Transcript, Hearing November 5, 2019

Volume: 1
Location: Gatineau, Québec
Date: November 5, 2019
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Attendees and Location

Held at:

Outaouais Room
Conference Centre
140 Promenade du Portage
Gatineau, Québec

Attendees:


Transcript

Gatineau, Quebec

--- Upon commencing on Tuesday, November 5th, 2019 at 9:03 a.m./ L’audience débute mardi, le 5 novembre 2019 à 9h03

1 MS. ROY: We are ready to start, Mr. Chairman.

2 LE PRÉSIDENT: Merci, Madame la secrétaire.

3 Good morning. Good morning, everyone. Bon matin.

4 Bonjour et bienvenue à cette audience publique. Avant de commencer, je voudrais souligner que nous sommes rassemblés sur le territoire traditionnel des Premières Nations. Je tiens aussi à remercier le peuple Algonquin et rendre hommages à ses ainés.

5 Good morning and welcome to this public hearing. Before we start, I do want to acknowledge that we are gathered here on First Nations territory. I would like to thank the Algonquin people and pay respect to their elders.

6 Cette audience se déroulera sur deux jours. Aujourd'hui, le CRTC examinera la demande de Allarco Entertainment de renouveler la licence de Super Channel.

7 So this hearing will take place over two days. Today, the Commission will examine Allarco Entertainment's application to renew the licence of Super Channel.

8 Tomorrow, the public hearing will focus on four British Columbia radio stations whose licences are up for renewal.

9 So to begin with Super Channel, the Commission is concerned with the way in which Allarco has interpreted the regulatory obligations and policies relating to Super Channel.

10 In particular, it appears that the licence is in non-compliance with certain requirements, including those relating to the distribution of Canadian programs, the eligibility and payment of certain Canadian programming expenditures, and expenditures dedicated to regional outreach programs and script and concept development.

11 Having a broadcast licence is a privilege that comes with certain responsibilities and obligations. And at this hearing, Allarco will have to demonstrate why the Super Channel licence should be renewed and not suspended, revoked or renewed for a shorter term, with or without the imposition of mandatory orders.

12 Each instance of apparent non-compliance will be evaluated on the facts.

13 Avant de commencer, permettez-moi de vous présenter quelques personnes. I would like to present certain persons.

14 The Committee, le Comité d'audition de l'audience publique est composé de madame Joanne Levy, conseillère régionale pour le Manitoba et Saskatchewan, Alicia Barin, conseillère régionale pour le Québec, et moi-même, Ian Scott, président du CRTC. Je présiderai cette audience. I am chairing this hearing.

15 L'équipe de conseil qui nous prête assistance comprend les personnes suivantes: Peggy Nebout, gestionnaire de l'audience, the Hearing Manager; Joshua Dougherty and Ricardo Wicker, conseillers juridiques, counsel; et madame Lynda Roy, secrétaire de l'audience.

16 J'inviterais maintenant nos conseillers juridiques à expliquer davantage les résultats possibles et leurs conséquences, ainsi que ce que l'on attend des titulaires lors de cette audience.

17 Conseiller?

18 MR. WICKER: Thank you.

19 I would like to take a few minutes to expand on some of the outcomes that the Commission is considering during this hearing.

20 As a result of this proceeding, pursuant to sections 9 and 24 of the Broadcasting Act, the Commission may choose not to renew the licence of this licensee, or to suspend or revoke the licence. Or if it chooses to renew the licence, it may choose to issue a short-term licence.

21 In addition, the Commission may choose to issue a mandatory order under section 12 of the Broadcasting Act requiring the licensee to comply with the regulations and its conditions of licence.

22 Under section 12 of the Broadcasting Act, the Commission may inquire into, hear and determine a matter where it appears that a person has failed to do any act or thing that the person is required to do pursuant to any regulation, licence, decision or order of the Commission and issue a mandatory order to ensure compliance with any such regulation, licence, decision or order.

23 If a mandatory order is issued, the Commission has the ability to register the order with the Federal Court, upon which it will become an order of the Federal Court.

24 If the licensee named in the mandatory order subsequently fails to comply with the order, the Commission could provide evidence to the Federal Court of the failure to comply and a show cause hearing for contempt of court would take before the Federal Court of Canada.

25 The person would be entitled to present a defence and, if found guilty of contempt, would be subject to a fine or other remedy as set out by the Court.

26 The licensee is reminded that the Notice of Consultation indicated that it has been called to this hearing to show cause why the Commission should renew its licence and why the Commission should not revoke or suspend the licence or implement one of the other described measures such as the imposition of mandatory orders.

27 To show cause means that the burden of convincing this Panel that the licence should be renewed and that the other described measures should not be pursued is on the licensee.

28 Please confirm that you understand the severity of the situation and the implications of the possible revocation or suspension of your licence and/or the imposition of mandatory orders?

29 MR. ALLARD: We understand.

30 MR. WICKER: Thank you.

31 THE CHAIRPERSON: Then I will turn proceedings over to the hearing secretary. Madame Roy?

32 MS. ROY: Thank you, Mr. Chairman, and good morning, everyone.

33 I would like to go over a few housekeeping matters to ensure the proper conduct of this hearing.

34 When you are at the presentation table, we would ask that you please turn off you smart phones as they cause interference on the internal communication system used by our translators.

35 Interpretation services will be available throughout the duration of the hearing. We would like to remind participants that during their oral presentations, they should provide for a reasonable delay for the interpretation while respecting their allocated delay for their presentation time.

36 Le service d'interprétation est disponible durant cette audience. Je vous rappelle que l'interprétation en français se trouve au canal 2 et en anglais au canal 1.

37 Nous désirons rappeler aux participants d'allouer un délai raisonnable pour la traduction lors de leur présentation à vive voix, tout en respectant le temps alloué pour leur présentation.

38 There is a verbatim transcript of this hearing being taken by the Court Reporter sitting at the table to my right. Please note that the transcript of each day will be posted on the Commission website the following business day.

39 Just a reminder that pursuant to section 41 of the CRTC Rules of Practice and Procedure, you must not submit evidence at the hearing unless it supports statements already on the public record. If you wish to introduce new evidence as an exception to this rule, you must ask permission of the Hearing Panel before you do so.

40 Please note that the Commission will also be tweeting the documents during the hearing at CRTC hearings using the hashtags number sign CRTC.

41 And finally, please note that if parties undertake to file information with the Commission in response to questioning by the panel, these undertakings can be confirmed on the record through the transcript of the hearing and if necessary, parties may speak with Commission legal counsel at a break following their presentation to confirm the undertakings.

42 Mr. Chairman, we will now begin with Item 1 on the agenda which is an application by Allarco Entertainment Limited Partnership to renew the broadcasting licence for the English-language pay Category A service Super Channel, which will be renewed as a discretionary service.

43 Please introduce yourself and your panel for the record. You have 20 minutes for your presentation.

PRESENTATION / PRÉSENTATION

44 MR. ALLARD: Thank you.

45 Mr. Chairman, Members of the Commission, and staff, my name is Chuck Allard and I am the Chairma of Allarco Entertainment Limited Partnership.

46 Before we begin our presentation this morning, I would like to introduce our team.

47 To my immediate left and your right, Don McDonald, President and CEO of Allarco Entertainment 2008 Inc. Jackie Pardy, our Chief Content Officer. To my immediate right and your left, Kim Ball, Director of Media Relations and Sponsorship.

48 In the back row from your left to right,

49 Mark Lewis, our legal counsel, Lewis Birnberg Hanet LLP. Richard Paradis, our Regulatory consultant.

50 Now we will begin our presentation.

51 Chairman, Commissioners, in decision CRTC 2006-193, the Commission awarded us a licence to establish the only national Pay Television service in Canada. That was close to 14 years ago, and this is the first time we get to discuss face to face with the Commission the challenges we have encountered in launching our Pay Television service within the Canadian broadcasting marketplace.

52 Personally, I have been involved in the Canadian broadcasting and entertainment business for more than 40 years, both in radio and in the pay television sector, where my family was involved in the introduction of the first Canadian pay television services back in the 1980’s.

53 At the outset, I wish to acknowledge the different industry groups, trade associations and independent producers that took the time to comment on our licence renewal. We were quite encouraged by the close to 40 positive interventions we received from independent producers from across the country.

54 We also took note of the many constructive comments and recommendations we received from intervenors, and in many instances, we have advised the Commission and the intervenors of our willingness to adapt certain proposed conditions of licence to reflect the comments and suggestions we received.

55 As one of the few independent broadcasters, still operating in the increasingly cluttered Canadian television marketplace, we have to deal on a daily basis not only with competing Canadian services, but more importantly, we have to face the increasing number of non-regulated, online, and over the top foreign programming services, such as Netflix, CBS-All-Access and soon-to-be-launched Disney, to name just a few. All these unregulated foreign services have one key objective and that is to attract Canadian viewers and dollars away from Canadian programming services.

56 As the Commission well knows, such non-regulated services and the increasingly prevalent unchecked piracy of television content are a serious threat to the Canadian broadcasting system and the objectives of the Broadcasting Act.

57 In addition, as an independent broadcaster, we must compete with our own market with increasing concentration of ownership and stifling vertical integration. Dealing with vertically-integrated BDUs, who are not only involved in programming services, but who are also gatekeepers to our access to consumers -- and this represents an ongoing challenge for any independent service.

58 Here again, we have witnessed in the last few years an increasing concentration of ownership of specialty services within VI ownership groups and this has not resulted in the expected increased diversity within the broadcasting system, but more so it has resulted in VI groups having increased access to expensive programming, which can then be leveraged on the multiple platforms owned by the VIs. That, in a few words, is the reality of the Canadian broadcasting marketplace, in which we must work every day.

59 I acknowledge that we have had difficulties in meeting our conditions of licence since the launch of our service. But, at all times, we kept the Commission aware of the difficulties we encountered, in trying to offer Canadians a different and dynamic Canadian Pay television service.

60 Not only did we have to deal with the BDUs being slow in providing and promoting our service, we are still waiting for full HD carriage with Shaw Cable, 12 years later. We have also had to deal increasingly with vertically-integrated BDUs competing and hoarding expensive prime programming, which they can cross promote and amortize on multiple platforms they directly control.

61 In addition, I would be remiss not to mention the important consequences of our having to be in CCAA on two occasions since our launch in 2007 and the lasting effects of such undertakings on the capacity of any company to resurface, and ultimately make a business viable.

62 We have kept the Commission fully aware of our activities during CCAA, which are part of the public file, including details on how we dealt with independent producers.

63 Throughout our experience with CCAA, we have been fully open and transparent about our relationship with independent producers and in the last CCAA undertaking during our last licence period it is interesting to note we had 77 of 78 creditors that approved the plan of arrangements under CCAA. At that time, we fully informed the Commission about the details of our coming out of CCAA in a filing on March 18, 2018.

64 No one should underestimate how difficult it has been for our staff and, yes, also for independent producers. None the less, quite an impressive number of producers continue to work with us and believe in the potential of the service.

65 Don?

66 MR. McDONALD: Mr. Chairman, members of the Commission, I have been at the helm of Super Channel for almost four years. I cannot change the past, but I firmly believe in the potential of our service within the Canadian broadcasting system and I have a positive view in the changes which we have made to access and offer compelling programming to attract and sustain audiences.

67 To that end, I am also a passionate believer in Canadian programming and we have put in place ongoing working relationships with many Canadian producers, to develop not only Canadian feature films, but also Canadian series and documentaries.

68 Programming, as you know, is the essential component to the success of any broadcasting entity and our programming outlook is very exciting. We would like to provide you with an overview.

69 Jackie?

70 MS. PARDY: Super Channel is committed to offering programming that is on brand with our four distinct channels, while being cost conscious and at the same time committed to supporting the Canadian production community.

71 We have significantly reduced foreign expenditures and continue to acquire and pre-license Canadian content.

72 This fiscal year we will have committed $9.5 million on Canadian programming for our 4 channels, and project $14.8 million in Canadian acquisitions for fiscal 2021 and beyond.

73 Our blueprint for success has been in rebranding our multiplexes into four distinct channels, allowing us to target our programming to specific niche audiences and focus our acquisitions and commissioned projects, with more clarity so that we can compete in an already saturated media landscape.

74 Super Channel 1 has been rebranded as "Fuse" and is described as follows, "A dynamic fusion of premium programming including exclusive series, movies and documentaries". The channel consists of a mix of foreign and Canadian movies and series with a focus on Canadian.

75 We are committed to commissioning two to three Canadian series a year for Fuse and are proud of our programming that showcases Canadian talent, representing strong female characters and tells compelling stories. We look for quality productions where we can partner with international producers or window with other broadcasters to bring these stories to life. Examples include series, such as "Pure, Mirage and The North Water".

76 For documentaries Super Channel pre-licenses 10-12 docs a year, all of which are Canadian. We look for compelling stories that entertain and inform our audiences. Documentaries of note include "Global Warning" where we supported the producer’s message of climate change awareness through additional promotional activities.

77 And features: Super Channel pre-licences 10 to 12 Canadian features a year. We look for quality films that require their final finishing funding through our license fees.

78 Super Channel 2 is now Heart & Home, offering feel-good entertainment featuring heartwarming series and movies for everyone in your home, TV you can trust, with shows you'll love.

79 Our strategy for Heart & Home has a predominantly Canadian focus. Substantial production for U.S. channels, such as Hallmark, Lifetime and UpTV is done in Canada and we have forged relationships with Canadian producers so that we are the first home in Canada for such series as "When Calls the Heart, When Hope Calls and Chesapeake Shores", as well as many made-for-tv features that are produced for these U.S. services. Over the upcoming holiday season, Heart & Home will broadcast 23 Canadian-made MOWs, making their premiere on Super Channel.

80 Super Channel 3 is now "Vault", a hand-picked collection of fan favourites and critically-acclaimed movies. Our goal for Vault is to provide 10 to 15 new library titles per month, including classic and critically acclaimed Canadian films.

81 And lastly, Super Channel 4 is now "Ginx", Canada's only 24-hour e-sports channel. Our strategy for Ginx is to continue to develop the newly-emerging gaming e-sports genre with new Canadian productions such as the daily show "Squad".

82 Moving forward, our program strategy to achieve growth and maintain fiscal responsibility for Super Channel is as follows: 1) Stay focused on programming that is on-brand with each of the four channels and 2) support Canadian production through partnerships with other broadcasters at home and abroad.

83 Super Channel does play an important role in the Canadian media landscape. Without Super Channel, there would be one less door for producers to knock on, one less broadcaster triggering production, one less platform showcasing original Canadian programming.

84 Without Super Channel the second season of "Pure" would not have happened. Series like "Acceptable Risk" would not have found a home. Chesapeake Shores would not continue to be in production. New productions like "The North Water" would not be happening right now if not for Super Channel’s participation with CBC.

85 It is imperative that Super Channel survives so that it can continue to play its role in the ecosystem of Canadian television production.

86 MR. MCDONALD: In addition to our programming strategy, we also see interesting possibilities in working with new platform services which facilitate our access to potential customers. In June, we launched on Amazon Prime Video and we are very pleased with the results. Soon, we will be part of the new channel offering on Apple+ TV and we look forward in working with Apple to garner more subscribers among cord cutters and a new generation of television viewers.

87 We are excited with our programming and distribution opportunities we are working on, but we need to have our licence renewed to move ahead. We cannot continue to have costly conditions of licence which seriously impact our ability to get our business on sound financial grounds.

88 Since launching the service in 2007, we have spent well over $67 million on Canadian programming and over $10 million on Script and Concept development and Regional Outreach. The only way we can succeed is if we get more Canadian consumers aware and interested in our four diverse channels. The more we are successful in the marketplace, the more we will be spending on Canadian programming.

89 We have reviewed with great interest the more than 45 interventions that were submitted to the Commission, of which close to 40 were positive interventions on the part of independent producers and industry representatives. As mentioned in our response to intervenors, we have listened to them, and as a result, we have committed to the following for our next licence period.

90 To expend 30 per cent of our revenues from the previous broadcast year on the acquisition of, or investment in Canadian programs. To expend at least $500,000.00 on Script and Concept development in each broadcast year and included in the calculation of the Canadian Program Expenditure. To expend at least $500,000.00 on Regional Outreach programs in each broadcast year and included in the calculation of the Canadian Program Expenditure.

91 With regards to the calls for the conditions of licence requiring shortfall payments, for apparent non-compliance, we believe such requests are counterproductive. The Commission is aware of our past record on conditions of licence. Ultimately, we did expend the additional funding required for Script and Concept and Regional Outreach. However, due to CCAA, there was some delay in fulfilling the condition of licence regarding Script and Concept development. However, the expense was made soon after exiting CCAA, and Regional Outreach funding was spent within the required reporting periods.

92 Concerning the interpretation of what should or should not be considered Script and Concept development funding and Regional Outreach activities, we are open to discuss and potentially receive direction from the Commission on what should be the framework for such expenditures as we look towards a new licence period. We wish to reiterate that today’s hearing is the first time we can meet and discuss our situation with the Commission since issuing our licence in 2006.

93 It has been over 12 years since we have launched our service, and during that period, we have -- we were never questioned by the Commission on any criteria that should be applied to the expenditures tied to our conditions of licence. It is only in this licence renewal that the Commission has addressed this question. Kim.

94 MS. BALL: Over the years, through our Regional Outreach initiatives, Super Channel has demonstrated our commitment to actively supporting a wide variety of vital industry training organizations, conferences, co-production markets and film festivals across the country, many of which have been positively recognized by numerous interventions in this procedure. Super Channel currently supports 14 different industry organizations from coast to coast.

95 Through our sponsorships of the Available Light Film Festival in Whitehorse, the Vancouver International Film Festival in British Columbia, the imagineNATIVE film and media arts festival in Ontario, the Fantasia genre film festival in Quebec, the FIN Festival in Halifax and the St. John’s International Women’s Film Festival in Newfoundland, Super Channel recognizes the importance of showcasing the diversity of Canada’s talent to audiences across the country.

96 Through our ongoing support of renowned training institutions such as the National Screen Institute, Canadian Film Centre and Women in Film & Television in Toronto, Vancouver and Halifax, these organizations are able to continue to deliver vital industry training programs that support traditionally underserved groups, including women, visible minorities and Indigenous screen professionals.

97 For example, through our partnership with Women in Film & Television Vancouver, Super Channel sponsored and helped to design From Our Dark Side, a national English-language script contest and project incubator program, now in its sixth year, designed to find and nurture feature film genre projects written by women and with strong representation of female creative roles attached to their production. Super Channel not only helped to develop this program, but is also a major funder of the program each year.

98 Through our Regional Outreach activities, Super Channel has also supported a wide variety of industry conferences and co-production markets across the country, including On Screen Manitoba’s “All Access,” the Toronto Screenwriting Conference, the Banff World Media Festival, the Frontières Co-Production market in Quebec and FIN Partners in Halifax. These industry events are instrumental in not only providing professional development opportunities for members of the production community, but also provide much needed access to broadcasters and distributors for pitching projects. In addition to providing funding, Super Channel also regularly sends representatives to participate in and engage with members of the production community at these events.

99 MR. ALLARD: Thank you, Kim. Mr. Chairman, members of the Commission, we at Allarco Entertainment firmly believe we have the expertise and the creativity to deliver a diverse quality of Canadian programming service within Canada’s increasingly competitive marketplace.

100 It is somewhat disconcerting that after we were issued our initial licence in May of 2006, we have never had the opportunity to meet in a public setting with the Commission. We are not shying away from our difficulties which we saw us go into CCAA on two occasions since the initial licence was awarded. However, we hope the Commission is cognisant of the critical implications for a corporate entity which enters into CCAA and eventually re-surfaces with the hope of rebooting the operations.

101 We look forward to having a stimulating conversation and exchange of views with the Commission this morning and later in the day with intervenors. Our objective is to have our licence renewed for four years with the conditions of licence we have proposed, and which respond directly to most of the suggestions and recommendations of those that took the time to submit interventions.

102 We are looking for an opportunity to continue our journey of developing a competitive Canadian independent programming offering that Canadian consumers are interested in supporting. We believe we must learn from the past and put in place conditions of licence for a future that reflect an increasingly competitive marketplace, not only among Canadian services, but also dealing with a barrage of non-regulated foreign services.

103 Yes, the outcome of this hearing is critical for the future of our service, but it is also critical for the independent products who are one of our most important contributors to our programming needs. During the period, 2007 to 2019, 217 Canadian productions benefited from development loans from Super Channel.

104 This completes our oral presentation and we look forward to responding to any questions you might have.

105 THE CHAIRPERSON: Thank you. Thank you very much for your presentation. You know, you look forward to a stimulating exchange of views. I don’t know if I’ll be stimulating, but I certainly have questions for you and we no doubt will have an exchange of views.

106 Just to begin, I note you have referenced several times in your comments that you haven’t had an opportunity to be in front of the Commission in-person since your initial licensing. But, forgive me, but I mean, there is no shortage of contact with the Commission through Commission staff and the variety of written processes, so I wonder why you think it’s so, you know, significantly different to appear in front of the Commission as opposed to responding to staff questions and the like.

107 MR. ALLARD: Well, we have attempted, at least every time we have attempted in the last probably 10 years, to meet with the Commission. I’ve instructed our presidents to come down because the Commission doesn’t know what we’re going through. And, a lot of times, we get feedback that we’re in a renewal and they can’t see us now, because -- but I would have loved to come down and talk to the Commission about what we’re facing every day but ---

108 THE CHAIRPERSON: Well, I think outside of -- yes, the Commission won’t -- or, members cannot meet and have a discussion when a matter is in front of them. But, certainly, since I’ve been at the Commission, I haven’t seen, or had a meeting request of that type. And, there is always room for discussions with industry players.

109 So, I’m just somewhat surprised at the suggestion that you haven’t been able to have a dialogue with the Commission, as staff is in regular communication with you. But, that -- we need not harp on it.

110 I do have some questions. And, I would like to begin with CPE. So, just looking backwards, for the broadcast year 2015-2016, you reported, I think it was $10.8 million in CPE. As you’ve referenced in May of 2016, you entered CCAA protection. The amount due producers at that point in time was just under $2 million, I think it was 1.9 -- $1,967,000.00.

111 And, the amount ultimately paid to producers was just under $700,000.00, leaving an unpaid amount of almost $1.3 million. So, the $1.2 million in CPE that wasn’t paid to producers was treated how? Like, it’s my understanding that it’s claimed by Super Channel in meeting its regulatory obligations, but not paid to producers; is that correct?

112 MR. MCDONALD: Mr. Chairman, I will answer that question. The way that we realize CPE Canadian expenditures is through the amortization method, which was employed in, I believe, a 2013 or 2014 regulation that instructed all broadcasters to convert from the cash system to the amortization system, which in fact we were -- that’s in fact what we did.

113 What was due, or the amounts that you speak of, is the amount of liability that was stayed or frozen at the point we filed in the CCAA. So, we’re really talking two different amounts of numbers here.

114 They are liabilities, and licence arrangements are -- you know, there are a number of different ways that the payments are made. They are either made on a monthly basis, or it could be on an accelerated basis of 12 monthly payments over an 18-month licence period, or it could be payments every six months.

115 So, there is not a direct relationship to the amortization amount that was realized in the Canadian spend calculation, and the amount of liability or debt that was owed at the time of going into CCAA.

116 THE CHAIRPERSON: I understand it’s not a debt owed. But, to be clear, the way that I phrased the question, my understanding is correct. So, the unpaid amount of $1.3 million was indeed included in your calculation of meeting your regulatory calculations for CPE; correct?

