
4283 COMMISSIONER KATZ: Thank you, Mr. Chairman.
4284 Good afternoon. I do recall you appearing before us in Calgary and I remember you had a spirited discussion with the Chairman and I'm not sure who won at the end of the day, on that day anyways. So thank you for coming.
4285 The issue of Pay TV and Canadian feature film movies, Corus obviously asked in their application initially to include that as part of the flexibility package. I just want to make sure clearly what your position is.
4286 Are you suggesting that we remove the Pay TV from that package of flexibility that allows them to shift Canadian programming expenditures between all of their specialty assets, or are you suggesting that we allow them the flexibility of shifting it between that entire package of specialty?
4287 MR. BERRY: Well, first, I share the concern of others in the business about this matter; approach it somewhat differently, for example, than the CMPA while sharing their concern.
4288 My understanding of the CMPA position is that they would -- they want to segregate it from the calculation; in effect from the amortization if you will of the programming expenditure.
4289 You know it's a subjective thing but my reaction is that you might achieve more with an incentive and that might be more effective. So while recognizing the same concern, my approach to it is somewhat different.
4290 And what I am suggesting would be to continue the 150 percent credit for pre-licensed dramatic programming on Movie Central, thinking that that might be a more effective tool and less in conflict with the overarching desire to provide the maximum flexibility.
4291 At the same time I don't really think there is any completely logical correct answer on this one. It's a tough one.
4292 COMMISSIONER KATZ: The challenge is that on the one hand the credit was there as an incentive for Canadian feature films.
4293 Now, we have come along and said, "Let's create an incentive for some flexibility to promote Canadian programming" and then if one is too strong for the other, I'm afraid next year someone is going to come along and say, "Can we boost up the 150 percent to 200 percent because it hasn't done enough because we introduced a flexibility on the specialty side?"
4294 Where does this thing end, other than more and more subsidization on both sides?
4295 MR. BERRY: There is certainly a point at which it gets ridiculous and you would have to see what the effect of -- as I understand it, Movie Central we continue to have a requirement to program 50 percent and they have declared over a long period of time that they will purchase every appropriate Canadian theatrical movie.
4296 I would like to make that actually a condition of license and I know the -- it's a sort of belt and suspenders thing, but all the same, I think enshrining things -- things are enshrined in conditions of license for a reason.
4297 COMMISSIONER KATZ: Okay.
4298 MR. BERRY: So I'm proposing as a remedy enshrining that as a condition of license and continuing with the 150 percent incentive.
4299 COMMISSIONER KATZ: Okay. Can you expand upon your concept here about broadening the exhibition requirement for pay from semester to annual calculations? What is the benefits of that and what is the potential risks associated with that?
4300 MR. BERRY: Well, I don't see a big potential risk. I am trying to imagine one, and if any of the Commissioners have one I would like to know what it is.
4301 For us it has two practical advantages. One of them is because the television movies we make are only possible if you presell them or sell them after the fact to other territories including the U.S.
4302 We also often have a windowing problem because a U.S. cable system will impose as a condition of license that we not broadcast anywhere in the world prior to their initial broadcast.
4303 Now, we for many years thought this was ridiculous and fought it tooth and nail because of course the U.S. cable signal doesn't come across the border. However, with all the internet piracy, now it makes perfect sense. If somebody is paying close to a million dollars or more for a license and doesn't want the risk of this thing floating around on the internet.
4304 So bearing that in mind, what will happen is that we will complete and deliver a movie and then it's programmed internationally depending on, you know, schedules and seasons. For example, if we make a Christmas movie, obviously it has to be programmed in December.
4305 Using a one-year window for the Pay TV broadcasters makes it easier for them to adapt to whatever our needs are in this respect.
4306 I think the other thing is that -- and I haven't been a Pay TV programmer but my gut on this is that they are likely to do more reruns if they have the semester system because they need to constantly make the adjustment.
4307 Now, of course, they also have their spending so sort of balance those two things. But as a content owner less reruns is good for me because it preserves the freshness of the movie.
4308 COMMISSIONER KATZ: Right. Okay.
4309 My last question, probably a loaded question: If Netflix knocked on your door tomorrow would you sell your library to them or license your library to them?
4310 MR. BERRY: Well, it's not as if we don't talk to each other. We make programming and we need to sell it to people. I do think that if we don't find a way to get Netflix to contribute to the Canadian system meaningfully, I think it will hurt us all. So I guess it comes down to price.
4311 COMMISSIONER KATZ: Yes.
4312 MR. BERRY: But just to sort of expand on this, I don't want to give the impression that I'm in favour of some kind of prohibition of Netflix. One of the geniuses of the regulation of the Canadian system is it has provided Canadians with very, very wide access and I think that the challenge is to harness Netflix to the purposes of Canadian broadcasting policy in such a way that they are also happy.
4313 COMMISSIONER KATZ: Yes. The challenge is where do you create that harness? Where do you create that loop? That's why I asked that question.
4314 Thank you. Those are my questions.
4315 THE CHAIRPERSON: Has Netflix knocked on your door?
4316 MR. BERRY: The phone has rung.
4317 THE CHAIRPERSON: Okay.
4319 COMMISSIONER PENTEFOUNTAS: Good afternoon.
4320 If Netflix and, you mentioned -- correctly I hope -- are contributing meaningfully to the Canadian services what would that mean for you? What would Netflix have to do, besides buying your product, Canadian product to constitute a player that contributes meaningfully?
