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Offrir un contenu dans les deux langues officielles
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Afin de rencontrer certaines des exigences de cette loi, les procès-verbaux du Conseil seront dorénavant bilingues en ce qui a trait à la page couverture, la liste des membres et du personnel du CRTC participant à l'audience et la table des matières.
Toutefois, la publication susmentionnée est un compte rendu textuel des délibérations et, en tant que tel, est transcrite dans l'une ou l'autre des deux langues officielles, compte tenu de la langue utilisée par le participant à l'audience.
TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TELECOMMUNICATIONS COMMISSION
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
CANADIAN TELEVISION POLICY REVIEW /
EXAMEN DES POLITIQUES DU CONSEIL
RELATIVES À LA TÉLÉVISION CANADIENNE
HELD AT: TENUE À:
Conference Centre Centre des conférences
Outaouais Room Salle Outaouais
Place du Portage Place du Portage
Phase IV Phase IV
Hull, Quebec Hull (Québec)
September 23, 1998 23 septembre 1998
Volume 1
tel: 613-521-0703 StenoTran fax: 613-521-7668
Transcripts
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
Contents.
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Transcription
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès-verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.
StenoTran
Canadian Radio-television and
Telecommunications Commission
Conseil de la radiodiffusion et des
télécommunications canadiennes
Transcript / Transcription
Public Hearing / Audience publique
Canadian Television Policy Review /
Examen des politiques du Conseil
relatives à la télévision canadienne
BEFORE / DEVANT:
Andrée Wylie Chairperson / Présidente
Vice-Chairperson, Radio-
television / Vice-
présidente, Radiodiffusion
Joan Pennefather Commissioner / Conseillère
Andrew Cardozo Commissioner / Conseiller
Martha Wilson Commissioner / Conseillère
David McKendry Commissioner / Conseillère
ALSO PRESENT / AUSSI PRÉSENTS:
Jean-Pierre Blais Commission Counsel /
Avocat du Conseil
Carole Bénard / Secretaries/Secrétaires
Diane Santerre
Nick Ketcham Hearing Manager / Gérant de
l'audience
HELD AT: TENUE À:
Conference Centre Centre des conférences
Outaouais Room Salle Outaouais
Place du Portage Place du Portage
Phase IV Phase IV
Hull, Quebec Hull (Québec)
September 23, 1998 23 septembre 1998
Volume 1
StenoTran
TABLE OF CONTENTS / TABLE DES MATIÈRES
PAGE
Presentation by / Présentation par:
CAB, Canadian Association of Broadcasters / 12
ACR, Association canadienne des radiodiffuseurs
CFTPA, Canadian Film and Television Production 236
Association / Association canadienne de
production de film et télévision
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1 Hull, Quebec/Hull (Québec)
2 --- Upon commencing on Wednesday, September 23, 1998
3 at 0905/L'audience débute le mercredi
4 23 septembre 1998 à 0905
5 1 THE CHAIRPERSON: Order, please. À
6 l'ordre, s'il vous plaît.
7 2 Bonjour, mesdames et messieurs, et
8 bienvenue à l'audience publique sur la révision des
9 politiques concernant la télévision canadienne. Good
10 morning, ladies and gentlemen.
11 3 Je suis Andrée Wylie, vice-
12 présidente, Radiodiffusion, et je présiderai cette
13 audience du CRTC. Permettez-moi de vous présenter mes
14 collègues: à ma gauche, Mme Joan Pennefather et
15 M. Andrew Cardozo; à ma droite, Mme Martha Wilson et
16 M. David McKendry. Je tiens également à souligner que
17 la présidente du CRTC, Mme Françoise Bertrand, encore
18 en convalescence, est tout de même avec nous grâce à
19 l'efficacité de la technologie moderne. Elle suivra
20 nos débats de très près et sera partie prenante des
21 décisions, tout comme d'ailleurs les autres membres du
22 Conseil, puisqu'il s'agit aujourd'hui d'une révision de
23 politiques.
24 4 Surely, you too have noticed that our
25 television policy review takes place during exactly the
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1 same year that television celebrates its 50th
2 birthday -- and the CRTC its 30th year of existence.
3 5 In half a century, television has
4 evolved at the speed of light. Just think of the
5 explosion of channels, the arrival of specialty and
6 per-per-view programming services, without forgetting
7 the Internet.
8 6 For its part, the Commission
9 undertook its last major review of the television
10 policy framework some 18 years ago. That's why, when
11 we developed our Vision action plan, we decided it was
12 timely to review thoroughly this regulatory framework.
13 7 The objective of this hearing is to
14 gather your opinions in order to adapt our approach to
15 today's reality, while allowing us to establish
16 parameters that will guide our future decisions. Our
17 action plan provides for this regulatory framework to
18 serve as a guideline against which we will examine
19 future applications for broadcasting licence renewals,
20 starting with CBC next spring, and CTV in the fall of
21 1999.
22 8 During this hearing, which will go on
23 until mid-October, the Commission will hear more than
24 100 oral presentations made by representatives from all
25 sectors of the industry, by numerous associations,
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1 individual citizens and television viewers. In
2 addition, 287 submissions have been filed with the CRTC
3 and will form part of the public record.
4 9 À partir de toutes ces informations,
5 nous cherchons à dégager des lignes directrices qui
6 nous aideront à répondre à plusieurs questions que je
7 regrouperai pour le moment en quatre grands thèmes:
8 10 Premièrement, en ce qui a trait à la
9 télévision conventionnelle privée de langue anglaise:
10 11 Comment le Conseil pourra-t-il
11 garantir la production et la diffusion d'une
12 programmation canadienne de qualité, surtout dans les
13 catégories sous-représentées, tout en rejoignant un
14 auditoire toujours plus vaste?
15 12 À ce chapitre, le Conseil veut
16 déterminer entre autres si, dans le futur environnement
17 télévisuel, la réglementation devrait continuer à
18 mettre l'accent sur les dramatiques, les émissions de
19 variétés, les émissions pour enfants et les
20 documentaires canadiens. Plus globalement, quel cadre
21 réglementaire pourrait encourager la production,
22 l'acquisition et la diffusion d'émissions canadiennes
23 commercialement viables au pays comme à l'étranger? Le
24 Conseil se penchera également sur la problématique
25 reliée à la production locale, question soulevée par de
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1 nombreux intervenants.
2 13 Deuxièmement, en ce qui a trait au
3 système dans son ensemble:
4 14 De quelle façon le conseil
5 pourra-t-il s'assurer que l'ensemble des joueurs soient
6 en mesure de s'adapter à un contexte en pleine
7 évolution où apparaissent de nouvelles technologies, de
8 nouveaux concurrents, de nouvelles structures
9 d'entreprise et où foisonnent de nouvelles occasions
10 d'affaires à l'échelle nationale et internationale? De
11 quelle façon le Conseil s'assurera-t-il que le système
12 de radiodiffusion canadien a accès au plus grand nombre
13 de sources de financement possible pour en faire
14 bénéficier les émissions de chez nous?
15 15 Troisièmement, for the French-
16 language market:
17 16 How can the regulatory framework
18 ensure that the unique characteristics of the French-
19 language market are maintained and recognized? To this
20 end, the Broadcasting Act states that English- and
21 French-language broadcasting, while sharing common
22 aspects, operate under different conditions and may
23 have different requirements. The regulatory framework
24 for television must take into account the linguistic
25 duality of Canada and the different realities under
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1 which English- and French-language broadcasters
2 operate.
3 17 It must not be forgotten that quality
4 French-language programs are produced in each and every
5 television genre. On the other hand, given the limited
6 size of this market, what approach should the
7 Commission choose to strengthen the ability of the
8 broadcasting system to finance the production of
9 French-language programs and ensure their profitability
10 in both domestic and international markets, while
11 serving the interests of francophone viewers?
12 18 For the regulator itself:
13 19 How can a regulatory framework
14 recognize the particular requirements of the different
15 elements of the system and balance the desire for
16 flexibility with the need to ensure equity and the
17 protection of the public interest?
18 20 In this regard, the Commission is
19 committed to establishing a balance between two
20 fundamental principles emanating from the Broadcasting
21 Act and leading to one overarching objective: that
22 quality Canadian programs, produced and broadcast by a
23 profitable programming industry, attract Canadian
24 viewers to informative and entertaining television
25 programming that reflects their distinctive
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1 characteristics. To use a favourite expression of the
2 Commission, let's say that we want to see "more
3 programs, better quality and increased profitability".
4 21 I would like to specify that the
5 Commission recognizes the importance of a current
6 phenomenon in the broadcasting industry -- that is
7 restructuring -- and that we wish to discuss this issue
8 as part of the broader policy framework.
9 22 The Commission notes, however, that
10 there have been a number of recently-announced
11 transactions, such as those involving Shaw
12 Communications, CanWest Global Communications, Western
13 International Communications, as well as Alliance and
14 Atlantis. The Commission wishes to stress that the
15 opportunity to consider various industry transactions
16 in depth will come later and that this hearing is not
17 the place to do it.
18 23 Therefore, we would ask that all
19 interested parties limit their focus during this
20 hearing, as we will, to the broader issues involved in
21 this policy review. We will all have an opportunity to
22 present our views on transfer and renewal applications
23 during future public processes, and we thank you in
24 advance for your co-operation in this matter.
25 24 Ainsi, nous poursuivrons ensemble un
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1 travail de réflexion déjà amorcé depuis la parution de
2 l'avis public et c'est en continuant à avoir recours à
3 un dialogue ouvert que nous essaierons de trouver le
4 cadre de réglementation qui répondra le mieux, à l'aube
5 du 21e siècle, aux objectifs énoncés dans la Loi sur la
6 radiodiffusion. Le Conseil sera donc en mesure
7 d'analyser tous les avis et commentaires reçus et de
8 rendre une décision au cours du printemps prochain.
9 25 I would like to extend a warm welcome
10 at this stage to a delegation with us today from South
11 Africa. The group includes representatives of the
12 South African broadcasting and telecommunications
13 regulatory authorities, the IBA and SATRA, the South
14 African Broadcasting Company, as CBC, and the
15 Department of Arts and Culture. The delegation is in
16 Ottawa for the next two weeks to observe this public
17 hearing and to meet with various government agencies
18 and private organizations who are involved in broadcast
19 and telecommunications activities.
20 26 Nous avons aussi avec nous
21 aujourd'hui et nous souhaitons la bienvenue à M. Hervé
22 Bourges, qui est président du Conseil supérieur de
23 l'audiovisuel en France.
24 27 Nous avons donc plusieurs nouveaux
25 amis avec nous.
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1 28 Je passe maintenant la parole à notre
2 conseiller juridique, Me Jean-Pierre Blais, qui vous
3 indiquera les procédures à suivre au cours de
4 l'audience.
5 29 Maître Blais.
6 30 Me BLAIS: Merci, Madame la
7 Présidente.
8 31 I have a number of procedural matters
9 to raise in no particular order.
10 32 First of all, I want to remind that
11 simultaneous translation is available in both
12 languages, and you can obtain headsets to follow that
13 at the front desk. Donc la traduction simultanée est
14 disponible, et vous pouvez obtenir des écouteurs à
15 l'extérieur de la salle pour suivre les délibérations.
16 33 To ensure that the recording and
17 transcription staff are able to produce an accurate
18 transcript of the proceeding, we would ask you to make
19 sure that your mikes are on when speaking -- and it is
20 usually indicated by a red light -- and turned off when
21 you are not speaking, to avoid feedback and other
22 problems. We would also ask, so that the transcript
23 staff can follow the matters accurately, to not speak
24 too quickly, take your time and speak clearly.
25 34 For those of you who wish to purchase
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1 copies of the transcripts, they will be available from
2 the court reporters and they will also be posted on the
3 Commission website in the usual manner.
4 35 The Commission proposes to sit from
5 9:00 a.m. to 12:30 and from 2:00 to 5:30 each day
6 throughout this proceeding. We will take break in mid-
7 morning and mid-afternoon. There may be exceptions to
8 this schedule in the hope of keeping as closely as
9 possible to the proposed order of appearance, but we
10 should be finishing around 5:30, although on some days
11 we may go past that.
12 36 This week the Commission will sit
13 full days until Saturday. Nous résumerons nos travaux
14 le lundi 28 à compter d'une heure et nous siégerons
15 toute la semaine jusqu'au samedi, sauf mercredi le 30
16 septembre. Pour la semaine suivante, nous reprendrons
17 nos travaux le 5. Il y a une possibilité qu'on siège
18 le 6, mais ce n'est pas cédulé pour le moment, ainsi
19 que le 9; mais on verra comment nos travaux
20 progressent.
21 37 We have a very full agenda and we
22 therefore ask your co-operation in focusing on the
23 issues and responding to the questions to ensure we
24 make efficient use of our time.
25 38 We also ask that cellphones be turned
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1 off and also would ask the journalists and cameramen to
2 not interfere unduly with the proceedings.
3 0915
4 39 I should also mention that there is a
5 public exam room where all the submissions that have
6 been filed are available. Even the non-appearing items
7 will be considered in deliberations as well as the
8 various regional consultations the Commission had
9 throughout the summer.
10 40 The Commission wishes to indicate
11 that it has added a number of items to the public
12 record. In particular, technical questions were asked
13 of the CAB by letter dated 15th September and they have
14 been asked to respond to those by the 15th of October.
15 41 In addition, the Commission has put
16 on the public record a survey prepared by Crop Four of
17 the Commission. Its a final report entitled "Audience
18 Viewing Habits and Attitudes with respect to
19 Programming in Canadian Content". Copies will be
20 available later on today, presumably this afternoon in
21 the public exam room. We ask you to register with
22 public exam room if you wish to have a copy.
23 42 As well, this morning the CAB has
24 provided some updates to their original filing of 30th
25 of September and that will also be added to the public
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1 record. They make corrections to their submissions.
2 43 At this point I would like to
3 introduce the staff team that is at the table with me,
4 Madame la Présidente. To my far left is Carole Bénard,
5 who will be acting as Secretary for the beginning of
6 the hearing. Diane Santerre will carry the ball later
7 on in the hearing process.
8 44 Next to her is Nick Ketcham who is
9 the Hearing Manager for this proceeding. To my
10 immediate left is Margot Patterson who is an articling
11 student who will be giving me a hand in this three week
12 hearing.
13 45 At the back table there are also
14 other members of staff who will be coming in and out as
15 various items come up that they have been involved in.
16 46 I believe that covers all points at
17 this time, Madame Wylie.
18 47 LA PRÉSIDENTE: Merci, Maître Blais.
19 48 Madam Secretary, would you call the
20 first appearing parties, please.
21 49 MS BERNARD: Thank you, Madam Chair.
22 50 The first presentation will be by the
23 Canadian Association of Broadcasters, TV Board. Mr.
24 McCabe will make the presentation.
25
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1 PRESENTATION/PRÉSENTATION
2 51 MR. McCABE: Thank you very much.
3 52 THE CHAIRPERSON: Good morning, Mr.
4 McCabe and ladies and gentlemen. We will invite you
5 now to present us your comments.
6 53 MR. McCABE: Good morning, Madam
7 Chair and Commissioners.
8 54 I would first like to welcome the
9 Vice-Chair Wylie to this first hearing in your new
10 capacity as Vice-Chair, Broadcasting, and congratulate
11 you on your appointment.
12 55 As well, I would like to send out our
13 best wishes to Françoise Bertrand. Françoise, I know
14 you would have liked to be with us here today. We hope
15 you get well soon and do indeed rejoin us. Perhaps you
16 can console yourself with the thought that today at
17 home you are the most important person in the whole
18 broadcasting system. You are a television viewer.
19 56 THE CHAIRPERSON: Better make this
20 good Canadian content.
21 57 MR. McCABE: How can we miss with
22 her?
23 58 My name is Michael McCabe. I am
24 President, CEO, of the Canadian Association of
25 Broadcasters. With me today to my right is Jim
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1 Macdonald who is President, CEO, of WIC Television
2 Limited and Chair of the CAB Television Board.
3 59 To the left is Daniel Lamarre,
4 President and CEO of Group TVI Inc. and a member of our
5 television board. Peter Miller is to my immediate
6 left. He is our senior Vice-President and general
7 counsel.
8 60 Behind us are CAB Vice-President,
9 Television, Rob Scarth and Tandy Greer Yull, our
10 Manager for Research and Societal Issues at the CAB.
11 61 Assisting us as well are our outside
12 consultants, led by Peter Lyman of
13 PricewaterhouseCoopers, whose team will be more fully
14 introduced later in the presentation.
15 62 We greatly appreciate the opportunity
16 you have provided us to open this policy proceeding on
17 Canadian television.
18 63 The world around us is changing
19 rapidly. As it changes, there is a growing need to
20 reflect upon and consider how public policy must
21 change. Over the last six years, the Commission has
22 held major policy proceedings on the structure of the
23 TV system, TV licence renewal hearings, the role of the
24 Information Highway, competition and contribution
25 within the distribution sector, the role of TV
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1 Networks, and now television policy more generally.
2 64 This hearing gives us all a chance to
3 review and confirm what works; to refine those elements
4 we want to work better and to discard those things that
5 we think are no longer necessary and that time and a
6 developing marketplace have passed by.
7 65 We don't think we are here to rewrite
8 the objectives of the Broadcasting Act or to throw out
9 30 years of public policy and start all over again.
10 This hearing is an opportunity to make a system that
11 works work better.
12 66 We also think this hearing gives the
13 CRTC a unique opportunity to look at the entire system;
14 conventional television, specialty, pay, per-per-view,
15 private and public broadcasting, production,
16 distribution and the role of government including the
17 CRTC.
18 67 The Commission starts with three
19 great advantages. First, the Canadian television
20 system is a recognized success story; second, a
21 regulatory framework that has worked and delivered what
22 it set out to do; and third, the strongest ever factual
23 and information base on the business of broadcasting
24 and production today.
25 68 Remarkably, there is a broad
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1 consensus in these three areas among the parties that
2 will be appearing before you over the next three weeks.
3 And yet, the choices the Commission faces in this
4 hearing could not be more stark.
5 69 The choices between continuing on the
6 path toward incentive-based regulation, which rewards
7 risk taking or returning to a more traditional model of
8 regulation where the focus is almost exclusively on
9 industry spending or exhibition "requirements".
10 70 Second, developing a policy
11 environment that helps make Canadian programming a
12 better business opportunity for all sectors or looking
13 instead at Canadian programming as simply a
14 contribution to the system broadcasters must make
15 irrespective of business realities.
16 71 Continuing to support the diversity
17 in the system that has served Canadians so well or
18 moving to a one size fits all approach.
19 72 Recognizing the need for a number of
20 complementary and interdependent CRTC business and
21 government actions as a means of accomplishing our
22 common goals or grasping for the simple solution.
23 73 Helping Canadian companies prepare
24 for the onslaught of the digital borderless world with
25 a more incentive-based model of regulation or seeing
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1 this hearing as the last opportunity to increase
2 regulatory obligations before that onslaught.
3 74 Looking at this process as an
4 opportunity to ask ourselves how we provide Canadians
5 with the television they want, or as a chance simply to
6 respond to the interests and the appetites of the
7 independent production community.
8 75 We are here with one single, vital
9 message. We want more Canadians watching Canadian
10 television.
11 76 We need a policy framework for the
12 system that supports the development of a business
13 environment in which Canadian programming can succeed
14 for everyone and that concentrates on how the system
15 can deliver on quality, not just quantity, for our
16 audiences.
17 77 The government to date, along with
18 previous Commissions, has focused solely on inputs --
19 more hours, more dollars.
20 78 We need to turn the lens around and
21 not just look at the inputs of dollars and hours but at
22 the results, audiences. By shifting the focus, we can
23 start to see the makings of a policy framework that is
24 capable to dealing with everyone's objectives:
25 79 First and foremost, of course, the
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1 objectives of Canadians to see quality television.
2 Second, the objectives of broadcasters to support and
3 exhibit Canadian programming in a way that enables them
4 to financially succeed at it. Third, the objectives of
5 producers to make their businesses successful.
6 80 Viewing is the key that ties all of
7 this together. Viewing is what really counts. Not
8 just how many hours we have or how many dollars we
9 spend. These are just proxies for what should be the
10 real goal -- more Canadians watching, being informed by
11 and, most importantly, enjoying Canadian television.
12 81 This is why we have said increased
13 viewing to Canadian television is our key goal for the
14 system.
15 82 Why should we consider a new
16 approach? The answer is clear, we don't have any other
17 choice. The world we expect to see unfold over the
18 next five to ten years is not the world of Canadian
19 television of 15 years ago.
20 83 In order to understand what the
21 future holds for Canadian television, we commissioned
22 PricewaterhouseCoopers and TD Securities to carry out a
23 comprehensive, in-depth scan of the television
24 environment for the next five to ten years.
25 0925
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1 84 We commissioned this study to create
2 what we hope is a useful reference tool for everyone in
3 this process. While the study is very detailed and
4 covers every aspect of the system, we believe the
5 Commission might benefit from a brief review of the key
6 conclusions.
7 85 I would now ask Peter Lyman, Partner
8 at PricewaterhouseCoopers, to introduce the members of
9 his team and to present the key findings of his study.
10 86 MR. LYMAN: Thank you, Michael.
11 87 As Michael said, I am Peter Lyman and
12 I am responsible for PricewaterhouseCoopers' consulting
13 practice and information communications, media and
14 entertainment.
15 88 The PricewaterhouseCoopers team, in
16 association with the TDSI, are pleased to be part of
17 this historic programming hearing. We are here to
18 present, as Michael said, some of the findings of the
19 environmental scan.
20 89 We feel that the scan is a landmark
21 study of the Canadian television system. It examines
22 how the challenges to the Canadian television program
23 industry were met in the last decade, i.e. the past.
24 It then projects how future trends will affect the
25 structure and economics of the Canadian broadcasting
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1 system in the short and in the long term.
2 90 We have brought together with us the
3 PricewaterhouseCoopers and TDSI professionals who
4 conducted the study. They are leading specialists in
5 the five major areas of the scan we want to emphasize
6 and document. Immediately to my right is Debra
7 McLaughlin, a well-respected Toronto market research
8 and television, radio advertising analyst. Debra has
9 had assignments in just about every major radio and
10 television broadcaster and has sat on the boards of
11 several industry and professional associations.
12 91 Debra will highlight how Canada has
13 created a diversified and successful broadcasting
14 system.
15 92 Second, next to Debra, is Dr. Rebecca
16 Goldfarb, our expert in international trade, with
17 special emphasis on the cultural industries. Rebecca
18 has prepared a separate report, submitted by the CAB,
19 that compares the Canadian regulatory regime and
20 programming support policies with those in seven other
21 countries.
22 93 Rebecca will document how the
23 Canadian broadcasting system no longer operates
24 independently from the global economy.
25 94 Third, next to Rebecca, is Glenn
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1 Suart, who has been involved in virtually every
2 broadcasting assignment for PricewaterhouseCoopers and
3 its predecessor firms over the last six years. Glenn
4 will address the economies of program production from
5 the broadcaster perspective and explain how Canadian
6 drama programming projects are limited by the
7 programming funding gap.
8 95 Fourth, next to Glenn, is Stuart
9 Jack. Stuart has extensive experience in market
10 research and strategic planning for domestic and
11 foreign and broadcasters and signal distributors. At
12 one stage in his career in fact he was part of the
13 broadcasting analysis group at the Commission, so some
14 of you may know him. Stuart will highlight how
15 broadcasters are challenged to invest now in order to
16 prepare for the digital world.
17 96 Fifth, next to Stuart, is Scott
18 Cuthbertson, a senior equity analyst with TD
19 Securities, a firm recently ranked as the top research
20 house in the investment sector. Scott will address
21 some of the ramifications of historic and recent market
22 trends affecting broadcaster access to capital and the
23 expectations of the investor.
24 97 Debra, would you start them off.
25 98 MS McLAUGHLIN: Thank you, Peter, and
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1 good morning.
2 99 By traditional measures, such as grow
3 in services, hours of exposition of programming and
4 expenditures, the Canadian broadcasting system has been
5 a tremendous success. The number of conventional and
6 specialty stations that the average Canadian viewer has
7 access to has increased almost exponentially in the
8 past three decades.
9 100 Using Ottawa as an example, the
10 number of Canadian signals available to viewers jumped
11 700 per cent. The number of foreign signals increased
12 in a commensurate fashion.
13 101 Similarly, the number of Canadian
14 programming hours -- I am going to pause here and wait
15 for the slide to catch up. It is there. All right.
16 102 Similarly, the number of Canadian
17 programming hours available to Ottawa viewers increased
18 sixfold over the same period.
19 103 Expenditures on Canadian programming
20 expressed on a system-wide basis grew threefold over
21 the period.
22 104 However, these successes of the
23 Canadian broadcasting system have not been reflected in
24 viewership to Canadian programming. Viewing trends to
25 Canadian programming over the last five years have been
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1 basically flat.
2 105 As shown in the accompanying chart of
3 Nielsen Data, the share of viewing to Canadian
4 programming has declined. This is true for both French
5 and English broadcasters. The share of viewing to
6 Canadian under represented programming categories 7, 8
7 and 9 is flat as well.
8 106 We have used Nielsen Data as it is
9 generally considered to be more representative at the
10 system level. However, Nielsen Data with this kind of
11 break down is not available earlier than 1992. The
12 trend over the longer period, 1985 to 1996, using BBM
13 data, also shows that viewing to Canadian programming
14 is relatively flat.
15 107 On this chart the increases in the
16 various measures of success are compared with that of
17 viewership by using an index that sets the 1985 data
18 uniformly to 100. By this method it becomes obvious
19 that the massive efforts by the Canadian broadcasting
20 system have not been rewarded by corresponding
21 increases in viewership.
22 108 The failure to increase viewing is
23 even more marked when the focus is placed on English
24 TV. Viewing to all Canadian programming on English
25 services dropped slightly, while viewing of under-
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1 represented categories increased slightly.
2 109 Viewing to all Canadian programming,
3 as well as under-represented categories, decreased on
4 French services.
5 110 Now let's examine how the roles of
6 conventional and specialty services differ in the
7 Canadian broadcasting system. As demonstrated by this
8 chart, the principal source of revenue for conventional
9 broadcasters is advertising. Eighty-eight per cent of
10 their revenue comes from air-time sales. For
11 specialties, the revenue comes from other sources.
12 Specialties are paid for their distribution, while
13 conventional broadcasters pay for their own.
14 111 While viewing to television across
15 all demographics has remained relatively unchanged, the
16 amount of time spent with Canadian conventional
17 services has declined. In 1987 the share for all
18 Canadian conventional was 71 per cent. The
19 introduction of new specialty services, both U.S. and
20 Canadian, the strength of the Fox Network in the U.S.
21 and its subsequent addition to many cable services and
22 the increased penetration of VCR have all served to
23 take viewing hours from traditional sources.
24 112 In 1997 the key source of revenue for
25 conventional stations, that being audience share, had
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24
1 been eroded by 11 points. Canadian conventional then
2 accounted for 60 per cent of the viewing. These shifts
3 create a considerable challenge to the revenue base of
4 Canadian conventional TV and its ability to support
5 high cost Canadian production.
6 113 Rebecca.
7 114 DR. GOLDFARB: Thank you, Debra.
8 115 Canadian producers and broadcasters
9 are operating globally. Film and television export
10 revenue is increasing substantially. The chart shows
11 growth in exports was an astounding 287 per cent
12 between 1990-91 and 1995-1996, from $81 million to $321
13 million. Despite the lack of incentives, Canadian
14 broadcasters are active in international markets in
15 three distinct ways. They are: One, exporting
16 Canadian programs; two, exporting Canadian services,
17 such as brands and formats and, three, investing
18 directly in foreign markets.
19 116 As you can see from the picture
20 above, CHUM, CBC and Global are examples of Canadian
21 broadcasters who have been active internationally.
22 Broadcasting is more than a domestic business. It is
23 global. Export and investment activity ensures that
24 broadcasters remain competitive internationally and
25 thus retain the strength they need to continue to
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1 provide Canadian content to the domestic market.
2 117 In this increasingly global
3 broadcasting environment, foreign broadcasters and
4 distributors are essential for Canadian production.
5 Canada is reliant on foreign broadcasters and
6 distributors because they invest heavily in Canadian
7 production. Even CAFDE certified productions obtained
8 one-third of their financing from foreign sources, as
9 shown by the above chart.
10 118 Canada is a small market. As a
11 result, producers and broadcasters are going global in
12 order to achieve the appropriate levels of funding for
13 making quality Canadian content for both domestic and
14 foreign markets.
15 119 While Canadian broadcasters do
16 participate globally, Canadian broadcasters operate in
17 a domestic market that is relatively highly controlled.
18 The Canadian regulatory system has encouraged this
19 domestic focus through a number of measures, including
20 content quotas.
21 120 Only Australia has domestic content
22 requirements that come close to the requirements in
23 Canada. The French, who have been the most strident
24 among EU members about enforcing the 50 per cent where
25 practical rule, still only requires 40 per cent
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1 domestic content.
2 121 Protectionist measures, such as
3 content quotas, may well be challenged by new rules
4 that are emerging to govern nations' trade in
5 investment relations. More and more trade and
6 investment agreements are being negotiated that open
7 borders and create opportunities for broadcasters.
8 These include the examples presented in the slide, the
9 Multilateral Agreement on Investment, the Free Trade
10 Agreement of the Americas and the World Trade
11 Organization.
12 0935
13 122 Liberalization has put pressure on
14 Canada's domestic regulations. Also, the domestic
15 environment must take into account the benefits of
16 liberalization. If the domestic, economic and
17 regulatory environment is appropriate, then Canadian
18 broadcasters will not miss trade and investment
19 opportunities. Without the revenues from participation
20 in the global market, Canadian programming will be more
21 difficult to produce.
22 123 Now to you, Glenn.
23 124 MR. SUART: Thank you, Rebecca, and
24 good morning.
25 125 Expectations on the volume, quality
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27
1 and exhibition of Canadian drama are rising, but
2 Canadian drama ambitions are limited by the funding
3 gap. It's basically a simple case of economics. On a
4 fully allocated basis, for every dollar that English-
5 language broadcasters generate in advertising in
6 revenue, they lose $1.15 on Canadian drama programming
7 and 46 cents on all Canadian programming, including
8 news.
9 126 For French-language broadcasters, the
10 operating margin is a meagre six cents, but let me put
11 it another way. The good quality domestic Canadian
12 drama, such as "Due South" or "Traders", costs about $1
13 million an hour to produce. Unfortunately, the bottom
14 line is that broadcasters could lose $75,000 per hour
15 airing such programming since the advertising revenue
16 they generate is much less than licensing fee.
17 127 Alternatively, a Canadian-produced
18 series designed for a more international market such as
19 a "Sci Factor" or "Nikita" generally cost broadcasters
20 less in licence fees and they generate somewhat more
21 revenues, so broadcasters make a slight operating
22 margin. However, you can see from the chart just how
23 important the U.S. programs are to the overall health
24 of broadcasters generating sometimes $120,000 profit
25 per hour, which helps cover operating costs and, more
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1 importantly, Canadian programming losses.
2 128 The situation is less stark for
3 French-language broadcasters, but basically the overall
4 story is much the same. Drama costs less to produce,
5 but revenues are much less as well and foreign programs
6 are still essential to the financial health of French-
7 language broadcasters.
8 129 Broadcasters lose money on Canadian
9 drama, not through any lack of effort. They have
10 worked hard to make drama viable. They actively
11 promote programs across their on-air schedules with
12 over $100 million worth of air time. Who watches
13 Global and doesn't know that "Traders" is on Thursday
14 at 10:00? You almost can't escape that kind of
15 promotion. Moreover, broadcasters combined spend $7
16 million annually on third party advertising just for
17 category 7, 8 and 9 programming on such things as TV
18 listings, newspaper ads, radio spots, et cetera. This
19 $7 million does not count as a Canadian programming
20 expense.
21 130 But what's the largest constraint on
22 Canadian drama? Well, existing funds are over-
23 stretched. In 1997, out of $182 million in program
24 funding, the CTCPF spent about $113 million in drama
25 programming, of which $30 million went to private TV
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29
1 broadcasters for their drama projects. With six
2 corporate broadcast groups, that amounts to just about
3 $5 million per year per group, barely enough to sort of
4 fund one flagship drama series.
5 131 In the absence of increased funding,
6 new spending by broadcasters will not be economical.
7 Even if broadcasters put up more money for a new
8 series, there will still be a $300,000 to $500,000 gap
9 in the budget where the CTCPF would be. If
10 broadcasters are expected to fill this gap, then there
11 will require changes in the system that will allow them
12 to recover what otherwise would be a direct hit to the
13 bottom line. Clearly, producers face risk in
14 developing programming, but broadcasters lose money, a
15 lot of money now and, more importantly, these losses
16 will increase exponentially with further requirements.
17 132 One last thing. In the end, it all
18 comes back to viewing. Attracting a sizeable audience
19 share or the share of all viewers watching television
20 at any one time is an increasing challenge for Canadian
21 drama programming. A hit show like "Traders" obtains,
22 at best, a 4 share in Toronto, despite all the
23 promotion and a production budget of $1 million per
24 episode, yet it has to compete against a show like "ER"
25 that costs twenty times as much, $20 million Canadian
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30
1 per hour, and generates a 35 share.
2 133 The bottom line is production costs
3 for Canadian programming are going to have to keep
4 increasing if they are going to remain competitive in
5 terms of audience share with the higher production cost
6 U.S. programming. Canadians will watch Canadian
7 television, but the funding gap is a severe constraint
8 on the production of quality programming.
9 134 Stuart?
10 135 MR. JACK: Thank you, Glenn.
11 136 The transition to digital is
12 underway, but significant investment remains. In the
13 accompanying chart, the elements on the left represent
14 the investments which broadcasters have undertaken over
15 the last 10 years. The elements on the right represent
16 new investments required by broadcasters.
17 137 In the 1980s, broadcasters invested
18 in computerized servers for programming commercials.
19 Starting in the late 1980s and early 1990s digital
20 cameras were introduced in the studios, digital
21 consoles and edit suites and digital-ready equipment,
22 such as antennas, added at transmitter sites. This
23 investment in digital equipment was largely financed by
24 the ongoing operations of the broadcasters. Without
25 new investments, broadcasters will be the only analog
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1 players in a digital world. However, this next phase
2 in the digital transition process carries with it
3 substantially higher financial risk because there is no
4 prospect of early return on investment.
5 138 The cost to broadcasters of producing
6 wide-screen product is still being assessed.
7 Broadcasters will be required to operate parallel
8 analog and digital transmitters for at least 10 years
9 and there will be no operational savings. Finally,
10 converting to over-the-air transmission facilities will
11 cost in the range of $500 million. Broadcasters must
12 develop new services to pay for the digitization of the
13 transmission facilities. These new services will
14 themselves require substantial investment, yet their
15 success is uncertain and even the most promising of
16 them will require a substantial period before they
17 generate significant revenues.
18 139 There is a range of competitive
19 threats and opportunities facing broadcasters in the
20 digital world: Digital distribution roll-out by
21 Canadian BDUs; second, the speed of U.S. digital roll-
22 out; and, finally, digital entertainment. Let's take a
23 look at digital distribution projections for the
24 Canadian BDUs. The accompanying chart shows that
25 digitization by the year 2000 should be well underway
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1 not only in cable, but also amongst its competitors,
2 MDS and DTH.
3 140 U.S. broadcasters and distributors
4 are pursuing an aggressive digital roll-out schedule.
5 Three new U.S. HDTV DTH services are planned for this
6 year alone. Broadcasters in the major U.S. cities in
7 the border markets of Seattle, Buffalo and Detroit are
8 scheduled to go digital by 1999. The superior picture
9 quality for the U.S. digital services will create an
10 incentive for Canadian viewers to bypass the Canadian
11 regulatory framework, Canadian viewers who expect
12 domestic TV services to provide the same digital
13 quality as U.S. services.
14 141 Digital entertainment is not only
15 about the arrival of digital signals from U.S.
16 broadcasters, it also includes a range of entertainment
17 choices which will compete directly with Canadian
18 broadcasters for consumers' time, including digital
19 video home theatre discs, new amphitheatre movies, web
20 TV. Broadcasters' over-the-air transmission facilities
21 are just one component in the distribution chain. BDUs
22 must upgrade their distribution facilities and
23 consumers must switch over to digital television sets.
24 However, digital TV will arrive sooner rather than
25 later, driven by new channels, competitively priced
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1 sets and DVD.
2 142 While the Commission will deal with
3 multimedia in a severed hearing this fall, a few points
4 bear directly on the broadcaster's financial stability.
5 The Internet is an advertising, marketing and e-
6 business medium which competes directly with
7 broadcasters' viewing time and advertising revenues.
8 As can be seen in the accompanying table, when we
9 compare TV on the Internet in their third year of
10 operation, the Internet actually drew more revenue than
11 did television.
12 143 Multimedia applications will provide
13 broadcasters with new opportunities for exposition and
14 branding of their programming, as well as new revenues.
15 However, there is no business model for content on the
16 Internet and broadcasters will have to make significant
17 investments over a long period before seeing a return,
18 if any, on their new investment.
19 144 Thank you. I will turn you over to
20 Scott Cuthbertson from TDSI.
21 145 MR. CUTHBERTSON: Good morning. The
22 key theme in these content hearings appears to be where
23 to get the money to finance more and better Canadian
24 programming. Many groups point to the success of the
25 broadcasters of the past two years, the implication
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34
1 being that they should have new commitments imposed
2 upon them by the regulator to transfer some of this
3 wealth to other sectors.
4 146 I believe a strong broadcasting
5 system of international stature is to the benefit of
6 all stakeholders introducing a negative fundamental
7 change to the industry at a time when many investors
8 are already moving money out of the sector due to its
9 economic sensitivity would reduce both financial
10 performance and our access to the capital needed for
11 growth and digitization. If Canadian broadcasters are
12 to be relied upon, to be important customers of
13 Canadian content, it's not in anyone's long-term
14 interest to provide them with additional challenges on
15 the eve of what's proving to be a very difficult
16 period.
