ARCHIVÉ -  Transcription

 

 

 

 

 

 

              TRANSCRIPT OF PROCEEDINGS BEFORE

             THE CANADIAN RADIO‑TELEVISION AND

               TELECOMMUNICATIONS COMMISSION

 

 

 

 

             TRANSCRIPTION DES AUDIENCES AVANT

                CONSEIL DE LA RADIODIFFUSION

           ET DES TÉLÉCOMMUNICATIONS CANADIENNES

 

 

                          SUBJECT:

 

 

 

VARIOUS BROADCAST APPLICATIONS /

PLUSIEURS DEMANDES EN RADIODIFFUSION

 

 

 

 

 

HELD AT:                              TENUE À:

 

Conference Centre                     Centre de conférences

Outaouais Room                        Salle Outaouais

Portage IV                            Portage IV

140 Promenade du Portage              140, promenade du Portage

Gatineau, Quebec                      Gatineau (Québec)

 

October 27, 2005                      Le 27 octobre 2005

 

 

 

 

 

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.

               Canadian Radio‑television and

               Telecommunications Commission

 

            Conseil de la radiodiffusion et des

               télécommunications canadiennes

 

 

                 Transcript / Transcription

 

 

                             

              VARIOUS BROADCAST APPLICATIONS /

            PLUSIEURS DEMANDES EN RADIODIFFUSION

                             

 

 

 

 

BEFORE / DEVANT:

 

Charles Dalfen                    Chairperson / Président

Joan Pennefather                  Commissioner / Conseillère

Richard French                    Commissioner / Conseillier

Helen del Val                     Commissioner / Conseillère

Ronald Williams                   Commissioner / Conseillier

 

 

ALSO PRESENT / AUSSI PRÉSENTS:

 

Chantal Boulet                    Secretary / Secrétaire

John Keough                       Legal Counsel /

Valérie Lagacé                    Conseillers juridiques

Jane Britten                      Hearing Manager /

                                  Gérante de l'audience

 

 

HELD AT:                          TENUE À:

 

Conference Centre                 Centre de conférences

Outaouais Room                    Salle Outaouais

Portage IV                        Portage IV

140 Promenade du Portage          140, promenade du Portage

Gatineau, Quebec                  Gatineau (Québec)

 

October 27, 2005                  Le 27 octobre 2005

 

           TABLE DES MATIÈRES / TABLE OF CONTENTS

 

 

                                                 PAGE / PARA

 

PHASE III

 

 

INTERVENTION BY / INTERVENTION PAR:

 

Première Bobine                                   892 / 4882

 

APFTQ                                             948 / 5157

 

The Producers' Roundtable of Ontario              974 / 5283

 

Alberta Motion Picture Industries Association     991 / 5362

 

IMP                                              1013 / 5471

 

Nancy Gregg                                      1018 / 5503

 

Kelaur Productions Inc.                          1026 / 5541

 

CFTPA                                            1035 / 5581

 

ACTRA                                            1074 / 5810

 

Directors Guild of Canada/Writers Guild of Canada 1088 / 5869

 

CAFDE                                            1101 / 5917

 

 

 

PHASE IV

 

 

REPLY BY / RÉPLIQUE PAR:

 

Groupe Archambault                               1111 / 5965

 

Allarco                                          1135 / 6080

 

Romen Podzyhun and Cal Millar (OBCI)             1152 / 6182

 

Spotlight Television                             1159 / 6215

 

                 Gatineau, Quebec / Gatineau (Québec)

‑‑‑ Upon commencing on Thursday, October 27, 2005

    at 0930 / L'audience débute le jeudi

    27 octobre 2005 à 0930

4877             THE CHAIRPERSON:  Order, please.  À l'ordre, s'il vous plaît.  Good morning, everyone.

4878             Madame la Secrétaire.

4879             LA SECRÉTAIRE : Merci, Monsieur le Président.

4880             We will now continue in Phase III with the interventions and I would call upon Mr. Tom Berry of Première Bobine to present his intervention and you will have 10 minutes to make your presentation.

4881             Thank you.

INTERVENTION

4882             MR. BERRY:  Thank you very much.  I must admit I don't know whether to feel honoured or particularly vulnerable by being alone at this table but I will assume until the questions start that it is an honour.

‑‑‑ Laughter / Rires

4883             MR. BERRY:  Mr. Chairman, Members of the Commission, my name is Tom Berry and I am currently the President of Première Bobine, a Canadian‑owned and ‑controlled company that produces and distributes feature films for theatrical release, television and other ancillary markets, as well as TV series programming.

4884             I have had an extensive career as a feature film producer in this country.  I founded one of Canada's most successful and prolific production companies, Allegro Films, as well as a distribution company and other related ventures in Canada, the United States and Europe.

4885             I have produced or executive produced more than 50 movies in Canada and I have worked extensively with broadcasters both here and internationally.

4886             Some of the movies that I have produced that may be familiar to you are "The Assignment," "Screamers," "Little Men," and recently, shot in the National Capital area, "Decoys."

4887             While some of our movies have had Canadian worldwide releases, most of them have been designed primarily for ancillary markets.  Our productions are clearly commercial, fitting into well‑defined genres and sold extensively in Canada and all major territories.

4888             A few of the applicants have suggested after the written intervention that my decision to participate in this public process is due to self‑interest and is related to the fact that my company supplies movies to the existing pay licensees Astral and Corus.

4889             I would like to be clear about this.  We certainly do sell films to both TMN and MovieCentral.  This is the case for every feature film producer in Canada who produces a significant number of films and certainly for every Canadian distributor.

4890             All Canadian producers have an interest in the outcome of these hearings but may have different views about whether or not approval of the new applicants will be beneficial.

4891             I have long been a participant in the development of public policy and support mechanisms for the Canadian film and television industry.

4892             I served on the Board of the Canadian Film and Television Production Association for many years.  I was Chair of its Board from '95 to '97.

4893             I served as Chair of its Tax Committee, its Government Relations Committee, which was charged at the time with developing the strategy for the Association as concerns federal government policy regulation and fiscal matters in respect of all areas of film and television production.  I was also the Chair of the CFTPA's Feature Film Committee at the time of the birth of the Canadian Feature Film Fund.

4894             I believe that my devotion of time and energy to these issues over many years has demonstrated an interest and passion for our sector that goes far beyond the specific interest of my own company.

4895             The Notice of Public Hearing that invited comments on these applications also posed significant policy questions related to competitiveness as well as access and system capacity.

4896             I note that while the CFTPA has chosen to neither support nor oppose any of the applications, the Association does make a very important observation which I agree with and which I hope the Commission will take seriously, namely that:

                        "We will not have accomplished anything if we merely fragment the contribution that pay television makes to the funding of the same amount of programming."  (As read)

4897             An American friend recently observed to me that the CRTC has clearly been more coherent and steadfast in its pursuit of well‑defined objectives than has the FCC, but then the FCC can afford to make mistakes as the United States will continue to have the world's dominant entertainment sector.

4898             Unfortunately, such is the fragility of the Canadian system that if our system is to flourish, the CRTC must almost always be right.  Our margin of error and our ability to survive and recover quickly from mistaken experimentation is very limited.  The stakes are too high to risk great setbacks unless we are absolutely certain of the benefits.

4899             CRTC regulation has provided Canadian viewers with the most popular international programming, which more often that not is owned by U.S.‑based if not ‑owned multinational companies.  At the same time, this programming has been harnessed to the Canadian cultural and sectoral agenda as set out by government policy formulated in collaboration with all interested parties.

4900             Applicants have stated that Canadian pay TV has not been aggressively marketed and that more energetic marketing will expand the pay TV universe.

4901             It is a truism that viewers are not attracted by networks, the strong HBO brand notwithstanding.  They are attracted by content.

4902             Will the new applicants make Canadians more aware of "The Sopranos"?

4903             The most visible U.S. programming is invariably very well known to Canadians by virtue of the world's longest and undefended electronic border.

4904             Should we spend scarce resources further promoting programming that Canadians are already well aware of through their ready access to American media?

4905             I believe that there is not much potential to raise the profile in Canada of "The Sopranos," "Rome" or "Six Feet Under."

4906             Therefore, the new applicants must generate financing for Canadian programming and promote that programming if they are to attract many more Canadian viewers to pay TV.  Otherwise, they simply risk moving those viewers from one channel to another in search of the programming they already know about and concurrently view on fewer channels.

4907             To increase the expenditure on Canadian programming, the total revenue and especially the net revenue of the pay TV system must increase.  For the total revenue to increase, Canadians must be prepared to spend more on pay TV.

4908             While applicants have cited the U.S. as a market where pay TV penetration is greater than it is in Canada, as we have seen from other intervenors, there are many examples where pay TV penetration is lower than it is in Canada.  The critical point is that net revenue must increase.

4909             I have spent my career not in broadcasting but in production and in the selling and sometimes buying of programming rights.

4910             The most prominent programming on Canadian pay TV services, that programming which is most likely to attract new subscribers, will be the heavily advertised U.S. programming.  It has a built‑in demand due in part to the enormous investment in promotion in the U.S. as well as high production expenditure.

4911             For the U.S. multinationals, Canada is an important market.  However, it is about 10 percent of the U.S. market, which is in itself less than 50 percent of the world market.

4912             A Canadian pay TV service needs U.S. programming more than a U.S. seller needs to sell it to Canadian pay TV.  At the moment, the situation is a standoff to the advantage of the seller.

4913             If one of the pay services does not buy the programming, then there is no possible Canadian pay sale in their territory for the U.S. rights owner.  On the other hand, the subscribers of the Canadian pay service expect to see that programming on their service.  If there is no sale, both parties suffer but the Canadian service is likely to suffer disproportionately.

4914             It was interesting in this regard to note the great importance that the people from MovieCentral and Corus attached to their ability yesterday at the start of their operation to resolve their contractual dispute with HBO and this is the reason behind it.

4915             However, if you add another Canadian buyer, the dynamics change very dramatically.  A new applicant will have to acquire a high‑profile programming.  The U.S. rights holder would then be in a position to dramatically increase the price for certain high‑profile programming and, as a result, to also sell other programming which might not previously have been sold.

4916             Unless the gross revenue of the pay TV sector increases dramatically, then the net revenue of the sector is likely to decrease dramatically.

4917             Increased competition for U.S. programming inevitably will lead to an increased cost of acquiring that programming, thus reducing the revenues available to invest in the acquisition of Canadian programming.

4918             Inevitably, licensees will either be forced to go to the satellite or cable companies seeking higher subscriber fees or they will seek ways to make lower expenditures on Canadian content.

4919             Clearly, the Commission's task at this hearing is very challenging.  The new applicants bring enthusiasm and they bring the promise of additional resources to the system.  My concern is that they are not simply risking their own time, energy and money.  By driving up the programming cost base they may be risking the hard‑won integrity of the system itself.

4920             In conclusion, I would like to return to my opening remarks to state that my company is clearly interested in this matter.  I believe that our interests are shared by all producers, all stakeholders and by the Canadian public.  Our interest is in a stable, profitable and predictable pay TV sector which is able to make bankable commitments to Canadian productions in a timely manner and is then able to fulfil those commitments.

4921             I believe that before putting at risk the present system the Commission must be sure that there will be significantly‑increased revenues which will more than compensate for the certainty of very significantly increased costs.

4922             I would like to thank the Commission for the opportunity to appear before you and to welcome any of your questions.

4923             THE CHAIRPERSON:  Thank you, Mr. Berry.

4924             Commissioner Pennefather.

4925             COMMISSIONER PENNEFATHER:  Thank you, Mr. Chairman, and good morning, Mr. Berry.

4926             MR. BERRY:  Thank you.

4927             COMMISSIONER PENNEFATHER:  It is nice to see you here and thank you for bringing your comments today and your intervention.

4928             I am not sure if I should thank you for saying that the CRTC must almost always be right, just a little extra pressure.

‑‑‑ Laughter / Rires

4929             COMMISSIONER PENNEFATHER:  But I agree that perhaps that is our challenge.  I just have a couple of questions to try to flesh out your articulation of that challenge.

4930             What I wanted to be clear about in your presentation this morning is I guess, bottom line is you are saying, as you do on page 5, a Canadian pay service needs the high profile U.S. programming.  That is a given.  This is where you are going with this?

4931             MR. BERRY:  Yes, I believe it is.

4932             COMMISSIONER PENNEFATHER:  And yet, you say that to attract more Canadian viewers to pay TV the new applicants must generate financing for Canadian programming.  In other words, are you saying that ‑‑ what are you saying there about the balance of the advantage it would bring to Canadian programming?  Because the new applicants, according to what you are saying here would have to consider, promote, finance; really try to find that distinctive Canadian programming, I think, as you were here yesterday, and we had a discussion about the advantages that new applicants in the system would bring to Canadian programming?

4933             So having the start, is there not another side to this that is here in your paragraph on Canadian programming that would be an advantage to the system?

4934             MR. BERRY:  Well, the question is, how do you achieve that; of course.  Since the U.S. high‑profile programming is already in the system the potential for growth is in Canadian programming.  The question is how do you generate the most funding for that programming?  We are here to talk about the pay TV system, not about the other support mechanisms.

4935             I think, attractive though it might appear to licence some of the new applicants because of the increased amount of Canadian funding, ultimately what they are going to do is to reduce the profitability of the sector which over time will have a negative impact.

4936             So my feeling is that it will be very exciting, for example, to licence Spotlight.  I think there would be short‑term gains for the production sector and I can see why the production sector would be excited at the prospect.  However, I think that there would then be a bit of a bloodbath because they are going sort of head‑to‑head with TM and MovieCentral, and the result of that bloodbath would be considerable instability.

4937             For producers instability is terrifying because we exist in a business which has both very long lead times and typically our movies will recoup their costs over a period of seven years.  So a little bit of instability for a year or two can really destroy all of the equity you might have built up over quite a period.

4938             COMMISSIONER PENNEFATHER:  Yes, I take that view of it.  I guess what I was trying to do is take the other side and look at the fact is that it will ‑‑ and I think you have said it yourself ‑‑ generate new money for Canadian programming.  I guess your point is over what period of time is that sustainable and is the result of that not putting the current system at too much risk?

4939             I assume your thesis is based on your understanding of the growth in the market, in the pay TV market per se.  You seem to be saying that the major impact of the entrants, of the new applicants would be to drive up the costs for U.S. programming and therefore reduce the amount of money available for Canadian programming.

4940             Have you had a chance to look at, for example, the Allarco view of the future of digital subscriber growth and within that the growth of the pay TV market?

4941             MR. BERRY:  I am familiar with the thesis but not the specifics.  Just to clarify, I am not taking the position that new entrants will not increase the revenue, but I am cautioning that they would have to increase the revenue really dramatically because the swing in the cost of their essential programming would be very dramatic.

4942             While I am not an expert on the broadcasting side, never having worked for a broadcaster, I have experienced the price swings in various territories over the years and watched ‑‑ for example, everybody is mentioning HBO as a great brand, but near the beginning of my career HBO was an extremely significant buyer of independent product and within a period of six months simply vanished as a buyer of independent product as they lined up their deals with the U.S. studios.

4943             These kinds of dramatic swings in the marketplace have occurred in country after country.  At various times countries have paid much more for studio product than their territory is worth.  A few years ago Germany was paying approximately 20 percent of the costs for production, which is absolutely absurd.  Germany might be worth 8 or 9 percent.  We have seen similar things happen in Canada at different times as the equation between buyers and sellers has been thrown out of whack.

4944             My point is I can't really speak with expertise as to the likelihood of the evolution of the digital world and I can't speak really to the prospects for the broadcasting sector but I think I can, with some experience, predict that new entrants are going to very dramatically increase the costs of U.S. programming.

4945             COMMISSIONER PENNEFATHER:  But in addition, you would accept that the new entrants would also increase the available sources for Canadian programming?

4946             MR. BERRY:  I would think so, yes.  But again, you look at the promises of Spotlight, for example.  How long would they be prepared to lose money?  Certainly, they are coming and making some promises but you would then have three large media groups with a lot to lose and you don't become a large media group by tolerating losses for long.

4947             COMMISSIONER PENNEFATHER:  Okay.  Thank you very much for your comments today.

4948             Thank you, Mr. Chairman.

4949             THE CHAIRPERSON:  Thank you.

4950             Commissioner del Val.

4951             COMMISSIONER del VAL:  On the point of the increase in the price, cost of acquiring of foreign programming, in the Directors Guild in their intervention, they suggested that to indirectly deflate pressure to bid up cost of foreign content by increasing Canadian program expenditure requirement to 40 percent ‑‑ and I will read this part to you.  It is on page 34 ‑‑ sorry, 33 of their intervention, paragraph 112.  They said:

                      "It may be counterintuitive to suggest upping the CPE percentage of revenues in the competitive model because marketing expenditures would increase and competitive bidding for U.S. product would drive up costs.  However, if the CPE were raised to 40 or 45 percent from the present 32 percent there would be some limitation on the amount operators would and could pay for foreign product." (As read)

4952             COMMISSIONER del VAL:  Can you please comment on that?  Yes, do you have a comment on that, please?

4953             MR. BERRY:  All producers are in favour of broadcasters being required to buy more Canadian product at higher prices.  I vote for that.

‑‑‑ Laughter / Rires

4954             MR. BERRY:  I also believe they don't pay me enough and I feel the same way about all my foreign buyers as well.  I think that's sort of motherhood.

4955             The task of the Commission is to arbitrate between the broadcaster's inevitable desire to carry less Canadian content and the producer's inevitable desire that they carry more.  I am in favour of them carrying more.

4956             COMMISSIONER del VAL:  Yes, but I was hoping that you could give me a real life sort of explanation of how does it work.  Now, I guess the Directors Guild position is that it would reduce the amount of money that the operator would have to pay for foreign programming.  But tell me in the real world what it is like if you don't have enough money, if you tell your U.S. supplier "I don't have enough to pay what you are demanding" what happens.

4957             MR. BERRY:  I don't quite understand the end of the question, if you tell your U.S. supplier?

4958             COMMISSIONER del VAL:  If they are demanding a million and you say "Well, no, I only have $500,000" what happens?

4959             MR. BERRY:  Well, they can decide to accept, obviously, or they can decide that they are going to take a strategic position and withdraw their product from the marketplace which happens sometimes.  It happened with HBO and western Canadian pay television.  It has happened in other countries that the studios have taken a longer view and just said "At this particular price we would rather not sell and we will assume that over time political pressure will be brought to bear through the public insisting that they have the right to see programming they know about".It is really tough to say.  I think the DGC idea is provocative and obviously they have given us some thought and it is kind of interesting.  You know, it is unique and worthy of discussion.

4960             What it would come down to ‑‑ and I am sorry if my initial reaction may have come across as being flippant.  I didn't mean it to be.  What I believe it would come down to is a re‑evaluation of what is the appropriate mix of Canadian programming versus usually more high‑profile U.S. programming so as to maximize the number of subscribers.

4961             I'm sure that the DGC representing its members would like to have more work and the producers who have an interest always in producing more would be in favour of raising the level.  And I am sure that the pay services would be concerned that it might be counterproductive because they would find that their number of subscribers drop off.  I think it is always worth looking again at that balance.

4962             COMMISSIONER del VAL:  Thank you.

4963             Then, on a different topic, what are your views on an all‑Canadian channel?

4964             MR. BERRY:  I am confused by it a little bit.  I know people have talked about ghettoization which if it hasn't ‑‑ if that term hasn't appeared in the Globe & Mail yet it is certainly worthy of an article or two.

4965             My concern, as raised by one of the producers yesterday, strictly from the point of view of the production sector is there is not a life in making movies for half a million dollars.  One of my colleagues the other day said to me "Well, your first movie and your last movie should be for $500,000".  In other words, when you are reduced to doing it again you should leave the business.

4966             COMMISSIONER del VAL:  Thank you.

4967             THE CHAIRPERSON:  Mr. Berry, your paragraph on page 6 of your oral presentation uses the adverb "dramatically" four times.

‑‑‑ Laughter / Rires

4968             THE CHAIRPERSON:  As a supporter of Canadian drama I am sure that's having a subliminal impact but it is short on what one of the witnesses before us yesterday referred to as "data points".  I wonder whether you could provide me with some empirical support and some ballpark numbers for where you use the word dramatically four times.

4969             MR. BERRY:  Well, thank you for the syntactical correction here.  I am in the drama business and I think he is in the data business so we take, I guess, our metaphors where we find them.

4970             I think it is difficult to really predict because the negotiation process is one which gives various strategic options to the buyer and the seller.  At what point would the buyer and the seller walk away from the table?  I can't predict that.  At what point would HBO in trying to ‑‑ in owning several of the properties which really more than anything else drive subscription levels of Canadian pay TV, I believe; at what point would they set their asking price?

4971             But experience in other markets has indicated that they are going to think big and they are going to look at ‑‑ as they should ‑‑ and they are going to look at a new start‑up service.  Again, I would go to the German model where the amount demanded for German rights doubled in a fairly short period of time and the many companies in Germany including companies like EMTV which had a market cap larger than, I think, all the Canadian broadcasters combined, went bankrupt.

4972             So while I can't really predict the outcome of a negotiation, if I were selling something which I felt that a start‑up service which was well financed absolutely needed, why not ask for double the price?

4973             THE CHAIRPERSON:  Right, and so your example would be Germany.  That was a pretty unique situation which ballooned pretty quickly and then crashed pretty quickly.  Now, of course, there is evidence in Canada back to the early eighties where ‑‑ perhaps not the exact same phenomena but a similar sort of result occurred.

4974             Do you have any other examples?  In other words, if I take out the word dramatically ‑‑ I mean, you put it in there because you wanted to connote high amounts, I expect.  Do you have anything ‑‑ because if I take it out the sense of it still remains but perhaps the sense of urgency that you are trying to connote ‑‑ I guess I am wondering what kind of benchmarks you are using in empirical and numerical terms that would help us to understand what you mean, unless it is purely for emphasis?

4975             MR. BERRY:  One of the things that I am trying to do is to connect it to risk and to the notion that the CRTC unfortunately has to be very good.

4976             You have to ask ‑‑ ultimately, this is a subjective thing and I concede that this is not really susceptible of empirical analysis because you are looking at a marketplace and you are looking at market forces and you are looking at a situation where you can't predict how the market will react because you have a few sellers who really have no competitors and are capable of strategically withdrawing from the marketplace.  So there isn't much of a limit to how much they can ask, but how they will behave simply can't be predicted.

4977             I think, in effect, licensing the new applicants is to place a bet on how that process will take place.  I think you have to look at the odds.  You have to look at the risks.  And you have to ask yourself if it is ‑‑ you know, I know Brian Mulroney is out style, but if you want to roll the dice on this one.

‑‑‑ Laughter / Rires

4978             THE CHAIRPERSON:  Okay. I think I have the point.

4979             Thank you very much.

4980             MR. BERRY:  Thank you.

4981             LE PRÉSIDENT : Madame la Secrétaire ?

4982             THE SECRETARY:  I would now call on the next appearing intervenor, Ms Helen Scarlett.

4983             If she is in the room, if she would come to the front.

4984             MR. BERRY:  Thank you very much for the opportunity to appear.

4985             THE SECRETARY:  Then we will move on to the next appearing intervenor, Mr. Michael Donovan of the Halifax Film Company.

4986             I would then call on the next two intervenors, Mr. James Dean and Ms Karen O'Donnell of the Wordshop Production Inc. and Centennial College, if they would please come to the front.

‑‑‑ Pause

4987             THE SECRETARY:  Ms O'Donnell, you have ten minutes for your presentation.

4988             MS O'DONNELL:  Good morning, Mr. Commissioner, and to the Commission.  Sorry, Chairman.

‑‑‑ Laughter / Rires

4989             MS O'DONNELL:  I am really nervous.

4990             I will try to start over.

4991             My name is Karen O'Donnell, and I am an independent director and producer, and so you can tell that I am much more comfortable behind the camera.

4992             But I felt that coming here today from ‑‑ well, yesterday, from Toronto, was a very important thing to do to speak on behalf of both myself, my company and other producers that I have trained through Centennial College with regard to support the Canadian Film Channel.

4993             My company actually started eight years ago.  I was not trained in this field.  I am trained as a playwright and a director for the theater.

4994             And when I decided that what I really wanted to do was just tell stories, Canadian stories, important stories, I felt that I needed a broader exposure than being in the theater one or two times.  So I selected broadcast.

4995             If I had have known the rules of broadcast at the time, I wouldn't have tried to get in.  It is a very, very tough go for an emerging film maker/producer.

4996             And what I did do is, I started up and I took my time trying to learn the ropes.  But I didn't learn them the right way, I suppose.

4997             And I recall after finally getting into production with my first documentary, post‑production actually, my editor continually telling me, `You can't do that, you can't.'  And I would say, `Well, why not?  You know, it is going to tell the story the way that I think it should be told.'  And his answer was, `Well, you just can't.  That is just not the way it is done.'

4998             I felt like I had gone through the pain of taking almost two years to finance just a $250,000 documentary that I should be right, and whether or not my film made sense in the end, that it does have to be the way that I think it should be done.

4999             And so I told my editor that, you know, `Please do it my way.'  And when it did come out ‑‑ and it was very successful.  It is called Odd kid out.  It is about children with attention deficit disorder.  It didn't win any prestigious awards, but although it was honored in Istanbul for having a direct impact in how they changed their education system toward how they deal with children with ADHD.

5000             When it did come out, people would say to me, `But why?  That is interesting.  How did you that?  Why did you do that?'

5001             And I think that had I known the traditional method, I probably wouldn't have gone that route.  And I think that is what the Canadian Film Channel is proposing.

5002             I am particularly interested in their financing model.  And I don't think that you have heard, as far as I know, from the emerging community, those that are in the first five years, about how important something like this actually is.

5003             Going back a little bit, because of my experience, I ended up creating a training program.  It is very small.  It is only around eight weeks, once every year.  Because that is all the time that I can devote to it.

5004             It is delivered through the Centennial College.  Their Centre of Entrepreneurship.  And it is funded, fully funded, by the Canadian Government.

5005             The participants are 25 per year, and they receive a full year of their employment insurance benefit in order to come and re‑train to learn how to be an independent producer, and not go back and produce for other people.

5006             So they have ‑‑ I have trained almost 250 people in the past eight years.  We do fluctuate sometimes with the numbers that we take in.  Sometimes less, sometimes more.  But it is around 250.

5007             And those individuals, I can tell you right now, have ‑‑ they learn to a certain point.  They get to a certain position of understanding the business of this industry.  But then we run into a really hard wall where it is trying to become recognized and getting in the door to a broadcaster without having had a real, you know, track record.  And getting a broadcaster to back you enough that you actually can continue to own your own program.

5008             I was very stubborn in the fact that I would not give up my copyright, where I was told that that is the only way I am going to get my first one off the ground.  And I wouldn't do it because the topic was so special to me.

5009             And so it did take that long.  And thank God for TVO because, you know, they believed in the fact that I could do it.  I think I was ‑‑ everybody was really crossing their fingers because it is just ‑‑ it is a gamble.

5010             So what the Canadian Film Channel is offering here with their model, their particular financing model, the two that I will speak about, the $500,000 model ‑‑ you want to give me $500,000 to make a feature doc.  Well, I am making an hour‑long now for $250,000.  So, easy.  I can do it no problem.

5011             What about feature‑length film?  Can it be done on $500,000?  We have already heard from a very experienced drama producer that, yes, your first one can be done for $500,000.  Absolutely.

5012             But it is not only just the first ones I would like to mention.  Other types of films, if the script fits, if it works.  Napoleon Dynamite is a great example.  It is done on 1.8 million U.S.  But still this is a huge film.  It was a creative film.

5013             And so you may select to go and use the $500,000 model as something that you might want to do in addition to your very big, big‑budget films as well.

5014             So, no, you are not going to make a living doing the half‑a‑million dollar films.  You won't.  I mean, unless you are me.

‑‑‑ Laughter / Rires

5015             MS O'DONNELL:  Doing $500,000 docs.  I am okay with that.

5016             And the other thing is, this is ‑‑ this model does not limit the producer to the $500,000.  If they want to build on that, they can.

5017             They are not taking an equity position.  They are leaving the producer to do what they do.  And that is to tell stories.  And the broadcaster is to broadcast them.

5018             So I see this as a great fit because the producers that I am aware of and, you know, I am one of ‑‑ I am only now in my second documentary.  I am in production now.

5019             But it takes me up to two years to get the financing to put together ‑‑ to make these films.  I do ‑‑ you know, people come up to me and say, `Your work is very important.', because of the kind of work that I do.

5020             They want to know, you know, `Why don't you do it more?'  I try to say to them it is not because I can't and it is not because it wouldn't work.

5021             I am only one person and it takes me a very long time to run around and put all these pieces together.

5022             So with this particular model, the producer has the option to use that $500 000 and to kick start it, if they want, into other financing structures or to select a script that works for $500,000.

5023             So that does mean that every single person in that production gets paid properly and fair.  And so I think that all of guilds don't need to worry, that as long as the script is calling for this particular budget and it is a proper fit, then there is no reason why people can't be paid what they are supposed to be paid at that level.

5024             And yes, they will be watched.  Yes, they can be interesting.  They might be ‑‑ they will be maybe more alternative thinking.  They are going to be more interesting things.

5025             This is just another auction.  And as far as the $100,000 model for the shorter pieces, the Canadian Film Channel is proposing to do 52 of these.

5026             That is giving an awful lot of emerging producers an opportunity to make their first piece or second piece.  Yes, it can be done.

5027             Now, and this only just cash that we are talking about.  We aren't even discussing the in‑kind offering that the channel is proposing to give for the producer's use.

5028             If my director of photography sees me near his camera, I am in trouble.  I am in a big trouble.  But I had to learn the technology.  I understand what a PD‑150 is.  I understand where HD is going.  I understand all of it.

5029             I don't execute it, but I have to understand what technology is going to be doing to the way that I make my material.

5030             And so therefore what this channel is offering to the producer to be able to utilize in addition to this cash, it is a great deal.