117 MR. MCDONALD: As I tried to explain that, it is not a direct relationship. Yes, we did not pay -- the amount that was owed to producers on the date of filing was $1.9 million, and we settled at roughly $700,000.00.

118 THE CHAIRPERSON: Mm-hmm.

119 MR. MCDONALD: And, leaving the amount that was uncollectable, if you will, of $1.3 million. So, we -- I guess, in my point of view, we do not consider that as applied against the CPE because we employed the amortization method to do that.

120 THE CHAIRPERSON: And so, how did that impact your relationship with producers?

121 MR. MCDONALD: We continue to work with producers that were, in fact, affected by that; you know? Many, many producers continue to work with us, and it’s
-- you know, it’s -- they are very appreciative that we exited out of CCAA, because at the time we entered we had no idea if we were going to come out on the other end.

122 We had to restructure the company. We had to ensure that we had brought our spend and expenses into the line to be in sync with our revenues. We had attempted to find investors and potentially sell the company. We had no takers. We had a couple of interested parties assigned NDAs, but they were basically tire kickers.

123 And, you know, as we progressed through the 23 months of CCAA, we were able to restructure the company. We were buying product under CCAA. We had to pay for the product. We had to, certainly, report to the court-appointed monitor on our progress. And, all along that, at any time, we could have gone into bankruptcy. And then everyone would have lost.

124 THE CHAIRPERSON: Understood. And, I guess more generally, how do you think this situation of going now twice into CCAA protection, how does that impact your overall contributions to the broadcasting system?

125 When you were licensed, you made some very broad commitments to the system, and to this Commission. I just wonder how you would assess your performance over those two licence terms, in terms of your overall contribution to the system.

126 MR. MCDONALD: Evidently so, we did not hit the conditions of licence, or the initial obligations that we made when the licences were granted to us in 2006. But, think back to 2006; that was a different time. In 2006, the iPhone wasn’t introduced. We didn’t have streaming. We didn’t have Netflix. You know, the whole landscape of the industry has changed in the last 14 years, and you didn’t have DIs buying up pay services. So, the landscape has changed dramatically.

127 At the same time, when we launched we had trouble getting carriage on some of the BDUs. In fact, one of them, and what Mr. Allard referred to, made reference to, was Shaw, where we are still on only two HDs. So, it has been -- you know, it has been tough in the broadcast industry to operate. But, we have persevered. Like I said, in my presentation you spend $67 million on Canadian programming, and over $10 million on reach and outreach, and scripting and concept.

128 If it wasn’t for Super Channel, those expenditures would not have been made; you know? We are a small independent broadcaster. One of the few. We are an option for many, many producers that don’t have opportunities to get in front of the big VIs. And so, I believe, granted, we have fallen short on our CPE, and we’re prepared to make good going forward. But, we are a contributor to the Canadian industry.

129 THE CHAIRPERSON: Thank you. Staying with the -- just hang on one sec. Sorry. If I don’t write it down, I won’t remember later.

130 Staying with CCAA protection for a moment, did it have any other impact on Super Channel’s conditions of licence that were not reported to the Commission?

131 MR. MCDONALD: Not that I’m aware of. We have -- yes, not that I’m aware of. We have -- well let me rephrase that. We did, in fact -- our Script and Concept requirements was not made within the initial licence period, which ended 2017. And, the reason for that, we were in CCAA, and we did not have the funds to expend to meet those commitments.

132 We certainly -- we did, in fact, inform the Commission, or the staff, during a meeting that we had in January 2017, on the 11th, that we basically met with a number of staff, just to give them an update where we were on CCAA, introduced myself. We talked about some other issues regarding our challenges. And so, we proceeded through. Once we exited CCAA, we were able to meet the initial spend requirements on Script and Concept development. During our years, we didn’t meet the Commissions for regional outreach.

133 THE CHAIRPERSON: Okay, thank you. Can I also ask, looking backwards, as part of the first CCAA protection where the Super Channel had claimed CP that wasn’t paid to producers, similar situation as the second one, was that -- did that happen the first time around?

134 MR. MCDONALD: No, I do not believe not. It was a different arrangement with the way that things were handled. We didn’t disclaim contracts, or things of that sort, because we were under a different method of how we -- how cash flowed to licence providers.

135 Typically, back then, you paid 50 per cent upfront on the start of window and 50 per cent of the licence fee at the end of the licence window. Certainly, when we were in our first CCAA, that did not -- that was a restrain on the business because we didn’t have any revenue to support the acquisitions.

136 During the CCAA, in order -- the way that we had to pay for program was on a pay-for-play basis. So, basically each time we played the particular movie or series, that we would -- there would be an amount paid towards that. And then through that, we renegotiated contracts, which we were allowed to do through CCAA. And, at the end, basically everyone was -- remained not whole, but they came out with an acceptable conclusion.

137 THE CHAIRPERSON: But, just to close on that, after you reached that acceptable conclusion, how is that reported in terms of CP expenditures?

138 MR. MCDONALD: It was required on a cash basis because that -- during that period, we reported CPE on a cash basis. So, cash out the door, four Canadian programs were reported on that basis.

139 THE CHAIRPERSON: Okay, thank you. So, a number of interveners have argued that some of your Canadian program expenditures may have been double counted. First as a Script and Concept development expenditure under Licence Condition 7 or 8, and then again as licence fees in terms of Canadian programming expenditures under Condition 5. Those interveners have suggested they can’t confirm, but based on the information on the public record whether or not your Canadian programming expenditures have indeed been met.

140 So, the Commission recently imposed a requirement on large English and French language ownership groups to report on Canadian productions. More specifically, the Commission laid out its directives regarding the annual completion of a production report in Broadcasting Information Bulletin CRTC 2019-304. The Commission also imposed this requirement by condition of licence to the services who have made mandatory distribution under Section 918 to the Broadcasting Act.

141 So, in order to improve transparency, with respect to Super Channel’s Canadian programming expenditures, could you comment on the imposition of a condition of licence requiring such a production report and that would include information related to payments to producers by 30 November of each year?

142 MR. MCDONALD: I am not absolutely clear on the question. Could you rephrase?

143 THE CHAIRPERSON: Are you familiar with the Commission’s requirement recently imposed with respect to a production report on other licensees, I guess is the starting place.

144 MR. MCDONALD: Not exactly, to be honest.

145 THE CHAIRPERSON: Okay. Well, as I said, I’ll just give you the, if you will, highlights. It lays out directions that confirm exactly what payments are made to producers and at a much more disaggregated detailed level, we can give you a document if you prefer.

146 But, the question is, would you be prepared to accept a condition of licence to completing such a production report? If you are uncomfortable answering that at this point, you could take an undertaking to do so once you review the specifics of the production report requirements.

147 MR. MCDONALD: I would prefer to do that because ---

148 THE CHAIRPERSON: Okay.

149 MR. MCDONALD: --- I don’t want to say something about not knowing what I’m saying.

150 THE CHAIRPERSON: Understood.

151 MR. MCDONALD: Okay.

152 THE CHAIRPERSON: We’ll take that as an undertaking, and we can come back to a list of those perhaps at the end of the questions today, or the end of my questions, perhaps.

153 UNDERTAKING / ENGAGEMENT

154 THE CHAIRPERSON: What about a condition of licence as to -- in addition to the production report, which we’ll just leave aside for the moment, to indicate the amount set aside as payments towards the acquisition of programs, as well as the amount and percentage actually paid to the producer or program supplier for the programs? Again, if you are uncomfortable given the spontaneity of the question, you can feel free to respond by undertaking.

155 MR. MCDONALD: I will take it as an undertaking.

156 UNDERTAKING / ENGAGEMENT

157 THE CHAIRPERSON: Okay. I think the third would probably be similar, and that is whether you would accept the requirement, or would you comment on a requirement that the information I just described be made public at the end of each broadcast year? I assume you would prefer to answer ---

158 MR. MCDONALD: You assume right.

159 THE CHAIRPERSON: --- all three elements in an undertaking ---

160 MR. MCDONALD: Yes.

161 THE CHAIRPERSON: --- response?

162 MR. MCDONALD: Thank you.

163 UNDERTAKING / ENGAGEMENT

164 THE CHAIRPERSON: Okay, that’s fine. Well, then, maybe before I leave this area, I just -- help me understand. What business strategies are put in place or will be put in place that will ensure that future regulatory obligations are going to be met? I’m struggling with this, so tell me why I should be confident.

165 MR. ALLARD: Well, I think we have met our requirements in most aspects. We were short, basically, on the development loans and development of the scripts. And, we went to the Commission and we said, “We’ll catch up once we get it off CCAA,” which we did.

166 As soon as we got out of CCAA, we had to put money to get out of CCAA. The next thing we did is put enough money in to cover the shortage that we hadn’t paid when we went into CCAA. So, that was the first thing we did.

167 As far as Script and Concept development, I’m not sure where the Commission is coming, but for 40 years, Script and Concept development, by way of loan, has been the main vehicle where Script and Concept development gets perfected. It’s not a part of the production, but -- and that has always been the case. And, yes, we might get -- it might get paid back before principal photography, but it has always been able to be counted.

168 THE CHAIRPERSON: We’ll come back to that. I have a number of questions about that particular subject, so maybe we can come back to that later. I don’t mean to interrupt, but I think there will be a need for a more fulsome response on that particular issue. Sorry. But, otherwise, please finish your response, or were you done?

169 MR. ALLARD: Well, the same thing with outreach. We feel that we have maintained it and we have done the same thing for the last 10, 15 years, and the same thing that happened before with Pay Television for the last 30, 40 years. So, we’re not sure why we’re offside, but we’re willing to discuss it.

170 THE CHAIRPERSON: Okay, fair enough. We’ll get into some of those. But, from your answer, you don’t need to change any of your business strategies in order to fulfill future licence obligations, is that my understanding?

171 MR. MCDONALD: I will answer that question, Mr. Chairman. We have restructured our staff. We are committed going forward and fully aware of the conditions that are -- will be placed towards us.

172 I firmly am a believer in Canadian programming. We are going to put in place requirements to ensure that we are properly monitoring it.

173 Some of the challenges that we have obviously with CPE span -- take for example we licence a series of series and just, for example, it's $1.5 million and then their licence fees. And we originally scheduled it to run, say, in October of 2018 but for whatever reason, due to other delivery issues or the U.S. broadcaster wants to broadcast it later on in the year, it gets broadcast in May or June of 2019.

174 So all of a sudden, we lost eight months of amortization that we would have incurred on CPE span. So then, depending on when we find that out we have to react. So how do you -- you know the challenge is how do we replace that?

175 The answer to that is we are with our rebranding of our channels, you know with -- particularly Heart & Home has a very high concentration on Canadian content and we are continuing to enhance that channel.

176 We have a number of interesting opportunities and projects that we are working on, which are both Canadian and air on Heart & Home. We are confident that we can adjust and be ready for those differences in moving of the programs. So I think we are going to be able to handle the CPE.

177 We have a -- when I first took over Super Channel and Heart & Home during CCAA, I had a flat organization. I recently restructured my team. Jackie has just joined us about six months ago. She's a seasoned veteran in this area and I'm going to be certainly turning to her to be working on this.

178 You know, given another licence, we have a very enthusiastic team to go ahead and we are working on strategies and developing -- you know, I'm a firm believer of Canadian content and we are going to be very proud to air it.

179 THE CHAIRPERSON: Okay, thank you.

180 So I would like to move on then to another subject and, specifically, as you just referenced, regional outreach programs. So Conditions of Licence 6 and 8 require an expenditure of $500,000 in regional outreach programs in each broadcast year and, in addition, as payment for unpaid expenditures in the first licence term, a total of $2 million should also have been added.

181 Now, there is some questions about these expenditures and whether they are all appropriate. In particular, indirect staff costs were claimed to relate to a portion of staff members' salaries. Some of the outreach activities relate to sponsorship of industry festivities or conferences and, lastly, contractor fees related to payments to third parties were included.

182 Now, in your submissions, you assert that these expenditures should all be eligible. But I would like you to state, what is your understanding of the intent of that condition of licence?

183 MR. McDONALD: Mr. Chairman, back when we first had our licence granted to us we had part of our licence and our plan going forward was to have representatives in every province on to meet with producers and be the creative, you know, mentor for new Canadian productions. And that was part of our initial licence or initial outreach proposal. As we went into our first CCAA, costs had to be cut and many of those representatives were terminated.

184 Where there is no clear -- any guidance, any manual, any circular or policy, what constitutes outreach expenditures ---

185 THE CHAIRPERSON: Well, can I pause you there?

186 So I've read the record and I understand you say there is a lack of clarity. Did it ever occur to you to contact Commission staff to ask the question?
MR. McDONALD: Well, we had reported as required, particularly on Condition 8, what the expenditures were and we never had any question back from staff. So we assumed we were doing okay.

187 THE CHAIRPERSON: So you didn't ask staff any questions and you just believed your business practices were consistent with the intent of the condition of licence?

188 MR. McDONALD: Well, we were doing it right from day one and because we incurred those provincial representatives in our outreach expenditure. And again, we were never questioned on it, so we believed we were doing what was required.

189 You know we look at the expenditures that are related to achieving the outcome on outreach, which is to go out into the industry, meet with producers; assist them to move through to produce the wonderful stories and great ideas they have to get their stores up on the screen or on the TV. And we were in fact doing that.

190 So we were just -- association -- what we believed were the associated costs, the direct costs. We weren't including overhead costs like lights and telephones and things of that sort in regards to that. These were all direct costs that we related to the outreach program.

191 THE CHAIRPERSON: Well, there certainly would appear to be some indirect staff costs that were included. I've got some specific questions about each of those areas and maybe we can go through them.

192 But I mean it seems to me at the outset -- again, help me understand why what I would see as expensing normal cost of business should be included in meeting your condition of licence. I'm not seeing, honestly, how that's contributing to the system which is obviously the intent of the condition of licence, as opposed to reducing your cost of business.

193 MR. McDONALD: As you referred to the normal cost of business, in my mind they're not a normal cost of business because they are costs related to the outreach initiative.

194 THE CHAIRPERSON: Sorry, go ahead.

195 MR. McDONALD: That was ---

196 THE CHAIRPERSON: Well, I'll give you an example. Okay, so some of the salary amounts included in the regional outreach program include the chief financial officer and IT staff. Tell me how that relates directly to your program expenditures, rather than a normal cost of business.

197 MR. McDONALD: Well, as far as the chief financial officer is concerned, he would have to review contracts on the follow up on scripting concept, loan recovery; would give guidance if there is any budgetary submissions that a producer would, in fact, submit. So yeah, we -- that particular person would, in fact, take part of his time out of his regular duties and work in that area as required.

198 THE CHAIRPERSON: And your IT staff?
MR. McDONALD: The IT staff that's a good question because we have developed, you know, online applications for the producers to apply for a scripting concept or to other website activities that the producers would, in fact, have available.

199 THE CHAIRPERSON: Okay. Here is another example.

200 On contractor fees, now a significant majority of contractor fees claimed are related to funds paid to third parties in order to manage the relationship with producers and writers. How are those fees -- how do you see those as eligible and contributing to Regional Outreach.

201 MR. MCDONALD: Well, we didn’t have our own staff there, so we used outside parties to, in fact...

202 THE CHAIRPERSON: I understand.

203 MR. MCDONALD: Yes.

204 THE CHAIRPERSON: But, how does that ---

205 MR. MCDONALD: Well, you know ---

206 THE CHAIRPERSON: --- relate to outreach?

207 MR. MCDONALD: Well, we have scriptwriters -- script readers and they would read scripts for -- that producers would submit and give comments back on scripts. So, it would be just part of the normal process we would go through.

208 THE CHAIRPERSON: Okay. Let’s try sponsorship. Same thing. So, again, in relation to Regional Outreach program conditions of licence, can you help me understand better how the sponsorship of those events and conferences meet the eligibility criteria of Regional Outreach, when the majority of events don’t take place in the regions, but rather in the three major markets of Canada?

209 MR. MCDONALD: Well, first of all, these festivals and events, whatnot, they’re always -- they’re always starving and need funding to have these events occur. At the same time, because they are industry events, many, many producers and members of those associations and festivals attend, and we are often asked to either be on a panel or to meet with them in a speed meeting scenario. So, it’s really an opportunity to allow everyone to get together in one spot.

210 And, yes, we do Vancouver and Toronto, and recently, we have been out to Halifax, to the Atlantic Film Festival. You know, many of these, of course, do occur in major cities because that’s where most people are. And, we’ve also been in Manitoba, Saskatchewan, so we’ve been to -- we’ve been all over.

211 THE CHAIRPERSON: Would you have -- would you be able to provide us with more detail or evidence to help us understand how -- where -- what are the tangible benefits, especially for Regional Outreach and regional producers and writers, stemming from these activities? And, you can take that as an undertaking. I just -- again, I’m having ---

212 MR. MCDONALD: I’ll be just ---

213 THE CHAIRPERSON: I’m struggling a little bit with the connective tissue and if you could provide some detail in writing.

214 MR. MCDONALD: Before -- yes. Before I take it as an undertaking ---

215 THE CHAIRPERSON: Oh, if you can answer, that’s fine.

216 MR. MCDONALD: --- I’d ask Kim Ball if she can ---

217 THE CHAIRPERSON: Sure.

218 MR. MCDONALD: Do you have anything to add to that?

219 THE CHAIRPERSON: You don’t -- if you feel comfortable answering it, I mean, that’s -- you can do so.

220 MR. MCDONALD: Well, what I’ll do -- we’ll let Kim comment on it and -- because she works in that area.

221 THE CHAIRPERSON: Okay. Thank you.

222 MS. BALL: Well, I feel in this instance of things like film festivals that we sponsor and support, as Don mentioned, many of these organizations need our funding for survival and funding from other broadcasters. But, they provide a necessary forum for Canadian films to be seen by audiences and, you know, producers who are coming to us with projects, if we’re supporting places where their films can then be seen and garner some visibility and discoverability, that goes to help the industry as a whole and we, sort of, see that as outreach to the production community in general.

223 And, at those events, as Don mentioned, representatives are able to go and meet individually with filmmakers, take meetings, discuss projects with them, let them know what we’re looking at at Super Channel. And, we really try to, in all of these conferences and co-markets and things that we sponsor, to make that part of the mix that we’re doing.

224 When members from the production community are attending these markets and conferences that we sponsor, they’re getting professional development. A lot of times, they are people that are just entering their careers in the industry and are looking for, you know, guidance from panels and experts, and being able to make those connections and do that networking. So, I think that, you know, our participating in those, because we don’t have regional representatives in each province any longer, that affords us an opportunity to be in those places and to offer some outreach and guidance, and to participate in their professional development and training in the organizations that we sponsor, like the National Screen Institute, the Canadian Film Centre, that all goes directly to help developing the production community, and then allowing them to, you know, be able to produce projects that they can then come to us with.

225 THE CHAIRPERSON: Thank you. That’s helpful context. I think I would still like to ask you if you could -- given that the focus of those activities are specifically on Regional Outreach though, I’d appreciate it if you could undertake to give us an indication of how it indeed specifically benefits writers, production in regions.

226 MR. MCDONALD: Yes, we will take that on.

227 UNDERTAKING / ENGAGEMENT

228 THE CHAIRPERSON: Now, in fairness, I should ask you, the other side of this question is, would you like to comment on the relevance of re-imposing that particular condition of licence as it differs from the standard approach to the licensing of discretionary services currently by the Commission?

229 MR. MCDONALD: Re-imposing as in what context?

230 THE CHAIRPERSON: As it exists in your current licence.

231 MR. MCDONALD: If I’m -- if I’m not mistaken, I believe we’ve already committed to continuing with Regional Outreach activities.

232 THE CHAIRPERSON: And, I’m simply pointing out that the Commission has a slightly different, if you will, standard -- to the extent there’s such a thing, standard conditions of licence with respect to discretionary services. So, I was simply giving you the opportunity to indicate whether or not you had any concerns about the re-imposition of that COL, and if -- and...

233 MR. MCDONALD: No, I don’t ---

234 THE CHAIRPERSON: Okay.

235 MR. MCDONALD: --- because we had -- I had confirmed that we were committed to adhering to that.

236 THE CHAIRPERSON: And, if it’s -- in furtherance of that commitment, is there anything that you are going to do differently? How will you ensure that that Regional Outreach component is indeed met in the future?

237 MR. MCDONALD: Well, we believe the Regional Outreach has been met based on the way that we have applied it. And, I’ve also suggested that we’re open for a dialogue on what expenditures should or should not be included and we are quite open to that, absent the fact that there is really no guidance or (indiscernible) on what expenditures are allowable. I believe they’re in the radio side of the area, there are specified expenditures that are, in fact, allowed. So, I certainly welcome that discussion and thought to determine that we can both agree what the expenditures are, so we can fulfil the expenditures.

238 THE CHAIRPERSON: I think -- well, maybe to close off on this particular part, you can, again, do this verbally or maybe you can add to it in terms of a written response. But, can you describe for me what you see are the tangible benefits reached through the Regional Outreach program through the years? I guess it’s building on the earlier undertaking you’ve already accepted ---

239 MR. MCDONALD: Yes.

240 THE CHAIRPERSON: --- but it would be very helpful to see what you perceive to be the tangible benefits that have accrued.

241 MR. MCDONALD: Absolutely. We will include that in the undertaking.

242 UNDERTAKING / ENGAGEMENT

243 THE CHAIRPERSON: Okay. My last question in this area is about, I guess if you will, looking backwards, and the potential impact of an obligation to pay arrears on your business strategy going forward.

244 MR. MCDONALD: We are not prepared to pay any repayments.

245 THE CHAIRPERSON: And, if the Commission considers that you have not met those conditions and believe repayments are required?

246 MR. MCDONALD: We -- I stand by my comment.

247 THE CHAIRPERSON: Thank you. So, moving on then, Script and Concept development. Again, your condition of licence requires you to expend at least $500,000.00 on Script and Concept development in each broadcast year, and you have a requirement to expend an additional $4 million in relation to unpaid expenditures in the first licence. So, almost $4 million was repaid to the licensee over the licence term. Mr. Allard, you made reference to this earlier. CPE policy 1993-93 clearly indicates these are not eligible expenses. And, for the benefit, just to be 100 per cent clear, I actually want to read to you the relevant passage from that policy statement.

248 It says, “Loans by broadcasters to assist in the financing of Canadian productions are not eligible expenses for purposes of the formula.”

249 And, yet, you just said it has always been the case that they are. A second question that I would ask you -- no, we’ll start with the first one. I can’t read something more clear than that. It says they are not eligible. You say different. Please explain.

250 MR. MCDONALD: The operative word you said is in the financing. The script and concept loans that we grant are not for financing. They are for specific development activities, such as writer’s room, script preparation sites, the location.

251 When we get all these development loans we have no idea if the project is even going to go ahead. So, all our loans are granted pre-financing, and so that’s where we believe that the loans are applicable, as being the custom in our industry for many, many years, as Mr. Allard has referred to.

252 THE CHAIRPERSON: So, the last decision the Commission added the following definition, for a little more clarity.

253 “Script and Concept development expenditures means those expenditures, excluding overhead costs, that are incurred prior to the commencement of pre-production, and before the financing of the project is in place. Spending on programs that are assured of going to air at the time of the expenditure are not considered a script and development expenditures.” (as read)

254 MR. MCDONALD: Yes, I am aware of that.

255 THE CHAIRPERSON: And, you believe that’s consistent with your interpretation that these are eligible?

256 MR. MCDONALD: Yes, I do.

257 THE CHAIRPERSON: All right, let me try it this way. Loans can’t be claimed, according to the policy, as CPE, nor as an expense. And, according to accounting standards, a loan should be calculated as an account receivable, not an expense.