17 147 As we can see in the chart,
18 television broadcasting is both a seasonal and cyclical
19 business highly dependent upon the health of the
20 economy. Currently, changes in gross domestic product
21 and television advertising spending tend to move
22 together. In the next slide we can see that television
23 advertising spending is even more closely related to
24 consumer spending. As this chart illustrates, TV ad
25 spend tends to lag consumer spending by about 6 to 12
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35
1 months outstripping it in good times and under-
2 performing in bad.
3 0950
4 148 With the recent economic turmoil, the
5 outlook for the Canadian economy has turned suddenly
6 more negative, dimming the prospects for the
7 broadcasting community. Our internal forecast for
8 world growth next year is now 1 per cent. Anything
9 below 2 per cent is technically a recession, and to put
10 it in context, in 1991 the world growth was 1.8 per
11 cent. To make matters worse, slower economic growth
12 driving lower television advertising spending may be
13 exacerbated by a weaker Canadian dollar, which makes it
14 more expensive for broadcasters to buy the most popular
15 foreign programming.
16 149 Deteriorating economic conditions
17 worldwide have probably ended the biggest bull market
18 in history, with most stock markets off sharply since
19 the beginning of the summer. While this has been a
20 widespread phenomenon, the cyclicality of the
21 broadcasting business and its correlation with economic
22 conditions make investment in the sector less defensive
23 than many other areas.
24 150 Since June the combined value of the
25 top five broadcasting stocks has declined by $1.8
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36
1 billion, erasing almost 26 per cent of their value,
2 while the TSE 300 during the same period --
3 151 THE CHAIRPERSON: Perhaps we can try
4 to ascertain whether that's the recession at our doors
5 or a false alarm, and we will resume once we have
6 established that.
7 --- Short pause/Courte pause
8 152 THE CHAIRPERSON: Excuse me, we will
9 adjourn for 10 minutes, until we know what the problem
10 is.
11 --- Short pause/Courte pause
12 153 MR. BLAIS: We will adjourn until the
13 matter of the alarm gets cleared up. So we will
14 adjourn for at least 10 minutes.
15 --- Short recess at/Courte suspension à 0955
16 --- Upon resuming at/Reprise à 1010
17 154 THE CHAIRPERSON: Order, please,
18 ladies and gentlemen. À l'ordre, s'il vous plaît.
19 Est-ce qu'on peut m'entendre dans la salle?
20 --- Short pause/Courte pause
21 155 Order, please. There seems to be a
22 problem with this mike. Can people hear me now? No?
23 Well, for the moment, as long as we can hear the
24 applicant --
25 156 MR. McCABE: Or the supplicant.
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37
1 157 THE CHAIRPERSON: The supplicant.
2 --- Short pause/Courte pause
3 158 THE CHAIRPERSON: Apparently, our
4 economic situation has now improved, so you may
5 proceed.
6 159 MR. CUTHBERTSON: Thank you very
7 much.
8 160 Before I was gonged, I was basically
9 outlining the fairly grim situation that we appear to
10 be facing and the sensitivity of the broadcast sector
11 to the economy ---
12 --- Technical difficulties/Difficultés techniques
13 161 THE CHAIRPERSON: Excuse me, I will
14 have to interrupt you again. Apparently, now the
15 stenographer does not have any sound, so we will have
16 to wait and see when that can be restored.
17 --- Short pause/Courte pause
18 162 THE CHAIRPERSON: It appears that we
19 are a long way from digital!
20 163 If you think that this is a good
21 idea, and it may be, perhaps you should start your
22 presentation from the top, assuming someone can put
23 your slides back in order, because the flow of it is
24 completely altered now.
25 164 And can people hear me? Yes?
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38
1 Because apparently there was a problem with this
2 microphone as well. So hopefully we now have our
3 engineering concerns ironed out.
4 165 Perhaps you can start from the top,
5 if you wish.
6 166 MR. CUTHBERTSON: Thank you very
7 much.
8 167 A key theme in the content hearings
9 appears to be where to get the money to finance more
10 and better Canadian programming. Many groups point to
11 the success of the broadcasters over the past two
12 years, the implication being that they should have new
13 commitments imposed upon them by the regulator to
14 transfer some of this wealth to other sectors.
15 168 I believe that a strong broadcasting
16 system of international stature is to the benefit of
17 all stakeholders. Introducing a negative fundamental
18 change to the industry at a time when many investors
19 are already moving money out of this sector due to its
20 economic sensitivity would reduce both financial
21 performance and access to the capital needed for growth
22 and digitization. If Canadian broadcasters are to be
23 relied upon to be important customers of Canadian
24 content, it is not in anybody's best interest, long
25 term, to provide them with additional challenges on the
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39
1 eve of what is turning into a very difficult period.
2 169 Television broadcasting is both a
3 seasonal and cyclical business highly dependent upon
4 the health of the economy. As we can see from this
5 chart, changes in gross domestic product and television
6 advertising spending tend to move together.
7 170 Television advertising spending is
8 even more closely correlated to consumer spending. As
9 this chart illustrates, TV ad spending tends to lag
10 consumer spending by six to 12 months outstripping it
11 in good times and under-performing in bad.
12 171 With the recent economic turmoil, the
13 outlook for the Canadian economy has turned decidedly
14 more negative, dimming the prospects for the
15 broadcasting community. Our internal forecast for
16 world growth next year is now 1 per cent. That's
17 significant, because anything below 2 per cent is
18 technically a recession; to put it in context, in 1991
19 the world economic growth was 1.8 per cent. To make
20 things worse, slower economic growth driving lower
21 television advertising spending may be exacerbated by a
22 weak Canadian dollar, which makes it more expensive for
23 broadcasters to buy the most popular foreign
24 programming.
25 172 Deteriorating economic conditions
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1 worldwide have probably ended the biggest bull market
2 in history, with most stock markets off sharply since
3 the beginning of the summer. While this has been a
4 widespread phenomenon, the cyclicality of the
5 broadcasting business and its correlation with economic
6 conditions make investment in that sector less
7 defensive than many other areas in a downturn.
8 173 Since June the combined value of the
9 top five broadcasting stocks has declined by $1.8
10 billion, erasing almost 26 per cent of their value,
11 while the TSE 300 is off about $135 billion, about 20
12 per cent of its former value. Many astute industry
13 watchers may be less than sympathetic at this reversal
14 of fortunes because this sector has created more value
15 over the past two years than during the previous five.
16 174 I think it is important to remember
17 that this value was created by the rare convergence of
18 three very important positive trends: number one, a
19 healthy economy driving strong advertising growth;
20 number two, the evolution of the major players from
21 regional to national station groups; and, number three,
22 the support of a progressive regulator who made new
23 licences available, approved consolidation activity and
24 generally allowed this group to move towards better
25 operational efficiencies. Publicly-trade
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41
1 175 Canadian broadcasting stocks have
2 also matured during this period, attracting more
3 interest from sophisticated investors, both
4 domestically and abroad, and shouldering the
5 considerable additional responsibilities that go along
6 with that transition. Unfortunately, the current
7 negative trend in economic and capital markets will
8 most likely put this period of development on hold.
9 The fact is that broadcasting stocks are not very
10 defensive, explaining why they have done worse than the
11 other sectors during this correction.
12 176 In tough markets, fund managers
13 gravitate towards big cap stocks with high dividend
14 yields and good insulation from economic downturns,
15 selling sectors that do not have these attributes.
16 Fine. So the stocks are down; that's not exactly news.
17 The point is that while companies may not change much
18 in the short term when the stock prices are sagging, if
19 these values remain low and/or there is a negative
20 fundamental change that keeps the outlook unpromising,
21 it becomes harder and/or more expensive to raise the
22 capital needed to continue to grow the business. We
23 are already seeing this. Access to new public equity
24 has virtually dried up over the last month, with the
25 number of new stock issues down sharply.
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1 177 Another very important source of
2 capital for the communications industry, the high yield
3 bond market, has been hit hard as well for the same
4 reasons, and not surprisingly the bank lending market
5 has also tightened considerably. The reason for this
6 is simple: Whereas only a few short months ago mutual
7 funds managers would get to work Monday morning and
8 there would be like a half million dollars that they
9 had to find some place to invest, so they were
10 constantly on the outlook for new opportunities, now
11 people are selling their mutual funds, redeeming them,
12 and those same fund managers get to work every Monday
13 morning and all of a sudden we need a million dollars
14 because people have redeemed their funds. So they have
15 to decide what to sell. They are making very tough
16 choices in a very tough market, and the flow of cash is
17 reversed.
18 178 So why should the CRTC or other
19 stakeholders care about all this? Virtually all
20 businesses are impacted to some degree by the state of
21 the economy. Economies go through cycles and stock
22 markets do as well, and there is very little we can do
23 about it. Agreed. We simply believe that refraining
24 from placing new challenges in front of the
25 broadcasters at the beginning of an already difficult
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1 period best serves all stakeholders. Obviously,
2 suppliers have a better chance of doing business with a
3 healthy client than with one whose fortunes are on the
4 wing.
5 179 We must be cognizant that every
6 dollar in EBITDA generation translates into roughly $10
7 in public market value; conversely, anything that
8 lowers EBITDA levels has a highly leveraged negative
9 impact, erasing $10 worth of value. It makes sense to
10 build on what has already been accomplished from a
11 position of strength rather than weakening the overall
12 structure.
13 180 If we were looking to the
14 broadcasters to help support important cultural
15 objectives, let's not make it fundamentally more
16 difficult for them to buy, and properly promote,
17 Canadian content.
18 181 Peter.
19 182 MR. LYMAN: As you have heard from
20 these industry experts, some more than once, the
21 Canadian broadcasting system has recorded some notable
22 successes. However, if you can recall, back to Debra's
23 presentation, the key indicator of viewership and of
24 particular viewing to under-represented categories by
25 English-speaking Canadians, the massive efforts have
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1 not had a commensurate return.
2 183 We have also shown in this
3 presentation the range of factors in the environment
4 that create future uncertainties in the broadcasting
5 system, such as trade, technology, vertical integration
6 and less than robust market conditions. These factors
7 should be taken into account in decisions flowing from
8 this hearing.
9 184 Thank you.
10 185 MR. McCABE: Thank you, Peter, and
11 thanks to your colleagues as well.
12 186 To sum up what we have just heard,
13 there are five critical lessons from this study:
14 187 First, the Canadian broadcasting
15 system is made up of a highly diverse combination of
16 niche and conventional services. By traditional
17 measures -- hours, dollars and number of services --
18 the system has been phenomenally successful, but in
19 terms of viewing, we have done little more than hold
20 our own.
21 188 Second, the Canadian broadcasting
22 system no longer operates in isolation from the global
23 economy and as markets become more open, our ability to
24 rely on traditional regulatory approaches will be under
25 challenge.
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1 189 Third, the Canadian entertainment
2 production ambitions of the system are limited by its
3 financial resources and the availability of funding
4 support. Requiring broadcasters to lose even more
5 money on Canadian programming is not an answer.
6 190 Fourth, digital TV is real and
7 broadcasters must start dealing with it now or risk
8 becoming an island of analog in a sea of digital,
9 unable to continue to reach all Canadians.
10 191 Fifth, the business of broadcasting
11 is closely linked to the economy and a demanding
12 investor environment. We can't afford to ignore these
13 realities.
14 192 Daniel.
15 193 MR. LAMARRE: Thank you, Michael.
16 194 Devant tous ces défis, il est bon de
17 nous rappeler ce que nous avons accompli, et nos
18 réalisations sont très importantes.
19 195 Dans l'allocution qu'elle a prononcée
20 à l'occasion du congrès de l'ACR de 1996, la présidente
21 du CRTC a énuméré les facteurs qu'elle considérait
22 comme les principaux indices de réussite du système
23 canadien de télédiffusion.
24 196 Nous avons obtenu d'excellents
25 résultats en ce qui a trait aux indices qui font partie
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1 du système, à savoir les sommes investies et les heures
2 de diffusion; toutefois, nous n'avons pas réussi aussi
3 bien dans l'ensemble sur le plan des indices externes
4 comme les parts d'écoute et le rendement sur les
5 investissements. Voici donc ces neuf indices de
6 réussite:
7 197 Premier indice: Le nombre d'heures
8 de séries dramatiques, d'émissions pour enfants et
9 d'autres émissions canadiennes de divertissement
10 présentées aux périodes de grande écoute. Entre
11 19 h 00 et 23 h 00, le nombre total d'heures
12 d'émissions canadiennes diffusées a augmenté depuis
13 cinq ans de 55 pour cent à la télévision de langue
14 anglaise et de 6 pour cent à la télévision de langue
15 française qui, comme on le sait, avait déjà un volume
16 très important de contenu canadien.
17 198 Deuxième indice: La part d'écoute
18 des émissions canadiennes dans les catégories sous-
19 représentées. L'écoute des émissions canadiennes dans
20 les catégories 7, 8 et 9 a augmenté quelque peu au
21 cours des cinq dernières années à la télévision de
22 langue anglaise pour atteindre 7,5 pour cent. Quant à
23 la télévision de langue française, l'écoute y est trois
24 fois plus élevée dans ces catégories, atteignant 21
25 pour cent. Dans l'ensemble, toutefois, l'écoute des
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1 émissions canadiennes est demeurée plutôt stable, se
2 situant aux alentours de 32 pour cent pour la
3 télévision anglophone et de 69 pour cent pour la
4 télévision francophone.
5 199 Troisième indice: La quantité
6 d'émissions typiquement canadiennes qui sont diffusées.
7 Les émissions d'affaires publiques, d'information et de
8 sports, qui sont typiquement canadiennes, dominent le
9 contenu de programmation canadienne. Le système a en
10 outre créé plus de 2 200 heures de productions
11 canadiennes de divertissement, financées par le Fonds
12 de production canadien, soit plus de quatre fois ce qui
13 se faisait il y a cinq ans.
14 200 Quatrième indice: L'utilisation du
15 talent canadien dans tous les aspects de la production.
16 Les 30 000 emplois directs du secteur de la production,
17 qui représentent le double de ce qu'ils étaient il y a
18 cinq ans, jumelés aux 20 000 emplois du secteur de la
19 télédiffusion, constituent aujourd'hui un système qui
20 emploie directement quelque 50 000 personnes dans des
21 postes de qualité, en plus d'être à l'origine de près
22 de 100 000 emplois indirects.
23 201 Cinquième indice: Les ventes
24 d'émissions canadiennes à l'étranger. Entre 1992 et
25 1996, les exportations d'émissions canadiennes ont
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1 atteint 320 millions de dollars, soit une croissance de
2 287 pour cent.
3 202 Sixième indice: Le nombre de
4 sociétés de production solides et qui exportent à
5 l'échelle mondiale. Nous avons aujourd'hui un secteur
6 qui représente quelque 2,9 milliards de dollars, compte
7 plusieurs grandes entreprises rentables dont les titres
8 se négocient sur les marchés publics et dont les
9 activités de production se sont étendues à la
10 distribution et, pour certaines, à la télédiffusion.
11 203 Septième indice: Le nombre de
12 stations qui investissent dans la technologie
13 numérique. Les télédiffuseurs privés sont en bonne
14 voie d'achever la conversion de leurs installations de
15 production et de leurs studios au numérique et en sont
16 maintenant au stade de la planification menant à la
17 transmission en mode numérique. Cette étape
18 représente, pour le secteur, une dépense
19 d'immobilisations de l'ordre de 500 millions de dollars
20 au cours des dix prochaines années.
21 204 Huitième indice: L'adaptation à la
22 convergence des multimédias. Les télédiffuseurs
23 commencent à créer leurs propres initiatives
24 multimédias et considèrent ce secteur à la fois comme
25 un défi et un débouché commercial.
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1 205 Neuvième indice: Le rendement des
2 investissements dans l'industrie à moyen et à long
3 terme. Les télédiffuseurs commencent à remonter la
4 pente après la chute de rentabilité qu'ils ont subie
5 pendant six ans. Les marges de profit ne sont
6 aujourd'hui que la moitié de ce qu'elles étaient au
7 milieu des années quatre-vingt.
8 206 Le système s'en est relativement bien
9 tiré pour bon nombre de ces indices de réussite. Ce
10 succès est dû à chaque télédiffuseur; qu'il soit
11 généraliste ou spécialisé, privé ou public, chacun y a
12 contribué à sa façon. En effet, c'est cette diversité
13 qui constitue l'une des plus grandes forces du système.
14 207 L'automne dernier, à l'occasion de
15 l'audience du CRTC sur les réseaux, une bonne partie du
16 débat a porté sur la question de la contribution
17 équitable que chacun devrait apporter au système,
18 notamment deux des plus grands groupes de diffusion de
19 langue anglaise du Canada. Le CRTC peut bien décider
20 de traiter cette question dans le cadre des futures
21 audiences relatives au renouvellement des licences,
22 mais il n'en reste pas moins que ce débat nous amène à
23 examiner de très près une question fondamentale à la
24 présente audience, à savoir: devrait-on exiger de tous
25 les télédiffuseurs qu'ils fassent la même chose, qu'il
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1 s'agisse de leurs émissions locales, des séries
2 dramatiques, des émissions pour enfants, des longs
3 métrages ou de toutes ces catégories? Ne devrait-on
4 pas plutôt encourager chaque télédiffuseur à se
5 concentrer sur ses points forts et à poursuivre la
6 stratégie de programmation qui lui convient le mieux?
7 208 Nous croyons que la réponse est
8 évidente. Le CRTC a abandonné depuis longtemps la
9 méthode d'une même règle pour tous lorsqu'il a commencé
10 à consentir des licences à d'autres types de services
11 généralistes comme City-tv et, plus tard, aux services
12 spécialisés. Le Conseil a convenu que nous pouvions
13 réaliser la diversité de la programmation non pas
14 uniquement au niveau individuel, mais bien au niveau de
15 l'ensemble du système. Cette formule a bien
16 fonctionné.
17 209 D'ailleurs, nos membres viendront
18 vous expliquer, au cours du présent processus, comment
19 ils ont contribué à la réussite de la télévision
20 canadienne, chacun à sa façon, et comment ils entendent
21 continuer d'y contribuer à l'avenir.
22 210 Jim.
23 1035
24 211 MR. MACDONALD: All of these are
25 important measures of success but as we have stated, we
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1 believe that increasing the viewing to Canadian
2 television should be the key goal for the system. In
3 the evolution of public policy for the broadcasting
4 system, its time to change the currency we deal in.
5 212 Placing the focus on audiences
6 signals four things. First, it recognizes that we have
7 moved into a new era of the systems development that
8 puts the viewer in the driver's seat and that policy
9 should serve the viewer, not just the interest of a
10 particular sector.
11 213 Second, it's the programming that
12 matters most. The expression of Canadian stories and
13 ideas is at the heart of what we are all trying to
14 achieve.
15 214 Third, it responds to what Canadians
16 tell us they want, which is quality Canadian
17 programming.
18 215 Fourth, it shows that the CRTC is
19 prepared to judge any proposal with a view to how it
20 improves viewership to Canadian programming.
21 216 We must change from a culture of
22 regulation and threat of punishment to a model better
23 suited to a mature broadcasting and regulatory system
24 where we have common goals and the incentives needed to
25 meet those goals.
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1 217 What we are proposing is an entirely
2 new way of looking at how we measure success in the
3 system. We are not suggesting that the CRTC try to
4 "regulate" viewing or create a complicated set of rules
5 that require each broadcaster to meet certain viewing
6 targets.
7 218 What we are suggesting is that the
8 CRTC make a basic fundamental change in the orientation
9 of how we look at the success of this system by putting
10 viewers first. Out of this proceeding we should
11 establish a new policy priority, which is to increase
12 viewership to Canadian television. Creating a national
13 audience goal gives the system a target to shoot for
14 and a benchmark to measure progress against.
15 219 When we focus the debate on how to
16 grow viewership to Canadian television, we create a
17 win-win situation for everyone: for the public because
18 what they care about is having quality programming; for
19 broadcasters and producers because we become partners,
20 not adversaries, with a shared goal of increasing
21 audiences and revenues for Canadian television; and for
22 government because it creates a link, not a conflict,
23 between business objectives and public policy
24 objectives.
25 220 This focus on results responds to the
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1 objectives the CRTC set out for itself in its Vision
2 Statement, with international developments in
3 broadcasting and with government's own thrust to
4 concern itself more with the results of its policies
5 than with its inputs.
6 221 This approach will give the entire
7 system a single focus, something it has never had
8 before.
9 222 How will it be applied? Our proposal
10 is straightforward. First, the CRTC should set up
11 national system-wide goals in consultation with the
12 industry. This hearing is an important first step in
13 that direction.
14 223 Second, these goals would be a policy
15 objective for the system and not licensee-level
16 commitments.
17 224 Third, different targets would be set
18 in French television and English television.
19 225 Fourth, each program licensee would
20 be expected to contribute in its own way toward the
21 realization of those audience goals in a manner
22 appropriate to the nature of its service.
23 226 Fifth, all of the non-regulated
24 components of the system would be expected to
25 contribute to these goals.
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1 227 Sixth, the CRTC would also contribute
2 to these goals through its licensing and policy
3 decisions.
4 228 Seventh, all broadcasters would come
5 forward in renewals, licensing and transaction hearings
6 and demonstrate how their program plans would
7 contribute to those audience goals.
8 229 Eighth, audience goals should be
9 established as a five year target by the CRTC and
10 progress should be reviewed annually.
11 230 Finally, after three years the
12 industry and the CRTC would come together to formally
13 assess progress and consider other initiatives.
14 231 What should the goals be? Based on a
15 review of where the system stands today and how far it
16 has come over the last five years, we can propose goals
17 for the system that we think are aggressive but
18 achievable.
19 232 Our proposal has two components:
20 one, increasing the level of viewership to Canadian
21 services in the system and, two, increasing the overall
22 level of viewing to Canadian programming.
23 233 Let's take them in turn. We have
24 seen an incredible explosion in the number of new
25 services available to Canadians over the last ten
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1 years. In fact, we have added some 55 new Canadian and
2 foreign services to the menu offering for Canadians.
3 234 One of the measures of success for
4 any broadcasting system in any country is how much time
5 do its citizens spend watching their own services.
6 These are the services that are particularly designed
7 to serve the needs of Canadians and the ones that make
8 the system a success.
9 235 Canadian services have held their own
10 against a vast array of new, non-Canadian services.
11 According to Nielsen data, Canadian services accounted
12 for 76 per cent of all viewing in 1997.
13 236 There are two things that could
14 increase the level of Canadian services to 80 per cent
15 over the next five years. The first is to create an
16 environment that enables conventional broadcasters to
17 effectively program to their audiences. The second is
18 to have a Canada first policy that helps the new next
19 wave of Canadian specialty TV services reach Canadians.
20 237 On the second component of our
21 viewing goal, increasing the overall level of viewing
22 to Canadian programming, we have to deal with the fact
23 that viewing to Canadian programming has been
24 relatively static for a long time, but there is a
25 fundamental difference between French and English
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1 television that has to be considered in setting the
2 goals.
3 238 In French television, viewing to
4 Canadian programming accounts for 69 per cent of all
5 viewing. This is a tremendous success story and
6 represents the culmination of 30 years of progress in
7 terms of the development of a competitive marketplace
8 in Quebec and the creation of a vibrant star system.
9 Our goal for French television should be to try to
10 sustain this level of success over the next five years.
11 239 In English television, viewership to
12 Canadian programming has also been relatively stable.
13 It has fluctuated between 30 and 32 percent and now
14 sits at 32 per cent. While the total hasn't changed
15 much, we have seen the mix of viewing shift more toward
16 specialty.
17 240 The challenge is to stop
18 redistributing audience share and instead grow overall
19 viewing for Canadian programming.
20 241 How are we going to do that?
21 Canadians are well served with news, information and
22 sports programming. While competition continues
23 between services for viewers for this form of
24 programming and it will be intense, we aren't likely to
25 grow overall viewing to Canadian programming from this
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1 area alone.
2 242 Canadian entertainment programming is
3 the area where we stand the best chance to grow
4 viewing. However, it is also the area of programming
5 that presents us with our greatest challenges.
6 243 The challenge is not one of quantity,
7 it is one of quality. Over the last five years the
8 availability of Canadian entertainment programming in
9 English television has increased by 55 per cent because
10 of growing commitments by conventional broadcasters and
11 the introduction of new specialty services. Canadians
12 now have more opportunities than ever before to watch
13 Canadian entertainment programming.
14 244 We have built up a considerable
15 quantity of Canadian entertainment programming in the
16 system because broadcasters are devoting significant
17 resources to its support. In addition, new funding has
18 become available to support more production and we have
19 introduced more Canadian services with our own program
20 appetites.
21 245 We have seen viewing to Canadian
22 entertainment programming increase over the last five
23 years in English television so that it now accounts for
24 7.5 per cent of total television viewing. The goal in
25 the English television system would be to grow that
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1 viewing further to 10 per cent, a 33 per cent increase
2 over the next five years.
3 246 If we can accomplish that, we would
4 be able to grow total Canadian viewing in English
5 television to 35 per cent over the next five years.
6 That would be a tremendous accomplishment.
7 247 MR. McCABE: Thank you, Jim.
8 248 Others have suggested in this
9 proceeding that we should go the old way of imposing
10 higher obligations on private broadcasters and
11 requiring them all to do the same things. These
12 proposals are based on the false premise that what's
13 good for independent producers will be, by definition,
14 good for the system. This is certainly not the case.
15 This proceeding has to deal with the entire system, not
16 just one sector.
17 249 We think the Commission should ask
18 each participant in this hearing three basic questions:
19 How will your proposals increase viewership to Canadian
20 programming, how will your proposals help create a
21 better business climate for Canadian programming and
22 how will your proposals contribute to diversity,
23 balance and choice in the system.
24 250 We pose these questions because we
25 are deeply concerned that the proposals of certain
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1 parties, particularly those of the CFTPA and the
2 Director's Guild, are predicated on the simplistic
3 notion that a broadcaster's responsibility begins and
4 ends with providing independent producers with more
5 business.
6 251 How Canadian programs perform with
7 audiences and how they work financially from a
8 broadcaster perspective are not their concerns.
9 252 The CFTPA and the DGC proposals both
10 have the dubious virtue of eliminating most of the
11 profit in the private conventional broadcast sector and
12 transferring it into the hands of independent
13 producers -- some $80 million in the case of the CFTPA
14 and some $50 million in the case of the DGC.
15 253 We understand how these proposals
16 would benefit their members. We don't understand how
17 they would benefit the system or the Canadian public.
18 254 Producers have shareholders just like
19 broadcasters. How would their shareholders react if
20 they were told that all of their profits had to be
21 siphoned away to some other sector? Shareholders would
22 certainly take their investments elsewhere.
23 255 The independent production sector is
24 a profitable $2.9 billion business that rivals
25 broadcasting in size. Its larger companies have a
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1 market capitalization level higher than many broadcast
2 companies. The levels of production activity within
3 the independent production sector have never been
4 higher. This sounds like a success story to us, not a
5 problem to be fixed.
6 256 What kind of a framework do we need?
7 What kind of framework would achieve our goal of more
8 Canadians watching Canadian television?
9 257 First, we need a policy framework
10 that recognizes the magnitude of the challenge in
11 meeting that goal. We must face a number of facts.
12 One, current funding support for the system and
13 particularly for the private TV sector is insufficient
14 to meet demand.
15 258 Second, $100 million in annual
16 federal government support to the CTCPF is scheduled to
17 disappear by 2001.
18 259 Third, Canadian entertainment
19 programs, at least in English television, don't make it
20 into the top ten and can't yet beat out average U.S.
21 entertainment fare.
22 260 Fourth, we have the makings of a
23 Canadian star system, but it's still underdeveloped.
24 261 Fifth, public policy has driven
25 artificial walls between production, program
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1 distribution and broadcasting and while it looks to
2 broadcasters to support Canadian entertainment
3 production, it doesn't concern itself with the success
4 of that programming on the air.
5 262 We have set ourselves the task of
6 developing a comprehensive plan for the system. A
7 number of the elements are under the CRTC's control,
8 some are at the decision of government and some are for
9 the industry alone to deal with.
10 263 All of these elements together are
11 intended to serve one vital goal and that is to
12 increase viewership to Canadian programming.
13 264 There are eight elements to our
14 policy framework. First, establish a stable and
15 flexible regulatory environment. That means
16 maintaining the balance in the system we currently have
17 with existing measures such as the definition of
18 Canadian content, Cancon levels, the 150 per cent drama
19 credit and the ability to choose how to meet program
20 obligations, that is Option A or Option B.
21 265 Second, increase the resources
22 available to the support of Canadian entertainment
23 programming by extracting support from the
24 non-contributing parts of the system, improving program
25 rights protection and introducing more flexible
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1 advertising rules to maximize industry revenues.
2 266 Third, enhance the audience potential
3 of Canadian programming through increased promotion and
4 the development of a Canadian star system.
5 267 Fourth, introduce new incentives to
6 encourage more effective scheduling of Canadian
7 programming by redefining categories 7, 8 and 9
8 programming to include documentaries, redefining peak
9 viewing periods, expanding on the 150 per cent Canadian
10 drama credit and introducing new incentives to
11 encourage more peak time exhibition of Canadian
12 entertainment programming.
13 268 Fifth, make more efficient use of
14 limited production funding by reallocating more funding
15 support to the private sector in the system to ensure
16 that the most efficient use is made of production funds
17 for the support of Canadian production.
18 269 Sixth, improve the economics of
19 Canadian entertainment programming by rebalancing the
20 risks and rewards of Canadian production by treating
21 Canadian broadcasters as eligible program distributors,
22 recognizing the role broadcasters can play in the
23 system as producers and eliminating barriers to funding
24 access to encourage greater investment and financial
25 participation by broadcasters.
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1 270 Seventh, make the current regulatory
2 framework more equitable amongst the players by
3 removing the significant benefits test for programming
4 undertakings, as is the case for distribution
5 undertakings, and redirecting the industry's
6 over-contribution to CRTC licence fees to the support
7 of Canadian programming.
8 271 Eighth, support a diversity of
9 services and programming by providing licensees with
10 increased choice in how they meet their Canadian
11 program obligations by building on PN 1994-48 and
12 creating a third option for broadcasters, Option C,
13 which would establish a level of spending to Canadian
14 entertainment programming. This new Option C would
15 complement the two that already exist, overall spending
16 requirements, Option A, or a fixed number of weekly
17 hours of Canadian entertainment programming, Option B.
18 272 In conclusion, we believe that each
19 of the elements in our proposed framework can
20 contribute to the goal of increased viewing to Canadian
21 programming.
22 273 Taken together, this policy framework
23 would do three things. One, it would provide enough
24 flexibility in the system to allow broadcasters to meet
25 their public service obligations and contribute to
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1 national audience goals in their own particular way.
2 274 Second, it would reward success
3 because it recognizes that the Canadian television
4 system must succeed as a business in order to deliver
5 quality Canadian programming that people will watch.
6 275 Third, it would create a business
7 climate that encourages risk taking and enables the
8 system to drive up viewing to Canadian programming.
9 276 Thank you for your attention. We
10 would be pleased to answer any questions.
11 1050
12 277 THE CHAIRPERSON: Thank you, Mr.
13 McCabe, and members of the panel.
14 278 We, of course, regret the
15 interruptions of this morning, but we had little
16 control over them.
17 279 What I propose to do is to tell you
18 what direction my questioning will take and take our
19 morning break and come back for questions, if that is
20 acceptable.
21 280 MR. McCABE: Certainly.
22 281 THE CHAIRPERSON: Mr. McCabe, your
23 submission advocates the status quo with regard to the
24 general mechanisms currently used by the regulator with
25 respect to Canadian content on TV, with some
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1 modifications of course. It proposes a scheme whereby
2 viewership goals for Canadian content on TV would be
3 established for the system as a whole and eventually
4 for individual participants to fulfil.
5 282 The Commission invited parties to
6 this hearing to bring to the table innovative
7 approaches. Some will say that you did, others that
8 you did not, since striving for viewership level is and
9 has always been at the very core of the TV industry.
10 283 Be that as it may, we would like to
11 clarify, discuss and also test your proposal during
12 this hearing, so that we better understand it and I ask
13 you to take my questions in that spirit.
14 284 I will want to explore with you how
15 you see the achievement of a viewership goal
16 established at the system level, but managed at the
17 licensee level practically. However, I would like to
18 discuss with you, first, the extent to which there may
19 be at least an appearance of a contradiction between
20 making viewership levels central to the regulatory
21 system and so a contradiction between viewership as the
22 key indicator and the policy goals that are set out in
23 the Broadcasting Act for Canadian programming, the
24 appearance also of a contradiction between that goal
25 and the documented mass audience TV viewing
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1 preferences. And even more so, the appearance of a
2 contradiction between that goal and some of the changes
3 to the current regulatory system that is proposed by
4 the CAB.
5 285 I will also have some questions on
6 concentration and the benefits test and vertical
7 integration, some financial issues, especially as they
8 relate to small stations or small markets, promotion
9 and advertising and the rights issue.
10 286 It is obvious that this hearing does
11 not allow us to go into every aspect of the submissions
12 of parties, but I thought I would give you an
13 indication of the direction that my questioning will
14 take.
15 287 So, we will now break for 15 minutes
16 and, therefore, resume at five minutes after eleven.
17 Thank you.
18 --- Short recess at/Courte suspension à 1055
19 --- Upon resuming at/Reprise à 1114
20 288 THE CHAIRPERSON: Order, please.
21 289 So, to go back to my initial plan, to
22 try to put some grid into this questioning, I said I
23 would discuss with you briefly whether making
24 viewership the central goal of the regulatory exercise,
25 despite I understand that you are also advocating the
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1 retention of some of the regulatory mechanisms we have,
2 but whether that is potentially contradictory to the
3 Broadcasting Act under which we operate, since the act
4 requires that there be a diversity of high quality
5 Canadian content, reflecting a wide variety of
6 interests and needs and that such programming be made
7 available to the broadcasting system as a whole.
8 290 I would assume that this policy goal
9 pertains discretely, as well as on a systematic basis,
10 to the conventional services which are available off
11 air to Canadians, whether or not they subscribe to
12 discretionary services -- that is, that the act intends
13 that they be made available to them of a wide variety
14 of services.
15 291 At page 48 of your submission you
16 state, and you repeated this morning in similar words,
17 that:
18 292 "...audience is the key
19 indicator of the success of the
20 system."
21 293 And that has to be the system as
22 intended by the Broadcasting Act.
23 294 While no one would dispute that
24 viewing of Canadian content is an important measure of
25 the success of the Canadian broadcasting system, can
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1 you elaborate on whether making it the key indicator is
2 consistent with the legislative objectives that I
3 referred to which, one could say, emphasizes
4 availability?
5 295 MR. McCABE: If I may, Madam Chair, I
6 would -- since this is I think the central issue that
7 we posed to you, I will just take one minute before I
8 go directly to the question to say that -- to make it
9 clear that we have spent a great deal of time working
10 at, thinking about, studying what we should say before
11 you.
12 296 We began our meetings of our Chief
13 Executive Officers 18 months ago and we have, as you
14 have seen, commissioned a significant number of
15 studies. All of them said, all the meetings, all the
16 studies led to the view that we have a system that if
17 it focused, continues to focus only on availability or
18 inputs, it is stalled.
19 297 We cannot believe that in an act
20 passed by the Parliament of Canada that the intention
21 is solely to say that these things must be available --
22 these services must be available as you have described
23 in that section of the act without reference to the
24 will of the people, and that's really what we see here
25 is a situation in which we have worked at the input
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1 side, we all together as a system and that has in fact
2 produced an enormous array and a balance of services
3 because of your licensing decision, because of your
4 regulatory decision and because of our choices as
5 broadcasters as to how we should serve our market.
6 298 But if, as the indicators are, we
7 have reached the point where we are not moving audience
8 numbers, it means that we are not getting more of the
9 people of Canada to watch our programming. In other
10 words, the input strategy has come to an end.
11 299 So, we are saying this indeed is in
12 conformity with the Broadcasting Act because it is an
13 attempt to say we now must establish a new -- I won't
14 say paradigm. We must establish a fundamental new
15 approach here in which we say, "All right, broadly
16 speaking, the inputs have been provided, the
17 availability is there." There will be more. You will
18 license more. There will be greater availability. And
19 indeed, from sources all over the world there will be
20 greater availability.
21 300 Now we must make sure that we are
22 providing what Canadians want, what they choose to
23 listen to -- to watch, number one.
24 301 Number two, the act also requires
25 that the broadcasting system be able to be operated in
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1 an economic fashion. In other words, it doesn't
2 provide for two public systems. It provides -- nor
3 does it, as one of my friends said, provides for a
4 public system and a non-profit system. It provides for
5 a public and a private system and if we are to deliver
6 what the act I think requires of us and of you, we must
7 succeed as businesses.
8 302 We are suggesting that unless we make
9 this fundamental change in the way we think about the
10 broadcasting system, in the currency we trade in, we
11 cannot hope to meet the objectives of the Broadcasting
12 Act.
13 303 Perhaps others of my colleagues would
14 want to say something.
15 304 MR. MACDONALD: I think one of the
16 things that Michael said was how long this process took
17 us. We started with really trying to look outside of
18 the nine dots, as we were invited to do by the
19 Commission.
20 305 We examined the possibility of no
21 regulatory environment whatsoever, which is of course
22 what we think could happen over the longer term. And
23 we looked at varying degrees of levels and Canadian
24 content levels and other levels of commitment and we
25 said there are fundamental reasons why the existing
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1 regulations with respect to Canadian content make
2 sense.
3 306 There are a number of other things
4 that we felt made sense. We ultimately came to the
5 conclusion that we really shouldn't be throwing the
6 baby out with the bathwater. But we did feel that when
7 we looked at the profitability of our industry there
8 was a very major problem because, as we said in our
9 presentation, we are now public companies for the most
10 part. You know, shareholders really don't care a lot
11 about other than two factors when they are making an
12 investment: What is the risk of the investment and
13 what is the return?