4321 MR. BERRY: I think you would look at the obligations of the other people who supply programming in the field and use that as a comparable.
4322 I mean I haven't thought about it exactly how it would work but I think if you look across the Canadian system there is a rough equivalency and you would look to set something up which was somewhat similar.
4323 COMMISSIONER PENTEFOUNTAS: Would you equate them with broadcasters?
4324 MR. BERRY: Absolutely. Yes.
4325 I mean the term broadcast hasn't meant anything for -- it hasn't meant you know what it used to mean for 25 years. And Netflix -- you know Pay TV is an -- we call it a broadcaster. Netflix is a broadcaster.
4326 COMMISSIONER PENTEFOUNTAS: Is the model -- and it goes to Netflix briefly. I don't want to take too much time on Netflix, but is that a sustainable model? I understand the multiples of 60/70 and I understand they are paying big money for product.
4327 Can they sustain themselves?
4328 MR. BERRY: I think time will tell.
4329 COMMISSIONER PENTEFOUNTAS: You are leading us to believe that in the earlier part of this five year licensing period we are going to see their effects and it won't even take that long. Can they sustain themselves?
4330 MR. BERRY: Well, they have got to get the right programming.
4331 On the other hand, they have access to the same pool of people who make all the programming for everybody else. You know they went out and hired David Fincher and Kevin Spacey and bought a very good property.
4332 You know, as those of us in the business know, there is no recipe that guarantees success. However, if you hire the right people and spend enough money I don't know -- I don't know why they, like HBO, couldn't develop a lot of programming people want to see. And if that's the case I don't know why they wouldn't succeed.
4333 COMMISSIONER PENTEFOUNTAS: But aren't they also putting upward pressure on the costs of programming, and wouldn't that be a benefit to you?
4334 MR. BERRY: Well, more buyers paying more money are always good and, yeah, we rely on the Commission to help create those conditions.
4335 But --
4336 COMMISSIONER PENTEFOUNTAS: Well, here is someone just coming on board asking that upward pressure. You should be happy with that.
4337 MR. BERRY: Well, frankly, in terms of -- if you look, there are two sides to this, production cost and the market for programming.
4338 COMMISSIONER PENTEFOUNTAS: M'hmm.
4339 MR. BERRY: I don't see any real relationship between production costs and the volume of production over a period of time. So I don't think -- it seems the capacity to produce seems to be very elastic in my experience. So I don't think that their entrance is going to drive up the cost of production.
4340 Now --
4341 COMMISSIONER PENTEFOUNTAS: It's simply going to drive up the price that they pay for your product then. It's not going to cost you any more to produce it.
4342 MR. BERRY: Well, it comes down to the windowing. You know, what windows do they want? Are they compatible with others?
4343 Not every new technology has been a windfall. The DVD business was a great windfall but initially the internet distribution business produced very little money for anybody. We have seen what happened in the music business.
4344 So it's not -- you know, frankly, I have no idea but I wouldn't assume that Netflix coming in is going to make me money. Although if they are another buyer, I'm in favour of that as long as they contribute to the Canadian system fairly.
4345 COMMISSIONER PENTEFOUNTAS: By forcing them to buy your product basically, simply because it's Canadian?
4346 MR. BERRY: Well, it would be great if there could be a regulation somewhere that specifically made them buy mine. I hadn't thought that was possible. Perhaps I haven't been bold enough.
4347 COMMISSIONER PENTEFOUNTAS: Well, you are basically asking us or asking someone to help create that environment whereby they are forced to buy Canadian product. That's what you are asking for, basically.
4348 MR. BERRY: Well, do you force them to buy Canadian product or do you force them to contribute to a fund? You know, there are a number of ways to do that, but it's been done successfully with other broadcasters.
4349 You know, one of the things that people don't grasp often about the Canadian system is one of the biggest beneficiaries of Canadian content are the big U.S. media companies. They do very well from the Canadian content system. This is a system that we have in place as -- in some ways it's sort of analogous to the auto pact.
4350 One of the results of it has been to lower the amount of money, for example, that U.S. television has to pay for things.
4351 COMMISSIONER PENTEFOUNTAS: Yes.
4352 MR. BERRY: Because there are Canadian subsidies.
4353 COMMISSIONER PENTEFOUNTAS: -- being subsidized.
4354 MR. BERRY: And I think that's a balance which has been very carefully worked out and being pro-Canadian and pro-Canadian content is not to be anti-American and neither is it to be against a choice for Canadians.
4355 COMMISSIONER PENTEFOUNTAS: Thank you.
4356 MR. BERRY: All these things can be done at once.
4357 THE CHAIRPERSON: Okay, thank you very much. As always, you have presented a different viewpoint than the majority of your colleagues. I always enjoy when you come before us. Thank you.
4358 MR. BERRY: Thank you very much for the opportunity.
4359 THE CHAIRPERSON: Okay, madam.
4360 What time do we start tomorrow morning?
4361 THE SECRETARY: Nine a.m. tomorrow morning.
4362 THE CHAIRPERSON: Thank you.
--- Whereupon the hearing adjourned at 1430, to resume on Friday, April 8, 2011 at 0900
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