258 MR. MCDONALD: That is correct. I am a CPA, so I fully understand that.

259 THE CHAIRPERSON: And, yet your treatment is what? And, you think that that is treated as an account receivable?

260 MR. MCDONALD: What we do specifically, we set up the loan on our balance sheet as a loan receivable. And, we will then reduce that loan once it is repaid, or if the loan is uncollectable, because the project is not going to go ahead, we would write that off as an expense, but not related to anything to do with CPE, or any of our conditions of licence.

261 THE CHAIRPERSON: So, from your perspective, you didn’t think that reporting those repaid amounts to the Commission would be required?

262 MR. MCDONALD: Could you repeat the question? I didn’t quite hear you.

263 THE CHAIRPERSON: I guess. Well, rather than make it as a comment, make it as a question. Can you explain to me why you did not think it was necessary to inform the Commission of that approach, of not reporting repaid amounts in your annual returns? Those amounts are included in your annual returns ---

264 MR. MCDONALD: Absolutely.

265 THE CHAIRPERSON: --- all as expenditures. But, no indication that there were repaid amounts.

266 MR. MCDONALD: No, in our returns we provided a supplementary document of what loans we had granted. We do, within our conditions of licence, can include Condition 6 and 7 in part of the CPE calculation. But, we would just -- we would report the loans as a loan receivable on our balance sheet. And, we would advise the Commission each year what the loans we had expended for that particular year.

267 THE CHAIRPERSON: But, not necessarily repayment. So, what happens following a project abandonment with respect to the treatment of the loans?

268 MR. MCDONALD: I would write it off. And, we would have a -- for specificity we have an account line in our GNA department called “Development Loans Write-off”, and it is treated as an expense. So, it would be an expense against revenues.

269 THE CHAIRPERSON: Okay. And, well, I guess we can -- I have a few more questions that might be best done by undertaking. But, again, I would ask you in this area about the impact, prospective impact, of an obligation to pay arrears in this area.

270 MR. MCDONALD: I am unclear on “arrears” because I believe we have fulfilled the obligation.

271 THE CHAIRPERSON: If the Commission -- let me repeat it the way as I did in the previous question. If the Commission makes a determination that you have not met your obligation, and determines that it is -- you have an obligation to pay arrears?

272 MR. MCDONALD: We will not repay what we’ve paid.

273 THE CHAIRPERSON: Thank you. So, in going forward in respect of fulfilling a similar condition of licence, how will you treat these arrangements? Do you have any plans to treat them differently?

274 MR. MCDONALD: No, we do not.

275 THE CHAIRPERSON: Okay. Then, I will move to a few specific questions, but they are primarily intended to be written undertakings.

276 So, when the Commission originally granted a Category A then, as it was, Category 1 Licence to Super Channel, it did so with a number of conditions attached so as to ensure the service would provide a meaningful contribution to the system.

277 Your ability to comply with these conditions of licence has been raised by a number of interveners as part of the process. And, the Commission has sought responses to a number of questions related to your performance with respect to these conditions of licence. But, certain details are required to fulfill, to fill out, if you will, the record.

278 Mainly, as it pertains to your performance relative to the conditions of licence for Regional Outreach, and Script and Concept development. Also, some further information is required with respect to your financial projections for any future licence terms.

279 The hearing secretary has an exhibit, a document that she can provide you. I’m just going to reach for my copy. And, I -- it’s not meant to surprise you or anything like that. It’s a set of written questions that I expect will be -- that you will want to answer only in writing. But, if you have any general comment before I move on to my colleagues, I am happy to hear it. We just need, as I said, to get a little further detail on the record.

280 MR. MCDONALD: Mr. Chairman, I am just quickly looking at what you provided without getting into it. I know that we had provided schedules to staff on -- with our May 8th response to questions from April, I can’t recall the exact date, letter. And, if I believe I recall, many of these -- I guess on the first page, these initiatives were answered. But, pardon me, I’ll have to read what the questions are, Mr. Chair.

281 THE CHAIRPERSON: I understand, and I wasn’t ---

282 MR. MCDONALD: Yes.

283 THE CHAIRPERSON: It wasn’t meant to be a skill testing question to see ---

284 MR. MCDONALD: Okay.

285 THE CHAIRPERSON: --- if you could answer them on the spot. I am sure there are reasons for us. If you find the question repetitive, then I would ask you to just look at it carefully. It might be a restatement. It might be an update. If you feel the question has already been fully responded to, then you make reference to where you believe it has been fully responded to in the record.

286 MR. MCDONALD: Okay, well we’ll take it upon as an undertaking to update.

287 UNDERTAKING / ENGAGEMENT

288 THE CHAIRPERSON: All right. And, I would ask you to give us a response to that undertaking and the others that you have agreed to provide by no later than November the 14th. Can you confirm that you’re prepared to do that by November 14th?

289 MR. MCDONALD: Yes.

290 THE CHAIRPERSON: Thank you.

291 MR. MCDONALD: Yes, we are.

292 THE CHAIRPERSON: All right, what else? I’m just trying to decide. Why don’t we move to -- I’ll ask my colleagues if they have any follow-up questions at this point for you. Members? Alicia.

293 COMMISSIONER BARIN: Thank you, Mr. Chair. Thank you for the answers that you have given so far. I’m looking for a little bit of clarity on the CPE spending. I heard Mr. Allard say, “We have complied with our CPE requirements.” And then I heard you, Mr. McDonald, say that you acknowledge that there were CPE shortfalls in the past.

294 So, I’m trying to get a handle on the amount of the shortfall. And, you spoke specifically of the transition from the cash reporting to the amortization or accrual reporting method. So, I guess I’m wondering when, Mr. Allard, you speak about meeting your condition of licence, are you talking about meeting the condition under both methods? And, if not, what the shortfalls would be under, whether it’s the cash or the accrual method.

295 MR. MCDONALD: If I can speak for Mr. Allard, I’m not 100 per cent sure if I heard that he mentioned CPE because, in my recollection, he was referring to scripting and concept and outreach. I have specifically only spoken to CPE, so I will be happy to answer your question that, I guess ---

296 COMMISSIONER BARIN: I guess my specific question is by what amount was the shortfall that you spoke of.

297 MR. MCDONALD: In what broadcast year? On record, we are -- we have done up to 2018 has been filed. In the 2018 year, our shortage was $1.7 million I believe.

298 COMMISSIONER BARIN: And, in terms of the broadcast licensed term? So, from 2014 up until the current ---

299 MR. MCDONALD: Well, what that amount is, is basically a rolling amount. So, each year we sort of add and subtract whatever shortages that we have. Like, for example, the broadcast year 2016, we were actually $45,000.00 to the good. And then 2017, we’re at $1.9 million. And then 2018, we’re $1.7 million.

300 So, we showed some improvement there over the one -- going from one year to another. So, as we move into 2019, it will be another calculation which would then basically determine what the overall shortfall going into the next licence period is.

301 COMMISSIONER BARIN: Okay. So, just for -- to clarify, up until 2018, the broadcast years that have been completed, what would your cumulative CPE shortfall be during the licence term? So, from 2014 to 2018.

302 MR. MCDONALD: $1.7 million.

303 COMMISSIONER BARIN: Thank you. I have another follow-up question on the Chair’s questioning of the loans. So, when you put the loans on your books, and then you recoup amounts on those loans, are you taking those recoupments back into revenues, and then using those revenues for the calculation of your CPE?

304 MR. MCDONALD: No, no. They’re strictly treated as loans. They are basically a repayment of cash. It goes back as cash. The only time it hits the income statement is if the loans are written off, and that’s when we’ll realize the loan is uncollectible on the income statement.

305 COMMISSIONER BARIN: Okay, thank you. I have another question that relates more to what some of the issues that interveners had raised about the manner to which the company entered CCAA protection the last time. And, I think the concern was that it was done at the expense of Canadian producers relative to some of the foreign suppliers.

306 So, I guess I would like to hear from you in terms of the arrangements that were determined under the CCAA. How were foreign producers feated [sic] relative to the Canadian producers?

307 MR. MCDONALD: Well, when -- with our plan arrangement that -- the total claims were $33 million of which it impacted foreign producers roughly $24.8 million. And, it impacted Canadian producers roughly just under $9 million with the remainder going to trade suppliers.

308 COMMISSIONER BARIN: And, in terms of cents on the dollar, was it equitable between the two?

309 MR. MCDONALD: The way the plan worked was the first $25,000.00 of claim, you got 45 per cent of $25,000.00. Then, it was 6 per cent thereafter. There was -- some 37 producers got 48 per cent of their money back, and then there was, like, a down scale down to I guess as low as 6.5 to 8 per cent for the larger claims on Canadian production.

310 COMMISSIONER BARIN: So, then a follow-up question to that. You spoke about the impact of the arrangement on Canadian producers and your relationship
-- your ongoing relationship with them. I guess my question is, how did that arrangement impact your ability to secure foreign programming from the suppliers that had been impacted?

311 MR. MCDONALD: Are you referring to foreign as well? Yes. We do business today with all the major studios, Sony, Fox, MGM, Paramount, so it has no impact at all. We have continued to do business. With non-studio suppliers as well, foreign, from the U.K., ITV, BBC. So, we have continued a very good relationship with all suppliers.

312 They truly believe that Super Channel needs to be here. You know, we are another place they can sell. And, you know, certainly was -- that was very much a common theme throughout the 40 positive interveners that we have.

313 Let’s face it. When you have to do something like CCAA, it’s not easy. You know, we were in dire financial straits, so we had two options: we go bankrupt, or we try to restructure and with the protection of CCAA. If we went bankrupt, we wouldn’t be here today talking. We wouldn’t have spent the millions of dollars in program we spent within CCAA and after.

314 So, you know, it’s not -- believe me, it was not a pleasure being in CCAA. And, you know, Mr. Allard, he has invested over $130 million into this business, and he, you know further invested some money to -- funds to support CCAA, as well as the plan of arrangement and the additional $2 million we require to fulfill our Script and Concept development.

315 And, we could only do that if we were going to exit CCAA. And, we didn’t know. When we went in, we had to restructure. We had to -- it was monitored by PPWC. We had five court extensions as we are restructuring. The courts had to be satisfied that we were making headway. And, obviously, they were.

316 COMMISSIONER BARIN: Thank you. I guess the concern that was expressed by a lot of interveners was that, you know, this is the second time that the company has gone into CCAA. Mr. Allard, you spoke about your long history in PTV. You know, in the 1980’s it was a similar situation with the Pay Television business being in a difficult financial situation.

317 So, I guess, the question would be what assurances can you give the Commission about your financial viability in the future?

318 MR. MCDONALD: Well, it would be really great to have a crystal ball and be able to tell the future. The business has to survive on its own. And, we are certainly moving forward to ensure that happens.

319 As I’ve told people, we are not going to threepeat. We are going to find ways to ensure our survival. But, it’s tough in this -- in today’s market. Mr. Allard is not putting in any more funding into the business. The business has to survive on its own which, certainly, we are.

320 COMMISSIONER BARIN: Thank you.

321 MR. ALLARD: Maybe I could comment, too. I mean, it was a big decision to come out of CCAA. I actually tried to get a broker to basically see if there was a buyer, and there wasn’t anything firm.

322 I, sort of, believe in the employees and the industry. And, I had a big fight with my children on whether I should put any more money into this. But, I did make the commitment to come out and try to meet our obligations, as we perceived them -- our obligations were.

323 So, I mean, there might be some light at the end of the tunnel, because with Amazon we have more subscribers in four months than one of our biggest BDUs. So that, sort of, gives you an idea; it hasn’t been easy dealing with the BDUs selling our product. So, I think, if we can get some momentum with Apple, we will start to see the light. But, there’s no sort of allusions that we might not make it.

324 THE CHAIRPERSON: I know Commissioner Levy has some questions, and I know Commission counsel does, but I think if you will agree, we’ll take a break for 15 minutes and come back, and then we’ll complete our conversation with you. So, let’s resume at five to, 10:55 please. Thank you.

--- Upon recessing at 10:37 a.m./

--- L’audience est suspendue à 10h37

--- Upon resuming at 10:56 a.m./

--- L’audience est reprise à 10h56

325 MS. ROY: Order, please. Ordre, s’il vous plait. Nous allons a prêt à commencer. Thank you.

326 THE CHAIRPERSON: Shall I say welcome back? Take your time. No hurry.

327 As we resume, I will call upon Madame Levy. I believe she has some follow-on questions for you. And then I will turn it to legal counsel, in a moment, as they have some. And, we should give you some clarity around the undertakings, so you have, you know, the exact wording of the questions, but they will take care of that.

328 Madam Levy, questions?

329 COMMISSIONER LEVY: Thank you. Good morning. Now, I was very interested in that last comment you made, Mr. Allard, about your association with Amazon proving to be so fortuitous and successful. Could you tell me a little bit more about that?

330 MR. MCDONALD: Mr. Allard has asked me to speak to it. Yes, June, just this past June, we launched on Amazon. And, we are one of several Amazon channels that was launched on there.

331 You have to have Amazon Prime, which most of us do have, because of shipping. And, you can then subscribe to Super Channel, plus a number of other channels. I believe Corus has a combination of channels called Stack TV.

332 And, we are sold for the same price as the BDUs are sold at. In the case of Amazon, it’s $9.95. So, it’s like a cord cutter, or a cord never, or someone who is not subscribing to cable, in fact, can have access to Super Channel.

333 But, what was interesting with Amazon is, they are very content-focused on promoting the content on their service. Not only do we get the ability to have some of our features pop up on the slider on the top of Amazon, but because of other products they have, like IMDb, Twitch, you see a Super Channel ad on IMDb, which is, kind of, interesting.

334 The thing that I like the most, not only the fact that we are getting a good subscriber growth, is there is a reporting. They report every week to us, on Wednesdays, at exactly 8:01 p.m. Eastern time. We get reports on the number of subscribers that were added that particular week. The number of live -- that people are watching the live linear program. And, also, the VOD content, who has watched what movie, what documentary, the number of streams, the number of minutes watched.

335 So, this is tremendous information that we get. On top of that, we get every month as well. And, we get a retention report, as well. So, this is tremendous valuable information for us to have so it can help us make decisions on our business going forward.

336 COMMISSIONER LEVY: So, you can appreciate that, although in your brief you comment about how the OTTs have hurt your business, I gather that you found a way to make it work for you?

337 MR. MCDONALD: Yes. There is a saying, “If you can’t beat ‘em, join ‘em.” So, we’ve had an opportunity to join them because certainly they have recognized -- you know, certainly, Amazon came to us. They actually came to us because they recognized they needed to have channels on their Amazon channels, in Canada, that is representative of high quality, entertaining, programming.

338 Now, they have Amazon -- they launched Amazon channels in the U.S. a few years ago. And, actually many of the U.S. pay services, like Stars and HBO, actually went on Amazon first before they launched their own OTT platforms.

339 COMMISSIONER LEVY: So, you can subscribe to Super Channel through Amazon Prime without having a subscription to the regular Pay TV?

340 MR. MCDONALD: Absolutely. And, because they -- you know, they show the full linear channels. I, kind of, call them virtual BDUs. So...

341 COMMISSIONER LEVY: Yes. And, I would imagine that Apple TV+ is going to be anxious for content because they have no back library. So, they’re ---

342 MR. MCDONALD: That’s absolutely true.

343 COMMISSIONER LEVY: Yes.

344 MR. MCDONALD: So, we are -- as I said, we are working right now with their tech team, and our tech, to get the XML files and stuff were all ready for the ingestion of our content.

345 COMMISSIONER LEVY: And, is it just to -- was that confined to the Canadian borders ---

346 MR. MCDONALD: Yes.

347 COMMISSIONER LEVY: --- for this?

348 MR. MCDONALD: Yes.

349 COMMISSIONER LEVY: Because you don’t have rights for the materials that ---

350 MR. MCDONALD: That’s correct. We are limited by our licence agreements.

351 COMMISSIONER LEVY: Well, nice to have a glimmer of hope there, but let’s get back to ---

352 MR. MCDONALD: Absolutely. Thank you.

353 COMMISSIONER LEVY: --- the matter at hand, so to speak. Since the Let’s Talk TV process, the CRTC, as you know, has stepped away from regulating broadcasters’ commercial practices. However, I am interested in knowing more about your business practices, particularly as they relate to independent producers, because it reflects on your approach as a player in the Canadian broadcasting system.

354 Now, the intervention by the documentary organization of Canada has described your payment plan for licence fees, four installments of 25 per cent each, beginning on delivery, and ending 18 months later, which means that the independent producer has to pay for interim financing for an extended period of time. Can you confirm this payment schedule, that you use this payment schedule?

355 MR. MCDONALD: Yes. That’s one of the payments schedules that we would use.

356 COMMISSIONER LEVY: One of?

357 MR. MCDONALD: Yes. It becomes a negotiated process. You know, some payments are paid over monthly -- over the licence term, so 18 monthly payments. We could have accelerated payments based on 12 months -- you know, it tends to be a variety. But, we do not typically pay before delivery.

358 COMMISSIONER LEVY: Now, do you propose to continue this practice into a potential new licence term?

359 MR. MCDONALD: Well, this has been the practice we have been doing for the last 12 years, so I don’t see any reason to change.

360 COMMISSIONER LEVY: Let’s move onto the staff costs as related to the Regional Outreach expenditures. Now, do I understand that -- and I recall this at the time, that when Super Channel launched, one of the innovations was to have representatives across the country who could liaise with independent producers in particular, and that that was a cost that was slashed in the first entry into CCAA.

361 MR. MCDONALD: Yes, that’s right.

362 COMMISSIONER LEVY: But, then, it appears that the -- capturing those staff costs continued on in your approach to Regional Outreach expenditures, going on from that; is that correct?

363 MR. MCDONALD: Yes, but it’s certainly on a lesser amount. We didn’t have a Regional Outreach person in every province.

364 COMMISSIONER LEVY: But, your content officer would be considered an outreach person, your CFO, your IT people, et cetera?

365 MR. MCDONALD: In -- a portion of their salary would be based on what we deem to be related to outreach activities.

366 COMMISSIONER LEVY: Are you aware that that’s unusual?

367 MR. MCDONALD: Well, it depends on the context of unusual. It’s not unusual to allocate costs over -- across other departments of -- it certainly is a common accounting practice. Absent of any circular guidance or what is specifically allowed as an expenditure in outreach, we deem those costs appropriate for the job or the activity they were in fact doing for the outreach area.

368 COMMISSIONER LEVY: How do you justify supporting festivals in the major markets as part of Regional Outreach? I mean, one of the things you might have done is provide bursaries to regional producers to go to those festivals, but you didn’t do that, you did sponsorships and that kind of thing instead. So, how do you justify that as a Regional Outreach?

369 MR. MCDONALD: Well, many of those producers will come to those festivals because that’s where all the activity is. This is where it gets us into one spot, where everyone is somewhat together and it’s -- they are members of the industry or the association, and it just gives a common opportunity for not only them to see Super Channel, but other broadcasters and developers as well, so...

370 COMMISSIONER LEVY: Could you comment -- now I would like to shift gears a little bit. I would like you to comment on your relationship with the Canada Media Fund. This is obviously a fund that’s there to help with Canadian production, but you have never really taken advantage or use that system; correct?

371 MR. MCDONALD: Well, we have. Up to the point of our second CCAA, we had an envelope of roughly $2.4 million which was not used in the CCAA years. And, one of the difficulties that we had with CMF is we don’t have an audience score that would help bolster that up.

372 We attempted a few years ago to subscribe to Numeris, formerly BBM, and the unfortunate thing, we certainly paid a great deal of money for the subscription, but really did not get any audience results because of, one, depending on where the transponders for Numeris was located, and then we would be dependent on those transponders or those people who have transponders be subscribers to Super Channel. And, because we had roughly 3 per cent of the penetration of subscribers in Canada, it really did not yield us very confident numbers, so we -- even the numbers we could share with CMF did not really relate to anything.

373 COMMISSIONER LEVY: Let’s just turn a little bit to the -- to your experience under CCAA. What’s your comment on the impact that Allarco’s financial difficulties have had on the producers of disclaimed projects?

374 MR. MCDONALD: Well, I’m sure it was devastating for them, as much as being devastating for us. We were in dire financial straits.

375 COMMISSIONER LEVY: But, you appreciate that they had risks involved in these projects ---

376 MR. MCDONALD: Yes.

377 COMMISSIONER LEVY: --- very large -- risks that were as existential as yours?

378 MR. MCDONALD: I do appreciate they had risks. You know, when we went into CCAA, and certainly this is all public record on court filings, our spend was a million dollars more than our revenue coming in. So, it was either we go into bankruptcy or we find a way to restructure the business and find an opportunity to continue the service which would still contribute to Canadian production and TV viewers, you know, the option and thing -- for Mr. Allard to have the confidence to say, “Let’s try to fix this,” and we in fact did. And, you know, it was either do it or we’re gone.

379 And, the alternative, I believe, would be a worst situation for everyone. And, I do -- I’m very apologetic and very re -- you know, feel for the producers that have -- was stuck in -- affected by the CCAA but, you know, we had no other choice.

380 COMMISSIONER LEVY: You’ve asserted that some of your financial difficulties, particularly in the past, pre-Amazon Prime and Apple TV+, are due in part to your difficulties in negotiating carriage with some of the BDUs. Have you ever used the Commission’s mediation services?

381 MR. MCDONALD: We have.

382 COMMISSIONER LEVY: And, what was the impact of that?

383 MR. MCDONALD: Well, the one -- now...

384 COMMISSIONER LEVY: Mediation services or ---

385 MR. MCDONALD: No, no, no, no.

386 COMMISSIONER LEVY: --- application?

387 MR. MCDONALD: Well, the -- we used the mediation service -- maybe I would return this to Mark Lewis, because the media -- this kind of predates my involvement. Mark, could you ---

388 MR. LEWIS: Yes.

389 MR. MCDONALD: --- comment on that?

390 MR. LEWIS: I’m somewhat constrained in what I can speak about because it’s a confidential process, but I’ll lay it out perhaps in broader terms.

391 The difficulty that Super Channel has had in negotiating affiliate agreements with BDU is -- has come down in the last few years to packaging and pricing, because the service has become unaffordable relative to Netflix and other over-the-top entrance. So, the one instance that we had with mediation, it was very clearly expressed by the other party that the Commission had no jurisdiction over retail price, and retail price is everything in terms of the carriage and accruing subscribers, so we walked out of that session with no resolution whatsoever. And, moreover, the BDU took the position that it had the ability to package or offer Super Channel for sale in a certain manner that, although we argued, it might constitute undue preference or undue disadvantage, the staff took the position otherwise and said that they could not make a decision in that regard.

392 So that's the difficulty. Many BDUs in the last few years, in these negotiations and I've been involved in them, have been somewhat resistant to lowering a retail price because some say it may devalue the value of other services that they offer, but in many cases they have. Many BDUs have actually seen the light of day with competition that's going on, have lowered the retail price and that has, I would say, more so stabilized churn rather than accrued new subscribers.

393 That's one aspect of it. The other aspect of it, if I can just go on for a moment, has been the issue of the HD channels and we also had an issue of distribution in Quebec. One was a Part 1 application where we were unsuccessful. This a number of years ago. This goes back, I think, prior to the first CCAA entry.