5031             And the other thing too is that, you know, as I said, I am in production with my second doc.  You know, it is not great to say that I am actually, you know, only in my second doc since year 2000.  I mean, really, it is very, very hard for me to say that.

5032             But I am getting just over $100,000, approximately $120,000 of my $255,000 budget after I make my film.

5033             Now I am not a big production company.  So the banks don't like me.  I can't get that big line of credit to do my interim financing.

5034             So I have to find ways.  I have to still make the film.  I need the money to make the film.  You know, that is what it is there for.  Not for me to be making a big profit.  I want to pay myself and later, if it sells, then yes, I am making money on that.  But thankfully I have a great crew who will wait until my draw downs come.

5035             Traditionally, the draw downs are set for everyone the same way.  What the Canadian Film Channel will do is sit with the producers whose scripts are selected, by the way.

5036             I mean, I am sure ‑‑ I can tell you right now, if that goes ahead, this is going to be a huge competition for ‑‑ there are ‑‑ I have seen them, you know.  I have seen the scripts that can be done that will be brilliant for that amount of money.

5037             So what they will do is, they will sit down and customize a draw down schedule so that, if they are doing the $500,000 financing scenario, then they will sit down and figure out, `Well, when are you going ‑‑ you know, what is your production schedule?  So when are you going to need what?  And let us make sure that you have all you money along the way.'

5038             So that people like me don't have to really suffer.  And I do suffer with this problem because it takes me away.  It takes me away from the creative.

5039             And you know, I really wish that I could just be left alone to make good Canadian programming, telling these stories that are ‑‑ yes, they are here in Canada.  They are told by Canadians.  But they are universally interesting and felt, really.

5040             So I think that, if someone in our position of the first five years, in your growing state, could have this potential, it would be very, very powerful.

5041             Thank you.

5042             THE CHAIRPERSON:  Thank you very much.

5043             Commissioner del Val?

5044             COMMISSIONER del VAL:  Thank you, Ms O'Donnell.

5045             Don't worry about being nervous and this being a first appearance.  It is my first broadcast hearing too.

5046             MS O'DONNELL:  Okay.

5047             COMMISSIONER del VAL:  So we will just muddle through.

‑‑‑ Laughter / Rires

5048             COMMISSIONER del VAL:  So it is a very helpful perspective on the Canadian Film Channel's proposal that you have provided.

5049             You have anticipated many of my questions.  So that is great.  You are doing well.

5050             I would like to just ask a few questions about your second production, right now ‑‑

5051             MS O'DONNELL:  Yes.

5052             COMMISSIONER del VAL:  ‑‑ that is underway.

5053             Where are you getting funding from?

5054             MS O'DONNELL:  Okay.  Well, thankfully again, TVO.  This one is called My different life, and it is about children with learning disabilities.  So it is a good fit for TVO.

5055             So in the $255,000 budget, TVO has given me 20 percent ‑‑ so a $50,000 licence fee.  Then they have assigned $50,000 from their CTF broadcast envelope to me.

5056             But I could only access that $50,000 once I had my full ‑‑ once my budget was 30 percent financed by a Canadian broadcaster.

5057             Now I got into big trouble with that because I couldn't ‑‑ a knowledge network came in, but then I had a $22,000 gap.  So luckily I did take several months and find the additional financing there.

5058             So you have to have your broadcasters at 30 percent.

5059             Now, in one of the things that I do with the program, with the guys that I teach, is, I really try to tell them that our Canadian funds are quite burdened and they have to be entrepreneurial and they have to think outside of the box, which again I think this model is doing just that.

5060             You have got to find money elsewhere.  I have raised ‑‑ out of this budget I have raised $100,000 of it from foundations.

5061             COMMISSIONER del VAL:  Great.  That is actually more the part that I am interested in.

5062             Outside of the public, how much of the funding for, say, this second project are you receiving from private sources?

5063             MS O'DONNELL:  $100, 000.  Yes.

5064             COMMISSIONER del VAL:  Thank you.

5065             Now, what are your views on an all‑Canadian channel?

5066             Take into consideration, say, they actually use the word `ghettoization' of Canadian programming.  Can you comment on that please?

5067             MS O'DONNELL:  Sure.

5068             Yesterday I heard that there was a comment made about, if you were a Canadian author and you had a choice for your book to go into the fiction section or the Canadiana section, you know, what would it be.

5069             Again, that is interesting, but I think that is assuming that the book has been published, that somebody has put money into it, or that it will be published so therefore you do have that choice.

5070             But if you haven't got the money to make it, it won't get made.  And so you are not going to be able to select where it goes.

5071             So in this case, no.  I don't think that this is `ghettoizing' our material.  This is just another option.

5072             This channel is not taking exclusive rights.  You can put it anywhere else that you want.  I mean, this is giving producers an opportunity to actually get a broadcast credit too, which will also elevate their ability to go to other broadcasters later with some credibility.  Like the Documentary Channel, for example.

5073             You know, they are very interested in working with already developed directors or name producers.

5074             You have to do something, you know.  It is like you have to be published to get published.

5075             COMMISSIONER del VAL:  Thank you.

5076             Then, as a relatively new producer, what would you prefer your product to be?  Would you prefer an exclusive arrangement to exhibit this show or a non exclusive?  What would be better for you as a new artist?

5077             MS O'DONNELL:  Non exclusive, absolutely.  Because it will get more exposure.  And it also allows me to capitalize on my program.

5078             COMMISSIONER del VAL:  And then, when you become successful and established and well‑known, what do you think would be your preferred arrangement?  Exclusive or non exclusive?

5079             MS O'DONNELL:  Non exclusive.

5080             COMMISSIONER del VAL:  Thank you.  Those are my questions.  Thank you.

5081             THE CHAIRPERSON: Thank you very much.

5082             MS O'DONNELL:  Okay, thank you.

5083             THE CHAIRPERSON:  Madam Secretary?

5084             THE SECRETARY:  Thank you, Mr. Chairman.

5085             I would like to call the next appearing intervenor, Mr. Peter Miller from CHUM Limited.

5086             Mr. Miller, if you could introduce your colleague, and you will have ten minutes for your presentation ‑‑ fifteen minutes for your presentation.

5087             MR. MILLER:  Good morning, Mr. Chair, Mr. Vice Chair, Members of the Commission.  It is a pleasure to be here with you this morning.

5088             For the record, my name is Peter Miller and I am Vice‑President, Planning and Regulatory Affairs with CHUM Limited and with me today is Peter Palframan, our Senior Vice‑President of Operations.

5089             As the Commission is well aware, CHUM has long been one of Canada's premier broadcaster exhibitors and supporters of feature film and cutting edge series drama.  More Canadians actually see Canadian feature film on CHUM stations than on any other outlet.  Given that each of the applicants before you has indicated that it intends to compete for the broadcast rights to feature films and series drama, how the Commission chooses to dispose of these applications is obviously of some consequence to CHUM.  Our interest, however, is not only the potential impact on us, there are other issues that have the potential for far greater impact, but on the Canadian broadcasting system itself.

5090             We have listened intently to the last three days of proceedings and we commend the applicants for some innovative proposals that, while advocating changes to current policy, are clearly positioned as increasing support for Canadian talent and Canadian programming.  On balance, however, we remain of the view that licensing any of the applicants would not be in the public interest and for three primary reasons.

5091             First, Canadian consumers would end‑up paying more to receive virtually the same range of content.  Second, increased competition for foreign movie and pay series rights would impact the availability and cost of foreign programming for conventional, specialty and pay television services leaving less money for Canadian programming.  And third, giving carriage rights to additional pay services would inevitably come at the expense of carriage of other Canadian services, including local broadcast signals, high definition versions of current services and existing and un‑launched Category 2 digital specialty services.

5092             MR. PALFRAMAN:  The genius of the Canadian broadcasting system is that Canadian consumers can access a wide range of high quality programming services at an affordable price while still ensuring strong representation of Canadian culture and heritage through financing of Canadian production and the distribution of Canadian programming.  In order to accomplish this the Commission has actively limited competition among programming services.

5093             The fundamental problem with the applications before you is that they seek to change this regulatory approach with no clear evidence that the benefits to them outweigh the harm to the system as a whole.  Over the last three days the Commission has heard two different approaches from the pay applicants.  Spotlight and Allarco have proposed services that will consist primarily of foreign feature films and cutting edge dramatic series.  This is precisely the kind of programming that is currently being offered by the existing pay television services operated by Astral and Corus.

5094             The other two applicants, Archambault and the Canadian Film Channel, are proposing to carry somewhat different content.  Archambault intends to rely less on movies and will also feature sports programming, concerts and special events.  The Canadian Film Channel would only air Canadian films, most of which have already received significant exposure on Canadian television.  While not identical to what the incumbents currently provide, the reality is that the programming these two applicants are proposing to offer is also largely available today, but on a combination of pay, conventional and specialty television.

5095             In the event the Commission licenses one or more new pay television services it is still unclear where the programming for the new service or services would come from.  A large portion would likely come from what is currently is being licensed by the existing pay licensees.  Given the existing programming arrangements MovieCentral and TMN have in place, initially very little of the programming they currently air would be available to a new licensee.

5096             Over the time the new service or services would likely be able to acquire some top tier programming.  However, even assuming this, large amount of their programming would have to come from what is currently being licensed by certain conventional television stations and drama‑based specialty services such as CHUM's Bravo and Showcase owned by Alliance Atlantis.

5097             Over the past decade conventional television and specialty services have benefited from the Commission's policy of limiting competition in pay television as it has resulted in programming not acquired by TMN or MovieCentral being available to them.  As a consequence, CHUM has been able to acquire the occasional cutting edge series that pay has passed on with excellent results.  For example, Bravo acquired the first Canadian window for HBO's groundbreaking hit Sex and the City.  Before Bravo began broadcasting this show it was a well‑respected service with a strong niche audience.  However, Sex and the City helped broaden its appeal to a wider audience, contributing to the channel growing by $4 million in revenues annually, 40 percent of which goes to new Canadian programming expenditures.  Showcase has had a similar experience with programs like Oz and Queer as Folk.

5098             With new competition in the pay television space many of these programs would likely no longer be available to Canadian specialty services and, even if available, the costs to acquire such programs would almost certainly increase.  In addition, new pay services would also draw programming away from conventional licensees who are increasingly acquiring made‑for‑cable programming from the U.S., The Shield on Global, Wanted on CHUM's CityTV and Nip/Tuck on CTV are notable examples.

5099             Moreover, as Spotlight stated on Monday, who intends to run movies that are five and six years old in addition to newer titles?  In other words, outside the traditional pay window.  These are exactly the titles that have been successful for CHUM's conventional stations.

5100             Another concern is that the repeat factor for any new pay licensee will likely be high, which devalues the second and third window rights to these programs.  Even if existing players such as CHUM could negotiate a lower licence fee for such programs, we would likely not be able to make up the losses in advertising revenue resulting from this overexposure.

5101             The inevitable end result is that the offerings of existing pay, specialty and conventional television licensees would become diluted.  Moreover, due to the fact that Canadian consumers would have to pay an additional fee to receive these new services, they would in fact be paying more to receive essentially the same mix of programming.  Premium television services would not be able to offer the same range of programming and viewers would be subjected to many more repeats.  In effect, these services would become far less premium.  CHUM submits that this is clearly not in the public interest.

5102             While the licensing of these pay applications, as proposed, would have a material but not devastating impact on CHUM they have the potential to seriously impact specialty services in general due to the fact that they will siphon off some of the sector's best programming and, hence, its audience.  Moreover, given the more general nature of the proposed Archambault service, less movies, more concerts, special events and sports and the synergies it would have with Sun TV, TVR and other Quebecor properties, it would have the greatest impact.

5103             MR. MILLER:  In the first two days of this hearing a number of the applicants argued that the Commission should look to the U.S. pay experience as a good model or reference point.  With respect, CHUM does not believe that this is a particularly useful comparison, as it ignores how the Commission's approach to pay television has benefited Canadians and the Canadian broadcasting system.

5104             In addition to ensuring the availability of programming for conventional television and specialty services and an affordable range of services for Canadian consumers, the Commission's decision to limit competition and pay television has contributed to the development of Canada's digital specialty sector.  Canadians now have access to an incredibly diverse array of home‑grown digital specialty services more so than in the U.S.

5105             In essence, Mr. Chair, if that gap exists it has been filled by the Canadian digital specialty services that have launched successfully in the last half a dozen years.

5106             All of the pay applicants are seeking guaranteed distribution on a digital basis.  Even if only one of these services is authorized it will require a significant amount of capacity to distribute the multiplex services they are proposing to offer, some of which or many of which may be in high‑definition.  With limited capacity available, this would inevitably impact the ability of distributors to offer more local television services or signals, HD versions of existing services or existing or un‑launched Category 2 services.

5107             These new pay services are asking the Commission to make an exception to not only longstanding historic policies but also the CRTC's 2000 policy that new digital pay and specialty services should have no carriage rights beyond that point in time.  Given the potential impact these services could have on the system, CHUM submits that none of the applicants have justified such an amendment.  At most, the Commission might consider introducing a requirement that BDUs must carry an unaffiliated pay service if they intend to carry a service with which they are affiliated.

5108             The final issue CHUM would like to address is the Commission's one‑per‑genre rule.  A few intervenors have commented that approving any of the pay applications currently before the Commission is an exception to this longstanding Commission policy.  As we have discussed, CHUM does not support the licensing of any of the new pay services for a variety of reasons.  However, we do not believe that genre protection itself is at issue here.  The genesis of the one‑per‑genre rule dates back over 20 years to the beginnings of specialty television.  In 1984 the Commission approved an application by CHUM to launch MuchMusic.  In doing so, it turned down two other applicants for music video services due to the fact that they were "competitive".  Since that time, the Commission has maintained a policy of not authorizing analogue specialty services that are directly competitive on the basis of genre.

5109             One of the pillars or the regulatory framework for specialty television in Canada, this policy has resulted in the emergence of a healthy specialty television sector in this country that employs thousands of Canadians, spends hundreds of millions annually on Canadian production and makes a tremendous contribution to the system.

5110             The regulatory framework for general interest pay television undertakings developed differently.  As the Commission is well aware and as we have discussed during this hearing, general interest pay services were originally licensed on a competitive basis.  But that original model didn't result in a self‑sustaining industry and so the current "not directly competitive model" was adopted.

5111             Genre protection was not an issue for pay then and is not an issue now.  In fact, the whole concept of a "general interest genre" is counter‑intuitive.  That, again, is not to say that the current pay model should be abandoned.  To the contrary, as we have said, CHUM believes that the current pay model remains valid today as it does ensure that Canadian consumers have access to top tier programming for a fair price and that conventional television stations and specialty services have orderly access to the best feature films and cutting edge drama series.

5112             However, should the Commission opt to approve any of the applications before it, it should not be because of some sense of abandoning its one‑per‑genre rule.  We continue to strongly believe that this policy is relevant for specialty services today or as relevant for specialty services today as it was two decades ago, as it ensures diversity and the greatest contribution to the Canadian broadcasting system.

5113             For all of these reasons, CHUM believes the present applications should be denied.  However, in the event the Commission chooses to licence one or more of these services, we recommend the following.  One, the Commission should not impose the safeguards requested by the applicants regarding programming exclusivity.  Aside from the fact that it is questionable whether or not the Commission actually has the jurisdiction to do this, granting the applicants' request would be kind of akin to requiring CTV and Global to grant CHUM access to their top 20 U.S. programming.  By the way, if you do give program exclusivity to the applicants we will be back with an application on that shortly.

5114             Two, the Commission should not grant new entrants any specific access rights, to do so would be directly contrary to the Commission's 2000 policy regarding the licensing of new digital, pay and specialty services and a clear step back.  The Commission has been very clear that analogue and Category 1 specialty services should have access rights, Category 2 services do not.  In this and many other ways the applicants are essentially five or 10 years too late.

5115             Three, the Commission should ensure an orderly marketplace for program rights is maintained by preventing new entrants from requiring exclusive second and third windows on programming and therefore depriving conventional television specialty services of such programs.  The Commission should restrict distributors from packaging these new services with specialty services.  The objective is to make them premium, let us make them premium.

5116             We would like to thank the Commission for this opportunity to provide some comments and we would welcome any questions you might have.

5117             THE CHAIRPERSON:  Thank you very much, Mr. Miller and Mr. Palframan.  Your oral presentation has answered a number of the questions I had with regard to the particulars arising from the intervention in respect of the specific programs in mind and we will ask the applicants to respond to the points you made, particularly on page 2.

5118             What I am going to focus on is the end part of your submission and your last three points.  I guess my first question, Mr. Miller, is when I read your first and third points at the end I immediately sense a complete contradiction in what you are asking.  Tell me why that is a misreading.

5119             MR. MILLER:  It is not a misreading, I confess to the contradiction.  The point is simply this, we don't think these players should be licensed, but if they are to be licensed you should try and make sure that the promise that they are suggesting to you is fulfilled.

5120             We heard the comments, particularly from Allarco, about how a premium window can benefit a broadcast window, and that actually is true, it can work that way.  For example, I don't know if you have read about the Canadian production Terminal City, which is a CHUM/Astral production and we are excited about and will benefit from the pay window exposure, because it does give buzz to the show and will help us when we get it on broadcast 18 months from now.  And, of course, by having two broadcasters involved, you are sharing the costs, etc. etc.  So that is true.

5121             But in order to make sure that that indeed does happen we are suggesting some rules would have to be put in place.  And in particular, as we have said in our intervention, we are very concerned about the notion that pay ‑‑ the new competitive environment in pay would take away the opportunity for specialty and conventional to have those historic windows.  So in order to maintain that orderly marketplace and in order to ensure that pay and specialty do have different windows and that specialty services and conventional services could take advantage or programming after a pay window, we would suggest you make it clear that that window could not be denied.

5122             And then on the last part in terms of packaging, again, we have seen an experience in Canada where a pay service effectively became a specialty service and that is Family Channel, it was licensed as a pay service, it is now packaged as a specialty service.  So again, in order to avoid that here and limit the impact of competing new pay services on specialty and conventional we are suggesting that you should have a rule that says they can't be packaged with specialty services.

5123             THE CHAIRPERSON:  Okay, it was on the first part of your point 3.  I hear you on that point.  But in your intervention that you filed in writing, at paragraph 10, you referred to prohibiting ‑‑ if the Commission licensed Archambault's application ‑‑ prohibiting it from acquiring exclusive rights to programming that will air on both its pay service and CKXT‑TV.  Is that the point you are making?

5124             MR. MILLER:  It is an expansion essentially of that point, yes, Mr. Chair.

5125             THE CHAIRPERSON:  So what you are saying is that exclusivity within a window is fine ‑‑

5126             MR. MILLER:  Yes.

5127             THE CHAIRPERSON:  ‑‑ but exclusivity vertically down through the windows is not, is that correct?

5128             MR. MILLER:  Precisely.

5129             THE CHAIRPERSON:  In your specialty and conventional deals do you ever take exclusivity for both windows?

5130             MR. MILLER:  Again, to be clear, there is a separation of rights by convention, not by law, between pay, cable and convention, but there is more of a merging now, if you will, of rights for conventional and specialty.  There is still different effects, particularly in terms of residuals for the unions and guilds and that can have an impact in terms of required product in the U.S.  But it is now quite common to purchase a conventional and a specialty window at the same time.  So that has already happened in the marketplace and I don't believe that has been something that has been to anyone's detriment.  I think it has been efficient.

5131             What we are suggesting, however, is that pay should remain as it has historically be, separate from specialty and conventional.

5132             THE CHAIRPERSON:  And the answer is?

5133             MR. MILLER:  And the answer is, in that situation, yes, it has always been separate for CHUM.

5134             THE CHAIRPERSON:  So the answer is you do ‑‑

5135             MR. MILLER:  Yes.

5136             THE CHAIRPERSON:  ‑‑ claim exclusivity for both conventional and specialty windows.  And yet, you are suggesting that the pay window should be treated quite differently from those two?

5137             MR. MILLER:  And the reason we are suggesting that is the applicants are requesting a fairly significant departure from policy on the basis that they are going to improve contributions to the Canadian broadcaster system and so in order to ensure that that at least has a chance of happening  we think it is vital that you don't have this negative impact on specialty and conventional.

5138             THE CHAIRPERSON:  Okay, I understand your point and we will allow the applicants, if they choose to, to comment on it.

5139             On point 2, I don't know whether you were present for my discussion with the CCTA at the end of the day yesterday but you are suggesting that in light of the Commission's 2000 Category 1 and Category 2 policy that a pay television licensee should be deprived of what it would ordinarily expect to claim under section 18 of the Regs.

5140             Now, I guess I have two questions.  One is I guess what you would be asking is somehow for a change in the Regs or some other way of implementing it. but more fundamentally, I will put to you the same question as I put to the Cable Television Association, which is that if we are departing from the non‑directly‑competitive rule, we are doing so because we think that there are going to be benefits, notably through competition, in terms of more Canadian programming, more dollars and hopefully more and better Canadian programs, and in order to give effect to that competition, how would it be appropriate, consistent with that licensing decision, to put one party at a disadvantage relative to the other in respect of must carry?

5141             MR. MILLER:  We did hear your exchange yesterday and, to be honest, I am not sure that I am going to have a better answer than you had yesterday because I thought the answer you had was pretty good.

5142             The reality is policy is a feature of time and place and policy evolves.  We are now in a more competitive environment.  That competition is not just from the regulated sector.

5143             In fact, I agree with Mike Lee's comments right now that part of the problem with this debate at this hearing is we are talking about how to cut up the diminishing part of the pie.  It is that other part, that very scary, kind of unregulated internet‑based, wireless‑based part of the pie that is going to be the one that we really have to worry about.

5144             So from our perspective, just as you have accepted that pioneers or incumbents ‑‑ one, I suppose, is a good word, one is a bad word ‑‑ have certain advantages that new entrants don't necessarily end up getting.

5145             You have done that in specialty with the evolution from, as was commented yesterday, dual status to modified dual status, analog basics to discretionary, analog rights to digital rights, and the ultimate move, access rights to no access rights.

5146             THE CHAIRPERSON:  So it is pioneer preference versus competitive equity?

5147             MR. MILLER:  But the one thing we slipped in in the presentation for your consideration, and we understand one of the applicants might make it, is that instead of access rights, you can put something in place that addresses the specifics of your intent behind the no undue preference rule, where you might say that if a BDU is going to carry an affiliated pay service, they have to carry an unaffiliate.  It is just a suggestion, something to think about.

5148             THE CHAIRPERSON:  This isn't about affiliation?

5149             MR. MILLER:  No, but it is a way of addressing access without putting an access right in.  I mean we noted that Spotlight, for one, said they would be prepared to launch without access rights.

Well, I think it would not be surprising to believe that the reason for that is because they have a distributor partner that is prepared to carry them in conjunction with the existing pay service, and as you heard from Rogers, once that happens to ExpressVu, they will follow suit.

5150             So every situation is different, but to Mr. Berry's point, we are very concerned about the downside risk and one way of you minimizing that downside risk, but perhaps seeing if there is an upside, is to do things in a slightly different way.

5151             THE CHAIRPERSON:  Thank you very much.  Those are our questions.

5152             MR. MILLER:  Thank you.

5153             THE CHAIRPERSON:  Madam Secretary.

5154             THE SECRETARY:  Thank you, Mr. Chairman.

5155             Je demanderais maintenant à la prochaine intervenante, madame Claire Samson, de l'Association des Producteurs de Films et de Télévision du Québec, de bien vouloir s'avancer.  Merci.

‑‑‑ Pause

5156             LA SECRÉTAIRE : Madame Samson, si vous pouvez présenter votre collègue, et vous aurez 10 minutes pour votre présentation.  Merci.

INTERVENTION

5157             MME SAMSON : Bonjour, Monsieur le Président, Monsieur le Vice‑Président, mesdames et messieurs les conseillers, membres du personnel.

5158             Mon nom est Claire Samson, Présidente/Directrice générale de l'Association des Producteurs de Films et de Télévision du Québec.

5159             Je suis accompagnée de madame Suzanne D'Amour, qui a été consultante pour l'APFTQ dans ce dossier.

5160             Je vous remercie, d'abord, de nous permettre de comparaître dans le cadre de cet appel de nouvelle licence de service de télévision payante.

5161             Notre Association représente plus de 130 entreprises québécoises de production indépendante engagées dans la production de longs métrages, d'émissions télévisuelles de tous les genres et de films publicitaires de langue française et anglaise.

5162             Notre Association, comme toutes les associations professionnelles qui ont présenté des interventions, n'a pas voulu intervenir sur chacune des demandes présentées par les requérantes.

5163             Chacune de ces demandes doit être analysée minutieusement, et nous ne disposons pas de tous les outils nécessaires pour juger de la pertinence de chacun des points décrits dans ces demandes ou pour élucider plusieurs confusions.

5164             C'est pourquoi nous avons opté pour la présentation d'un mémoire de principes qui devrait guider le Conseil dans l'analyse de ces demandes.

5165             Nous sommes, toutefois, conscients que le Conseil s'attend à ce que nous répondions à des questions spécifiques concernant la demande de BOOMTV, qui propose un service de télévision payante de langue française, en plus d'un service de télévision de langue anglaise.

5166             Sans décliner tous les arguments qui se trouvent dans notre mémoire, j'aimerais rappeler ici quelques points qui nous semblent prioritaires dans l'étude de ces demandes : le financement de la production originale canadienne, la concurrence entre les services et les grands principes qui devraient guider le Conseil dans l'octroi de toute nouvelle licence de radiodiffusion.

5167             En tant que producteur qui désire servir adéquatement leurs clients radiodiffuseurs, nos membres sont les premiers intéressés puisqu'ils auront, en principe, à répondre à une demande accrue de production de la part de ses détenteurs de licence.

5168             Qu'en est‑il en réalité?

5169             Nous savons tous que le financement de la production canadienne originale n'est possible qu'à la seule condition de recevoir des fonds publics et privés.  Ces fonds ne sont pas inépuisables.  En tant que membre du conseil d'administration et trésorière du Fonds canadien de télévision, j'en sais quelque chose.

5170             Or, toutes les requérantes prévoient un certain pourcentage de production originale canadienne à leur antenne.

5171             Il est vrai que la définition de production originale peut être interprétée de différentes façons et faire en sorte que des émissions diffusées par un service conventionnel, un service spécialisé et un service de télévision payante pourraient toutes être considérées comme des productions originales pour chacun de ces services, comme semble le proposer BOOMTV.

5172             Dans ce cas, les fonds de soutien à la production ne seraient pas plus sollicités, puisque les émissions se promèneraient d'un service à l'autre.

5173             On ne parle plus ici de production originale créée expressément pour le service de télévision payante, mais plutôt d'exploitation multiple d'une même émission sur différents services ou plate‑formes.

5174             Le résultat net n'est pas plus de productions canadiennes à l'antenne, mais plutôt un partage de coûts d'acquisition qui ne servira que les radiodiffuseurs et sûrement pas la production indépendante canadienne ou l'ensemble des ayants droits de cette production.

5175             D'ailleurs, le Président et Chef de la direction de Quebecor Média, dans son allocution à une assemblée d'actionnaires, confirme notre appréhension lorsqu'il déclarait, et je cite :

                        * Dans les prochaines années, les téléspectateurs réclameront plus de choix et la possibilité de visionner leurs émissions au moment qui leur convient le mieux, ce que la technologie de la télévision numérique permet déjà.  Le défi pour un télédiffuseur comme TVA sera de créer et d'exploiter des contenus de qualité qu'elle proposera sur plusieurs véhicules de diffusion afin d'en maximiser l'utilisation dans ce que j'ai appelé plus tôt notre stratégie de contenu, qui est déjà et sera encore davantage dans l'avenir l'un de nos axes prioritaires de croissance. +

                      (Tel que lu)

5176             Ce qui nous amène à penser qu'au lieu de créer un environnement propice à la création de nouvelles émissions canadiennes, ces nouveaux service permettront à certains diffuseurs conventionnels de diminuer leur niveau de licence pour les faire absorber par le service de télévision payante.  Il ne faut pas oublier que les diffuseurs conventionnels n'ont aucune obligation de dépenses de contenu canadien inclus dans leur licence.

5177             Dans son intervention, Wayne Clarkson, Directeur de Téléfilm Canada, se questionne sur la pression que pourrait exercer les nouvelles productions de long métrage sur le Fonds du Long Métrage du Canada.

5178             L'APFTQ supporte la proposition de Téléfilm Canada qui demande au Conseil de s'informer auprès des requérantes de leurs attentes envers les fonds publics pour le financement de leur programmation et de leurs intentions dans le cas où ces productions ne trouveraient pas de financement chez les fonds publics, et ce, tant pour le Fonds du Long Métrage du Canada que pour le Fonds canadien de Télévision.

5179             Ces intentions doivent être clairement exprimées par les requérantes.  Cela permettra d'éviter qu'elles ne reviennent devant le Conseil pour demander un assouplissement de leurs conditions de licence sous prétexte que le marché et le financement canadien ne peuvent supporter cette demande accrue.

5180             En principe, notre Association ne s'oppose pas à la concurrence dans un marché libre et ordonné.  L'industrie de la production indépendante évolue dans un marché hautement concurrentiel pour le plus grand bénéfice des radiodiffuseurs et des consommateurs.  En effet, le nombre important d'entreprises de production indépendantes a permis d'élargir le bassin de créations, d'apporter une expertise diversifiée des produits télévisuels de plus en plus prisés par les consommateurs.

5181             Nous questionnons, toutefois, la pertinence d'accorder une exception à la Loi sur la radiodiffusion pour permettre la concurrence dans le marché de la télévision payante.

5182             À l'heure du déploiement des nouveaux accès à des produits télévisuels et cinématographiques comme internet, par exemple, les services autorisés de télévision payante devront, d'ailleurs, faire preuve d'imagination pour conserver leurs abonnés.

5183             L'ACTRA a développé un point très pertinent dans son mémoire à ce sujet.  Ces services sont déjà en compétition avec une vaste option de choix disponibles aux consommateurs, et cela autant pour maintenir leurs auditoires que leurs revenus.