14 307 It is something that the broadcasting
15 industry, now that we are completely controlled as
16 public companies, we have no choice but to make an
17 adequate return to our shareholders.
18 308 So, we put that into the mix and
19 said, "All right, what do we do in the middle?" If
20 profitability is something that we must return to
21 shareholders and we are not particularly profitable
22 now, particularly by comparison to other sectors in the
23 communications area, then how do we drive the key goals
24 of the system and how do we achieve what we are all
25 trying to do?
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1 309 The one thing we said we are not
2 measuring -- we are measuring hours. We are measuring
3 dollars. We are measuring this. We are measuring
4 that, but we are not measuring the key component which
5 is viewers. We felt that since it is viewers that
6 drive audience, that drives the sale of advertising,
7 that drives the whole system, that if we were to
8 embrace viewership in addition to all of the other
9 factors that we have talked to you about, that this
10 would move us forward considerably.
11 310 What we really wanted to do is to try
12 to change, as we have said, the culture and the
13 currency because we don't believe that there has ever
14 been any currency related to audience.
15 311 I would say to any producer that will
16 come before you, there is no broadcaster that has any
17 problem paying for performance and that's to us what
18 this is all about as we move to the next step,
19 performance.
20 312 LA PRÉSIDENTE: Monsieur Lamarre.
21 313 M. LAMARRE: J'aimerais peut-être
22 ajouter, parce qu'on souligne souvent le modèle de la
23 télévision francophone lorsqu'on réfère au contenu
24 canadien... et c'est évidemment pour nous un objet de
25 grande fierté lorsqu'on en arrive à discuter de la
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1 distinction de notre marché. Toutefois, lorsqu'on
2 regarde la situation financière, 90 pour cent du budget
3 de l'entreprise que je représente est investi en
4 contenu canadien; donc 10 pour cent de notre budget de
5 programmation est investi en contenu étranger, donc
6 américain. Soixante pour cent de nos profits viennent
7 de 10 pour cent de notre investissement en
8 programmation.
9 314 Alors le point qui est important ici,
10 c'est qu'on est dans une industrie qui a des règles
11 économiques qui sont importantes. Il nous faut trouver
12 une façon de mieux performer en termes de contenu
13 canadien.
14 315 Il n'y a pas de magie. Les agences
15 de publicité ne nous appellent pas et ne nous disent
16 pas "J'aimerais investir X millions de dollars dans une
17 émission à contenu canadien." Les agences de publicité
18 nous appellent pour dire "On veut rejoindre le plus
19 vaste auditoire canadien possible."
20 316 On a eu une description par A plus Z
21 tout à l'heure de l'environnement dans lequel on
22 travaille. Lorsque, au début des années 90, notre
23 entreprise a perdu 7 millions de dollars dans une
24 année, je ne pense pas qu'il y ait personne qui soit
25 venu à la rescousse de cette entreprise-là.
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1 317 Alors c'est certain que présentement
2 nous avons une situation économique qui est plus
3 intéressante, mais je ne pense pas qu'on puisse voir à
4 vase clos cette situation-là parce qu'au même moment où
5 on a une situation économique qui est intéressante --
6 présentement on va parler d'investissements en
7 immobilisations qui sont importants -- on parle de plus
8 en plus dans les couloirs du gouvernement de règles
9 avec tous les échanges qui s'en viennent avec les
10 marchés internationaux, qui sont une menace importante,
11 et de plus en plus on libéralise et de plus en plus on
12 voit une concurrence qui devient de plus en plus
13 féroce.
14 318 Donc, c'est dans cet environnement-là
15 qu'on tente de voir... et nous n'abdiquons pas; on
16 tente de voir quelles sont les façons dont on pourra
17 arriver -- et vous l'avez mentionné tout à l'heure dans
18 vos remarques d'introduction -- à rendre le contenu
19 canadien plus profitable. Dans le fond, c'est ça,
20 l'essence même de la discussion parce que tous les
21 diffuseurs sont prêts et disposés à mettre plus de
22 contenu canadien dans la mesure où la profitabilité est
23 là. Et la profitabilité est là si l'auditoire y est.
24 319 Donc, dans le marché francophone,
25 même si les coûts sont plus chers que la télévision
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1 américaine, on réussit à mettre plus de contenu
2 canadien en ondes parce que la profitabilité est quand
3 même meilleure que dans le marché anglophone, mais
4 c'est la règle de base.
5 320 Alors ce qu'on vous propose, si on le
6 regarde, on vous propose tout simplement une approche
7 qui nous permettra de rentabiliser davantage le contenu
8 canadien.
9 321 LA PRÉSIDENTE: Il est intéressant,
10 Monsieur Lamarre, que justement il y ait certaines
11 parties intéressées dont les soumissions sont basées
12 sur des paramètres qui seraient exactement une réplique
13 de ce qui se passe au Québec, qui est un succès, où
14 vous avez justement mentionné le niveau des dépenses
15 sur le contenu canadien, les heures qui sont diffusées,
16 et caetera.
17 322 Alors c'est un peu contradictoire,
18 encore une fois. Il y a quand même des parties qui
19 vont argumenter que, justement, au Québec on dépense de
20 l'argent sur la programmation canadienne, on la diffuse
21 et donc les gens la regardent. Donc les audiences...
22 les auditoires suivent.
23 323 M. LAMARRE: Je crois que ce n'est
24 pas contradictoire du tout.
25 324 LA PRÉSIDENTE: Contradictoire vis-à-
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1 vis le principe qui mettrait... et ma question était:
2 Si on met comme but principal atteindre des niveaux
3 d'écoute -- et j'ai une série de questions qui visent à
4 voir comment on les atteint, ces niveaux d'écoute là --
5 est-ce que c'est naturel? Et l'agence de
6 réglementation, comme au Québec, peut simplement ne pas
7 s'immiscer dans les mécanismes qui vont y arriver,
8 parce qu'il y a quand même deux marchés différents avec
9 des alternatives différentes.
10 325 Donc c'est exactement ce que
11 certaines parties intéressées font, c'est de dire: "Au
12 Québec ou réussit, et voilà ce qu'on dépense, voilà les
13 heures de diffusion. Et on ajuste justement les
14 critères proposés en utilisant le succès du Québec
15 comme point de référence."
16 326 Alors c'est intéressant. On aura
17 l'occasion, évidemment, de poursuivre cette discussion
18 davantage.
19 327 Essayons maintenant d'y aller un peu
20 plus en détail, comment ce but serait plus propice à
21 atteindre les buts de la radiodiffusion, ce but
22 d'augmenter les auditoires.
23 328 At page 49 of your submission you
24 foresee, as far as I can tell, establishing goals in
25 English-language TV by categories of programming in the
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1 underrepresented categories and in the French-language
2 TV market for all Canadian programming. Do I gather
3 from your presentation this morning that viewership
4 goals would also be established for all programming?
5 329 MR. McCABE: Yes, that is correct,
6 Madam Chair.
7 330 THE CHAIRPERSON: I stand to be
8 corrected, but I didn't see that.
9 331 MR. McCABE: Yes. We had said that
10 the objective for all Canadian programming should be to
11 move to 35 per cent all English speaking.
12 1130
13 332 THE CHAIRPERSON: I didn't see that
14 on page 49 in your --
15 333 MR. McCABE: These things evolved.
16 334 THE CHAIRPERSON: That's fine, which
17 leads me to the question as to how audience goals would
18 be applied. You state on page 49 that they be
19 expressed as a percentage of total viewing and it's not
20 clear on that page how it would work as between all
21 programming. You would look, from what I gather in
22 your presentation, at viewership to all programming and
23 the goal would be established as a percentage of that
24 and then a subset would be the under-represented
25 categories.
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1 335 MR. McCABE: That is correct.
2 336 MR. CHAIRPERSON: You would look at
3 the current viewership and establish your goal to reach
4 in five years 35 per cent overall and 10 per cent for
5 entertainment programming?
6 337 MR. McCABE: That's right, and our
7 analysis there was, if you will recall in our
8 presentation, that we thought that it was an attainable
9 goal, although a difficult one, to move from the
10 essentially static levels over the past 10 years of 30
11 to 32 per cent and drive it to 35 per cent. We thought
12 that the way to do that was, one, to focus on viewing
13 as an objective because, in a sense, we are the only
14 part of the system that does that.
15 338 You do not in any of your policy
16 approaches do that, the independent production sector
17 certainly does not, and again we have said that in the
18 area of the sports and news and public affairs, we do
19 quite well and most likely where we can grow is in the
20 area of entertainment programming. We have said,
21 therefore, we should set a goal there. If we are to
22 attain the goal of 35 per cent, we should set a goal
23 there of moving ourselves from 7 and a half per cent to
24 10.
25 339 Again by "ourselves", may I say we
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1 mean the system. We mean private broadcasters, public
2 broadcasters, the specialty services, and all of these
3 should be, in effect, encompassed by a goal that you
4 set. Each in its own way will come to you and propose
5 how they will plan to meet the goal and you will have
6 at hand the current tools that you have, plus some
7 others we have suggested, to use to help achieve that
8 goal.
9 340 We are not suggesting that any of the
10 tools you currently have not be used, we are suggesting
11 some other tools as well, but we are suggesting that
12 you use those tools for a different purpose. We are
13 suggesting a complete sea change in how you think about
14 going forward because we believe that, essentially, we
15 are stalled if we do not now pay attention to how we
16 drive those audiences up, to how many Canadians are
17 watching us.
18 341 THE CHAIRPERSON: In your submission
19 you emphasize the need for a flexible regulatory
20 environment for the overall achievement of viewership
21 goals that would be established for a system as a whole
22 and you advocate the retention of Options A, B, as
23 mentioned this morning, and Option C, which would be
24 one that the Commission has addressed to some licensees
25 in the past, which would be to focus on certain
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1 categories of programming.
2 342 Do you envisage inside of this
3 framework each licensee choosing to make commitments
4 toward the achievement of the goal in one category
5 while another licensee emphasizes the achievement of
6 the goal in another category to ensure flexibility in
7 achieving the goals?
8 343 MR. MILLER: The short answer is yes.
9 344 THE CHAIRPERSON: So that you could
10 have in a market, if all programming is the mechanism,
11 someone who chooses to emphasize information
12 programming, news, sports, and not the other
13 categories. That would be left to the other licensee
14 in the market.
15 345 MR. MILLER: That's correct, Madam
16 Chair. Central to our proposal is the notion that one
17 size doesn't fit all, that we built a system that
18 allows players to specialize. That's most evident
19 among specialty services, but it's also evident among
20 conventional services, and we cited the example of
21 Citytv. Obviously, there are other examples,
22 particularly smaller market broadcasters, who focus
23 their resources and their energies on serving their
24 local communities with strong local programming,
25 particularly strong news programming.
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1 346 We think it would be a complete
2 reversal of everything we have accomplished to take
3 those services who have specialized, who have built
4 their businesses and built their audiences on certain
5 genres of programming and tell them that they now have
6 to do something else, they have to contribute to
7 something else, because central to our view and central
8 to our viewing goals is the notion, as Michael has
9 indicated, that these are system goals and each element
10 of the system will contribute differently, but that the
11 objective of the Broadcasting Act is to ensure that the
12 system achieves viewing Canadian programming
13 availability and that the way to achieve it is to allow
14 the different elements of the system to contribute
15 differently.
16 347 THE CHAIRPERSON: If you drive that
17 plan at the market level, who decides first how they
18 are going to achieve this viewership goal? If I take,
19 for example, the 25 per cent, I think is the right
20 number, of Canadians who do not have cable and,
21 therefore, are dependent on conventional services for
22 their Canadian television fare, how would this ensure
23 that that occurs as the Broadcasting Act requires?
24 348 Is it the first licensee in the
25 market if there are three conventional stations or two
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1 who sets out what part of the system and of the
2 viewership he or she is prepared to strive for and what
3 is the flexibility left for the other participants in
4 the market if we keep in mind this goal that the
5 Broadcasting Act says that Canadians should be offered
6 a variety of Canadian programming?
7 349 MR. MILLER: Perhaps we could use an
8 example, such as the Toronto market.
9 350 THE CHAIRPERSON: I said two or three
10 available conventional. Take a smaller market.
11 351 MR. MILLER: Which market would you
12 like?
13 352 MR. McCABE: Which one do you know?
14 353 THE CHAIRPERSON: Probably my
15 Commissioner colleagues in Vancouver would be most
16 offended if we took Toronto as the benchmark.
17 354 MR. MILLER: I would be happy to take
18 Vancouver, if that is a better example. Vancouver,
19 actually, happens to be a very highly cabled market and
20 very few Vancouver television watchers don't have
21 cable, but there is a significant percentage, about 16
22 per cent in Vancouver --
23 355 THE CHAIRPERSON: Yes, and I may add
24 here that the cable industry will tell us that there
25 will be intensive competition for cable subscribers by
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1 services who are not able to offer your members at the
2 key conventional stations' services.
3 356 MR. MILLER: So, your point is very
4 valid because there is many Canadians that do continue
5 to rely on over-the-air television service and one of
6 the key fundamentals of the Broadcasting Act is to
7 ensure that all Canadians get access to these key
8 services. So, that remains a very key objective.
9 357 In Vancouver, to pick an example, the
10 Commission initially licensed players that did serve
11 broad and general categories of programming starting
12 with stations that became -- BCTV became a CTV
13 affiliate, later with Global and its stations, and, of
14 course, most recently with VTV, the new CTV station,
15 and, of course, the public broadcasters and other
16 elements in addition to that.
17 358 VTV is licensed in a different way
18 than the others. It contributes in a different way.
19 In fact all the players contribute in a different way.
20 Global clearly emphasizes serious drama as its main
21 contribution and has chosen ours as its way of being
22 regulated. CTV Baton has adopted a different measure
23 and contributes in a different way.
24 359 THE CHAIRPERSON: If I may interrupt,
25 Mr. Miller, it's very interesting because all these
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1 choices were made before this submission was put before
2 us. I am asking you whether the submission you are
3 putting before us has or has not a risk in it of
4 shifting the emphasis from a more general approach,
5 albeit with some strengths, that market forces, as
6 people strive for viewership, will -- certain market or
7 business imperatives going to be put into the system,
8 but what I am asking you is whether these choices that
9 were made without this proposal may become different
10 and the extent to which there may be a risk that it
11 will be at the expense of the viewer, if you take the
12 Broadcasting Act's objectives as a backdrop to
13 understanding this.
14 360 So, what you are telling me is there
15 is diversity right now and it has occurred under the
16 regulatory system as it exists. What I am interested
17 in is what is the risk? Is there any that this
18 proposal would alter that at the expense of some types
19 of programming?
20 361 MR. MILLER: We think the risk is in
21 the other proposals. Ours is a viewing proposal that
22 allows each player to continue to contribute in their
23 own way, but still requiring, obviously, equity between
24 the players. The other proposals before you are fixed
25 proposals that require everyone to do the same thing.
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1 So, we think quite the contrary to the supposition that
2 there is risk in our proposal. We think ours is the
3 only way to avoid the homogenization and the lack of
4 diversity of service that would otherwise come from
5 some of the other proposals before you.
6 362 THE CHAIRPERSON: At page 50 of your
7 submission you describe as one of the advantages of
8 your approach of looking at viewership as a key
9 indicator is shifting the balance away from quantity or
10 tonnage to quality. Can you elaborate on how the level
11 of viewership of a program is necessarily a measure of
12 its quality, as that term may be used in the
13 Broadcasting Act? In particular, how do you make a
14 connection between high viewership and quality, as well
15 as diversity, but I am focusing on quality, and is
16 focusing exclusively on viewing not -- is it not
17 dangerous that it would lead to airing programming that
18 appeals only to the lowest common denominator?
19 363 What I am looking at here, as I
20 mentioned before the break, is that we do have some
21 knowledge of what it is that people like to watch and
22 when they watch it, but we have to focus on where that
23 crosses on the graph of broadcasting with giving
24 quality and diversity Canadian content, as the
25 Broadcasting Act requires. So, the focus of my
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1 question is: How does level of viewership guarantee
2 quality or how does measuring viewership measure
3 quality, which is one of the mandates that the
4 Commission has to enforce or to fulfil, is to ensure
5 that there is quality and diversity?
6 364 MR. McCABE: If I may, some years ago
7 I was involved in what has now become Telefilm and we
8 spent a great deal of time as public servants trying to
9 decide what quality was and trying to invest in
10 quality. At the end of the day, I think that kind of
11 exercise of judgment by public servants is not
12 appropriate. Clearly, in a society like ours, audience
13 -- that is, what the people choose -- unless we are
14 prepared to be very cynical about the views and
15 capabilities of people, I think what the people choose
16 has to guide us broadly in what we choose to call
17 quality.
18 365 I, for one, and the broadcasters that
19 I represent have a great deal of confidence in the
20 people who are their viewers and their judgment and I
21 think that we may have mechanisms that government may
22 put in place to assist with particular kinds of
23 programming. But at the end of the day you depend upon
24 the responsibility of broadcasters, number one, the
25 responsibility and good judgment of their audiences and
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1 I think if you take a look at the system that we have
2 developed, it has worked.
3 366 We do not have programming that is
4 keyed to the lowest denominator in the system. We
5 don't have a public broadcaster presumably administered
6 by public servants that has a definably different,
7 higher quality set of programming because better minds
8 have been applied to it. We have audiences applying
9 their minds to this question and I think they make that
10 judgment.
11 367 THE CHAIRPERSON: In order to make a
12 link to the exchange I had with Mr. Miller, then you
13 would have the largest audiences -- without regulatory
14 intervention, which you don't advocate, but you
15 certainly advocate less regulatory intervention, you
16 would have then the most popular programming decide for
17 those who are interested in some other programming
18 which they will say is of different interest for them,
19 reflect different needs, as the Broadcasting Act
20 requires. They would decide then how much of the most
21 popular programming or it may be that in some markets
22 that's what would happen or in the overall system.
23 Unless the goals are established very discretely by
24 categories, if you say, "Let the people decide what
25 they want to watch" -- so that means let the largest
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1 number of people decide what the small number of people
2 may want, and that is, I know, a popular approach, but
3 there is a Broadcasting Act and here we are.
4 368 MR. LYMAN: Michael, I don't know if
5 you want us to come, just based on our analysis, to
6 respond to a specific question.
7 369 MR. McCABE: You have come in.
8 370 MR. LYMAN: I think the notion of
9 popular programming in a very fragmented competitive
10 marketplace should be viewed a bit differently because
11 being popular in a particular market that you are
12 aiming for, a particular demographic, and being good
13 and beating out the competition in that area is not
14 giving sort of pablum broadcasting that we all sort of
15 think of when we say "popular programming". To be
16 popular in each of the market segments that you are
17 going after in a very crowded marketplace --
18 371 THE CHAIRPERSON: It's the first time
19 I hear the word "popular" being used. What I have been
20 hearing is viewership levels. It's not dissimilar,
21 but, nevertheless, go ahead.
22 372 MR. McCABE: They are the same thing.
23 A popular program has higher viewership levels.
24 373 THE CHAIRPERSON: I stand corrected.
25 374 Go ahead, Mr. Lyman.
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1 375 MR. LYMAN: Maybe I will bring Debra
2 into this, but when you are faced with the marketplace
3 and the result of measures that would emphasize
4 viewing, it would lead to viewing targets and
5 achievements that appeal to different kinds of
6 audiences and you have one broadcaster with one type of
7 programming at one -- placing a program at a certain
8 time slot would hope to get the highest viewing
9 percentage in that time slot.
10 376 So, when you get a range of
11 broadcasters in a marketplace, I think you will see the
12 more fragmented the broadcasting system is, you will
13 get higher viewing in a number of categories that would
14 tend to cover a lot of the elements of the objectives
15 of the Broadcasting Act to provide diversity. That's
16 the point I wanted to make, that just the concept of a
17 three- or four-station market is no longer valid in the
18 marketplace.
19 377 Debra.
20 378 THE CHAIRPERSON: I am not being
21 facetious when I say there is a difference between
22 popular and high viewership levels because what I am
23 looking at is, in the conventional system, if you look
24 at it by itself, viewership levels in a certain
25 category of programming. I was discussing the risk,
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1 that that would be at the expense of other popular
2 programming areas as well because unless there is a
3 fair amount of intrusion of regulatory means in the
4 system to force each licensee, which is not something
5 you want, to force each licensee to contribute so that
6 the whole remains diverse for the viewer.
7 1150
8 379 In your submission, at Appendix 1 I
9 believe, on page 2, you state that minimum requirements
10 for Canadian content in peak viewing hours are
11 unnecessary. Is it your view that the attainment of
12 viewing goals is a sufficient incentive to ensure the
13 airing of Canadian content when we know from
14 measurements -- and it is documented -- that there are
15 periods when viewing is at its highest. Does that not
16 suggest the appearance of a conflict between your
17 goals?
18 380 I understand that you support the
19 maintenance of the 60/50 rules, but, by removing the
20 requirement that there be Canadian content -- not by
21 removing, but by not accepting the submissions of some
22 parties that most conventional broadcasters be
23 subjected to a requirement in peak viewing hours, is
24 that not contradictory to trying to reach viewing
25 levels, especially if you want to increase them?
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1 381 We know when it is that Canadians
2 watch TV and, unless you have something to tell me
3 about this, I don't expect that Canadian viewing habits
4 or working habits will change greatly and that peak
5 viewing hours will become different from what they are
6 substantially.
7 382 MR. MILLER: I think it is important
8 to set out some base parameters.
9 383 First of all, we have not suggested
10 that viewing is the exclusive measure or the exclusive
11 goal, we said it is the key goal; and we have not
12 suggested that the Commission abandoned its other input
13 requirements, just that it places key emphasis going
14 forward on viewing. So the questions that would
15 suggest that our only emphasis is viewing are not based
16 on our proposal.
17 384 Secondly, yes, obviously the
18 Commission has a lot of data available to it, and it is
19 obvious that peak viewing does occur in the 8:00 to
20 11:00 or 7:00 to 11:00 period, but we don't think the
21 Commission is best equipped to tell broadcasters how to
22 get their largest audiences. Broadcasters have
23 different programming strategies. Some will adopt a
24 peak viewing strategy because that's where they can get
25 audiences, but if a broadcaster thinks they can get an
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1 audience at midnight with Mike Bullard or at seven
2 o'clock with a family-oriented show or at any other
3 time, then that broadcaster should not be discouraged
4 but encouraged to do that.
5 385 So our whole point is that by setting
6 broad goals you allow the players to come forward and
7 say how they are going to meet them. Some will meet
8 them with a fewer number of quality hours in peak time,
9 some will meet them with more volume, some will meet
10 them with other types of programming. But the system
11 together is stronger by allowing these players to come
12 forward.
13 386 So when we say that a peak time
14 viewing requirement is not required, what we are saying
15 is it is not required for everyone. Obviously, the
16 Commission has imposed some peak time requirements on
17 some of the larger broadcasters, and obviously you will
18 want to discuss with them their views of that going
19 forward, but our point in response to this question is
20 that's not the way to go for the system to apply that
21 one-size-fits-all measure across all players.
22 387 THE CHAIRPERSON: So a short answer
23 to my question, then, if I ask you, is it your view
24 that the attainment of viewing goals is a sufficient
25 incentive to ensure that we will have Can con aired in
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1 peak viewing hours, the answer is "yes", that the
2 flexibility allowed and the choice to be made and the
3 goals set will be sufficient incentive, and the
4 suggestion that regulatory intervention is necessary to
5 ensure that there is Canadian content at peak viewing
6 hours is unnecessary.
7 388 MR. McCABE: That, of course, is not
8 what we have represented. What we have suggested is
9 the tools that you have in hand, including the 60 per
10 cent in prime time as opposed to peak viewing hours,
11 obviously will ensure that, in peak viewing hours,
12 there is some programming that is Canadian.
13 389 The problem is the programming we
14 have to work with. Broadcasters, including Jim I
15 think, would like to talk to you a bit about that as
16 they come along, because what they are saying, what we
17 are saying is, help us make the Canadian programming
18 work better; do not force it into programming slots
19 where it can't work, allow us the freedom, within the
20 prime time certainly, to in fact find the time slot
21 where the program can in fact make it.
22 390 You have seen the numbers, we are not
23 working yet in the main with programming that can take
24 on effectively even the ordinary run-of-the-mill U.S.
25 drama productions.
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1 391 THE CHAIRPERSON: Yes, I understand
2 that. My question is simply your view is that this can
3 be fixed by keeping the system we have, relaxing it in
4 a number of areas we discussed, but establishing this
5 goal; then that is an incentive that will cure this
6 problem.
7 392 MR. McCABE: It will require that, at
8 the licensee level, which is the other proposal we
9 have, the other part of our proposal here, you will be
10 discussing with licensees how they will achieve these
11 goals, how they see doing better with their Canadian
12 programming, how they see getting more Canadians
13 watching them, and indeed then setting their conditions
14 of licence so that they in fact are required to do
15 these things -- number one; number two, on an ongoing
16 basis, meeting with all of the other elements of the
17 system to see whether in fact we are together making
18 progress at this and whether other steps have to be
19 taken.
20 393 It is a new approach, there is no
21 doubt. It isn't just regulation as usual, it requires
22 a new way of coming at this, but we do believe that if
23 we don't take this new approach and just keep plugging
24 down the same road, we are not going to get ourselves
25 off the dime on viewership.
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1 394 THE CHAIRPERSON: I want to re-
2 stress, which I did this morning. that what we are
3 doing here is examining the various submissions that
4 are put before us to improve the system; so it is
5 necessary for us, then, to look at what are the
6 problems you perceive and to what extent are your
7 submissions rather than someone else's likely to reach
8 our goals.
9 395 So I am just trying to look at your
10 submission and trying to examine more closely the
11 extent to which it is preferable and more likely to
12 reach the goals in light of the Broadcasting Act, in
13 light of what we know about viewing habits, and of
14 course in light of some of the proposals you put
15 forward, which are changes to the regulatory system as
16 it exists.
17 396 So this is the spirit of the
18 exercise.
19 397 MR. MACDONALD: Madam Chair, I would
20 like to go back, if I could, to your original point,
21 which is talking about peak time and 8:00 to 11:00, and
22 you were talking about audience levels and the
23 viewership in those --
24 398 THE CHAIRPERSON: You are not
25 changing your mind about 7:00 to 11:00, are you?
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1 399 MR. MACDONALD: No, not at all. In
2 fact, I was going to come back and say that the whole
3 point of 7:00 to 11:00 is not to create anything other
4 than an opportunity where the HUT levels, or the homes
5 using television, are still high, not as high of course
6 at eight o'clock, but the competitive programming from
7 U.S. channels, which is primarily stripped programs,
8 are significantly different types of competition than
9 prime time first run network programming.
10 400 Our view is that we can attack the
11 relatively high audience levels with better quality
12 programming against less competition and do better, and
13 we have proved that in many circumstances. I certainly
14 know, if you look at the Sunday time period as an
15 example, "On TV" has won the time period at six o'clock
16 by putting prime Canadian programming in when it was
17 not up against powerhouse U.S. programming.
18 401 So what we are looking for is high
19 level audience availability but also less competition,
20 and I think that this is very important, as opposed to
21 trying to create a circumstance where we just run off
22 Canadian programming where there is no audience.
23 402 THE CHAIRPERSON: Nobody has ever
24 forced you to do that, of course.
25 403 You have certain proposals, for
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1 example -- let me test them against this scheme -- to
2 extend the 150 per cent Canadian drama credit incentive
3 from peak time to the whole broadcast day -- that's on
4 page 76 of your submission -- and adding a 200 per cent
5 credit for distinctive Canadian programming in peak
6 time.
7 404 Are you of the view that this
8 proposal, for example, will be helpful to achieve your
9 viewership goals since Canadian drama then could be
10 aired let's say at 9:00 a.m. in the morning and result
11 in a half-hour less of Canadian programming, or, if it
12 is aired in peak viewing hours, then you would have an
13 extra hour per each hour of credit to air foreign
14 programming in peak time -- number one, just on this
15 idea of shifting the credit to all day parts, and then
16 the fact that it adds to the reduction or it reduces
17 further the number of hours of Canadian programming,
18 depending on what kind of conditions of licence or
19 options you are under.
20 405 MR. MACDONALD: I will let Peter talk
21 to the broader issue, but let me, as a broadcaster, say
22 that the idea of taking expensive $150,000-an-hour
23 Canadian drama and running it at nine o'clock in the
24 morning would make absolutely zero sense. We have to,
25 for a whole bunch of reasons, make sure that that
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1 investment runs where there is the broadest possible
2 audience.
3 406 As we have said, we are not
4 suggesting that there should be any abandonment of the
5 amount of Canadian programming running in prime time,
6 and clearly we need to run the most competitive
7 Canadian programming in that time period. Therefore,
8 it would only make sense that we would run our best
9 Canadian programming.
10 407 One of the things about the drama
11 credit, you are quite right, is it could result in a
12 half-hour less Canadian programming, but I think that
13 what that is driving to is the type of Canadian
14 programming that's desired, the recognition that it is
15 going to take more money to produce it. So we have
16 tried to bring together the quantity and the quality
17 side of the equation when making that recommendation.
18 408 Peter.
19 409 MR. MILLER: If I may, two
20 observations.
21 410 First of all, we have proposed a
22 number of incentives, and not every broadcaster will
23 use every incentive; it is a package of incentives, and
24 the intent is to give tools to broadcasters so that,
25 where they see an opportunity to potentially air more
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1 programming or air it at different times, and where
2 they see a return for it, they would do it. So
3 certainly this incentive would not be used, as Jim has
4 indicated, for the top cost million-and-a-half drama.
5 411 But that's not the only drama out
6 there. We know the French-language broadcasters have a
7 history of téléromans at a much lower cost, $300,000 an
8 hour. We know "Riverdale", the first Canadian soap
9 that CBC airs, is at a cost of $500,000 an hour.
10 412 What this would help create is
11 perhaps a new generation of drama programs at lower
12 costs where broadcasters may find audiences at
13 different days, and by applying the same logic and the
14 same success of the 150 credit that we currently have
15 in peak time to other day part periods, certain
16 broadcasters may finally find the financial incentive
17 and the ability to do it, so that we get Canadian drama
18 at other hours of the day as we have already in the
19 French-language system.
20 413 THE CHAIRPERSON: While we are on
21 this 200 per cent credit, it is a bit of a more pointed
22 question, but I think you describe in Appendix 1, at
23 page 2, what it would be, how it would be
24 differentiated from the 150 per cent credit programs,
25 that it would be distinctively Canadian, dealing with
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1 Canadian themes, historical events, personalities.
2 414 What do you mean by "Canadian
3 themes"? What would be the distinguishing factor to
4 put it in the 200 per cent credit category?
5 415 MR. MACDONALD: It would have to
6 feature a beaver.
7 416 MR. MILLER: I will pass this to Rob
8 Scarth, who is our expert on this, but I do note that
9 this notion of a super Canadian credit for some of the
10 very tough, truly indigenous Canadian programming,
11 feature films and otherwise, is something that has got
12 support among a number of interveners, and it is I
13 think an important area for us to explore.
14 417 MR. SCARTH: Thank you, Peter.
15 418 Just to expand on that, when we
16 looked at the availability of 10 out of 10 Canadian
17 drama in prime time, we saw that the Commission's 150
18 per cent content credit had been quite a success --
19 sort of half of that programming was 10 out of 10.
20 This 200 per cent credit, the concept behind this
21 credit is simply to take the success that we have seen
22 with the 150 measure to the next stage.
23 1205
24 419 The next stage is to deal with the
25 financial challenge of those programs that are
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1 "distinctively Canadian". In terms of what constitutes
2 distinctively Canadian, as you know, the fund, for
3 example, the Canada Television Cable Production Fund,
4 has a set of criteria that it works with to narrow and
5 limit the scope of what is distinctively Canadian.
6 420 The key sort of components of that
7 above and beyond ten out of ten are projects that deal
8 with Canadian themes, Canadian stories, projects where
9 the underlying rights are held by Canadians, in essence
10 projects that are very, very difficult to finance, very
11 difficult to mount and have very little export
12 potential.
13 421 The intention behind the proposal was
14 to create a superincentive for those types of projects,
15 those types of productions that present the whole
16 system of broadcasters and producers and funding
17 agencies with the greatest challenge.
18 422 THE CHAIRPERSON: I was curious to
19 hear from you to what extent that would meet your
20 viewership goals, however.
21 423 MR. SCARTH: In terms of how it would
22 meet viewership goals, I think the answer is quite
23 simple. It creates the circumstances and the incentive
24 for the broadcaster to look to this form of production
25 which again is a considerable financial risk and
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1 financial challenge, to enable the broadcaster to mount
2 and exhibit those kinds of productions in their
3 schedules.
4 424 They are popular with Canadians. The
5 situation for broadcasters is they are not popular
6 enough to be able to offset the costs yet.
7 425 MR. McCABE: We expect they would be
8 very high quality, though.
9 426 THE CHAIRPERSON: There seems to be
10 some confusion sometimes in your submissions as to how
11 many or whether stations in the market have a
12 requirement to air under-represented category
13 programming during the evening hours. My understanding
14 is that is not a general requirement at the moment.
15 427 The reason I am asking that is to ask
16 you again to elaborate for me the incentive inherent
17 with regard to viewership levels, inherent in your
18 proposal at page 77, I believe, with regard to
19 relieving broadcasters who air 7, 8 and 9 programs
20 between seven and eleven beyond current commitments --
21 That's why I made the preliminary remark that it's not
22 a general imposition right now, so I don't know what
23 you mean by current commitments -- that since you are
24 not advocating that there be a general commitment to
25 certain categories of programming in peak time, but you
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1 say that beyond current commitments, broadcasters would
2 be relieved of the requirement to exhibit up 2.5 hours
3 per week of day time, that is 6:00 a.m. to 6:00 p.m.,
4 Canadian programming for every half hour in category 7,
5 8 and 9, they be exhibited between seven and eleven.
6 428 Again, relate that for me with your
7 aim to increase viewership to Canadian programming. I
8 see that as a 1.5 ratio. Is that based on your view of
9 6:00 p.m. to 7:00 to 11:00, midnight audiences being
10 five times larger than daytime ones? How does it
11 relate to the general goal?
12 429 MR. MILLER: Let me start in general
13 terms and Rob may have specifics.
14 430 First of all, again our whole
15 approach, as we said in our opening statement, is to
16 get off simple measures of expenditures and quantity
17 and allow more focus on quality and on viewership.
18 This is an example where broadcasters that would avail
19 themselves if such an incentive were to be introduced
20 by the Commission would get out of simply creating
21 volume Canadian programming viewing day parts and focus
22 all that volume on half an hour or more of prime time
23 Canadian programming.
24 431 The ratio, as you alluded to,
25 reflects the business reality and different audiences.
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1 I think what is very significant about this incentive
2 is that there's a lot of interest in it among parties
3 in this proceeding. Both the Director's Guild and
4 Atlantis for two have recognized that this would be a
5 good way to drive more Canadian programming and
6 dramatic programming into prime time and to get the
7 broadcasters that choose to avail themselves of this
8 out of the volume that they currently need to generate
9 in day parts.
10 432 As you pointed out in the way we
11 described this, the notion would be that those that
12 exceeded any commitments they would have in peak time
13 would then have access to this incentive and,
14 therefore, get effectively relieved from some of their
15 day time, their general 60 per cent day time
16 obligations.
17 433 THE CHAIRPERSON: So this would be a
18 relief from the commitments they made to viewership
19 levels. We don't have that requirement at the moment
20 in peak time and you don't propose -- some parties
21 propose that we have it. Others and you say no, there
22 is no need for that.
23 434 MR. MILLER: Again, it's not a relief
24 from viewing commitments. It's a relief from Canadian
25 content quota requirements. In other words, just as
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1 the one fifty gives an incentive, this is a different
2 kind of incentive that recognizes --
3 435 THE CHAIRPERSON: You are talking
4 here by reference to the 60/50.
5 436 MR. MILLER: Precisely.
6 437 THE CHAIRPERSON: I see. Now, you
7 realize that the CBC, for example, has suggested that
8 there is no need to regulate during the day.
9 438 MR. MILLER: And that's a radical
10 proposal that we haven't gone as far on.
11 439 THE CHAIRPERSON: You have no comment
12 to make as to whether it is still necessary to have
13 60/50 given viewership if we do retain the viewership
14 goal model.
15 440 MR. MILLER: We think that Canadian
16 content requirements of 60 per cent overall and 50 per
17 cent in prime time are very entrenched in the
18 broadcasting system. We think both politically and
19 otherwise it's not the time to alter those.
20 441 THE CHAIRPERSON: Another proposal
21 that you have that is somewhat at odds with some
22 proposals of others that I would like to relate again
23 to a viewership level, your recommendation -- no, I
24 think it's in the appendix at page 8 -- but in any
25 event, you recommend that the promotion of foreign
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1 programming be allowed to count in spending
2 requirements as well as the promotion of Canadian
3 programming.
4 442 MR. MILLER: While my colleague is
5 looking at it, I don't believe that was our proposal.
6 443 MR. SCARTH: Madam Chair, are you
7 referring to our proposals with respect to advertising
8 content in terms of PSAs and the program promos?
9 444 THE CHAIRPERSON: Yes.
10 445 MR. SCARTH: Okay, I understand.
11 446 THE CHAIRPERSON: And there are
12 interveners, of course, who feel that it should only be
13 counted when it's for the promotion of Canadian
14 programs. I read your proposal as including all
15 promotion.
16 447 MR. SCARTH: That is correct, Madam
17 Chair. Our proposal in that particular area relates to
18 all program promotion. The intention behind it was
19 really just to reflect the reality of the business in
20 that program promotion is not advertising time sold.
21 What it is is an opportunity to maximize audiences and
22 viewer awareness of programming.
23 448 Certainly the Commission's measure
24 with respect to flexibility on not counting Canadian
25 program promos as ad material has been of considerable
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1 assistance. Now we are just stepping back from that
2 and looking at it in a more sort of wholistic fashion
3 and saying the same logic applies to all of our
4 programming.