394 And the other issue with respect to HD, we started a process but it became very apparent in our discussions with Commission staff -- this is several years ago -- that they would not -- they did not believe that our 2006 decision specifically referred to "must-carry of HD" and that's been part of the problem because the service was licensed as a multichannel HD service at a time when HD had not really rolled out in Canada.

395 Mr. Allard and the original group had hoped that coming on the market as the first fully HD service would have driven sales and BDUs were resistant to provide HD transmission. So we're still in, as he mentioned today, a standard definition which is a 1980s technology in the 21st century, which is a problem.

396 COMMISSIONER LEVY: okay. And I'd like to just briefly go into what you see as the light at the end of the tunnel. What is it that you think differentiates Super Channel as an offering to Canadian viewers?

397 MR. ALLARD: I'm going to let Jackie respond to this because I think she outlined it quite nicely in her presentation.

398 MS. PARDY: I would say I outlined our strategy for programming as it pertained to Canadian content, but we do also have a strategy for foreign content because, of course, you can't just have Canadian content on your channel. You have to compete with U.S. shows as well.

399 And we are moving forward focussing on foreign content that satisfies more of a niche audience, shows that are not offered through the big studios that we would engage in biding wars over and probably lose to our competitors. Instead, we're going to go after shows that have a lot of buzz around them, shows that are maybe sourced not just from the U.S. but on smaller tiers, but also form international places like from the U.K., from Australia. We just -- we're putting out a show in January called "Upright" from Australia. Correct, I believe it's from Australia. "Line of Duty" is from the U.K.

400 There's so much great programming out there that doesn't get a spot. It doesn't get a spot on our competitors' shelves, and we provide that programming and it's not enough just to rely on the traditional viewing methods of cable television. We are -- as mentioned before, we're launching on Apple TV channels. We've just launched on Amazon Prime.

401 It's a crowded marketplace out there. Our shows and our niche audiences can find our shows better on these platforms because it's all based on searches and algorithm. So if you like one particular show, they will let you know, oh, this is another show you might like.

402 And so it sort of breathes new life into our... into our strategy. We have the opportunity to reach more viewers, more niche audiences. It gives them the opportunity to find us better over these types of platforms.

403 COMMISSIONER LEVY: Do you have exclusive rights in all cases to your programming?

404 MS. PARDY: Not in all cases because, again, cost consciousness is a big part of my role. I have to make sure I get programming that we can afford but we window. We are doing programming where we would get certain rights and then we'll go in black for a bit and let someone else have the rights to air it. We will share exclusivity. We want to bring the programming to the screen and whatever we need to do, that's how we'll do it.

405 COMMISSIONER LEVY: And specifically with regard to Canadian programming, do you have a particular approach, a theme that you're using, something that will be unique to the market that will attract people to Super Channel?

406 MS. PARDY: Well typically, we try to be the first home in Canada. We want to be -- we want to première the show in Canada and then we will allow for a second window. In terms of themes, you know, compelling stories, strong characters, interesting to our Canadian audiences, and also shows that show success and interest abroad as well because that's how we can afford to bring the show to Canada.

407 COMMISSIONER LEVY: And what's your approach to the proportion of original programming versus acquired Canadian programming?

408 MS. PARDY: In terms of onscreen or in terms of spend? What do you mean? In terms of how much ---

409 COMMISSIONER LEVY: Probably spend.

410 MS. PARDY: In terms of spend, well Canadian -- yeah, we have reduced our foreign expenditures so that it can enable us to do the co-productions. Otherwise, if we're bringing "Homeland" to the screen, season 6 of "Homeland", we couldn't afford that. So we gave up "Homeland" which was a signature show for Super Channel for many years. We decided to let "Homeland" go somewhere else so that we could spend the money in Canadian versus a foreign show.

411 COMMISSIONER LEVY: And was that for -- again, was that for original Canadian commissions or acquisitions?

412 MS. PARDY: Yeah, absolutely.

413 COMMISSIONER LEVY: Okay. And finally, I noticed that you talked in your presentation today about the number of productions that you air, particularly some of the Hallmark ones that are made in Canada with sometimes Canadian co-producers but they don’t qualify as Canadian content.

414 MS. PARDY: No, they do qualify as Canadian content.

415 COMMISSIONER LEVY: Do they? Okay.

416 MS. PARDY: Absolutely.

417 COMMISSIONER LEVY: They do, okay.

418 MS. PARDY: Yeah. They're not just service productions. We are -- we are working with the producers that are, you know, filing for C numbers and we count these shows as Canadian content.

419 COMMISSIONER LEVY: Okay. Thank you very much. That's all I have.

420 THE CHAIRPERSON: Thank you, Commissioner Levy.

421 And I'll ask Commission counsel, I believe you have some questions for the panel and some clarifications in relation to undertakings? Thank you.

422 MR. WICKER: Thank you.

423 So this is just to clarify certain points regarding some questions on the undertakings.

424 So the first one has to do with the production report. As the Chairperson noted earlier, the Commission recently imposed a requirement on large English and French-language ownership groups to report on Canadian productions.

425 As reference, you can look at Broadcasting Information Bulletin 2019-304. Now this is just a reference to give you an idea of the kind of report that we're talking about.

426 So I'm going to ask you to confirm -- to give an undertaking to come in in writing by 14 of November 2019 on three points related to this production report.

427 So the first one is that you're going to comment on the imposition of a condition of licence requiring the filing of a production report which would include information related to payments to producers by 30th of November of each broadcast year.

428 The second point would be to comment on the imposition of a condition of licence requiring that in addition to filing the production report, you'll be required to file for each broadcast -- for each production highlighted in the production report the amount set aside as payment for the acquisition of that program, as well as the amount and percentage actually paid to the producer or program supplier for that program.

429 And then the third and last point in relation to this production report will be to comment on the requirement that the above noted information be made public at the end of each broadcast year.

430 Now where confidentiality may be an issue, also please comment on what elements of these requirements should, in your view, be kept confidential and the reasons why? Do I obtain your confirmation of this undertaking?

431 UNDERTAKING / ENGAGEMENT

432 MR. McDONALD: It is confirmed.

433 MR. WICKER: Thank you.

434 Now there is another point regarding certain questions where I am going to ask you a question and I believe you can answer with a yes or no to the following questions. And this is just to round up certain facts that the Commission needs to consider.

435 So using as an example the $1,967,316 amount owed to Canadian producers relating to the CCAA protection reported in the 2015-2016 broadcast year, please confirm the following and you can answer with a yes or no.

436 So confirm that the total amount of $1,967,316 was claimed as CPE in the 2015-2016 annual return.

437 MR. McDONALD: No, it wasn't claimed, the CPE. No.

438 MR. WICKER: Thank you.

439 And the second question is: Confirm that the amount that was eventually unpaid to producers under CCAA, that is $1,276,952, was never reported as a reduction to CPE upon the exit under the CCAA.

440 MR. McDONALD: Yes, that's correct.

441 MR. WICKER: Thank you.

442 Now the following question you can respond if you have information now or you can provide a written undertaking by November 14, 2019. So this is concerning a comment on -- a detailed explanation of your amortization methodology regarding Canadian programming rights. Now, specifically outlining how Canadian programming rights are recognized as assets or liabilities and subsequently amortized.

443 In addition, confirm if programming rights are ever recognized, amortized and claimed in the annual returns as CPE prior to funds being paid to the independent producer.

444 MR. McDONALD: I'm not sure I understand what -- could you repeat that again, please?

445 MR. WICKER: Yeah, for sure.

446 So the -- if you can respond -- if you have any information to add to the record right now you can respond. If not, you can just commit to an undertaking.

447 So the first part of it ---

448 UNDERTAKING / ENGAGEMENT

449 MR. McDONALD: Okay, let me clarify. I will commit to the undertaking.

450 MR. WICKER: Okay. Okay, that's good.

451 Now, also, just for the record, I have a couple more undertakings to confirm with you.

452 So please confirm that you give an undertaking to commit in writing by 14th of November 2019 on how certain indirect staff expenses, including expenses relating to the CFO and IT, as well as sponsorship expenses contributed to the creation of Canadian programming.

453 UNDERTAKING / ENGAGEMENT

454 MR. McDONALD: I confirm to the undertaking.

455 MR. WICKER: Thank you.

456 Now, the following is also an undertaking. So please comment on the tangible results, especially for producers and writers obtained through the regional outreach program over your licence term, which started in the broadcasting year 2013-2014.

457 UNDERTAKING / ENGAGEMENT

458 MR. McDONALD: I confirm.

459 MR. WICKER: Thank you.

460 And the last point that I want to raise is concerning the scripting concept development. So for these ones you can confirm orally and if you don't have the information you can take an undertaking.

461 So please comment on the number of productions initially funded by Super Channel under Conditions of Licence 7 and 8 that were ultimately aired.

462 UNDERTAKING / ENGAGEMENT

463 MR. McDONALD: I'll take that as an undertaking.

464 MR. WICKER: Thank you.

465 That's all I have to add, Mr. Chairman.

466 Ms. ROY: Go ahead, Mr. Chairman. I'm not sure your mike is working.

467 THE CHAIRMAN: Yes. No, it's on.

468 That is fine. I have no further questions.

469 Madame la secrétaire?

470 Ms. ROY: Okay. Unless you have any other questions, this will conclude Phase I of this item. Anything to add, anyone?

471 MR. McDONALD: Mr. Chairman, I would like to put on the record just for clarity, you had asked me a question regarding discretionary services and the -- my understanding or maybe I did not critically understand the question that discretionary services do not typically have outreach and scripting concept conditions of the licence. Is that correct?
THE CHAIRMAN: It is not part of the standard terms and conditions, or conditions of licence, rather, that are currently being applied to specialty channels, that's correct.

472 MR. McDONALD: Okay. So in our proposal to have those conditions that would be a benefit to a discretionary service in that matter, correct?

473 THE CHAIRMAN: I think that's up for you to determine.

474 MR. McDONALD: Yeah.

475 THE CHAIRMAN: I was simply asking you. Obviously we had asked you a number of questions about whether and to what extent you have fulfilled your obligations. I felt it fair to point out to you that those same obligations are not always applied currently to discretionary channels and I asked you for your comments on it. That's no more complicated than that.

476 MR. McDONALD: Okay. No, no, that's -- I quite -- I understand that. I just did not quite understand the question. But certainly from -- it would be a clear benefit to the service to have those conditions applied to that.

477 You know we have to go forward with -- you know we can't be burdened by harsh, I guess, repayments of what happened and what we've -- we have to go forward.

478 Looking at the fact that we are adding these potential conditions to our licence under a discretionary service, it's obviously a benefit. So I just would like to get that on the record.

479 THE CHAIRMAN: Understood. Thank you.

480 MR. McDONALD: Okay.

481 THE CHAIRMAN: Madame la secrétaire?
MR. ALLARD: I wonder if I could make a few comments.

482 THE CHAIRMAN: Oh, yes, you can, sir.

483 MR. ALLARD: I just wanted to clarify a few things. We did -- we have talked to staff but we've never had the opportunity of a full Commission to talk. I did talk to Michel Arpin once and he is quite easy to talk to. You know we did converse with him about some of the problems we were facing.

484 Just to give you an overall, when we did launch we thought we were going to get mandatory carriage. But I think we sort of budgeted for competitive service with existing pay providers and we probably lost 80 percent of our money because we pre-spent that money and we couldn't get -- we couldn't get carriage or it took such a long time for the carriage because the money was expended.

485 And I can tell you now one of the founders of one of the big BDUs told us we were outrageously treated. But still, we still maintained we did -- we had an opportunity to do a phone survey of how we were treated back in 2008-2009 and it wasn't very pretty. I mean, first of all, they wouldn't mention our service. So these are some of the things we have had to face dealing with BDUs.

486 And now since 2014-2015, the piracy is a huge issue, not just for us but for the whole Canadian broadcasting industry. And it's got to be dealt with. I would have loved the CRTC to deal with that but I guess maybe you don't have the jurisdiction, but I mean it has to be addressed by somebody in some way.

487 Oh, and one more thing. I was around in 1993 when that provision came out with the regulations. I had a few legal people look at it, legal counsel, and they said that related to equity. It had nothing to do with the way we did development loans back then. So, I just want to put that on the line because I was there, and I did have a feedback from existing legal counsel.

488 THE CHAIRPERSON: You’re referring to Commission legal counsel or your legal counsel?

489 MR. ALLARD: Our legal counsel.

490 THE CHAIRPERSON: Thank you.

491 MR. ALLARD: One of which is right now is at McCarthy, so...

492 THE CHAIRPERSON: Thank you. Any further comments at this point? Then, I will turn it over to madame, la secretaire, s’il vous plait.

493 MS. ROY: So, this concludes, officially, Phase I of this item. Thank you very much, ladies and gentlemen. You can now leave the presentation table.

494 THE CHAIRPERSON: Thank you, ladies and gentlemen. We will not take a formal break, but we will just have a short pause as we do a changeover and move to the next phase. We’re ready?

495 MS. ROY: We’re ready if you are.

496 THE CHAIRPERSON: Thank you. Then, we’ll just allow for the...

497 MS. ROY: So, just for the record, Mr. Chairman, Shaftesbury Films Inc. and Alberta Media Production Industries Association have indicated they will not appear in Phase II. So, they are not in the order of appearance anymore. And, we will start Phase II with a panel of five interveners when we’re ready in a few seconds.

498 MS. ROY: So, I would kindly invite the following interveners to the presentation table. Facet 4 Media and Good Soldier Films, please come forward. And, Mr. Chairman, we have also three interveners appearing by Skype, which are Score G Productions, Phoolan Films and FarPoint Films. You should be seeing them on the screen in a few seconds.

499 THE CHAIRPERSON: I do indeed see them now.

500 MS. ROY: So, Mr. Chairman, we are ready now. We will hear each presentation individually. Each intervener is allowed up to five minutes to make their presentation. And then questions by the Commission panel members will follow the last presentation.

501 And, we will start with Score G Productions appearing by Skype. Can you hear me well?

502 MR. SCORGIE: Good morning.

503 MS. ROY: Yes.

504 MR. SCORGIE: I can hear you. Can you hear me?

505 MS. ROY: I can hear you.

506 THE CHAIRPERSON: We can, indeed. Welcome.

507 MS. ROY: So, panel is ready to hear your presentation. Go ahead. You have five minutes.

508 MR. SCORGIE: Perfect.

PRESENTATION / PRESENTATION

509 MR. SCORGIE: Thank you, Mr. Chairman and the board for hearing me today. I wanted to speak at this hearing because, quite frankly, without Super Channel, myself, my team and my company would not exist. They have been supporting me.

510 I’m an independent film producer that I primarily do feature documentaries. I have done 11 of them, which our most recent one, which was backed right from the beginning from Super Channel using the CMF Performance Envelope and Program, recently just sold to Universal Studios, so for the international market and for a documentary to be produced.

511 So, we’re owned and controlled by Canadians out of Canada, and then getting that kind of studio deal is nothing short of a miracle. And, it would not happen without Super Channel. They came in right from the beginning, provided development, provided a performance envelope and helped us bring this to light.

512 You know, Super Channel is also one of the last independent broadcasters in Canada, and one of the only English-speaking broadcasters in Western Canada. I think that’s important because, in today’s market, a lot of the bigger networks that are connected to telecommunication companies have -- you know, they have big sponsorship deals.

513 And, certain content will not go on their airwaves simply because they have different sponsors and stuff that are on there as well, and they will feel that it’s too controversial or not for their brand. They won’t air; whereas Super Channel is still about the content itself and making sure that it gets on there, and that Canadian stories and great Canadian storytelling can be heard not just in Canada, but worldwide as well.

514 You know, one of this being our first film, which is called The Union: The Business Behind Getting High, Super Channel -- it was a documentary about drug policy in Canada and internationally, and actually was screened at Parliament Hill to help influence the current drug policy and the changing Cannabis laws a couple years ago.

515 Every other network shut this down because they didn’t want to touch such a controversial subject, because it would -- you know, conflicted with certain sponsorship deals and stuff that they had on their networks. But, again, Super Channel is based on the content itself and not primarily based on sponsorships.

516 So, I think it’s important that independent broadcasters like Super Channel are still around. Hearing obviously that, you know, they have run into some financial troubles, I can say with my time, I was one of those films that was affected early on but, you know, I understood their position because the market and the technology is ever-changing.

517 This is not much different than even big, you know, distributors I had seen in Canada where they run into financial hardships, they hide it under marketing fees and distribution costs, and other things, that they find their way to not pay you back. So, you know, at least Super Channel took it on the chin and tried to make ways to make it work.

518 And, I can say ever since then, they have been involved in 90 per cent of my films and everything has run smoothly from the development phase to the payment structure, to making sure that the content gets seen by Canadians and supporting us at festival to markets.

519 You know, I think just -- in closing, just the flexibility of Super Channel’s, you know, management and schedule to exhibit films, you know, based on the content and not, you know, on necessarily it fits broadcasters’, you know, sponsorship deals are super important in the day and age. And, they are one of the only few that are really, you know, pre-buying documentaries, or at least in my experience, ones that will be great for Canadian audiences, but also, you know, have the international appeal.

520 There is often a lot of documentaries that get funded that are great for Canadian audiences, but outside of a small targeted region won’t have a lot of viability in the market. I think Super Channel has done a great job of both.

521 So, before I open up to any questions you guys might have for me, I would just like, in closing, that, you know, I understand that they have had financial struggles, but I am one of those film producers, as I said at the beginning of my statement, that I just simply would not have a career. And, my team of, you know, 20 to 40 subcontractors over the years, we wouldn’t have careers either.

522 And, I would like to say we’ve done an okay job of, you know, surviving in the industry for 14 years, and Super Channel has been involved in 98 per cent of those projects from development to release, to marketing to helping from, you know, film festivals and market strategies.

523 So, I for one am very for Super Channel and very thankful for what they have done. And, again, I am even one of the producers that -- one of my projects didn’t get the payout at the end, but I understood what was going on at the market because there was a drastic change in piracy and everything else going on. So, since then, I think they have taken the right steps to get their business on track and try to be a great provider for Canadians.

524 MS. ROY: Thank you very much for your presentation. Second and third presenters will be appearing in person, Mr. Chairman. So, we’ll now hear the presentation by Facet 4 Media. Please go ahead. You have five minutes.

PRESENTATION / PRESENTATION

525 MR. GREENBURG: Good morning. My name is Stephen Greenburg, President of Facet 4 Media based in Montreal. I am pleased to be here today in person to support the broadcast licence renewal for Super Channel.

526 By way of a short introduction, I have been part of the Canadian entertainment landscape for my entire career. I worked at Astral Media for 22 years and rose to the position of Senior Vice-President of the Astral Entertainment Group. I was responsible for the day-to-day operations, Film, Television and Home Video Distribution; Laboratory, Sound and Dubbing; Film Financing Production; and International Partnerships.

527 In 1996, I became President of Distribution, Film and Television Financing and International Partnerships at Groupe Coscient. And, in 2001, I founded Incendo Media, a Television Development, Financing and Distribution company prior to founding Facet 4 Media in 2013.

528 Super Channel is a distinctly independent broadcaster based in Western Canada and is uniquely positioned to continue to bring alternative and complementary programming to the Canadian consumer. These programs have added to the Canadian experience, as well as giving access to programs which might not be available to Canadian audiences. Super Channel has been committed to enhancing the Canadian experience to its viewers, and has become an important partner to many Canadian producers, who otherwise would not be able to bring their creative projects to fruition.

529 Independent broadcasters, such as Super Channel, play a pivotal role in providing an alternative window of exposure for Canadian programming, particularly Canadian feature films, Canadian documentaries and Canadian drama in an era where many OTT broadcasters and specialty services have reduced support for, and exhibition of such programming.

530 The ability to enhance the programming services in Canada would be of interest to all Canadians. The ability to expand programming service in Canada is an asset in the current television environment. Super Channel has the ability to work directly with many independent producers, financially and creatively, to enhance Canadian-driven programming for their viewers. I am here today as a staunch advocate that we need to support the independent companies that are supporting our unique film and television industry.

531 I have enjoyed a privileged relationship with Super Channel. They have been instrumental in funding our most recently produced television series and have provided us with important development funding, as well as a commitment to acquire the sequel, which is moving towards production in 2020.

532 Acceptable Risk was a six-hour dramatic series and an official Canada-Ireland co-production. Shot on location in Ireland and Montreal, Acceptable Risk was a tremendous success for Super Chanel, was written by an Emmy-award wining writer, and this $10 million television series was sold around the world. Super Channel and RTE in Ireland were commissioning broadcasters of this critically acclaimed series, and we are delighted that the success of the series has led to both broadcasters committing to the development and production of season two.

533 With the renewal of their licence, Super Channel will be able to continue to support a broad base of Canadian talent, whether they be producers, directors, writers, composers, VR effects, post-production facilities, technical crews, studio support services, casting agents, actors and actresses. These positions are not only important culturally, but all have a serious economic impact on communities, municipalities and provinces.

534 Our industry is facing challenging times not only in Canada, but around the globe. We are in the midst of a revolution in this industry. Technology has driven change more quickly in the past five years than in the previous 50 years. The speed of the worldwide consolidation in these areas has been nothing short of breathtaking.

535 In the past few years, Disney has bought 20th Century Fox; Comcast has bought NBC Universal; AT&T has bought Warner Bros. When you add the entry of Apple, Amazon, Hulu and Netflix, it is easy to see where the industry is headed.

536 Canadians would be well served by the renewal of the Super Channel broadcast licence, and I would be pleased to answer any questions that you may have. Thank you.

537 MS. ROY: Thank you very much. We will now hear the presentation by Good Soldier Films. Please go ahead.

PRESENTATION / PRESENTATION

538 MS. KINGSLEY: Thank you so much for having me today. My name is Brigitte Kingsley, and I am a Canadian producer. I have been a working producer for 12 years now.

539 In 2007, Super Channel acquired my very first feature film, Dark Rising, which launched my producing career. In a time when no other broadcaster would even take a meeting with me in Canada, Super Channel took the time to review our content and to encourage new talent.

540 A dozen years later, I have produced 17 feature films and two television series. Thanks to their continued support, I have been able to hire hundreds of Canadian actors, crew, artists and background performers every year, and have had the opportunity to showcase Canadian talent in numerous countries around the world.

541 I am here today in support of the licence renewal of Super Channel. Not only have they been very supportive of our content, allowing us to become a successful production company, but I believe that they are vastly important to the viability of many Canadian producers.

542 They play a vital role in providing an alternative window of exposure for Canadian programs, particularly Canadian feature films, documentaries and Canadian drama. Without their support, independent Canadian producers would struggle to have the proper items in place to finance and create content.

543 Their licence agreements often trigger international presales, which help filmmakers, like myself, to finance and produce films in Canada. Their involvement in our projects allow us to maintain a health and successful company.

544 As a broadcaster, they also take a personal interest in all their content. When our films premier on their channel, President Don McDonald and many of the Super Channel team live tweet, along with us and the actors and heavily promote the projects. Their interactions with their fans and viewers demonstrates their dedication to the content, and to all the film makers that work alongside them. Super Channel always makes us feel like they care about our films and that they are part of our team.

545 Super Channel is one of the last remaining independent broadcasters in Canada, and one of the only English-language broadcasters located in Western Canada. They provide complementary programming to what is being offered by highly vertically integrated companies, such as Shaw, Rogers, Quebecor, et cetera.