5184             L'industrie de la radiodiffusion est en mutation, et nul ne peut prédire ce que feront les consommateurs face à cette offre accrue de produits pour lesquels ils auront à payer.

5185             Nous pensons, tout comme l'Association canadienne des radiodiffuseurs, d'ailleurs, qu'avant de permettre une exception à la Loi sur la radiodiffusion, ouvrant la concurrence dans les services de télévision payante, il aurait été préférable d'analyser les différents enjeux de l'industrie de la radiodiffusion et de procéder à des audiences publiques sur le sujet.

5186             Toutes les requérantes tentent de démontrer qu'il y a de la place pour la concurrence.  Oui à la concurrence des styles, mais pas trop.  Un service tout au plus, et le leur de préférence.

5187             Nous pensons que le Conseil devra analyser scrupuleusement les avantages de cette concurrence tant pour l'industrie de la production canadienne que pour les consommateurs qui auront à payer plus pour des émissions qu'ils obtiennent actuellement avec les différents services autorisés.

5188             Maintenant, supposons que le Conseil décide d'accorder une exception à la Loi sur la radiodiffusion et d'autoriser un nouveau service de télévision payante.  Nous souhaitons que le Conseil, dans une telle situation, exige des conditions de licence fermes de la part de tout nouveau détenteur de licence.

5189             Nous croyons que le Conseil doit donner priorité aux requérantes qui ont un plan d'affaires viable qui contribue à la diversité de la programmation, qui offre un pourcentage de contenu canadien important, qui consacre une part significative de leurs recettes brutes aux dépenses de programmation canadienne, et qui confie une large part de leur programmation, en pourcentage de contenu et de budget, aux producteurs indépendants canadiens; qui ne confieraient pas plus de 25 pour cent de leur programmation à des producteurs qui leur sont liés et qui ne concurrencent pas indûment les services existants; qui apportent une offre de qualité supplémentaire aux consommateurs.

5190             Concernant le point relatif aux dépenses de programmation canadienne, nous avons constaté que BOOMTV, contrairement aux autres requérantes, indiquait à la question 9.2.1 de la demande initiale, émissions devant être diffusées, des dépenses largement supérieures pour la production canadienne à celle des engagements qu'elle serait prête à accepter comme condition de licence, soit 20 pour cent des revenus bruts.

5191             Ainsi, pour toute la durée de la licence, c'est 78 pour cent des revenus du service de langue française qui est projetée comme dépenses de programmation canadienne, et non 20 pour cent.

5192             La seule façon de parvenir à atteindre un tel niveau de dépenses de programmation canadienne, c'est de réduire les licences de TVA et de les faire absorber par BOOMTV, tout en les offrant sur les deux plate‑formes.  Ceci ne représente aucune production originale additionnelle et un coût supplémentaire pour les consommateurs.

5193             Dans le cas où le Conseil n'accorderait pas de nouvelle licence de télévision payante, nous pensons, comme un très grand nombre d'intervenants, que les services de télévision payante existants devraient être tenus de consacrer une plus grande part de leurs recettes brutes aux dépenses de programmation canadienne.

5194             Soyez assuré que l'APFTQ se présentera devant vous lors des renouvellements de licence de la télévision payante pour en faire la demande formelle.

5195             En terminant, nous joignons notre voix à celle des intervenantes qui demandent au Conseil de rendre public les états financiers des services spécialisés de télévision payante pour l'année 2004, tout comme cela se faisait par le passé.  Ces données nous sont essentielles pour permettre l'analyse de l'évolution de l'industrie des services spécialisés de la télévision payante et devraient même être obligatoires pour l'ensemble des détenteurs de licence de radiodiffusion.

5196             Je vous remercie de m'avoir permis d'exprimer notre opinion, et je suis disponible pour répondre à vos questions.

5197             LE PRÉSIDENT : Merci, Madame Samson.  C'était une présentation très claire.

5198             Juste une précision avant de passer la parole à Madame Pennefather, et c'est que vous dites à la page 4 que vous questionnez la pertinence d'accorder une exception à la Loi sur la radiodiffusion et vous répétez dans le même paragraphe :

                        * Je ne vois pas qu'on est en face d'une exception à la Loi sur la radiodiffusion. +

5199                  (Tel que lu)

5200             Ce qui est devant nous, c'est peut‑être une exception à une politique?

5201             MME SAMSON : À une politique du Conseil.

5202             LE PRÉSIDENT : C'est ça.

5203             MME SAMSON : Pardon, je m'excuse, vous avez totalement raison.

5204             LE PRÉSIDENT : Pas de problème.

5205             Madame Pennefather.

5206             CONSEILLÈRE PENNEFATHER : Merci, Monsieur le Président.

5207             Madame Samson, Madame D'Amour, bonjour.

5208             Votre présentation ce matin répond à plusieurs questions que j'avais d'après votre présentation écrite, mais par contre, il y a certains éléments qui restent peut‑être à aller un peu plus à fond.

5209             * Oui à la concurrence, disent‑ils, mais pas trop. +  J'ai eu l'impression dans votre intervention écrite que c'était un peu la position de APFTQ aussi, dans le sens que vous allez alors nous conseiller sur les critères qu'on devrait prendre en considération si, en effet, on donne une licence à un nouveau service de télévision payante.

5210             Alors, j'aimerais peut‑être comprendre un peu mieux votre position dans le sens suivant.  Est‑ce qu'on peut revenir après sur les désavantages, mais, d'après vous, est‑ce qu'il n'y aura pas des avantages?

5211             Laissons de côté, pour le moment, la question des fonds publics...

5212             MME SAMSON : Mm‑hmm.

5213             CONSEILLÈRE PENNEFATHER : ...et regardons la position qui dit que ça sera une nouvelle source.

5214             Vous avez mentionné aussi dans votre présentation écrite... vous avez cité le Conseil, la décision 2003‑502, que :

                        * Dès le début, l'industrie de télévision payante canadienne, le but était de fournir de nouveaux débouchés et sources de revenus aux producteurs indépendants. +  (Tel que lu)

5215             Est‑ce qu'on n'a pas devant nous des nouvelles sources de financement pour le secteur indépendant, et pourquoi ça, ce n'est pas un avantage pour le système de radiodiffusion canadienne?

5216             MME SAMSON : Je vous dirais qu'à la face même des demandes qui ont été présentées à la Commission, aucune n'a fait la preuve qu'il y avait nécessairement un marché et que des nouveaux arrivants allaient justifier une croissance des revenus de la télévision payante, puisque dans les faits, bien qu'on n'ait pas pu analyser la grille de programmation d'aucune des requérantes, mais dans les faits, dans les propos qui ont été tenus et les échanges qui se sont tenus à la Commission, ce qu'on en conclut, c'est que ce sera exactement la même offre, ou sensiblement la même offre que celle que connaissent actuellement les consommateurs canadiens, à un prix supérieur.

5217             Dans le cas de la demande de la télévision payante de langue française, c'est d'autant plus évident dans la demande de BOOMTV que ce que le consommateur retrouvera sur cette télévision payante, c'est, dans les faits, une programmation à laquelle il a actuellement accès par le biais de TVA et une programmation de long métrage ou d'événements sportifs à laquelle il aurait accès, de toute façon, via les services déjà existants.

5218             Donc, on ne voit pas l'offre supplémentaire, et on peut se poser la question, pourquoi le consommateur devrait‑il assumer des frais supplémentaires pour une offre qui est exactement ce qu'elle est aujourd'hui, sans compter qu'il y a, bien sûr, le risque de l'augmentation des coûts d'acquisition des productions américaines qui n'ont pas un si grand attrait au Canada français, qui ont un attrait très important au Canada anglais?

5219             Il est évident que la pression de plusieurs joueurs sur le marché pour acquérir cette programmation‑là va faire augmenter les coûts.  Donc, l'argent des diffuseurs va aller davantage à la production américaine, au détriment, possiblement, de la programmation canadienne.

5220             CONSEILLÈRE PENNEFATHER : Je comprends ce point.  Je vous entends très bien.  Je pense que c'est un point qui a été soulevé par plusieurs intervenants.

5221             Si je comprends bien, alors, en plus de cette position‑là, qui est basée sur une analyse qui dit que la programmation sera exactement la même, y compris la programmation canadienne, que je trouve difficile à concevoir, mais de toute façon, acceptons ça pour le moment, est‑ce que, d'après la présentation aujourd'hui, votre souci est plutôt que oui, il y aura les nouvelles productions, mais ces productions seront utilisées dans plusieurs créneaux, alors, ça reste un peu le statut quo?  Est‑ce que c'est ça le souci?

5222             MME SAMSON : Le souci, il est évidemment là.

5223             On peut imaginer, et prenons l'exemple de la télévision payante au Québec, que si BOOMTV fait l'acquisition d'une série dramatique prestigieuse, évidemment ‑‑ et BOOMTV ne s'en cache pas du tout dans son plan d'affaires ‑‑ il négociera au même moment les différentes plate‑formes de diffusion pour cette même série.

5224             On peut penser qu'à l'heure actuelle, un producteur indépendant québécois pourrait produire cette même série prestigieuse‑là, la vendre à un service de télévision payante existant, à une chaîne spécialisée ou à un diffuseur traditionnel, conventionnel, et cela en séquence.

5225             On peut imaginer que le même pouvoir décisionnel ou d'acquisition, centralisé en un seul endroit, limite d'autant la capacité d'un producteur et ses ayants droit de bénéficier de toute la vie économique de l'oeuvre en question, et évidemment, je ne pense pas qu'il soit réaliste de penser que la télévision payante francophone va offrir de la production télévisuelle coûteuse de grande qualité qui ne se retrouvera pas éventuellement sur sa chaîne conventionnelle.

5226             CONSEILLÈRE PENNEFATHER : Je pense que le CFTPA fait des remarques sur ce point‑là en insistant que c'est important qu'il y aura une négociation séparée pour chaque fenêtre.  Ça veut dire que ce qu'on appelle bundling of rights...

5227             MME SAMSON : Oui.

5228             CONSEILLÈRE PENNEFATHER : ...arrive à augmenter, en effet, le coût d'acquisition pour les producteurs au lieu de le diminuer.

5229             Est‑ce que c'est ça une façon d'aborder ce problème‑là?

5230             MME SAMSON : C'est possiblement une façon de l'aborder.  C'est, de toute évidence, pas la façon qu'a choisi de l'aborder la requérante dans le dossier qui nous est présenté.

5231             Je dois dire que nous avons, il y a de cela plusieurs mois, signifié à la requérante de BOOMTV nos inquiétudes à son sujet, et je vous avouerai que, même cette année, on a vu arriver dans les contrats qui sont proposés aux producteurs indépendants des clauses contractuelles, on ne peut plus abusives, quant aux exigences qui étaient demandées aux producteurs, qu'il s'agisse de droit de premier refus, de droit de dernier refus, de droit d'exploitation d'éléments dérivés d'une production, d'un spinoff d'une production, qui fait en sorte que TVA, pour la nommer, dans son offre contractuelle, requiert énormément du producteur et limite sa capacité à exploiter l'oeuvre.

5232             Je vous dirais honnêtement là, et c'est une blague qu'on fait à l'APFTQ, dans ce contrat‑là, honnêtement, la seule chose qui n'était pas demandée du producteur, c'était un don d'organe.

‑‑‑ Rires / Laughter

5233             MME SAMSON : Mais systématiquement, toute l'exploitation de l'oeuvre était cédée.  C'est un modèle qui est largement inspiré du modèle américain, qui est basé sur des buyout, ce qui est totalement en opposition avec notre tradition et notre façon de négocier nos conventions collectives avec les créateurs et les ayants droit des oeuvres.

5234             CONSEILLÈRE PENNEFATHER : Je pense que vous abordez aussi ce que monsieur Miller vient de mentionner, qu'il y a certainement à l'avenir... on ne peut pas peut‑être prévenir tout très exactement, mais on voit un avenir qui contient beaucoup d'autres débouchés que dans le système actuel, et je pense qu'on a bien saisi votre point.

5235             Un autre élément qui, d'après moi, est important ‑‑ vous le répétez aujourd'hui sur la page 5 ‑‑ c'est :

                        * Dans le cas où le Conseil n'accorderait pas de nouvelle licence de télévision payante, nous pensons, comme un très grand nombre d'intervenants, que les services de télévision payante existants devraient être tenus de consacrer une plus grande part de leurs recettes brutes aux dépenses de programmation canadienne. +

                      (Tel que lu)

5236             Deux questions.  Comment proposez‑vous que le Conseil aborde ce propos, et deuxièmement, est‑ce que ça peut avoir aussi un impact négatif sur l'avenir des services de télévision existants, dans le sens de mettre trop de pression sur leur plan d'affaires?

5237             MME SAMSON : Sur le plan d'affaires...

5238             CONSEILLÈRE PENNEFATHER : Oui, c'est ça.

5239             MME SAMSON : ...des télévisions payantes?

5240             CONSEILLÈRE PENNEFATHER : C'est ça.

5241             MME SAMSON : Bien, je pense que l'opportunité qu'on souhaite avoir ‑‑ et c'est la raison pour laquelle on demande à avoir un accès accru quant aux données financières découlant de l'exploitation des chaînes de télévision payantes et spécialisées ‑‑ nous souhaitons avoir l'opportunité de discuter avec les détentrices de licence, effectivement, des marges bénéficiaires fort importantes, qui sont démontrées dans les résultats financiers des entreprises, et certainement, un effort soutenu de leur part pour supporter la production canadienne, ce qui pourrait encourager la production d'oeuvres originales, réellement originales, canadiennes et nouvelles.

5242             CONSEILLÈRE PENNEFATHER : Merci, Madame Samson, Madame.

5243             MME SAMSON : Merci.

5244             CONSEILLÈRE PENNEFATHER : Monsieur le Président.

5245             LE PRÉSIDENT : Monsieur le Vice‑Président French.

5246             CONSEILLER FRENCH : Madame Samson, je voulais être juste certain que j'ai bien saisi votre point.

5247             D'abord, je comprends très clairement le point sur le dédoublement possible de programmation, l'impact sur le consommateur de payer deux fois pour ce qu'il ou elle reçoit déjà.

5248             Deuxièmement, cependant, on aboutit dans une situation où, en tant que représentant des producteurs de film et contenu audiovisuel québécois, vous nous dites ‑‑ et on parle des intérêts de vos membres ‑‑ j'aimerais mieux une situation où il y a un acheteur plutôt que deux, et je l'aime mieux essentiellement parce que le deuxième acheteur ne nous paraît pas, d'après notre expérience passée, comme un acheteur susceptible d'acquérir des droits où c'est contenu de façon propice à favoriser l'efflorescence de mes membres et de l'industrie.

5249             Est‑ce que c'est une façon...  Je sais que c'est un peu cru, mais est‑ce que c'est ça que vous nous dites?

5250             MME SAMSON : Non, mais je pense que le net/net, c'est à peu près ce qu'on...

5251             CONSEILLER FRENCH : O.K.

5252             MME SAMSON : Je pourrais dire que c'est ce qu'on prétend, en effet, oui.

5253             CONSEILLER FRENCH : D'accord.  Parce que ce n'est pas évident que dans une situation comme ça, on n'aime pas mieux deux que un là.

5254             MME SAMSON : Non.  Non, ce n'est pas évident...

5255             CONSEILLER FRENCH : Non.

5256             MME SAMSON : ...et je dois vous dire que dans le cas plus spécifique de BOOMTV, nous reconnaissons... tous les producteurs reconnaissent que le Groupe TVA a effectivement consenti des investissements importants en productions canadiennes au cours des dernières années, beaucoup de ces investissements découlant des bénéfices tangibles liés à la transaction et à l'acquisition de TVA par Quebecor.

5257             Je pense que les investissements ont été faits... d'après ce qu'on voit sur les résultats financiers de TVA, ça n'a pas été un fardeau trop insupportable.  La santé financière de l'entreprise est là pour le démontrer.

5258             Nous craignons, effectivement, que la période des bénéfices tangibles achève et que, dans les faits ‑‑ je vous donne la lecture assez crue que nous en faisons ‑‑ dans les faits, la requérante demande au CRTC une faveur ou un passe‑droit pour lui permettre de continuer à financer cette programmation, qui la rend si populaire et rentable, en faisant payer le consommateur et en ajoutant absolument rien à son offre télévisuelle actuelle.

5259             Je m'excuse si ma réponse a été plus crue que votre question.

‑‑‑ Rires / Laughter

5260             CONSEILLER FRENCH : Madame Samson, j'apprécie votre candeur et votre franchise.  On bénéficie de vos lumières ‑‑ sans nécessairement accepter mot pour mot.

5261             Tout ceci au sujet d'un télédiffuseur qui nous a informé que ‑‑ et je cite de mémoire, je peux me tromper ‑‑ mais quelque chose de l'ordre de 90 pour cent de leurs achats d'acquisition de contenu sont sur les acquisitions de contenu canadien.

5262             MME SAMSON : Depuis les récentes années, certainement, il faut dire qu'au Québec, c'est certainement une offre de programmation qui s'est avérée excessivement profitable pour les diffuseurs, pour tous les diffuseurs, en effet.

5263             La situation est peut‑être un peu différente au Canada anglais, mais il faut dire qu'au Québec, il y a maintenant 15 ans qu'une émission américaine n'a pas occupé une position importante dans le palmarès, et c'est dans l'intérêt des diffuseurs québécois d'offrir une programmation québécoise de qualité.  C'est ce que le consommateur et le téléspectateur est habitué de recevoir chez lui et veut recevoir chez lui.

5264             CONSEILLER FRENCH : Donc, ce n'est pas un sujet sur lequel on devrait se targuer, c'est plutôt une nécessité commerciale qu'on reconnaît que l'entreprise en question a poursuivi et accomplit?

5265             MME SAMSON : Oui, mais l'entreprise en question ne s'est jamais engagée à ni réduire sa programmation canadienne sur sa chaîne conventionnelle et à ne jamais réduire ses investissements en programmation originale non plus.

5266             Donc, on a lieu de penser que la télévision payante pourrait prendre le relais financièrement d'un réseau conventionnel sans pour autant apporter une plus‑value à l'offre télévisuelle actuelle.

5267             CONSEILLER FRENCH : Alors, nous voici devant une situation où dans un milieu qui est quand même assez restreint, soit le milieu de diffusion et de production de contenu audiovisuel à Montréal.

5268             Vous n'avez pas pu dans le conversations antécédentes résoudre ces questions.  Vous avez discuté avec Vidéotron... pas Vidéotron, avec QMI?

5269             MME SAMSON : Avec TVA et Quebecor, oui, oui.

5270             CONSEILLER FRENCH : TVA et Quebecor, et puis le résultat était insatisfaisant?

5271             MME SAMSON : Insatisfaisant dans le sens où nous avons levé le drapeau, il y a de cela plusieurs mois, quant à certaines préoccupations de la requérante.  On nous a bien parlé d'un modèle d'affaires qui allait être revu et qui allait être proposé.

5272             Je vous avouerai qu'on n'a pas eu de retour de modèle d'affaires, en tout cas, qui nous a été présenté jusqu'à maintenant, et ce qu'on déduit ou ce qu'on comprend du modèle d'affaires qui nous attend, il est tout à fait inapproprié et inadapté à nos conventions collectives.

5273             Ils remettent en question la totalité de la culture et des coutumes de négociation, et pour l'avoir dit bêtement à la requérante, et je peux vous le dire exactement, je ne crois pas que l'APFTQ, qui s'engage dans les mois qui viennent dans plusieurs négociations de conventions collectives majeures au Québec, je ne crois pas que l'APFTQ s'engagera sur une piste qui risquerait de paralyser l'industrie francophone canadienne de la production et de la diffusion dans un conflit d'un travail pour permettre à la requérante d'arriver à son plan d'affaires, sans que les autres intervenants de l'industrie y trouvent leur compte.

5274             Ça m'apparaît absolument impensable et irréaliste de penser que...  Puis vous savez, il faut comprendre que les dirigeants des associations professionnelles, comme les producteurs, ne sont pas sans voir les résultats financiers et les desseins menés par les radiodiffuseurs et les télédiffuseurs.

5275             Je pense qu'il est incroyable qu'on puisse croire que les gens vont se départir de leurs droits ou de la possibilité de participer à la vie économique d'une oeuvre pour s'en aller vers un modèle de travail et d'exploitation, qui est le modèle américain, qui n'est pas le nôtre, et je peux vous dire que, pour représenter 140 entreprises de production indépendantes, les producteurs indépendants québécois n'ont aucune intention de devenir des line producers pour un major canadien, et ça n'aide pas du tout le dessein et le plan d'affaires des producteurs indépendants, et la position dans laquelle semble nous amener la requérante est pas mal celle‑là.

5276             CONSEILLER FRENCH : Merci beaucoup, Madame Samson, c'est très clair.

5277             MME SAMSON : Merci.

5278             LE PRÉSIDENT : Merci beaucoup, Madame Samson.

5279             MME SAMSON : Merci.

5280             LE PRÉSIDENT : Ce sont les questions.

5281             On va prendre une pause‑café maintenant.  We will have a coffee break now and resume in 15 minutes.

‑‑‑ Upon recessing at 1114 / Suspension à 1114

‑‑‑ Upon resuming at 1137 / Reprise à 1137

5282             THE CHAIRPERSON:  Order, please.  À l'ordre, s'il vous plaît.  Please proceed.

INTERVENTION

5283             MS JONAS:  Bonjour, good morning.

5284             I am Jennifer Jonas.  This is Bill House.  We are members of the Producers Roundtable of Ontario or PRO, regrouping independent feature film producers in Ontario.

5285             So as an active industry stakeholder we are happy to be here this morning.  Thank you.

5286             As principal suppliers of English‑language feature film programming we offer our perspective on the call for comments on new pay television broadcasting services without endorsement or support of a particular application or applicant.

5287             Nous sommes convaincus que le Conseil est à même d'évaluer si le marché actuel de la télédiffusion est suffisamment robuste pour soutenir de nouveaux services de télé payante.

5288             En tant que producteurs de longs métrages indigènes, nous constatons qu'il y a un urgent besoin d'accroître le financement et l'investissement dans les films canadiens, et ce afin de revitaliser l'environnement économique dans lequel évolue la production cinématographique.

5289             Nous croyons que ceci peut être accompli par l'introduction de mesures pratiques que nous décrirons plus tard, des mesures qui s'appliquent aux services proposés et/ou aux services actuels.

5290             Ces mesures auraient un impact immédiat et bénéfique sur la programmation canadienne et donc sur l'industrie même de la production.

5291             MR. HOUSE:  Thank you.

5292             The Producers Roundtable of Ontario comprises over 40 Ontario‑based feature film producers responsible for many of the most artistically and commercially successful English‑Canadian feature films in recent years.  We are not service producers but holders, initiators and developers of proprietary programming.

5293             PRO's members are small production companies whose priority is the creation of original English‑language Canadian feature films in which we retain copyright and profit participation in those films.

5294             The film output of PRO's membership forms the core of the domestic English‑Canadian language feature film content offered by the Canadian pay TV services.  PRO's members employ the best of Canadian creative talent, writers, performers, composers, production and post‑production crews.

5295             Since its formation in 2004 PRO has paid an active advocacy role including meeting informally with Telefilm Canada's Ontario office on a monthly basis, making written submissions on both the federal and provincial levels on matters pertaining to feature film such as the recent submissions to you, to CAVCO and to the Standing Committee on Canadian Heritage before which we also appeared.

5296             MS JONAS:  Challenges facing feature film production in Ontario.  There is, unfortunately, no ongoing direct investment in the development or production of feature film available in the province of Ontario, less than sufficient feature film activity from distributors and little support from public or private broadcasters other than pay television in the English‑language market.

5297             As a result, Ontario‑based producers of English‑language feature film are at a material disadvantage to their peers in other provinces and countries.  We are an identifiable production community distinct from the CFTPA, formed to concentrate on the particularities and difficulties of producing in the Ontario market as we have enumerated above.

5298             Étant donné l'absence relative d'investissement provincial dans notre industrie, les mécanismes fédéraux et leur bon fonctionnement sont d'une importance vitale pour les membres de PRO et pour l'avenir de l'industrie dans laquelle nous oeuvrons.

Nous sommes donc très heureux et reconnaissant d'avoir le privilège de témoigner dans le cadre de l'audience publique aujourd'hui.

5299             MR. THOMAS:  English‑Canadian production requires additional production financing assistance.  Simply put, we need more development and production money.

5300             This request is not to sustain the current level of production activity.  Sustaining current levels of activity is just not enough.  We need to offer Canadian audiences more films and more choices.  We need a more robust domestic content market.  We need to develop a critical mass of production activity necessary to build and sustain a viable and self‑sufficient domestic English‑language feature film industry.

5301             For the record, we wish to express our gratitude to Astral and Corus for their participation and support in a wide variety of feature films and development, production, promotion and exhibition over the past several years.  However, in addition to the official statistics presented by both the applicants and the intervenors at this hearing, a telling case in point was this year's Canada First! series at the Toronto International Film Festival.  In this highly‑recognized indigenous Canadian programming only two of 14 films, about 14 percent, came from Ontario and their budgets were less than $2 million.

5302             So we find ourselves before you today on behalf of all PRO members to request that the Commission not just focus on the economics and sustainability of the proposed services per se.  We implore the Commission to focus as well on the principle content of these intended services and to focus on the Cancon carriage and expenditure commitments of those intended services and their incumbent competitors.

5303             We urge the Commission to focus on Canon as it relates to the acquisition, development, production and carriage of feature films and original dramatic series with a particular intention of expanding the economic resources available to the English‑language feature film production community.  We urge the Commission not to waste this opportunity to enhance private sector contributions in a system where the public purse is bursting.

5304             MS JONAS:  There are some encouraging notions in the four applications.  We are interested in the lessons and proposals to be derived from the differing approaches to Cancon adopted by the four applicants.

5305             As a baseline, each new pay television entrant must contribute new Cancon development and production financing.  This cannot simply be a rob Peter to pay Paul scenario.  Each new successful entrant into the pay television sector must bring new net Cancon dollars to the table and it must not weaken or jeopardize the performance of the existing pay television services whose activities in the current indigenous community are indispensable.

5306             Nous croyons fermement que le financement et l'investissement dans les productions canadiennes devront elles aussi augmenter en fonction de la croissance des abonnés résidentiels.

5307             We urge the Commission to require these applicants to make meaningful Cancon commitments and to establish clear and unequivocal rules concerning these commitments.  Why is CFC able to offer 50 percent Cancon and other applicants not?  Perhaps all applicants should be under an obligation to devote at least half of their broadcast carriage to domestic feature film programming.

5308             Other interesting Cancan proposals drawn from these applicants include:  from CFC and Spotlight offers to fully finance low‑budget features; from Archambault meaningful licence fees of $500,000; from Allarco paying out of licence fees during production and thus removing the burden of interim financing.

5309             PRO also wishes to acknowledge and wholeheartedly endorse the 12 recommendations put forth by the CFTPA in its intervention specifically as they relate to the issues and concerns advanced by PRO's membership; that is, that any aspect of this hearing must reinforce the current minimum or greater conditions for Cancon expenditure in the areas of development, production and the acquisition of Canadian feature films for carriage on these proposed new pay TV services.

5310             MR. HOUSE:  Our principal intervention is really:  What is this thing called transparency?

5311             We do not wish to overlap the submissions made or to be made by our colleagues at the CFTPA.  However, we do want to underscore the comment made in a written intervention comment letter specifically with respect to the issue of transparency and will elaborate on this comment in our remarks that follow.

5312             Historically, the Commission has focused on the Cancon commitments made by prospective applicants as expressed as a percentage of revenue to be spent on Cancon expenditure.  In fact, this focus has resulted in these expenditure percentages being inscribed as the conditions of licence in past hearings.  It goes without saying that we urge the Commission to make all new and increased Cancon expenditure and carriage commitment, express conditions of any licences to be issued pursuant to this hearing.

5313             However, a commitment without consequence or a commitment that is equivocal is tantamount to no meaningful commitment at all.  PRO feels it is equally as important for the Commission to emphasize, demand and enforce these Cancon commitments as it is to set Cancon carriage and spend commitments in the first instance.

5314             The rules applicable to Cancon carriage and expenditure commitments must be universal, unequivocal, easily understood and their compliance easily assessed.  In essence, they must be transparent.

5315             So what does this transparency mean to Ontario and the English‑language predecessors?  Simply put, it means this:

5316             Firstly, a dollar commitment is a dollar to be spent.  Definitions of subscriber revenues must be gross subscriber revenues and subscriber‑based revenue numbers and their calculation must be made publicly available.  The Commission's Cancon expectations and the successful applicant's conditions of licence must provide that no discounting either direct or indirect contribution, packaging or any other means can serve or have the effect of reducing the licensee's gross Cancon expenditure commitment.

5317             Moreover, the Cancon expenditure commitment must be easily discernible and calculable by the recipients of the Cancon expenditures and not just by the accounting or finance departments of the successful licence applicants.  A dollar commitment ‑‑ a dollar of gross licence revenue must relate directly to a dollar of Cancon expenditures.  Licensees must be candid and make complete disclosure of their revenue base.  This process must be transparent to all, the Commission and the recipients of Cancon expenditure, not just the licensees.

5318             MS JONAS:  Secondly, Cancon expenditures must be exclusively committed and spent on the acquisition, development and production of Canadian feature films and original dramatic series production without exception; In‑house production, non arm‑length production; barker channel activity, for example, while all worthy activities, should not in our view be allowed to satisfy a licensee's Cancon expenditure commitment.

5319             MR. HOUSE:  Thirdly, the Cancon carriage and expenditure rules must be universal subject to limited exception if any and easily understood by the Commission, the licensees and the production community to avoid misinterpretation or multiple interpretations.

5320             What is the licensee's allocation within the mandated Cancon expenditure for acquisition, for development, for production and how are these rules administered insofar as they affect the production community?

5321             For example, we fully understand the rules under which the Harold Greenberg Fund operates.  We do not understand aspects of the present equity investment programs of either incumbent pay TV service. Such rules in the future for either incumbents and/or new services need to be easily understood and identifiable and are components disclosed for the independent production community's assessment.