5 449 At the end of the day, one of our --
6 Michael and Jim and Daniel referred to it in the
7 opening remarks -- one of the objectives is to sort of
8 maximize viewership to Canadian television. That
9 viewership to Canadian television has two components.
10 One is increasing the viewership to Canadian services
11 and non-Canadian programming is a part of our services.
12 The other component naturally is increasing viewership
13 to Canadian programming.
14 450 It was in the spirit of maximizing
15 audiences to Canadian services that that particular
16 measure was put forward.
17 451 THE CHAIRPERSON: Again, you would
18 trust that the incentive to increase viewership to
19 Canadian programming would discipline the extent to
20 which promotion to foreign programming is used
21 vis-a-vis promotion of Canadian programs.
22 452 I did find it. It is in appendix 1
23 at page 8:
24 453 "-- expand the categories
25 excluded from --"
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1 454 I perhaps didn't phrase it properly.
2 It would result in excluding from advertising promotion
3 to Canadian and foreign programs without any limit as
4 to which one.
5 455 MR. MILLER: That's right, Madam
6 Chair. We were initially a little confused by your
7 question.
8 456 THE CHAIRPERSON: Yes, it was
9 confusing. I apologize.
10 457 MR. MILLER: We are not suggesting
11 that promotion of American programming count as a
12 Canadian programming expenditure.
13 458 THE CHAIRPERSON: No, no. I
14 understand that.
15 459 MR. MILLER: This measure is simply a
16 matter of some flexibility in advertising. The
17 Commission asked us to look at the issue of the 12
18 minute per hour advertising limit and whether it should
19 be abolished entirely or modified in some way.
20 460 The consensus CAB Television Board
21 position is the one reflected here which was not to
22 entirely abolish it, but to be more clear on what
23 counts as advertising material and to exclude what is
24 traditionally recognized in the industry as not
25 advertising, that is promotion, and exclude all
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1 promotion.
2 461 This is an area where you will hear
3 different views from our members and others, but the
4 point is simply to recognize industry practice here and
5 abroad, that promotion of programming is an important
6 part of what we do and shouldn't detract from our
7 ability to maximize our 12 minutes advertising avails
8 per hour.
9 462 MR. McCABE: In addition, Madam
10 Chair, there remains the question of the
11 cross-subsidization of Canadian programming from the
12 revenues from American programming. To the extent that
13 we can maximize that, and you have seen the economics
14 as presented by PricewaterhouseCoopers of Canadian
15 programming, it is again an attempt to increase the
16 revenue that we have available for that purpose.
17 463 THE CHAIRPERSON: You mentioned that
18 some of your members have different views about this.
19 I guess, for example, WIC has proposed a 50/50 control
20 between but your view is it is not necessary to impose
21 that sort of maximum. I think their proposal is no
22 more than 50 promotional spots -- 50 per cent rather
23 promotional spots should be discounted from advertising
24 if it's to foreign programming, but your view is it's
25 not necessary to impose any limit.
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1 464 MR. MACDONALD: Jim's view is we left
2 it out. Perhaps I will just clarify. I will put my
3 WIC hat on for one second to say that the WIC proposal
4 was that no promotion should count as advertising but
5 that a minimum of 50 per cent of total promotion should
6 be for Canadian programs.
7 465 We recognize that there might be some
8 concern that there might not be inventory left. We
9 were trying to, I think, make sure that people
10 understood that there was intent to continue to promote
11 heavily Canadian programming, but at the same point to
12 Michael's comment, we also recognize that we have to
13 make sure that to the greatest extent possible, which
14 is not generating the same kinds of margins that it
15 used to, continues to do so at least as long as
16 possible.
17 466 MR. McCABE: Which approach seems to
18 be a prudent one.
19 467 THE CHAIRPERSON: Now, it's a good
20 thing that WIC was present to clarify all this.
21 468 You don't propose the abolition of
22 expenditures on Canadian content as a regulatory
23 mechanism. To what extent in your view do expenditure
24 goals have or could have a more direct relationship to
25 program quality than viewership goals?
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1 469 MR. McCABE: Do I understand you are
2 asking do we think that expenditure goals would create
3 better program quality than viewership goals?
4 470 THE CHAIRPERSON: Well, elaborate for
5 me. Obviously you had made some choices in your
6 proposals.
7 471 MR. McCABE: Yes.
8 472 THE CHAIRPERSON: You are keeping
9 expenditures as the regulatory mechanism so that option
10 would still be open. I would like your view as to how
11 successful that mechanism could be.
12 473 We heard Mr. Lamarre this morning
13 tell us what is the level of expenditure on Canadian
14 content in Quebec and presumably what the results are.
15 I'm sure Pricewaterhouse or Coopers Lybrand could make
16 an intelligent connection between the two.
17 474 I am asking whether the Commission
18 should retain -- why is it that the Commission
19 shouldn't retain that as a major goal for measuring
20 quality as opposed to your proposal which is to use
21 viewership?
22 475 MR. McCABE: Again, there are two
23 different levels we are talking about. We are
24 proposing the establishment of viewership as a system
25 goal, but at the individual licensee level we expect
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1 you will continue to use your tools, the ones you
2 currently have, one of which you just referred to, and
3 others that we proposed when we have been discussing
4 here as conditions of licence on individual licensees
5 in accordance with their plans to try and improve their
6 viewership.
7 476 By that I mean I think it would be a
8 fruitless exercise to try at the licensee level to
9 establish viewership goals, but you have created a
10 flexible system of either choosing expenditures or
11 hours of programming and we have proposed a third one
12 respecting 7, 8 and 9.
13 477 What we are suggesting is these are
14 very useful tools for you in your role as regulator to
15 continue to use, and we are not suggesting their
16 removal. We are merely suggesting as you apply them,
17 you will want to hear from broadcasters how they think,
18 if that's the tool they are going to use, how they
19 think that will help them achieve their goals.
20 478 Someone may come to you and say
21 "Look, I can do this better if I choose the overall
22 hours proposal because here is my strategy for doing
23 this". Another would say "The expenditure goals are
24 right for me because my plan is to pour a lot of money
25 into -- since you have broadened the prime time perhaps
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1 from current peak hours to a broader view of that, I
2 can now pour more money into programming that will get
3 me an audience there".
4 479 These are tools that may be used. We
5 are aiming for more flexibility in our proposal by
6 different broadcasters, all of them again trying to
7 achieve greater viewership, that is more Canadians
8 watching.
9 480 MR. MACDONALD: Madam Chair, I'm sure
10 you are familiar with the term what gets measured gets
11 done. I am going to come back --
12 481 THE CHAIRPERSON: That's a dangerous
13 preface to what we will hear this afternoon.
14 482 MR. MACDONALD: Well, we have got
15 lots of measurement. What we are trying to do is
16 encourage the cultural shift to the measurement that
17 really matters.
18 483 As I said earlier, we measure
19 everything that really does drive the whole system.
20 The conventional broadcasters are facing some enormous
21 change as outlined to you in our proposal.
22 484 We have come back and said "There is
23 no way that we can continue to sit on our feet in terms
24 of where Canadian programming is going". It has to be
25 profitable. What is the best way of going about that?
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1 Certainly trying to drive the audience we feel is the
2 best way to do that.
3 485 We believe all of that emanates from
4 the regulator who is creating more of a culture and the
5 expectation. We feel that we are not asking you to
6 abandon any of the other forms of measurement. We are
7 simply asking that viewership become a very key part of
8 how we are doing overall as partners and how we are
9 doing in the system.
10 486 THE CHAIRPERSON: When all is said
11 and done, is the CAB not saying don't abandon
12 expenditures as a regulatory mechanism, keep the status
13 quo there, but don't increase it as a measurement.
14 Instead, superimpose on it this broad incentive which,
15 as we can discuss, would be difficult to measure and to
16 implement, but this broad incentive of looking to reach
17 a viewership goal in a five year span is sufficient to
18 lead to more expenditures, if that's what's necessary
19 to get the quality or the diversity that will give you
20 a ship.
21 487 Let me ask you. During your
22 deliberations, which appear to have been quite arduous
23 --- I was told how long it took. It took a long time
24 to read the result -- did you ever consider
25 establishing a spending requirements goal on a system
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1 basis? You seem to believe that that's a regulatory
2 mechanism which is of some value toward meeting the
3 objectives of the Act.
4 488 MR. McCABE: Our discussions
5 obviously ranged over the whole gamut of possible ways
6 of coming at this. What the PricewaterhouseCoopers
7 study showed us in stark detail was that if we
8 continued down that road of essentially saying let's
9 measure a number of hours, let's measure a number of
10 dollars.
11 489 We would not be able to achieve the
12 business objectives that we needed in order to in
13 effect grow as businesses, in order to succeed as
14 businesses. We said yes, it is a tool that you should
15 have available.
16 490 We have not said, by the way, that
17 you should not increase that when you are talking about
18 licensees. We are just saying you should not set a
19 regime which increases that for everybody with respect
20 to particular kinds of programming, that you really do
21 have to make a judgment about the level that each
22 licensee that is before you ought to expend, if that's
23 the measure that they choose given that you have
24 provided that flexibility.
25 491 Part of your concern obviously will
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1 be equity as among the equivalent players, but our view
2 was that given the flexibility that you had already
3 provided, if all of a sudden we were to say no, we will
4 go back to a major measure which will be expenditure
5 that, one, it had not been working to drive audiences
6 up and, two, it would be a step backward in the
7 flexibility you have already provided.
8 492 MR. MILLER: I think, Madam Chair, it
9 is important to in simple terms distinguish the
10 difference between our proposals and the others, and
11 they are very clear.
12 493 THE CHAIRPERSON: Clear as this
13 afternoon.
14 494 MR. MILLER: Our proposal posits
15 viewership as the most important measure of success.
16 Theirs posits expenditures. Our proposal suggests
17 diversity is the best way of achieving our objectives.
18 Theirs suggests one size fits all.
19 495 Our proposal says we have to put
20 Canadian programming on a better business footing.
21 Theirs suggests that broadcasters should
22 cross-subsidize it more. Those are the fundamental
23 differences. They are not minor differences.
24 496 They are major because they are major
25 differences in the way that the Commission and the
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1 industry approach the future.
2 497 THE CHAIRPERSON: I understand that
3 your proposal is again one size fits all and more
4 flexibility. Would you propose then any changes to the
5 spending requirement model we have now or are you
6 suggesting that the Commission look, for example, at
7 certain markets, decide what are comparable amounts
8 depending on the type of programming they choose to air
9 to reach the viewership to reach the viewership goals.
10 1230
11 498 Would we look at multistation groups
12 and compare them to other multistation groups? What
13 kind of flexibility would you look at since you agree
14 that spending requirement be retained?
15 499 MR. MILLER: Again, the beauty of the
16 way the Commission approaches contributions on
17 obligations is twofold. We have a competitive bidding
18 process that allows in the case of new applications
19 everyone to put their best offer on the table and the
20 Commission gets the best value from that, but whatever
21 that new offer is doesn't mean you can't take that and
22 just translate it automatically to everyone else. The
23 beauty of a competitive bidding process is you get the
24 best offer on a given service and you can't just take
25 that and make it the margin for everyone.
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1 500 The second thing the Commission has
2 always done is approach things on a case-by-case basis.
3 Markets differ, broadcasters differ. Seventy per cent
4 of Canada in some markets is not 70 per cent of Canada
5 in other markets.
6 501 The only way the Commission can look
7 at this is by looking at the specific proposals the
8 companies come to you with and assessing if they are in
9 fact valid contributions. You cannot take an overall
10 figure and say this is what everyone must do. You have
11 never done that and we wouldn't suggest, as others have
12 suggested, that you do this from now on.
13 502 THE CHAIRPERSON: My last question
14 before we break for lunch, since it is related to
15 performance levels and I assume that that's viewership
16 levels, at pages 65 and 66 of your main submission you
17 introduce or discuss a concept of performance
18 incentives that would draw into your performance goals
19 the producers.
20 503 If I understand what would happen is
21 that bonuses could be paid by broadcasters to producers
22 where programs perform better than expected. I imagine
23 a scheme where you would estimate a performance and if
24 it is exceeded then a financial bonus would be paid to
25 the producer.
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1 504 Conversely, you don't talk about
2 penalty when there is default, but you do use -- that
3 there would be other prenegotiated default points. Do
4 I understand this scheme well and how it is related to
5 viewership levels?
6 505 MR. McCABE: If I may, this arose
7 from a quite congenial but sometimes raucous meeting
8 that we had with the CFTPA and some other people, in
9 which one of the broadcasters posed the proposition
10 that supposing I had to hand another $4 million or $5
11 million. Now, I have got a couple of programs that are
12 not Canadian programs that are not performing very well
13 and what would you suggest? That I throw those out and
14 try to spend that money on better programs and more
15 promotion of them, or should I do two additional hours?
16 Unanimously, it was do two additional hours.
17 506 So, we said, well then, supposing we
18 talked to you about performance bonuses -- in other
19 words, when we contract with you we would together
20 determine some sort of expectation. This would be
21 individual contracts. You contract and we would have
22 some expectation of how that program would perform.
23 507 Supposing we wrote into it that if it
24 performed better -- in other words, by certain audience
25 percentage points, we would in fact pay you more.
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1 508 The immediate question was: What if
2 it didn't do as well? Would we have to take less? We
3 said, "Well, no, fair enough, when we bought that we
4 expected it would achieve," but couldn't we work out
5 something where our contracts in effect said, "Look, if
6 we can get some better programming you that we can do
7 better with on the air, we will pay you more."
8 509 But the answer then was, effectively,
9 no. Spend it on -- add some more money and make
10 another program. That concerned us greatly.
11 510 So that what we are proposing here is
12 something that would have to operate at the individual
13 contract level.
14 511 THE CHAIRPERSON: Yes. Your proposal
15 at least appears consistent with drawing in the
16 producers into making viewership levels a key indicator
17 of the success of the system.
18 512 MR. McCABE: Yes.
19 513 THE CHAIRPERSON: I think I heard you
20 say earlier that your plan would be to draw everybody
21 into this, including the regulator.
22 514 Thank you very much. We will
23 continue this afternoon.
24 515 Considering the engineering hurdles
25 we had this morning, I propose to resume at 1:30 p.m.
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1 --- Lunch recess at/Suspension pour le déjeuner à 1235
2 --- Upon resuming at/Reprise à 1335
3 516 THE CHAIRPERSON: Good afternoon. I
4 hope you all had a good lunch.
5 517 I said this morning that after
6 looking at some of the basics of your proposal we would
7 have a brief look at how you propose to establish it.
8 518 Well, let me say first that I heard
9 you say this morning that you want broad goals
10 established for the system as a whole and I gathered
11 from your comments this morning that you were
12 envisaging your role, the specialty services role, the
13 pay services role and possibly would you also look at
14 drawing into this system the distribution undertakings?
15 519 MR. McCABE: Yes. We believe that
16 they should play a part because obviously the questions
17 as to what services are carried will affect the
18 viewership levels, so that they are essential to it, as
19 we believe is the CBC, which I don't know if you
20 included. I can't recall if you included it in your
21 listing there and the production --
22 520 THE CHAIRPERSON: I said conventional
23 broadcasters. So, let's take it for granted.
24 521 MR. McCABE: And the independent
25 production industry because again, as the anecdote I
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1 gave you just before the break there illustrates, they
2 have to be committed to the performance of the
3 programming as well.
4 522 So that our hope would be,
5 recognizing they are an unregulated part of the system,
6 but they are an unregulated part of the system that
7 marches to the drum that you beat.
8 523 THE CHAIRPERSON: I am sorry, I
9 missed which was the unregulated part of the system.
10 524 MR. McCABE: The independent
11 production industry.
12 525 THE CHAIRPERSON: Yes.
13 526 MR. McCABE: I am just suggesting
14 that what you decide here, the tone you set, the
15 direction you set for the system in fact drive them and
16 where they go too, despite the fact that they are
17 unregulated.
18 527 MR. McCABE: But do you see drawing
19 them in indirectly because of -- as we change the
20 regulatory system obviously indirectly it will affect
21 them, or do you see them at the table when goals and
22 means of reaching them are discussed?
23 528 MR. McCABE: They should be at the
24 table. You know, they are in the regulatory system, if
25 you look at the act. In some senses they are required
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1 to make a substantial contribution and, as I am
2 occasionally reminded, we think they should.
3 529 I think that they should be at the
4 table. We are really trying to create a new dynamic
5 here in which based upon the regulator and the
6 regulatory system we try to set some goals for the
7 system that we can all be working toward and see if we
8 cannot find co-operative strategies to do that.
9 530 THE CHAIRPERSON: Now, in the
10 appendix to your submission in response to Question No.
11 85 regarding specialty services, you say that:
12 531 "...the CAB believes that the
13 existing regulatory framework
14 already maximizes the
15 contributions made by specialty
16 and pay services to Canadian
17 programming."
18 532 So, do you foresee having the
19 specialties at the table for discussions, the purposes,
20 or I gathered from that statement that you felt that
21 the system had produced -- well, had maximized as it
22 exists the contribution of specialty services.
23 533 MR. MILLER: We made that comment
24 referring to the fact that the process the Commission
25 undertakes to license specialties is a competitive
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1 licensing process. Applications are invited. People
2 come forward with their best business plans, their best
3 offers of contribution and the Commission chooses who
4 gets the licence. So, that side of it works very well.
5 We don't think some universal rule should be applied to
6 all specialty services.
7 534 That being said, as Mr. McCabe has
8 indicated, the other side of the equation is the
9 carriage of those services. We have today a very
10 unfortunate situation wherefore Canadian services have
11 been licensed and still haven't launched.
12 535 On the other hand, a number of new
13 American services have been brought into the system.
14 So, this notion of ensuring that distributors and the
15 Commission maximize the entry of new specialty services
16 obviously is key to maintaining and meeting the viewing
17 goals.
18 536 THE CHAIRPERSON: What I understand
19 you to say is you feel that the system as it applies to
20 specialty services has given good results and we should
21 keep on the same track of the approach to the request
22 or to the requirements we demand of specialty services?
23 537 MR. MILLER: Yes, but we are
24 suggesting a little nuance there. We are suggesting a
25 more vigorous application of priority carriage for
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1 Canadian services and that we make sure that we get
2 these services launched and that we get the next round
3 launched.
4 538 THE CHAIRPERSON: That would address
5 I gather the distribution part, but with regard to
6 specialty services the manner in which the Commission
7 has approached is satisfactory to you?
8 539 MR. MILLER: Exactly.
9 540 THE CHAIRPERSON: And you want to see
10 it continued, not necessarily to ask the specialty
11 services at the table to rejig what they are doing in
12 light of your model if it were retained?
13 541 MR. MILLER: That's correct.
14 542 MR. MACDONALD: Madam Chair, one of
15 the reasons we also have asked you to look at the whole
16 system is because obviously the advent of specialty
17 services has provided a tremendous amount of diversity
18 in the system. It has added millions of dollars in new
19 investment in Canadian programming and hundreds of
20 additional hours of Canadian content, but the
21 specialties have had an effect on the conventional
22 broadcasting system to the tune of about 20 per cent
23 erosion of our core audience. That's not to complain.
24 That's the reality, but what we certainly want to make
25 sure is that everybody is cognizant of is that there is
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1 a push and pull within the system that does affect us
2 moving forward.
3 543 So, we totally respect what has been
4 achieved, but we also know where it has come from.
5 544 THE CHAIRPERSON: Now, with regard to
6 the establishment of a level of viewership which would
7 be important to keep in mind as a beginning if we are
8 going to check it as it goes forward, how did you
9 arrive at the figure to which you applied a growth
10 factor for the five years when you measured viewership
11 in English television to all programming and viewership
12 to entertainment programming? So, you started with 32
13 all programming and 7.5 per cent entertainment. Can
14 you tell me where these figures come from?
15 545 MR. MILLER: We looked at two things.
16 We looked at what could be realized going forward.
17 546 THE CHAIRPERSON: But from what
18 database is my question?
19 547 MR. MILLER: We used Nielsen data for
20 these numbers.
21 548 THE CHAIRPERSON: You know that the
22 Commission uses BBM data instead, which I understand
23 gives us a better picture of the smaller markets than
24 Nielsen. Would you think it reasonable to also have
25 regard to the BBM figures when establishing the
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1 baseline?
2 549 MR. MILLER: Yes. We used
3 Nielsen data because for the national goals, as we were
4 establishing, they seemed to have the most accurate
5 measurement, but we, like you, recognize that BBM is
6 very strong in the local market data.
7 550 THE CHAIRPERSON: And I guess one of
8 the advantages for the Commission is that it makes the
9 determination as to what is a level of entertainment by
10 distinguishing the categories, whereas Nielsen is done
11 by another party. Right?
12 551 MR. MILLER: Perhaps others can
13 comment on the details there.
14 552 MS McLAUGHLIN: Excuse me. I just
15 want to clarify the question, Madam Chairman. Are you
16 asking or suggesting that BBM categorizes the
17 programming?
18 553 THE CHAIRPERSON: No, that we do.
19 554 MS McLAUGHLIN: Okay. Well, and
20 Nielsen -- I'm sorry, you said Nielsen does it by
21 another source?
22 555 THE CHAIRPERSON: My understanding is
23 it's not -- we use BBM's and one of the advantages is
24 it covers the smaller markets and also that the
25 determination of when you measure the percentage of
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1 entertainment programming you have to determine the
2 programming that fits within these categories, that
3 with regard to BBM the Commission makes that
4 determination.
5 556 If I have misrepresented the facts I
6 am sure the staff will correct me.
7 557 MS McLAUGHLIN: No. In actual fact
8 you haven't, but Nielsen doesn't measure small markets,
9 so you have to --
10 558 THE CHAIRPERSON: That's what I said.
11 559 MS McLAUGHLIN: Yes.
12 560 THE CHAIRPERSON: The purpose of my
13 question is very simple. It is simply to say "would
14 it" and I think I have the answer. Would it make sense
15 to also, if we were to retain this model, to sit down
16 and decide whether we should also look at what baseline
17 we get if we use BBM's instead. It is no more
18 complicated than that.
19 561 M. LAMARRE: Je pense, Madame Wylie,
20 qu'à partir du moment où on s'entend sur des outils de
21 mesure, notre réponse à ça est très simple, c'est
22 "oui". Et je pense que le point qui est important sur
23 ce sujet-là, c'est le suivant... parce qu'on utilise
24 souvent le modèle francophone comme étant le modèle...
25 562 Le point que j'aimerais faire là-
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1 dessus, c'est qu'à partir du moment où nous nous
2 entendons sur les modalités et à partir du moment où le
3 principe de la performance est respecté, non seulement
4 sommes-nous confortables, non seulement sommes-nous
5 prêts à y adhérer, mais on est convaincus que l'effet
6 de ça serait très, très grand pour toute l'industrie de
7 la production au Canada parce que le modèle dans le
8 marché francophone est basé sur un critère: la
9 performance.
10 563 La raison pour laquelle nous
11 investissons autant dans le marché francophone en
12 contenu canadien, c'est parce que ça marche. À partir
13 du moment où on peut établir des critères qui vont
14 permettre dans le Canada anglais de performer autant,
15 nos collègues du Canada anglais, j'en suis convaincu,
16 vont suivre le pas. Mais le principe de base, c'est un
17 principe de performance, et ce principe-là ne doit pas
18 être uniquement l'adage des diffuseurs mais on devrait
19 de plus en plus retrouver les autres partenaires de
20 l'industrie liés à cette performance-là. C'est comme
21 ça qu'on arrivera à avoir plus de contenu.
22 564 On ne peut pas, dans l'entreprise
23 privée, fonctionner autrement que sur des critères de
24 coûts, de profitabilité et de rendement. Sinon, nous
25 serions une télévision publique, et ça, c'est le rôle
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1 de quelqu'un d'autre dans notre industrie.
2 565 Alors comme diffuseurs privés nous
3 sommes extrêmement fiers d'avoir une excellente
4 performance en termes de contenu canadien, mais je
5 trouve que si on peut maintenir ce critère-là de
6 performance, je pense que c'est toute l'industrie qui
7 s'enrichira de contenu.
8 566 LA PRÉSIDENTE: D'accord,
9 Monsieur Lamarre.
10 567 Maintenant, évidemment, au Québec,
11 pour un nombre de raisons, vous avez déjà atteint le
12 but vers lequel le Canada anglais voudrait se diriger,
13 mais il semble qu'il faut changer les mécanismes, et
14 l'Association propose un mécanisme qui n'existe pas au
15 Canada français mais qui a produit les résultats visés.
16 568 Alors ce que je regarde maintenant,
17 c'est comment on s'y prendrait pour établir, de façon
18 il semble artificielle, un mécanisme qui donnerait les
19 même résultats qu'on a au Canada français.
20 569 M. LAMARRE: Je pense que la question
21 est extrêmement importante parce qu'elle est au coeur
22 de tout le débat.
23 570 Nous sommes partis du principe
24 suivant: nous sommes partis du principe qu'afin
25 d'offrir du meilleur contenu canadien, il faut y aller
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1 par la performance.
2 571 Nous avons saisi l'invitation du
3 CRTC... et moi, je pense que c'est un rendez-vous
4 unique. L'invitation du CRTC, c'est comment tous les
5 intervenants de l'industrie peuvent faire pour
6 améliorer le contenu canadien.
7 572 Nous avons saisi votre invitation et
8 nous avons compris que, dans votre invitation, il y
9 avait une notion d'innovation. Alors c'est certain
10 qu'on arrive avec une notion qui est innovatrice, et si
11 on retourne aux anciennes règles du CRTC et qu'on
12 regarde ça, on dit peut-être que l'approche de
13 l'Association des diffuseurs n'entre pas dans le livre,
14 et vous avez raison. Ce qu'on vous dit, c'est que nous
15 sommes prêts à nous asseoir avec vous et avec d'autres
16 intervenants pour amener cette nouvelle notion-là.
17 1350
18 573 Moi, je pense que ça va exactement
19 dans l'esprit de votre invitation, qui est de dire: Si
20 on trouve une façon d'amener des modalités pour évaluer
21 la performance en contenu canadien, non seulement on va
22 y arriver parce que ça va être un outil de mesure, mais
23 ça va aussi nous amener à garder le focus sur quelque
24 chose qui devrait être continuellement dans l'esprit
25 non seulement des diffuseurs mais également des
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1 producteurs et encore plus du diffuseur public... parce
2 que le gouvernement fédéral, j'imagine, lorsqu'il a mis
3 sur pied un diffuseur public, c'était pour cette
4 raison-là précisément.
5 574 Alors moi, je pense qu'on répond à
6 votre invitation d'innover, et nous serons présents
7 pour nous asseoir avec vous et regarder toutes les
8 modalités.
9 575 Alors est-ce qu'on est prêt à partir
10 du barème BBM plutôt que Nielsen, la réponse, c'est
11 "oui". Est-ce que nous sommes prêts à avoir des
12 modalités? Bien sûr. Mais nous sommes très encouragés
13 par la possibilité d'amener une nouvelle notion dans
14 notre industrie qui est d'évaluer nos performances.
15 576 LA PRÉSIDENTE: Peut-être qu'il y
16 aurait un grand avantage à ce que le Conseil établisse
17 un règlement qui oblige les radiodiffuseurs du Canada
18 anglais à s'asseoir avec les radiodiffuseurs du Canada
19 français au moins une fois par mois pour essayer
20 d'absorber leurs trucs.
21 577 M. McCABE: On le fait toujours.
22 578 LA PRÉSIDENTE: Ça nous donnerait
23 moins de travail.
24 579 Je remarque que, when you speak, Mr.
25 McCabe, of drawing in all the players, you include the
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1 Commission -- however, Monsieur Lamarre is not good
2 enough to -- to establish your viewership goals.
3 580 MR. McCABE: We think you are
4 essential because you are the leader. You are the body
5 that sets the tone for the system and that tone that
6 you set ends up being the guide post for the other
7 parts of the federal government; that is, the
8 Department of Heritage and the government and
9 telephone, for instance. When the government wants
10 advice as to how the system should operate, they come
11 to you, and properly so. So, our view is that you have
12 here the power to set a new direction for the system,
13 to set us in the direction that Daniel suggests of
14 measuring performance.
15 581 THE CHAIRPERSON: Of course, that
16 brings me back to the modalities of how the regulator
17 would be involved in this process. Presumably, once a
18 level is set, then you would have each licensee
19 appearing before the Commission with its plans, be it
20 at renewal or -- how do you perceive this happening and
21 how should the Commission evaluate whether the
22 licensee's plans fit the overall goal?
23 582 As we discussed this morning, people
24 will make choices, and correctly so, on the basis of
25 what is expected of their shareholders and their view
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1 of the market and how to make their company profitable.
2 How should we evaluate the plans so that the whole is
3 fulfilled at the end of the day? Is it the first
4 person who comes who chooses and then the last person
5 gets to fulfil the part that hasn't been suggested yet?
6 How would this operate?
7 583 MR. McCABE: I think, first of all,
8 you have established, in a sense, the correct forum for
9 dealing with the specifics of achieving the plan; that
10 is, at the licence renewal or at the transaction or at
11 the application for licence. I don't think it's as cut
12 and dried as there are five slots in the plan for
13 Market A, the first one along gets the best one, the
14 second gets the second best one, and so on. It really
15 is a situation in which I think that, first of all, you
16 will, as you do in all of the work you do, be required
17 to exercise some judgment about whether what is before
18 you makes sense.
19 584 For instance, if a broadcaster came
20 and said, "Our plan is to use one of those incentives
21 you have there", and you say, "You are proposing, in
22 other words, to cut a couple of hours of daytime
23 television which are now getting you this kind of
24 audience for a program type that, on balance, turns out
25 half the audience in the normal course than the one you
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1 are giving away", you are going to want to be saying,
2 "Explain to me what it is that you are about." That
3 person may say, "That sort of audience is one I can
4 grow, this is the kind of thing that, given what we do,
5 we can develop with our audiences."
6 585 In other words, you are going to want
7 to hear those plans and their proposals, as to which of
8 the incentives they will use and which of the options
9 they will choose on the basis of how they see it
10 contributing to their performance. You obviously don't
11 pull these together individually and add them up. I
12 think it's a process in which annually you would be
13 taking a look and you would expect some annual returns,
14 I would think.
15 586 So, you take a look at how the system
16 is performing altogether and then would sit down with
17 us to determine whether there are other things that
18 have to be done. It will require, it seems to me, a
19 different style of working other than just assuming
20 that we are going to try to solve the problem, if you
21 will, with each individual licensee.
22 587 THE CHAIRPERSON: In the meantime,
23 you see regulations: obviously, the 60/50; you also see
24 options. You have added an Option C. Therefore, you
25 see regulations and conditions of licence attached to
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1 individual licensees, but with this viewership goal as
2 an objective, but not an objective that one would
3 measure compliance with a view to changing what the
4 individual licensee is doing, compliance in the sense
5 of bringing back a licensee who is not performing
6 according to the goal, but is doing what the
7 regulations require and the conditions of licence
8 require.
9 588 MR. MILLER: That's correct. The
10 Commission cannot regulate viewing. What we are
11 proposing is a very different model. Essentially, the
12 Commission, if you will, relies more on its supervisory
13 aspect of its mandate to set these goals for the system
14 to make sure through all its decisions, through all its
15 reviews, through all its applications, through all its
16 licence decisions that that is an important factor that
17 is kept in mind and that the Commission choose to
18 exercise increasing flexibility, increasing access to
19 these incentives, particularly those who come to you
20 with business plans that clearly direct their companies
21 to meeting those objectives.
22 589 The beauty of it is for the very
23 first time the Commission ends up with a goal, a
24 measure that has public policy objectives and business
25 objectives in sync because you want --
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1 590 THE CHAIRPERSON: Now --
2 591 MR. MILLER: If I could just finish,
3 because the beauty is you end up with increased viewing
4 to Canadian programming, which is, in our minds, very
5 much in sync with the goals of the Broadcasting Act and
6 the broadcasters have increased viewing, which is key
7 to their business success. So, it's a win/win because
8 you are monitoring and championing and pushing the
9 envelope on the most important measure of all.
10 592 THE CHAIRPERSON: I have heard Mr.
11 McCabe and others on the panel say a number of times,
12 "Well, this is just going to be a goal and we will have
13 the regulatory system with the modifications that you
14 propose continuing. If the goal is not working as we
15 monitor it, we will do other things." What are these
16 other things since when there is no -- I mean
17 regulators are there to regulate or they are not there
18 at all.
19 593 Do you say then that if the goals are
20 not being -- you say we can't regulate viewership, but
21 presumably if viewership is not attained, then we will
22 do what with the regulatory mechanisms that you accept,
23 spending requirements, exhibition requirements? Will
24 we increase them like some other submitters suggest?
25 What will we do then if this incentive program doesn't
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1 give results?
2 594 MR. McCABE: As well, obviously, as
3 the spending requirements, we have proposed a series of
4 incentives and what we are suggesting is that if we can
5 work together and say we have a common focus, we have a
6 common goal, it's in those reviews that we would say,
7 "This area isn't working. Do we need an incentive in
8 fact to make it work", because it really is again a sea
9 change in how we think about the system.
10 595 You have some tools to make sure that
11 people, in effect, do the minimum, but the aim is to
12 try to do better than the minimum. It's there that we
13 all put our heads together to decide how we can work
14 together now that we have this focus, work toward a
15 goal that, as Peter says, begins to focus on our being
16 able to perform well and, in the same instant, provides
17 some indication to the public policy authorities that
18 what we are all doing here is getting somewhere, we are
19 all moving toward making a success of the job we are
20 all doing together.
21 596 MR. MACDONALD: As was said earlier
22 by Mr. McCabe, though, everything is keys off the
23 general message from the Commission. We have talked to
24 you about changing the culture of the key objectives
25 and I am going to come to that again because some of
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1 our proposals, of course, have requested things that
2 are beyond the scope of the Commission per se. I mean
3 obviously we need the support of Heritage in fulfilling
4 some of our proposals, we require the support of
5 Industry Canada in some of our proposals and certainly
6 with respect to the ongoing funding gap that we have
7 talked about, we need the support of the Finance
8 Department and the government.
9 597 So, we look at this overall and say,
10 "Have we in fact gone after the right thing?" We
11 believe we have by going after viewers. Have we in
12 fact recommended the regulatory touchstones that can
13 ensure that the job continues to get done? We believe
14 we have. So, it's all about taking a different focus
15 to where we really want to drive the future for
16 conventional television.
17 598 M. LAMARRE: Je pense que, exprimé
18 simplement, dans le fond le message des diffuseurs
19 aujourd'hui est simple, c'est de dire: Nous voulons,
20 dans le cas du marché francophone, maintenir le même
21 niveau d'investissements que nous avons, et au niveau
22 des anglophones, tenter d'arriver à un niveau
23 additionnel, mais le problème est le suivant: Même
24 avec 90 pour cent de mon budget qui s'en va en contenu
25 canadien, si je n'ai pas de marge de manoeuvre et si je
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1 n'ai pas de flexibilité dans l'avenir... parce que
2 c'est aussi un rendez-vous où on fait une révision des
3 règles. Si je ne me garde pas de marge de manoeuvre,
4 je ne serai pas capable de maintenir 90 pour cent de
5 mon budget en contenu canadien, je vais être obligé à
6 ce moment-là, pour maintenir un niveau de
7 profitabilité, d'augmenter mon investissement en
8 contenu américain, ce qui aurait un effet pervers
9 extrêmement malheureux.
10 599 Alors ce qu'on dit... et c'est pour
11 ça qu'il y a des normes qu'on amène qui peut-être, vues
12 de l'extérieur, peuvent avoir l'air banales, mais ce
13 sont des éléments d'incentive qui ont été mis sur la
14 table qui nous garde une certaine marge de manoeuvre,
15 parce que ça n'a l'air de rien de dire qu'on va
16 comptabiliser la promotion... qu'on ne comptabilisera
17 pas la promotion des émissions comme étant de la
18 publicité, mais pour nous, ce sont des petites façon,
19 comme ça, qui nous permettent d'avoir et de maintenir
20 une certaine marge de manoeuvre.
21 600 Donc, dans le fond, nous, ce qu'on
22 dit, c'est qu'il y a un modèle économique qui
23 fonctionne relativement bien. On a des objectifs qui
24 sont un peu plus ambitieux; alors assurons-nous comme
25 diffuseurs qu'on a une certaine flexibilité.
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1 601 Nous sommes prêts à rencontrer votre
2 rendez-vous du contenu canadien. Dans le cas du
3 français, on le fait déjà. Mais pour s'assurer de le
4 faire dans un marché qui est complètement cyclique, je
5 pense qu'il est important qu'on se garde une certaine
6 marge de manoeuvre et de ne pas nous amener dans des
7 restrictions qui nous enlèveraient cette marge de
8 manoeuvre et, comme je le disais, pourraient avoir un
9 effet pervers.
10 602 MR. McCABE: If I may, in one sense,
11 to put it perhaps in another way, I guess we are
12 suggesting that we together here address not just the
13 regulatory system, but the broadcasting system and you
14 are the leaders in that system and if you can set the
15 context, set the focus, set the goals, you can make
16 that system better in a way that I don't think it can
17 do with the regulatory system alone. I think that's
18 the tool you have in hand, but I think we are inviting
19 that we move above that and say: Let this body, which
20 is the centre of expertise, the focus of the concern
21 with the broadcasting system in the government and in
22 the country, let this be the body that sets the tone,
23 the goal, and brings us all to that and, as one of its
24 tools, uses the regulatory system.
25 603 THE CHAIRPERSON: There has been a
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1 general consensus, I take it, in the last six months or
2 so that the Commission would be wise to take into
3 consideration multi-station groups or the status of
4 certain stations by reference to who owns them or
5 controls them in order to achieve better equity in the
6 regulatory framework. How would you propose that this
7 goal be factored in in establishing the fulfilment of
8 viewership goals by different participants?