546 Super Channel is one of the few remaining independently owned Canadian channels. Since its licence was first granted, Super Channel contributed over $67 million to the production and airing of Canadian programming that came from all regions of Canada.

547 Canadian producers, content creators, artists and actors, are all very lucky to have Super Channel in this country, supporting and showcasing their talent and content. I truly believe that their presence as a broadcaster in this country has a tremendous impact on both established and emerging filmmakers and the health of a growing film industry in Canada.

548 Thank you so much.

549 MS. ROY: Thank you so much. Our next presenter is Phoolan Films, and is appearing by Skype. Good morning. Can you hear me well?

550 Please go ahead. You have five minutes.

PRESENTATION / PRESENTATION

551 MR. SILBERMAN: Thank you very much. I appreciate the opportunity to appear before the panel. I am appearing in support of the licence renewal of Super Channel.

552 My name is Jack Silberman. I’m a Canadian producer, and I have been making documentaries for closer to four decades. I’m especially interested in social issue documentaries. And, I would like to start by telling you a bit about the one I am completing now, which was pre-licenced by Super Channel.

553 Phoolan Films Inc. is a documentary film production company based in Vancouver, British Columbia. We are making a feature-length documentary about Phoolan Devi, India’s infamous bandit queen. Phoolan is the true story of a poor low-caste girl who, having suffered repeated abuse and gang rape, became the leader of a gang of male bandits and transformed herself into a female Robin Hood, robbing the rich and giving to the poor, avenging abuses against women, and exacting her own brand of rough justice against high-caste men who raped young girls.

554 Becoming the most wanted criminal in India for three years, the beautiful bandit roamed the countryside evading capture. Eventually surrendering to protect her parents from police abuse, Phoolan served 11 years in prison. On her release, she ran for parliament, and even though she couldn’t read or write, she won a landslide victory. The first low-caste woman ever elected to India’s parliament. Once in parliament, she championed the rights of women.

555 In 2001, Phoolan Devi was assassinated by a high-caste man. Her life is the stuff of legend. And, today, she is widely reserved as a hero of the poor. In fact, there are poor women in India who worship Phoolan Devi as an incarnation of the Goddess Durga. And, there are groups of young women banding together to fight abuse, to fight sexual violence, and we profile some of them in the film, and they say they are inspired by the life of Phoolan Devi.

556 Battling against the seemingly inescapable injustice of poverty, gender and caste, Phoolan Devi rose above her circumstances and became a mythic Indian heroine. And, because her story raises universal questions about sexual violence, social justice and the struggle against oppression, it has significance for us all.

557 We originally presented Phoolan to a number of Canadian broadcasters. Super Channel was the only one who responded positively. In fact, we put together a real strong proposal. I’ve done this for many years. A number of Canadian broadcasters didn’t even have the courtesy to respond to say they were interested, just didn’t answer at all. Super Channel was the only one who responded positively. They clearly appreciated the importance of a social issue story like this and told me so repeatedly.

558 They provided $20,000.00 in development funding, which allowed our director, Hossein Fazeli, to go to India and conduct critically important location research, to meet and gain special access to Phoolan’s mother, brother, sisters and former gang members, to establish a working relationship with our Indian fixers and to plan for the first shoot. Super Channel development funding also triggered additional funding from Creative BC. This was the critical research that we needed in order to start this film, and without Super Channel’s money, we would not have been able to do it.

559 Super Channel has also pre-licensed “Phoolan” and has been especially encouraging and supportive throughout the long journey of what we know will be an important film that speaks to important issues to Canadians and to people around the world.

560 Super Channel is one of the last remining independent broadcasters in Canada and one of the only English language broadcasters located in western Canada. Super Channel provides complementary programming to what is being offered by the highly vertical company such as Shaw, Rogers, et cetera. Independent broadcasters such as Super Channel play an important role in providing an alternative window of exposure for Canadian programming, especially Canadian documentaries and Canadian drama in an era where many of the Over-the-Air broadcasters and Specialty Service have reduced support for and exhibition of such programming.

561 And, I would add that, as someone who is particularly interested in social issue documentaries, I find that the environment for that is just not positive at all in Canada. The rise of reality TV, factual entertainment, people like me who want to make the kind of documentaries that we feel speak to important social issues that aren’t being addressed, Super Channel is one of the few places, in my experience, that are still open to that kind of production. And, for me, that’s really important and is under appreciated. It is important that there be a healthy balance of programming choices available to consumers and creators in the Canadian broadcasting system thereby ensuring more diversity.

562 Since its licence was granted, Super Channel has contributed over $67 million to the production and airing of Canadian programming that came from all regions in Canada, and I’m appreciative of the work they’re doing and I’m appreciative of your allowing for me to appear before you today. Thank you very much.

563 MS. ROY: Thank you very much, Mr. Silberman. We’ll now hear the last presenter, Kyle Bornais, from FarPoint Films. Please go ahead.

PRESENTATION / PRÉSENTATION

564 MR. BORNAIS: Hi, yes, thank you for having me. I’m listening to everybody else speak about how much they have worked with Super Channel in the past and I have to say, I’ve been fortunate enough to work with Super Channel on probably 10 hours of script to television. But, in the last few years, the majority of my production, the majority of FarPoint’s production is being brought -- being purchased by the UK or the U.S. We have found that Canadian broadcasters, other than Super Channel, are not really speaking to us as much as they used to, which is part of the reason why I wanted to speak here.

565 As an independent production company located in Manitoba, so kind of between the west and the east, I’ve always said that we need Canadian broadcasters like Super Channel that are not part of a larger conglomerate. You know, it’s true, as we’ve heard, that non-reliance on being part of a larger company has, at times, been a struggle for Super Channel. I can say that they have never not been able to pay me, they’ve always lived up to their end of the deal and they’ve always been -- where they may have been late, they were always very open and honest about everything as opposed to some of the other companies that I have unfortunately had to deal with in the past. And, I’m currently dealing with the D Films bankruptcy.

566 I was going to say that we need Super Channel to remain active and part of the Canadian landscape because they license shows that the Bells and the Coruses won’t take on. And, I wish I could say more than the Bells and the Coruses, but really it is pretty much them now. So, without Super Channel, we would be -- we would really be losing a huge voice for the Canadian filmmaking landscape and for, you know, the audience.

567 Super Channel has continually helped foster growth in our industry by working with emerging talent and helping walk them through on how to create a successful program. We’ve heard that here today, that a number of the producers we’ve heard from have gotten their first project off the ground with Super Channel. Other networks will not take that chance. They ask what you’ve done, and if you can’t show that you’ve been producing for a while or you’ve produced projects, they’re not interested in working with you, whereas Super Channel has always been willing to work with new producers and new filmmakers.

568 So, you know, another reason we need them currently viable, because in a world with Netflix and all the other networks -- and Amazon, it's harder to get in the doors. We need those ones that will take meetings and will talk to you -- and will talk to the new guys. You know, even as a producer with over 20 years experience and over 400 hours of content, I still have trouble breaking down the doors of the Netflixes and the Amazons. You know, I can’t imagine what it would be like to be new to this industry at this point.

569 So, I mean, for me, as a producer of Canadian television -- even though I don’t necessarily work 100 per cent or even 90 per cent with Canadian broadcasters. The one that I am currently with is Super Channel and I hope to keep that relationship going and -- you know, because of that, I really support their application and I support them continuing doing what they’re doing, and hopefully they can get through their problems and we all can win. Thank you.

570 MS. ROY: Thank you very much. Panel members will now have questions for you.

571 THE CHAIRPERSON: Thank you. Thank you to all of you for your presentations. I believe Commissioner Levy has some questions for you.

572 COMMISSIONER LEVY: Good morning, good afternoon depending on where you are in Canada. Thank you very much for all of your productions and your contributions to the Canadian Broadcasting System and the Canadian Cultural Ecosystem. I think that what you do is, of course, extremely valuable work.

573 You’ve all received -- I want to ask you some questions about your -- dig into your relationship with Super Channel to begin with. You have all received concept and development loans from Super Channel; correct? You’ve all at one -- yes?

574 MS. KINGSLEY: I received pre-licences.

575 COMMISSIONER LEVY: A pre-licence?

576 MS. KINGSLEY: Yes.

577 COMMISSIONER LEVY: Okay. In terms of the loans in particular, those of you who had loans with Super Channel, how were the loans distributed? What was the terms?

578 MR. SCORGIE: I can speak to this first. I mean, the original ones which you already talked about earlier with Don, right, where there was, you know, 33 per cent upon delivery, 33 per cent halfway through ---

579 COMMISSIONER LEVY: No, I’m talking about the loans in particular. Just the loans. Not the payout of the licence ---

580 MR. SCORGIE: Like, the interim financing?

581 COMMISSIONER LEVY: No, your Script and Concept development loans. How were they ---

582 MR. SCORGIE: Okay.

583 COMMISSIONER LEVY: --- paid out to you from Super Channel?

584 MR. SCORGIE: Okay. So, for development
-- the development was that -- you know, once we did the development application, you would get -- you know, once they saw that you were putting in a small percentage, Super Channel came in for the bulk of it. So, I believe, not having it in front of me, it would be anywhere from 50 to 75 per cent, provided that we are putting the other, you know, 25 per cent, showing that both parties are putting skin in the game and invest and believe in the project.

585 And, it was pretty straightforward. I mean, you have to do the unmagical part of filmmaking, a lot of paperwork to make sure that everything is there, that you have incorporated the company, you’ve got production insurance, you’re doing those kind of, you know, checks and balances. But, it was pretty simple and, you know, relatively formulaic formula that you do with the other -- you know, I did a similar one with Bell as well. So, development application, once all the paperwork goes in and is approved, then Super Channel was right, you know -- like, payment was very prompt.

586 I’m located in Edmonton, Alberta, so it’s really easy for me. I could go visit them if I need to. So, I might have a competitive advantage there. But, yes, it was pretty -- I put in the development application and they cam on from the beginning, which allowed -- you know, it’s great that you can go then, put together a sizzle reel or whatever else is needed, or even your legal paperwork in order to go get your interim financing stuff put together; right? That they put up the cash and invest in the project right away. And,
I ---

587 MR. SILBERMAN: I had ---

588 COMMISSIONER LEVY: Any -- okay. Any other -- sorry.

589 MR. SCORGIE: One last thing. It’s less bureaucratic than dealing with the big ones as -- I forget the gentleman on the far left side. Like, when you’re dealing with the ones that have to get 35 people to sign off on something, it’s nice to have an independent producer, that it’s two or three people that can believe in your project and sign off.

590 COMMISSIONER LEVY: Anyone else?

591 MR. SILBERMAN: I had a similar -- sorry.

592 COMMISSIONER LEVY: Yes?

593 MR. SILBERMAN: I had a similar experience in terms of receiving development funding from Super Channel. Application, they loved it, they responded to it, they understood. We signed the agreement very quickly. I believe -- it was a number of years ago. I believe it was again 50 or 75 percent upon signing of the agreement. We went to India. We did the research, sent the required deliverables, and payment was very prompt.

594 COMMISSIONER LEVY: I believe -- yes.

595 MR. GREENBERG: It was a simple process to, once the discussion was had about the amount of development that needs to take place, and that's script writing and location surveys and things, very responsive and the process was simple in terms of -- and I don’t live in Edmonton but wire transfers work beautifully too.

596 COMMISSIONER LEVY: What did you do to pay back the loan? How did you pay back the loan?

597 MR. BORNAIS: I'll speak to this. Well, a little about actually because it ties into a story I love to talk about with the larger companies, Bell specifically.

598 With Super Channel, the phone call, I pitched the project. They agreed. I didn't even go through the development paperwork. I just sent my paperwork in to get the money. They sent me -- they sent me a cheque. The development money was easy.

599 The reason why my company stepped away from the Canadian marketplace is -- I don’t remember the year but I remember the date. It was August 13th and I was in a meeting in Toronto on Queen Street with Bell and I pitched this out and they said we love it, we're putting it into development. August 13th a year later, I received my development contract. So when that happened, I was actually on the golf course with my head writer and I looked at him and I said we're done. Like we cannot run a business like this. It's time to stop focussing on trying to sell shows to these networks.

600 So with Super Channel, it's a phone call. They sent me a cheque less than a week later. How I repaid that was typical development, first day of principal photography. They got me out. I don’t even think we wrote them a cheque. I think they just took it off the licence instead in terms of what they paid out. They counted that as prepaid.

601 COMMISSIONER LEVY: Now, have any of you had loans that didn't subsequently lead to production, so you had to pay back a loan that came out of something else?

602 MR. BORNAIS: I had a loan -- I had a development loan that didn't lead to a production but we didn’t pay it back.

603 COMMISSIONER LEVY: Okay. So they just wrote it off?

604 MR. BORNAIS: Yes, they considered it, you know, development costs.

605 COMMISSIONER LEVY: Okay.

606 MR. SCORGIE: Mr. Speaker, if I could ---

607 COMMISSIONER LEVY: Yes.

608 MR. SCORGIE: I would just like to speak to kind of following up what he said about terms. You know, when you're trying to work with the CMF and in Alberta we have a cap on our tax credits, right, and there's windows in that you have to get in, this is another thing that Super Channel is excellent for because they get back to you right away. You know, following up -- sorry, I keep forgetting the gentleman's name and using the bottom-left screen of my corner there, but with the big networks, like yeah, you're waiting to get a "no" sometimes for like a year, right, and I'll say I needed a "no" in two weeks so that I can move on, right. The rest of, like, we don’t sit and wait but so what's happening with these companies is they've gotten so big, the Bells and all, that they need to have 35 people to sign off just to allow you. And of course, in Canada, you have three options essentially that you don’t want to just say, okay, give me "no". You wait and wait and wait and wait, but usually by the time I hear back by Bells and Cores (phon.), I'm already funded and in production with Super Channel because it takes so long to hear back from them and they're like, unfortunately, we pass. I'm like, oh, yeah. We've already shot half the film. I couldn't wait for you to say "no" or nine months.

609 COMMISSIONER LEVY: How do your licences from Super Channel compare in size to other broadcasters?

610 MR. BORNAIS: Well, it's about the same. it's all threshold in Canada. Admittedly Super Channel in the past was taking longer to pay but I can say that my last deal with Super Channel is panning out exactly the way Crave (phon.) would pay. So I'm not even seeing a difference in terms of the Pay TV networks.

611 MR. SCORGIE: No, and actually when comparing to how Netflix does payments now, Netflix, even if you're an original, they'll give you like 10 percent upfront. They won't give you anything until you deliver and then they give you quarterly for the next three to five years. So you're sometimes carrying a loan for three to four years even if they get it right from the get-go and no banks, very few banks in Canada will even loan to Netflix, yet they're very cash strong.

612 So, you know, when people complain about Super Channel's payment schedule, some of the biggest U.S. competitors are not great either. So I will prefer Super Channel's payment schedule over Netflix's to be honest.

613 MR. BORNAIS: And Super Channel's cheques show up. I've had Netflix forget to pay for three quarters.

614 MR. SCORGIE: Yeah.

615 COMMISSIONER LEVY: Super Channel doesn't currently use or have access to the broadcaster envelope at Canada Media Fund. How does that affect financing a Super Channel licensed project for you?

616 MR. SILBERMAN: It doesn’t affect my company because I don’t deal with the CMF anymore. I find that doing projects in Canada with Super Channel is my trigger money, and then I take it to the international marketplace.

617 MR. BORNAIS: Actually, they did have a performance envelope just this recent one because I got it for one of my documentaries and two or three that I've done I've also had CMF envelope. The CMF is actually trying really hard to work with Super Channel because they understand. I work with Caroline Chopra who is in charge of the documentary section there and she's been very supportive of Super Channel too because she understands a lot of films that wouldn't get signed off by 35 people at the bigger networks that they fit really nicely and have done well both with CMF and Super Channel. So they are just building their envelope back. I'm helping to do that with a current project and hopefully one or two more next year.

618 So it did get suspended for a year but they are building it back and we are, both of us, working with Super Channel to take the appropriate steps to continue that and I know CMF is -- they took some extra safeguards. I had to sign a few other documents but they did allow this project to go forward and the previous one as well.

619 MR. SILBERMAN: I'd like to add something. I had a different ---

620 COMMISSIONER LEVY: Just hang on, Mr. Silberman.

621 Ms. Kingsley has something to say here.

622 MS. KINGSLEY: I was just going to say as an independent filmmaker on feature films, I know that a lot of my colleagues and myself, if Super Channel is not on board, it's not like we can go elsewhere. So it doesn't affect us if they don’t have an envelope because generally we don’t have access to those things anyway.

623 I've spent a lot of years doing my projects with either U.S. and international, and if it's in Canada, it's Super Channel or no one because it's very hard to get -- as I said, even if you've been in the industry for 12 years and you do -- you know, your Hallmark movie is the number one in the summer movies, you still have a hard time getting any pre-licence from another broadcaster. So I've had -- just a quick story to tell you the difference between Super Channel and other broadcasters, and this is very important because it's vital to our survival.

624 I was developing, you know, a number of the Hallmark-type projects. My partners are always international and then I tried to get a Canadian broadcaster on board, couldn’t get a response from anyone anywhere else, but Super Channel, you know, looked at our projects immediately. They came on board for a project called "From Friend to Fiancé". They gave us the ability to have an international distributor on board and our tax credit. So we shot this beautiful film.

625 Once it was completed, we pitched it to Hallmark and Hallmark loved it. So they picked it up, which is a huge win for us. As soon as it was picked up, then we got a call from the other broadcasters being like, hey, can we have a meeting with you here? You have a Hallmark movie, and then they wanted to purchase it. We're like, well, we had development money with Super Channel and they've got the licence. If you guys are interested, we're always developing, you know, wonderful Canadian projects. Here's our list of films that we're working on for the new slate. Let us know if you're interested in one of them. We'd be happy to develop with you.

626 No answer and the short, you know, response was, hey, next time you sell one of those to Hallmark, let us know and then we'll pick it up, which is not supporting Canadian producers at all because it's not -- you know, we need that company to take a chance on us at the concept and have that pre-licence so that we can actually shoot the film. Once it's done and shot and pitched, then we don’t have -- you know, that buy is not useful to us.

627 COMMISSIONER LEVY: Mr. Silberman and then you, yes.

628 MR. SILBERMAN: In our particular situation with Phoolan, we received a pre-licence commitment from Super Channel of I believe $5,000, which in my experience is very high, very generous, and we would have qualified for the CMF but when Super Channel went into creditor protection and I spoke to CMF, they said they were closing down the envelope and we couldn't access it.

629 And so that has cost us a lot of time. We had to look for an alternative source of financing, which is difficult here in Canada. We don’t have access to those sources of financing that usually Canadian producers use and I have stopped and turning actually finding people with means, people with money who are socially conscious who appreciate the kind of film we're making and the issues it's addressing.

630 We have been able to do some independent investment arrangements that are helping us to get closer to completing the film. But I did feel some personal resentment against CMF because Super Channel had provided the documentation we needed and the CMF just -- it seemed to me arbitrarily -- you can't access the envelope.

631 COMMISSIONER LEVY: Mr. Greenberg?

632 MR. GREENBERG: Just a general comment because you are focussed on the financial aspect of all this. So the plight or the -- for the challenge for independent producers of production companies is multileveled. It’s not only the licences, or pre-licences, or investment monies that you receive from broadcasters, cable companies, OTT networks. Then, you need to bank finance them because the comment before was those monies roll in over a long timeline.

633 So, the challenge is not only getting broadcaster involvement, but it is also being able to finance the paper, or setting up facilities to finance those commitments, because you need the cash up front in order to produce a show, and then the revenue streams are downstream.

634 And so, the challenges are not only licence fees, but how you can turn that into usable cash in order to finance the production. And, it requires pre-licensing from many different sources. It requires putting together different types of funding, whether it’s CMF, whether it’s investment funding.

635 So, it is a very complex undertaking, and challenging for everybody who is -- I’ve done this for an awful long time, and the challenges remain as they were way back when it all started, and ---

636 COMMISSIONER LEVY: Has Super Channel’s entry and exits into CCAA complicated the bankability of their paper?

637 MR. GREENBURG: Yes. I mean, but that is also a question for the banks; right? Because there are probably three or four major banks in the country that do what is called “film financing”. And, each one of them has a different attitude to whose paper is actually bankable, who is going to advance monies based on pre-licences. So, yes, it is a fact of life.

638 COMMISSIONER LEVY: No, I’ve heard some comparisons with others. But, Super Channel does these payments that extend far into the future after delivery. Doesn’t that make your life more difficult, because you have to carry those interim financing charges for that period of time?

639 MR. GREENBURG: Sure. Except that that is the state of the industry. It’s not unique to Super Channel. It’s -- you know, it’s the broadcasters -- rare is the case where you get paid 100 per cent on signature of a contract.

640 COMMISSIONER LEVY: Well, that I wouldn’t expect. But, is it usual to not get paid anything until delivery?

641 MR. GREENBURG: Look, payment schedules can vary depending on -- it’s all a negotiation; right? I mean, it’s all part of you sit down at a table and you try to figure out what makes the most sense.

642 There are thresholds that can be met. You can get part of a payment on a signature of your contract; part of it lays out in first day of principle photography, last day of principle photography, delivery. It could be quarterly. It could be monthly. There’s -- I’ve seen and done every single one of them. It just -- it just depends. It’s a negotiation.

643 COMMISSIONER LEVY: Now, once you’ve delivered, is there -- how does the Super Channel promote your projects, help you build viewership? Or, are you expected to do a lot of your own promotion?

644 MR. GREENBURG: No. They have supported
-- well on the series that I did, I can speak directly. There was a social media presence. There was a broadcast awareness presence. There were previews and promos. And, they did the maximum what anyone would have expected for an original production at, you know, at a budget of $10 million. And, by the way, the results of their labour was that our series was either number one or number two on their audience viewing list.

645 So, the proof is always in the viewership, and the challenge of viewership in this multichannel crazy world of trying to get your programming both recognized, broadcast, and then seen by an audience.

646 COMMISSIONER LEVY: Ms. Kingsley?

647 MS. KINGSLEY: Yes, their strength definitely is in promotion, and helping their filmmakers get their product seen. Like, you really feel like you are part of the team.

648 Even Don spends the time live tweeting when a premiere comes out with their fans. They interact. Their entire team is involved on all aspects of social media, which makes the actors, and the fans, and the filmmakers feel very confident.

649 COMMISSIONER LEVY: Do they share -- you mentioned something about sharing the data on viewership. Do they typically share their -- whatever data they have on the impact on the audience with you?

650 MR. GREENBURG: They did with us on our show. I mean, the -- you know, all information is proprietary to a broadcaster or an OTT network. Our concern was our program and how well it did on Super Channel. So, yes, they were very open about sharing, and support.

651 COMMISSIONER LEVY: Is that typical with all of you?

652 MR. SCORGIE: I have received that. And, again, not to play on Netflix, but Netflix never gives you numbers. The best you can get from them is, like, “Yes, we’re adequate. We think it does adequately on there.” They don’t share. Super Channel is very transparent. It has always shared how our projects have done on their network.

653 MR. BORNAIS: I would like to speak on that, and say not only Netflix. I don’t get numbers from Bell. I don’t get numbers from CBC. I don’t get numbers from Corus. I did get numbers from Super Channel. And, in order to find out how my shows are doing -- I didn’t get numbers from Rogers. In order to find out how much shows are doing on the other networks, I have to circumvent the game with people I know in the industry to get me the numbers; whereas with Super Channel, they sent them without me asking.