5322             MS JONAS:  Fourthly, for the acquisition of Canadian content films, the price paid by a licensee as part of its Cancon expenditure commitment needs to either be a relatively fixed number dedicated by the service or, in the case of existing services, administered on something akin to a per‑subscriber calculation.

5323             For example, 10 years ago Cancon feature films were being purchased by pay TV licensees at a rate of 25 cents per subscriber.  In the current environment, based conservatively on one million subscribers, the minimum licence fee for Cancon feature films should be in the range of 250,000.  Is this the case?  No.  The current presale value of a Canadian feature film to a pay TV licensee is in the order of $150,000.  Why the falloff?  What is then the method of calculation?

5324             These issues are mysteries as there is no transparency in the application of the current rules.  It should go without saying that increasing licence fees in the acquisition of movies to rates experienced 10 years ago would in turn increase the minimum guarantees we get from Canadian distributors and therefore improve financing structures for the production community.

5325             MR. HOUSE:  Fifthly, commitment to riskier script and project development, not just broadcast licence fees, must be enshrined as part of each successful licensee's Cancon commitment.  In an environment in which Telefilm Canada has fully committed its fiscal 2005‑06 feature film development dollars by the beginning of October 2005 with a new fiscal five months away, a significant Cancon commitment to script and development financing by successful pay TV licensees would have an immediate and beneficial impact on Canadian domestic feature film production.  At the same time it will relieve the burden from Telefilm Canada in moving feature film development along the production pathway.

5326             MS JONAS:  Sixthly, each successful licensee's Cancon commitment must include an equity investment participation component.  This will assist indigenous feature producers to increase their budgets to meet the exigencies of producing for the world marketplace.

5327             MR. HOUSE:  Seventhly, in calculating each successful licensee's Cancon commitment to original and dramatic series production, direct and indirect contributions flowing through or calculated in respect of the licensee's Cancon contribution, like the Canadian Television Fund and; more specifically, the licence fee top up administered by the CTF, must be excluded.  Each licensee's Cancon commitment must be a real additional dollar commitment to the content production community, not just a re‑channelling of existing sources of finance.

5328             MS JONAS:  Finally, red tape production.

5329             To ensure that these Cancon carriage and expenditure recommendations and conditions of licence are effected both in spirit and practice on an ongoing basis, PRO believes that each successful pay licensee should be required as a condition of licence to appoint an internal Cancon officer similar to that required in connection with the safekeeping of personal information by the privacy officer under the Personal Information Protection and Electronic Documents Act Canada.  This Cancon officer would be charged with the authority and responsibility to ensure that Cancon conditions of licence are affected, to serve as a Cancon champion or ombudsman for producers in their dealings with licensees on Cancon issues, and for reporting both Cancon compliance and the lack thereof to the Commission.

5330             MR. HOUSE:  PRO submits that the compliance with the spirit and intent of Cancon expenditures as outlined above as conditions of licence for each successful pay TV licensee or with respect to the incumbents, will have an immediate beneficial impact on the economic and cultural environment in which we strive as content producers to make English‑language feature films and original dramatic series in Canada.  Such measures enshrined by you would give the Commission a long term and lasting impact on this complex playing field.

5331             MS JONAS:  Nous remercions le Conseil de nous avoir donné l'opportunité de témoigner aujourd'hui.  Bonne chance.

5332             Nous serons heureux de répondre à vos questions.

5333             THE CHAIRPERSON:  Just as an introductory comment, and I don't want to sound critical but, you know, you filed basically a 10‑line intervention and then filed an extremely detailed and elaborate oral presentation.  The problem with that is that neither the applicants nor other intervenors nor the Commission can really get a hold of this until you actually present it to us at the last minute and because of its elaborateness it is extremely difficult to come to grips with.  So for the future and, I think, even in this proceeding, the weight we can attach to it is significantly diminished by that procedure that you adopted.

5334             I just wanted you to know that.  You know, we go through a tremendous amount of analysis of all the briefs filed and prepare questions and try and come to terms with it.  So the next time you appear you should reverse the detail and put the detail in your initial presentation and then speak to it or elaborate it or, hopefully, move along with the flow of the proceeding when you come to your oral presentations so that it is clear that you are plugged into what has been happening here over the last few days and you help us more.

5335             MR. HOUSE:  Yes, Mr. Chairman, in the future we will do that.

5336             Just as a word, I mean, PRO is a very unofficial non‑bureaucratic ad hoc organization. We don't have any staff.  Our members, you know, our quite dispersed throughout the province of Ontario.  In light of that, we felt that filing a letter as brief as we did, focusing on one issue; being transparency, it was incumbent on us to appear subsequent to that letter and explain what is this thing called transparency from our point of view.

5337             So I apologize for the reverse order of things.  We will take that under advice in future and act accordingly.

5338             THE CHAIRPERSON:  Thank you.

5339             Vice‑Chair French.

5340             COMMISSIONER FRENCH:  Because of the issue that the Chairman has raised with you, I hope you will pardon us if we don't go into detail on the last half of your presentation because, as he has pointed out, we are really not in a position ‑‑ as educative as it may be for all of us and as informative and useful for the roundtable perhaps as a base of future interventions, it is not something that we can realistically expect to discuss and possibly decide upon in this proceeding.

5341             What is before the Commission is the possible licensing or non‑licensing of some additional pay services and you have urged us not to waste this opportunity.  So what in your mind would be a waste of the opportunity?

5342             MR. HOUSE:  For the end result of this process, whether it be with respect to incumbents who I understand the licences are not up for another couple of years; but if new licences are granted, for these measures with respect to Cancon to be the principal focus and that we have at the end of the day a system that we all understand, what is gross revenue; what is, therefore, 32 percent of gross revenue?  How is that 32 percent of gross revenue spent?  What is the division between development production, acquisition, et cetera?

5343             I guess what we are asking for in this document and, in general, is that we all understand better.

5344             As a backdrop to this we think the system and the status quo is in a shape that requires serious attention and if that attention is going to be as a result of new licensees and that is going to have an impact on the amount of dollars in the system from our point of view, that is what we are looking to happen here.  I think that is fair for us to do so.

5345             COMMISSIONER FRENCH:  So you are neither in favour nor against the licensing of an additional one or more pay licensees?

5346             MR. HOUSE:  We said we are not really in a position to comment on whether the market can sustain one or more licenses.  We simply would like to say that the system needs more finance in it and if that comes from greater transparency with respect to the incumbents, new licensees and, again, more or greater transparency, that would be certainly a net gain for us as producers in Ontario.

5347             COMMISSIONER FRENCH:  Mr. Chairman, I don't think I have any more questions.

5348             Thank you.

5349             THE CHAIRPERSON:  Thank you very much.

5350             Madam Secretary ‑‑ oh, sorry, Commissioner del Val.

5351             COMMISSIONER del VAL:  Sorry, just one factual question.

5352             In your paragraph 16 you mention the Toronto International Film Festival and only two of the 14 films came from Ontario and their budgets ‑‑ oh, sorry ‑‑ where did the other 12 come from?

5353             MR. HOUSE:  Across the country.

5354             COMMISSIONER del VAL:  Okay.  I guess you don't have the breakdown of ‑‑

5355             MR. HOUSE:  Oh, sorry, I don't, no.

5356             COMMISSIONER del VAL:  Okay, great.  Thank you.

5357             THE CHAIRPERSON:  Thank you very much.

5358             MR. HOUSE:  Thanks very much.

5359             THE CHAIRPERSON:  Madam Secretary.

5360             THE SECRETARY:  Thank you, Mr. Chairman.

5361             I would now like to call as a panel of intervenors the following eight intervenors to come to the front table.  It is the Alberta Motion Pictures Industries Association, Sandy Peardon from ITAP; Sound Venture Productions Ottawa Limited; John Aaron Production Inc.; IMP Inc.; Jim Bird; Nancy Craig and Kelaur Productions Inc.

INTERVENTION

5362             MR. BROOKS:  AMPIA represents over 250 member companies involved in all aspects of film and television production in Alberta.

5363             The mandate of our association is to ensure the growth and development of Alberta's indigenous industry, especially the key creative levels:  Producers, screenwriters, cinematographers, directors, and talent, plus many other creative craft positions.  Central and crutial to this mandate is maintaining an environment which Alberta producers can initiate, develop, and produce films and programmes which they have creative and financial control.

5364             For the record, AMPIA would like to state this intervention was prepared without conflict of interest.  Our position was developed and approved in accordance with the Conflict of Interest bylaws of our association.

5365             It is beyond the expertise of AMPIA to determine whether new paid television channels should enter the Canadian marketplace.  We leave this important determination to the Commission.

5366             However, AMPIA is here today in support of the application by Allarco Entertainment. In the past, AMPIA has enjoyed a very positive relationship with the Allard family through its previous terrestial and paid TV ventures.  Over the years, the Allard family has been instrumental in the growth of Alberta's independent film and television production community.  Dr. Charles Allard had a vision for a new independent way of creating and broadcasting television.  Many of Alberta's most notable films and entertainment programms were made as a result of their committment to Alberta's local production community.

5367             These productions allowed our crews to gain experience and allowed our creative pool of producers, directors, writers, and actors to flourish.

5368             There's been a great deal of discussion this week about the concept of an all‑Canadian paid TV channel.  Some intervenors have suggested this as a negative, as ghettoisation or marginalisation of Canadian programming.  Others have debated the merits using the example that a Canadian author might have more success if their book was in the fiction section rather than in the Canadiana section.

5369             While we understand these points of views, could this not be a visionary concept?  What if an all‑Canadian channel were seen as an opportunity for the growth of original Canadian programming?  What if serious dollars were expended to create original Canadian programming that was exclusive to this Canadian channel?

5370             It would take vision and courage to take such a chance, which is one of the reasons AMPIA supports Allarco's proposal for a proudly Canadian channel.  This, in addition to the required Canadian content that will run on all of its other proposed multiplex channels.

5371             However, we also believe that it is crucial that this channel be promoted and supported as promised.  It must truly be proudly Canadian, and significant lincense fees from Allarco should reflect that pride.  However, we would also believe that in order for this concept to truly work, a committment to scheduling original Canadian programming must be a condition of the licence and that the hours of original programming should increase each year of that licence.

5372             This concept provides an opportunity to truly grow the Canadian industry and build viewer loyalty from Canadian viewers.

5373             AMPIA respectfully recommends that the applicant's promotional commitment of $1 million annually for the Canadian channel also be made a condition of licence and that the Commission explore with the applicant their commitment to original production on their proudly Canadian channel concept.

5374             AMPIA is also very supportive of Allarco's regional innitiative to place senior creative development executives in every province.  We believe that this initiative is critical since the people located in each province are most familiar and in tune with the regional production communities.

5375             We respectfully recommend that the Commission explore with the applicant their vision of how the senior executive officers would have the authority to move projects forward.

5376             In addition, Allarco proposes additional expenditure for Canadian programming by investment either by equity or bridge financing.  In our discussions with Allarco, it is our understanding that the $4 million commitment in the first year of the licence is designed to prime the pump for future dollars and dependent upon 32 percent of gross revenues in the subsequent years of the licence.

5377             AMPIA welcomes the concept of equity investment and understands that Allarco is willing to consult with us in relation to their bridge financing proposal so that it may truely benefit our membership. We also recommend that these promised dollars be in addition to licence fees.

5378             As the Commission is aware, the feature film and drama producers in Alberta ‑‑ in fact, across Canada continue to struggle to accumulate the necessary funding to create uniquely Canadian programming.  AMPIA is encouraged by Allarco's commitment to spend $2 million each year of the licence on script and concept development.

5379             Alberta producers have seen various development funds disappear over the last few licencing decisions, and it has had an extremely negative impact on our membership.  We believe it has significantly reduced the number of Alberta stories on Canadian television and movie screens.

5380             We are also pleased to see this proposal from Allarco is exclusive of overhead costs. AMPIA supports the applicant's suggestion that this annual commitment be made a condition of licence, as it ensures that the promised dollars go on the screen and not into administration.

5381             AMPIA also applauds Allarco's committment to use independent producers exclusively for all their in‑house production requirements in addition to the programming they will licence.  This is a very important committment, and we respectfully recommend that this promise also be made a condition of their licence.

5382             AMPIA is encouraged by Allarco's accelerated production funding initiative.  This innovative plan to pay out installments of the licence fees during the production process will greatly assist producers in managing cash flow for productions, a very critical issue for Alberta's independant producers.

5383             In closing, AMPIA respectfully suggests that the Commission make Allarco's commitments to the funding ‑‑ be it development or licencing ‑‑ conditions of their licence, that the applicant report annually on expenditures to independent producers.

5384             We would also that the Commission explore a method of ensuring that a specific percentage of the monies committed are expended each year to ensure the dollars flow to the production community in a manner that can be easily calculated.

5385             We sincerly thank the Commission once again for the opportunity to provide our comments and welcome any questions you might have.

5386             COMMISSIONER DEL VAL:  Thank you, Mr. Books.  I trust you are in good health.

5387             MR. BROOKS:  Yes.  Thank you.  Yes, thank you, Mr. Chairman.  I am.

5388             THE CHAIRPERSON:  Good.

5389             Commission Del Val.

5390             COMMISSIONER DEL VAL:  Thank you.

5391             Your whole presentation actually answered a number of questions that I have, so thank you very much.

5392             It leaves me with just one or two points.  On exclusivity of Canadian programming, I note that on page 4 at the last line, you were envisioning Canadian programming that was only available on this Canadian channel.  So could you tell me what is your view on whether Canadian programming should be exclusive arrangements with broadcasters or should not be exclusive?

5393             MR. BROOKS:  Well, I think you have to look at it as a business initiative.  If it is non‑exclusive, and a producer goes to the various services and sells their programming on a non‑exclusive basis, the price actually goes down, because people say, "Well, if it is on the other channel, then I guess I don't have to pay as much".

5394             But I think there should always be ‑‑ especially for pay.  I mean, for paid television where you are going to market a service, you have to market something that is different, not the same as, and that would mean you have to have an exclusive period where that original programme was available only to you.  And perhaps maybe we need to reduce the exclusivity periods, perhaps three months, six months before it goes onto another service.  But I think that you need an exclusive period.

5395             COMMISSIONER DEL VAL:  And in your view, the exclusive arrangements, should it be up to, say, the market for the producers to decide whether they want an exclusive arrangement, or should that be something that is regulated?

5396             MR. BROOKS:  I think that is part of the negotiation process.  In some cases, it is the producer that may want it non‑exclusive, in some cases it is the buyer who may want it non‑exclusive.  It is usually a negotiating process, and the price varies upon the deal itself.

5397             COMMISSIONER DEL VAL:  And I am wondering in terms of the current licencees, have they been supportive of your activities, or have you received any funding or support from the two existing licencees?

5398             MR. BROOKS:  Yes, the current licencees are very supportive, certainly, of Alberta producers.  But at the same time, there is only one place to go.  Some of our people have some very innovative ideas, and in some cases, the current holders of a licence are not interested in some of those ideas, so there is no place to go.

5399             And if we have another channel, there is a chance that the other channel will say, "Well, that is interesting.  Let me try that".  So it opens up the whole idea of presenting an innovative idea to another competitor, as it were.

5400             COMMISSIONER DEL VAL:  So would that be an answer to a question of, say, why not just increase the Canadian programming, a contribution requirement of the existing licencees versus licencing more services?  Would that be an answer to it, because there would be more places to go?

5401             MR. BROOKS:  Well, if there was an increase in the percentage of Canadian that was required, they would certainly be more interested than in listening to more proposals.  So I think that would have the same effect.  If they were increased with the current holders of those licences, that would be the same effect of introducing new services.

5402             COMMISSIONER DEL VAL:  Thank you. Those are my questions, Mr. Chairman.

5403             THE CHAIRPERSON:  Thank you.

5404             Thank you very kindly, Mr. Brooks.

5405             And Sandy Peardon will be next.

5406             MR. WILSON:  Mr. Peardon had to catch a plane this morning so will not be here.  He extends his apologies.

5407             THE CHAIRPERSON:  Thank you.

5408             Sound Venture Productions.

5409             MR. BREGMAN:  Mr. Chair, Commissioners, my name is Neil Bregman.  I am pleased to be here today in support of the Allarco proposal for a national general paid television service licence.

5410             Sound Venture Productions is a 25‑year‑old Ottawa‑based film and TV production company, thereby making us unique right from the start, specialising in the production of high quality Canadian content programming across a wide variety of genres.

5411             From the documentary film, we screen Tuesday night at the Canadian War Museum about Raymond Moriyama and his architecural marvel, the War Museum across the bridge, to the contemporary dance film "Assylum of Spoons" that will premier next week in Toronto at the Moving Pictures Festival to our award‑winning preschool children's series called "The Toy Castle" featuring dancers from the Royal Winnipeg Ballet.  And now the growing number of movies that we've been producing in Ottawa over the last few years were an active participant in the production community in, and I would characterse us as a mid‑size production company.

5412             In addition to being the President and CEO of Sound Venture, I've been an active member of the CFTPA, also having spent nine years on the Board of Directors in various capacities including Treasurer and Chair of the Ontario Producers Panel.  And, of course, being from Ottawa, one of the issues that I've been interested over the whole term of my participation there is fairer access to the air waves and fairer access to financing opportunities for smaller regional producers across Canada.

5413             First of all, I would like to say that I believe the Canadian Broadcasting System can sustain another paid television service and, furthermore, needs at least one more.  It is obvious that Canadian Broadcasting System has become successful and profitable.  Yet at the same time, the system has become more and more restrictive and complex for the independent producer to navigate.

5414             A lack of competition in the system is limiting our programming and production capabilites in creating an environment where innovation is being stifled.

5415             In regards to the profits that are generated, I think a lot of them do come at the expense of the production community.  Production companies are being squeezed, and this squeeze comes in various forms including lower licence fees or stagnant licence fees in the face of ever‑rising production costs, less rights or territories left to the producer for the same or stagnant licence fees, more onerous deliverable requirements, slower payment structures, and other similar forms of restrictive licencing terms.

5416             In the end, I believe this only hurts the quality of programmes being made and marginalises the value of the independent production sector. Somehow we must fight to reverse this trend, and increased competition in the sector is one way of doing it.

5417             I also believe there is substantial room for more voices in the system, not just from the major production centres, but from regions like our own that have distinct and unique stories to tell.  In this regard, another paid service will help improve the overall choice and quality of programming available to the Canadian public and ensure a more diverse selection of stories for people to choose from.

5418             This is a win‑win for the public, the producers, and the system at large, all of whom will benefit from the added diversity in the system and some well‑needed competition to push all the licencees to be their best.

5419             This notion of increased access for producers from regional production centres is one of the cornerstones of the Allarco proposal.  With their commitment to the establishment of development offices in every province across Canada and in cities other than just the major market cities, Allarco is taking a bold and innovative step in increasing opportunities for many pruducers who may have been marginalised in the past, and in doing so has made an important statement about our potential and future in the Canadian production sector.

5420             I am certain you will see increased innovative input into the system from Ottawa/Gatineau, and other regional areas with the presence of Allarco here and across the country to the benefit of everybody in the system.  And in particular, Ottawa/Gatineau is an interesting case in that it is been for years an underdeveloped market, but in the past several years has been able to open up its own independent film office.  We have been able to bring a substantial amount of film and drama production into the city, and we have started to grow a real solid foundation and infrastructure upon which there is tremendous potential.

5421             Aside from regional access and development, Allerco has cleanly deliniated a variety of very thoughtful, producer‑friendly initiatives that will assist all producers and ensure an overall improvement in the broadcastsing system that will hopefully push others to follow.

5422             Most of these are quite straightforward and obvious but I think are worth mentioning again.  As an example, added funding specifically for programme delivery and high definition is a long‑overdue initiative essential to keep Canadians competitive in a changing technologial and market environment.

5423             Increasing cash flow from greater licence fee payments during production will greatly assist us.  And this is a key factor in the production process that is always a problem for independent producers.

5424             Other independent producer‑friendly policies such as no in‑house production, more marketing and promotion for Canadian programmes, and other related commitments that are well documented should make a big difference to the system overall.

5425             I would ask the Commission to support this innovative, important submission and grant a licence to Allarco to compete in a paid television market at its earliest opportunity.

5426             I thank you for allowing me to participate in this hearing and to express my opinions today.

5427             THE CHAIRPERSON:  Thank you very much.

5428             Madam Pennefather?

5429             COMMISSIONER PENNEFATHER:  Thank you, Mr. Chairman.

5430             Thank you for your comments. Mr. Bregman, I think I heard you say at the very start of your comments today that the system can sustain another service and needs one more.  Did I hear you correctly?

5431             MR. BREGMAN:  Yes.

5432             COMMISSIONER PENNEFATHER:  On the "needs one more", I'm assuming you're talking about the advantages you listed again today to predict the production community.  Am I right?

5433             MR. BREGMAN:  Yes.

5434             COMMISSIONER PENNEFATHER:  But when you say, "It can sustain another", on what do you base that comment?

5435             MR. BREGMAN:  Based on what I understand of the broadcast system, what we see of profit announcements, what studies have been done by the CFTPA and other organisations, about the profitability of the broadcasting organisations, and also based on what I know from my experience in terms of what is spent on programming and the way programmes are made.

5436             I think another organisation in the system would be good for the overall system because of the competitive nature.

5437             COMMISSIONER PENNEFATHER:  So it is not your concern that another service ‑‑ and I think you said one ‑‑ would put at risk the Canadian programming expenditures currently in the system?  Is that your concern?

5438             MR. BREGMAN:  I don't believe that another one would, no.

5439             COMMISSIONER PENNEFATHER:  Now, one of the other points I think my collegue Commissioner Del Val just raised was the matter of exclusivity, and I am talking now about Canadian programming.  And it was raised yesterday in the discussion.  I think you were here with other producers as a way to support a new service, amongst other points, because it would ensure diversity.  And I think you said you think that the new service would add diversity to the system.  But as a producer, how would the idea of exclusivity for your product on one window work in your favour?  Or not? What is your position?

5440             MR. BREGMAN:  Well, we work in that environment now.  Every licence, every production we make has an exclusive window.  I mean, that is just an environment within which we work.  So having another window where it might be exclusive doesn't change anything in the system as far as I can tell.

5441             COMMISSIONER PENNEFATHER:  So you would be comfortable with that approach in terms of a new service?

5442             MR. BREGMAN:  Absolutely.  We deal with that with all of the existing services.  I guess on the issue of the ‑‑ the issue of exclusivity is a negotiation which basically comes down to licence fees.  You are going to pay more for an exclusive window than an non‑exclusive window, that is part of what we deal with everyday.

5443             COMMISSIONER PENNEFATHER:  Thank you very much.

5444             Thank you, Mr. Chairman.

5445             THE CHAIRPERSON: Picking‑up on that, Mr. Bregman, I am looking at your written intervention.  You referred to the other promises beyond Canadian ‑‑ beyond the Ottawa office ‑‑ other promises such as the speeding up of licence fee payments and I wondered what are you anticipating as ballpark licence fee payments?

5446             MR. BREGMAN:  What we have seen happen in the system is the back end paying of licence fees, ie. ‑‑ and this was brought up earlier in the day ‑‑ where you may get a license fee from a broadcaster but the bulk of it is paid after delivery over some extended period of time.  This seems to be, in my experience, growing amongst the broadcaster community and it is a tough pill to swallow as an independent producer.

5447             So Allarco has made a commitment to pay its licence fees during production, which is when we need the money.  You know, we need money day in, day out, when we are dealing with production issues.  We can't necessarily ‑‑ obviously we have learned how to wait until after the end of production and delivery, but I can tell you it is painful.

5448             THE CHAIRPERSON:  The same intervenor that you had just referred to also said that the fees were running at $150,000 a feature currently.  Would that be your experience?

5449             MR. BREGMAN:  This was a documentary producer?

5450             THE CHAIRPERSON:  This was the roundtable ‑‑ feature film, "The current presale value of a Canadian feature film to a pay TV licensee is in the order of $150,000."

5451             MR. BREGMAN:  I know they pay fees in that area, sometimes less and sometimes more.

5452             THE CHAIRPERSON:  What are you anticipating in respect of Allarco?

5453             MR. BREGMAN:  Well, from what I have seen we are expecting licence fees well in excess of that and I guess, again, it would depend on the kind of film or series or program.  Obviously, it is hard to generalize against, you know, a documentary film versus a small film or a series, but we would expect a much higher percentage of licence fees against budget.

5454             THE CHAIRPERSON:  Right.  In my questioning of Allarco in respect of the licence fees they gave a ballpark figure of $300,000.  Were you here when they said that?

5455             MR. BREGMAN:  I am aware of the number, yes.

5456             THE CHAIRPERSON:  You also mention in your written intervention additional payments for high‑definition mastering.  What is the ballpark you are anticipating, say per feature film, in that ballpark?

5457             MR. BREGMAN:  I am not sure exactly what they will pay, but they have made a commitment to pay extra dollars for high definition.  I am sure depending on their own technical structure, that may include perhaps some service, as well the offer of doing it.  Any contribution ‑‑ I have just returned from Mipcom and when you see the amount of high‑definition services that are opening in the United States the demand for programming in high‑definition and, even here, we have had this question of why don't we do it in high‑definition?  Well, in the programs that I have done there has been, you know, no economic incentive to do it.  We could do it if we wanted to absorb the cost.

5458             THE CHAIRPERSON:  What would that cost be?

5459             MR. BREGMAN:  Well, it depends on the program.  It really depends what you are filming on and a wide variety of technical questions.  In some cases we haven't shot in high‑definition, but the transfer of whatever material you are doing into high‑definition is costly.

5460             THE CHAIRPERSON:  You can't give me a film feature amount?

5461             MR. BREGMAN:  A couple of thousand dollars, probably several thousand dollars to go through the process, it really depends how you are converting.

5462             THE CHAIRPERSON:  Right.  They have again put the number of $75,000 as a ballpark on the record for additional HD costs above and beyond their licence fees for feature films.  Does that sound like a ballpark amount?

5463             MR. BREGMAN:  It would sound reasonable, yes.

5464             THE CHAIRPERSON:  It sounds from the last statement you gave me that it would have been reasonable.

5465             MR. BREGMAN:  I am not sure.  They said $75,000 per movie, is that what we are ‑‑

5466             THE CHAIRPERSON:  Well that was, you know, in a give and take on a ballpark basis and subject, I said, to them refining it when they came backing reply, that was the number they put on the record for increased costs of HD production per feature film.

5467             MR. BREGMAN:  Well, I wouldn't ‑‑ I the few movies that I have done in high‑definition I haven't seen the costs that high.  We wouldn't expect that much money.  But the costs that we would expect, we would welcome them to be covered so that we could have a high definition copy.

5468             THE CHAIRPERSON:  Thank you very much.

5469             John Aaron Productions.  Okay, not seeing a representative of John Aaron Productions.

5470             IMP Inc.

INTERVENTION

5471             MS TILSON:  Good morning.  It is a great pleasure to have the opportunity to be here to speak to you in person in support of the Allarco Entertainment application.  But before I address that, I would like to point out that MovieCentral has always been very supportive of the industry in Saskatchewan and is a valuable component to the Canadian industry and to the viewing audience.  So with the ‑‑

5472             THE CHAIRPERSON:  Excuse me.  I assume you are Gail Tilson?

5473             MS TILSON:  I am sorry, I am Gail Tilson ‑‑

5474             THE CHAIRPERSON:  That is okay.

5475             MS TILSON:  ‑‑ from Independent Moving Pictures in Saskatchewan.  Sorry about that.

5476             With the exception of fair competition, I would like to see the Allarco Entertainment application of approved in manner that doesn't jeopardize MovieCentral.

5477             Now my next paragraph is a little redundant.  As an independent producer from Saskatchewan I would like to express the extremely valuable impact that this service will have on our industry and, I believe, on the presentation of Canadian programming.  The commitment to a regional creative development executive in each province provides unprecedented access for producers to a national broadcaster.

5478             This is a real demonstration of Allarco's commitment to fully represent Canada to their audience.  By past experience, I know that the individuals involved in this application have supported the representation of a culturally diverse society on screen and I am pleased to see that this application, through emphasis on regional connection indicates the same priority by Allarco Entertainment.

5479             This application positively addresses the delivery of the highest quality in programming.  The expense of HD video and Adobe digital 5.1 delivery is not left to be extracted from other areas of the production budget or all too often to be born by the producer.  The application expressly commits to assisting with this expense of enhanced delivery quality.

5480             Over the years the importance of the stability of independent production companies to the Canadian industry has been a focus of discussion. This application with the enhanced reinvestment in Canadian programming component and the accelerated production fund initiative actually addresses that goal in a practical and viable fashion.  These two elements of the proposal positively support the ability of independent producers to cash flow projects, get paid during productions and proceed with the next project.

5481             The focus of production within my company is highly Canadian content long‑form drama and I would hope that the intelligence of this application will be repeated and supported from other areas of our industry as well. Specifically, this application supports the marketing of the Canadian schedule.  Audiences need to be aware of Canadian programming and our Canadian talent needs to be promoted in order to create a following and this commitment will elevate the level of audience awareness.

5482             I do disagree with the idea that a Canadian channel is ghettoizing Canadian programming.  I think the comparison as would you have a novel in the Canadian section or in the fiction section, I think it is positive to have it in both and I think the presentation of the Canadian section or channel can leave the audience proud of the Canadian product.  So the Allarco Entertainment application clearly reflects their sophisticated understanding of productive means of collaboration within the independent production community in this industry and I would respectfully ask for you support for the Allarco Entertainment application.

5483             THE CHAIRPERSON:  Thank you very much, Ms Tilson.

5484             Commissioner del Val.

5485             COMMISSIONER del VAL:  Thank you, Ms Tilson.

5486             Just a question that I have asked other intervenors before, if instead of licensing an additional service the required Canadian programming contribution of the existing licensees were increased what would be your view on that?

5487             MS TILSON:  So you are suggesting that a combination of MovieCentral, TMN and Super Écran would double what they currently pay for that window in Canada?