9 604 MR. MILLER: Madam Chair, I think we
10 have recognized that station group licensing has a
11 number of benefits, among them the administrative
12 efficiencies that go along with it, the opportunity for
13 a corporate group to come before you and present its
14 full corporate strategies in all its elements and also
15 the ability to ensure that flexibility is possible
16 among the different elements of a station group.
17 605 Obviously, equity is also another
18 important area that the Commission is able perhaps to
19 achieve better among station groups. We would expect
20 that station groups would come forward and obviously
21 would be presenting their plans at appropriate times
22 over this next period, but we do not believe that, de
23 facto, being a station group necessarily requires
24 incremental additional obligations.
25 606 THE CHAIRPERSON: My question was a
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1 lot more simple than that. It was with regard to your
2 viewership model. How do you see factoring in the
3 desire to recognize this?
4 607 MR. McCABE: I think, Madam Chair,
5 that, indeed, the emergence of these groups not only
6 among the broadcasters, but also, for instance, among
7 the producers, the emergence of these groups starts to
8 create in fact the base upon which the kind of proposal
9 we are making will, indeed, be much more workable
10 because you are working then in a sense not with, in
11 effect, so many individual pieces. You have larger
12 corporations which have emerged in response to the
13 marketplace and you have responded creatively to their
14 proposals, you have bodies to work with who can in fact
15 move large dollars and move to large audiences to in
16 fact achieve the goals of the system. I think it's
17 very much a plus in terms of trying to implement this
18 system.
19 608 THE CHAIRPERSON: Now, conversely,
20 you address in your submission how smaller, possibly
21 unprofitable stations would be treated in looking at
22 their requirements and that they not be subjected to
23 this type of commitment when they are unprofitable,
24 which brings up the question, of course -- and we are
25 talking here about the $10 million revenue and under,
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1 which are looked at differently by the Commission at
2 the moment with regard to its options.
3 609 It brings up the question, of course,
4 of how one measures profitability and unprofitability
5 and whether operating efficiencies in the multi-station
6 groups should also be taken into consideration in
7 establishing goals or objectives at the licensee level
8 to reach the broader objectives of viewership. If we
9 do not have expectations of the smaller stations on the
10 basis of unprofitability, how would you measure that
11 and when would you decide that they now have to be
12 factored in because they have gone into the profitable
13 level, et cetera?
14 610 MR. MILLER: Can I treat your
15 question as a two-part question, which is one related
16 to smaller stations that are part of station groups
17 and, two, related to smaller stations that are not? Is
18 that what -- okay. First of all --
19 611 THE CHAIRPERSON: Yes, but it's more
20 which stations are we not going to ask any commitments
21 from which we do now under $10 million and do you want
22 to base it on the level of profitability which would
23 then remove even the requirement of making a
24 commitment?
25 1410
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1 612 MR. MILLER: First of all, we are not
2 proposing anything other than the $10 million revenue
3 test than you currently have because to try to measure
4 profitability at a station level, particularly when a
5 station is part of a corporate group --
6 613 THE CHAIRPERSON: Yes, but you did
7 use the word "profitable". So, then, the answer is,
8 you don't mean "profitable", you mean "revenues".
9 614 MR. MILLER: We think the $10 million
10 revenue level is --
11 615 THE CHAIRPERSON: Because throughout
12 that section you use the word "profitable"; so all my
13 questions are unnecessary, then, about profitability
14 and how you measure it.
15 616 MR. MILLER: Yes.
16 617 THE CHAIRPERSON: Continue, then, on
17 the other part.
18 618 MR. MILLER: First of all, the
19 Commission has recognized obviously that, for small
20 market stations, they have particular challenges and
21 that their greatest strength and greatest need is to
22 maintain their local audiences often through a strong
23 local programming and local news, and we obviously
24 consider that, whatever happens, that continues to have
25 to be the major priority of those stations and of the
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1 Commission.
2 619 Therefore, for independent small
3 market stations of less than $10 million, we certainly
4 believe that no obligations should be added to those
5 stations other than the current expectations that the
6 Commission has. In fact, many of our members will
7 argue, and we agree, that those expectations may be
8 increasingly unrealistic given how difficult the market
9 is now for these smaller broadcasters across the
10 country.
11 620 With respect to smaller stations that
12 are part of station groups, we are very concerned that
13 they should automatically have their revenues rolled
14 into the larger corporate group and have larger
15 corporate obligations automatically applied. Again, we
16 think the strength of the Commission's processes is the
17 ability to look at these matters on a case-by-case
18 basis.
19 621 We think station group licensing and
20 the ability of station groups to include smaller market
21 stations as a bonus, it is a plus, it adds to the
22 system, no further obligations should be automatically
23 applied; but obviously we recognize that the
24 Commission, in looking at station groups, either in the
25 current process or in a future group licensing process,
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1 will look on a case-by-case basis at the contribution
2 they can make, and we would expect that to continue.
3 622 MR. MACDONALD: Madam Chair, sorry,
4 but I had also mentioned that, as consolidation is
5 taking place, there has been a public process of
6 course, there have been a number of public benefits
7 that have been put forward, considered commensurate
8 with those transactions, and I think we have to be very
9 careful, when we look at the economic environment that
10 we are going into, to presuppose that there is a whole
11 bunch of goals at the end of the consolidation rainbow,
12 as suggested by some of the interveners here.
13 623 I think that throughout the process
14 the Commission has an opportunity to evaluate the
15 profitability of each individual station group as well
16 as the profitability of the industry. What we are
17 saying right now is that we are very, very concerned
18 about the profitability of the industry and that it
19 should not be taken for granted that consolidation is
20 going to materially change that. Consolidation might
21 at best allow us to maintain the profitability we have
22 now.
23 624 So I think that one might look for
24 additional obligations if the profitability is
25 significantly changed, but it should not be done in
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1 anticipation of that happening.
2 625 THE CHAIRPERSON: That's an excellent
3 bridge, Mr. Macdonald, to the next area that I was
4 going to look at, which was concentration and the
5 benefits test, and you have just talked about the
6 benefits that can flow from concentration.
7 626 In one part, I think at page 58 of
8 your submission, you say that industry concentration
9 supports Canadian programming, and at page 38 you say
10 that in a competitive marketplace the key drivers or
11 issues both for the industry and public policy makers
12 will be -- there are five parts to it, and the third
13 one is future growth through consolidation.
14 627 You recommend the abolition of the
15 benefits test when this consolidation occurs by
16 reference to the fact that the Commission has abolished
17 the test for broadcasting distribution undertakings "to
18 encourage the development of a competitive distribution
19 sector" -- these are your words -- and you point out
20 that broadcasters have been operating in a competitive
21 environment for years and, therefore, the benefits test
22 is not necessary since you operate in a competitive
23 environment, and the reason why the Commission
24 abolished it for distribution undertakings is that it
25 was opening the field to competition.
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1 628 Would you address for me how the
2 abolishment of the test when there is consolidation
3 matches your emphasis that consolidation and horizontal
4 and vertical integration in the broadcasting industry
5 will support Canadian programming? Because I hear you
6 say, "Don't ask more of multi-station groups just
7 because they are multi-station groups and eliminate the
8 benefits test."
9 629 The benefits test for the Commission
10 is with a view to finding an opportunity to get more
11 into the system. How do you see, then, consolidation
12 as -- your words were that consolidation supports
13 Canadian programming. If you don't want that the
14 benefits test for the concentration is allowed, or
15 restructuring, consolidation, and consolidated groups,
16 no more should be required from them, I guess you are
17 saying that from consolidation there will be benefits
18 flowing to the Canadian broadcasting system naturally.
19 We don't have to have a benefits test or demand more of
20 those who have greater concentration.
21 630 MR. McCABE: Madam Chair, over the
22 years the benefits test evolved to be virtually a sort
23 of understood tax upon the transaction. In other
24 words, no matter what the economic situation of the
25 acquirer or the acquiree, there seemed to be some
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1 understanding that this tax, 10 per cent, whatever,
2 would apply. Certainly in more recent years,
3 particularly for instance in the area of radio, you
4 have become more lenient on a transaction-by-
5 transaction basis, recognizing the economic situation
6 of particular licenses.
7 631 I guess what we are saying here is,
8 you should not assume that there should be some
9 automatic levy upon the transaction because there is an
10 assumption that that is the way to get the contribution
11 to the broadcasting system. I think what we are saying
12 is that each situation should be reviewed on its merits
13 and you should be looking at the parties to the
14 transaction, taking a much more individual view of that
15 transaction and not so much saying what do we levy for
16 this as saying what is appropriate for the players in
17 this transaction? Are there in fact economies of scale
18 that will emerge? Are there in fact greater benefits?
19 632 It is indeed true that in some cases
20 what these consolidations do is create the situation
21 where there is an opportunity to buy programming
22 because you become a national system, for the sake of
23 argument, which might not otherwise have been there or
24 might otherwise have been considerably more expensive.
25 You may want to take that into account in your
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1 judgment.
2 633 But what we are essentially saying is
3 that these are judgments you should be making on a
4 case-by-case basis given the economics of the
5 particular participants and, as Jim says, not
6 anticipating that, just by virtue of this occurring,
7 there is going to be some great improvement in the
8 business of the businesses involved.
9 634 I suppose the other question is basic
10 equity. I mean, in a situation where you said, "We are
11 anticipating competition in the distribution business,
12 so let's take the benefits test off, it won't be
13 necessary", I guess we are pointing out that we have
14 had competition for a long time and we aren't just
15 anticipating it.
16 635 THE CHAIRPERSON: I take it, then,
17 from your comment that the Commission should look at
18 the intangible benefits. Are you foreclosing
19 altogether that the Commission would also request
20 tangible benefits in the form of the funds to script
21 and concept development or the type of contributions we
22 have had before? Because I gathered from your response
23 that the Commission should look at whether this
24 restructuring us a good idea, and what I heard was more
25 what we referred to as intangible benefits.
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1 636 MR. McCABE: We have not ruled out --
2 637 THE CHAIRPERSON: Tangible benefits?
3 638 MR. McCABE: -- tangible benefits.
4 What I have been saying is they should be tailored to
5 the situation that is before you. That's all.
6 639 THE CHAIRPERSON: So you prefer,
7 then, the old model of tailoring rather than the fixed
8 radio percentage of 6 per cent, if the Commission were
9 to retain a benefits test?
10 640 MR. McCABE: The short answer is
11 "yes", but, as the world has become more competitive,
12 the one in which we operate, we think it would be
13 inappropriate for you to, as I say, levy a particular
14 tax unless you have some particularly low level in
15 mind.
16 641 THE CHAIRPERSON: Do you have any
17 recommendations? It can't be a minus.
18 642 MR. McCABE: We are all short of
19 recommendations; we are all out of recommendations on
20 that subject.
21 643 No, we don't have one because we are
22 not recommending that. We are recommending that you
23 take these transactions in the marketplace as it exists
24 and make your judgment as to what is appropriate. It
25 is the same judgment, I do believe, that you make with
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1 any licensee at a renewal. The appropriate judgment
2 that you have made is, is what this licensee is doing
3 and promising and undertaking to do appropriate to
4 their particular circumstances and having regard for
5 others in the same circumstances and some measure of
6 equity and so on. That's the sort of judgment we think
7 you should be making rather than some sort of automatic
8 levy.
9 644 THE CHAIRPERSON: If I were to lend
10 you my hat for ten minutes and you were looking at this
11 issue from the perspective of a regulator -- and I do
12 have a big head; it would fit -- do you think you would
13 be concerned about concentration of ownership in the
14 television industry?
15 645 MR. McCABE: It has always been in
16 this country -- I am fairly long in the tooth, so I
17 remember a lot about this country --
18 646 THE CHAIRPERSON: When did you get
19 that idea?
20 647 MR. McCABE: My friends.
21 648 It has always been a concern in this
22 country, and over the years in the politics of this
23 country we have seen that concern rise and fall.
24 649 I think that you have to be concerned
25 about it but I also believe that you have to in a sense
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1 listen to some of the things that were said by our
2 consultants here, and that is, we now operate in a
3 world where we must have the size to be able to compete
4 internationally. You saw that a third of the budget of
5 Canadian programming comes from foreign sources; you
6 saw that the cost of Canadian programming is not
7 covered within our own markets.
8 650 I think at this time, yes, you will
9 have to think about that, but you have to be thinking
10 about can we create the units that can operate, that
11 are big enough to in fact do the programming things we
12 want and succeed globally as well as domestically.
13 651 MR. MACDONALD: Can we also suggest
14 that we need a shift in thinking. The test is no
15 longer the old test of concentration of ownership in
16 television, the test should be diversity of voices and
17 media. In some instances, in fact in many instances,
18 allowing a level of consolidation of ownership actually
19 helps diversity, it allows you to keep stations open
20 that might not be as profitable otherwise, it allows
21 you to program very differently when you have different
22 outlets. So it is a very different world.
23 652 As Michael suggests, the
24 Environmental Scan posits a world that's much more
25 competitive, and we need the bigger units to compete.
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1 We have recognized that in the broadcasting side, the
2 production sectors also with recent transactions
3 recognizing the same thing. It is a global trend, and
4 we can't forget about it, we can't ignore it, and we
5 can't great Canada as an island that simply blocks that
6 out.
7 653 So we suggest the Commission look at
8 this a little differently, and as long as it can assure
9 itself it has diversity of choices, diversity of
10 services, that's by far the most important objective.
11 654 THE CHAIRPERSON: Mr. McCabe, I can't
12 resist asking you if your teeth are longer since this
13 morning, because I can tell you my elevation hasn't
14 done anything for me, I am still five feet tall.
15 655 MR. McCABE: I just assumed being
16 long in the tooth helped me to bite better.
17 656 THE CHAIRPERSON: Vertical
18 integration now.
19 657 At page 38 of your submission, in
20 those five key drivers or issues in the competitive
21 marketplace, the second bullet at page 38 is that one
22 of the key issues is staying competitive through
23 vertical integration. What is intended by "vertical
24 integration" here?
25 658 MR. McCABE: What we are suggesting
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1 is quite simply that we be free to integrate in ways
2 that others are in the system. I think it is
3 appropriate that, for instance, you have licensed
4 independent producers to be broadcasters, we see cable
5 companies I think with legitimate ambitions to operate
6 in the broadcasting area and in the programming area.
7 659 It seems to us that this is one of
8 the ways that not only can we remain competitive but
9 that we can in fact contribute to programming goals,
10 and it seems to us that restrictions on our entry
11 particularly into the program production area, whether
12 these restrictions be direct or indirect, are
13 counterproductive in terms of our competitiveness and
14 meeting the programming goals of the system.
15 660 Daniel.
16 661 M. LAMARRE: Je pense qu'il est
17 extrêmement important, dans une audience où on parle de
18 l'avenir du contenu canadien, de s'assurer que tous les
19 leviers économiques de l'industrie soient mis à
20 contribution. Je pense que, comme vient de le
21 mentionner Michael, il y a des producteurs qui sont
22 maintenant devenus également des diffuseurs parce que
23 j'imagine que leur situation économique leur permet
24 maintenant d'investir en diffusion, et je dis tant
25 mieux. Du même souffle je dis qu'il serait tout à fait
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1 normal que les diffuseurs également... parce qu'il nous
2 faut regarder un environnement qui est différent.
3 Lorsqu'on parle d'un environnement de contenu, on ne
4 parle pas uniquement d'un marché domestique mais on
5 parle d'un marché international.
6 662 Alors moi, je pense que nous nous
7 regardons entre nous et souvent nous nous plaisons à
8 nous faire peur l'un et l'autre en se disant que nous
9 sommes trop gros. La réalité, c'est que nous sommes
10 beaucoup trop petits et qu'il est important qu'au
11 Canada on puisse regrouper les forces des diffuseurs,
12 des producteurs si on veut continuer à avoir une
13 croissance et un intérêt sur les marchés
14 internationaux.
15 663 Alors moi, je dis que non seulement
16 c'est sain pour les diffuseurs, mais c'est essentiel
17 pour l'ensemble de l'industrie qu'on puisse avoir des
18 entreprises plus fortes, mieux intégrées et qui ont des
19 ambitions internationales.
20 664 LA PRÉSIDENTE: Monsieur Lamarre,
21 dans le cas que vous mentionnez où il y a intégration
22 dans le sens que les producteurs ont des effectifs dans
23 des entreprises de programmation, on y a quand même mis
24 des mécanismes réglementaires pour tenter de minimiser
25 les problèmes qui pourraient surgir de cette
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1 intégration verticale.
2 665 Est-ce qu'à votre avis ces mesures
3 sont nécessaires si on permettait une plus grande
4 intégration verticale, au Canada anglais surtout, entre
5 les radiodiffuseurs et les compagnies de production?
6 666 M. LAMARRE: Je pense que, par les
7 mécanismes de financement qui existent, les organismes
8 de financement qui existent, il y a déjà des règles
9 extrêmement strictes qui protègent les situations dont
10 vous parlez.
11 667 Moi, je pense qu'il y a une situation
12 de fait et des principes économiques qui m'apparaissent
13 extrêmement contradictoires. C'est que de la main
14 droite on souhaite la plus grande concurrence possible
15 et on dit souvent aux diffuseurs que ce sont les lois
16 du marché qui doivent opérer et on nous regarde aller
17 sur la piste de course et on nous souhaite bonne
18 chance. Et, de l'autre main, lorsqu'on arrive pour
19 vouloir s'intégrer, lorsqu'on arrive pour vouloir
20 donner à notre formule un l'engin que ça prend pour
21 nous défendre, eh bien là on amène des règles où on
22 voudrait en même temps enlever les ailerons ou nous
23 amener des restrictions.
24 668 Alors je vous fais simplement une
25 comparaison pour vous dire que je pense qu'il faut
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1 avoir un certain respect de l'équilibre des forces, et
2 dans ce sens-là je pense qu'il y a des règles qui sont
3 déjà en place.
4 669 Par ailleurs, si on veut une
5 industrie qui soit concurrentielle sur un marché
6 international, il faut nous laisser la chance d'être
7 organisés et équipés pour concurrencer.
8 670 LA PRÉSIDENTE: Monsieur Lamarre, en
9 réponse à ma question est-ce qu'il devrait y avoir des
10 mécanismes pour protéger ou minimiser les problèmes,
11 vous indiquez qu'il y en a déjà, mais moi, j'aurais cru
12 que votre proposition exigerait que ces mécanismes-là
13 disparaissent, que ce sont exactement les mécanismes
14 que vous voulez voir disparaître.
15 671 M. LAMARRE: C'est ce que nous
16 souhaitons. Je croyais que votre question était
17 d'amener des restrictions additionnelles au CRTC.
18 672 LA PRÉSIDENTE: Oui, exactement,
19 comme il y en a... parce que, si vous vous souvenez, la
20 préface était que, quand on a permis aux producteurs
21 d'avoir des licences de radiodiffusion, le Conseil lui-
22 même a établi des exigences. Alors si les exigences
23 que vous voyez comme protection disparaissaient, il n'y
24 aurait rien du tout à ce moment-là, et ma question est:
25 Est-ce que ce serait nécessaire que le Conseil ait des
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1 exigences qui ressembleraient ou qui seraient du même
2 genre que celles qui ont été imposées aux producteurs
3 qui ont des licences de radiodiffusion?
4 673 Monsieur Miller a bien hâte de
5 répondre.
6 1430
7 674 M. MILLER: Oui, si je peux
8 ajouter -- two things. I think it's important to put
9 our proposals in context of the shifts in public policy
10 that have taken place in the last 10 to 15 years.
11 675 The public policy approach or the
12 eighties was to treat industry sectors as separate and
13 to put up barriers. In the nineties we have recognized
14 that is not a public policy that we can continue with
15 in order to maintain competition and healthy companies.
16 676 The government's convergence policy
17 was perhaps the best example of that as the government
18 recognized the traditional boundaries between telephone
19 companies and cable companies had to be broken down to
20 foster strong competition and strong companies.
21 677 What we are suggesting with respect
22 to our ambitions on production and distribution is an
23 extension of that philosophy, an extension of that
24 trend necessary to build strong, healthy media
25 companies that can compete at home and abroad. With
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1 that is the need for safeguards.
2 678 We recognize there must be
3 safeguards. However, they have to be safeguards that
4 don't effectively block the entry of broadcasters into
5 those lines of business. The safeguards that are in
6 place today, the supposed safeguards, effectively
7 prevent broadcasters from playing any role in
8 production or distribution. We are suggesting those
9 safeguards change, still have some safeguards to make
10 sure there is fair competition, that independent
11 producers have a fair chunk of the market.
12 679 What we are suggesting is they be
13 different safeguards. We are not suggesting, to be
14 clear, that the CRTC impose those safeguards. We are
15 mentioning this issue here as one of the issues that is
16 part of the broader context of what we believe is
17 necessary to be a more competitive industry and to
18 achieve our viewing goals.
19 680 The safeguards that we would
20 anticipate would be safeguards that would be put in
21 place by government or, more appropriately, the funding
22 agencies such as telephone. We would be happy to
23 explain those safeguards if you would like.
24 681 THE CHAIRPERSON: The Commission has
25 established safeguards for telephone.
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1 682 MR. MILLER: For telephone? That is
2 correct and we are not --
3 683 THE CHAIRPERSON: And for vertical
4 integration of producers and broadcasters. Your answer
5 is safeguards are needed, but the Commission shouldn't
6 get into it.
7 684 MR. MILLER: Our proposal is that
8 safeguards be introduced at the funding level. That is
9 our proposal. We also recognize that there might need
10 to be some rebalancing should the safeguards that we
11 are proposing be introduced to make the Commission's
12 safeguards in sync.
13 685 THE CHAIRPERSON: The safeguards that
14 the Commission would not impose.
15 686 MR. MILLER: The safeguards the
16 Commission currently has because the Commission has on
17 a licence by licence basis imposed certain safeguards.
18 687 THE CHAIRPERSON: Since you admit
19 that safeguards are called for, what do you see the
20 problems to be safeguarded against?
21 688 MR. MILLER: First of all, I think
22 it's important that we deal with these two issues
23 separately, the issue of distribution and the issue of
24 production. The issue of distribution --
25 689 THE CHAIRPERSON: You speak in terms
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1 of distribution in terms of airing, not distribution in
2 the cable sense.
3 690 MR. MILLER: No. Thank you for that
4 clarification. We talk about distribution as the right
5 of broadcasters to distribute programs particularly
6 abroad, not just exhibit, but to distribute abroad.
7 691 THE CHAIRPERSON: I see what you
8 mean. Taking in the marketing of product into
9 consideration.
10 692 MR. MILLER: Yes.
11 693 THE CHAIRPERSON: Thank you.
12 694 MR. MILLER: The main issue in terms
13 of distribution of programming is to make sure that
14 there is a fair competition, if you will, a fair market
15 for those rights and that broadcasters compete fairly
16 for the right to distribute.
17 695 What we have proposed is that the
18 current rules the telephone uses in the case of feature
19 film be extended and refined in this situation so that
20 when a broadcaster licences a television program, they
21 separately have the opportunity to bid for the rights
22 to distribute it internationally.
23 696 They would be separate. The
24 agreements would be separate. Telephone or possibly
25 some ombudsman would assure that it is fair and that it
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1 is a separate agreement.
2 697 THE CHAIRPERSON: Before we leave
3 this area, I am quite curious about a comment you made
4 at page 83 as follows in the second full paragraph.
5 698 "-- we need to revisit
6 government policy measures in
7 the context of tax credit rules
8 that discourage equity
9 investment by treating such
10 investments as a 'grind down' on
11 the amount of the tax credit
12 provided to production
13 companies."
14 699 What does that mean?
15 700 MR. MILLER: If you will permit us to
16 deal with the first two issues and then get to that
17 because they are different issues. I think it's
18 important that we don't confuse them.
19 701 I have dealt with the distribution
20 issue. The production issue is another separate issue.
21 There the concern is if broadcasters act as producers,
22 they use their affiliated companies for all their
23 production needs.
24 702 The way to deal with that is to
25 ensure there is some maximum threshold that
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1 broadcasters can use and that is the currently in place
2 in a number of the funds.
3 703 I should ask my colleague, Rob
4 Scarth, to add any important details to those specific
5 areas before we deal with your third question.
6 704 MR. SCARTH: No. I think that covers
7 the ground on those two, unless there are more
8 specifics that you would like to move into.
9 705 With respect to your question on the
10 submission on page 83, the reference there is to the
11 current situation that we have with the federal and the
12 provincial tax credits. Our understanding is that
13 equity investments, whether they are made by telefilm
14 or any other group, is considered, and I will get my
15 terminology incorrect here, assistance and therefore
16 not considered by the government as part of the budget
17 against which the tax credit is applied.
18 706 In effect, it reduces the allowable
19 amount of the budget against which the tax credit
20 applies. It has sort of, in our view, something of a
21 dampening effect on the private sector in terms of its
22 interest in making equity investments in production.
23 707 Again, not an issue for the
24 Commission. An issue for the government, for Heritage,
25 but that's where it has been discussed.
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1 708 THE CHAIRPERSON: So you see a major
2 role at the government level regarding taxation and at
3 the CTCPF and telefilm level in reducing barriers to
4 distribution in the sense that we were talking about
5 and production by broadcasters.
6 709 MR. SCARTH: That's correct.
7 710 THE CHAIRPERSON: Now, again, a
8 question of clarification. At page 19 of your main
9 submission your state:
10 711 "In terms of any increase in
11 Canadian dramatic programming,
12 every weekly half hour increase
13 automatically translates into 40
14 new original hours of demand for
15 Canadian entertainment
16 television each year across the
17 private English television
18 system."
19 712 Can you explain to me what that
20 means?
21 713 MR. McCABE: It was a long time ago
22 that we wrote this.
23 714 THE CHAIRPERSON: Forty hours sounds
24 very good, so I want to know what it means. The
25 paragraph before it talks about increased demand from
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1 specialty TV sector, et cetera. It is only at page 19.
2 715 MR. McCABE: Yes, that's easy. I
3 have found the page.
4 716 Jim has suggested what is suggested
5 here, if one looks across the system, if you add a half
6 hour of dramatic programming in effect in each licensee
7 across the system, the impact is that the demand is for
8 40 original hours in terms of demand for programming.
9 717 I am trying to see if I understand
10 that either. Maybe we should get back to you on that.
11 718 THE CHAIRPERSON: Yes. I did read it
12 twice or three times like you did and it still wasn't
13 clear. But let's not get hung up on that. You can get
14 back to me if you think it's important.
15 719 MR. McCABE: Yes.
16 720 THE CHAIRPERSON: Or if you are
17 worried that I will give it the weight it deserves if I
18 don't understand it.
19 721 MR. SUAR: If you want to consider it
20 this way. There are three sort of broadcast networks
21 in a sense in English Canada. Each one, let's say,
22 they are going to do a half hour a week for 26 weeks,
23 so you would have three networks times 26 shows, half
24 hour length, 78 shows, and they are repeated once, so
25 three networks, 26 half hours shows, works out to 40
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1 hours.
2 722 THE CHAIRPERSON: That's how you get
3 from one half to 40.
4 723 MR. SUAR: That's correct. If the
5 entire system, all three networks.
6 724 THE CHAIRPERSON: Okay. Now, also on
7 this same page, lower down, you talk about current
8 funding sources and the growing level demand and the
9 need for reallocation of CTCPF support to address the
10 increased demand from private sector television. What
11 do you mean here by reallocation?
12 725 MR. SCARTH: Quite simply, what we
13 mean is, as I am sure you are aware, the current fund,
14 CTCPF, which is a $200 million funding initiative, half
15 of that money, a hundred million dollars, is allocated
16 specifically to projects destined for CBC and Radio
17 Canada.
18 726 The reality of what we are dealing
19 with in these last couple of years is, frankly, most of
20 the demand is coming from the private sector side of
21 the business. The reallocation that we have proposed
22 is one that we think should be driven by where the
23 audience is.
24 727 When we look across the system,
25 English and French combined, our analysis tells us that
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1 CBC and Radio Canada together capture something under
2 30 per cent of total viewing to the types of programs
3 that the fund supports whereas all of the other private
4 sector broadcasters combined account for the rest, 70
5 per cent.
6 728 What we are dealing with is a
7 situation where half of those moneys which are
8 essential to realizing your Canadian program production
9 ambitions is insufficient to meet those demands. It
10 doesn't reflect the balance in terms of where the
11 audience actually is.
12 729 THE CHAIRPERSON: Thank you.
13 730 Since we have referred to the CBC or
14 the public corporation, do you have any comments when
15 we talk about the limitations in vertical integration,
16 of limitations toward the more vertical integration and
17 concentration and so on, any comments to make about the
18 CBC's concept of constellations and how they should
19 operate and what value can be extracted from them to
20 reach our goals?
21 731 MR. MILLER: Two general comments.
22 First of all, we believe the CBC by virtue of its
23 parliamentary appropriation has a different
24 contribution to make to the system than the private
25 sector. Part of that is viewing, but part of it is in
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1 a lot of other areas.
2 732 We think obviously the CBC is best
3 equipped to speak to you about that, but areas such as
4 airing more experimental Canadian programming,
5 developing talent, et cetera, are vital and --
6 733 THE CHAIRPERSON: Excuse me.
7 734 MR. MILLER: I will come to your
8 question.
9 735 THE CHAIRPERSON: I wanted you to
10 comment, if you wanted, because I would have thought it
11 would help your comments, your proposal as well, this
12 concept or approach of constellations in the context of
13 what we have just been discussing, concentration and
14 vertical integration and so on, not the role of the
15 CBC, simply the concept because of course they are
16 better -- well, not everybody believes that they are
17 best equipped to speak about what they should do, but
18 this approach, this concept. It's a new word at a
19 minimum.
20 736 MR. MILLER: I think my answer is
21 related to that.
22 737 THE CHAIRPERSON: Sorry to interrupt.
23 738 MR. MILLER: Again, first of all, the
24 CBC is different and, therefore, the notion of a
25 constellation approach has to apply differently to the
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1 public broadcaster than to private broadcasters because
2 of their different roles and imperatives.
3 739 Secondly, we think one of the vital
4 elements missing is a certain level of transparency in
5 terms of CBC's operations, where money is made, where
6 it isn't made, where allocation costs go. We think
7 vital to any decision to any decision made in using the
8 CBC terminology, increasing their constellation of
9 services, is for CRTC to assure itself that each of
10 these services either are generating the profits that
11 CBC is suggesting they are or contributing to the
12 public interest in a way that they are intended so that
13 we are satisfied that the government's parliamentary
14 appropriation is effectively used.
15 740 THE CHAIRPERSON: We spoke earlier of
16 small market stations and the flexibility required.
17 Would I be correct in summarizing your view on that as
18 there should be flexibility if they are not owned by a
19 multistation group and if they are owned by a
20 multistation group no more should be expected of the
21 group than would have been expected of the components
22 added together.
23 741 MR. SCARTH: The answer is yes, that
24 small market stations, and here we have defined them or
25 actually the Commission has defined them as stations of
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1 under $10 million in revenue, should be looked at
2 differently than other types of licensees, irrespective
3 of their link to a larger broadcast group.
4 742 THE CHAIRPERSON: Did I understand
5 you, Mr. Miller, earlier saying that -- let me ask you
6 the question. If in a multistation group there is
7 below $10 million revenues that we wouldn't take into
8 consideration the fact that it's in a multistation
9 group. We would treat it like a singly owned one.
10 743 MR. MILLER: That's right.
11 744 THE CHAIRPERSON: So that you would
12 not factor in any operating efficiencies that may flow
13 from large ownership, which is normally what is the
14 philosophy behind let's get bigger because we will do
15 better and more.
16 1450
17 745 MR. SCARTH: Again, you are right in
18 terms of the operating efficiencies. They are there,
19 but I think the goal within small-market television is
20 really to try and sustain a level of local service that
21 is becoming more and more of a challenge to sustain.
22 So, those efficiencies, to the extent that they are
23 there, go towards supporting that objective for those
24 broadcasters in those markets. We think that kind of
25 an approach continues to be useful.
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1 746 MR. McCABE: There has, as you know,
2 been considerable concern expressed about local
3 broadcasting. We are among those who are concerned
4 about it. I think that what we are trying to say is
5 that one must treat these lower-revenue stations, these
6 smaller-market stations in a particular way in
7 consolidations. In larger companies if we are to be
8 able to maintain local service we are going to have to
9 recognize how fragile these stations are at this time.
10 747 It has to do with the way that the
11 industry is becoming, both in terms of on its revenue
12 side, but also on the production acquisition side, so
13 national and international. If you choose to merely
14 treat a smaller station within a group in an
15 acquisition, for instance, as any other station, you do
16 and assume that it can just be added to group
17 objectives, group obligations, you do risk taking away
18 from that smaller station the resources as the group
19 tries to meet your obligations, you do risk taking away
20 that fragile economic base that they currently have.
21 748 THE CHAIRPERSON: In spending
22 requirements you advocate keeping spending
23 requirements. Do you see any change necessary as to
24 whether it should be directed to all programming, or to
25 entertainment programming only, or the under-
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1 represented categories or can it depend on the role
2 that one wants to play in achieving viewership goals?
3 In other words, do you foresee changes in the formula
4 that we use now?
5 749 MR. MACDONALD: Madam Chair, one of
6 the things that we have talked about here is diversity
7 and from our perspective it makes a lot of sense for
8 those licensees that do have spending requirements that
9 it be directed to all categories.
10 750 THE CHAIRPERSON: That it continue to
11 be directed to all categories?
12 751 MR. MACDONALD: Correct. Although we
13 have suggested a third category, "C", which of course
14 is directed -- the proposal is directed specifically at
15 7, 8 and 9. Peter might have some additional comments
16 here.
17 752 MR. MILLER: Yes. I think the
18 important part of our suggestion is that we believe the
19 flexibility that the Commission has in A or B. Our
20 speech said 94/48. That was 95/48, be extended,
21 maintained and broadened to include this Option C,
22 which would be a percentage of revenue obligation to 7,
23 8 and 9, our entertainment programming.
24 753 I think the important thing about our
25 proposal is that it recognizes that different corporate
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1 groups can achieve the Commission's objectives and
2 their objectives in different ways and some are most
3 comfortable with an overall expenditure requirement,
4 particularly those that have a large local or in-house
5 production component. Others want to concentrate on
6 underrepresented or entertainment programming, either
7 through volume, by choosing hours, or through
8 expenditures by being able to focus on perhaps a more
9 limited number of quality programs.
10 754 We think by allowing those choices
11 you best achieve the viewing objective and best achieve
12 the diversity objective by allowing corporate groups
13 and broadcasters to choose the options that most
14 reflect the nature of their services.
15 755 THE CHAIRPERSON: But Option C you
16 would not see having any relation to when you air this
17 programming. It would be categories, if I recall?
18 756 MR. MILLER: That is correct.
19 757 THE CHAIRPERSON: And you would still
20 maintain the view that demanding certain hours in peak
21 time is not necessary for Option C licensees?
22 758 MR. MILLER: Again, I think to take
23 it back, we are suggesting that the basic --
24 759 THE CHAIRPERSON: Is the answer yes?
25 760 MR. MILLER: Well, the answer is
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1 never simply yes or no because again our model is a
2 case-by-case approach and that's important. We are not
3 suggesting a one size fits all. We are suggesting a
4 regulatory framework -- a broad regulatory framework of
5 A or B or C.
6 761 There will be circumstances where the
7 Commission determines or corporate groups offer to do
8 more. That's the benefit of a competitive licensing
9 process. That's the benefit of having renewals and
10 transactions where groups come to you and present their
11 business plans and present how they are going to
12 contribute to the system. You will decide on
13 conditions of licence precisely what are the conditions
14 of licence.
15 762 But what we are suggesting as the
16 base model is your A or B plus -- or C.
17 763 THE CHAIRPERSON: And with the C then
18 your statement that there isn't -- that demanding a
19 certain exhibition in peak time is not necessary, the
20 Commission could at its discretion decide otherwise if
21 somebody -- in any case, and particularly if someone
22 chooses the Option C.
23 764 MR. MILLER: That's right. If
24 someone comes with a business plan predicated on
25 daytime soap operas or shows after midnight that have a
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1 strong audience potential and they are strongly
2 committed behind them, then that's a plus and the
3 Commission should applaud that and support it, not
4 force that broadcaster into a certain model of peak-
5 time requirements.
6 765 THE CHAIRPERSON: But you see the
7 possibility that that would appear to be necessary to
8 meet our goals should we retain your viewership model?
9 766 MR. MILLER: We see the possibility
10 that in an individual case either a broadcaster would
11 choose and offer to concentrate on peak time or the
12 Commission could decide it was necessary, but what we
13 don't want is from the get go this assumption that
14 there is only one way to do it, 7 and 7 -- between 7/11
15 or any other option. That's the fundamental difference
16 between our proposals and the others that you will hear
17 about.
18 767 THE CHAIRPERSON: I have a few more
19 questions, but not many. I thought perhaps we could
20 finish this and my colleagues might have a few
21 questions and then we would take a break and find out
22 from our legal counsel whether we got along too well
23 and he has questions for you, at the break. So, please
24 you would come back after in case we have more
25 questions.
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1 768 So, I will finish what I have, but it
2 is not a lot, so that you don't get too discouraged.
3 769 Now, in promotion and advertising you
4 have made some suggestions and I understand the
5 principle of increasing promotion of Canadian programs
6 towards meeting the goal of increased viewership.
7 770 I think at page 62 you arrive under
8 the "Importance of Promotion" and you estimate that
9 broadcasters devote right now the equivalent of
10 approximately $100 million in air time value and about
11 $7 million on third-party advertising, the last item
12 being equivalent to about one half of 1 per cent of
13 conventional TV advertising revenues. How did you
14 arrive at these estimates?
15 771 MR. SCARTH: These estimates were
16 derived from detailed discussions that we had with all
17 of our members. It is really based on an evaluation of
18 the air time in terms of the on air promotion
19 component. The harder figure of $7 million, of course,
20 is based on actual expenditures on third-party
21 advertising, TV listings, billboards, radio ads, et
22 cetera.
23 772 THE CHAIRPERSON: If I recall, you
24 advocate that that should be acceptable towards meeting
25 your spending requirements?