654 MR. GREENBURG: Netflix won’t even tell you how many subscribers they have in Canada. So, the bar is very low for them.

655 COMMISSIONER LEVY: Now, I think that only one of you was in the position of having a project disclaimed in the past -- in the most recent CCAA experience of Super Channel. What impact did that have on you and your company?

656 MS. KINGSLEY: For us, they paid us back completely. So, we had no impact.

657 COMMISSIONER LEVY: You weren’t disclaimed?

658 Ms. KINGSLEY: No.

659 COMMISSIONER LEVY: Okay. I believe one of you was.

660 MR. SCORGIE: I was ---

661 MS. KINGSLEY: We did have projects during that period ---

662 COMMISSIONER LEVY: Adam Scorgie.

663 MR. SCORGIE: I was in the first one, and they made that -- they paid me back and made it up to me on the next project, Ice Guardians, and gave me a large performance envelope. So, I’ve been paid back ten-fold.

664 COMMISSIONER LEVY: Okay. You weren’t disclaimed in the most recent CCAA ---

665 MR. SCORGIE: No.

666 COMMISSIONER LEVY: --- process.

667 MR. SCORGIE: No. Sorry, if I made that
-- if I was unclear on that. Apologies.

668 COMMISSIONER LEVY: Okay, that’s important to know. But, I’m sure that you know of others in your community that were disclaimed. And, I would just like some sense from you of what the impact is on your colleagues, your peers, your community, when that happens?

669 MS. KINGSLEY: As Canadian filmmakers, to be honest, it happens so often that we do not get paid back. Super Channel is one of the most reliable source of money coming into our projects in Canada. And, I say that dating back to 2007, when I did my first one.

670 We have often either, you know, been in litigation with Canadian distribution companies or, right now, there is one project that I had where we’re still fighting to try to get some of our money back. So it’s not -- you know, filmmakers don’t hold that in any way against Super Channel, in my knowledge. They’re just happy that Super Channel is a place that we can go and get a pre-licence, or get a sale, once the project is done.

671 COMMISSIONER LEVY: Yes?

672 MR. GREENBURG: I think you would also have to see, the projects that did get excluded, a lot of them got replaced, maybe not at the same level, with other broadcasters. So, I think, you know, there is also a net effect that happens in situations like that, because there probably were a number of shows that got left behind, but then got resold to other players in the interim. So, it’s the whole picture.

673 COMMISSIONER LEVY: Finally, what -- I don’t know whether you’ve seen or heard about the interventions by the CMPA, and other -- and DGC, and so forth, who have real serious concerns about the way Super Chanel carries on its business. You are all great supporters, but what do you say to those who have real concerns about the viability of the service, and the harm that can be done if it is ultimately not successful?

674 MR. GREENBURG: My ---

675 COMMISSIONER LEVY: Mr. Scorgie. Yes.

676 MR. SCORGIE: (Indiscernible) on this one is just, I -- that’s unfortunate that they would say that, because I think in this -- as some of the other speakers alluded to, in this everchanging market, to get rid of yet another player in Canada that supports its independent, I don’t see how that’s helpful to anybody.

677 And, it’s unfortunate that -- you know, maybe some people have not come out of the other side on this, but as the one just before me spoke, the lady, I’m used to this with distributors and stuff too. Even some of the biggest names you can name in Hollywood, they will come up with creative accounting costs to make sure that they don’t pay you. So, producers -- normally, I find when I go into production, I’m always having an A, B, C, D and E to make sure -- you know, that’s just what a good business should do, is have back up plans for this, not
-- and that’s nothing against Super Channel or anybody else, but just being prepared for your project to be able to move if it needs to.

678 So, I’m not sure -- I didn’t get to hear the CMPA or the DOC, what they exactly had to say, but I think it’s really unfortunate they would speak against, you know, an independent provider that is providing to a lot of us. I am members of both of those, so they don’t speak for me and a lot of -- and all the people I work with, because you know, I am not -- I hope that’s not just a few people that are in higher positions in those organizations that might have a bad, you know -- a bad taste for Super Channel, but I don’t think that’s fair to go after another -- you know, somebody that’s providing a lot of good for a lot of people. Sure, you know, they’ve had some troubles in the past, but I don’t think removing them and not renewing their licence helps anybody. And, I’m a member of both, so...

679 COMMISSIONER LEVY: Mr. Greenberg, and then Ms. Kingsley.

680 MR. GREENBERG: It’s a really changing landscape, not only in Canada, but around the world. We should be concerned at the same time, not only with Super Channel, but with the viability of the entire Canadian broadcast system as a whole, because that is what is at risk at this point. So, it is not simply a Super Channel matter, it is a matter of Canada as a separate marketplace, and maintaining borders and structures and giving the CRTC teeth in order to help -- to help form boundaries that can create a sustainable industry.

681 We are really at a precipice in this country -- and it’s not only Super Channel related. We are bombarded. We’re a 4 per cent world market, we’re 7 per cent of North America, that has not changed in 40 years. And, if we’re not careful on a regulatory basis and keeping pace with technology, we’re going to lose a broadcast system here and maybe even a telecommunication system here, because we’re just so -- we’re just so prone to getting swallowed up in this world market.

682 So, it’s not a super Channel issue, this is an entire broadcast system issue. And, I think you can transpose those issues just as easily to every broadcaster and OTT service in this country.

683 COMMISSIONER LEVY: Ms. Kingsley.

684 MS. KINGSLEY: And, I also want to say, we’re talking as though if -- you know, if Super Channel went away, all of us would just suddenly go to Bell and Corus. And, the truth is, that is not the case. If Super Channel disappears, you are taking away a lot of our voices. You know, will one of my projects a year maybe end up there? Sure, maybe one. What about the three or four others that I get to make now, that employs all these Canadian actors, and artists and directors? You know, it’s a huge impact on us.

685 As an independent producer, I have very few outlets in Canada where I get to do something special. And, we did, we get to do something special right now because Super Channel supports us, which triggers our tax credits and also triggers our international sale. You take that away from a lot of us, we have nothing, you know? It becomes much more difficult and you’re taking away a lot of Canadian voices.

686 COMMISSIONER LEVY: Anyone else? If not
-- oh, okay. Kyle.

687 MR. BORNAIS: Yes. How are you doing?

688 COMMISSIONER LEVY: Mr. Bornais.

689 MR. BORNAIS: No, no. We’ve known each other for years. I was just going to say that, you know, this is not just a Super Channel issue again. I mean, there is a reason why I have pretty much pulled my entire company out of the Canadian marketplace and taken it international. I mean, I’m on a plane to L.A. tomorrow morning. It doesn’t exist in Canada at the moment. We have a serious problem. And, seeing that the CMPA is stepping up and having a problem with Super Channel (indiscernible) you know, look at the past, you can look at the issues they’ve had, and yes, I mean, from a business perspective, I would be looking at that and going, “Oh, my gosh, you know, how is this going to work?” But, they have done far more good than they have done negatively.

690 I think they have tried, this is an extremely tough industry -- I mean, I’m in the middle of going through the latest receivership on D Films because I had -- I had a couple of Canadian funders push me in that direction, saying that I would get more money if I gave my movie to D Films, and of course they went into receivership, owing me a lot of money. I had Peace Point rights steal -- you know, basically go away, owing me a quarter of a million dollars. They have never tried to make it up to me, whereas Super Channel has always stepped up to the plate and tried to make it up.

691 And, they -- you know, I heard the gentleman, they take it on the chin. That’s true. They’ve never hidden behind the fact that they ran into
-- ran into problems and -- you know, it sucks. This is a business. It’s an industry. And, we’ve got to recognized that it’s a business and we all can run into problems, but I appreciate the -- I appreciate the people who admit they ran into problems and step up trying to fix it, versus the people who just step behind and say, “Well, you know, not our problem anymore.”

692 MR. SCORGIE: I concur.

693 THE CHAIRPERSON: Thank you, Commissioner Levy. Commissioner Barin? No. Staff Commission Counsel, do you have any follow up maters? No. Then, I thank you all very much for your submissions and your responses to our questions, and I will -- we will recess for lunch now, return at 1:35. Thank you very much.

--- La séance est suspendue à 12 h 29

--- Upon recessing at 12:29 p.m.

--- La séance est reprise à 13 h 35

--- Upon resuming at 1:35 p.m.

694 MS. ROY: Thank you. Mr. Chairman, we’ll start this afternoon with a presentation by Canadian Media Producers Association. Please introduce yourselves first for the record. You have 10 minutes.

PRESENTATION / PRÉSENTATION

695 MS. MCLAREN: Good afternoon, Chairperson Scott, Commissioners Barin and Levy, and Commission staff. My name is Kelsey McLaren and I’m the Director, Regulatory for the Canadian Media Producers Association. With me today is Marcia Douglas, the CMPA’s Senior Director, Business Affairs. The CMPA represents the interests of Canada’s English language independent producers for film, television and digital content.

696 We wish to thank the Commission for holding this oral public hearing today and for giving us the opportunity to share our members’ views with respect to Allarco’s application to renew its broadcasting licence for Super Channel.

697 It is important that Canadians, including Canada’s independent producers, have confidence in the integrity of the Commission’s processes and, more broadly, Canada’s broadcasting licence system. While this particular licence renewal proceeding has been long and arduous, it has provided much needed transparency and trust in the licensing process. And, while a number of issues have been resolved, some points of disagreement remain.

698 First, the fact remains that Allarco did not meet its conditions of licence during the term. Some of these conditions were not met, in part, because of the broadcaster’s insolvency filing and the protections that come along with that. Others were not met because Allarco misinterpreted its regulatory obligations. But, neither of those explanations negate the fact that the conditions were not met. For these reasons, we are seeking findings of non-compliance and clear direction for the next licence term. As well, Allarco has twice filed for protection from its creditors under CCAA, which means that this broadcaster’s survival has twice been at the expense of the independent production sector.

699 Going forward, we are asking for further assurances, via conditions of licence, that Allarco can and will remain financially viable and meet its ongoing obligations through the next licence term, especially after hearing this morning that Allarco is not planning on changing its business practices with respect to Script and Concept development and Regional Outreach programs. As such, we submit that a mandatory order, evidence of financial capacity and a short-term licence renewal are appropriate in the circumstances.

700 We also heard this morning that the condition is proposing implementing a condition of licence for annual production reports, including amounts committed to producers and amounts actually paid. We support this kind of transparent reporting and tracking.

701 MS. DOUGLAS: Super Channel plays an important role in the Canadian broadcasting system as the only independent premium discretionary service. As you heard from the supporting intervenors earlier today, when that relationship works well, the partnership is valued by Canadian producers. However, these appearances do not represent the experiences of all producers. In preparing for this hearing, we have received feedback from many members, both positive and negative.

702 And, to be clear, we are not asking the Commission to suspend or revoke the Super Channel licence. We are asking for assurances that Allarco will deal with producers fairly and not place the burden of another CCAA filing on our sector.

703 As the Commission is aware, it has been a long road to this public hearing. When the CMPA first intervened in the proceeding, Allarco was just emerging from creditor protection. The impact of Allarco’s CCAA filings on Canada’s independent producers has been heavily felt, to say the least.

704 In our first intervention, we referred to New Metric Media’s What Would Sal Do?, Nomadic Pictures’ Van Helsing and Incendo’s France-Canada co-production Versailles. These producers, and others, had their program licence agreements compromised as a result of Allarco’s CCAA filing.

705 Another example on the record before you is that Allarco broadcast the entire first season of the television series Slasher without making any of its scheduled payments to the producer. In doing so, it burned the valuable premier rights and left Shaftesbury to make up the shortfall of $1 million. In essence, Allarco reaped all of the benefits of a program licence agreement and paid very little for it.

706 MS. MCLAREN: As I noted earlier, many things have changed since Allarco first submitted its licence renewal application in August 2017. By virtue of this process, including various intervention and reply periods and rounds of deficiency questions, Allarco has now agreed to maintain its 30 per cent CPE requirement; to maintain its $500,000.00 per year requirement on Regional Outreach programs and exclude the cost of staff time; to maintain its $500,000.00 per year requirement on Script and Concept development; and to no longer log filler programming as Canadian unless it meets Canadian certification requirements.

707 The CMPA supports these commitments, but following Allarco’s appearance this morning, clear direction is necessary on the eligibility of these expenditures. We are also asking the Commission to make determinations on the few outstanding issues left in this proceeding, as per our most recent intervention dated September 27th, 2019.

708 Namely making findings of noncompliance with respect to Super Channel’s conditions of licence for the record of this proceeding; require that any remaining shortfall expenditures be made up in the new licence term based on the Commission’s assessment of the licensee’s financial capacity to do so; impose a mandatory order requiring the licensee to comply with its conditions of licence and the Discretionary Services Regulations; require evidence of financial capacity to demonstrate that Allarco has the necessary finances free from any form of obligation to ensure it is able to operate Super Channel in the new licence term; and issue a short-term licence renewal of no more than three years.

709 Thank you for giving us the opportunity to present our members’ views today. We would be pleased to answer any questions you may have.

710 THE CHAIRPERSON: Thank you. Thank you for your presentation. Commissioner Barin.

711 COMMISSIONER BARIN: Thank you. Thank you, Ms. McLaren, Ms. Douglas, for your presentation and for your participation in this process. I have a few questions as they relate to some of the contents of your interventions.

712 Specifically, you talk in the last intervention about the substantial harm that the independent production sector has suffered due to Allarco’s failure as a broadcaster. Can you please comment more specifically on the extent of the negative impact that Allarco’s financial difficulties have had on producers?

713 MS. MCLAREN: In terms of the impact, I’m going to hand that question over to my colleague, Marcia, to speak a bit more on that.

714 MS. DOUGLAS: So, while we didn’t do a formal survey of our members, we did undertake outreach to collect evidence before coming before you today. And, a lot of this is already on the record but, as an example, Super Channel compromised 96 of the 135 active broadcast licence agreements with Canadian producers at the beginning of its CCAA process. That just happened. That is a significant number of projects at various stages that, then, had to face financial hardship of varying levels.

715 COMMISSIONER BARIN: Would you say this was directly related to the CCAA process, or is this evidence of regular practices that they would have exhibited outside of that CCAA process?

716 MS. MCLAREN: The disclaiming of those active broadcasting licence agreements was related to the CCAA process.

717 COMMISSIONER BARIN: Thank you. So, you spoke about the harm to the system, and specifically to your members during the CCAA process. But, you also mention in your interventions the fact that Allarco is a rare non-vertically integrated player, and that it does provide an additional door for producers to knock on.

718 So, I would like to hear from you, despite the instances of noncompliance that -- or apparent noncompliance that we’re looking at right now, can you talk about the positive contributions that you believe Allarco makes to the system?

719 MS. MCLAREN: Sure. And, again, as my colleague, Marcia, or Ms. Douglas, mentioned at the outset, we did receive feedback from a lot of our members, and it was mixed; right? Members who have had positive experiences with Super Channel, similar to the ones that you heard this morning from the appearing interveners in support of this licence renewal.

720 It is a rare non-vertically integrated door to knock on. It does give producers the opportunity to trigger financing and find homes for their programming here in Canada. And, we don’t want to take away from the importance of that, and that really is why we’re here today, looking for assurances going forward and not asking for suspension or non-renewal.

721 We are here today asking for those assurances because we want Allarco to succeed. We just cannot be -- we can’t come here again before you having gone through a third CCAA process and having it be sort of on the backs of Canadian producers for their survival.

722 COMMISSIONER BARIN: I guess I’m wondering, then, what kind of assurances, you know, can the Commission provide given that this is -- you know, Allarco is in a specific market. You heard this morning about the competitive environment in which it operates, they have a plan going forward, but there are no assurances in that. So, what kind of assurances would your members be looking for?

723 MS. MCLAREN: Specifically in this process with the CRTC, the assurances that we’re hoping for are a mandatory order. Allarco has a history of serious and recurring noncompliance not just in this current licence term before us today, but in the previous one. So, a mandatory order to ensure that they must follow all their conditions of licence and the Discretionary Services Regulation.

724 As well as, the demonstration of financial capacity. We do believe that there is precedent with the CRTC for doing this. The CRTC also in looking at transactions will ensure that a licensee is able to operate.

725 You know, once the transaction is done, and we think, based on the history of noncompliance and the history of financial non-viability, that that would be a more than reasonable request to make of Allarco to ensure that, in the new licence term, that they would be able to operate as per their business plans.

726 Another assurance is the three-year licence term. A short-term renewal to ensure that, yet again, we will have that built-in check-in before the Commission to come and ensure that they are meeting their conditions of licence, and that things are running smoothly.

727 COMMISSIONER BARIN: Thank you. There is a question of arrears, or a potential shortfall on Canadian programming expenditures and the issue of whether Allarco should be made to pay back those arrears if that was the finding.

728 I know your position in your intervention was that they should be made to pay those arrears. However, there is also the question that it would impact their financial viability. So, if that’s the case, then what impact would that have on your members, if they were required to pay back the shortfall on the CPE?

729 MS. MCLAREN: In terms of shortfalls on CPE, I guess our first ask is, one, that there is a finding of noncompliance for the record. We want it to be clear that these conditions were not met.

730 We understand that with the CCAA process that that essentially wipes the slate clean, so to speak. But, you can tell from the language I used just there, I’m not a bankruptcy lawyer. But, it is important to us that there is a finding of noncompliance, that those expenditures were not actually made.

731 Beyond that, we are asking the Commission to determine whether those shortfalls can be made up in the new licence term. So, essentially, leaving that with the Commission in terms of whether Allarco has the financial capacity to make up those shortfalls. But, first and foremost, it is that finding that, when expenditures are not made, they are not made, and there is a finding of noncompliance with conditions of licence.

732 COMMISSIONER BARIN: Thank you. I want to talk about the specific conditions of licence that Super Channel has in relation to Script and Concept development and outreach. Can you tell me whether it is important for your members, for those two conditions to remain as conditions? Is there a benefit, or is it, in your view, better to just have a spending requirement without those two additional conditions?

733 MS. MCLAREN: That’s an interesting question. So, whether it is a benefit to producers that there are the conditions of licence for $500,000.00 per year for Regional Outreach programs and $500,000.00 per year for Script and Concept development, as opposed to a straight 30 per cent CPE? I just want to make sure that I understood the question.

734 We do think that there is a benefit to that to members. Clearly, we, as producers, will always say that it is incredibly important to have support in development from broadcasters. So, that is excellent. And, again, in terms of Regional Outreach, in order to have real meaningful access to a broadcaster for regional producers is also incredibly valuable. So, yes, we do see those two conditions of licences as benefits.

735 COMMISSIONER BARIN: I know you had some concerns about, I guess, the interpretation of those conditions by Allarco. So, my question would be, if you feel that those are conditions that are important, would you be willing to provide a definition of what types of expenditures would be acceptable from the licensing?

736 MS. MCLAREN: Yes, we would be pleased to provide that to the Commission as an undertaking, in terms of what would be acceptable as Regional Outreach program expenditures and Script and Concept development expenditures.

737 UNDERTAKING / ENGAGEMENT

738 COMMISSIONER BARIN: Thank you. That’s great. I want to move on now to some of the comments, again, that were made in your intervention that alluded to perhaps some expenditures being double counted by Allarco in relation to development expenditures, and then being counted as licensees. Can you explain what you mean by that?

739 MS. MCLAREN: We would be please to. In terms of Script and Concept development potential for double accounting, I will pass this over to my colleague in business affairs, Ms. Douglas.

740 MS. DOUGLAS: So, our questions in the intervention around that related to the information that was available to us.

741 And so, we noted in some of the information that was put forward, certain things that we wouldn’t normally see. And, as an example of what has already been discussed here today, the approach of using loans. And, if a loan is repaid, we wouldn’t necessarily see that as an expenditure because if that amount is being repaid, it wasn’t something that was expended.

742 We weren’t able to determine from what was put forward in the reports, if then projects that had been repaid were then subsequently also counted as part of Canadian programming expenditures. So, that would be up to Super Channel and the Commission to determine. But, our concern was that amounts that were repaid were also counted as expenditure.

743 COMMISSIONER BARIN: And, I know from your oral presentation that you would be supportive of additional reporting requirements with respect to the spending?

744 MS. MCLAREN: Yes, the CMPA would fully support a condition of licence for Super Channel to provide an annual production report, similar, or the same as I guess I should say, as the group-based licensees that was essentially just launched to replace the former P&I reports.

745 COMMISSIONER BARIN: Thank you. I have just one last question, and then I will see if my colleagues have any more questions.

746 This morning we heard from other independent producers who essentially said that, taken as a whole, Super Channel did far more good than the harm that it potentially may have caused with the CCAA process that it went through. Would that be your view as well?

747 MS. MCLAREN: As the CMPA, we have more than 400 members in Canada, all across the country, of all sizes. And, we often will joke that we have more than 400 members and more than 400 points of views on issues, and this is certainly one that is no different.

748 I have to say that we were pleased to hear that the producers who appeared this morning have had a good working relationship with Super Channel. This is a positive thing. We just want this to be the experience of all of our members.

749 And, as Ms. Douglas earlier alluded to, in preparing for this hearing and for this entire licence renewal process, we have been discussing with many of our members. And, there have also been quite a number of very negative experiences from producers who have had their projects disclaimed or compromised, and only being paid seven cents on the dollar, in some cases. And, we are here to represent the interests of all our members.

750 So, it’s trying to have something where the members can reach consensus on these issues. So, again, we understand the positions of the individual supporting interveners who appeared this morning. But, we do need assurances, going forward, that these experiences, these incredibly negative, impactful experiences for producers won’t be repeated.

751 COMMISSIONER BARIN: I understand. Thank you. Thank you for your comments. I have no more questions.

752 THE CHAIRPERSON: Thank you, Commissioner. Commissioner Levy, do you have any questions? Go ahead.

753 COMMISSIONER LEVY: Good afternoon. Just a couple of questions. In terms of your survey of your members who were disclaimed went through that process, do you know whether any of them have gone out of business as a result of that experience?

754 MS. DOUGLAS: Apologies. Sorry. We did not conduct a survey of our members. And, at this point we would need to -- we can’t answer that question as to whether or not anyone has gone out of business as a result of CCAA.

755 COMMISSIONER LEVY: Thank you. And, finally, after -- I believe you were present for much of the morning and heard the presentations by Allarco about its future plans and so forth. Is there anything that you heard that gives you confidence for your members that Allarco seems to have a forward-looking strategy that’s going to be positive for the independent production community in Canada? And, if so, are there anything specific?

756 MS. MCLAREN: In terms of what we heard this morning, we were pleased to hear that Allarco and Super Channel are pursuing new lines of revenues, specifically with Amazon Prime channels and Apple+. Clearly pursuing new lines of revenue is important to this business. That being said, we are still deeply concerned about their financial capacity going forward, but we were pleased to hear that.

757 COMMISSIONER LEVY: Thank you.

758 THE CHAIRPERSON: Thank you, commissioners. Commission Counsel, do you have any follow-up?

759 MR. WICKER: Yes.

760 THE CHAIRPERSON: Please go ahead.

761 MR. WICKER: Thank you. This is just to confirm that the undertaking to provide the definitions that you agreed to provide regarding acceptable Regional Outreach expenses and acceptable Script and Concept development expenses is to be provided to the Commission by November 14th, 2019; is that correct?