5488             COMMISSIONER del VAL:  No, I guess your comments would also give me an idea of how much you think the increase should be to, in your mind, be equivalent to the opportunities in that an additional licensee would be providing?

5489             MS TILSON:  In my experience what Allarco is suggesting is double what we are currently receiving for pay window on Canadian content programming, so I see it as a big advantage.

5490             COMMISSIONER del VAL:  Okay.

5491             MR. BREGMAN:  May I make a point?

5492             COMMISSIONER del VAL:  Yes.

5493             MR. BREGMAN:  Just in answer to that question, I think part of the issue is having a different service, another service, not just more of the same.  You know, a different point of view, a different perspective, a different licensing mentality and different creative outlook.  So certainly volume‑wise you could say, you know, create X volume out of any number of services, but I think part of the benefit is another type of service with other opportunities.

5494             COMMISSIONER del VAL:  Thank you.  Then what is your view or experience, Ms Tilson, on the exclusivity arrangements?  Do you think that is a good thing for Canadian programming or do you think non‑exclusivity is better or does it depend on how established the producer is?

5495             MS TILSON:  I suspect that is something that is almost best determined by the project.  You know, certain projects that would possibly benefit from sharing the goals of two different competitive pay services and there would be other projects that would have a better end product with a single vision working with the producers.  So I can see opportunities project by project both ways.

5496             COMMISSIONER del VAL:  So you would agree with Mr. Brooks that that should be left up to the producers to negotiate rather than something that is regulated?

5497             MS TILSON:  That would be my preference, exactly.

5498             COMMISSIONER del VAL:  Thank you.

5499             Those are my questions, Mr. Chairman.

5500             THE CHAIRPERSON:  Thank you very much.

5501             Next on my list is Jim Byrd.  I saw him yesterday, but I don't see him in the room today.

5502             Next is Nancy Gregg.

INTERVENTION

5503             MS GREGG:  My name is Nancy Gregg and I am a medical consultant for the film industry in Edmonton, Alberta and I wish to intervene strongly in favour of Allarco Entertainment, Application Number 2005‑0454‑9, I am sure you know those numbers.  I am an operating room nurse.

5504             Edmonton is constantly struggling to draw productions and local producer support in their push to create their own projects.  As a medical consultant I have directly felt the pressure when producers can't make ends meet and therefore they can't get a project going and so the work stops.  For somebody that started out as a neophyte just in the last few years, as a result of my involvement with Nic Wry and getting me introduced after a long long illustrious career as an operating room nurse, I know what it feels like to be on a production when people start worrying about are we going to have the money to do this, are we going to be able to finish.

5505             As far as the medical end of that, it becomes very intensive for somebody who is providing medical support to the industry in coordination with a producer to glean all the medical knowledge and personnel and equipment and supplies to augment a film and then be told we don't know if we are going to be able to go on with this film, we don't know if the money will be there.

5506             I think that, for me, it was an opportunity of a lifetime to be involved in that and I think my colleagues in a vast array of medical areas also benefited from it and saw the intensity that goes into making a Canadian production and the fact that people from such a unique area work so hard and work so long as a team to put something together.  And here we work on another end of the team and realize that our end result depends on the fact that we have beds and dollars and somebody else's lifetime depends on whether the fact they have the money to go through with the production, with the movie after they have invested all this time and energy.

5507             I was just stunned at the amazing hours and the agreements between people that had to get things going and make it happen right now.  It was totally an eye‑opener for somebody that wasn't in the area.

5508             I really think that some of the things that I have heard and read and talked to that Allarco Entertainment has on the board, as far as what they have to offer, certainly would appeal to me, both in my capacity and as a consumer and as a parent that has five boys that love to watch things on TV.  My analogy to that would be we have a Nintendo and a Nintendo 64 and a GameBoy and a PSX and a XPS and whatever the rest of them are and if you said to my boys, why would you want something new, they would go, oh but mom, you have to see the graphics on this, you have to see what this has to offer.  And so my eyes just lighted up when they started talking about high‑definition and I thought that would be the one thing that, in my family, that they would say, hey, we have got to get this, dad.

5509             Now, if you look at that and you say our cable bill is going to increase, I could see my husband having a bird unless of course the other companies were going to provide a $400 rebate which we are used to in Alberta when things change.

5510             So from everything that I have seen and the people I have talked to and base it on the fact that my start was not in this industry like a lot of other people and I can speak also as a consumer, I would strongly support some of the initiatives and really strongly support the rest of the initiatives that Allarco puts forward and that was based on my experience too in my first film and I have had the luck to do six more.  And, for me, it was always a matter of I have to wait and see if something is going to come along in Alberta, if I am going to be able to get involved and my community will be able to get involved and we will be able to help this and what a cool thing.  And then the viewing audience can sit there and say, oh my God, look at her, look what she has done on this film or look what this film industry has allowed her to do.

5511             So I would say that I think this is great for producers and the ones I have had to meet I think will absolutely benefit from this.  So I would think that it would be a real loss if you don't support this.

5512             Thank you.

5513             THE CHAIRPERSON:  Thank you, Ms Gregg.

5514             Commissioner Pennefather.

5515             COMMISSIONER PENNEFATHER:  Thank you, Mr. Chairman.

5516             I am tempted to ask you if your training is in long‑term care or acute care?

5517             MS GREGG:  I work in the operating room.

5518             COMMISSIONER PENNEFATHER:  I see.  And your thesis is both types of care would be required for support for those struggling through the medical induystry.

5519             MS GREGG:  You bet.

5520             COMMISSIONER PENNEFATHER:  I see your point is quite well taken.  The five boys though, I was going to ‑‑ congratulations, that is fantastic.

5521             MS GREGG:  Thanks.

5522             COMMISSIONER PENNEFATHER:  But when you asked them the question, the answer, if I heard you right, was high def.

5523             MS GREGG:  Yes.

5524             COMMISSIONER PENNEFATHER:  In other words, some new quality like that.  Are they watching television?

5525             MS GREGG:  I have five boys.

5526             COMMISSIONER PENNEFATHER:  Yes, as opposed to the other kinds of, let us call it, entertainment they can get through the internet and so on and so forth?

5527             MS GREGG:  Oh yes, yes.

5528             COMMISSIONER PENNEFATHER:  But what I am wondering is is it the high‑definition piece of it that is pulling ‑‑

5529             MS GREGG:  It would certainly be an attractive factor.  I mean, they are exposed to so much these days.  They can do, as you say, the internet, they could sit on the ‑‑ you know, on their games, whatever they play, they can do all the rest of the stuff, so why would they choose to watch, you know, television when they can boot a movie on their laptops or do whatever?  I think the thing that would draw them ‑‑ certainly we have cable ‑‑ and I think the thing that would draw them to go even further than that and say we would appreciate this is the fact that it would be something new and available on more than one channel.

5530             My boys are just at that age too when they are appreciating the Canadian part of it.  And to be able to say, gee, this is something, you know, produced in Canada or something that we can, you know, sink our teeth into that has Canadian content.  It is a source of pride for them.  Yes, I think they would.

5531             COMMISSIONER PENNEFATHER:  Well congratulations, you have raised them well.

5532             MS GREGG:  Thank you.

5533             THE CHAIRPERSON:  Ms Gregg, which is more life‑threatening, the film business or the operating room?

5534             MS GREGG:  You know, I really wondered on that one.

5535             THE CHAIRPERSON:  Did you ever have the opportunity to work with Dr. Allard when he was a surgeon?

5536             MS GREGG:  No, but I have worked with people affiliated with him and my husband worked with him, yes.

5537             THE CHAIRPERSON:  Thank you.

5538             MS GREGG:  Thank you.

5539             THE CHAIRPERSON:  Those are our questions.

5540             The next on my list is Kelaur Productions.

INTERVENTION

5541             MR. WILSON:  Mr. Chairman, Commission members, I want to thank you very much for the opportunity to be here today.

5542             My name is Ray Wilson, I am from Fredericton, New Brunswick.  In November of 2004 I incorporated a company through which I am in the early stages of developing film and television projects both independently and in cooperation with other producers.  As well, I have been providing a consulting service to New Brunswick companies and other individuals in the film and television industry in New Brunswick, and also I have clients in European companies.

5543             But it is not from this experience that I want to speak today, because I really don't consider myself a producer yet since I have never produced anything.  My previous six years I was executive director of New Brunswick Film, which is a New Brunswick film development agency.  I am not speaking on behalf of the New Brunswick Film today, just from my experience that I gained there.  In that capacity, I worked with the New Brunswick film and television production industry to promote the growth of the industry in New Brunswick and attract guest productions to the province.

5544             New Brunswick Film provides a full range of service, development loans, equity, investment, film tax credit, marketing and training assistance.  In my position as executive director I developed a fair understanding of the strength and needs of the Canadian industry in general and in New Brunswick in particular.

5545             First, I want to support the approval by the CRTC of new general interest pay television service, but under certain conditions.  In particular, conditions which ensure that all regions of Canada benefit from the approval.  As stated in my written intervention, after reviewing the application of Allarco Entertainment, I feel strongly that their application will best meet the needs of regional producers in the New Brunswick.

5546             Too often there is a tendency to lump all the Maritime/Atlantic provinces together.  While we share certain similar heritage and culture, as all Canadians do, there is no doubt many differences in the cultures of each of the Atlantic provinces as there are between any of the other provinces in Canada.  The English, Irish, Scottish, Acadian and loyalist history and culture of New Brunswick is significantly different from that of Nova Scotia, Prince Edward Island, Newfoundland and Labrador and the other provinces of Canada.

5547             As you all know there are both cultural and economic benefits in having production occur in a region.  I am going to primarily address the cultural aspect.  It is important to the cultural life of New Brunswick that there be an opportunity for New Brunswickers to tell their own stories and not have these stories only told by non‑New Brunswickers.  Having television and film production occur in the province enriches the cultural life of the province and helps and keeps young New Brunswickers at home.

5548             During my time at NB Film I too often was frustrated seeing the best and brightest young people in the film industry leave the province.  They would come to me and ask when the next production was going to occur.  If the New Brunswick industry couldn't keep them busy they would leave.  They would either leave the province of leave the industry.

5549             I tried to encourage both the production of indigenous projects in New Brunswick and as well ‑‑ in both official languages ‑‑ and I also tried to attract guest productions.  It is important to note that there has to be a strong indigenous industry if there is to be a strong film industry.  It is the local New Brunswick producer that will give the up and coming New Brunswick crew a chance, who will promote local crew, in general, who will take the chances with the services that are available in the province.  It is an indigenous producer that will grow and develop the crew base.  Guest productions are important, often they pay better, often they will provide a higher level of experience, but they tend not to take chances with a local crew and local production services.

5550             When the New Brunswick crew didn't have the right production credit and, as well with the producers, it is the guest producers, natural tendency to be more comfortable with working with those they know, they often would bring people in rather than take a chance on a local person.  Having a strong indigenous industry provides more stability.

5551             Why do I explain this?  The current system of support in Canada for regional producers is inadequate.  The tendency is to centralize because it is perceived more efficient does not serve regional producers well.  As I stated earlier, there is a natural tendency to be more comfortable with doing business with who you know or who you have worked with before.  But it is almost impossible for regional producers to get to know the decision makers.  We have all heard about the $1,500 cup of coffee.

5552             If you want to meet a decision maker from one of the networks you have to go to Toronto, pay $2 for the cup of coffee, $1,000 for the airfare and $400 or so for the hotel room and then you may or may not get to see the person after you get there.  While the film festival circuit is useful, it just isn't enough face time for regional producers to get to be known.

5553             New Brunswick has many strengths, it has many and good film‑friendly locations.  Production can occur in either of the official languages.  There is a core of good producers who want to grow their businesses, a good core of film production crew and very competitive provincial financial incentives.

5554             So why hasn't the industry grown beyond $20 to $30 million a year in production?  One reason, it is too difficult for New Brunswickers to access the Canadian marketplace, because it is too difficult to access the decision makers.  There is a lament that there isn't enough money in the system and I know that is true, but at the same time there is lots of money in New Brunswick that is always left on the table.  We have a 40 percent labour tax credit and the more production we have the more money we would put into the Canadian system.  That 40 percent labour tax credit can fund 15 to 20 percent of production and it just isn't taken advantage of.  If production increased in New Brunswick so would the amount of provincial dollars going to the film production.

5555             As well, the cost of production is often less in regional centres.  New Brunswick has been fortunate to attract a number of modest budget guest productions, usually in the range of $2 to $10 million and we have hit such actors as Jennifer Tilly, William Hurt, Marley Marl, Wayne Rogers and James Khan among others and they were good for New Brunswick, but they were all guest productions.

5556             I have to say, often I found it easier to talk these producers to bring these productions into New Brunswick, and maybe in L.A. or somewhere else, than it is to talk to networks here to try New Brunswick.  It is easier to get these kinds of productions than it is to get Canadian productions into New Brunswick.

5557             While producers were happy with the New Brunswick experience ‑‑ while these guest producers were happy, they have no vested interest, only in the one project, so they weren't interested in growing the industry.  My previous experience and observations of broadcasters is that they are not committed or organized to encourage new production.  New Brunswick producers are not equipped to compete effectively and be successful in having their productions financed from the development phase to the end of production under the current system.

5558             I believe that the application of Allarco Entertainment outlines a model that will best serve the interests of all producers of all regions in Canada.  In particular, the commitment to not do any in‑house production will result in more opportunities for independent producers.  Allarco's plan to place a representative in each province will ensure producers in each province will have easy access and inexpensive access to the decision‑making process.  These representatives will be very interested and committed in promoting quality productions in their province, because that will be their job.

5559             The representatives can act as a catalyst for the industry in their respective provinces.  They can be involved ‑‑ encouraged in development of local production, involved in local film festivals and training, because that is in their interest.  As well, these representatives may encourage inter‑provincial co‑production, working with colleagues in other provinces.

5560             In summary, I believe Allarco's commitment to a representative of each province, commitment to improved funding for productions, no in‑house production, $2 million funding for script and concept development is the best proposal and will be welcomed by regional producers.

5561             I want to thank you for your time and I will answer any questions you may have.

5562             THE CHAIRPERSON:  Thank you.  Commissioner Williams.

5563             COMMISSIONER WILLIAMS:  Good afternoon, Mr. Wilson.

5564             MR. WILSON:  Thank you.

5565             COMMISSIONER WILLIAMS:  I note in your written intervention that you provided to us that one of your main reasons for requesting appearance was that you felt that it was the only way the challenges of producing in New Brunswick could be explained adequately and I think you have done a great job on that, because your comments on the challenges facing regional producers I think I have heard in Alberta and I have heard in other places in the country as well and they are very similar.

5566             My question is on the financial and cash flow needs of the production community and why did the system of paying licence fees evolve to be one in which a large portion of the monies are paid at or after completion as opposed to along the way as matching‑up with the timeframe of when the expenses were being incurred?

5567             MR. WILSON:  I am not sure why.  I guess they wanted to be sure the product was complete and developed and they actually had a product before they paid for it.  Most productions do get completed, but I guess it is a tool that networks and broadcasters wanted to make sure that they actually had a product before they paid for the product.

5568             But I can tell you that this cash flow is just such a serious issue.  As I have said, New Brunswick Film put equity and other funding into productions and there was hardly a production in the province that I didn't call ‑‑ get a call from a producer that a payroll is coming up and is there anyway that I could move the equity that New Brunswick Film was putting into production, if I could cash flow it sooner, and I did my very best to do that and I know that goes on constantly.

5569             So it is a very real and serious issue and it is tough.  I mean, you are always worried.  I mean, you know, you are dealing with an employer ‑‑ crews are working with their employer on a onetime basis, they don't always know these people that well and, you know, they get a little nervous when payday goes by and they don't get paid, so cash flow is a real real issue.  And why broadcasters don't do it, I don't know, other than I can only guess that they want to make sure that they got the product in hand before they paid for it.

5570             COMMISSIONER WILLIAMS:  Okay, thank you, that was my question.

5571             THE CHAIRPERSON:  Thank you very much.

5572             MR. WILSON:  Thank you.

5573             THE CHAIRPERSON:  Thanks very much to all the members of the adhoc panel.

5574             Madam Secretary, we will break now and we will resume at 2:10.  Nous reprendrons à 14:10.

‑‑‑ Upon recessing at 1252 / Suspension à 1252

‑‑‑ Upon resuming at 1413 / Reprise à 1413

5575             THE CHAIRPERSON:  Order, please.  À l'ordre, s'il vous plaît.

5576             Madame la secrétaire.

5577             THE SECRETARY:  Merci, monsieur president.

5578             We will now proceed with the next intervenor, the next appearing intervenor, which is the Canadian Film and Television Production Association.

‑‑‑ Pause

5579             THE SECRETARY:  Good afternoon.  If you could introduce yourself and people you have attendant for your presentation.

5580             Thank you.

INTERVENTION

5581             MR. MAYSON:  Mr. Chair, and members of the Commission.

5582             My name is Guy Mayson and I am the President and CEO of the Canadian Film and Television Production Association.

5583             With me today are two very prominent Canadian producers.

5584             On my left, Julia Keatley, President of Keatley Entertainment Limited from Vancouver; creator and producer of "Godiva's" which has just been nominated for a Gemini award, I may add, for best dramatic series and one of the longest‑running shows on television "Cold Squad".  Julia chairs the CFTPA's broadcast relations committee and is past chair of the CFTPA board.  She is also the chair of the BC Producers branch for the CFTPA.

5585             Also with us is Sandra Cunningham, President of Strata Films in Toronto and the creator of such films as Robert LePages' "Possible Worlds" and two films by John L'Ecuyer, as well as being the co‑producer of Atom Egoyan's "Where the Truth Lies" and co‑producer of "Being Julia" starting Annette Bening and also co‑producing Norman Jewison's "The Statement" starring Michael Caine.  Sandra is the chair of our Future Film Committee.

5586             They are here to share with you their experiences in creating films and drama, Canadian drama programs; the realities of production financing and how Canadian broadcasters, specifically those in the pay television sector, fit into this.

5587             The CFTPA represents more than 400 companies that create, finance, produce, distribute and market feature films, television programming and multimedia products in every region of the country.  Our membership has a vital interest in the program practices and commitments of our major customers, Canada's broadcasters, and today we are focused on the pay television sector and the possibility that new undertakings may be licensed to compete head‑to‑head with the existing general interest pay TV services.

5588             Each of the applicants has proposed a unique approach to pay TV and made an effort to address the interests of Canadian viewers and of the Canadian independent production community.  You have spent the last few days reviewing their respective business strategies.  Rather than commenting on the individual applications, our written submission recommended 12 licensing principles to help you determine the most appropriate framework for assessing the applications before you in this proceeding.

5589             It is our view that more choice and more competition are good for the Canadian Broadcasting System, good for Canadian viewers and good for the Canadian production industry.  We believe that the Canadian pay industry, pay television sector is healthy and can well contribute more to the creation and promotion of Canadian feature films and quality drama series.

5590             Julia.

5591             MS KEATLEY:  Thank you.

5592             Good afternoon.  The CFTPA is pleased to note the applicants' various commitments to support new Canadian independent production in different genres, particularly theatrical features, original television drama series and long form documentaries.  These types of programming are the most costly to create and, thus, the riskiest to undertake.  They are also among the genres of programming that Canadian government has chosen to support with public funding.

5593             As producers we need strong, viable broadcast partners to create the feature films and drama series that they exhibit.  That is why we have asked you to frame as conditions of license the applicant's planned expenditures on Canadian features and drama series in terms of development, program financing and promotion.  We also recommend that you make their commitments concerning the percentage of Canadian programming expenditures to be devoted to drama a condition of license.

5594             We recommend that Canadian programming expenditure commitments of new pay television licensees should at minimum meet the highest existing expenditure levels of the incumbent pay services or 32 percent of revenues.

5595             Consistent with our approach and response to other applications, the CFTPA recommends that the CRTC require all pay television licensees to commit that a minimum of 75 percent of all original Canadian programming will be independent productions obtained from unaffiliated producers.  This requirement should apply to both the exhibition of Canadian programming and to Canadian program expenditures.

5596             However, we also recommend that 100 percent of original feature films and dramatic series be produced at arms length.  Both Spotlight and Archambault have both proposed to do in house‑related party production.  We have no concern if they wish to engage in production of sports, interview and talk shows, concerts and interstitials, but original Canadian features and drama series should be the exclusive domain of the independent producer.

5597             We ask that you give careful scrutiny to the Canadian foreign program expenditure ratio of pay TV licenses.  CFTPA also recommends that the Commission require any newly‑licensed pay TV licensee to submit detailed annual reports outlining all activities related to the licensing of independent production.

5598             We urge that the CRTC continue its practice of publishing detailed financial information at the individual licensee level for pay and specialty services.  Clarity and transparency in this matter is essential.

5599             As a producer of high‑budget drama series I know what it costs to make quality dramatic series that could serve as signature works in the schedule of a pay television service.  In a recent letter dated September 30th, 2005 to the Minister of Canadian Heritage the CFTPA proposed funding models for CTF‑funded programming in the highest risk production genres.  We have recommended that the minimum broadcast license threshold for a one‑hour drama production with a $1.2 million budget should be $450,000, or approximately a third of the cost, and that TV movies and miniseries with a $4 million budget should obtain a license fee of $1 million.  Just so you have some context there, it is about $300,000 now and half that in the movie arena.  So in terms of the costs they are actually provided by the broadcasters.

5600             These are not unrealistic numbers.  In fact, they are ‑‑

5601             THE CHAIRPERSON:  Excuse me, your ad lib ‑‑

5602             MS KEATLEY:  I can clarify any questions if you want.

5603             THE CHAIRPERSON:  Okay.

5604             MS KEATLEY:  In fact, these are not unrealistic numbers.  In fact, they are necessary.  Some of the applicants have offered to fully finance some of the high‑budget series and features.

5605             This is in fact how the very successful program "Corner Gas" has been created and supported.

5606             Broadcasters must be prepared to take on the larger proportion of the financial risk in creating original domestic product content.

5607             Sandra?

5608             MS CUNNINGHAM:  Thank you.  Good afternoon.

5609             Feature films are undoubtedly a powerful force in contemporary society.  The truth is though that it is very difficult for us get our projects funded and, at best, with the exception of a few high‑profile films, have them exhibited at our domestic theatres.

5610             The pay television sector provides us with audiences in many cases more significant than what we achieve at the theatrical box office.

5611             This cannot be underestimated.  The government's goal with the feature film fund administered by Telefilm Canada is to build audiences for Canadian features.  An important component of this initiative is the marketing and promotion of domestic movies.

5612             We have asked you to ensure that any new pay TV licences make a strong commitment to domestic feature film production in terms of program expenditures, as well as marketing and promotion.

5613             It is critical that the CRTC assess each applicant's specific allocations for investment in Canadian theatrical film and made‑for‑television movies, as well as signature drama series.

5614             Canadian pay television broadcasters are major partners in the production and exhibition of Canadian features and high quality drama.

5615             The Association's emphasis on higher licence fees for Canadian drama that Julia referred to a moment ago should also apply to the support for Canadian features, starting with the licence fees paid by Canada's pay television broadcasters.

5616             We have recommended that licence fees should be appropriate to products that are offered to Canadian viewers at premium prices.

5617             Yesterday, you discussed with Michael Prupas and some of the other independent producer interveners, as well as some today, the level of licence fees offered by the pay services and how despite increased subscriber levels these have decreased from earlier promised levels and how for many years they remained static.

5618             In the face of higher production budgets and increased costs incurred in delivering quality dramatic content, each year when the CFTPA publishes our economic report on the production industry we provide various statistics about the financing components of various sectors in the industry.

5619             With respect to the domestic feature film production, the pay TV licence fee is in the range of 4 to 5 percent of low‑budget productions, and as low as 1 or 2 percent of the budget of Canadian features with budgets of over $10 million.

5620             This is an appallingly low contribution to the financing of what should be the most important sector of the pay television offering.

5621             There has been considerable discussion over the last couple of days about the potential strain on the public funding support mechanisms if competitive pay services are licenced.

5622             Let us put this in context.  Telefilm's feature film fund has an annual allocation of 43 million to dispense for the development and production of English‑language feature films.  This was a 2003‑2004 statistic.

5623             In effect this means financial support for some 12 to 15 Canadian features out of approximately 50 English‑language films produced.  There is obviously an allotment there for development financing.

5624             If we refer again to the marketing and promotion of Canadian features, the CRTC should be aware that Telefilm's total annual contribution to the creation of Canadian English‑language feature films equals the promotional budget of one or two medium‑budget Hollywood movies.  It is also roughly David Cronenberg's A History of Violence which is doing so well right now.

5625             The incumbent pay services have told you about the various initiatives that are put in place to support the Canadian production community.  In addition to licence fees, as they have told you, they also on occasion make equity investments in film and drama productions.

5626             We have stated previously that broadcaster equity must be truly at‑risk money with the broadcaster in a recruitment position that is subordinate to that of the producer.

5627             Any guaranteed or effectively guaranteed revenue should not count as part of the broadcaster's Canadian program expenditures.  And only fully arm's length independent productions should be deemed eligible for the broadcaster equity investment.

5628             Our written intervention also recommended that the CRTC discuss with each applicant the safe guards they would put in place to protect independent producers from unfair distributor demands if the pay television broadcaster acts or has a preferred relationship with the distributor of the theatrical production.

5629             The push by some broadcast entities to licence multi‑platform exhibition rights undermines the ability of the producer to negotiate separate licencing agreements for each broadcast window and depresses the fair market value of the producer's creation.

5630             Thank you.

5631             MR. MAYSON:  As a means of offsetting these and other contentious contractual matters, CFTPA has asked the CRTC to require the existing pay television licensees, as well as any new entrants, to negotiate terms of trade agreements to ensure that the disproportion of power held by the broadcaster is not abused and that the rights of the independent producer are respected.

5632             We are pleased to inform you that each of the new applicants and the incumbent pay TV licensees have given us a verbal commitment to enter into such agreements.

5633             The CRTC has developed clear procedures for considering competitive applications.  In the present instance, before licencing new pay television services, the Commission will have to be satisfied that there is room in this sector for the system for competition.

5634             New competitors must satisfy the Commission at approval, but not resulting in reduction in the existing level of service, and that the applicants have sufficient resources to enhance the program offering of the Canadian broadcasting system.

5635             If adopted, the 12 licencing principles we have proposed will ensure that the cultural and economic value provided by the Canadian independent production sector to Canadian pay TV will be upheld.

5636             The Commission has the difficult task of evaluating the applications before it, and the various principles and policies should govern the introduction of competition to the pay television sector.

5637             From our perspective, the entry of new players must result in a significant amount of new money available to fund the creation of more original Canadian independent production.

5638             We will not have accomplished anything if we merely fragment the contribution that the pay television sector makes to fund the same amount of programming.

5639             Our written intervention referenced a recent study of Canadian broadcaster financial performance and Canadian program expenditures that we have commissioned for the Nordicity Group.  The report indicates that the incumbent pay television operators are maintaining very healthy profit margins.

5640             This suggest that there is room for some competition in this sector and greater choice for viewers.  It also suggests that Astral and Corus should be prepared to make stronger commitments to Canadian production at the time of their next licence renewal.

5641             A lot of numbers have been bandied about at this hearing.  Subscriber numbers and revenue projections.  The growth and shrinkage of the pay TV sector.

5642             The numbers that are important in the independent production community really involve creating more quality Canadian programming and greater choice for Canadian viewers.

5643             Thank you for your attention today.  Obviously we would be pleased to answer any questions you may have.  Thank you.

5644             THE CHAIRPERSON:  Thank you very much.

5645             Commissioner Pennefather?

5646             COMMISSIONER PENNEFATHER:  Thank you, Mr. Chairman.

5647             Good afternoon, Mr. Mayson.  Mesdames, welcome.

5648             Let us go back to that clarification.  Page five of your presentation.

5649             You gave us some numbers on high‑risk production genre.

5650             MS KEATLEY: Right.

5651             COMMISSIONER PENNEFATHER:  I am seeing you referring to feature film and dramatic series.

5652             MS KEATLEY:  Yes.  And television movies and mini‑series, sort of the higher cost production.

5653             We put a proposal in to Mr. Frula(ph) regarding this.  We undertook over the course of the summer sort of an economic study of essentially if we were trying to get to supporting higher quality dramatic programming.  You know, where are the problems.

5654             And sort of a sub‑group of some people on our board analysed all of this, and we actually came to the conclusion that to stretch the government dollar and the dollars that we as producers actually contribute to the system, which is about often as much as 30 to 40 percent.

5655             The broadcasters really need to be paying higher licence fees and a greater proportion.  You know, for a television movie, it is about 17.5 percent of the actual overall budget, which isn't very hard.

5656             And these numbers are specifically ‑‑ for instance, on a one‑hour television drama series, it averages about $315,000, rather than the $450,000 that is suggested here.

5657             And on the average movie, it is about half a million dollars, rather than the million that is suggested here.

5658             COMMISSIONER PENNEFATHER:  And when you were speaking to us a moment ago, you said that ‑‑ you referred to the current, I think, $300,000 ‑‑

5659             MS KEATLEY:  Yes, that is essentially what comes under the Canadian Television Fund guidelines, and the broadcasters do access those moneys, and the top‑up moneys have to meet those benchmarks.

5660             But usually it is a floor and a cap.

5661             COMMISSIONER PENNEFATHER:  You said afterwards that current was about half of what your recommendation is.  You meant half of a million?  When you were referring to ‑‑

5662             MS KEATLEY:  Yes, sorry.  When I say that on a one million dollar, usually it is about $500,000.

5663             COMMISSIONER PENNEFATHER:  Yes, $500,000 for TV movie mini‑series with a four million dollar budget.  It is currently closer to half of $500,000.

5664             MS KEATLEY:  In fact, it is 17.5 percent that is required by the Canadian Television Fund in that sector.

5665             So I think this just is an overall note.  What we are looking for in general is a greater contribution, as you have heard from many of the people intervening, that whether the licence fee levels on a feature film of $150,000 or whatever, the actual cost, as Sandra has pointed out, you know, that could be 4 percent of a budget.