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1 773 MR. SCARTH: What we are suggesting
2 is that promotion is an absolutely essential ingredient
3 to our viewing strategy towards meeting viewing goals,
4 that what you have here is a description of what the
5 system currently does.
6 774 I think what you are hearing and will
7 hear more from our members is how much more they have
8 to be prepared to consider in order to successfully
9 promote their programs, their Canadian programs to
10 generate audience success.
11 775 So, one of the proposals that we have
12 put forward is to create an incentive that actually
13 stimulates more direct spending in this particular
14 area.
15 776 THE CHAIRPERSON: Are you looking
16 here at out-of-pocket expenses or air time as well?
17 777 MR. SCARTH: No. Out-of-pocket
18 expenses.
19 778 THE CHAIRPERSON: Just out-of-pocket
20 expenses.
21 779 So, you are saying this is what you
22 are doing now and it doesn't help towards meeting your
23 spending requirements?
24 780 MR. SCARTH: That's correct.
25 781 THE CHAIRPERSON: But you want it to
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1 go towards your spending requirements as an incentive
2 to do more, which would reach your goal of your
3 viewership goal. So, would only the incremental
4 expenses be considered towards your spending
5 requirement or what you spend at the moment?
6 782 MR. SCARTH: The way that we looked
7 at it was to look at all of our spending in third-party
8 advertising as a contribution to our Canadian program
9 efforts.
10 783 THE CHAIRPERSON: So, unless there
11 was an increase in spending requirements, it would have
12 the effect of decreasing spending requirements because
13 now this amount is not calculated towards meeting
14 spending requirements and what you are saying is will
15 spend more, but all of it should go towards meeting our
16 spending requirements?
17 784 MR. SCARTH: The virtue of any
18 incentive is if it's designed properly it does
19 stimulate marketplace activity. I think the Commission
20 has designed a number of incentives that have been
21 very, very successful in the system.
22 785 So, we believe that creating an
23 incentive like this would deliver what we believe it
24 can deliver, which is increased focus, increased energy
25 and increased resources to the business of promoting
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1 Canadian programming.
2 786 MR. McCABE: If I may add something
3 to that. One of the keys to the success of U.S.
4 programming is the fact that they spend on promotion,
5 on advertising. The estimate out of the United States
6 is that 5.5 per cent of the revenue of major
7 broadcasting organizations is spent at external
8 promotion.
9 787 We proceed, in my view, having been
10 around the marketing business for some time, that quite
11 naively to produce these programs and not assume that
12 an essential part of the budget of any program has got
13 to be the promotion that makes it -- that gets it out
14 to viewers and develops that viewership.
15 788 So, we are suggesting that we really
16 modernize our view of how we look at promotion and,
17 indeed, what we are suggesting is that it is a normal
18 and essential part and I would suggest, especially
19 where public money is involved, that it should be a
20 required part of the budget of show, of a production,
21 so that we then are in a position to make that work on
22 our screens.
23 789 So, in our proposal here we would be
24 spending the same amount of money or increased amounts
25 of money if that were the case, but some percentage of
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1 it would be going to promotion.
2 790 THE CHAIRPERSON: The producers, as
3 you know, have suggested that financial commitments to
4 promotion should be a condition of licence for access
5 to the licence fee and equity investment programs. Do
6 you have any comment?
7 791 MR. MILLER: The producers have
8 suggested a number of obligations should be imposed
9 upon us and have come forward with very little that
10 they intend to do to contribute to the system.
11 792 Underlying our proposals on promotion
12 is the notion that the Commission has traditionally
13 looked at our Canadian programming expenditures very
14 narrowly. It has just allowed us to calculate
15 specifically what we pay to third parties or
16 specifically what we spend in-house to produce a
17 program.
18 793 All the other things we have to do,
19 which are very much part of the business of
20 broadcasting, part of putting shows on the air, be it
21 promotion or our executive talent or our sales forces
22 is never counted. Funny enough, all that kind of
23 support that independent producers require that are
24 part of their business very much is counted in what we
25 pay them and what gets counted as an eligible
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1 programming expense.
2 794 We think the answer going forward is
3 not new obligations imposed on us, but a new approach
4 to looking at the issue of Canadian programming. We
5 have talked about viewing. We have talked about the
6 fact that we believe the answer is not increased
7 obligations, but about a partnership and more
8 flexibility and more incentives, more diversity and we
9 have also argued strongly for a recognition of business
10 realities.
11 795 Everything we said in the
12 Environmental Scan and all of our evidence in terms of
13 our costs on Canadian programming point to the fact
14 that for this to remain a viable business and for
15 broadcasting in Canada to remain viable the answer
16 isn't more obligations on broadcasters. The answer is
17 a different approach and so we reject, obviously these
18 simple suggestions that broadcasters should do more
19 here or more there or more anywhere else.
20 796 THE CHAIRPERSON: You do not advocate
21 the elimination of 12 minutes of advertising per hour,
22 but what you advocate is that there be more exclusions
23 to what fits in as advertising?
24 797 MR. MILLER: As we alluded to
25 earlier, this is a controversial issue among
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1 broadcasters. There are different views among those
2 that are larger players versus the smaller players. It
3 is fair to say that the smaller players feel that the
4 limit is an appropriate measure that preserves a
5 certain level of inventory going towards them.
6 798 The larger players feel that the
7 limit prevents them from maximizing their revenues.
8 799 We at the CAB tried to find a
9 consensus position and we achieved that with our
10 proposal that maintains the 12-hour limit, but excludes
11 from it various elements that really aren't properly
12 advertising. So, we are proposing that promotions not
13 be counted as advertising that will allow broadcasters
14 to maximize their paid advertising inventory and make
15 sure that promotions and PSAs don't count.
16 800 Incidentally, it would have the
17 benefit we believe in making the monitoring and
18 enforcement job of the CRTC so much easier.
19 801 THE CHAIRPERSON: You have also
20 advocated that some infomercials be counted as Canadian
21 content. In your view, if the Commissioner were to
22 entertain this idea what kind of specific formula would
23 have to be developed to establish the Canadian type of
24 infomercial.
25 802 MR. MILLER: I will let my colleague
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1 comment on the details, but the basic philosophy here
2 is that Canadian advertising content brings jobs. It
3 is part of the system. The Commission has recognized
4 it in allowing, for example, exempt services that just
5 have infomercial programming.
6 803 We think the current system has a
7 disincentive to produce infomercials and to have them
8 aired on broadcasters. So, what we are suggesting is
9 simply count infomercials in the same way you count
10 other programming, it's either Canadian or it's not,
11 and we would essentially log it accordingly.
12 804 MR. SCARTH: The only thing to add to
13 that perhaps is the Commission took a fairly
14 conservative and cautious approach to the issue of
15 infomercials some four years ago when it introduced the
16 flexibility to permit infomercials in daytime and that
17 has been of some value to the industry. I believe that
18 the industry generates something in the order of $12
19 million a year in infomercial revenue as a result of
20 that particular approach.
21 805 So what we are looking at going
22 forward is how do we truly maximize the potential
23 marketplace in infomercials and, as my colleague
24 suggests, perhaps it is now time to look at Canadian
25 made infomercials as legitimate Canadian programs.
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1 806 THE CHAIRPERSON: And your view is
2 that the certification process or the test that we use
3 to determine whether a program is Canadian would be
4 useable for an infomercial?
5 807 MR. SCARTH: Well, subject to a more
6 detailed review of that specific question, I would say
7 yes. The Commission in its rules with respect to how
8 it defines Canadian content lays out for everyone all
9 the key elements that make a program or make content
10 Canadian. Certainly an infomercial, like any other
11 piece of production, would have to conform to that.
12 1510
13 808 THE CHAIRPERSON: One of the issues
14 that the Commission has asked for submissions on is the
15 concern over the North Americanization of program
16 rights and certain proposals have been put forward to
17 meet that concern. One of the ones that you have put
18 forward would be to restrict distribution undertakings
19 from carrying U.S. signals from a major market into a
20 smaller market.
21 809 MR. SCARTH: Our proposal is quite
22 simply to find a way to rationalize the distribution of
23 U.S. network signals across the country so that we can
24 maximize program substitution opportunities. The
25 system that we have at present has a critical flaw and
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1 that critical flaw is unless a signal is sourced from
2 the same time zone, the ability of the local
3 broadcaster to protect its program rights, the rights
4 that it purchases for its markets, is impaired.
5 810 So, what we are suggesting -- and we
6 have sort of laid out a number of elements of our
7 strategy in this in the Commission's SRDU proceeding,
8 which is still underway with the Commission -- is quite
9 simply to look at three criteria to determine what
10 would constitute a suitable U.S. network signal
11 delivered via satellite and provided to a terrestrial
12 distribution undertaking. That is quite simply that it
13 come from the same time zone, that it come from a
14 larger market which, as you can imagine, will sort of
15 reduce the incentive to sell back into Canada and,
16 third, that all of the signals come from a single
17 metropolitan market, which again is another way of
18 maximizing program substitution opportunities.
19 811 So, the intention here is to continue
20 to ensure that consumers and Canadians have access to
21 the U.S. network signals and all that we are
22 suggesting, really, is that the sourcing of those
23 signals be done in such a way that we achieve two
24 goals: One, we maximize program substitution and, two,
25 we provide Canadians with the U.S. signals that they
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1 want and that they expect to see.
2 812 THE CHAIRPERSON: Your estimation is
3 that $50 million of Canadian advertising is syphoned or
4 is spent on U.S. border stations. Are you of the view
5 that if your proposal was retained, that entire $50
6 million would be repatriated?
7 813 MR. SCARTH: No, I don't believe we
8 would repatriate the entire $50 million. There will
9 always be market situations such as KVOS in Bellingham,
10 for example, where you are not going to sort of
11 unsource that signal from the Vancouver marketplace
12 because it's available off air in that marketplace.
13 But what the proposal would do is go a considerable way
14 to reducing the level of drain out of the Canadian
15 system. But, no, we don't believe that it would stop
16 altogether the drain.
17 814 MR. MILLER: If I can add to that,
18 the most recent estimates are that simultaneous
19 substitution brings in $150 million a year in revenues
20 into the Canadian system. That is a huge amount of
21 revenue and a huge part of the base we require to do
22 our Canadian programming. In a competitive
23 distribution environment, that will get steadily eroded
24 unless we carefully set up a regime that ensures that
25 we maximize simultaneous substitution. Otherwise, in
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1 five years that could easily have been eroded down to
2 $100 million, which is $50 million that has vanished to
3 border systems and out of the Canadian system.
4 815 So, we do urge the Commission to look
5 seriously at this because we have in this country been
6 very ingenious with our simultaneous substitution
7 regime, but as we evolve into a more competitive
8 distribution environment, unless we put these measures
9 in place, that revenue source and the ability to
10 maintain Canada as a distinct rights market will be
11 seriously compromised.
12 816 MR. MACDONALD: This proposal has the
13 potential to add more than the $20-odd million that we
14 think can be repatriated from the $50 million in total
15 because as you are looking at new networks, the Warner
16 Brothers network, the UPN network, there are border
17 stations that potentially can bring those signals in as
18 well. So, it's not just a matter of looking at ABC,
19 CBS, NBC and Fox, Fox being the latest, it's also
20 looking at the networks that are coming in behind. So,
21 there is an ongoing benefit, as well as a current one,
22 if we can shift out some of the smaller stations like
23 Buffalo into Boston or New York.
24 817 THE CHAIRPERSON: With regard to the
25 North American rights problem, as it is perceived by
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1 some, that is U.S. services or foreign services, which
2 usually means U.S. services in the context that they
3 are aired in Canada or are distributed in Canada have
4 not purchased separate Canadian rights, but have
5 purchased North American rights and various proposals
6 have been put forth for regulatory intervention.
7 Considering your scepticism about how much regulatory
8 intervention there ought to be, do you think this is a
9 problem that warrants intervention at this time?
10 818 MR. MILLER: Again I think it's
11 important that we start from a recognition that while
12 U.S. services are not regulated in Canada, they get
13 significant benefits from carriage in Canada. They get
14 significant revenues in terms of subscriptions and they
15 even get advertising spillover benefits. So, with that
16 privilege, with that benefit, we think there should be
17 some conditions of entry. So, the proposals that
18 suggest that U.S. services should have the Canadian
19 rights point to that notion that as long as we have the
20 ability to control entry, some conditions should go
21 along with that entry.
22 819 You also, no doubt, have noted that
23 we have been perhaps more aggressive than others in
24 suggesting that the Commission should require a direct
25 contribution from U.S. services as a privilege of entry
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1 and we have suggested a number of things in that area
2 as well.
3 820 THE CHAIRPERSON: But to answer the
4 question of whether it's a serious problem at this
5 time, do you see the setting of any regulatory scheme
6 as a defensive measure as this gets worse? My question
7 was: How does the CAB perceive the seriousness of the
8 problem at this time?
9 821 MR. MILLER: We think it's a serious
10 problem and it will be a problem that our specialty
11 board will address more fully when it appears.
12 822 MR. MACDONALD: But it's not clear
13 how a Canadian regulatory authority could really
14 enforce any U.S. service from not acquiring Canadian
15 rights. In fact if we go back to some of the earlier
16 U.S. specialties, because of black-outs the Commission
17 asked if those services had Canadian rights and many of
18 them purchased at the time non-exclusive Canadian
19 rights, which meant that they were still available for
20 Canada. But as Mr. Miller said, as the value of the
21 Canadian market increased, particularly companies like
22 A&E realized that they had significant viewership in
23 Canada and that was valuable to them in selling that
24 viewership to other advertising agencies and, as a
25 result, they have exclusive Canadian rights.
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1 823 Now, our biggest concern has been if
2 you look at the amount of programming that is now
3 produced by the U.S. networks through their own
4 production companies post-SYNFIN, the syndication
5 rules, then it is quite conceivable that they could
6 decide to retain the rights to those programs for North
7 America. NBC, ABC and CBS have virtually 100 per cent
8 coverage of Canada and they could take that and sell it
9 to multinationals in the United States. So, that takes
10 us to its worst case conclusion, but to be very, very
11 clear, Canadian audiences are already being sold to
12 clients on a spill basis.
13 824 MR. McCABE: How one finally deals
14 with that in the particular situation we find ourselves
15 in in North America and given particular sensitivities
16 about trade relations with the United States is going
17 to be problematic, but I would suggest that one of the
18 ways is to make sure that we continue to have here a
19 broadcasting system that is strong enough to be able to
20 make it worth their while to continue to separate those
21 rights. That, in part, would be the effect of the
22 proposals we are making about the strengthening of the
23 system.
24 825 THE CHAIRPERSON: Some of my
25 colleagues will have questions for you, so we will take
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1 a break before I deliver you to them.
2 826 Let me ask you, though, to come back
3 full circle to my initial remarks this morning, I
4 referred to the Commission's favourite expression that
5 we want more programs, better quality and increased
6 profitability. If we retained your proposals and, to
7 be fair, take into account viewership levels, no
8 imposition of exhibition in peak hours, your credit
9 bonuses, et cetera, would you be more profitable?
10 827 MR. McCABE: Yes. If I may, we
11 believe in Canadian programming as the key to our
12 future. Our key problem is that it isn't working now
13 for us. We are losing money at it. It is working for
14 the producers and they are making money at it. Our
15 plan, the plan we have suggested, taken in its
16 entirety, is designed to make it work not just for
17 them, but for us and for the whole system. If we can
18 find our way to a framework that we have suggested, we
19 can do more and we can do better.
20 828 THE CHAIRPERSON: The second
21 component was better quality. So, would it result in
22 better quality programming?
23 829 MR. McCABE: Yes, we believe that to
24 be the case and that's the aim. When we are looking at
25 the entirety of the proposals we made, we are saying,
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1 "Let's see if we can't find a way to make programming
2 that works in audience terms." What that will
3 inevitably mean for us, it is our strong belief, is
4 better quality programming that Canadians will want to
5 watch.
6 830 THE CHAIRPERSON: Would we have more
7 programming hours?
8 831 MR. McCABE: Not necessarily.
9 832 MR. MACDONALD: But the system has
10 more programming hours as a result of the specialties
11 and that's a point that we want to keep coming back to,
12 because we have the tonnage on one side, we have the
13 investment on the other side and we want to focus on
14 the quality side and not necessarily the quantity side.
15 The quantity that we want to focus in on is viewers.
16 833 MR. CUTHBERTSON: If I could just
17 jump in here, the context is basically --
18 834 THE CHAIRPERSON: I hope you are not
19 going to trigger that alarm again!
20 835 MR. CUTHBERTSON: You and I both,
21 Madam Chair.
22 836 With the exception of Quebec,
23 basically, the sad fact is nobody is really watching
24 Canadian drama. It doesn't rate. If we are ever going
25 to get a Canadian message across, we have to produce
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1 programming that Canadians will watch. Once there is a
2 more equitable balance between foreign programming and
3 Canadian programming, then we can perhaps deal a little
4 bit -- maybe fine-tune more what quality means per se.
5 But moving to performance-based measures that have been
6 suggested here I think is extremely courageous given
7 the rather dismal performance of Canadian programming
8 in the past.
9 837 To put it bluntly -- and I don't
10 think any of my colleagues on the broadcasting side
11 could say this -- the facts of the situation are that
12 from a financial standpoint, Canadian programming has
13 been a cost of doing business and I think that it's in
14 everyone's best interest to turn it into a business,
15 into a business that makes money, not just a costing
16 business, just keep throwing money at it and then you
17 can make your money on foreign stuff and everyone is
18 happy. That doesn't work any more and coming into the
19 new reality, which is a very, very competitive
20 environment with tons of signals from all over the
21 world coming into Canada, if we are ever going to make
22 it work, we have to make Canadian programming pay for
23 itself.
24 838 THE CHAIRPERSON: Thank you.
25 839 Thank you, ladies and gentlemen. We
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1 will see you back here in 15 minutes. We shouldn't be
2 much longer and then we will proceed with the next one.
3 --- Short recess at/Courte suspension à 1522
4 --- Upon resuming at/Reprise à 1542
5 840 LÀ PRÉSIDANTE: À l'ordre, s'il vous
6 plaît. Welcome back.
7 841 Commissioner McKendry has questions
8 for you.
9 842 COMMISSIONER McKENDRY: Thank you,
10 Madam Chair. I have a question about one of the
11 PricewaterhouseCoopers schedules, the one entitled
12 "Canadian Drama Not Economic". The question I have is:
13 Looking at English drama, what would be the impact on
14 that number of using incremental costs rather than
15 fully allocated costs?
16 843 MR. SUART: You mean just direct
17 costs in a sense?
18 844 COMMISSIONER McKENDRY: What I mean
19 is the costs that would be incremental to producing
20 drama as opposed to fully allocated. I assume "fully
21 allocated" means you have allocated some fixed costs to
22 drama. What I am asking is: What would the number
23 look like if you just used the incremental costs?
24 845 MR. SUART: The fully allocated costs
25 include the amounts that have been apportioned by the
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1 broadcasters in giving us the data for technical and
2 other operational costs. If you just did it on a
3 direct cost basis, the CRTC style, the loss would still
4 be about 28 per cent. So, for example, for every
5 dollar of advertising revenue on a direct cost basis,
6 just paying for that English drama they lose 28 cents.
7 846 COMMISSIONER McKENDRY: So, that
8 number would be 28 cents rather than $1.15. Is that
9 what you are telling me?
10 847 MR. SUART: It's 28 cents for a
11 direct cost, but if you allocate all the other costs in
12 that are relevant to the broadcaster, which should be
13 there probably, then it's more a fully allocated one
14 and, therefore, $1.15.
15 848 COMMISSIONER McKENDRY: But the
16 answer to my question is 28 cents.
17 849 MR. SUART: I think so.
18 850 MR. MILLER: Commissioner McKendry,
19 this information in detailed form is found in a number
20 of pages in our submission. This is actually precisely
21 the information that we filed slightly amended numbers
22 to today that counsel alluded to earlier. So, rather
23 than taking you to that now, if you don't have it, I
24 can refer to page 15 in our submission that has now
25 been amended and pages 3 and 4 of the Environment Scan
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1 that have now been amended. You will find that
2 information there.
3 851 COMMISSIONER McKENDRY: Thank you,
4 but again the number is 28 cents.
5 852 MR. MILLER: Precisely.
6 853 COMMISSIONER McKENDRY: Thank you.
7 854 The other schedule that I had a
8 question about was Internet competes with broadcasters.
9 My first question there is: Is this data for North
10 America, the United States, Canada?
11 855 MR. JACK: No, we only had data for
12 the U.S. So, this is U.S. data, third year of
13 operation in both television and the Internet.
14 856 COMMISSIONER McKENDRY: And what is
15 the source of your data for the Internet? If you don't
16 have it at hand, you can provide it to us later.
17 857 MR. JACK: I can get that for you,
18 sure.
19 858 COMMISSIONER McKENDRY: Is the point
20 of this schedule to show that the Internet has taken
21 away $907 million worth of advertising revenues from
22 TV? I just want to make sure I understand the point
23 you are trying to make with this schedule.
24 859 MR. JACK: No, it wasn't the point,
25 although there certainly is a large portion of the
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1 sourcing from dominant media, which is television in
2 the United States. It happens to be the biggest
3 advertising pie that they go after, but the point is
4 that the Internet has to be considered now as a
5 credible advertising medium and increasingly as
6 advertisers migrate to that new medium, television will
7 be in direct competition with the Internet.
8 860 COMMISSIONER McKENDRY: So, you see
9 advertising on the -- I guess the point I am trying to
10 understand is do you see advertising on the Internet as
11 eroding the advertising that's available to television
12 broadcasters?
13 861 MR. JACK: There will certainly be
14 some erosion. As new media come into play, as we have
15 seen with radio, then TV and now the Internet, there is
16 a layering effect where you get some new revenues
17 coming into the market and some substitution within the
18 existing advertising pie. So, in the case of the
19 Internet coming in, it will certainly take away from
20 television because television is a dominant advertising
21 vehicle right now. So, inevitably it will be hit and
22 it has been hit within that $900 million, but
23 increasingly on a go-forth basis they will be competing
24 head-to-head.
25 862 COMMISSIONER McKENDRY: Do you have
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1 any view about how much advertising will be lost to the
2 television industry as a result of the emergence of the
3 Internet?
4 863 MR. JACK: To a large extent, it
5 depends how quick the broadcasters are in actually
6 using the Internet as a second window, using the
7 branding and the exposure the Internet can provide, but
8 some advertisers will want television and the Internet,
9 with the Internet being the second window for the same
10 product, some of them will look at it in terms of a
11 holistic approach of billboards, television, Internet
12 as one buy and others will just want the Internet
13 because some of those demographics will only be on the
14 Internet.
15 864 MR. MILLER: Commissioner McKendry,
16 if I could just add to that, Internet advertising has
17 two very significant impacts. First of all, it is a
18 direct competitor, an increasing competitor and, as
19 this chart shows, the growth in Internet advertising is
20 quite appreciable. But for Canada, the second impact
21 is more significant. It bypasses the Canadian system.
22 So, if you are a major advertiser, a Ford, a Proctor &
23 Gamble, you have the potential on the Internet to
24 completely bypass the Canadian system.
25 1550
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1 865 So the threat to Canadian
2 broadcasters is very real. Obviously, we are in the
3 early days now, and broadcasters are looking at how
4 they can take advantage of the Internet, but that
5 threat is one that concerns us all very greatly.
6 866 MR. MACDONALD: Commissioner
7 McKendry, additionally, we have talked at length about
8 digital and we have talked about convergence, and I
9 think you are well aware that in the United States,
10 even though HDTV is in the thousand lines plus area,
11 what cable has been really advocating is more along the
12 lines of 750-odd lines.
13 867 The point here is not to get into a
14 technical discussion but only to say that that puts the
15 new digital monitors right -- to be computer-compatible
16 monitors it really forces convergence at a much higher
17 rate, so that could be a major, major factor for us.
18 As we move to digital and as we move to digital-ready
19 sets, those sets will not just be televisions, they
20 will be computer monitors.
21 868 COMMISSIONER McKENDRY: This leads me
22 to my last question for you. I forget who, but one of
23 you said earlier that broadcasters must develop new
24 services to pay for digital. I was wondering if you
25 could tell me what those services are that you will
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1 develop to pay for digital.
2 869 MR. JACK: For example, paging
3 services, non-broadcasting services; it could be
4 merchandising services. In fact, that goes back to
5 your Internet question -- right now, the U.S. network
6 revenue sourcing is increasingly merchandising based.
7 As you are going into the digital world, there will be
8 more possibilities because you will have two-way
9 transactions or return line with the telephone.
10 870 In terms of what Peter was talking
11 about, right now, for example, "Seinfeld" merchandising
12 is done through New York. When it appears on Global,
13 Global does not get the merchandising revenues, it is
14 the U.S. producers, the U.S. studios that get that
15 merchandising revenue and the vertically-integrated
16 companies, the broadcasting studio companies, that get
17 that merchandising revenues.
18 871 The challenge for the Canadian system
19 is to develop other revenue sources over and above
20 advertising. The Internet would be one source for them
21 to do that.
22 872 Just to answer your question, in the
23 Environmental Scan, on page III-7, the source is
24 Coopers & Lybrand, and it comes from the Internet
25 Advertising Bureau, IAB, in the United States.
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1 873 COMMISSIONER McKENDRY: Thank you.
2 874 MR. MILLER: Commissioner McKendry,
3 can I just drop three broad categorizations? The
4 business opportunities we see are threefold. Number
5 one is in the data area because digital gives us more
6 capability to provide data services, and that could
7 lead us into non-traditional businesses such as paging
8 or even telecommunications. Second is in a sense
9 enhanced programming or secondary programming streams.
10 Obviously, digital television gives us the potential to
11 not only have HDTV but also second channels, which
12 could be more windows and possibly subscription
13 revenues. And the third broad opportunity comes from
14 interactivity, both in terms of providing interactivity
15 in programming and downloading additional information,
16 but also in particular the value added to the
17 advertiser as you are able to focus very specifically
18 on the advertiser's interests and target much more
19 precisely particular advertising messages to particular
20 audiences and getting the feedback in terms of direct
21 marketing.
22 875 COMMISSIONER McKENDRY: When you
23 refer to subscription services, are your members
24 contemplating broadcasting specialty services in a
25 digital format?
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1 876 MR. MILLER: I think we are
2 contemplating all such possibilities. It is early days
3 now, and obviously no final decisions have been made,
4 but that is certainly a possibility.
5 877 MR. MACDONALD: Commissioner
6 McKendry, Peter is paid to be positive; I am the guy
7 that's going to end up paying for this digital
8 conversion, and I would like to say that, as positive
9 as --
10 878 THE CHAIRPERSON: You are not paid at
11 all?
12 879 MR. MACDONALD: You work for your
13 stipend.
14 880 I think that, from a broadcaster's
15 point of view, while those are all possible, they are
16 not fleshed out, they are not, in our view, clear cut
17 opportunities for digital in fact to become a business.
18 So I am not suggesting that they are not there, because
19 they exist as a potential. But $500 million is a lot
20 of boodle to come up with to fulfil digital in this
21 country, and I just want to make sure that we haven't
22 left you with the expression that it is going to be a
23 cake-walker, that we are moving into an instant
24 business.
25 881 COMMISSIONER McKENDRY: Thank you.
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1 882 Those are my questions, Madam Chair.
2 883 THE CHAIRPERSON: Thank you.
3 884 Commissioner Pennefather.
4 885 COMMISSIONER PENNEFATHER: Thank you.
5 886 I would just like to ask two
6 questions. The first is to clarify one point that I
7 think underlines your whole approach.
8 887 I wondered if you could just explain
9 for us how the approach, which is one that addresses
10 the entire broadcast system, which I think I have
11 understood you say also will be managed in terms of a
12 case-by-case basis. Could you explain how the two will
13 work together?
14 888 MR. McCABE: Yes, certainly,
15 Commissioner Pennefather.
16 889 As we have said, and as you have
17 gathered, the aim would be to have you establish a
18 system-wide goal with respect to Canadian programming,
19 and we would then expect that you would, as licensees
20 appear before you, use the tools that you have -- and
21 we have added some incentive tools as well in our
22 suggestion, in our proposal, and we have as well
23 suggested some measures of flexibility.
24 890 You would use these tools in making
25 judgments about their renewal or about their
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1 acquisition of properties and so on, and the basis upon
2 which you would use them is you asking them "How will
3 your plans meet the viewing goals of the system?"
4 891 So we are merely providing a context
5 here. We are not taking away any of the tools that you
6 have currently, in fact we are suggesting some others,
7 but the plan would be specifically that, at the
8 licensee level, you set their conditions of licence in
9 the light of a business plan that was aimed at telling
10 you the part they would play in achieving the goals.
11 892 COMMISSIONER PENNEFATHER: And those
12 are the goals set, as you described earlier, for
13 viewership --
14 893 MR. McCABE: Yes.
15 894 COMMISSIONER PENNEFATHER: -- based
16 on discussion with the industry or the players?
17 895 MR. McCABE: Beginning with this
18 hearing certainly, and it may well be, if this
19 discussion can be joined, that you will get other views
20 on this and that you will be able to come out of it and
21 say, yes, it is reasonable for us to say we have to
22 rethink in a sense how we go forward to create a
23 stronger, better broadcasting system; let us get a
24 focus. We heard from a number of people, a number of
25 interveners here, we believe these goals as we propose
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1 or as modified by others' interventions and your
2 thinking -- you say these would provide a focus that we
3 could all work toward in the system and we could begin
4 the process.
5 896 COMMISSIONER PENNEFATHER: Thank you.
6 I am sure as we do one of the concerns we will have is,
7 as we have heard today and are all concerned about, if
8 in fact profitability is the goal and if that
9 profitability at this point in time, as you have
10 explained, is not connected to Canadian programming, if
11 the drive for viewership leads to programming which is
12 profitable, that doesn't leave us with a very
13 optimistic future for Canadian programming, and the
14 diversity of programming within the system.
15 897 Have you considered that component of
16 this debate?
17 898 MR. McCABE: Yes. Our proposal
18 essentially says that we have to make Canadian
19 programming profitable, and a key part of that is
20 diversity in the marketplace.
21 899 We aren't in fact saying that this is
22 kind of a way to get to profitability, we are saying it
23 is the way. We really must focus on our Canadian
24 programming for the future of our businesses, because
25 the margins on our American programming are coming
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1 down, the competition that we are facing is increasing,
2 and in that more competitive world where we are less
3 able to cross-subsidize from American programming we
4 are going to have to make the unique programming we
5 have work for us.
6 900 So, in some senses, when I said
7 earlier on that there was no other choice, we really
8 believe that when we put this before you. You know,
9 when you take a look at the numbers, they are so stark
10 that you say to yourself, is this even possible? But
11 we have to set out to try to do it. And we are
12 suggesting that if you can be leaders in the system and
13 we can become drivers in the improvement of Canadian
14 programming so that it performs better, I think the
15 whole system can be pulled along and we can make better
16 programming that will perform better.
17 901 COMMISSIONER PENNEFATHER: Thank you.
18 902 L'autre question, c'est pour
19 M. Lamarre.
20 903 Monsieur Lamarre, vous nous avez
21 décrit très, très clairement que l'objectif sur le côté
22 francophone n'est pas la part d'écoute mais surtout la
23 performance. Est-ce que vous pouvez nous expliquer ou
24 même nous rassurer que cet objectif va inclure aussi la
25 performance de la programmation canadienne?
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1 904 M. LAMARRE: Comme je l'ai mentionné
2 précédemment, pour nous, la programmation canadienne,
3 c'est un objet de fierté; c'est ce qui a fait que les
4 réseaux francophones ont réussi à se tailler une place
5 enviable dans le marché; donc c'est quelque chose qu'on
6 veut définitivement maintenir.
7 905 Comme je l'ai mentionné également --
8 et c'est la partie un peu triste de notre bilan -- la
9 grande partie de nos profits, malgré notre excellente
10 performance en contenu canadien, provient du contenu
11 américain. Alors nous sommes conscients qu'il y a là
12 une menace pour nous de maintenir un équilibre entre le
13 contenu canadien et américain de façon à maintenir une
14 certaine profitabilité.
15 906 Nous sommes par ailleurs confiants
16 que, si nous arrivons à maintenir les coûts du contenu
17 canadien à un niveau qui est acceptable, nous pourrons
18 relever ce défi, mais je pense que tout le monde
19 comprend dans l'industrie que tout ça est lié beaucoup
20 aux sources de financement qui sont présentement en
21 vigueur.
22 907 Dans un scénario où les sources de
23 financement public ne seraient pas présentes à la
24 hauteur où c'est le cas présentement, ça deviendrait
25 définitivement une menace non seulement pour notre
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1 profitabilité mais également pour le contenu canadien
2 francophone parce que, comme vous le savez, il n'y a à
3 peu près pas de débouchés pour le contenu francophone à
4 l'extérieur du pays.
5 908 CONSEILLÈRE PENNEFATHER: Merci,
6 Madame la Présidente.
7 909 THE CHAIRPERSON: Commissioner
8 Cardozo.
9 910 COMMISSIONER CARDOZO: Thank you,
10 Madam Chair.
11 911 I have three quick questions and one
12 quick observation.
13 912 I was quite interested in your
14 discussion about the viewer and the focus on the
15 viewer, but I kept thinking that I couldn't see your
16 juxtaposition between public policy objectives and
17 issues of viewership as being different or opposed to
18 each other. To me, they ought to be the same thing.
19 Public policy is about serving the public, and they
20 ought to be the same; and, if they are off from each
21 other, then I suppose we have to get them back.
22 913 I see what the Commission has done
23 over a number of years, focusing on things like
24 expenditure requirements and peak hour viewing, as
25 being specifically aimed at driving up viewership.
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1 914 That's just my observation. Unless
2 you are really itching to respond, I would rather move
3 on to my question.
4 915 My first is with regard to
5 descriptive video service. At the last hearing on the
6 third networks we had talked about that, and the
7 Commission was interested in your following up on that.
8 916 I wonder if you can give us an update
9 as to where things are with DVS.
10 917 MR. MILLER: Thank you, Commissioner
11 Cardozo.
12 918 We have looked at this very seriously
13 and are in the process of finalizing a report on
14 feasibility which we would hope to file with the
15 Commission in the next short period. Essentially, we
16 have tried to look at it in terms of its economic
17 implications and the availability of programming.
18 919 Our conclusions are essentially
19 twofold. The solution to greater access for blind
20 Canadians to television lies not simply in this one
21 measure but through various measures we can do to
22 improve the availability of our programming, and
23 secondly it lies not just with private broadcasters, it
24 is something that we believe the public broadcaster and
25 in particular the producers have to be very involved
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1 in, because after all it is the producers that have the
2 copyright in the programming and, should we pursue
3 this, their participation would be vital.
4 920 Secondly, in brief strokes, it has
5 become apparent that the costs for this are enormous,
6 in the order of 500 to 1,000 more the current costs for
7 closed captioning. The Commission is aware that we
8 have met just very recently the closed captioning
9 policy requiring us, particularly the larger stations,
10 to move towards 100 closed captioning in our news.
11 921 The costs involved in moving towards
12 descriptive video appear at this stage, quite frankly,
13 somewhat insurmountable. We notice that in the U.S.,
14 which is the only jurisdiction we are aware where there
15 is some descriptive video, the government Department of
16 Education has been a key funder of descriptive video.
17 So that kind of public-private partnership we think
18 will be essential should we choose to proceed with this
19 in Canada.
20 922 Moreover, also, as has been
21 discovered in the U.S., because of the technical
22 difficulties, digital television may offer the best
23 promise of being able to proceed with this.
24 923 So these are our basic conclusions
25 that we would be outlining with you in more detail in
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1 our feasibility report that we will be filing hopefully
2 within the next month or so.
3 924 COMMISSIONER CARDOZO: Thanks.
4 925 I wanted to ask you about cultural
5 diversity as well. You talked, in response to one of
6 our questions in the Appendix, page 112 I believe it
7 is, that the best way for Canadian television to
8 reflect Canadian diversity is through new specialty
9 services and niche programming. What we were also
10 asking was whether mainstream conventional broadcasters
11 and specialties also have a role in reflecting the
12 diversity, responding to it, including it.
13 926 MR. MILLER: We believe diversity
14 must be achieved fundamentally at the system level,
15 that not all licensees can contribute or should be
16 required to contribute in the same way.
17 927 That being said, we are well aware
18 that, particularly in some of the issues of serving
19 minority or ethnic Canadians, a number of broadcasters
20 have taken upon themselves to service that market and
21 to make it their business to do so, and we note that a
22 number of other interveners will be coming before you
23 to outline those initiatives.
24 928 Again, our fundamental philosophy
25 that we have outlined today is that we believe
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1 diversity in all its aspects is best achieved by
2 allowing proponents, whether they be TVNC or City-tv or
3 Global or CTV, to come forward with their proposals and
4 the services that they intend to provide and the kind
5 of programming they intend to provide for the
6 Commission to make its determinations based on that
7 rather than the Commission suggesting that everyone
8 must do everything.
9 929 COMMISSIONER CARDOZO: What you are
10 saying now is perhaps a bit more than was in the
11 written brief, and it struck me that in your written
12 brief you are basically saying diversity belongs to
13 those ethnic specialties and you are writing off a good
14 segment of viewers which supposedly we are all after in
15 this business.
16 930 MR. MILLER: I think that's a valid
17 point. I think that, if we gave the impression that
18 diversity was the sole responsibility of specialty
19 services, that was incorrect. Whether it be TVNC or
20 CFMT or City-tv or the Craigs out west, obviously there
21 is a number of broadcasters, both private and non-
22 profit, that have strong proposals in that area.
23 931 COMMISSIONER CARDOZO: My last
24 question is opening up a whole large topic, so I would
25 ask you to keep it quite short -- another aspect of
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1 diversity, and that's regional/local diversity. It has
2 been touched on today, but I wonder if you could
3 summarize for us your thoughts about the future of
4 local programming.