762 MS. MCLAREN: That is correct.

763 MR. WICKER: Thank you.

764 THE CHAIRPERSON: Then, I believe that concludes the work for this panel. Thank you very much for your submissions and answering our questions. Madame la secrétaire?

765 MS. ROY: Thank you, Mr. Chairman. I will now invite On Screen Manitoba to come to the presentation table. When you’re ready, please go ahead. You have 10 minutes.

PRESENTATION / PRÉSENTATION

766 MS. MATIATION: Thank you. Good afternoon, Chairperson Scott, Commissioners Barin and Levy, and Commission staff. My name is Nicole Matiation, I am the Executive Director of On Screen Manitoba, the provincial industry association that leads, builds and represents the Manitoba media production industry.

767 Our members work in English and French language markets, and represent the cultural and linguistic diversity of the province. The On Screen Manitoba membership includes individuals, which is producers, writers, directors and other industry professionals; labour organizations, such as ACTRA-Manitoba, DGC-Manitoba, IATSE 856; service suppliers of materials, equipment, professional services and so on; training organizations; film festivals and other stakeholders. We truly try to speak for the entire industry.

768 On behalf of my members and the broader media production industry in Manitoba, I wish to thank the Commission for holding a public hearing today and for giving On Screen Manitoba the opportunity to share our members’ views with respect to Allarco’s application to renew its broadcasting licence for Super Channel.

769 As we have stated in our written interventions, On Screen Manitoba believes that Super Channel has, and should continue to play, an important role in the development, production and exhibition of independently produced original Canadian programming. It is the only independent premium discretionary service, and as you have heard from others today, has made possible the development and production of valued Canadian content.

770 I am here today because, in Manitoba, media production industry creators, producers and crew recognize the potential that Super Channel represents for regional production in particular.

771 The renewal process of Allarco’s licence has been long, but it has been an important process that is pointed to and is addressing confusion and misinterpretation in regard to conditions of licence as we may have seen in the efforts by Allarco to address compliancy issues throughout this process, including the filler programming which cannot be counted unless it’s Canadian certified, and considering the truly direct cost to regional programming which doesn’t include indirect staff.

772 I took heart this morning in listening to Allarco’s presentation when they began to speak about their new efforts in regard to Amazon and Apple TV. Again, we see this outreach as a positive development that gives us hope for the future of Super Channel.

773 This renewal process has also underlined the important impact of this broadcasters’ financial commitments and their ability to meet payments. And, while On Screen Manitoba appreciates that there are challenges in developing and maintaining a media operation such as Super Channel, we also have to stand up for our members who have had difficulties in dealing with them. But, we do see the fact that Allarco is here today seeking to renew as a positive sign of financial viability, combined again with this interest in Amazon and Apple TV.

774 However, with a broadcasting licence come responsibilities, expectations and obligations. And, in the case of Allarco, we ask the Commission to take a hard look at their financial track record and their business plans for the future. We do wish them to continue to play this important role notably in regards to regionally produced programming, but we also need them to do so from a viable financial position that does not come at the expense of the independent media production community, as was the case in the two times that they filed for CCAA protection.

775 Should the Commission award a licence renewal to Allarco for Super Channel, and we certainly hope that they do, On Screen Manitoba asks for assurances from the Commission that Allarco can and will meet ongoing obligations through the next licence term. It’s for these reasons that we request a mandatory order, evidence of financial capacity and a short-term licence renewal.

776 On Screen Manitoba and other non-profit industry service organizations across the country have benefited from Super Channel’s support for industry events and professional development. We believe that Super Channel has invested in a variety of valuable programs and activities related to Regional Outreach during the period of its current licence.

777 And, we thank Allarco for their offer to consult regarding Regional Outreach initiatives, and we welcome the opportunity to do so once the Commission has made its determinations. On Screen Manitoba welcomes the opportunity to work with any licensed Canadian broadcaster to ensure Regional Outreach initiatives are effective in increasing the diversity of voices in the Canadian content distribution system.

778 As I noted earlier, this licence renewal process has resulted in a number of positive outcomes, including Allarco’s agreement to maintain its 30 per cent CPE requirement; to maintain its $500,000.00 per year requirement of investment in Regional Outreach programs, with the exclusion of staff time; to maintain its $500,000.00 per year investment in Script and Concept development.

779 But, this is about improving the overall broadcasting system in Canada, and so we continue to request that the Commission make determinations on the following outstanding issues, including noting that Super Channel is in non-compliance with respect to its current conditions of licence; requiring that any remaining shortfall expenditures be made up in the new licence term as the Commission determines is appropriate and looking at all of the information before them. And, that the Commission impose a mandatory order requiring a licensee to comply with its conditions of licence, and requesting evidence of financial capacity and again maintaining a short-term licence of no more than three years.

780 Thank you for the opportunity to present my members’ views today and I would be pleased to answer any questions you may have.

781 THE CHAIRPERSON: Thank you for your presentation. Commissioner Barin?

782 COMMISSIONER BARIN: Thank you. Thank you very much, Mrs. Matiation, for your presentation. I want to touch, again, on some points that you had made in your written interventions.

783 On behalf of your members, you expressed grave concerns about Allarco’s apparent lack of compliance with its conditions of licence. And, I guess I would be interested in hearing, as a representative of regional producers, what that negative impact was specifically for that community.

784 MS. MATIATION: So, again, similar to the CMPA, I have many members -- we have 300, but that includes many individuals who are not producers, they’re creatives. So, I also received mixed feedback from our members. So, as you saw, FarPoint Films this morning is one of On Screen Manitoba’s members and they have had very positive experiences with Super Channel. This is not the case with other producers. And, some of the other producers who were negatively impacted experienced significant financial difficulty as a result of the CCAA process and you know, well, none of the production companies that I have been in contact with have -- are no longer in business. They certainly are all in business but they did experience significant financial difficulty during that time period.

785 And I would add that it created a sense of uncertainty and I know that this is of great concern to my members, particularly those who make documentary films where it is -- there are already very limited windows for documentary production in this country. And so they would very much like Super Channel to be a broadcaster that they can count on.

786 COMMISSIONER BARIN: I note this morning some of the producers talked about Super Channel making up for some of the -- I guess the shortfalls during the CCAA process. Would that also be something that some of your members have experienced that they ---

787 MS. MATIATION: I would have to check in with them. I'm not sure which amongst them benefitted from that. I know that at least one chose not to engage in that process simply because there were a number of other issues that they were dealing with at the time.

788 COMMISSIONER BARIN: There were also practices that I think you expressed members had problems with, specifically the long amortization periods for some of the programming. Can you speak a bit more about that?

789 MS. MATIATION: Yeah, indeed. That certainly came out in the discussions that members were -- regardless of the CCAA proceedings, were concerned with that particular practice and that has to -- you know that does occur with other broadcasters and distributors, as we heard this morning.

790 But it does create pressure on production companies because they are obligated then to carry the financial burden, having paid for all of the production upfront and they must wait for the payments over a long period of time. And so that would result in additional banking fees because they would have had to take loans in order to pay for the production.

791 So it is -- it remains a concern and I think the concern seemed to come most loudly from the smaller documentary producers who experience -- had more difficult managing the risk.

792 COMMISSIONER BARIN: Would you say this was any different than the terms that they were being given by other broadcasters?

793 MS. MATIATION: You know, again, I think the terms are negotiated one by one and in the discussions that we had, they were very focused around the Super Channel. So people weren't speaking in comparative tones or terms, rather. They were really speaking to their experiences at Super Channel.

794 COMMISSIONER BARIN: Thank you.

795 In terms of the positive contributions of Super Channel as a regional broadcaster -- and maybe you can, you know, speak to some of those specific contributions for western ---

796 MS. MATIATION: Absolutely. You know, we do feel strongly that they have made and continued to make an important contribution as a regional -- as a supporter of regional production. There -- again, there are very few broadcasters left for producers to go to.

797 They remain the single independent broadcaster in western Canada and they have been involved in a number of projects with Manitoba producers and we -- again, we do hope to see a long future with Super Channel as a buyer and investor in regionally-based production.

798 And I would add that their investment, also in events such as All-Access, which On Screen Manitoba producers each year, is also important. It is -- the event is important to our members and increasingly we have producers attending from nearby provinces.

799 So there is an opportunity for increased involvement with the regional production community through that kind of outreach.

800 COMMISSIONER BARIN: Okay, so moving onto a different area, with respect to the arrears or shortfall on standing requirements, what is the position of your members?

801 MS. MATIATION: Again, the positions are mixed. You know in an ideal world, everybody would love to see the arrears fully settled. I think we're not necessarily in an ideal world and people will take a realistic approach. But our members want to be sure that the situation that Super Channel found it in twice is recognized in an appropriate manner, and that the lost opportunity that wasn't realized over the period of the licence has somehow caught up.

802 COMMISSIONER BARIN: Thank you.

803 You spoke about the outreach program and the importance of the outreach program and the scripting concept to your members. Is this something that you feel should continue to be a condition of licence or is it something that you feel is better dealt with, in terms of the commitment, in a different way?

804 MS. MATIATION: No, we feel that those are two very valuable conditions of licence and that while, you know, it again may not have been perfect in the past, again it represents an enormous potential for partnership in terms of the outreach and the opportunity to develop regionally-based producers.

805 And we also feel and hear regularly from our membership the importance of specific investments in development. It's one of the areas of high concern and we know that in investing in development that we are going to have better productions. And so from a regional perspective, yes, both conditions are very important.

806 COMMISSIONER BARIN: And I asked the CMP the same question, but would you be willing to provide a condition of licence supporting that would be acceptable to your members, in terms of the kinds of expenditures that would count as outreach expenditures, or a scripting concept?

807 UNDERTAKING / ENGAGEMENT

808 MS. MATIATION: We would be pleased to have the opportunity to provide a written undertaking in response.

809 COMMISSIONER BARIN: Thank you.

810 I have one last question and it relates to reporting requirements. I think you had concerns about the transparency and the ability to track Super Channel's commitments. This morning we proposed a more strict reporting regime. Is this something that you would support?

811 MS. MATIATION: Yes, absolutely.

812 I now remember where I couldn't read my handwritten notes. It was my note to mention the opportunity or the suggestion to include annual reporting based on the new reporting -- annual reporting process that other broadcasters are using.

813 On Screen Manitoba has been always requesting transparent reporting that can be compared amongst broadcasters and that allow us to track how they are responding to their conditions of licence with as much detail as is possible.

814 So, yes, absolutely we would support a condition of licence.

815 COMMISSIONER BARIN: Thank you. That concludes my questions. Thank you very much.

816 MS. MATIATION: Thank you.

817 THE CHAIRMAN: Commissioner Levy.

818 COMMISSIONER LEVY: As you look at some of those definitions and qualifications, we heard this morning and we got the list of where Allarco has spent some of its regional outreach in the past. And would you say that regional outreach should be confined to the regions or do you see a place for regional outreach support going to larger festivals in the major production areas?

819 MS. MATIATION: That's an interesting question.

820 You know, I think there, again, there is an opportunity to bring our focus into the regions and celebrate the quality of productions and the quality of the production communities outside of our centres. And I think that this particular condition of licence is a real opportunity to do that.

821 Now, I think, Commissioner, that you made an interesting suggestion earlier this morning to look to opportunities of fellowship or bursaries and fellowships. We are seeing that increasingly with some of the larger production or larger industry events where they are creating programs to help bring emerging Indigenous, regionally-based, francophone outside of Quebec producers and creators who have traditionally been held somewhat outside of the system typically for financial reasons, or perhaps just a variety of different access regions.

822 So, that’s something that perhaps would be interesting to explore. I don’t think that those bursaries necessarily need to be connected to major events in the centre. I think those can also be connected to smaller, more intimate events that actually might be of greater benefit to an emerging producer. So, I think there is, you know, always opportunity to take a step back and look at, you know, where is it most effective to invest limited resources.

823 COMMISSIONER LEVY: I know that you have a very successful program for supporting access to markets by your members. So, that was really inspired by what you’re already doing, and I thank you.

824 THE CHAIRPERSON: Thank you, Commissioners. Legal counsel?

825 MR. WICKER: Thank you. This is just to confirm that they gave you an undertaking to provide the definitions of acceptable Regional Outreach expenses and acceptable Script and Concept development expenses by November 14, 2019.

826 MS. MATIATION: Very good, we look forward to doing it. Thank you.

827 MR. WICKER: Thank you.

828 THE CHAIRPERSON: Thank you very much for your submission and your responses to our questions. Madame, la secretaire.

829 MS. MATIATION: Thank you.

830 MS. ROY: Thank you very much. I will now invite Documentary Organization of Canada to take place.

831 THE CHAIRPERSON: The hearing secretary may have to explain our procedures to at least one of the participating panels. Madame.

832 MS. ROY: Please go ahead when you are ready. You have 10 minutes.

833 MR. DAGONAS: Thank you.

PRESENTATION / PRESENTATION

834 MR. DAGONAS: Thank you, Mr. Chair, Commissioners and CRTC staff, for giving me the opportunity to address you today. My name is Matthieu Pierre Dagonas, and I am the Executor Director of the Documentary Organization of Canada, often referred to as DOC. With me at the table is a guy you may know by the name of Nick Ketchum, who has a few years of experience more than I do so that’s why we have invited him here to discuss regulatory policy.

835 DOC is the collective voice of independent documentary filmmakers across Canada, a national non-profit organization arts service organization representing over 800 directors, producers and craftspeople from all provinces and regions of the country working in the documentary genre. DOC was also the founding body of Hot Docs, North America’s largest documentary film festival. DOC advocates on behalf of its members to foster an environment conducive to documentary production and strives to strengthen the sector within the broader film and television production industry.

836 DOC recognizes that Allarco, through its licensee, Super Channel, is an important platform for the distribution of Canadian documentary programs, many of which are produced by DOC members. However, we have serious concerns about the financial stability of this licensee and the impact that its business practices have upon our members.

837 If the Commission sees fit to renew the broadcasting licence of Super Channel, DOC considers that the licensee must be constrained in a number of ways in order to ensure that it adheres to all CRTC requirements and that, in its relations with independent producers, it respects standard broadcast business practices.

838 As we noted in our written intervention of March 13th, 2019, DOC members have suffered significant losses at the result of Allarco’s precarious financial position. Let me describe this impact in more personal terms.

839 To start, after Allarco disclaimed its licence on the film The Divided Brain, producer Vanessa Dylan incurred more than $94,000.00 in debt forcing her to remortgage her home. To this day, Vanessa is still unable to pay herself for that project which she barely completed by pulling together funds from other sources.

840 When Vanessa filed a formal complaint to the CRTC in 2017, they replied:

841 “While the Commission regulates the Canadian broadcasting system and grants licences to undertakings such as Allarco, it is not involved in the licensing of programming rights or in contractual disputes with respect to such rights.” (as read)

842 What makes Allarco so dangerous to small independent producers in the documentary space, like Vanessa, is that it has been allowed to operate outside the standard terms of trade in the industry which see production companies paid upon signature of the contract and throughout the production process. Contrary to other broadcasters like TVO or CBC, for example, Allarco requires producers to interim finance and deliver the film before any of the licence fees are released. That means that producers are forced to assume 100 per cent liability and overseeing the films to completion.

843 So, why then do independent producers take the risk? They do so, as many have alluded to today, because they have little to no choice. In Vanessa’s words, “I work under duress and agree to interim finance films because broadcast licences for a documentary are very, very hard to get, even for top creative teams.”

844 For small independent producers that shine a light on systemic issues, such as climate change and Indigenous rights, they quite literally live project to project, forced to accept precarious agreements to produce their work, work that is critical to advancing public knowledge in Canadian society. But, beyond that, Allarco did, at one time, provide a unique opportunity for many independent producers.

845 Amy Miller and Byron Martin, for example, worked together with Allarco on the film Tomorrow’s Power. For Amy, this was her third project with the company which provided the only licensing opportunity for her film that didn’t meet the Canadian broadcasting language requirements of English, French and Indigenous languages.

846 Martin and Miller agreed to a contract with Allarco, found interim financing, completed production, sent in their rough cut, and then received a letter from Allarco stating that their $70,000.00 licence had been disclaimed. Martin and Miller were forced to halt their project for a year while they sought alternative funding, and are still recovering from the economic burden.

847 These two stories I have shared with you today are a small sample of the impact of Allarco’s business practices and financial instability. I can’t stress this enough. When Allarco went bankrupt, they threatened the documentary industry across the country.

848 The existence of more than 70 independent production companies, like those I share with you today, were threatened by Allarco. And, while Vanessa, an award-winning producer, weighed whether or not to shut down her business, Allarco continued to operate and bought the licencing rights of a football league in 2017 even after filing for insolvency twice.

849 Despite producing content crucial to the fragile ecosystem of factual discourse in Canada, the documentary industry is highly vulnerable. If Allarco is allowed, once again, to continue to operate, they must be closely regulated to protect both small and large businesses.

850 DOC proposes the following: we understand that the Commission has been generally unwilling to regulate the business relationship between producers and broadcasters. In fact, avoiding such detailed and intrusive regulation was part of the rationale behind the development of the CRTC’s Terms of Trade Policy first implemented in 2007.

851 That policy encouraged, and then required the largest broadcasters to work with producers and develop mutually satisfactory terms of trade. This largely, successful policy was dropped in 2015. In its absence and in the case of licensees’ flagrant refusal to adhere to standard business practices and has been demonstrated by Allarco, DOC considers that it is entirely appropriate for the Commission to impose a condition of licence that ensures producers are treated fairly.

852 As noted, during the past licence term, DOC producers have been required to sign contracts with no payments until a project has been completed, and frequently not until a year or more following completion. DOC submits that a condition of licence setting out detailed payment schedules such as that set out in DOC’s written intervention on March 13th would be appropriate. However, a more general requirement that Allarco make a payment upon the signing of a contract and payment throughout the production process with the remaining balance being paid upon full delivery would also be acceptable.

853 The Commission’s focus in this proceeding has been on the applicant’s noncompliance with a variety of conditions of licence respecting programming and program development. With regards to these important issues, DOC has worked closely with the CMPA and fully supports the proposed conditions set out in their intervention.

854 In its March 13th intervention, DOC underlined the importance of requiring Allarco to file detailed annual reports with respect to their Canadian programming requirements and commitments. The Commission has recently published its revised production report to be completed by the large English and French ownership groups.

855 DOC congratulates the Commission on this revised approach to reporting which will address DOC’s concern and enable us to assist the Commission in ensuring that licensees continue to support and broadcast high quality Canadian documentary programming.

856 However, since Allarco is not considered a large ownership group, it will not be required to file these reports. Given that Allarco, through Super Channel, plays an important role in acquiring Canadian long-form documentary programs, as well as other categories DOC considers that the licensee should be required through condition of licence to submit, at a minimum, the program information set out in Appendix 6 of the Broadcast Information Bulletin CRTC 2019-304.

857 Thank you again for providing DOC with the opportunity to intervene in this proceeding. I’m happy to answer any questions you may have. Merci beaucoup.

858 THE CHAIRPERSON: Merci. Thank you. Commissioner Levy.

859

860 COMMISSIONER LEVY: Good afternoon. You’ve done a very good job of outlining what the impact of Allarco’s financial difficulties have had on your producer members. What do you think their contribution has been, despite the instances of the apparent noncompliance that they have made to the system?

861 MR. DAGONAS: That has been asked a few times. I think we agree, in general, that we value their contribution. It’s an important player, specifically in Western Canada, but across the country as well. It’s more money in the system, which we think is an important piece. Because in the documentary space, as you know, it’s difficult to get a licence.

862 And so, from that perspective we think, you know, that they continue to play a role within the system. I think from our perspective, we are similar to the CMPA, and the rest of the interveners today, looking for standard business practices to be applied.

863 COMMISSIONER LEVY: So, you think it’s worth the risk?

864 MR. DAGONAS: I believe that’s your decision, not mine. But, I think, from our perspective, you know, we think that compliance with our recommendations allows for the industry to be better off in the end. And, yes, we would support, like I said, an Allarco, a Super Channel, that is good for business in the documentary space.

865 COMMISSIONER LEVY: Do you have any comment on whether we should make them pay arrears and what impact that would have on their viability?

866 MR. DAGONAS: Yes, I’m not so concerned about the viability piece. I think, again, that’s something that they need to look at. I think, from my perspective, we have the list of the 31 members of DOC that have been affected. We’re happy to share that with Allarco, and I do think they should right their wrongs.

867 COMMISSIONER LEVY: Okay. Do you think that we should impose conditions of licence relating to Regional Outreach and Script and Concept development, even though those are, in fact, in addition to the standard approach for licensing discretionary services?

868 MR. DAGONAS: Yes. And, I think I will pass it on to Nick to comment as well.

869 MR. KETCHUM: Well, I think as you’ve heard from many of the interveners today, that an effective way of helping out regional producers and smaller producers through Script and Concept development is really vital in order to get those smaller producers outside the major centre into the mainstream where they have the talent to succeed. So, I think that was the central rationale for the original licensing of Allarco. It was committed to being sensitive to the regional centres, and I think they should stay committed to it.

870 COMMISSIONER LEVY: Could you offer definitions, either now or as an undertaking, definitions of acceptable Regional Outreach expenses and a definition of an acceptable Script and Concept development expense regime?

871 MR. DAGONAS: Yes, we will work with our friends at the CMPA and Onscreen Manitoba to do so.

872 UNDERTAKING / ENGAGEMENT

873 COMMISSIONER LEVY: Thank you. I think that that is all that I have. Thank you very much.

874 THE CHAIRPERSON: Commissioner Barin, do you have any follow-up questions? Please go ahead.

875 COMMISSIONER BARIN: Thank you. I have one question. You speak about the negative impact that Allarco’s financial situation has had for your members. Outside of the precarious financial situation that it found itself in, how has Allarco been as a supporter and broadcaster of documentary productions for your members? Was it just -- are your comments limited to the fact that it underwent these financial difficulties outside of that? Can you describe the relationship and give us your comments?

876 MR. DAGONAS: Again, I can’t -- similar to the CMPA, many of our members feel differently about Allarco and the Super Channel. But, I think what I would say is, you know, it’s an opportunity for documentary creators to have a licence, and that’s always good. Again, what we were hoping for is for business practices to be in line with other comparables, you know, TVO and CBC. And, you know, I don’t think we should set Netflix as the bar. I think that’s problematic. So, I think, from our perspective, that’s what we would like to see.

877 COMMISSIONER BARIN: Thank you.

878 THE CHAIRPERSON: Thank you. Commission counsel, do you have any follow-up questions?

879 MR. WICKER: Thank you. This is just to confirm that your undertaking to provide the definitions of Regional Outreach expenses and Script and Concept development expenses would be by November 14, 2019?

880 MR. DAGONAS: Correct. Yes.

881 MR. WICKER: Thank you.

882 THE CHAIRPERSON: Thank you very much for your submissions, and your responses. Madame, la secretaire.

883 MS. ROY: Thank you, Mr. Chairman. I will now invite Directors Guild of Canada to come forward, please. Please go ahead, gentlemen. You have ten minutes.

PRESENTATION / PRESENATION

884 MR. FORGET: Thank you, Mr. Chair, Commissioners, and staff. We are pleased to appears today to discuss the application for renewal of the broadcast licence of Allarco Entertainment’s Super Channel. My name is Dave Forget. I am the Executive Director of the Directors Guild of Canada. With me is Samuel Bischoff, Public Affairs Manager.

885 The DGC is a national labour organization representing key creative and logistical professionals in film, television and digital media industries. Today, we have approximately 5,000 members covering all areas of direction, design, production, logistics and editing.