5666             Are these real contributions?  How important are these original programs for, you know, the pay television sector?  And we are just expecting ‑‑ the pay services have been very very active in dramatic series area and through the Fund and have managed to be paying us higher prices at those times.

5667             So I guess we are looking for this across the board.  If Canadian dramatic programming, whether it be in feature film or mini‑series or television series, if it is important to them, if should be, you know, a key part of their programming strategy that they support it financially.

5668             COMMISSIONER PENNEFATHER:  I gather that this recommendation was for CFT‑funded programming?

5669             MS KEATLEY:  Yes.  That is what we are specifically referencing and we can certainly make the letter available to you.

5670             MR. MAYSON:  It has been.

5671             MS KEATLEY:  It has been.

5672             COMMISSIONER PENNEFATHER:  Let me ask you ‑‑ I think ‑‑ when we go to page seven, are you addressing the same point in the second paragraph when you are concerned about the licence fee in the range of 4 to 5 percent of low budgets?  Is this the same point basically?  Or is this another point?

5673             MS CUNNINGHAM:  Yes, it is similar.   One relates to television drama, movies or series.  The other is feature films.  And they are slightly distinct, but we separated them for the reason because they are different numbers and sometimes it can get confusing.

5674             So, yes.  These numbers reflect feature film contributions in the form of licence fees, separate from equity.

5675             And these have gone down in fact.  You have probably heard from a lot of people about original subscriber levels, original calculation of price per subscriber and original estimates of anywhere from $250,000 to $500,000 a film.

5676             And while these amounts vary production to production and between Astral and Corus, the statistics we are giving are a range.

5677             You know, the benchmark for Astral seems to be about 150.  Less so for the West.  You can cobble together ‑‑ on a large film you can probably cobble together a few hundred thousand.  But that may only be 2 percent of a $15 million film.

5678             Instead, on a $3 million picture, $150,000 might be what you get, which is where the 5 percent comes from.

5679             COMMISSIONER PENNEFATHER:  So when you say there has been considerable discussion over the last about strain on public funding, in proposing these levels of licence fees going forward, it is your sense that ‑‑ I suppose the presentation to the Minister was in the context of public funding.

5680             So I am assuming that your proposals are such that the public funding would be commensurate, would be able to absorb the number of productions that would ‑‑ and that level of financing.

5681             MS CUNNINGHAM:  Right.

5682             COMMISSIONER PENNEFATHER:  Am I right?

5683             MR. MAYSON:  I can comment on that.  I think it is a very good point, Joan.  I think the ‑‑ our strategy outlined in the letter to the Minister is really in addition to ‑‑ it is all about a new partnership.

5684             Everybody contributing, including ourselves.  Contributing a fair amount into the production budget.

5685             But given the realities of how other demand on this system right now, demands of HD, it is important that the government, I think, increases its contribution to the Fund, and as well as maintaining long‑term commitments.

5686             COMMISSIONER PENNEFATHER:  So isn't that context okay?  Thank you for your 12 points for ‑‑ I guess they are the framework that you would propose for any licensing going forward in the pay sector.

5687             Just a couple of questions on two of them.

5688             Number three is the annual reports.  I think in the presentation you talk about all activities.  Would you just briefly give us a sense of what you would expect to be in such an annual report?

5689             MR. MAYSON:  I think in many ways information has been made available in the past of what concerns us.  It is harder to obtain now.

5690             I think it is in all of our interest.  Basically program expenditure and Canadian programming expenditures, revenues, et cetera, and profitability obviously.

5691             While we respect the issues of confidentiality, I think it is very important that the system as a whole, for sort of a relatively easy public access to this information, I think it makes everyone's life easier so that everyone knows what numbers we are dealing with.

5692             COMMISSIONER PENNEFATHER:  Well, I understand the purpose, but I was just looking at the specifics.  So you say in the past.  So we would reference previous annual reports and basically the same kind of information that was there?

5693             MR. MAYSON:  Yes.

5694             COMMISSIONER PENNEFATHER:  Any question of specifics?

5695             MR. MAYSON:  That is right.

5696             COMMISSIONER PENNEFATHER:  Number 12 says:

                      "CRTC should scrutinize the Canadian foreign program expenditure ration of pay television licensees on an annual basis to ensure that foreign program costs do not escalate at the expense of Canadian program expenditure."  (As read)

5697             I understand the point, and obviously that has been an important discussion this week.

5698             But when it comes to ensuring that costs do not escalate at the expense of Canadian program expenditures, exactly what would we do?  In that circumstance, if costs escalated, what is it that you would expect the Commission to do?

5699             MR. MAYSON:  I think we would simply expect that ‑‑ the key point here is that there is an annual review going forward.  And I think if there is a clear problem in terms of, for whatever reason, foreign programming expenditures increasing, some sense from licensees they are not able to maintain the Canadian programming expenditures.

5700             We would simply want some obvious public disclosure of that and some review at that point about what are we going to do about that.

5701             Obviously, I think what we are fearing to some degree in this is a repeat of the early `80s when this all first came up.

5702             A lot of promises were made and then people quickly retreated from their program expenditure requirements.

5703             And so I think we just want the Commission to be vigilant and ultimately have a public call for comment if there is any attempt to back away from Canadian programming requirements.

5704             COMMISSIONER PENNEFATHER:  Thank you.

5705             It is just that that, as you know, we have discussed various possibilities in the matter of the acquisition of foreign programming in terms of exclusivity, non exclusivity, and various proposals in that regard.

5706             So I wasn't sure where you were precisely going there.

5707             My last question, I guess, I feel I should ask.  When I come to page ten and you say that:

                      "The report indicates that pay television  operators are maintaining very healthy profit margins and there is room for some competition and greater choice."  (As read)

5708             And then, in the last paragraph, there has been a lot of numbers, you say, bandying about.  But the bottom line is where the independent production sector ends up and quality programming for Canadians.

5709             I guess you have said that right through your written presentation.

5710             If you see ‑‑ what I am actually reading is, you see there is room for competition or rivalry, as we might rather call it, and that that will be a benefit to the production community and Canadian viewers.

5711             So is it the case that you think, despite the fact that you didn't want to pronounce on the numbers and yes, we have had different projections ‑‑ what is your view in fact of the benefits of the possibility of going forward?

5712             MR. MAYSON:  Sorry.  It is an excellent point because I think we basically do see room for competition here and room for more choice, and obviously more production opportunities for our members, which is key in more programming opportunities for viewers.

5713             I think looking at the relatively healthy state of the current licence holders I think there is obviously, in our business ‑‑ there is probably room here.  And competition ultimately is probably a healthy thing.

5714             Our concern from the beginning though, we also went to some trouble to speak to all of the licence applicants in advance, you know, of the hearing.  And very constructive discussions.  We were impressed with some of the undertakings that were being made.

5715             We see real value in many of the ‑‑ some of the undertakings that are there.

5716             I think the concern is, what is the long‑term viability here?'  We don't want a lot of promises being made and people retreating from them.

5717             So I think ‑‑ we are not trying to be wishy washy here.  We are simply saying yes.  I think we can go forward.  Choice is good.  And competition is good.  And production opportunities is very good.

5718             The issue is, what is the long‑term viability of the system?

5719             COMMISSIONER PENNEFATHER:  Okay, fair enough.

5720             One last question, particularly taking advantage of the two very experienced producers with you.  I am sure you would have an answer too, Guy, but I am going to take advantage of the fact that you thought well to bring along the producers.

5721             I take your point about equity investment.  And as you know the Commission even most recently in 2004‑93 has made it clear that we are looking for at‑risk equity investment.  So let us not go to that point.

5722             What I was curious about was, in you view, the relative importance of acquiring programming and invest in programming.  In your view.

5723             They are both there.  There are both possible.  It seems that some major and important productions have been done recently based on investment, equity investment.

5724             Is that the trend going forward that is going to be of more support to the production industry?  Or is acquiring programming still of greater importance?

5725             MS CUNNINGHAM:  Thank you, John.

5726             I will take a stab at this from the feature film perspective, because I think it actually can have a different answer.

5727             In terms of feature film, traditionally our licences that we get from pay television, or conventional broadcasters for that matter, form part of a distribution advance and usually get assigned to a theatrical distributor who then administers all of that, whereas equity investment flows right into the financing plan and is controlled more ‑‑ negotiated directly with the producer.

5728             So as distribution advances have decreased and licence fees have decreased, it has become increasingly important to have real equity investment.

5729             The that the real point is, we want more of both.  We would like to see competitively high licence fees, but in feature films equity investment is essential to continue producing at high budget levels that make us internationally competitive and appeal to wider audiences.

5730             COMMISSIONER PENNEFATHER:  Thank you.

5731             Thank you, Mr. Chairman.

5732             THE CHAIRPERSON:  Thank you.

5733             A very delicately balanced submission, Mr. Mayson and ladies, and I understand your situation.  We have to balance objectives and interests all the time.

5734             I wanted to take the opportunity to ask Mrs. Cunningham a number of questions concretely related to one of your excellent productions, "Being Julia" ‑‑ which, by the way, I thought Annette Bening should have won the Oscar.

5735             MS CUNNINGHAM:  We are happy she won the Golden Globe.

5736             THE CHAIRPERSON:  What was the budget of that film?

5737             MS CUNNINGHAM:  The budget was just under $20 million Canadian.

5738             THE CHAIRPERSON:  Twenty million Canadian.

5739             MS CUNNINGHAM:  I'm sure you all understand that is very high budget in terms of Canadian standards.

5740             THE CHAIRPERSON:  Right.  For sure.  Low by the standards of a movie like that in a way, but high by Canadian standards.

5741             Did it air on both pay services in Canada?

5742             MS CUNNINGHAM:  Yes it did.

5743             Actually "Being Julia", "Where the Truth Lies", "The Statement" have all been very highly supported by Astral and Corus.

5744             I would add that their investments in the productions were substantial in terms of equity.  We won't get into the discussion of guarantees or not at this point.

5745             At the same time, the roll‑in promotion was also important.  This is something we see that needs to be very emphasized with any new applicants as well, is they do promote at the time of theatrical release.  These were productions that meant a lot to them and so they did promote at the time we released the films in the domestic marketplace and provided actual marketing dollars to certain key appearances.

5746             Most recently, with "Where the Truth Lies" they contributed to the premiere of the film in Cannes.  We encourage these efforts.

5747             THE CHAIRPERSON:  This is the pay‑tv licences?

5748             MS CUNNINGHAM:  This is the pay‑tv.

5749             So they are demonstrating more than a token gesture, I would say, to support those projects they invest heavily in.

5750             THE CHAIRPERSON:  In that budget of ‑‑ you said $20 or $22 million?

5751             MS CUNNINGHAM:  I said $20 million, yes.

5752             THE CHAIRPERSON:  What part of your budget was devoted to promotion in that case?

5753             MS CUNNINGHAM:  Very little.  Very little in terms of how our system really works.  In terms of promotion after the film was made, there may have been $40,000 or $50,000 and that's it.  We rely heavily on our distributors.  Usually that is considered a distribution expense ‑‑

5754             THE CHAIRPERSON:  I see.

5755             MS CUNNINGHAM:  ‑‑ and therefore not part of the producer's expenditure.  Producers spend well beyond that $50,000 however and it goes into overages that don't get claimed.

5756             THE CHAIRPERSON:  So you are saying it is the distributors in effect, whether theatrical or pay distributors, that are usually accounting for the promotion.  This is why you are saying on page 6 that you have asked us, as you have:

                      "... to ensure that any new pay tv licensees make a strong financial commitment to domestic feature film production, in terms of program expenditures as well as marketing and promotion."

5757             I take it you have given us an order of magnitude of licence fees.  In your letter to the Minister at least you have put forward numbers.

5758             Do you have a sense of magnitude of the promotion that you are looking to that you would expect?

5759             MS CUNNINGHAM:  I would hesitate to give an exact figure, but what we would like to see, because pay is often the first window ‑‑ it is interesting, we said it right at the beginning, so few of our films last very long on the screens, as I'm sure you all know.  "Being Julia" is a fortunate one that people seem to be aware of.

5760             But the pay is often the premier audience for the film.  That helps us essentially grow audience for future film and our whole point here is to grow audience.  So it seems to us that we would like to get the promotional support upfront prior to a pay window and have meaningful contributions.

5761             A film like "Being Julia" probably had a distribution expenditure of upwards of $2 million in Canada alone in promotion and ads for the release.  Of that money, much of it is at risk.

5762             It would be interesting to see really, really high level, high profile campaigns both in‑house on pay networks, some of which is done, but also contributions to third party costs such as this, because $2 million is what Americans spend in Canada on a typical even independent film that does relatively well.

5763             For a film to have a high profile that is a fairly realistic figure.  Most Canadian films have closer to $200,000 to $500,000 spent.  With all due respect, sometimes that is a good number for those films, but that is ‑‑ I will stop there.

5764             THE CHAIRPERSON:  You are saying $2 million would be the typical American release spent in Canada in Canadian dollars?

5765             MS CUNNINGHAM:  That can be.  That would be comparable.

5766             THE CHAIRPERSON:  Right.  Okay.

5767             What was your licence fee from the pay licensees on "Being Julia"?  I don't want you to disclose anything that was confidential, except privately to us.

‑‑‑ Laughter / Rires

5768             MS CUNNINGHAM:  I would rather say that is confidential at this point.

5769             THE CHAIRPERSON:  Okay.  If you wouldn't mind filing that with us in confidence it would be interesting to know what that was.

5770             Also you suggested that they spent money on promotion ‑‑ I don't know whether you were relating it to that film, but if they did indeed whether that was above and beyond the licence fee.  I assume it was.

5771             MS CUNNINGHAM:  Yes.

5772             THE CHAIRPERSON:  If you could also give us that?

5773             MS CUNNINGHAM:  Certainly.

5774             THE CHAIRPERSON:  Just to give us a sense of what that entailed on that particular film.

5775             Thank you.  Those are very helpful comments and very informative.

5776             Commissioner Pennefather.

5777             COMMISSIONER PENNEFATHER:  Just one last point I forgot about.  We had discussion on high definition and costs on upgrade to high definition and/or, if I may suggest, high definition from the beginning of the budget.

5778             Where does that fit now in your views in your budgeting and in your exhibition?

5779             MR. MAYSON:  I will take a run at that, Joan, and I will pass it back to Julia and Sandra both, because it is slightly different.

5780             High definition has become extremely sort of ‑‑ has taken on a new urgency.  Mr. Dalfen has spoken eloquently on the need for more high def programming and it has sort of suddenly caught on it seems with everyone.

5781             We have been working with the Canadian digital television initiative with broadcasters ‑‑ yes, producers and broadcasters do actually work together on certain things.  I think there are two main areas, there is a cost of transfer and format costs, but there is also a significant production cost as well.

5782             Just in the discussion this week I have noticed there has been some confusion about that, but there are very significant production costs which I think will ultimately stabilize going forward, but significant cost increases involved in shooting in high def.

5783             The CDTV group has been basically looking at a kind of average of 10 to 15 percent increase in budget.  When you look at CTF numbers for things that are shot in high def, some very dramatic increases.  We realize those aren't representative maybe, but 40, 50, 60 percent budget differences in certain centres.

5784             This is another area where we have asked Heritage to show more attention, make a bit of a commitment to this, because the CTF is being stretched in so many different ways and high def is a reality and high def is coming and all of our members are producing ideally for sales abroad where high def is just a given and there needs to be some recognition that some resources need to be made available or otherwise there would just be yet another further strain on CTF resources.

5785             But there are sort of transfer differences too from film and television.  It might be interesting.

5786             You should probably comment on this I think.

5787             MS KEATLEY:  I think just so you understand, when we talk about the different genres, obviously drama ‑‑ for instance, in the United States they shoot their drama series on 35 millimetre which transfers to HD.  The cost of shooting on 35 is much higher in a production budget but you can transfer it.  In Canada the trend has been to shoot super 16 which doesn't transfer as well.

5788             Ultimately, you can choose to shoot in HD, but you don't end up with a film look.  It is a bunch of things in terms of what does the audience demand.  Ultimately, this is for both feature film and for television, what we as producers ‑‑ all of these costs are basically being downloaded onto the production.

5789             I am delivering an HD format now, which is something I didn't do, for "Cold Squad" on "Godiva's" and that is just the reality.  What we are being asked to do is deliver for the international markets various versions.  It is not just an HD version, it is a letter box version, it is in this version, all the different elements that we have to do and those kinds of things.

5790             The good intent of this, because audiences want them and that is the way it is going, it is really important that we address it, and the costs are significant and it is not a cookie‑cutter answer because it is different depending on the kinds of programming you are making.

5791             COMMISSIONER PENNEFATHER:  Thank you very much.

5792             THE CHAIRPERSON:  Vice‑Chair French.

5793             COMMISSIONER FRENCH:  On the bottom of page 4 you say that:

                      "Dramatic series should be produced at arms' length.  Original Canadian features and drama series should be the exclusive domain of independent producers."  (As read)

5794             Are you asking the Commission to make that a condition of licence for any pay‑tv licensee?

5795             MS KEATLEY:  I would say yes.

5796             COMMISSIONER FRENCH:  Could you tell us what kind of a rationale you think the Commission could introduce to support that?

5797             MS JULIA KEATLEY:  Justify that.

5798             I think most of the broadcasters that are out there in the pay television, they don't have particularly the expertise within their companies.  I am actually the daughter of a CBC producer who left when they stopped actually producing in‑house production for the most part in terms of drama.

5799             I also think just in general one of the things that has actually been proven through the growth of the independent sector is you end up with more choice and more quality and if you are developing more projects with independent producers rather than investing in the infrastructure that supports them, you are actually getting to choose from, hopefully, higher quality projects because you are probably comparing 10 projects versus two.

5800             COMMISSIONER FRENCH:  I do know the general arguments in favour of independent production, but I am asking a more specific question.

5801             What would the Commission say to justify an absolute prohibition from in‑house production by a pay licensee of original Canadian features and drama?

5802             I can't say I met this very nice young lady at a public hearing and she convinced me that she knew better than you do.  That won't do as a public policy rationale.

5803             So I need to understand what the CFPTA thinks is the argument for a prohibition on internal production of dramatic series by a licensee.

5804             MR. MAYSON:  I can take a jump at that just because I think it is an important ‑‑ I understand the question and I think it is an importance of a juncture.

5805             I think the idea here is, this basically would be a signal by the Commission to encourage independent production in this country.  We are not saying that the licensee should not do in‑house production, but we think in the area of drama, higher budget drama and documentaries, independent production, I think that is an area where the Commission can actually help the independent sector create more diversity and let the independent producer bring more value to the system.

5806             COMMISSIONER FRENCH:  Thank you.

5807             THE CHAIRPERSON:  Thank you very much, Mr. Mayson, ladies.

5808             Madam Secretary.

5809             THE SECRETARY:  I would now like to call on the next appearing intervenor, Mr. Ken Thompson from the Communications for the Alliance of Canadian Cinema, Television and Radio Artists, ACTRA.

INTERVENTION

5810             MR. THOMPSON:  Good afternoon, Mr. Chair and Commissioners.  My name is Ken Thompson.  I am Director of Public Policy and Communications for the Alliance of Canadian Cinema, Television and Radio Artists, ACTRA.

5811             ACTRA represents over 21,000 Canadian professional performers working in the English‑language recorded media in Canada.  ACTRA and its predecessor organizations have represented the interests of professional performers working in English‑language media in every region of Canada for over 60 years.

5812             ACTRA's principal function is the collective bargaining needs of its members and others whose performances in film, television programs, sound recordings and digital media, entertain, educate and inform Canadians and global audiences.

5813             ACTRA is a vocal advocate for the preservation and strengthening of Canadian culture and Canadian creativity.  ACTRA plays a leading role in coalitions for the advancement of Canadian cultural programs and in international bodies working for the protection of cultural diversity in a global economy.

5814             ACTRA has taken an active role in the Coalition of Canadian Audiovisual Unions, whose mandate is to restore Canadian‑made drama productions to Canadian television.

5815             ACTRA members have a vital stake in Canada's cultural future.  Performers benefit professionally when work opportunities are strong.  They also believe passionately that Canada needs a strong Canadian presence wherever entertainment and information services are created and however these are provided to Canadians.

5816             If we are to achieve our creative promise, the work of artists and performers must be seen.  ACTRA believes in our national creativity, our capability to tell and perform our own stories.  This is what motivates ACTRA's participation in public processes about the future of Canadian television, film and other media that made up the cultural industries.

5817             We are very pleased to have the opportunity to speak to you today at this hearing regarding the application of four of the proposed TV services for English Canada.  I won't comment on the French‑language pay‑tv applicants.

5818             In our written submission we offered some comments concerning the impact of technology in respect of the possibility of licensing one or more additional pay‑tv services.  I welcome your questions in that regard, but I will not repeat those comments here.

5819             Our written submission also briefly analyzed the four proposed English‑language pay‑tv applicant services.  I will not repeat those summaries, but would welcome questions regarding comments that we have made with respect to any particular applicant.

5820             I would like to restrict the comments today to issue number one of the Panel's focus in the hearings referenced in the Chair's opening remarks and quotes the benefits to the benefits to the Canadian broadcasting system in licensing a new general interest pay television service, particularly in respect to contributions to Canadian programming.

5821             Our primary concern regarding the new proposed pay‑tv services is to ensure that there is a place for new Canadian drama programming on these and on the incumbent services and that these services will contribute financially to the production of new Canadian English‑language drama programming and new Canadian films.

5822             We believe we share this primary concern with our colleagues at the Writers and Directors Guild and we support their intervention in that respect.

5823             We do not support any one applicant, but believe that increasing the number of pay‑tv services would increase the opportunities for production and exhibition of more new Canadian television dramas and Canadian films.

5824             With a 50 percent growth in pay‑tv revenues between 2000 and 2003, and a substantially lower penetration rate than in the United States, there would seem to be room for competition.

5825             As well, in the short term competition would increase the market overall for pay‑tv.  In turn, this should create an environment in which additional resources can be directed to the production of Canadian programs.

5826             The general interest pay television licences now spend approximately $31.5 million annually on Canadian drama.  The additional resources for Canadian content could be significant.

5827             In the optimistic scenario, this spending could increase by 50 percent or more even in the first year of operation of any new service.  As a consequence, we would support the licensing of one or more additional national, general interest English‑language pay‑tv services subject to appropriate conditions of licence.

5828             Pay‑tv represents an additional window for the viewing of and viewing of new English‑language drama made‑for‑tv productions, as well as new Canadian films.

5829             There is an ongoing crisis in English‑language television drama that requires urgent and immediate action.  In the past four years, ACTRA and its members have been in the forefront of the campaign to reverse the precipitous decline in the availability of domestically produced English‑language television drama.

5830             We have raised this issue publicly with politicians and with the Commission.  Granting licences to additional pay‑tv services with appropriate conditions of licence would not benefit the broadcasting system as a whole and would not provide any measurable assistance to stem the crisis in English‑language drama.

5831             To the contrary, it would likely contribute to a further decline in English‑language Canadian television drama.  Therefore, appropriate minimum Canadian content requirements at least matching those of the existing pay television services must be required as a condition of licence for any new service licensed.

5832             As a member of the Coalition of Canadian Audiovisual Unions, we endorse the recommendations in its recent report "The Need For A Regulatory Safety Net".  The report highlights that spending on Canadian dramatic services was down by 33 percent between the years 2000 and 2004 and spending on feature films was down by 49 percent in the same period.

5833             While Canada's private conventional television broadcasters might bear the brunt of the obligation to reverse the decline in television drama and ensure that Canadian audiences have an adequate supply of high quality drama programs and series, specialty and pay television services must play a role as well.

5834             In this context, the CCAU report puts forward the following recommendations with respect to pay TV services and we urge the Commission to adopt these principles in the current process.

5835             First, that Canadian pay TV services would be required to increase their Canadian content and to make greater Canadian content program expenditures commensurate with their increased financial resources.  That the Commission should provide enhanced reporting for pay TV services with revenue and drama hours and dollars identified for those that include drama in their mandate.  That the Commission should remove the licence fee top‑up policy.  Pay TV services should not be permitted to reduce their financial obligation to Canadian content by having their spending on productions treated as equity, even when there is little or no risk to the investment.

5836             The rationale for these recommendations is provided at length in the CCAU report and we believe it is sufficient here to only make the following brief comments.  We think that it is important to note that appropriate minimum spending by a licensee on Canadian content in each year of the licence should not provide the ability to claim the licence fee top‑up.  Under the top‑up policy broadcasters receive a credit for the funds made available to Canadian Television Fund that are designed to increase the value of the broadcast licence fee of independently produced Canadian programs.

5837             It seems to be inappropriate to permit the broadcaster to count these payments when they have not made the expenditure.  In the year in which they spent $31.5 million on Canadian programs this policy excused Canada's pay TV services from spending $5.8 million or more.  The current process is an opportunity for the Commission to begin to reverse this policy throughout the entire broadcasting system.

5838             Ensuring that the minimum Canadian content programming expenditures are directed exclusively to television dramas, feature films or long‑form documentaries, since these categories are the most underrepresented in the broadcasting system.  This process also enables the Commission to implement a requirement that count as an eligible Canadian content expenditure any equity investment made by a pay TV licence that should have no higher recoupment status than other equity investors.  This is necessary throughout the broadcasting system in order to ensure that independent producers are not required by broadcasters to carry an unfair burden of the financial risk of the productions.

5839             Although not raised in our written submission, we agree with and support the proposal of the Writers and Directors Guild joint submission that recommends that the Commission indirectly deflate the pressure to bid up the cost of foreign content by raising the percentage of revenues that is required for Canadian programming.  The proposal recommends that the current level of expenditures of 32 percent be increased to 40 percent as a proactive step by the Commission to deter a massive increase in foreign programming costs, such as have occurred in the case of conventional television.

5840             The proposal works with a competitive model and, given the profitability of the incumbent services in the periods between 1998 and 2003, there is, as the Writers and Directors Guild posit, a capacity to make an increased commitment to Canadian programming.

5841             With respect to reporting requirements, it is essential for the Commission to provide detailed information about pay TV licenses.  Without it, the public cannot be guaranteed that private broadcasters are fulfilling their obligation under the Broadcasting Act to contribute to the creation and presentation of Canadian programs to an extent consistent with the financial and other resources available to them.  The Commission should confirm in this process that it will continue to release such information about any licenses.

5842             Pay TV is a broadcast window for the exhibition of Canadian films.  Canada's feature film industry continues to fall short of its potential.  Canada has the performers, writers, directors and producers we need to make high quality and entertaining movies that should be able to attract audiences in Canada and elsewhere.  However, despite 50 years of public policy and investment, it remains the case that Canadian movies account for only a small percentage of the domestic market.  While there may have been some progress in the five years since the latest feature film policy was announced, more attention needs to be paid to both marketing and exposing Canadian movies, including through the broadcasting system.  The licensing of new pay TV service must take account of this situation as well.

5843             In our submission to the House of Commons Standing Committee on Canadian Heritage's review of feature film policy we noted that the government support measures are overwhelmingly designed to affect the supply side of the movie industry rather than the demand side.  These include a range of policies to assist producers to create Canadian movies with reasonable budgets, including marketing and promotion expenses.  We have pointed out that these should be balanced and complimented with concrete measures to stimulate audience demand as well.  There need to be guarantees that all Canadian feature films appropriate for pay TV release will be programmed on the licence services.

5844             And finally, in addition, there is an urgent need for additional resources to be provided to the script development with conditions permitting professional writers and other film artists to be able to apply for funding without having a producer attached to the project.

5845             Thank you for providing this opportunity for ACTRA to voice its concerns and offer its recommendations in this important process.  I welcome your questions.

5846             Thank you.

5847             THE CHAIRPERSON:  Thank you very much, Mr. Thompson.

5848             Your written intervention was fairly clear and I only have one question arising from it and it is at paragraph 41, and if you don't have it right there ‑‑ perhaps you do?

5849             MR. THOMPSON:  I do.

5850             THE CHAIRPERSON:  This is where you state that the ‑‑ you were:

                      "..convinced by the applicants that, in the short‑term, competition will increase the market overall for pay TV, this is positive and creates an environment in which additional resources can be directed to the production of Canadian programs, most particularly feature films."  (As read)

5851             You haven't done any independent research though that would support that, you are just basically convinced by the logic of their argument?  Is that a fair way to put it?

5852             MR. THOMPSON:  We haven't done any independent research, no.

5853             THE CHAIRPERSON:  Okay, thank you.  Commissioner del Val.

5854             COMMISSIONER del VAL:  Thank you.  I am just turning to page 8 of your oral presentation today where you agreed with the Writers Guild submission that the Commission indirectly deflate the pressure to bid‑up the cost of foreign content by raising the percentage of revenues that is required for Canadian programming and, to that, raise the CPU requirement to 40 percent or 45 percent.

5855             This is a question that I will also raise for the Writers Guild.  I had, in particular it was in ‑‑ I think through paragraphs 111 to 114 in their submissions that they dealt with this point.  I read it several times and I had a very difficult time, after gathering all of the facts, concluding that increasing the contribution requirement would actually lead to ‑‑ I think that they put the section under threat of seeking regulatory relief.  So I am wondering whether you can walk me through that to see maybe what is it that I am missing?

5856             MR. THOMPSON:  Well, I have to admit, I had some with it at first as well.  It does make sense.  It is a model that requires exclusivity, which I think is something that you have to read into that.  I prefer not to answer for the Writers and the Directors who I believe can better explain their reasoning for that.  It did make sense, though.

5857             COMMISSIONER del VAL:  Okay.

5858             MR. THOMPSON:  If I could ‑‑

5859             COMMISSIONER del VAL:  Yes, please.

5860             MR. THOMPSON:  ‑‑ if I could avoid your question by asking you to direct it to them.

5861             COMMISSIONER del VAL:  I will, but ‑‑

5862             MR. THOMPSON:  Thank you.

5863             COMMISSIONER del VAL:  ‑‑ but since you are supporting that submission I thought that ‑‑ I wouldn't mind hearing your interpretation of why that would be the logical interpretation, particularly in light of what Mr. Berry, I think of Premiere Bobine, said today that the Canadian services need the U.S. suppliers more than they need us.  And I think that ‑‑ to one of the questions I said, you know, what happens in real life when you say I don't have enough money to pay you?