5 932 MR. MILLER: Thank you. That is a
6 very important question and one that we have spent some
7 time on.
8 933 First of all, as we have outlined in
9 our submissions, one of the unfortunate consequences of
10 the Commission establishing something as a priority is
11 that other things suffer, and I think one of the
12 unfortunate consequences of the emphasis on 7, 8 and 9
13 and entertainment programming is the broadcasters have
14 had to make choices and have, to some extent, put less
15 resources on local and regional programming,
16 essentially because they are not getting any credit for
17 it. We think that is unfortunate.
18 1610
19 934 Again, that is one of the reasons why
20 we strongly urge the Commission not to adopt a one size
21 fits all approaches. Unless you regulate everything,
22 which is impossible, you will lose some important
23 things.
24 935 We think the best option is to allow
25 a climate where those that are in the local or regional
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1 business are an integral part of the system and come
2 forward with their proposals. There are some very
3 strong regional broadcasting companies, obviously in
4 English Canada the Craigs and the CHUM group. There
5 are some very significant local players, be it the
6 Thunder Bay Broadcasting or Newfoundland Broadcasting
7 or any number of the smaller market players.
8 936 It's vital that they have the
9 flexibility to pursue their strategies which centre on
10 local and regional programming and that they not be
11 forced to do other things to take away from that.
12 937 COMMISSIONER CARDOZO: That's all our
13 fault? Is that our fault?
14 938 MR. MILLER: No. It's, if you will,
15 the law of unintended consequences.
16 939 COMMISSIONER CARDOZO: I won't pursue
17 that. That covers my questions.
18 940 THE CHAIRPERSON: Commissioner
19 Wilson.
20 941 COMMISSIONER WILSON: Hi, Mr. McCabe.
21 I have just a couple of questions for you.
22 942 One of the components of your
23 proposal is that the Commission give more flexibility
24 to broadcasters in terms of choosing the categories
25 that you wish to pursue in your spending and promotion.
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1 943 MR. McCABE: Yes.
2 944 COMMISSIONER WILSON: Would you
3 describe what you are proposing as sort of a hybrid
4 conventional specialty? I mean the specialties have
5 been very successful. They have taken away some of
6 your viewership.
7 945 Are you sort of approaching a
8 strategy or pursuing a strategy that makes each
9 broadcaster specialized in that sense?
10 946 MR. McCABE: Well, I suppose in the
11 nature of a marketplace, especially one that becomes
12 increasingly fragmented, that everyone becomes a niche
13 player at some level. I think there will always be a
14 substantial difference between, if you will, the
15 general service, conventional broadcasters and
16 specialties.
17 947 What we are saying is in a
18 marketplace, if we are going to pursue the objective of
19 diversity then we should make sure that we don't, as
20 some interveners here suggest, adopt rules that are
21 going to drive everybody into the same kind of
22 programming. Our hope here with the proposals we have
23 put forward for diversity, for flexibility, is to
24 ensure that the broadest spectrum of people in a
25 marketplace can be served, number one, and number two,
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1 that the conventional broadcasters who will continue to
2 deliver, if you will, most of the audience to Canadian
3 programming have an opportunity to go and find the
4 audiences as they develop in the marketplace.
5 948 If they are caught in inflexible
6 regulatory requirements which say you must do this kind
7 of programming and you must do it in these particular
8 hours, our ability to in effect compete in that
9 marketplace will be severely limited. The inevitable
10 result is yes, we will get services that look a lot
11 different one from another. I think that's a benefit
12 to the system. Yes.
13 949 COMMISSIONER WILSON: Another
14 question with respect to specialties. You said with
15 the fragmentation of the market into specialty and pay
16 services that the margins on your U.S. programming are
17 dropping, yet broadcasters do own a significant number
18 of specialty channels. Is this not sort of a rational
19 strategy to follow as a broadcaster, to try and develop
20 an alternate revenue stream or recoup some of those
21 margins that are flowing away from you?
22 950 MR. McCABE: Absolutely. To be
23 clear, the reason for the margins on American
24 programming coming down isn't particularly and
25 shouldn't particularly be laid at the doors of the
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1 specialty services.
2 951 The problem that we face is that --
3 952 COMMISSIONER WILSON: Where are they
4 going?
5 953 MR. McCABE: First of all, you have
6 to recognize that as the number of U.S. networks grow,
7 in other words purchasers of programming in the United
8 States, the demand on that programming is driving the
9 costs up. We in Canada suffer from the same thing.
10 954 By the same token, as there are more
11 potential purchasers in this country of programming in
12 this country as well, the costs get driven up.
13 955 Following those higher prices you
14 pay, if you are then fragmented, not only by Canadian
15 specialty services but by U.S. specialty services and
16 by U.S. conventional services in the system, that pulls
17 those margins down.
18 956 Yes, certainly, one of the strategies
19 that is I think essential to broadcasters going forward
20 is that ability to in effect move into specialty
21 services where they can in effect find economies and
22 efficiencies with their programming, where you can take
23 a programming that may begin on the specialty service
24 and move it on to your main service and so on.
25 957 I would hope and we would expect that
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1 more of that will in fact occur.
2 958 MR. MACDONALD: Commissioner Wilson,
3 your point is a good one, but it needs to be I think
4 recognized that there is still the cost of running the
5 new specialty. You have taken the audience and you
6 have hived off a big chunk of it and moved it over to
7 this other service. Even though that service is owned
8 by the broadcaster, there is still all of the
9 infrastructure of running the service, so it's not just
10 a loss here and a gain over there.
11 959 COMMISSIONER WILSON: Yes, I
12 understand that.
13 960 MR. MACDONALD: I just wanted to make
14 sure that was clear.
15 961 COMMISSIONER WILSON: Okay. I guess
16 the last question that I wanted to ask you about is
17 about web TV and television and the convergence of the
18 two.
19 962 Recently I had the opportunity to
20 spend some time with the senior network engineer from
21 the U.S. He has been in the business for 41 years. He
22 is heavily involved in the conversion, the gear-up to
23 digital in the U.S.
24 963 He said to me when I asked him about
25 web TV and television that in his view, the very nature
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1 of the activities involved in computing and television
2 watching don't lend themselves to real convergence,
3 that they are two discreet activities. One is close up
4 and interactive. The other one is more distant and
5 passive. Marshall McLuhan talked about the same thing
6 about television.
7 964 I am just wondering. You have talked
8 about the convergence of these two things and
9 television becoming a monitor, but how many people are
10 going to sit across the room this far from their
11 monitor and try and work on things that they would
12 usually be this close to?
13 965 I am just wondering if you have done
14 any analysis about how quickly you think this is going
15 to happen. How realistic is it?
16 966 MR. MILLER: A very significant
17 question, one we have been thinking about and one
18 hopefully we will have the opportunity to talk to you
19 about more in the New Media hearing to follow.
20 967 To lay the issue out in its simplest
21 forms, we think Internet TV could be as significant for
22 television broadcasters in the next millennium as cable
23 was for TV in the seventies and eighties. We say that
24 because of a simple premise.
25 968 On Internet TV, broadcasters are the
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1 portal to the Internet. It's those channels that will
2 lead viewers to the Internet, to the subscription
3 revenues and to the advertising revenues. In a sense,
4 we maintain some control over the distribution,
5 maintain control over that universe through leading our
6 audiences there. That's possible with Internet TV.
7 969 On a computer that's separate, the
8 surfer will simply go to the millions and millions of
9 websites that are out there, so through TV we have a
10 way of repatriating and maintaining those revenues and
11 opportunities, but through the computer we will likely
12 lose them.
13 970 Our investment in Internet TV, the
14 cable industry's investment in Internet TV, the
15 Canadian producers and multimedia providers, that
16 investment is critical. We think it will be a vital
17 policy objective over this next period.
18 971 MR. MACDONALD: It's not at all clear
19 yet which way it's going to go. I don't think anybody
20 can absolutely substantially say this is it and this is
21 where it is going to go. Let me give you an example of
22 something that could happen in a very hypothetical way.
23 972 Let's say that "Seinfeld" was not
24 available on any television station, that the only
25 place you would be able to go wwcolumbia.com which
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1 happens to be the distributor and they happen to own
2 the rights and it was available to you on your
3 monitor/TV set on a pay-per-view basis or some other.
4 973 The point is that we are talking
5 about the conventional system right now that says we
6 distribute programs through television stations that
7 hop along across the country or we distribute them
8 directly by satellite.
9 974 The distributor could at one point
10 decide "You know what? I'm going to use an alternative
11 distribution method. I'm going to keep it all myself
12 and they're going to come to me because I've got the
13 better mousetrap".
14 975 I agree with your earlier point about
15 the distance and the interactivity. Certainly we have
16 got a lot of experience with interactivity in Canada,
17 but clearly if there was a product that was in
18 significant demand and if we moved into real time video
19 and the quality was not in issue, then one could
20 clearly see the Internet competing very, very directly
21 with television.
22 976 To your earlier point and the one
23 that I tried to make, I don't think it's clear yet. We
24 just simply look at it and say content for the New
25 Media usually follows from the previous media. It's
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1 becoming more and more clear that the Internet as it
2 evolves will draw upon television as its primary source
3 much as television drew upon its predecessor, which was
4 radio.
5 977 COMMISSIONER WILSON: Thanks for the
6 example because it helped me look at in a different way
7 and in a way that this engineer hadn't sort of -- well,
8 he has probably conceived of it but he didn't talk
9 about it, so thanks very much.
10 978 THE CHAIRPERSON: Legal counsel?
11 979 MR. BLAIS: I am very conscious that
12 it has been a long day and everyone is tired, so I will
13 try to very much focus my very few --
14 980 THE CHAIRPERSON: Sorry, you're not
15 going home yet.
16 981 MR. BLAIS: That wasn't my intent.
17 It was to ask a few questions, but on the understanding
18 that staff might follow up with some more detailed
19 questions in writing that would be put on the public
20 file during the process of questions that would be best
21 asked in a written format and to save precious hearing
22 time.
23 982 If would like to bring you first to
24 page 13 of your oral presentation this morning where
25 you talked about the 35 per cent and 10 per cent as
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1 objectives. You write those in terms of English
2 television system, the 10 per cent and the 35 per cent
3 over the next five years.
4 983 To be quite clear, you include in
5 English television not just private conventional, but
6 you would also be looking at the public sector, the CBC
7 and the specialty services.
8 984 MR. MILLER: That is correct.
9 985 MR. BLAIS: We were having a
10 discussion earlier this morning about the Broadcasting
11 Act. It's quite clear that it's a single system, one
12 single system, but you yourselves have recognized that
13 it has to be divided between French and English. In
14 fact, it's quite clear in your presentation.
15 986 One could argue as well that in
16 between on the one hand the single system and the
17 individual licensees there are a number of ways to
18 slice and dice public, private, community, alternative,
19 mainstream, specialty, off-air. You have obviously
20 come to the conclusion that the best way was to look at
21 it from the system perspective.
22 987 I have two questions. One, do you
23 agree with the way I am presenting the Broadcasting Act
24 as having various components and the broadcasting
25 objectives could be looked at for each one of those
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1 elements separately? That's the first question.
2 988 The second question is you have
3 obviously decided to look at it on a system basis, the
4 English system basis, rather than subcomponents. Why
5 haven't you looked at or why have you dismissed the
6 possibility of having your ship objectives for, let's
7 say, the conventional over-the-air private broadcasters
8 as distinct from this larger group of all English
9 television stations?
10 989 MR. MILLER: I am going to preface
11 this by saying this may be one of those questions that
12 will have to have a written answer as well.
13 990 First of all, it is our view that the
14 Broadcasting Act in all its objectives sets those
15 objectives for the system in its two components that
16 you have referred to, so it does not require each
17 licensee or each element of the system to contribute to
18 the objectives in the same way or, in fact, at all
19 necessarily.
20 991 It is a system based approach. We
21 take evidence from that just by a number of the key
22 provisions in section 3 of the Broadcasting Act. We
23 take from that also, to return to the questioning that
24 the Chair had at the beginning of the hearing, as
25 support for our proposal, that viewing be the key
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1 objective.
2 992 Obviously I don't need to take you,
3 counsel, through the Broadcasting Act, but for the
4 benefit of others, I think it's noteworthy to look at
5 provisions like 3(1)(b) that talks about broadcasting
6 as a public service essential to the maintenance and
7 enhancement of national identity and cultural
8 sovereignty.
9 993 Obviously to meet that objective, you
10 need Canadians watching it, not just the availability
11 of programs. I could go through a number of other
12 objectives, be they enriching the cultural, political,
13 social and economic fabric or providing a balance of
14 entertainment and information, as Mr. Cardozo was
15 referring to, the drawing from local, regional,
16 national and international sources.
17 994 Finally under section (s) being
18 responsive to the evolving demands of the public.
19 Again, that one in particular strikes to us at the
20 chord of responding to the viewing demands of the
21 public.
22 995 MR. BLAIS: Maybe I will follow up
23 because we are talking about the Broadcasting Act and
24 we will come back to part (b) of my question.
25 996 Part (a) is one whether the diversity
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1 has to come from, you know, sub-elements of the system
2 as opposed to the system as a whole. There have been
3 other instances, particularly because over the year it
4 is sometimes the only source for a large portion of
5 Canadian, that there was a need to make sure that there
6 was diversity, and even balance, and that's a link to
7 election debates on issues of public concern, that one
8 would have to find it at least at the level of
9 sub-elements of the broader broadcasting system.
10 997 MR. MILLER: I take your point as the
11 Commission has to look at the broadcasting sometimes as
12 a whole nationally, but sometimes market by market,
13 depending on its concern and obviously when addressing
14 the concern of universal availability and making sure
15 that is an essential service, all Canadians have
16 access.
17 998 That lends itself to the focus on
18 conventional over-the-air broadcasters. Therefore, in
19 that instance the Commission has to satisfy itself that
20 the broadcasters available in a given market do give a
21 diverse range of programming.
22 999 Obviously that has been achieved to
23 date and we would argue can be best achieved in the
24 future by allowing broadcasters to play different
25 roles. A local broadcaster in a local market may
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1 emphasize local programming whereas other broadcasters
2 that take feeds from broader corporate systems or
3 networks may emphasize more entertainment programming.
4 1000 It's that balance that we think can
5 be achieved at a market level, at a system level that
6 leads us to the conclusion that not all broadcasters
7 have to have all the same requirements.
8 1001 MR. BLAIS: To come to my point (b),
9 you have put in the same pool public and private
10 broadcasters. As I understand it, what's driving your
11 philosophy of industry goals based on viewership is
12 that it makes good business sense from your
13 perspective.
14 1002 One could argue that as far as the
15 public broadcasters, either the CBC or other public
16 broadcasters, that objective, the business or profit
17 motive, is not there, yet you have chosen arguably to
18 mix apples and oranges to come up with a single
19 objective for the entire system.
20 1003 We have argued that viewing is the
21 key objective, but we recognize that there are other
22 objectives that may be more important for other
23 players. We noticed that CBC also has argued that
24 viewing is a key objective and in fact in some ways has
25 been more aggressive than us in proposing for a 50 per
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1 cent increase in dealing to entertainment programming
2 while we have argued for 33 per cent increase.
3 1004 That being said, we think one has to
4 start from the level of a system goal. That's the
5 starting point and that's the point that we started
6 with with both English language and French language
7 goals.
8 1005 What we would hope is through the
9 course of this hearing and through the course of what
10 may follow this hearing is that that overall national
11 goal then does get in a sense get broken down with
12 different parts of the system and different players in
13 the system indicating how they can contribute to it.
14 We have no doubt that the CBC will indicate how they
15 can contribute to this goal and how they can contribute
16 to other goals that are critical to being a public
17 broadcaster.
18 1630
19 1006 MR. BLAIS: Are you suggesting that
20 the CBC is going to bring the average up?
21 1007 MR. MILLER: No. I am suggesting the
22 CBC as a primary purveyor of Canadian programming in
23 the broadcasting system could obviously -- has an
24 interest and a capability to contribute very
25 significantly to a viewing goal to Canadian
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1 programming.
2 1008 MR. BLAIS: Getting back to this 10
3 and 35 goal. I assume, just to make perfectly clear, I
4 assume that what you are saying is that that's what
5 your objective would be, to the extent that you get all
6 the other flexibility that you have listed below?
7 1009 MR. MILLER: That's correct, but
8 again we are talking about an objective. Obviously,
9 through the course of this hearing you will have the
10 opportunity to hear from others as to what they think
11 the right objective could be and this is our starting
12 point and we are looking forward to further discussion
13 as to what's realistic under what circumstances and
14 what's necessary to achieve it.
15 1010 But you are certainly correct that
16 the elements of our plan are all geared to achieving
17 that objective.
18 1011 MR. BLAIS: In your policy framework
19 one of the first things you mention is stability. I
20 can understand as businessmen and women you want to
21 know what is going down, sort of saying better the
22 devil you know than the devil you don't know. I guess
23 I am the devil's advocate here.
24 1012 The potential though of looking at it
25 completely differently, not like we have done for maybe
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1 the past 10, 15 years is that there may be a
2 potentially destabilizing effect, not only on your
3 membership, but as well on other elements in the
4 broadcasting system.
5 1013 Between the need for flexibility and
6 tinkering with the regulatory system and what seemed to
7 be a key element of stability, for instance, you
8 mentioned that you might want to revisit how we are
9 doing with the viewership goals after three years.
10 What if it is not working? What if we have to change
11 course? How would your membership feel about that?
12 1014 MR. MILLER: I guess at the outside
13 it goes without saying that our members would not have
14 proposed and allowed us to propose a viewing goal if
15 they thought it wasn't in their business interest.
16 1015 But more to the point, we have set
17 these viewing goals as the very way to achieve our
18 business objectives and the objectives that we think
19 are most important for the broadcasting system -- that
20 is, the objective of Canadians watching Canadian
21 television. We would expect that as you hear from
22 other corporate groups in this proceeding, other
23 intervenors and subsequent proceedings that were
24 alluded to at the beginning of this hearing, that the
25 opportunity to refine them and the opportunity to
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1 figure out how specific players can contribute those
2 goals will become evident.
3 1016 Obviously, we are looking for a
4 balanced approach. We are suggesting business
5 certainty, but we are also trying to be visionary,
6 trying to come forward with a new approach going
7 forward that doesn't just rely on your traditional
8 regulatory tools, both because we think that's
9 necessary in this new environment and because it makes
10 for good public policy.
11 1017 Me BLAIS: Monsieur Lamarre, je
12 réalise qu'il y a une spécificité au marché français,
13 et on en a parlé longuement ce matin. Par contre on
14 peut dire qu'il y a quand même eu des acquis du côté
15 francophone et, dans le contexte d'avoir des buts pour
16 l'industrie au niveau des auditoires, pourrait-on
17 envisager au moins d'avoir des objectifs en tant que
18 plancher pour le système français?
19 1018 M. LAMARRE: Des objectifs planchers
20 en termes de minimum ou de maximum?
21 1019 Me BLAIS; Ça revient toujours à la
22 même chose, mais on sait qu'il y a un certain goût pour
23 l'histoire du côté du produit canadien du côté
24 français, et si on introduit de la flexibilité dans le
25 système réglementaire on pourrait voir un glissement.
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1 Mais, quand même, on pourrait se demander s'il n'y
2 aurait pas eu lieu d'avoir un plancher pour éviter un
3 trop grand glissement en-deçà des performances
4 historiques.
5 1020 M. LAMARRE: Je pense que l'histoire,
6 pour reprendre votre terme, est assez éloquente en ce
7 qui a trait au réseau français, parce qu'on a toujours
8 produit un niveau de contenu canadien qui est de loin
9 au-delà des obligations. Et on l'a fait parce que le
10 marché est gourmand de production de contenu canadien.
11 1021 Alors je ne pense pas que plus de
12 flexibilité amènerait un glissement de la part des
13 diffuseurs francophones; je pense que l'histoire
14 démontre de façon extrêmement éloquente que même sans
15 des obligations nous avons toujours dépassé de façon
16 magistrale et spectaculaire ce qui nous était requis
17 par le CRTC parce que le marché est là et que notre
18 population et nos téléspectateurs sont friands de
19 contenu canadien.
20 1022 Me BLAIS: Donc n'y a-t-il pas lieu
21 quand même d'avoir un seuil de référence?
22 1023 M. LAMARRE: Nous pourrions avoir un
23 seuil de référence. Mon point est le suivant; c'est
24 qu'il m'apparaît important, quand on a des intervenants
25 dans l'industrie qui performent extrêmement bien... ma
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1 compréhension du système, c'est qu'on met
2 habituellement des obligations à des intervenants qui
3 peut-être ne contribuent pas de façon significative.
4 Ce n'est pas le cas dans le Canada français.
5 1024 Alors, pour toutes sortes de raisons,
6 si le CRTC jugeait important de mettre un plancher,
7 j'imagine que ce sont des choses avec lesquelles on
8 n'aurait pas le choix de vivre. Mais nous, ce qu'on
9 dit, notre position à ce moment-ci, c'est qu'il n'y a
10 vraiment pas de nécessité puisqu'on performe au-delà de
11 vos espérances.
12 1025 Me BLAIS: Merci.
13 1026 Madame la Présidente, ce sont mes
14 questions, sujet aux questions écrites qui pourraient
15 suivre par la suite.
16 1027 LA PRÉSIDENTE: Et voilà.
17 1028 Thank you very much, ladies and
18 gentlemen.
19 1029 We will take a short break, five
20 minutes, to change panels. Unfortunately, we are
21 coming back. We will change this panel.
22 1030 We will sit until 6:00 p.m., to
23 resume at nine o'clock tomorrow morning.
24 --- Short recess at/Courte suspension à 1640
25 --- Upon resuming at/Reprise à 1650
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1 1031 THE CHAIRPERSON: Madam Secretary,
2 would you introduce the next party, please.
3 1032 MS BÉNARD: Thank you, Madam Chair.
4 1033 The next presentation will be by the
5 Canadian Film and Television Production Association. I
6 would invite Ms McDonald to introduce her colleagues.
7 PRESENTATION/PRÉSENTATION
8 1034 MS McDONALD: Good afternoon, Madam
9 Chairperson, members of the Commission and Commission
10 staff. My name is Elizabeth McDonald and I am the
11 President and CEO of the Canadian Film and Television
12 Production Association, the CFTPA. We are a national
13 trade association that represents the interests of more
14 than 300 companies engaged in the production and
15 distribution of English language television programs
16 and feature films in all regions of Canada.
17 1035 Before starting our opening remarks I
18 would like to introduce you to our panel. To my
19 immediate right is Linda Schuyler, Chair of the Board
20 of the CFTPA, President of Epitome Pictures and
21 producer of "Riverdale," "Liberty Street" and the
22 DeGrassi programs. To her immediate right is Michael
23 MacMillan, Chairman of the Board and CEO of Alliance
24 Atlantis Communications, which has produced "Traders,"
25 "Due South," "North of 60" and many other Canadian
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1 television programs and feature films.
2 1036 To my immediate left is Andy Thomson,
3 President of Great North Communications of Edmonton,
4 which produces and distributes television programs,
5 including the "Nature Nut" and "Faces of History". To
6 his immediate left is Catherine Tait, President and
7 Chief Operating Officer of Salter Street Films who
8 produce "This Hour Has 22 Minutes," "Emily of New Moon"
9 and "Lexx".
10 1037 Behind Michael MacMillan is Ira Levy,
11 Executive Producer and Chairperson of Breakthrough
12 Entertainment, a producer of children's and documentary
13 programs, including "Dudley the Dragon" and "The Riot
14 at Christie Pitts".
15 1038 Beside Ira are our technical experts,
16 Dr. Matthew Fraser, Professor of Broadcasting Policy
17 and Communications in Ryerson School of Radio &
18 Television Arts; Guy Mayson, Senior Vice-President of
19 the CFTPA, our legal counsel, Kathleen McNair of
20 Johnston and Buchan, and Steve Ord, Chair of the
21 CFTPA's Finance and Tax Committee and Senior Vice-
22 President of Atlantis Films.
23 1039 We welcome this hearing, as it comes
24 at a critical time in the development of our cultural
25 industries. Canadians have an incredible menu of non-
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1 Canadian programming available to them through cable,
2 satellite and other broadcasting distributors and we
3 can expect more. There must be Canadian choices
4 present in that menu.
5 1040 While the Commission has raised a
6 large number of important issues in its Call for
7 Comments, we believe with you that at the end of the
8 day, it is all about programming, and more specifically
9 Canadian programming. It is truly time to get the
10 picture right.
11 1041 We come to this hearing looking for
12 workable solutions to the key problem that all
13 participants have identified -- attracting English-
14 Canadian viewers to Canadian programs in greater
15 numbers, perhaps to even approach the enviable record
16 of success for domestic programs that we see with our
17 colleagues in French Canada.
18 1042 We believe the answer is quite
19 simple. We must reclaim prime time for Canadian
20 entertainment programming. American programming
21 dominates the peak prime-time schedules of most
22 Canadian broadcasters. Currently, private conventional
23 broadcasters devote about 22 hours per week between 7
24 and 11 p.m. to entertainment programming -- and
25 Canadian programs represent just under four hours per
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1 week. This level is unacceptably low. Canada is the
2 only first world country that has given away its prime
3 time.
4 1043 Canadians must be given the
5 opportunity to watch Canadian entertainment,
6 documentary and children's programming in peak viewing
7 periods.
8 1044 The CFTPA has proposed as a solution
9 the 10/10/10 plan, which we believe to be reasonable
10 and very effective in creating the critical mass of
11 high quality Canadian entertainment programming
12 necessary to reclaim prime time for Canadian
13 programming and Canadian viewers.
14 1045 Sitting before you today is a group
15 that is representative of our industry. We are small,
16 medium and large entrepreneurs from all regions of
17 Canada who make the entertainment, documentary and
18 children's programs that tell Canadian stories to
19 Canadians and increasingly to the world.
20 1046 You have seen clips of a number of
21 well known Canadian programs -- we are the ones that
22 produce these programs. It is Atlantis' "Traders,"
23 Alliance's "Due South," Salter Street's "This Hour Has
24 22 Minutes," Epitome's "Riverdale," Breakthrough's
25 "Dudley the Dragon" and the list can go on. While we
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1 are pleased when our broadcast partners are successful
2 with one of our programs and promote it to their
3 audiences as theirs, we are the entrepreneurs and risk-
4 takers who make and own these programs.
5 1047 We are encouraged by the progress
6 shown by some broadcasters over the past year,
7 including those that pitched in to help save some
8 programs when there was a crunch at the CTCPF in April.
9 However, we feel that this was just a first good step -
10 - more must be done, and all players must participate
11 and it must happen every year. We believe that
12 broadcasters with similar reach and impact must
13 contribute equitably and that equity should mean that
14 the lower contributor increase their role, rather than
15 the higher contributor decreasing theirs.
16 1048 Linda.
17 1049 MS SCHUYLER: We are the content
18 providers and the risk-takers. We are passionate about
19 the programs that we make and we want to regain our
20 prime time for Canadians.
21 1050 The research and analysis that we,
22 and most others, filed with the Commission makes one
23 point very clearly. English Canadians do not get to
24 view Canadian programming in sufficient numbers,
25 despite the great strides made in the professionalism
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1 and production values of those programs. Market share
2 has remained level for the past 10 years. Whether the
3 viewing data comes from BBM or Nielsen, the same
4 conclusion is clear for English Canada. Canadian
5 programs make up only 33 per cent of overall viewing to
6 television through the broadcast day and this drops to
7 about 25 per cent in the peak viewing hours of 7 p.m.
8 to 11 p.m. Canadians deserve better.
9 1051 The success of our programs around
10 the world attests to the quality of programming that we
11 bring to the screen. One fact stands out clearly, we
12 are the only first world country that does not own its
13 prime time. When viewers in other countries have
14 access to their own productions in peak viewing times,
15 they watch them. A look at the top 10 programs between
16 8 and 11 p.m. in the month of February 1998 shows that
17 in the U.K. all 10 were domestic; in France, eight of
18 the 10 were domestic; in Germany, 9 of 10 were domestic
19 and in Italy, all 10 were domestic. Although Canada
20 claims to be the second-largest exporter of television
21 programs in the world, our programming is not really
22 featured in the prime-time schedules of Canadian
23 private conventional broadcasters.
24 1052 A review of the availability of
25 Canadian entertainment programs in peak viewing hours
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1 is all too telling. If we look at all the choices
2 available to Canadians, whether foreign or Canadian,
3 about 57 per cent of all the programming in prime time
4 is entertainment. Canadian entertainment programs make
5 up only about 12 per cent of the programs broadcast in
6 that time.
7 1053 In our view, to increase viewing to
8 Canadian programs, three things must be present:
9 Enough programs broadcast in the times that people are
10 available to watch them; high production and creative
11 values to be attractive against stiff competition; and
12 extensive promotion on-screen and in other media.
13 1054 Our 10/10/10 plan will create the
14 critical mass of quality Canadian programming to
15 reclaim our prime time.
16 1055 Who does it apply to?
17 1056 Stations with advertising revenues
18 higher than $10 million and all stations which are part
19 of a multi-ownership group. These are the stations
20 that currently must choose between hours or spending as
21 a condition of licence -- the Commission's Options A
22 and B. Most of these stations are part of multiple
23 station ownership groups and those that are not are
24 affiliated to one or other of the networks or have
25 buying arrangements with other large broadcasters.
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1 Clearly, these stations can afford to support and
2 present a higher level of the kinds of Canadian
3 programming which are significantly underrepresented on
4 our television screens.
5 1057 What does it require?
6 1058 Ten hours of first-run programs per
7 week from the underrepresented program categories
8 broadcast in peak-viewing hours and three hours of
9 first-run children's programming in children's time.
10 The 150 per cent bonus for high Canadian content
11 programs would continue, but we suggest that the bar be
12 raised beyond the current 10-point criterion.
13 1059 We believe that broadcasters must be
14 required to open prime time shelf space to Canadian
15 entertainment programming in peak viewing periods. We
16 consider 10 hours to be a reasonable goal which will
17 mean that 50 per cent of the entertainment programs in
18 prime time will be Canadian. The three hours of
19 children's programs will ensure that our broadcasters
20 meet the minimum level of children's programs required
21 of U.S. broadcasters.
22 1060 To ensure that the product is
23 available, we have suggested a gradual ramp-up of the
24 hours requirements.
25 1061 Andy.
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1 1062 MR. THOMSON: Thank you, Linda.
2 1063 How will it be financed?
3 1064 We propose that broadcasters be
4 required to spend 10 per cent of their previous year's
5 revenues on underrepresented programming. This
6 represents a significant increase from the less than 4
7 per cent that they spend on these programs now.
8 English-Canadian broadcasters will still spend a lower
9 percentage of their revenues on Canadian entertainment
10 programming than they currently do on foreign
11 entertainment programs. And the 10 per cent will bring
12 them almost up to the level that their French-language
13 colleagues spent in 1997.
14 1065 We have heard much about a funding
15 gap, and that because of it increased commitments for
16 Canadian programs should not be imposed on
17 broadcasters. The fact is that from 1993 to 1997,
18 English private broadcasters' profit margins increased
19 from 12.7 per cent to 17.3 per cent, while their
20 spending on Canadian programs decreased from 30.4 per
21 cent to 26.6 per cent. Looking at the decline in
22 broadcaster licence fees and spending on Canadian
23 programming, the funding gap seems to be a shortfall in
24 broadcaster commitment.
25 1066 We estimate that the 10 per cent
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1 spending contribution will generate an additional $70
2 million. Moreover, if the broadcasters were to keep
3 their traditional spending on other categories of
4 Canadian programming at historical levels, the increase
5 in spending would only require that a total of 33 per
6 cent of their revenues be spent on Canadian programs.
7 1067 Our submission, and the supporting
8 evidence from Dr. Fraser, demonstrates that
9 broadcasters' licence fees as a portion of the budget
10 of Canadian programs have been declining over the past
11 few years. We believe that it is time for broadcasters
12 to make a more significant investment in Canadian
13 programming.
14 1655
15 1068 Not all of the entertainment programs
16 will need to access either equity funding from Telefilm
17 or the top-up funding of the licence fee program. Our
18 submission shows that the structure of financing of
19 Canadian productions has changed significantly.
20 1069 The financing structure is summarized
21 on the screen and in your handouts. On average,
22 contributions from producers and their distribution
23 companies make up almost 30 per cent of the financing
24 of CAVCO-certified projects and money we obtain from
25 foreign partners makes up another 30 per cent. The
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1 remaining 40 per cent is split almost evenly between
2 broadcasters and the funding agencies, both public and
3 private. So, while some might argue that the explosion
4 in Canadian programming is a result of government
5 programs, in fact this growth is based to a large
6 degree on our own business expertise and our assumption
7 of risk.
8 1070 Ira?
9 1071 MR. LEVY: We believe that the
10 10/10/10 solution is very workable. At the same time,
11 we remain open to other positive solutions. However,
12 we do suggest the following by which other solutions
13 should be evaluated. Do they result in a real
14 expansion of the shelf space for Canadian programs
15 while offering an incentive for those that are
16 identifiably Canadian? Will they be put in place as
17 soon a possible? Do they ensure that control is in
18 Canadian hands and that creators are in a position to
19 control their intellectual property? Are they
20 flexible, appropriate and equitable?
21 1072 We noted earlier that we are willing
22 to be full participants in this process. We would like
23 to outline what our role is in the system. It's the
24 independent producer who acquires the rights to books
25 or stories, hires writers to bring the script together
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1 and hires the key creative people.
2 1073 We arrange the financing by finding
3 money within our own companies, private investors and
4 through debt financing from banks of other lenders, we
5 negotiate distribution advances with Canadian
6 television distributors, we find Canadian or foreign
7 co-producers, we find and negotiate with foreign
8 broadcasters and distributors to arrange for pre-sales,
9 licensing and distribution advance financing, we find
10 Canadian broadcasting partners and negotiate licensing
11 for both broadcast through the various windows and,
12 where necessary, negotiate with the funding agencies.
13 1074 In addition, we develop and
14 administer the ongoing infrastructure of contracts,
15 copyrights and licensing agreements that support the
16 productions and help reimburse loan and equity holders.
17 We are increasingly exporting our productions to assist
18 in the financing of new Canadian projects. In short,
19 our business success or failure is based on us as
20 producers arranging 100 per cent of the financing of
21 the production and producing what we promised to our
22 customers on time and on budget. If the broadcasters
23 provide the shelf space and fair licence fees, we will
24 take the risk and raise the necessary investment to
25 fill their schedules.
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1 1075 Elizabeth?
2 1076 MS McDONALD: We would now like to
3 take a few minutes to comment on other issues. First
4 of all, intellectual property rights. The CFTPA
5 believes very strongly that the Commission must become
6 more involved in protecting intellectual property
7 rights. In a world where programs may be transmitted
8 in 1s and 0s, it's not videocassettes that we will
9 sell, but rather the rights to exploit our programs for
10 specific purposes and for a specified time. While the
11 common wisdom is that content is king, it is
12 increasingly clear that it is those that can control
13 content who will rule the kingdom.
14 1077 Currently broadcasters are the
15 gatekeepers to shelf space for our product. With the
16 privilege of holding a licence for a public frequency
17 comes the ability to choose what programs Canadians
18 will see and when they will see them. It is precisely
19 because of this imbalance in power that the government
20 did not allow broadcasters access to the broadcast
21 fund. The Commission has also recognized the
22 gatekeeping role that those who are both producers and
23 broadcasters could play when it imposed limitations on
24 self-dealing on producers who are involved in specialty
25 services.
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1 1078 We are particularly concerned about
2 the possibility of broadcasters using their gatekeeping
3 power in Canada to unfairly extract various
4 intellectual property rights from us. Therefore, we
5 believe that in addition to ensuring that non-
6 affiliated independent productions have access to the
7 prime time schedule of broadcasters, any additional
8 intellectual rights above and beyond the broadcast
9 licence must be subject to a separate negotiation
10 process.
11 1079 Finally, in the area of rights, it is
12 vital that all of us, the producers, the broadcasters
13 and the Commission itself, are extremely sensitive to
14 the protection of Canada as a separate market for
15 rights. Increasingly, Canadian producers are being
16 pressured by U.S. broadcasters to provide North
17 American rights. This has two consequences. First,
18 Canadian broadcasters and audiences may be denied
19 access to these programs except via a U.S. service.
20 Secondly, the producer has to settle for a licence fee
21 that is lower than the separate Canadian and U.S.
22 licence fees combined.
23 1080 Further, the repeal of the financial
24 interest and syndication rules in the United States
25 have resulted in some cases of the networks or studios
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1 refusing to offer a Canadian right for a program and
2 instead reaching Canadian viewers from its own
3 stations. We recognize that there are hindrances to
4 effective action in this area. However, if we do not
5 collectively find a way to keep Canada as a distinct
6 rights market, Canadian producers, program
7 distributors, broadcasters and eventually the viewers
8 will suffer.
9 1081 A second issue is broadcaster
10 involvement in feature film production and
11 distribution. In most countries around the world, the
12 conventional broadcasters play a critical role in
13 supporting national cinema. For example, in England
14 Channel 4 and the BBC make up 16 per cent of the total
15 budgets of U.K. indigenous movies. In France,
16 broadcasters make up 49 per cent of the financing of
17 feature films.
18 1082 We have not suggested that private
19 conventional broadcasters be required to air Canadian
20 features, but have suggested that incentives be
21 introduced to encourage broadcasters to pay licence
22 fees for them. We particularly believe that the CBC
23 must play a bigger role and have recommended that it be
24 required to provide an average of one additional hour
25 of long-form drama production per week with at least 50
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1 per cent of this being theatrically released films.
2 1083 We would be interested in discussing
3 any means to provide incentives to private broadcasters
4 to become more involved in broadcasting long-form drama
5 as well. One idea that we offer is to bonus any 10-
6 point Canadian feature film with a 200 per cent credit.
7 And, finally, we would like to address the role of the
8 public broadcaster.