886 Since the 2017, Allarco’s application for licence renewal of Super Channel, this is the third intervention from the DGC on this matter. DGC brings the perspective of the Canadian creative community and its members.

887 We understand that changing market conditions, and transitioning from a closed system to an open one, represents a challenge for broadcasters to reach their objectives. The granting of a broadcasting licence is a privilege, not a right, despite shifting market conditions.

888 This is why we are here today, to keep watch, that Allarco will comply with the CRTC’s regulations. In other words, we’re asking the following question: on which conditions will Super Channel continue to operate and comply with the imposed CRTC regulations when Allarco failed to make up the shortfalls of expenditures from the previous licence term?

889 To start, we would like to draw the attention to the fact that most interveners today, or in the past, whether it’s the CMPA, independent producers or other industry associations like us, remain committed to Super Channel’s success as a broadcaster. Even more so, all parties agreed on the necessity of a public hearing, also coming closer together since the beginning of the consultation process, and now agreeing on a number of points.

890 In fact, we are all working towards the same goal, which is finding the best possible way for Allarco to respect its conditions of licence, and achieve its regulatory requirements in a new licence term. And, in result, restore opportunities for the independent production sector, which has been impacted by Super Channel’s situation.

891 As representatives from the creative community, we would like to also emphasize the importance of maintaining a diversity of independent broadcasters and creative voices in this country. This principle is at the centre of our intervention. Sam.

892 MR. BISCHOFF: Through the various proceedings of this licence renewal process since 2017, keeping in mind that Allarco went through severe financial distress, and in light of the submitted data and documents, Allarco has remained noncompliant, both in the current and previous licence term, with repeated infringements of industry standards.

893 The Commission had already pointed out that Allarco’s blatant situation of non-compliance in its broadcasting decision of 2013 for Super Channel’s licence renewal, that goes as follows,

894 “The Commission’s standard practice is to deny applications seeking to amend conditions of licence for which the licensee is in a situation of non-compliance. It is concerned with Allarco’s non-compliance...” (As read)

895 Nevertheless, the Commission renewed Super Channel’s licence. And, now, the history repeats itself. In 2013, Allarco was directed by the Commission to repay a portion of the shortfall expenditures for a total of $6 million in the current licence term, as well as $500,000.00 to be spent on outreach programs and $1 million on script and development in each broadcast year of the licence term. Once again in 2019, Allarco failed to comply with most of its regulatory requirements and we are legitimately concerned that the company might file for protection from the CCAA one more time and risk bankruptcy.

896 Super Channel has shown apparent non-compliance on nearly half of the total eleven conditions of licence set in 2013. Condition of licence 3 relating to the distribution of Canadian programs; condition of licence 5 relating to the eligibility and late payment of Canadian programming expenditures; condition of licence 6 relating to the eligibility of certain expenditures allocated to Regional Outreach programs; condition of licence 7 relating to the eligibility and late payment of certain expenditures devoted to Script and Concept development; and condition of licence 8 relating to the eligibility and late payments of certain expenditures devoted to Regional Outreach programs and Script and Concept development.

897 MR. FORGET: Given the past and current circumstances, the DGC would like to present the following recommendations and comments on potential CRTC measures and remedies.

898 The DGC respectfully submits that, if the Commission determines that the renewal of Super Channel’s broadcast licence is appropriate following this public hearing, the following assurances and measures ought to be required to address any occurrences of non-compliance in the current licence, as well as verifying Super Channel’s financial capacity in achieving conditions of licence in the new licence term.

899 First, we recommend the Commission to grant a shorter licence term of no more than three years, which in our view strikes a good balance to develop and produce new original content. Second, following an assessment of Super Channel’s financial capacity, require the licensee make up shortfalls of expenditures relating to conditions of licence 5, 6, 7 and 8, including a requirement for Allarco to repay the funds provided under the form of development loans during the previous licence term. Third, we believe in the necessity of imposing a mandatory order under Section 12 of the Broadcasting Act requiring the licensee to comply with its conditions of licence and the Discretionary Services Regulations in order to resolve Allarco’s repeated and significant noncompliance.

900 Fourth, as set out in DGC’s previous interventions, we believe the Commission shall maintain CPE requirement for Canadian programs of 30 per cent of its revenues from the previous broadcast year and require a minimum PNI of 5 per cent. Fifth, we recommend to maintain condition of licence 6 that, included in the expenditures required under condition of licence 5, the licensee shall expend on Regional Outreach programs at least $500,000.00 in each broadcasting year.

901 Sixth, as stated before, investing in Script and Concept development is the single most important factor in creating a successful drama or feature film that will resonate with audiences. It allows screenwriters to test ideas and write a number of drafts of the script. Investment in development is critical. And, films that are not well developed, or televisions series, where there is limited resources to commission additional scripts are typically less successful. Consequently, the Commission should maintain condition of licence 7 that, included in the expenditures required under condition of licence 5, the licensee shall expend on Script and Concept development, including bursaries for writers, excluding overhead costs, at least $500,000.00 in each broadcast year.

902 In addition, as a guarantee to ensure Super Channel has a viable plan for the future, the Commission should require the licensee to provide a demonstration of financial capacity for the next licence term; and explicitly require Allarco to not include “indirect staff costs” or other ineligible expenditures for the purpose of conforming with conditions of licence 6 and 7 that involve loans and other ineligible expenditures; and finally, impose any additional condition of licence that it deems appropriate.

903 Independent broadcasters in Canada have a special importance and role towards the creative sector. Despite serious and repeated non-compliance and non-standard industry practices, we hope that our presentation will help the Commission to establish a plan that will allow Super Channel to operate and remain an opportunity for independent producers while complying with the Commission’s policy.

904 Members of the committee, I thank you for your time. I’d be pleased to answer any of your questions.

905 THE CHAIRPERSON: Thank you. Thank you for your presentation. Commission Levy?

906 COMMISSIONER LEVY: Thank you. Just a couple of things that jump out immediately from your presentation, both previously and today. You are suggesting a minimum PNI of 5 per cent. That has not been mentioned by most others, why are you being so specific about that?

907 MR. FORGET: Well, we have referenced it in previous interventions. So, we’re nothing if not consistent on PNI. And, you know, when we -- when we take a look at the type of programming -- in fact, I think Allarco makes mention of this in one of their responses. There is PNI programming being commissioned and put on the air, which we think is a good thing. It’s important programming, it’s feature documentaries, scripted drama, feature films. We think that’s important. It’s the kind of content that our members work on, it’s important to the system and we think that it would be good to have a minimum requirement. That said, we do recognize and acknowledge that Allarco is commissioning PNI content.

908 COMMISSIONER LEVY: Okay. Secondly, in your suggestions of the guarantee to ensure that Super Channel has a viable plan for the future, you say we should require the licensee to provide a demonstration of financial capacity for the next licence term. How do you think that should happen? What would be a demonstration of financial capacity?

909 MR. FORGET: That’s a good -- well, I mean, that’s a theme that has been common this afternoon. You know, in a discussion around the risk of compliance and maybe even the more fundamental risk of continuing to operate as a broadcaster, you know, given the stress, given the issues that have come up, it seems to me that there is a larger risk around compliance and an even more fundamental one about Allarco remaining in business.

910 One of the ways that they could demonstrate to the Commission is -- obviously this is confidential information. But, the extent to which information could be shared around their capacity financially, what their plan is going forward and how they are going to be financing their activities going forward, to -- you know, we’re in the risk business. There’s no such thing as no risk, whether you’re a broadcaster, producer or making, but there are ways -- when we talk about assurances, we’re talking about mitigating risk, and one of those ways is to get a better sense of what the capacity is financially of the organization, how are they financing their affairs going forward, and what’s the level of risk and what extent they have been able to mitigate that.

911 COMMISSIONER LEVY: To the extent that we can go beyond what we might get in a confidential manner, what would give you and your members comfort? What could we say that would indicate that we’re getting to the core of something that would alleviate some of the anxiety?

912 MR. FORGET: Well, a couple of thoughts on that, in terms of our suggestions. One is a shorter licence term that allows a check-in to happen. You know, we’re mindful of the comments made this morning around -- and in their interventions around the financing cycle and the development, it takes months and years for shows to get up off the ground and on the air. But, nonetheless, a shorter term would give some comfort that there is a check-in -- a check-in here.

913 Better and more comprehensive reporting. In fact, we made reference to that in our intervention and just -- what was presented this morning as a more transparent way for Allarco to provide reporting in terms of its engagement with independent production companies I think is actually more than we asked for and it's definitely a step in the right direction. So that's another way.

914 A third way would be, you know, on the ground on a project, production by production basis, I mean you've heard there surely is a continuum and it is obviously a component of negotiation that payment schedules can be rotated to the beginning of the cycle, the end of the cycle, or in stages.

915 One of the ways of mitigating the risk of the independent production company is to have some of that money being paid in instalments and upfront. I think you've heard a number of intervenors on that subject already but to me, that once again goes to the question of the extent to which monies flowing from the broadcaster is one -- one of the ways they can demonstrate that they have the financial capacity and the other is that they provide assistance and lower the cost of the production in the aggregate because there's less having to finance.

916 COMMISSIONER LEVY: You do appreciate that we don’t get involved in those commercial relationships. So the fact that you're raising it and discussing it is important but it goes beyond something that we could impose as a condition of licence. I hope you understand that. Yes?

917 MR. FORGET: Yes.

918 COMMISSIONER LEVY: Okay. Thank you.

919 Just back to some other questions, do you have a comment on whether we should impose payment of arrears on Super Channel if -- and how that might affect its business plan and viability?

920 MR. FORGET: Yes, we do. You know, what we say in our intervention is we would like to see those arrears paid and I think it would be naïve to think that, you know, the burden of making those payments wouldn't have a financial impact. I mean it's only normal that it would.

921 And so the way that we framed the question is that any imposition would be following an assessment of its financial capacity. And so if it was determined -- I mean if you were to ask me can I afford to do something, it's going to cost money and obviously it's going to have an impact. I think it's only normal to answer that question that way but to go beyond that, can we determine if they have the capacity, and so I would say to the extent that they have the capacity to. But as a principle, they should.

922 COMMISSIONER LEVY: We've talked about conditional licence relating to regional outreach and script and concept development and I think you've been quite clear about your support for that. And I'll offer you the same opportunity as others.

923 Would you offer a definition of acceptable expenses in terms of regional outreach and script and concept development for the purposes of the COL?

924 MR. FORGET: Yes.

925 COMMISSIONER LEVY: Yes, okay. So you'll take that as an undertaking?

926 MR. FORGET: Yes.

927 COMMISSIONER LEVY: Thank you.

928 UNDERTAKING / ENGAGEMENT

929 COMMISSIONER LEVY: And I believe that that's all for me. Thank you.

930 THE CHAIRPERSON: Thank you.

931 Commissioner Barin?

932 COMMISSIONER BARIN: Thank you for your presentation and your comments.

933 I have one question and it relates to something you said in your oral presentation. You say you have legitimate concerns that the company might file for protection from the CCAA one more time and was bankruptcy.

934 Do you have any optimism with respect to Allarco's ability to continue to operate Super Channel in the future?

935 MR. FORGET: Thank you for asking that question. It gives me an -- yes, of course, we do. You know, I think the first answer is we've seen a pattern and so when there's a pattern, there's a legitimate concern.

936 But that said, in listening to myself read our oral remarks, I did want to take the opportunity to express a bit of optimism. We think that they are an important player in the system, that in particular having an independent broadcaster who is located in Western Canada, it does fill an important gap in the system.

937 And you know, maybe one other point to add to the question around, you know, I think it must be obvious to everyone why it's important to have decision-making that's happening outside major centres.

938 But, you know, one of the other functions of that is -- and the extent to which they can restore their relationship and build back up a relationship with the CMF and with Telefilm and so on is to leverage some of that federal money, leverage some of that money from agencies that right now isn't going into Western Canada to the extent that it should.

939 And one of the levers for having that happen for example with the CMF is having a broadcast licence, having a broadcast licence from a regional operator who can then leverage into the jurisdiction.

940 So there's lots of reasons why they're an important player and we sincerely, you know, wish them well and hope that they succeed.

941 COMMISSIONER BARIN: Thank you.

942 THE CHAIRPERSON: Thank you.

943 Perhaps legal counsel can just confirm the undertaking, the due date and so on, thank you.

944 MR. WICKER: Thank you. So the due date for the undertaking to provide the definitions of regional outreach expenses and script and concept development expenses would be the 14th of November 2019.

945 MR. FORGET: M'hm.

946 MR. WICKER: Thank you.

947 MR. FORGET: Thank you.

948 THE CHAIRPERSON: Thank you very much again for your presentation and your responses.

949 Madam Secretary, let us break at this point and we can return at 3:15 for the next phase.

950 MS. ROY: Perfect. Thank you, Mr. Chairman.

951 THE CHAIRPERSON: Thank you. Thank you everyone.

--- Upon recessing at 2:55 p.m.

--- Upon resuming at 3:18 p.m.

952 Mme ROY: À l'ordre, s'il vous plaît. Order, please.

953 Mr. Chairman, we are now ready to proceed with Phase III which is the reply by the Applicant. So please go ahead. Please just reintroduce yourself for the record first, and then go ahead.

REPLY / RÉPLIQUE

954 MR. McDONALD: Hi. I'm Don McDonald. I'm President and CEO of Super Channel Allarco Entertainment 2008.

955 Chairman, Commissioners, staff, thank you for this opportunity to comment on the intervenors.

956 We wish at the outset to thank the supporting intervenors that took the time to participate in this proceeding today and we have no further comment to make about their presentations.

957 With regards to the intervenors that appeared individually, we have the following comments.

958 We have provided detailed replies to intervenors during different phases of this proceeding, on the following dates: April 6th, 2018; March 18, 2019; June 13, 2019; and October 7th, 2019.

959 Each of these written replies to interventions form part of the record of this hearing. We realize this has been a long day. In the interest of completing this hearing, we will not repeat the responses filed previously.

960 Concerning the presentations from the CMPA, On Screen Manitoba, Documentary Organization of Canada, and the Directors Guild of Canada, we take note of the views of these intervenors and we stand by our position we discussed this morning.

961 Yes, the outcome of this hearing is critical for the future of our service, but it is also critical for Canadian independent producers, documentary producers, and the different guilds that intervened today.

962 If Super Channel is awarded a new licence with the conditions of licence that we have proposed, we do look forward to continue working with independent producers to the benefit of the Canadian broadcasting industry, increasing our contribution to the development and broadcasting of Canadian independent productions.

963 We recognize that both script and concept and regional outreach are not part of the standard conditions of licence for discretionary services.

964 As we have indicated previously in response to interventions, we are prepared to accept script and concept and regional outreach expenditure conditions of licence, provided there is no re-spend of past expenditures attached as additional conditions of licence and there is clarity regarding what constitutes valid expenditures.

965 You have heard from producers who appeared this morning that the development expenditures that we have made over a number of years have positively impacted their ability to move to the next stage, to licence, and then exhibit productions that enjoy audience success. But, you also heard from producers this morning that Super Channel is one of the remaining outlets for acquisition and exhibition of their programs, where other doors are shut elsewhere in Canada.

966 And, we do all of this effectively with a very small staff, whose resources are limited and their responsibilities are diverse. We are nimble. Our door is open. Producers cannot wait years for a green light that never comes.

967 In closing, Super Channel cannot be expected to become a viable contributor to the objectives of the Broadcasting Act,if we are continually tied to conditions of licence which are 14 years old and which, in no way, take into account the tremendous technology changes we have experienced and the reality of the competitive Canadian marketplace, which is increasingly dominated by nonregulated foreign services and platforms.

968 We hope that we have provided confirmation today that Super Channel is prepared to move forward, because we cannot undo the problems and failures of the past. This completes our reply to interveners. Thank you.

969 THE CHAIRPERSON: Thank you. I think legal counsel has a number of questions that they need to put, and then it will come back to me and my colleagues maybe for a last couple of questions. But, I will let counsel proceed first.

970 MR. WICKER: Thank you. So, I just have a few more questions to complete the record of this proceeding. In response to one of my questions, this morning you confirmed that the total amount of $1,967,316.00 was not claimed as CPE in the 2015/2016 annual return.

971 However, in response to a Commission staff Request for Information dated August 20, 2018, and I’m referring here specifically to Question 5(a), you stated that this amount was reported as part of the annual returns. So, could you please clarify how this amount was then reported in your 2015/2016 annual returns?

972 MR. MCDONALD: I would have to take a look at the report that you refer to before I can really comment on that.

973 MR. WICKER: Okay. So, can you confirm that? You give an undertaking to comment in writing by November 14, 2019?

974 MR. MCDONALD: Yes. Yes, I will.

975 UNDERTAKING / ENGAGEMENT

976 MR. WICKER: Thank you. Now, the following five questions may seem a bit repetitive, but we need your response for each one of them for the record.

977 So, the first one is, please comment on the possibility of the Commission imposing a mandatory order requiring you to file an annual production report, such as the one set out in Broadcasting Information Bulletin CRTC 2019-304.

978 MR. MCDONALD: I confirm that we would do that.

979 MR. WICKER: Now, this is concerning the mandatory order. So, you confirm That you would -- do you have any comments now, or you confirm that you give your undertaking to provide the information?

980 MR. MCDONALD: I’m sorry. We will take an undertaking for that.

981 UNDERTAKING / ENGAGEMENT

982 MR. WICKER: Okay. Question 2 is, please comment on the possibility of the Commission imposing a mandatory order requiring you to make up any Regional Outreach program shortfall over the term of your next licence.

983 MR. MCDONALD: We will not do that.

984 MR. WICKER: Okay.

985 MR. DOUGHERTY: Sorry, just -- Josh Dougherty. Just to confirm then, if the Commission were to impose a mandatory order such as that, that’s what we’re asking for a comment on regarding the imposition of a mandatory order ---

986 MR. MCDONALD: So, you're just ---

987 MR. DOUGHERTY: --- the possibility.

988 MR. MCDONALD: You’re asking for a comment?

989 MR. DOUGHERTY: That’s correct.

990 MR. MCDONALD: I do apologize. But, yes, we will make a comment on that.

991 UNDERTAKING / ENGAGEMENT

992 MR. LEWIS: Counsel, I just want to clarify one thing. The sheet of questions today that we received this morning, some of those are actually in those questions to comment on re-imposition. The question you’ve just asked, that’s part and parcel of that, or are we being asked to respond to it over and above that mandatory order?

993 MR. WICKER: This is a separate question and regards specifically a mandatory order.

994 So, Question No. 3 would be, please comment on the possibility of the Commission imposing a mandatory order requiring you to make up any Script and Concept development shortfall over the term of the next licence. So, you can respond now, or confirm your undertaking.

995 MR. MCDONALD: We will confirm the undertaking.

996 UNDERTAKING / ENGAGEMENT

997 MR. WICKER: Okay. And, Question No. 4 is, comment on the possibility of the Commission imposing a mandatory order requiring you to adhere to a condition of licence for a Regional Outreach program obligation.

998 MR. MCDONALD: We’ll confirm an undertaking.

999 UNDERTAKING / ENGAGEMENT

1000 MR. WICKER: Okay. And, the last one is, we are asking for your comment on the possibility of the Commission imposing a mandatory order requiring you to adhere to a condition of licence for Script and Concept development obligation.

1001 MR. MCDONALD: We’ll confirm to an undertaking.

1002 UNDERTAKING / ENGAGEMENT

1003 MR. WICKER: Okay. So, just for the record, all these undertakings are for the 14th of November, 2019.

1004 MR. MCDONALD: Understood.

1005 MR. WICKER: Thank you.

1006 THE CHAIRPERSON: I have, I guess, one -- I’m not sure if it’s a final question. My colleagues may have an additional question or two.

1007 I guess what I really would like to hear from you is, what can you tell me to give us confidence that you have the necessary plan in place, the necessary financial maturity or robustness to move forward successfully and fulfill future conditions of licence? Tell me why you will be successful, why you will be able to do so.

1008 MR. MCDONALD: As in every business, there are no guarantees of success. We have plans in place through the rebranding of our channels, the diversity of each of the channels with what we feel are very robust content.

1009 The diversity will appeal -- we feel will appeal to many members of family through the edgy, exciting content you will find on FUSE, the heartwarming content that will be on Heart & Home. Vault is library blockbusters that have aired previously that -- everyone enjoys a good movie. And then, of course, we feel we are pioneers in the e-sports area with Canada’s only 24-hour e-sports channel.

1010 In regards to -- we are adding new revenue streams with the advent of being on Amazon Prime, coming on going to be on Apple TV+. We are assessing and will be implementing an advertising strategy on certain channels, in particular GiNX, where previously, as a pay service, ads were not allowed. But, that has since been changed.

1011 We have not implemented that until now because we wanted to assess the viability of it. Certainly, with the number of subscribers that we have, we will have to take an out-of-the-box thinking approach to it, because agencies typically do not look at anything below a million subscribers. But, we have a unique channel that is already set up for in-programming ads. On the other free channels, we’re looking at sponsorship opportunities. And, we will certainly continue to put funds into marketing to provide Canadian awareness for our programming.

1012 So, we have certainly very exciting plans ahead. We feel that we have very strong programming to offer the Canadian audiences. In addition, we are continuing to work with the BDUs to basically change the way we are sold in packages. Traditionally, we were sold basically at the end of the selling cycle where we oftentimes competed with TMN, which his now Crave.

1013 Our hope is to move us up into theme packs of sorts to allow subscribers to have more access to our channel branding. So, again, I wish I can give you a guarantee. We have -- we certainly have very tight controls on our fiscal expenditures, and we will do our very best.

1014 THE CHAIRPERSON: I certainly am not asking for or looking for a guarantee. I am looking -- or we, I should say, not I, are looking for some assurance and something to provide us with confidence.

1015 I’m not trying to belabour the point nor put words in your mouth, but most of what you’ve described, and I appreciate the fulsome response, is not fundamentally different than the circumstances you’ve been operating under in recent years. Is it fair to say that it is the -- your presence on Amazon Prime and future presence with Apple that is the source of your optimism?

1016 MR. MCDONALD: That is certainly ---

1017 THE CHAIRPERSON: On the financial side. On the content side, I understand.

1018 MR. MCDONALD: That is certainly the catalyst to that. Again, we can’t set back on our laurels without imposing change to what we have done in the past. And, in all due respect, we have a change in management. We have new focus.

1019 In the past, we would probably never look at wanting to change the way we sold with the BDUs, or look at ads on our service. We are thinking outside the box. Certainly you have my commitment that I’m an endlessly tireless worker, and certainly my staff can attest to that. You know, we have -- all of our jobs are at stake.

1020 We realize that what we do will impact producers and content providers in the future. And, believe me, I do not want to go through another CCAA. The experience I have had is not pleasant, and I’m committed to the success of Super Channel.

1021 THE CHAIRPERSON: Okay, thank you. Members, any further questions from either of my colleagues? Counsel, any other further questions? No? Then, I thank you very much. I thank you for your candor and your responses to our many questions, and your patience throughout the day. Thank you for appearing before us. Madam Secretary.

1022 MR. MCDONALD: You’re welcome.

1023 MS. ROY: So, this officially concludes Phase III of Item 1. So, I guess we will adjourn for the day and back tomorrow at 9:00.

1024 THE CHAIRPERSON: Thank you. Thank you.

--- Upon adjourning at 3:35 p.m./

L’audience est close à 15h35


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