5864             MR. THOMPSON:  What I think the proposition that is put forward in the Directors and Writers submission is that if there is exclusivity in the services it would create a bidding‑up for programs.  And rather than direct that bidding to the purchase of foreign programs by increasing the obligation to purchase or to licence Canadian programs you create an incentive for the services to focus more or to fill their broadcasting schedules with more Canadian programs.  Essentially, but increasing the requirement for Canadian programs you are lowering the amount of expenditure that they would have available for foreign.  That is the way I understood that proposition.

5865             COMMISSIONER del VAL:  Thank you.

5866             THE CHAIRPERSON:  Thank you very much.  Madam Secretary.

5867             THE SECRETARY:  Thank you, Mr. Chairman.

5868             I would now call on Ms Monique Twigg and Gail Martiri from the Directors Guild of Canada and Writers Guild of Canada to present the next hearing intervention.

INTERVENTION

5869             MS TWIGG:  Good morning, Mr. Chairman, members of the panel, Commission staff, ladies and gentlemen.  My name is Monique Twigg, National Research & Policy Manager of the Directors Guild of Canada.  The DGC is a national labour organization representing over 3,800 key creative and logistical personnel in the film and television industry.

5870             MS MARTIRI:  Good afternoon, I am Gail Martiri, the Director of Policy of the Writers Guild of Canada.  The WGC is a national association representing more than 1,800 screenwriters working in film, television, radio and new media production in Canada.  Our consultant in this proceeding, Peter Lyman of Nordicity Group joins us.

5871             MS TWIGG:  The WGC and DGC actively promote the continued growth of a healthy Canadian film and television industry at both the policy and professional levels.  We see this proceeding as an excellent opportunity to enhance Canadian film and TV drama programming.  The challenge for the CRTC is whether to adopt a competitive model or the rival of this model, as the Vice‑Chair has correctly termed it, and put in place the appropriate measures to make it work as anticipated or to deny the applicants and set the stage to increase requirements on the incumbents to more fully support Canadian content.

5872             If we look at the economics of this matter one thing is clear, the pay TV sector has grown significantly over the last several years.  It is now a solid contributor to Canadian programming and its growth has generated profits that exceed those of the conventional and specialty universe.

5873             In 2004 the pay TV sector, as a whole, reached 25 percent EBITDA as opposed to 20 percent for specialty services and 11 percent for conventional television.  Unfortunately, we weren't able to do an up‑to‑date profit analysis for TMN and MovieCentral, since we were dealing with two‑year old figures.  Nevertheless, we note that EBITDA for these two pay services grew from 17.9 percent in 1999 to 27.2 percent by 2003.  We didn't have access to the 2004 figures and we recommended the CRTC release this data immediately.

5874             As a result of this growth, the pay sector has recently become an essential financing partner with other broadcasters in the production of new Canadian television drama programs, such as Slings & Arrows and ReGenesis.  Given its financial success, we believe the pay sector can afford to offer a greater choice of high quality indigenous English‑language features and drama series to audiences whether or not the Commission opts for a competitive model in this proceeding.

5875             This brings us to the question of the competition and its impact on the pay TV sector.  Although we have not taken a position regarding competition, we trust that the Commission will carefully weigh the risks and benefits.  While competition could drive revenue growth and thus increase spending on Canadian programming we believe a competitive model would need regulatory conditions to protect Canadian content.  This is not incompatible with the successful launch of a new service.

5876             If the Commission opts for a competitive model, it should allow exclusivity for foreign programming to enable pay TV providers to differentiate their services and offer consumers a meaningful choice.  Since most applicants' business plans rely on foreign content as their main attraction, a new entrant would need the opportunity to own an exclusive window for at least some top U.S. movies if they hope to entice subscribers to switch or to subscribe to two services.

5877             Upon reviewing other submissions and the rebuttals of the applicants, we concluded that service differentiation is possible, especially if the services increase their contribution to Canadian production.  Though there is a limited supply of top‑rated movies in any given year, pay TV services could make their services more attractive by offering high quality original Canadian drama series.  We look forward to seeing the programming information the applicants have been asked to provide to see what they have in mind.

5878             It is likely that competition will lead to bidding wars for premium U.S. content.  We don't want to see a situation where the winner is the Hollywood studios who jack‑up the prices for their programming.  If this occurs, the result will be severely diminished bottom lines with consequences affecting Canadian programming.  We have seen the results of bidding wars play out in the conventional television sector where spending on U.S. programming has exploded and, as a consequence, spending Canadian programming has suffered.  A recently published Coalition of Canadian Audio‑visual Unions report, which was appended to our written intervention, details the specific figures.

5879             The pay sector must avoid a replay of this scenario.  Although the CPE guarantees that the pay sector will make a minimum level of investment in Canadian content we don't want to see weakened pay TV services coming back to the Commission for regulatory relief in the future.  Spotlight characterized this possibility as the nuclear winter scenario.  The analogy is not quite correct.  While we have never experienced a nuclear winter, we have seen the pay TV sectors mandated contribution to Canadian content cut in the past when it ran into difficulties through competition.

5880             MS MARTIRI:  Thank you, Monique.  To mitigate the risk of competition and increase support for Canadian production we have proposed five recommendations.  First, we propose that the Commission increase the rate of the CPE to at least 40 percent.  Since all services will have to incorporate this higher domestic expenditure requirement into their business plans they will be forced to cap the amount of money they spend on U.S. content if they aim to meet shareholders' expectations.  This higher CPE will also help ward off any decrease in real investment in Canadian production if revenues are negatively affected by price competition or other factors.

5881             Second, exclusivity should be permitted for indigenous programming, including movies to stimulate Canadian production.  All pay services will have to support the production of original Canadian films and series to attract audiences and fulfill their exhibition requirements.  Also, there is no incentive for them to promote Canadian shows if they are on the competitor's roster.

5882             Third, we recommend that the CRTC disallow the use of licence fee top‑ups as eligible Canadian programming expenditures for both pay TV and specialty broadcasters.  In  2003, for example, this practice diverted $5.8 million that could have gone to Canadian production.  Eliminating the licence fee top‑up will give the system more integrity, it will clarify what is actually being spent and it will relieve some pressure from the Canadian Television Fund.

5883             Fourth, the CRTC must tighten current rules for all licensees to ensure that permitted equity investments truly are at risk.  Fifth, all pay TV licensees should increase their support for script and concept development.  Development financing is the research and development stage for our industry.  Like any other industry, investing in this R&D phase is the most cost‑effective way to increase the quality of our projects.  We need a sufficient amount of script material to make sure that a project works on the page before we spend millions to shoot it.  The successful Hollywood model knows this lesson well.  L.A. studios develop about 10 scripts for each production made with most offering at twice this level to improve their chances of getting a hit.

5884             Although the majority of applicants have opposed fixed dollar amounts for development, we believe that this is a flawed approach.  By setting development expenditures as a percentage of revenues CRTC will ensure that this investment grows as the sector prospers.  We believe that 3 percent of gross revenues is the right level of investment in this crucial research and development stage and propose that this form part of the overall 40 percent CPE.

5885             In conclusion, whether or not competition is introduced, it is our position that the financial successful pay TV sector must increase its commitment to Canadian production to provide Canadian audiences with greater choice of home‑grown content.  The measures we have proposed today are designed to achieve the same.  We look to the CRTC for guidance on the issue of whether the market can support competitive pay TV services at this time.  We also look to the Commission to uphold in its decision a key objective of the Broadcasting Act, that is to ensure that all broadcasters fully support Canadian films and television programs to the best of their ability.  Thank you.

5886             THE CHAIRPERSON:  Thank you.  Commissioner del Val.

5887             COMMISSIONER del VAL:  Thank you for your submissions.  I guess you know what one of my questions will be, but before we go there I must say that I find your submission very comprehensive and, to my delight, easy to read and I thank you for that.

5888             Now, so from almost all of the points I follow your logic and I know why you come to the conclusions that you do and make the recommendations that you do.  There were only three points that I would require clarification and one of those is what we have discussed already.  It is up to you, we can start with that point first or I could go to the two probably easier points first.

5889             MS MARTIRI:  Are you referring to the 40 percent?

5890             COMMISSIONER del VAL:  Yes, yes.

5891             MS MARTIRI:  Yes, okay.  I will ‑‑

5892             COMMISSIONER del VAL:  Okay, can I give you a little bit where I am ‑‑ more about where I am coming from?  That section was under, I think, threat of regulatory relief and how the licensees would just come back to the Commission to ask that they be relieved from their CPE requirement.  And then you go on to make your argument about deflating the pressure and actually making the ‑‑ you know, increasing the CPE requirement and thus forcing the broadcast licensees to have less money to spend on U.S. programming.

5893             Now, to me, when I ‑‑ I have tried this several times and when I walk it through I think I am only going to bring them back before us faster to ask for regulatory relief, because if I put that together with what Mr. Berry today said, you know ‑‑ and also, because in my own mind the U.S. supplier is unlikely or there is not guarantee that the U.S. supplier is going to say, okay because you have less money to spend therefore I will charge you less and that is something over which I have no control.

5894             If the U.S. supplier quotes a ‑‑ calls for a price that is not affordable, then you go down the chain, ultimately the programming won't be as desirable, there will be loss of subscribership, loss of revenue, inability to meet the now even higher threshold for CPE contribution.  So that is why I am not following the logic yet, so if you could please walk me through.  Thanks.

5895             MS TWIGG:  Sure.  We suggested that it would act as a break on escalation of spending on American products simply because they would have finite production of programming budgets.  So they would have 60 percent to spend on foreign programming.  I think one of the interveners yesterday mentioned that the studios follow very closely what goes on in Canada and so they would know basically what they are dealing with in terms of programming budgets when they come to Hollywood to bid on their product.

5896             Generally, when it comes to the situation of the blockbusters, the most popular programming, the studios have already made back their money in the U.S. market.  And consequently, when they sell to foreign markets they sell based on what those markets will bear.  So they certainly won't sell to Costa Rica for the same price that they sell to Canada.  They will set the price for Canada based on what they know the market will bear in Canada.  It is hard to imagine a scenario in which the Hollywood studios refuse to sell their blockbusters to Canadian pay TV because they are not.

5897             And then the other thing is that once the two pay TV competitors are dividing up they are only going for half the top product each anymore.  So we are not ‑‑ I mean, I can see it playing out ‑‑ the reason why we are not coming out in favour of competition is because we can see it playing out in many different ways.  However, we do see it in a way that this 40 percent could act as a break on the kind of bidding wars that we have seen just three conventional stations managed to get themselves into.

5898             COMMISSIONER del VAL:  So the assumptions that I will have to make is that the U.S. supplier will charge less knowing that the Canadian licensees have less to spend?

5899             MS TWIGG:  I am not saying they will charge less than what they are charging now.  They will probably charge more than what they are charging now.  However, what I am saying is that they will want to sell to this market and they will get the highest price that they can based on what the market will bear.

5900             COMMISSIONER del VAL:  Okay, what do you say to, I think it is Mr. Berry's intervention, that we need them, so the Canadian licensees need the U.S. suppliers more than they need the Canadian market?

5901             MS TWIGG:  I can't argue with that. Certainly, all the pay TV incumbents and applicants talk about that programming as being their main driver for their subscriptions.  However, the fact that we may need them more than they need us doesn't mean that they don't need us.  They need all their customers.

5902             COMMISSIONER del VAL:  Thank you.

5903             MS TWIGG:  You are welcome.

5904             COMMISSION del VAL:  On the point of exclusivity, I think it is on page 27 of your intervention, paragraph 83 where I think you suggested that the Commission could consider a period of non‑exclusivity ‑‑ oh no, I am sorry, consider imposing a prohibition against the incumbents, making exclusive arrangements for a period of time.  Do you have any suggestions as to what that period of time should be?

5905             MS MARTIRI:  No, that is really a market issue and that is not where our expertise lies.

5906             COMMISSIONER del VAL:  That is okay.

5907             Now then, this is another point of clarification, page 32, paragraph 106.

‑‑‑ Pause

5908             COMMISSIONER del VAL:  The last sentence:

                      "It is our view that the Commission must provide a licensing framework that encourages licensees from excessive payments for foreign products."  (As read)

5909             I think "encourages" should be "discourages" isn't it ‑‑ okay, good, because then I understand.

5910             MR. LYMAN:  Or encourages licensees from making excessive payments.

5911             COMMISSION del VAL:  Yes, good.  I just thought that I was missing something.

5912             Those are my questions, Mr. Chairman.  Thank you.

5913             THE CHAIRPERSON:  Thank you.  Those are our questions, thank you.

5914             Madam Secretary.

5915             THE SECRETARY:  Thank you, Mr. Chairman.  I would just like to state for the record that Téléfilm Canada has indicated that they will not be appearing at the hearing.

5916             I will then call on the last appearing intervener and that is the Canadian Association of Film Distributors and Exporters.

INTERVENTION

5917             MR. EAST:  Thank you.

5918             Mr. Chairman, Members of the Commission, my name is Ted East and I am President of the Canadian Association of Film Distributors and Exporters or CAFDE as it is commonly known.  CAFDE is a non‑profit trade association that represents the interests of nine Canadian‑owned and controlled feature film distributors and exporters and CAFDE members distribute over 90 percent of the non‑studio and Canadian films released theatrically in Canada each year and we distribute films in Canada from all over the world and in the widest range of genres and budgets.

5919             As mentioned in our written intervention, we are in favour of competition and over the last several days we have heard from many people about the benefits of competition.  I think we can all agree fundamentally that competition is good, it stimulates excellence, it is good for consumers and it is good for suppliers.

5920             In this case, what would competition achieve?  We believe that it would mean the expansion of the market, better programming, wider selection of films, increased marketing efforts for the services themselves and increased brand recognition for the services.  Somebody yesterday mentioned that they thought in Canada the HBO brand was more recognizable than the existing services.  It would also mean greater funding for Canadian films and increased audience and profile for Canadian films.

5921             But can the market stand competition?  We believe, yes.  The feature film distribution business is sort of built on three pillars, theatrical, home video DVD and premium pay.  There is other sources of revenue like post‑pay television and secondary releases of video DVD, but those are the three primary sources of income.  In both theatrical and home DVD market the market is and has been for decades approximately 10 percent of the U.S., but premium pay has lagged behind.  There were many reasons for this in the early years but today we believe the fundamental reason is the lack of competition.

5922             In the theatrical and home vide business there is competition, it is unregulated, any Canadian is free to open a movie theatre or video store or a chain of movie theatres and video stores.  There is compelling evidence that has been presented in support of the applicants that competition is going to bring about an increased market share.  Specifically, we noted that over 50 percent of cable and satellite homes in the United States subscribe to at least one premium pay service, but less than 20 percent in Canada.

5923             Of the existing premium pay subscribers in the U.S. more than 50 percent subscribe to a second service and a survey shows that more than 50 percent of existing subscribers in Canada would subscribe to a further service if one was available.  Now, six years ago the subscriber base of the existing services is less than half of what it is today and yet they were profitable businesses.  So following the logic of the evidence and research, at minimum, one new service could survive on a subscriber base of six years ago.  So we think that that is pretty compelling evidence that, you know, there is an opportunity for at least one service to make a very profitable business, at a minimum, just on the fact that of the existing services half of them would take a second service.

5924             Now, there has been a lot of discussion about the future and the impact of technology on the premium pay services.  Some are suggesting there is limited room for growth, because the growing popularity of DVD and the looming delivery of distribution by illegal downloading over the internet is going to cut into their business.  Well the truth is, nobody knows exactly how the business models built around technology changes will evolve, nor do we know exactly how the consumers are going to react to these changes.  But one thing seems clear, for watching movies at home the environment is improving rapidly.  The increasing size of the screen and the quality of the images and the attendant sound systems have significantly made watching films at home more satisfying than five years ago and five years from now there will be a substantial increase in the number of homes that have legitimate home theatres, if you will.

5925             Now a recent AP‑AOL poll in the United States revealed that 73 percent of people prefer to watch movies at home.  Now it is hard to see that percentage decreasing in the years ahead.  Decima research done for the Canadian Department of Heritage revealed that 20 percent of Canadians never see movies in theatres at all and 32 percent see movies once every six or 12 months.  So the future seems increasingly to be movies in the home.

5926             The present and future models for delivering these movies could be broken down into two categories.  The à la carte category, which would be home video DVD, the existing on‑demand services and future technologies like downloads.  The second model would be the prefix model, which is the premium pay services as they exist today.  Now each model has its benefits and in a competitive environment we believe that both can survive and thrive.

5927             So CAFDE is bullish on the future of movies and we are certain that watching movies in the home will experience considerable growth in the years ahead and we are delighted that there are other groups that feel the same and are prepared to invest significantly in this belief and have presented their cases to you.  So, thank you.

5928             THE CHAIRPERSON:  Thank you.  Commissioner Williams.

5929             COMMISSIONER WILLIAMS:  Good afternoon.  I am going to base a couple of my questions from your written intervention.

5930             MR. EAST:  Okay.

5931             COMMISSIONER WILLIAMS:  Do you have that document?  Okay.  Let us start in the area of concerns with the existing pay TV services.  You list a number of areas that your organization is concerned about, I guess their behaviour in a variety of areas.

5932             The first one I want to talk a bit about is number 10 and it says:

                      "Although the subscriber base has dramatically increased for the existing services the prices paid for films have not had a corresponding increase.  In effect though, the revenues and profits have increased, the pay services have lowered their per subscriber licence fees for Canadian feature films."  (As read)

5933             I would like to know how you would think that a more competitive market would help this and I understand the incumbents have not adjusted their rates upwards in the past 20 years and some would say in fact they have been eroded somewhat by inflation over that period of time.

5934             So to put more financial pressure on these organizations how would that help this situation for ‑‑

5935             MR. EAST:  Well, fundamentally, if you have more subscribers you have more revenue in the system and the percentage of that revenue, 32 percent say, has to go to Canadian film so that, by itself, is going to increase the appetite for Canadian films.

5936             COMMISSIONER WILLIAMS:  Okay.  What would the effect be if this competition ‑‑ let us say there isn't going to be a bigger pie, there is only a limited market for this type of business in Canada ‑‑ and so would three players not as strong as two players help your situation?

5937             MR. EAST:  That is a difficult question to answer.  Two strong players, are they better than three not so strong players?

5938             COMMISSIONER WILLIAMS:  That is correct.

5939             MR. EAST:  I suspect two strong players would be more beneficial because they are strong.  Three weaker players wouldn't have the financial resources to attract more audiences and attract more revenues as a consequence, but we would prefer three stronger players.

5940             COMMISSIONER WILLIAMS:  Yes, obviously.  In your point 15, it says, finally:

                      "CAFDE notes that the current conditions of licence allow existing services to take 150 percent scheduling credit for Canadian films that they pre‑buy."  (As read)

5941             This is providing an incentive to the incumbents to pre‑buy most of the Canadian films they run, however, you state further that:

                      "It also is meant that if they decide not to pre‑buy a Canadian film they will have little or no incentive to purchase it at all, and certainly not for the kind of licence fee paid in the past."  (As read)

5942             What would you propose as an appropriate incentive or how can this be rectified?

5943             MR. EAST:  Well, our members would like to get rid of that altogether actually.  I mean, one of the problems with this as it stands now is that the pre‑buying of Canadian films is significant and, unfortunately, distributors when they meet with producers, producers are walking in with film proposals where the pay TV has already been sold and distributors believe that they can get a better deal and it also restricts them in terms of when they can sell the film.  It also significantly reduces the shelf space for Canadian films, because if it is something that is done occasionally ‑‑ and I understand why it is being done in many cases, to go after the CTF money for top‑up, etc. ‑‑ but when it is being done in the volume that it is now it is significantly reducing the shelf space, which means the appetite for Canadian film is dropping.

5944             COMMISSIONER WILLIAMS:  Okay.  In your conclusions, I guess if I read 22 and 23 correctly, they essentially are that the Commission must licence and in a must‑carry format?

5945             MR. EAST:  Yes.

5946             COMMISSIONER WILLIAMS:  Okay, thank you.  Those are all my questions, Mr. Chairman.

5947             THE CHAIRPERSON:  Thank you.  Commissioner del Val.

5948             COMMISSIONER del VAL:  I just wanted to say that I found your submissions very well written ‑‑

5949             MR. EAST:  Oh, thank you.

5950             COMMISSIONER del VAL:  ‑‑ and they were very easy to follow and concise, so thank you.

5951             MR. EAST:  Thank you.

5952             THE CHAIRPERSON:  Thank you, those are our questions.

5953             MR. EAST:  Thank you.

5954             THE CHAIRPERSON:  Madam Secretary.

5955             THE SECRETARY:  Thank you, Mr. Chairman.

5956             This now completes the list of the appearing interveners and therefore Phase III.  I would like to say for the record that the interveners who did not appear and were listed on the agenda as appearing interveners will remain on the public record as non‑appearing interventions.

5957             Thank you, Mr. Chairman.

5958             THE CHAIRPERSON:  Thank you.

5959             We will break now for 15 minutes and resume with Phase IV.  Nous reprendrons dans 15 minutes.

‑‑‑ Upon recessing at 1540 / Suspension à 1540

‑‑‑ Upon resuming at 1604 / Reprise à 1604

5960             THE CHAIRPERSON:  Order, please.  À l'ordre, s'il vous plaît.

5961             Madame la Secrétaire.

5962             LA SECRÉTAIRE : Merci, Monsieur le Président.

5963             Nous allons poursuivre avec la Phase IV, où les requérantes peuvent répondre à toutes les interventions soumises à leur demande.  Les requérantes comparaissent dans l'ordre inverse.

5964             Alors, je demanderais au Groupe Archambault de bien vouloir faire leur présentation, et vous disposez de 10 minutes pour ce faire.  Merci.

RÉPLIQUE / REPLY

5965             M. SOLEY : Bonjour, Monsieur le Président, Monsieur le Vice‑Président, mesdames et messieurs, Membres du Conseil.

5966             Mon nom est Richard Soley, Président du Conseil du Groupe Archambault, et je suis accompagné aujourd'hui par Pierre Lampron et Édouard Trépanier.

5967             Nous voulons profiter de cette occasion pour remercier tous les intervenants qui ont appuyé BOOMTV et tous ceux qui, sans nous appuyer ouvertement, ont manifesté le désir d'avoir plus de concurrence dans le domaine de la télévision payante canadienne, en particulier, l'appui de l'Association des Distributeurs, la CAFT, dont les membres sont les principaux fournisseurs de contenu canadien aux services existants.

5968             Astral et d'autres intervenants semblent avoir mal compris ou mal interprété notre demande.  Nous souhaitons en profiter pour la clarifier de nouveau.

5969             BOOMTV will provide two distinct general interest pay television services, one in English and the other one in French, each with its own very distinct personality.

5970             In its oral intervention, Astral and Corus claimed that authorizing a new service will not introduce more program diversity and that consumers will not be better off.

5971             As you can see in the English‑ and French‑language program schedules filed with the Commission on Thursday morning, BOOMTV's proposed services are based on four teams that distinguish them from the existing services and from the other applicants.

5972             Movies will contribute only about 64 per cent of BOOMTV's schedules and not 90 to 95 per cent, as is the case with the incumbent services.

5973             The rest of BOOMTV's schedules will consist of sports programming, approximately 13 per cent, dramatic series, roughly 12 per cent, and cultural events, about 11 per cent.

5974             BOOMTV's concept represents something different from the existing services but any demonstration of its uniqueness offends some incumbent or other.

5975             For example, some intervenors such as CTV, the licensee of TSN and RDS have a problem with the volume of sports programming we are proposing.  In terms of program diversity, we are damned if we do and damned if we don't.  The fact that 35 per cent of our original programming, both Canadian and non‑Canadian, consists of sports coupled with our desire to acquire premium sports events means that we are planning to spend more on sports programming than on movies.

5976             This said, the low average repeat factor of our sports programming compared to the repeat factor for our movies means that movies will be more prominent on BOOMTV schedules.

5977             Corus claims it can find no evidence in Archambault's research of demand for new pay television services.

5978             In fact, Synovate's opinion research indicates clearly there is a demand for the services proposed in the BOOMTV concept:  55 per cent of the respondents in Synovate's sample said they liked the concept; 43 per cent said they were likely to subscribe in the absence of any price information; and 11 per cent said they would subscribe to the service at a price of $10.99 per month.  These results are sufficient for Archambault to propose investing up to $147 million in BOOMTV.

5979             Various scenarios have been developed by communication management at the request of Astral and Corus.  As the Chairman's questioning of the intervenors demonstrated, these scenarios rely on a series of ad hoc assumptions with little or no empirical basis.

5980             Ultimately, the quality and originality of any new service's programming will determine its success.  Quebecor Média and Archambault's track record in succeeding with the launch of new services is a guarantee to this effect.

5981             In our view, the PBIT margins of the incumbent services indicate clearly there is ample room in the two markets for more competition, and again, as the Chairman himself said, the addition of new players generally adds new consumers to a broadcast market.

5982             Dans son intervention, Astral prétend qu'Archambault ne croit pas à la viabilité d'un service au Canada francophone.  Ce n'est pas le cas.  En fait, un seul service en français nous désavantage en matière d'approvisionnement en compétition avec un titulaire qui exploite les deux marchés.  Nous croyons fermement à la viabilité du marché francophone à condition que d'obtenir des licences pour les marchés francophone et anglophone.

5983             Nous sommes heureux qu'Astral ait déposé l'Annexe 3 de son intervention orale, soit une liste partielle des activités des entreprises appartenant à Quebecor Média.  La position de leadership de ces entreprises est directement liée à leur engagement envers le contenu canadien.  Nous comptons nous inspirer de la vision de ces mêmes entreprises dans le déploiement des deux services de BOOMTV, et nous confirmons notre volonté de mettre à profit toutes nos expertises pour en assurer son succès.

5984             Nous aurions pu aussi rendre hommage à Astral en faisant la liste de toutes leurs propriétés télévisuelles, radiophoniques et placements média.  Une telle liste aurait démontré qu'Astral aussi dispose de tous les outils nécessaires pour faire face à la concurrence dans le domaine de la télévision payante, pour peu qu'elle soit stimulée à le faire.

5985             Astral, Corus et CHUM prétendent que l'autorisation des deux services de BOOMTV aurait un impact négatif sur leurs services.

5986             À notre avis, le caractère distinctif de ces deux services minimisera tout impact, et cette affirmation a été confirmée par l'étude de Synovate, qui indique que, parmi les répondants avec un potentiel élevé d'abonnement au concept, seulement 12 pour cent remplacerait un bouquet existant de canaux de films, et 10 pour cent un bouquet existant de canaux spécialisés dans le sport s'ils s'abonnaient à un concept comme celui de BOOMTV.

5987             Devant ces résultats, nous avons confiance que des groupes comme Astral, Corus et CHUM possèdent les moyens pour faire face à la concurrence dans le domaine de la télévision payante.

5988             Beaucoup d'intervenants ont prétendu que l'octroi de nouvelles licences pourrait avoir un impact négatif sur la production de contenu canadien.  Les services existants affirment que les pertes qu'ils subiront se traduiront par une baisse de leurs investissements dans le contenu canadien.

5989             Ce n'est pas ainsi qu'il faut envisager les impacts de la concurrence.

5990             BOOMTV injectera 298 millions de dollars dans le contenu canadien et misera sur ce contenu pour bâtir son succès.  Il nous semble que ce serait une mauvaise stratégie de la part des services existants de répondre par une réduction de leurs investissements dans le contenu canadien.

5991             Pierre.

5992             M. LAMPRON : Dans leur intervention orale, Astral et Corus, encore, présentent une fausse image des engagements de BOOMTV.

5993             Notre proposition, elle est cohérente, et nos discussions avec le Conseil ‑‑ et merci pour ces discussions ‑‑ nous ont permis de clarifier notre projet et nos engagements envers le contenu canadien, que nous tenons à confirmer maintenant.

5994             Nous avons déjà expliqué que nos prévisions financières pour BOOMTV ont été divisées en raison de 60 pour cent pour le service de langue anglaise et de 40 pour cent pour le service de langue française.

5995             Ainsi, selon cette répartition budgétaire de 60 pour cent en faveur du service en anglais et de 40 pour cent pour le service en français, nous aurions 119 millions de dollars qui seraient dépensés par le service francophone et 179 millions de dollars par le service anglophone sur les sept ans, en autant, bien sûr, que le Conseil nous octroie deux licences.

5996             Nos engagements vis‑à‑vis le contenu canadien comprennent les suivants, et excusez‑nous de la répétition.

5997             Tel qu'indiqué dans notre plan d'affaires, BOOMTV serait prêt à consacrer à l'investissement dans les émissions canadiennes ou à leur acquisition les montants indiqués dans sa demande comme prévisions financières, soit 298 millions de dollars sur les deux services pour la durée de la licence.

5998             De toute façon, quoiqu'il arrive, nous nous sommes déjà engagés à dépenser un minimum de 28.9 millions de dollars sur les deux services la première année.

5999             À partir de la deuxième année, et tel que nous l'avons suggéré mardi, BOOMTV est prêt à respecter les conditions de Super Écran pour le service français et de la plus élevée des conditions de TMN ou de Movie Central pour le service en anglais.

6000             En ce qui concerne le développement, nous allons dépenser au moins 1 pour cent de nos revenus bruts sur la conception et la rédaction de scénarios pour les dramatiques canadiennes ou un minimum de 5 millions de dollars sur sept ans si jamais nos prévisions de revenus ne se réalisaient pas.

6001             Cela constitue un engagement substantiel envers le développement de nouveaux films et de séries dramatiques canadiennes : 275 heures d'émissions canadiennes originales au cours de la première année, avec une croissance de 10 heures par année, pour atteindre 335 heures originales canadiennes au cours de la septième année pour chacun des services de langue française et anglaise.