9 1084 The CBC has been given access to a
10 large envelope of the money available at the Canadian
11 Television Fund or the CTF in both the equity program
12 and the licence top-up program. This money is intended
13 to assist in its acquisition of independently produced
14 programs. We are concerned that in some cases the CBC
15 does not always understand the independent in
16 independent producer and that it often asks some of our
17 members to cede rights well beyond broadcast rights to
18 get a licence fee.
19 1085 We feel very strongly that the CBC
20 must re-orient its relationship with the production
21 sector and we feel that it should be put on notice for
22 its renewal that it should develop a code of practice
23 for relations with the independent production sector,
24 as did the BBC. We have provided a more thorough
25 analysis of these issues in our brief and we intend to
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1 pursue this matter at the licence renewal hearing of
2 the CBC. We have also recommended that the CBC follow
3 the BBC's lead and appoint a senior executive
4 responsible for dealing with our sector.
5 1086 Linda?
6 1087 MS MacMILLAN: We have raised a
7 number of points with you today. To recap briefly,
8 Canada is the only first world country to give up its
9 prime time schedules. We have a workable plan, the
10 10/10/10 plan, that will create the critical mass of
11 Canadian programs that will help reassert our
12 sovereignty over our own prime time. We are the
13 business people who make the programs and tell Canadian
14 stories to Canadians. Canadians deserve to regain
15 their own prime time.
16 1088 We thank you for your attention and
17 we are ready to reply to your questions.
18 1089 THE CHAIRPERSON: Good afternoon,
19 ladies and gentlemen. There are many of you. You are
20 not trying to intimidate me, are you?
21 1090 We discussed with the CAB this
22 morning or today -- really this morning and this
23 afternoon -- a proposal to achieve the Commission's
24 often-stated objectives with regard to Canadian content
25 on TV and to which I referred to in my opening remarks
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1 and in my closing remarks, more programs, better
2 quality and increased profitability. The CAB's
3 proposal is in part based on the view that success in
4 meeting this objective should be measured by the
5 viewership to Canadian content achieved in the system
6 as a whole. This would ensure, in the CAB's view, that
7 there is increased flexibility for individual
8 participants in the system in meeting stated viewership
9 objectives.
10 1091 The CAB, therefore, advocates the
11 maintenance of both spending and exhibition
12 requirements as regulatory tools, but opposes any
13 increase or any tightening of the rules currently
14 applied. In fact the CAB proposes a certain degree of
15 relaxation; for example, the application of a 150 per
16 cent credit to all day parts, the re-definition of
17 advertising to include certain elements, and the
18 inclusion of equity investment as an eligible Canadian
19 expense.
20 1092 You, on the other hand, argue that
21 success in meeting Canadian content objectives is
22 dependent largely on increased exhibition of Canadian
23 product in certain categories of programming and
24 increased spending on those categories. Where the
25 broadcasters say, "We must produce and exhibit programs
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1 that Canadians want to watch", you appear to say,
2 "Exhibit Canadian content programs when Canadians watch
3 TV and on which enough money was spent and Canadians
4 will watch them."
5 1093 I have no doubt, greatly simplified,
6 about the respective positions of the two parties, but
7 I would like your comments first on (a) the extent to
8 which, in your view, there is a divergence in the basic
9 approach of the CAB and yours when all is said and done
10 and (b) the main reasons why, in your view, to the
11 extent that is a divergence, increased expenditures and
12 what could be called increased tonnage in certain
13 categories of programming are more likely conducive to
14 an improvement in meeting our stated goals than having
15 a sharper focus on viewership levels.
16 1094 I will then have some questions to
17 clarify and better understand particular areas of your
18 submission mainly as they relate to spending
19 requirements, including current licence fee levels,
20 programming including promotional programs, vertical
21 integration between the broadcasting and production
22 sectors and the rights issue. So, if we go back to my
23 general question, the first part was I would like your
24 comments on the extent to which, in your view, the
25 CAB's basic approach and yours are really different at
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1 the end of the day and then the reasons why, in your
2 view, your approach rather than theirs is more
3 conducive to meeting the stated goals of having more
4 product, better quality and increased profitability.
5 1095 MS McDONALD: Thank you. Linda
6 Schuyler will begin to answer that question and
7 address, first of all, the audience issues raised by
8 the CAB.
9 1096 MS SCHUYLER: Certainly we agree with
10 the CAB that we have to have audiences for our Canadian
11 shows. As producers, we are the storytellers, we are
12 the people who have the stories, the legends, the myths
13 that we want to share with the Canadian public and we
14 want to do that through a viewership. So, in terms of
15 wanting viewers, we could not agree with the CAB more.
16 It's very simple for us. If we are running a show and
17 we have viewers, we get renewed. So, that's a big
18 measure of success for us.
19 1097 Where we will disagree with the CAB
20 is this needs help to be implemented. As we said in
21 our opening remarks, we do not yet have a critical mass
22 of Canadian programming in prime time and that is
23 because we are butting against the shelf space
24 availability. We disagree with the numbers that some
25 of the research pointed out in terms of the number of
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1 people who are watching Canadian programs.
2 1098 From various studies we know, people
3 are watching Canadian programs, there are not enough of
4 them. We do not have a critical mass and we do not
5 have the diversity out there that we feel the Canadian
6 audience needs. So, our 10/10/10 solution has been
7 carefully thought out in a way that we will be
8 providing more hours to the Canadian public with money
9 that we believe is available to be found and this will
10 increase our critical mass and with critical mass we
11 will increase viewers.
12 1099 We are not looking for complete new
13 money, we are looking for incremental money, money that
14 is already existing in the system. At this point it
15 exists at about four per cent. We are asking for it to
16 go up to 10 per cent. We believe very strongly that
17 this increased investment will generate new revenues
18 and, as you saw in our study, there has been a definite
19 decline in the broadcaster licence fees over the last
20 few recent years and yet even with that definite
21 decline in licence fees we have been able to maintain
22 our audiences. So, we feel very strongly that we have
23 a workable plan that can help achieve the CAB objective
24 of more audience.
25 1100 MS McDONALD: As we understand the
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1 CAB strategy, what we understand is that they have
2 recommended the retention of all the current
3 broadcaster incentives. Last night when we were
4 prepping, we started making a list of them. That
5 includes simulcasting, Bill C-58, priority carriage,
6 market entry protection, access to public funds,
7 including 33 per cent of the licence fee program, tax
8 credits and a number of others, the ability to count
9 the top-up of the licence fee program, the 150 per cent
10 bonus. So, we understand that they want all those
11 incentives to stay in place and the introduction of a
12 new regime of regulatory flexibility.
13 1101 However, we don't see any material
14 commitment to a clear strategy for meeting their own
15 stated audience-building target. So, that's where we
16 see that there is a difference. So, I think that we
17 see that they want to retain what has been favourable
18 in the system, seek more flexibility. It was not clear
19 to us what their commitment will be in terms of their
20 audience strategy.
21 1102 THE CHAIRPERSON: Would it be your
22 view that if there was a way to find a system based on
23 viewership that could be imposed or that we would get
24 some firm regulatory-driven commitments from the
25 industry to achieve those viewership goals, we would
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1 end up with the same and maybe close to 10/10/10
2 because the broadcaster would be obliged then if the
3 viewership goals had been properly established and
4 there was some way of enforcing them, would be obliged
5 to get viewership to various content categories by
6 spending money on the program and airing them when
7 people watch TV. So, if we could establish this model,
8 wouldn't we end up with the same result?
9 1103 MS McDONALD: There is no doubt that
10 building Canadian audience is good for both the
11 producer and broadcaster, but I think Catherine Tait
12 would like to address your question.
13 1104 MS TAIT: I just want to step back
14 for a minute as a producer of three programs that are
15 top rated in this country, "This Hour Has 22 Minutes",
16 "Emily" and "Lexx", to say that we have some concerns
17 about some of the representations made this morning
18 about in fact the audience share of Canadian programs,
19 because I think it really is important to understand
20 when you compare audience share of "Traders" to a show
21 like, I think it was, "ER", you may be getting not a
22 complete picture.
23 1105 So, what we did was just quickly look
24 at some data from January to March 1998 of this year
25 and we looked at audience share. For Canadian shows,
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1 "Traders" was between 4 and 9, "Cold Squad" between 11
2 and 15, "Due South" between 9 and 15, "Emily" was in
3 the 7s, and for the U.S. shows that supposedly are so
4 much more profitable, we saw "Touched by an Angel" was
5 between 11 and 19, "Chicago Hope" between 10 and 15,
6 and, yes, "ER" was in the mid-20s, with the top at 38.
7 1106 So, I felt it was important here. We
8 feel it's very important to stress that when Canadian
9 viewers get a chance to see high quality drama
10 programming and programming in the other under-
11 represented categories in the hours that they watch
12 television, which is after supper, they do watch these
13 programs.
14 1715
15 1107 So, when we talk about a model that
16 is focused on viewership, let's focus on viewership,
17 let's focus on when Canadians are looking and watching
18 television.
19 1108 MS McDONALD: I think Linda Schuyler
20 would also like to address the issue of scheduling.
21 1109 MS SCHUYLER: The issue of viewers,
22 as we say very clearly, we very much support it as an
23 objective. It is a very slippery slope, though, in
24 terms of how one can set up measurement for this. And
25 I would like to talk a little bit from my personal
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1 experience.
2 1110 I am currently engaged in a very
3 interesting experiment with the CBC where I am
4 producing a soap opera for English-language Canada, and
5 knowingly, together, as broadcaster and producer, we
6 went in to schedule this show at the seven o'clock time
7 slot, which is very unusual to run first run drama at
8 seven o'clock. And I know that the CAB proposal is
9 that perhaps we should be opening up prime to have the
10 150 per cent bonus for the seven o'clock period.
11 1111 What we have found very clearly at
12 the seven o'clock time slot for drama is there is less
13 than half the audience at seven then there is for after
14 eight o'clock. You might say this is just based on
15 this particular show, but that's not true. The CBC ran
16 an experiment where they then moved "Traders" that was
17 running in the later time slot into the seven o'clock
18 time slot, and its numbers were half and less at the
19 seven o'clock.
20 1112 So, if we are going to play a numbers
21 game, we have to look very carefully at where the
22 broadcaster is scheduling, how the broadcaster is
23 promoting because the numbers are very much affected by
24 those two very key issues -- how we schedule and how we
25 promote.
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1 1113 So it is a noble objective and one we
2 endorse; it is one that has to be extremely carefully
3 considered.
4 1114 THE CHAIRPERSON: So you believe in
5 the model, you just don't think that it can be worked
6 out in such a way as to ensure that we get the results
7 that you want.
8 1115 MS SCHUYLER: Well, it is not just
9 the results that we want, it is the results that you
10 want, because if we are talking about the kind of
11 diversity that we as producers want to provide to the
12 Canadian public and you want to see there for the
13 Canadian public, then that diversity has to allow for
14 some degree of experimentation as well. So we cannot
15 lay the burden on every show to have a certain
16 benchmark that it has to achieve.
17 1116 I think one of the joys about
18 representing this association here is that we represent
19 over 300 different producers in this country and we
20 have very different voices. That's the joy of having
21 an independent producing community, that's the joy of
22 not having producers do all the production; we can
23 bring this delightful diversity of voice to the
24 Canadian public.
25 1117 What I think is important about our
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1 model is it addresses diversity as well. There is lots
2 of flexibility within our 10/10 plan for broadcasters
3 to choose how they spend their money, how they schedule
4 their time. We are not asking for all the broadcasters
5 to be the same; some can do long formats, some can do
6 features -- sorry, some can do series. We want to see
7 a system that is extremely flexible.
8 1118 So our caution about just going with
9 the ratings model is that there is going to be
10 artificial barriers put up that will not allow for
11 diversity of programming. Perhaps if we have a few
12 years with our 10/10/10 model we might be able to then
13 look at ratings alone as a measure of success, but I am
14 very cautious and very doubtful about that, that
15 certainly we can't get there immediately.
16 1119 THE CHAIRPERSON: You raise the issue
17 of flexibility and diversity, and diversity is
18 certainly central in the Broadcasting Act, sections of
19 which we have read into the record earlier.
20 1120 I would like your comments on the
21 extent to which your proposal to require 10 hours a
22 week of first run programs in certain categories, with
23 "first run" defined as two plays, and all in peak time
24 from all broadcasters with revenues of $10 million or
25 more, will ensure diversity and flexibility. I
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1 emphasize here that it would all be in peak time, it
2 would all be from certain categories of programming
3 that we defined, under-represented categories, and it
4 would be required of all broadcasters with $10 million
5 in revenues or more.
6 1121 So what does that do for flexibility
7 and for diversity?
8 1122 MR. THOMSON: We take some exception
9 to the CAB's stated comment about one-size-fits-all
10 because we certainly don't intend to advocate --
11 1123 THE CHAIRPERSON: I didn't say that.
12 1124 MR. THOMSON: No, I know you didn't,
13 but someone else did.
14 1125 We think that broadcasters should be
15 able to wear all different sizes of clothes, that's not
16 a problem; we just think that some of those clothes
17 should be made in Canada. That's our issue.
18 1126 Our proposal is advocating increased
19 activity in the under-served category 7, 8 and 9. We
20 have also proposed that documentaries be considered as
21 an under-served category and we have also addressed the
22 issue of children's programming. So, as a result, we
23 are looking at five different categories of
24 programming; and, as Linda said earlier, each of those
25 categories break down into subdivisions. In drama you
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1 have long form, you have miniseries, you have
2 anthologies, you have continuing character series. The
3 same is true of documentary; you can have documentary
4 features, you can have documentary specials, you can
5 have documentary series. As Linda also pointed out, we
6 have more than 300 producers working in this country
7 coming up with ideas for this kind of programming.
8 1127 I can't see how, by asking
9 broadcasters to have 10 hours a week of Canadian
10 programming, that's going to detract from diversity. I
11 think it would contribute to it. It seems to me that,
12 if one looks at the schedules of the major private
13 broadcasters right now, in the kind of American
14 programming that they import and simulcast, there isn't
15 a whole lot of diversity there at all.
16 1128 THE CHAIRPERSON: As you know, we
17 have had a series of townhall meetings, listening to
18 people's concerns, which are part of the record over
19 and above the submissions that have been filed, and
20 there is a concern among the population that, if a
21 fairly significant ramp-up, 10 per cent of revenues --
22 it will not be a ramp-up from what I understand, you
23 would want an immediate regulation -- that the effect
24 of that may be a reduction in diversity.
25 1129 Now, we haven't had too many people
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1 in the townhall meetings read us sections of the
2 Broadcasting Act, but what people say is, in practical
3 terms, where will local programming, regional
4 programming, information programming go if too much is
5 required on certain categories of programming from all
6 broadcasters? That's what I meant by the effect on
7 diversity.
8 1130 I am not suggesting that the
9 producers in producing 7, 8 and 9 and documentaries --
10 and, of course, children's programming is something
11 else because it will be in children's time, which I
12 assume won't necessarily be in peak time. There will
13 be different programs of a category.
14 1131 If you look at it from that
15 perspective, is there a legitimate concern that these
16 requirements would reduce flexibility and diversity by
17 making very pointed and immediate financial demands on
18 broadcasters in defined categories in defined hours?
19 1132 MS McDONALD: I am going to ask
20 Michael MacMillan to address that issue, but I think
21 before I continue, since we are talking about diversity
22 and we are talking about the Canadian broadcasting
23 system, I think probably this week was one of the best
24 demonstrations of when we have diversity because I
25 noticed on Monday evening, if I had been living in
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1 Rochester, I probably would have had no diversity,
2 there only seemed to be one show on about the same
3 people; at least in the Canadian broadcasting system we
4 had some choices.
5 1133 Michael, I think you were going to
6 take that question?
7 1134 MR. MacMILLAN: Sure.
8 1135 First of all, I think that our focus
9 on the so-called under-served categories 7, 8 and 9,
10 and we include documentaries in that as well, is a way
11 of broadening the choices available because the tapes
12 of shows that Andy was just referring to are in fact
13 quite a broad variety, are in fact exactly the sorts of
14 shows that Canadian broadcasters and others around the
15 world compete actively for to secure from American
16 suppliers. It is exactly the range that Canadians want
17 to see in these categories. And this focus on the
18 under-served categories need not come at the expense of
19 local programming.
20 1136 I would hope that this is not a zero
21 sum game. The 50 and 60 per cent Canadian content
22 levels as prescribed by the Commission need not be a
23 ceiling; in fact, we believe it should be a floor. And
24 it is possible that the very important local reflection
25 need not be sacrificed by a focus in prime time on 7, 8
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1 and 9. Indeed, a significant part of this local
2 programming is not currently broadcast, certainly
3 between the hours of 8:00 and 11:00. Those hours are
4 significantly given over to American simulcast
5 programs.
6 1137 Secondly, we believe that
7 broadcasters should continue to have requirements for
8 local programming, as they currently do in their
9 various promises of performance. And not all local
10 reflection is in the news. There are some aspects of
11 7, 8 and 9, including documentaries, music and variety
12 shows, that offer local reflection that are in the 7, 8
13 and 9 categories.
14 1138 We agree with Baton that there should
15 be a concept of priority programming including the
16 under-represented categories and local programs, and we
17 are not sure that there has to be a choice made between
18 the two. We note in Craig's submission statement that
19 local programming plus Canadian long form drama has
20 been very successful for them.
21 1139 So, in short, it need not be a zero
22 sum game.
23 1140 THE CHAIRPERSON: This raises an
24 interesting question that we now have some broadcasters
25 who have opted for the expenditure requirement on all
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1 programming, and you say that their expectations and
2 their licence and their spending requirements, et
3 cetera, vis-à-vis local news, local information
4 programming, ought not to be reduced by this, but you
5 would add this 10 per cent in spending revenues and
6 immediately, via regulation.
7 1141 How do you see the system being
8 affected by having this 10/10 requirement and retaining
9 the system that exists at the same time? Are you
10 envisaging an incremental regulatory requirement over
11 and above what is there to ensure that there isn't any
12 shift away from some of the programming that citizens
13 can be concerned about in the system as concentration
14 and competition and fragmentation seem to endanger, in
15 the minds of many people -- that the conventional
16 system will not continue to afford to Canadians on
17 conventional stations this type of reflection.
18 1142 MS SCHUYLER: Very much. We were
19 realistic about the implementation of our plan and we
20 suggested a ramp-up for the plan. We actually called
21 for the immediate implementation of it, which I think
22 we have actually amended so that we would suggest that
23 it begins a year later; perhaps we were a little
24 overzealous in this suggestion.
25 1143 However, we want it --
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1 1144 THE CHAIRPERSON: You are amending it
2 now, you mean?
3 1145 MS SCHUYLER: Yes, you are.
4 1146 THE CHAIRPERSON: I didn't
5 misunderstand that you were going to reach your exhibit
6 goals over four years, but immediately implement a $10
7 million.
8 1147 MS SCHUYLER: Yes. The $10 million,
9 we wanted to --
10 1148 THE CHAIRPERSON: Right, and my
11 question, you understand, is --
12 1149 MS SCHUYLER: Actually, no, sorry.
13 1150 MS McDONALD: No. There is a ramp-up
14 in both the hours and the expenditure. I think what
15 Linda is referring to is that, based on our timing, we
16 had expected perhaps to begin this week, which is
17 perhaps unrealistic.
18 1151 I think we note that we were probably
19 off by a year in the beginning, but we do see it as a
20 ramp-up both in terms of expenditures and in terms of
21 the hours.
22 1152 THE CHAIRPERSON: I clearly saw the
23 ramp up in terms of the hours; I did not see a ramp up,
24 other than the length of time it takes to issue a
25 regulation, in the expenditure.
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1 1153 MS McDONALD: It looks like I was
2 wrong.
3 1154 THE CHAIRPERSON: As long as I
4 right --
5 1155 MS McDONALD: You are always right.
6 1156 THE CHAIRPERSON: -- I don't care
7 which one of you is wrong.
8 1157 THE CHAIRPERSON: So, now that we
9 have had this conservation, maybe you can meet
10 Ms McDonald in what should be done, because the
11 conversation began with what may happen to the other
12 categories of programming, and that is a concern that
13 is expressed, if too much is required on the under-
14 represented categories and in peak time.
15 1158 So I am asking you how we would
16 manage this. There are broadcasters who already
17 have --
18 1159 So your answer, Mr. MacMillan, is the
19 system as it exists would remain, so commitments and
20 expenditures -- commitments, expenditures follow,
21 obviously -- would continue and there would be this
22 additional requirement.
23 1160 How do you see that happening without
24 creating some serious financial demands, some would
25 say?
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1 1161 MS SCHUYLER: Obviously, there is a
2 question of where is the money going to come from to do
3 this. I think it is important, though, to remember
4 that our 10 per cent is not all new money. There is
5 already existing money in the system that is paying for
6 the programs that are out there.
7 1162 Then, also, this 10 per cent, if it
8 is a ramp-up from about four hours to ten hours, there
9 would be existing foreign programming that would be
10 being replaced. So it would be the expenditures on
11 that foreign programming that would be expected to
12 contribute to the monies that would be found for our
13 10/10 solution.
14 1163 In terms of the ramp-up, you are
15 quite right, we have addressed it just purely in number
16 of hours. One of the things that we feel strongly
17 about as the producers is that this is a solution that
18 will very much achieve our goals.
19 1164 We are realistic, though. Our goal
20 is not to drive broadcasters into bankruptcy; that
21 doesn't serve us well at all. We are looking for a
22 very realistic plan that we can regain our prime time.
23 And if, in order for us to be flexible and to work with
24 the broadcasters, we have to take a second look at our
25 ramp-up to include ramp-up of expenditures, and I think
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1 that we are going to be willing to do that.
2 1165 At the end of the day, though, we
3 feel that this is an absolutely achievable plan, that
4 it will get to Canadian audiences what we should be
5 delivering to them, the diversity that they need
6 without having to lose those other important shows and
7 programs that they know and love and need.
8 1166 THE CHAIRPERSON: Now, you say some
9 of the money won't necessarily be new money, it will be
10 there in the system, and the example you give is some
11 U.S. programming will be replaced by Canadian programs,
12 if I understood you well, the expenditures made on this
13 U.S. programming won't be made any more, and therefore
14 they can be made on Canadian programming.
15 1167 Considering the information, that is
16 the financial information that is filed, isn't it now
17 obvious that some of the American programming that is
18 purchased at low cost is making a lot of money? So it
19 won't be a tit for tat necessarily?
20 1168 If you remove one hour of American
21 programming, you don't have to spend that $200,000 or
22 whatever it is; instead, it will be half an hour of
23 same category of programming, you are assuming, when
24 you say that it is not going to need new money, that
25 the same revenues could be --
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1 1169 MR. THOMSON: That's a good point.
2 We clearly understand that the Canadian programming
3 that we are asking the broadcasters to put into their
4 schedule will probably cost more than the comparable
5 American programming. That's why our proposal has two
6 elements to it. It is not just an increased number of
7 Canadian content, it is also increased expenditure, and
8 we think it is reasonable, looking at their profit
9 levels --
10 1170 THE CHAIRPERSON: I am just making
11 the point that it is increasing expenditures and that
12 it is only partly an answer to say it is not
13 necessarily going to be new money, and the example is
14 some other money is spent on American programming
15 that's going to be put in Canadian because you have to
16 balance what are the expected revenues compared to the
17 cost.
18 1171 MR. THOMSON: Yes, some of the money
19 would be the money that was spent on American
20 programming which Canadian programming will replace.
21 Other money would come to get the licence fees back up
22 where they used to be before the CTF came into affect,
23 Canadian broadcaster licence fees have dropped by 10
24 per cent in the last three years. If we were to go
25 back up to where we were and only where we were, which
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1 is only 25 per cent or 24.5 per cent, that would
2 generate quite a big chunk of that 10 per cent you were
3 asking for.
4 1172 THE CHAIRPERSON: Now, you have based
5 it on exhibitions and spending in particular hours --
6 and, of course, based on revenues for stations who make
7 $10 million or more.
8 1735
9 1173 To achieve your aim, would it work if
10 what we had were the exhibition part? Would that be a
11 sufficient incentive for increased expenditures if we
12 retain the exhibition requirement of your proposal?
13 1174 MS McDONALD: I think that we
14 reviewed what has occurred in our brief. We reviewed
15 what has occurred with those stations that only had
16 expenditure requirements and those stations that only
17 had time requirements. I think in the end we came to
18 the conclusion that the combined time and expenditure
19 option worked better.
20 1175 THE CHAIRPERSON: But we haven't, as
21 far as I know, tested the type of exhibition
22 requirements that you are making. I don't think
23 there's anything in the Canadian system to measure that
24 because we don't have it where anything near ten hours
25 of under-represented categories must be shown in peak
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1 viewing hours.
2 1176 MS McDONALD: I think Linda would
3 like to address some of that, but I also think it's
4 important to understand that it depends on the kind of
5 programming you do because we have left in bonusing
6 incentives, so it depends on how you choose to do those
7 ten hours, what in fact that would mean. Linda?
8 1177 THE CHAIRPERSON: But you understand
9 my question is there are various ways of achieving the
10 goals of more product, better quality and
11 profitability. We have heard one which is establish
12 viewership levels, monitor that and with the other
13 items that are proposed, that will be incentive enough
14 to achieve the goals.
15 1178 You are saying you need spending and
16 exhibition requirements. I'm asking, have you
17 considered the strict number of hours exhibited at the
18 peak time that you propose without the spending
19 requirements? Would that be incentive enough to get
20 the result and presumably provide more flexibility?
21 1179 MS McDONALD: I think we have
22 competing answers here. We are going to go from east
23 to central Canada.
24 1180 MS TAIT: I think that the reason we
25 came up with the two elements to the plan was that
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1 evidence has indicated, and perhaps again not to use
2 the word overzealous, but perhaps we are bruised, and
3 given the evidence that shows that without dollars
4 attached to these particular kinds of programming the
5 performance levels will drop.
6 1181 We have seen the performance at 3.5
7 per cent of revenues. This is extremely discouraging
8 to us as producers, so for us, we want to deliver the
9 programming that's going to attract the audiences. We
10 know we can do this, but we also need the budgets to be
11 able to produce high quality programming and that
12 requires some level of commitment of dollars.
13 1182 If the Commission sees in its wisdom
14 that this can be accomplished without attaching a
15 dollar requirement to that, obviously we would look at
16 it again, but from our point of view, we felt that this
17 was going to provide Canadians with the insurance
18 policy that they would be getting high quality Canadian
19 programming in prime time.
20 1183 THE CHAIRPERSON: What I'm trying to
21 say, and correct me if I'm wrong, but we haven't
22 measured that because we haven't tried it. You are
23 estimating from what is happening now what would occur
24 because we haven't had something yet imposed that every
25 station with revenues of $10 million or more, and if I
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1 recall every station, even under $10 million, if it's a
2 multistation group defined quite narrowly would also be
3 in that. Am I correct?
4 1184 MS TAIT: Yes.
5 1185 THE CHAIRPERSON: Any two or more
6 conventional TV stations under common control reaching
7 50 per cent of English viewers would also have the
8 requirements of ten hours during prime time of specific
9 categories of programming. You don't have a test, as
10 far as I know. You can estimate perhaps, but we
11 haven't tested what that would do without enforcing
12 spending requirements.
13 1186 MS McDONALD: The only, I guess, data
14 we have is absolutely data that we got from the
15 Commission. If you note on page 39 of our June 30
16 filing, we look at what happened in terms of those
17 broadcasters who opted only for the spending options.
18 In fact, in that we found that they opted to spend most
19 of their money on news. Then during the time period
20 they are spending on 7, 8 and 9 dropped from 11 per
21 cent to 6 per cent of all Canadian program expenditures
22 while they increased their spending on news from 52 per
23 cent to 66 per cent.
24 1187 Those who chose Option B, they opted
25 for more expensive lower point Canadian programs, so
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1 they maintained their spending at 14 per cent of all
2 Canadian program expenditure over the period while
3 increasing their hours. They also increased their
4 percentage of spending dedicated to news.
5 1188 I appreciate where you are going with
6 it, but what we have is in the past that it hasn't
7 happened to 7, 8 and 9 on Option A and Option B. I
8 think what we are trying to say is the money hasn't
9 been there and the time hasn't been there. We are
10 talking about ten hours spread over a seven day week.
11 1189 You look at the amount of American
12 programming that's available, then you have to ask at
13 what point we are going to decide to reclaim prime time
14 for the Canadian broadcasting system and make it truly
15 available to Canadians.
16 1190 THE CHAIRPERSON: What we are looking
17 at today is how to improve those results and looking at
18 what are the tools, whether innovative, new, a
19 recasting of the old or whatever. When you look at
20 those figures, the spending requirement was on all
21 programming, as far as I know, except for two stations
22 which had a combination of both.
23 1191 You don't have figures that test what
24 happens if certain categories are required in high peak
25 hours without spending requirements. It would be a new
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1 tool.
2 1192 You are suggesting two, spending
3 requirements and hours increased in certain
4 under-represented categories in certain peak times.
5 I'm asking is there also a way of looking at this by
6 having one of these tools which is demand certain types
7 of programming in certain hours and the incentive to
8 spend on it because you can't afford not to have your
9 audience in that hour may be enough and would be more
10 flexible.
11 1193 Do you understand? You can't say you
12 tested it and it doesn't work because we haven't.
13 1194 MR. MacMILLAN: I think you are
14 right. There is no existing evidence of the dual
15 mechanisms working together or the single one.
16 1195 Personally speaking, I think that
17 both the scheduling requirement and the spending
18 requirement working together is the method most likely
19 to succeed. Personally, if there is only going to be
20 one, if it was either scheduling or spending, then for
21 sure I would go with the scheduling requirement because
22 it would logically follow that any intelligent
23 broadcaster, and every Canadian broadcaster fits in
24 that category, would obviously want to spend what was
25 required in order to gain the most audiences.
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1 1196 That does stand to reason. If there
2 only was one, I would go with the scheduling, but I do
3 think that belt and suspenders works the best.
4 1197 THE CHAIRPERSON: For some of us.
5 1198 MR. MacMILLAN: Even though there is
6 no evidence that our plan will work, there's an old
7 expression fish where the fish are. By our proposals
8 to focus in prime time and to focus in the underserved
9 categories, in prime time is where people watch TV
10 mostly. That's by far the best chance that we have got
11 of actually increasing viewership.
12 1199 I took away from the CAB's
13 presentation this morning that we should abandon prime
14 time, it was too competitive. They were saying there's
15 lots of other really good simulcasts of the shows that
16 are going to get the audience and that we shouldn't
17 waste our money trying to compete there.
18 1200 If we want viewers, and we agree that
19 viewership should be the ultimate test, the really
20 difficult part is how you are going to measure it.
21 Fish where the fish are and focus on prime time.
22 1201 THE CHAIRPERSON: With regard to
23 local and regional programming, some producers and some
24 provincial organizations propose that broadcasters
25 should nevertheless continue to make commitments and
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1 greater commitments to local and regional programming.
2 1202 What are your comments on how that
3 should work for local stations, for networks? I
4 touched on that a bit earlier, but what are your views
5 as to how this should be managed so that the
6 combination of the expense requirement and the peak
7 time requirement for certain categories does not impede
8 the other?
9 1203 You seem to suggest that local
10 commitments would simply be continued and expected as
11 they are now.
12 1204 MR. MacMILLAN: In general, I would
13 suggest yes. There may, of course, be circumstances
14 or, quite frankly, a detail of certain local
15 obligations that I am not sufficiently fluent with
16 where this would be inappropriate to maintain them
17 unchanged.
18 1205 I recall at a number of hearings in
19 front of the Commission over the past four or five
20 years where we actively supported the
21 nationalization -- I don't mean in that sense, but the
22 going national, the creation of broadcast groups and we
23 have made terrific progress in this country of creating
24 national or quasi-national systems or groups or
25 networks.
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1 1206 Part of the pitch at the time, part
2 of the premise and certainly the promise, was that
3 small markets needed to come in under or as part of
4 larger broadcast groups that were national and
5 quasi-national. That way they could schedule
6 nationally across the whole country or most of the
7 country.
8 1207 They could attract national media
9 attention in a way that wasn't possible before. They
10 could achieve infrastructure savings. They could
11 compete with the big giants from the U.S. All these
12 things were going to be in aid of more and better
13 Canadian spending, including for use within each of
14 those small markets that were going to be joining these
15 larger broadcast groups.
16 1208 We agreed with the logic then. We
17 still agree with it now. I was disheartened this
18 morning to hear that notwithstanding that logic
19 explained often in front of this Commission over the
20 past few years, today they are saying "There is no pot
21 of gold at the end of the consolidation rainbow" and
22 suggesting in fact there shouldn't even be new
23 contributions or benefits test contributions to the
24 system upon consolidation, which was always part of the
25 concept and I think still stands.
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1 1209 I am saying all this because there
2 was supposed to be a lot of benefits from
3 consolidation. I believe there are. I believe they
4 are logical. Therefore, I don't believe that it is an
5 unfair imposition to extend a proposal over small
6 markets under $10 million that are part of larger
7 broadcast groups.
8 1210 THE CHAIRPERSON: In that context
9 where you would have two or more stations, do you
10 recommend that each of the stations in the multistation
11 group as defined, regardless of the revenues it earns,
12 be bound by the exhibition and spending requirements
13 that are proposed?
14 1211 MR. MacMILLAN: Yes.
15 1212 THE CHAIRPERSON: You have no concern
16 about the ability or the financial impact on those
17 stations.
18 1213 MS SCHUYLER: I think it's important.
19 You are hearing very clearly from us that we do feel
20 that it has to be a hand in glove relationship here,
21 that we need hours and that we need expenditure.
22 1214 We do not want to be told by the CAB
23 that we produce programming that people don't want to
24 see. We need money in order to be putting the best
25 quality program we can for a Canadian audience.
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1 1215 I think it's very important to look
2 at one of the schedules that are launched this fall
3 from one of the private stations. It very much fits
4 into our 10/10/10 plan in its phase-in level. We are
5 seeing the level of programming commitment in prime
6 time to Canadian shows that we are expecting in our
7 first level of ramp-up.
8 1216 This has happened without regulation,
9 without specific regulation tying the two together. I
10 think that is possible. We need to look as well at how
11 the CBC has performed when it has converted its
12 schedule increasingly to 100 per cent Canadian, that
13 they are having success with the numbers. Canadians do
14 want to watch Canadian shows.
15 1217 In terms of how we see this plan
16 implemented, we realize we have to be flexible. We are
17 looking at the fact already in our counting of what is
18 first run. We are letting it be the first two plays of
19 the show. We are suggesting that any play of a
20 Canadian feature be counted as first run. We are
21 keeping intact the 150 per cent bonus. We are
22 suggesting even a 200 per cent bonus for features.
23 1218 We are not talking direct hours. We
24 are talking a matter of getting quality hours out
25 there. We believe truly and very strongly that if we
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1 get the shows out there of the right quality that
2 Canadians will watch them and we will not have to
3 detract or take away from any of the local services
4 that they are currently enjoying.
5 1219 THE CHAIRPERSON: Now, should the
6 Commission actually retain this idea of establishing
7 viewership goals, you have heard your friends from the
8 CAB suggest that they wanted a very inclusive system,
9 the model should include all participants, including
10 producers.
11 1220 What would you see your possible role
12 in discussing the establishment of viewership levels as
13 a goal with whatever other regulatory mechanisms
14 accompany that model? I heard Ms Schuyler say they
15 were very flexible.
16 1221 MS McDONALD: I think part of the
17 problem we have is that the audience target that the
18 CAB brought forward, they clearly made a very strong
19 case for it and they have also stated quite clearly, as
20 did the representative from the Toronto-Dominion Bank,
21 concern about the poor performance of Canadian shows.
22 1222 I must say, and I don't know if
23 others understand clearly what the CAB's proposal was
24 vis-a-vis audiences and how it was to be achieved.
25 Clearly, when you create programming for a broadcaster,
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1 it's a common partnership of both parties wanting it to
2 be successful and achieve audience.
3 1223 I don't know if Michael would like
4 to --
5 1224 THE CHAIRPERSON: Let me add that
6 they were general some of the time and very specific
7 some of the time, such as very specific bonuses that
8 they would negotiate with producers that would be tied
9 to performance. That was very specific.
10 1225 I'm just asking you, should this
11 model be retained and for fear that it is, maybe you
12 want to tell us how it should be done and what your
13 role should be.
14 1226 MR. MacMILLAN: I think that it's
15 very difficult to have an across-the-system viewership
16 goal because how do you really measure it when one
17 broadcaster succeeds beyond their wildest hopes and
18 another one doesn't come up to scratch?
19 1227 They are competitors. Their goal is
20 to maximize their own viewers and beat out their
21 opponents. I think it's very difficult to figure out
22 who gets to choose which type of viewers they want to
23 go after and how you are going to measure it
24 systemically. I think you have to measure it
25 broadcaster by broadcaster.
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1 1228 In our experience, producers are
2 quite willing to be measured based on viewership.
3 Michael McCabe mentioned this morning how would
4 producers feel about participating in the upside if the
5 show performed well and vice-versa if it didn't.
6 1229 I know our company has a number of
7 arrangements on current series with Canadian
8 broadcasters where we do get an increased licence fee
9 if we have increased ratings and a penalty if it's the
10 opposite. With many American broadcasters and some
11 European broadcasters, those are common deals.
12 1230 It's difficult because we don't
13 control the schedule. We don't control the marketing
14 plan. We certainly don't control which programs are up
15 against our program on the other channels. It's a very
16 complex web of factors that actually create the rating
17 success.
18 1231 For my part, we would be enthusiastic
19 participants in anything that was driving towards
20 viewership.
21 1232 THE CHAIRPERSON: I was going to move
22 to another area of questioning. It is five to six, so
23 I think we will adjourn until nine o'clock tomorrow
24 morning.
25 1233 Have a pleasant evening.
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1 --- Whereupon the hearing adjourned at 1755,
2 to resume on Thursday, September 24, 1998,
3 at 0900/L'audience est ajournée à 1755
4 pour reprendre le jeudi 24 septembre 1998
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