6002             Dans son intervention orale, Astral a prétendu qu'aucun gain net pour les producteurs ne se produirait si le Conseil introduisait de la concurrence dans le secteur de la télévision payante.  En vérité, les services existants n'ont eu qu'un impact modeste sur l'industrie de la production canadienne.

6003             Comme nous l'avons déjà dit, les deux services de BOOMTV apporteront une contribution substantielle au contenu canadien et, par conséquent, la production indépendante.

6004             L'APFTQ exprime des craintes au sujet du guichet unique et les occasions d'affaires que propose Archambault aux producteurs indépendants.

6005             Quoique compréhensible, compréhensible parce que nous vivons dans un monde en perpétuel changement, compréhensible parce que nous savons que se déploieront bientôt de multiples fenêtres de diffusion et de nombreuses possibilités d'abonnement, donc compréhensible, ces craintes ne nous apparaissent, cependant, pas justifiées.

6006             Les producteurs parmi les plus éminents au Canada, qui ont diverses expériences de négociation avec Quebecor Média et avec d'autres diffuseurs, ont appuyé nos demandes.

6007             Nous répétons que dans le cas d'un contrat d'acquisition couvrant plusieurs fenêtres, nous avons l'intention de négocier et d'identifier dans le contrat le montant payé pour chaque média séparément.

6008             De toute façon, ce que nous avons dit et ce que nous répétons, notre stratégie de guichet unique, de multi plate‑formes, comme on l'a appelé également, est plutôt une stratégie qui est à l'avantage de tous les intervenants puisque ça a comme objectif premier de permettre l'exploitation d'un même produit sur un ensemble de fenêtres.

6009             Vous me permettrez, en conclusion, trois derniers points.

6010             Le premier.  Astral, dans son intervention, a un peu minimisé ou a tenté de minimiser la référence que nous faisions à Canal Plus, parlant de résultats en décroissance.

6011             La vérité est que... et je ne veux pas remonter au début, mais vous signaler que Canal Plus est un peu comme ici, est dans sa vingtième année, est en train de fêter ses 20 ans.  Les débuts de Canal Plus, contrairement à ce qu'on a évoqué, ont été aussi difficiles pour Canal Plus qu'ils l'ont été pour Super Écran, qu'ils ont bénéficié d'une situation de monopole, et qu'il est un fait incontesté que, pendant toute cette situation de monopole, Canal Plus a été, en France et en Europe, un leader incontesté, non seulement pour la cinématographie française et européenne mais également pour le modèle même de télévision.  Et puis ensuite est arrivée la concurrence.  Puis en même temps qu'est arrivée la concurrence est arrivée cette malheureuse affaire Vivendi, et qui a entraîné un certain nombre de pertes.

6012             Aujourd'hui, la situation de Canal Plus, c'est 4,95 millions d'abonnements.  C'est une hausse nette de 48 000 par rapport à 2003.  Son taux de résiliation n'est que de 11 pour cent, donc, est toujours en baisse, en baisse de deux points par rapport à l'année précédente.  Il y a 550 000 nouveaux abonnements en un an.

6013             Mais si j'en parle, c'est surtout pour dire que Canal Plus, avec son concurrent TF1, ont initié une nouvelle stratégie de mise en marché dont on peut penser s'inspirer.  Canal Plus a donné Canal Satellite.  TF1 a donné TPS.  Les deux sont arrivés sur le marché.

6014             Quelle est la situation d'aujourd'hui?  C'est que non seulement Canal Plus a réussi à protéger son vaisseau amiral et à développer une base d'abonnés qui, comme je l'évoquais, est toujours en croissance, mais, en plus, a pu profiter, si vous voulez, de tous ses développements technologiques ‑‑ ils sont assez rapides en France avec les lignes téléphoniques ‑‑ et transmettre, via DSL, l'ensemble des produits avec la question satellite, et caetera.

6015             Donc, Canal Satellite est aussi dans une situation de croissance assez intéressante à observer : 2,99 millions d'abonnements aujourd'hui et un taux de résiliation de seulement 8,6 pour cent, et contrairement à ce qui a été évoqué, il n'y a pas de baisse, si vous voulez, dans l'intervention de Canal Plus par rapport aux devis de production.

6016             Si en pourcentage, il y a un flottement entre 12 et 15 pour cent des devis, il n'y a pas de baisse en termes relatifs, c'est‑à‑dire en termes d'argent neuf injecté au niveau du cinéma, puisque ‑‑ et je n'ai, malheureusement, pas les taux de croissance, mais ils sont assez phénoménaux en France ‑‑ le nombre de films et les devis de production de ces films‑là ont augmenté considérablement ces dernières années dûs au fait de la concurrence.

6017             Le deuxième point sur lequel ‑‑ et c'est un peu en conséquence de ça ‑‑ sur lequel on veut insister, c'est ce concept d'élasticité de la demande.

6018             L'ensemble des intervenants qu'on a entendus, lorsqu'ils ont évoqué tantôt le iPod, tantôt l'arrivée de toutes ces nouvelles fenêtres de diffusion, ils l'ont décrit au Conseil comme étant une nouvelle concurrence qui s'installait sur le marché et une menace aux services existants.

6019             S'agissant de la télévision payante, nous avons essayé d'intervenir auprès du Conseil pour dire que ce n'est pas notre stratégie.  Notre stratégie est basée sur le fait que toutes ces fenêtres de distribution vont entraîner un marché de l'abonnement qui va, nous le croyons, connaître une croissance importante.

6020             C'est vrai, et on l'observe dans le domaine de la musique.  Ça arrivera dans le domaine de l'audiovisuel.  Toutes ces différentes fenêtres vont être faites, bien sûr, à la demande, comme tous les intervenants l'ont indiqué, mais elles vont être faites également par des services d'abonnement, et le principal fournisseur, si vous voulez, la principale organisation en mesure de profiter du développement de ces services et, en particulier, d'assurer la vraie diffusion du contenu canadien, à notre avis, est que c'est un service de télévision payante, et c'est une des motivations les plus importantes pour notre demande.

6021             Enfin, le dernier point, Monsieur le Président et Membres du Conseil, Astral et Corus ne sont pas en péril.  Leurs revenus, leur croissance sont des assises solides.  Leur savoir‑faire, qu'ils vous ont démontré tout au long de ces audiences, et, je vous dirais, les démonstrations de leur capacité, de leur performance et de leur savoir‑faire ne font pas de doute qu'ils sont en mesure de se situer et de pouvoir lutter dans un environnement davantage concurrentiel.

6022             Corus et Astral ont également des organisations et des moyens de pouvoir profiter de ce nouvel environnement dont on parle, de l'environnement de l'abonnement qui créera de nouvelles opportunités.

6023             En fait, nous espérons être en mesure d'offrir une saine concurrence, mais nous n'avons pas de doute que les services existants seront en mesure de continuer d'apporter ce qu'ils disent apporter au niveau du système canadien.

6024             On a beaucoup insisté sur la télévision généraliste.  Vous avez vu les résultats de Quatre Saisons qui ont été publiés hier ou avant‑hier.  La télévision généraliste est celle qui est la plus menacée dans les circonstances du paysage que l'on décrit, et c'est mon dernier mot pour vous dire que très certainement que la télévision payante est plutôt dans une position favorable dans ce nouveau paysage.

6025             Je vous remercie.

6026             LE PRÉSIDENT : Merci, Monsieur Lampron.

6027             Madame Pennefather.

6028             CONSEILLÈRE PENNEFATHER : Merci, Monsieur le Président.

6029             Juste pour vérifier, Monsieur Lampron, si j'ai bien compris.

6030             Pour le contenu canadien, c'est 29 millions pour les deux services ensemble, 29 millions la première année, et un pourcentage les années suivantes, et vous avez mentionné 32 pour cent, je pense, pour le service français.  Est‑ce que j'ai bien compris?

6031             M. LAMPRON : Nous avions, effectivement, mentionné le chiffre de 32 pour cent...

6032             CONSEILLÈRE PENNEFATHER : Oui.

6033             M. LAMPRON : ...en précisant, comme on avait fait, si vous voulez... en évoquant le 20 pour cent, on avait fait référence, probablement en tout cas, à une situation qui n'était pas la situation actuelle.  Le 32 pour cent nous semble être le pourcentage qui est celui qui est exigé des services existants.

6034             Si dans les vérifications, si vous voulez, de la façon de présenter, si vous voulez, ce pourcentage de 32 pour cent, il y avait des modifications qui devaient être apportées par le Conseil pour être absolument conforme aux exigences, c'est ce que nous évoquons.

6035             CONSEILLÈRE PENNEFATHER : Alors, c'est 32 pour cent pour les deux services?

6036             M. LAMPRON : Oui.

6037             CONSEILLÈRE PENNEFATHER : Merci beaucoup.

6038             Merci, Monsieur le Président.

6039             LE PRÉSIDENT : J'ai quelques petites questions, Monsieur Lampron, à ce sujet.

6040             D'abord, est‑ce que vous étiez ici pendant la présentation de l'APFTQ?

6041             M. LAMPRON : Oui.

6042             LE PRÉSIDENT : Oui.  Votre stratégie de véhiculer vos programmes sur une multiplicité de plate‑formes les inquiète, et l'inquiétude, c'est ‑‑ si on lit ce qu'ils disent ‑‑ que chaque plate‑forme sera une autre manifestation d'une programmation originale et que :

                        * Le résultat net ne sera pas plus de productions canadiennes à l'antenne, mais plutôt un partage de coûts d'acquisition qui ne servira que les radiodiffuseurs et sûrement pas la production indépendante canadienne... +

                      (Tel que lu)

6043             Est‑ce que vous avez des commentaires là‑dessus?

6044             M. LAMPRON : Oui.  Effectivement, dans la description que nous faisions de cette stratégie multi plate‑formes... et si on se réfère à notre présentation orale, nous avons bien dit que s'agissant des dramatiques en particulier, notre objectif était de rendre plus possible le financement de la dramatique dans un contexte où les généralistes privés, et je vous dirais, en particulier TVA ‑‑ qui, vous savez, est le diffuseur privé qui en finance le plus ‑‑ donc, pour permettre de maintenir un plus grand volume de dramatiques à la télévision canadienne, donc, nous nous proposons, si vous voulez, comme un partenaire.

6045             Ce que nous contestons de la...  Là où on partage un avis différent de l'APFTQ, c'est concernant ce gain net.  Donc, appliquer simplement au dramatique, nous croyons qu'il s'agit, effectivement, d'un gain net, parce qu'avec l'apport de BOOMTV, nous évaluons qu'il y aura, au minimum donc, ce maintien d'un nombre important de dramatiques et rendra possible le financement de dramatiques qui sont de plus en plus problématiques, comme vous le savez, à l'intérieur du système actuel.

6046             LE PRÉSIDENT : Vous avez indiqué dans votre requête que vous comptez payer 500 000 dollars comme frais de licence pour chaque présentation sur la télévision payante, est‑ce que c'est vrai, parce qu'il y a des intervenants qui ont répété ce chiffre‑là?

6047             M. TRÉPANIER : Je ne crois pas qu'on ait indiqué le montant des droits de licence dans la demande, Monsieur le Président.

6048             M. LAMPRON : Je ne voudrais vous induire en erreur.  Donc, on n'a pas une réponse précise sur cette question, mais...

6049             LE PRÉSIDENT : Je pense que je l'ai remarqué moi‑même, mais j'oublie.  Il y a tant de documents.

6050             Est‑ce que vous savez, Madame Pennefather?

6051             CONSEILLÈRE PENNEFATHER : Certainement, les intervenants ont mentionné un montant de 500 000 dollars pour frais de licence.  Je vais vérifier le dossier.

6052             M. LAMPRON : Je ne sais pas comment, je dirais, à cette étape‑ci vous répondre, mais je peux vous dire que, de toute façon, de façon générale, la façon dont est négociée la licence de première diffusion ‑‑ puis là, on reste simplement à l'intérieur du cadre des séries ou des dramatiques, et j'exclus le cas, si vous voulez, de films ou de téléfilms ‑‑ mais dans le cas des séries dramatiques, la négociation qui se fera avec les différents partenaires sera liée plutôt à un pourcentage du devis de production qu'à un montant fixe.  Honnêtement, le terme de 500 000 dollars ne me...

6053             M. TRÉPANIER : Je présume, Monsieur le Président, qu'il s'agit du résultat d'un calcul qu'aurait fait un intervenant.

6054             LE PRÉSIDENT : Ce n'était pas ça, mais étant donné qu'on n'a pas les informations précises devant nous pour le moment, on doit le laisser pour le moment.

6055             Est‑ce que vous avez des commentaires sur la proposition de CHUM que...  Eux, ils disent que si on vous octroie une licence ‑‑ une des requérantes, mais ils concentrent le plus sur vous autres ‑‑ qu'il y aurait une prohibition d'acquérir l'exclusivité pour des deuxième ou troisième fenêtres sur la programmation.  Avez‑vous des commentaires là‑dessus?

6056             M. LAMPRON : Bien, oui.

6057             Le premier commentaire.  Venant de CHUM, c'est assez surprenant.  Probablement qu'il n'y a pas eu à la base de ce commentaire une analyse très fine de la situation, en particulier de la situation de la télévision au Canada anglais.

6058             La réponse, c'est que nous croyons que c'est une crainte infondée.  Nous l'avons un peu expliqué, si vous voulez, dans le jeu de... je dirais, dans le jeu quasiment d'entonnoir dont on parle.

6059             La télévision payante va, effectivement, négocier des droits et des droits d'acquisition qui sont très largement supérieurs à la possibilité d'exploiter tous ces droits sur toutes les fenêtres, et au Canada en particulier, dans le domaine qui nous occupe, évidemment, si ça faisait allusion à notre capacité, par exemple, de fournir notre propriété qui s'appelle Sun TV, je pense que vous seriez à même de constater qu'on n'accaparera pas, si vous voulez, un ensemble de droits exclusifs qui pourrait être de conséquence à nuire à la compétitivité de CHUM.

6060             L'autre point sur lequel...  Je ne sais pas si on s'est bien compris dans nos échanges de mardi.

6061             Sur la question de compétitivité et de droits exclusifs, nous avons bien affirmé que nous avions l'intention, si vous voulez, de laisser le marché s'exprimer sur cette question‑là.  Nous acquerrons, lorsque ce sera possible et de notre intérêt et à des prix que nous sommes en mesure de payer, des droits exclusifs, et lorsque les conditions le permettront, nous acquerrons également des droits non‑exclusifs, et c'est dans cette perspective‑là que nous n'avons pas demandé à la Commission de protection.

6062             LE PRÉSIDENT : Merci.

6063             Dernièrement, est‑ce que vous étiez ici quand j'ai posé la question à monsieur Goldstein s'il avait des commentaires sur votre étude sur l'impact sur Super Écran de BOOMTV, et il a noté que le chiffre de vos abonnés n'était pas correct?

6064             M. LAMPRON : Oui.

6065             LE PRÉSIDENT : On a essayé de les comparer, et je veux vous donner une opportunité de répondre, parce que là, vous mentionnez, par exemple, dans la septième année, un chiffre pour des abonnés d'à peu près 241 000 abonnés, tandis que si on fait la répartition dans vos documents déposés devant nous, on a un montant plutôt de 369 000 abonnés.

6066             Est‑ce que vous avez des commentaires là‑dessus?  Il ne pouvait pas procéder, ayant trouvé cette erreur‑là, quant à lui.

6067             M. LAMPRON : Oui, j'y étais, mais monsieur Dorion lui était retourné à Montréal, à ses bureaux, et monsieur Dorion avait réalisé qu'il y avait une erreur qui s'était produite à la page 5 du document.

6068             Je vais vous lire le courriel qu'il nous a fait parvenir à 10 h 46 de l'avant‑midi, où il nous dit :

                        * J'ai réalisé qu'une erreur a pu se produire à la page 5.  Je ne sais pas si le document déposé hier avait été corrigé par notre équipe mais, à tout hasard, je t'informe... +

6069             Il s'adressait à monsieur Trépanier.

                        * ...à tout hasard, je t'informe de la révision suivante.

                        Pour les années cinq, six et sept, les foyers abonnés à BOOMTV francophone devraient lire : en cinq, 325 000 plutôt que 215 927; en six, 312 000 plutôt que 229 323; en sept, 373 400 plutôt que 241 657.

                        En corrigeant les données trop rapidement ce jour‑là, [nous dit‑il] nous avons utilisé des données de pénétration de BOOMTV de 11 pour cent pour les années cinq, six et sept, plutôt que 13 pour cent [là, on est à l'année cinq], 15 pour cent à l'année six et 17 pour cent à l'année sept. +

6070             On est dans le domaine des prévisions très précises.

                        * Ces nouvelles données modifient donc le nombre d'abonnés potentiel qui pourraient délaisser Super Écran durant toutes ces années si le taux de 15 pour cent de désaffection par année se maintient. +

6071             Donc suivre, si vous voulez, les chiffres de, en l'an cinq, 38 000 abonnés; en l'an six, 46 000; en l'an sept, 56 000.

                        * Donc, cette modification ne change pas l'essence de notre témoignage d'hier, à savoir que l'arrivée de BOOMTV aura un impact possible de 15 pour cent sur le nombre d'abonnés de Super Écran. +  (Tel que lu)

6072             Alors, c'est le message que nous envoie monsieur Dorion, en indiquant, donc, que l'erreur de transcription s'applique sur les années cinq, six et sept, et donc, aurait pas, puisque le 15 pour cent est toujours d'actualité ou serait toujours d'actualité dans la cinquième année ‑‑ je ne voudrais pas contester monsieur Dorion ‑‑ donc, cet impact serait de la nature que je viens de vous lire et ne devrait pas affecter, je dirais, de façon significative la situation de Super Écran.

6073             LE PRÉSIDENT : Je vous remercie.  Vos remarques sont sur le procès‑verbal, et on va les étudier si c'est pertinent.

6074             M. LAMPRON : D'accord.

6075             LE PRÉSIDENT : Merci beaucoup, messieurs.  Ce sont nos questions.

6076             M. LAMPRON : Merci beaucoup pour votre compréhension.

‑‑‑ Pause / Pause

6077             THE CHAIRPERSON:  Gentlemen, proceed when you are ready.  Ten minutes, I think.

6078             THE SECRETARY: The next applicant is Allarco Entertainment who respond to all the interventions that were filed on their application.

6079             Please go ahead.

REPLY / RÉPLIQUE

6080             MR. ALLARD:  Good afternoon, Mr. Chairman, Commissioners and Commission staff.

6081             I am Chuck Allard and with me are Malcolm Knox, Nic Wry, Mark Lewis, Wally Kirk, Mario Motto and Doug Malkie.

6082             Before we start our presentation, I would like to hand in our homework.

6083             You asked us to provide a program grid with details of each program, as outlined by Vice‑Chair French during our question period on Tuesday.

6084             We handed a document to the secretary at noon today with the program grid for our main channel, our proudly Canadian channel, and some comments on multiplexing.

6085             Mr. Kirk is here if you have any questions on what we did or how we did it.

6086             You also asked us to give you a breakdown of where our subscribers would come from in each year of the licence term:  DTH, digital cable or other sources.

6087             We have just handed in a page to the secretary that does just that.

6088             It was prepared for us by Mr. Motto of Decima Research who is here if you have any questions on that aspect.

6089             Just in passing, there were a number of statements yesterday about a piece of research done by Decima.  If you wish clarifications, Mr. Motto would be more than pleased to comment.

6090             Mr. Chairman, we will respond to the interventions, both oral and written, filed in support and in opposition to our application and those providing comments on it.

6091             I would particularly like to thank the producers and their original associations who came to Gatineau from across the country to demonstrate their support.

6092             We wish to respond to the points raised by the incumbents and by the CCTA.

6093             Malcolm.

6094             MR. KNOX:  Thanks, Chuck.

6095             The incumbents stated that there were five basic problems with the applications for new services:  consumers will have to pay for two services to get the same product; applicants have not shown consumer or producer benefits; no added program diversity; negative impact on their services and their contribution to Canadian production; no net gain for Canadian producers.

6096             We will address each of these issues.  The incumbents' point of view is largely based upon the research presented by CMI.  They seem to confuse our application with the Spotlight application, as does CMI's Table 7 that you asked us to review on Tuesday, Mr. Chairman.

6097             Our model does not require consumers to pay twice for anything.  Our proposal for non‑exclusivity means that both the incumbents and Allarco will air the top grossing Hollywood hits.  In fact, our assumption is that 30 per cent of our shelf space will be made up of the box office hits that the Incumbents would also have access to.  This is reflected in the schedule filed by Mr. Kirk this morning.

6098             Subscribers will not have to take both services to keep what they had.  There would be no change to the Incumbents' schedules.  Contrary to the Incumbent statements, there will be net benefits for the producers, consumers, the distribution industry, and the system in general  Consumers will have a real choice and diversity in programme offering.

6099             Our service, with the top grossing blockbusters making up about 30 per cent of our schedule and fully 70 per cent of the schedule, will be different from what is on the Incumbents'.  And all of this will be in high definition television, generating new growth in revenues for pay TV, distributors, and an injection of new funds into the production industry

6100             The interventions from the production industry were eloquent on the benefits from their point of view:  Over 209 million in support of independent production with a strong emphasis on developing programming in the regions.  The Incumbents' gloom about our impact on their services and their contributions to Canadian independent production rests on the negative portrayal of the industry presented by CMI and culminating in the analysis of Allarco in Table 7.

6101             This report consistently understates the picture for the pay television industry.  The Incumbents grossly understate the uptake of digital distribution.  Our projection for the growth of digital distribution started with Decima's historical data and projections for the next two years.

6102             We would note that the PWC "Global Entertainment and Media Outlook:  2005‑2009, Canada" digital subscriber projections exceeded those of Decima.

6103             Our own projections, endorsed by Decima, show growth of 10 per cent per year and arriving at 7.8 million subs by 2009.  PWC's report projects 9.3 million subs in that year.  The Incumbents and CMI then tried to dismiss our projections as to how many of the new digital subs will take pay by using their early adopter argument.

6104             Evidence from witnesses such as Mr. Smith with his experience at B Sky B and Express Vu and Mr. Lee from Roger's attested to steady growth in pay subs as new digital subscribers came on.  The Incumbents also overlooked the attraction that our all‑HDTV package will have.

6105             It is estimated that about 7 per cent of Canadian homes have HDTV‑enabled television sets, although the penetration of HDTV set top boxes is much lower.  The number of sets will grow exponentially as virtually all new TV sets are HDTV‑enabled.  The set top boxes are selling like hot cakes

6106             CMI's Table 7 is based upon an assumption that a large portion of our subscribers would receive our service as part of a discounted bundle.  There is a clear flaw in their analysis.  Mr. Lee of Roger's told you yesterday that it was likely they would not bundle us with the Incumbents or any other service.  Rather, he suggested they would sell us a la cart

6107             Table 7's average per subscriber rate for both our service and for the Incumbents is grossly understated.  This means the projections for our contribution to Canadian programming and that of the Incumbents are also understated

6108             But let's suppose for a moment that some BDUs choose to offer our 6‑channel HDTV service as an add‑on to the Incumbents at a lower wholesale price.  We anticipate that the largest portion would be in addition to the a la cart subscriber numbers in our model.  The result would be higher revenues than projected for our model, resulting in a substantially higher contribution to our Canadian programming objectives.

6109             Another flawed part of Table 7 is the decline of per sub rates for the Incumbents.  This starts with CMI's analysis on page 15 of the drop in per sub rates for the Incumbents from 2000 to 2004.  But this is only half the story.

6110             During that same period, their overall revenues grew over 150 per cent.  From 2000 to 2003, Movie Central's revenues grew from 34 million to 62 million, while TMN's grew from 55 million to 89 million in the same period.

6111             CMI underestimates the capacity of their clients.  The Incumbents have been in this business from the worst days up to the present.  They are accomplished programmers and marketers.  To summarise, the Incumbents greatly underestimate the digital universe, understate the per centage of that universe who will take pay, misstate the likely packaging arrangements, and undersell their own capacities as programmers and business people to arrive at their conclusions

6112             The CCTA, for its part, stated in its oral intervention that capacity remained an issue, and there should be no must‑carry requirements.  We would remind the Commission that in 1994 and in 1996, cable stated that it was unsure of being able to provide capacity for new specialty services.  In both cases, it followed shortly with multichannel launches.

6113             Now, once again, the CCTA is concerned with the capacity to add new channels.  Yet in 2003, the CCTA asked the Commission to add all the U.S. pay services with their multiplexes including HD, a total of approximately 45 channels.

6114             We have good news for the CCTA.  Our HDTV multiplex pay service will help drive the extension of their digital capacity and provide HD content for those consumers wanting to use their new HD sets.

6115             On another issue, Commissioner Del Val asked a number of applicants about ACTRA's concern about ghettoising Canadian programmes.  Let me quote from ACTRA's brief concerning our proudly Canadian channel.  We also find that the model of multiplexing an all‑Canadian channel in addition to programming Canadian movies and drama on the main service could be the most effective way of highlighting the Canadian programmes.

6116             Before we address exclusivity issues related to foreign programming, we would like to reiterate our views on exclusivity of Canadian programming.  We believe the decision should always be in the hands of the producer.

6117             Mr. Lewis will now address the U.S. exclusivity issue.

6118             MR. LEWIS:  We believe that the Incumbents have misstated the situation regarding the current non‑exclusivity provisions in the pay television regulations.  Allarco's non‑exclusivity proposal is born out of the fear that the Incumbents will on their own volition force Hollywood studios to grant them exclusive rights.

6119             In our original filing, we proposed an amendment to the existing pay television regulations to ensure that pay television licencees do not acquire the rights to programmes on an exclusive or other preferential basis.

6120             The pay‑per‑view services have thrived under the non‑exclusivity regulations that were mandated by a direction to the CRTC from the Governor and Counsel  The Incumbents have owned or operated pay‑per‑view undertakings that have been subject to and benefited from the regulation.  There is no question of the legality of the current non‑exclusivity regulation.  It is simple to administer and does not unduly enrich distributors of foreign programming.

6121             We also stated during our appearance on Tuesday that any existing exclusive agreements should be allowed to run their course provided they were entered into before the call.

6122             Further to our discussion on Tuesday and the Intervener's comments at the hearing, I have tabled today with the legal counsel to the hearing, the hearing secretary, two drafts of pay TV regulations dealing with exclusivity, and I would be pleased to answer your questions regarding the drafts.

6123             MR. ALLARD:  Mr. Chairman, members of the Commission, and Commission staff, I would like to thank you and your staff for the thoroughness and the fairness that we have experienced in both the paper and our oral parts of this proceeding.  Thank you very much.

6124             THE CHAIRPERSON:  Thank you very much.  Your presentation was very clear, and I have no questions.  I believe Counsel has a question.

6125             MR. KEOGH:  Thank you, Mr. Chairman.

6126             Mr. Knox, I will put the question to you, but perhaps other members of your team may wish to respond.  It goes to the proposed drafts that Mr. Lewis referred to in his remarks, and one of the questions I will probably put to him.

6127             But I just want to confirm for the record what Mr. Lewis has put before us are two different drafts, one called Version 1, and one called Version 2.  And recalling the position that you have put forward earlier, would I be correct in assuming that Version 1, which is a prohibition on exclusive rights for non‑Canadian pay television programmes, is your preferred position, and Version 2 is your fallback ‑‑ if I can put it that way ‑‑ is that correct?

6128             MR. KNOX:  That is correct.

6129             MR. KEOGH:  Okay.  And my last question with respect to them, and perhaps this would be for Mr. Lewis, in Version 1, you refer to non‑Canadian pay television programmes as being the object.  And in Version 1, you refer to non‑Canadian feature films, and I am assuming the distinction is deliberate  And if it is, I wonder if you can just identify what a non‑Canadian pay television programme is to encompass.

6130             MR. LEWIS:  I thought you would ask that  I am glad you did.

6131             Version 1 is really virtually identical to the pay‑per‑view regulation, which refers to pay‑per‑view programmes.  And in this case, we crafted it for pay television programme  We would envision, of course, that the Commission might look at when the pay ‑‑ I am sorry.  Let me back up.  In the pay‑per‑view regulations that now stand, it doesn't differentiate us between a Canadian or a non‑Canadian programme.  So in Version 1, it would be a non‑Canadian programme.

6132             Based on the discussion we had the other day, it would be our expectation that there may be a middle ground, which would be feature films, which are well defined.  But I crafted Version 1 recognising that the word "programme" was used in the current regulations, which is very easy to administer.

6133             MR, KEOGH:  Thank you

6134             Thank you, Mr. Chairman.

6135             THE CHAIRPERSON:  Gentlemen, I wasn't going to go over this, but I can't help but be struck by the digital TV market growth chart that you have filed for a number of reasons.

6136             For one thing, you've broken out the actual Decima forecast, PWC forecast, and ABI forecast.  And I guess when I look at the inputs into those numbers, I note that the current numbers ‑‑ for example, for DTH at end of second quarter, '05, is almost 3 million, 2.95, and cable is just under 2.  So I am not sure where the Decima ‑‑ so in effect, the DTH for the Decima forecast, Mr. Mota, seems quite low, and the cable quite high.  And I wonder whether you can comment on that

6137             MR. MOTA:  Sure.  I want to understand what number you are looking at exactly.

6138             THE CHAIRPERSON:  This is the 2005 Decima forecast.

6139             MR. MOTA:  Decima forecast, we see DTH at 2,524,000.

6140             THE CHAIRPERSON:  Yeah.

6141             MR. MOTA:  That's a year‑end calendar number that we are forecasting out.  Cable is at ‑‑

6142             THE CHAIRPERSON:  They are already at 2.95.

6143             MR. MOTA:  No, sir.  If you were to count Star Choice's latest numbers and Bell Express Vu's, Bell Express Vu is roughly 15 million, Star Choice at 800,000.  Round those numbers up, you get ‑‑

6144             THE CHAIRPERSON:  I am sorry.  You are quite correct.  No, no, that is right  15,95 and 8,36, what does that add up to?

6145             MR. MOTA:  Sorry, I don't know which numbers you are looking at.

6146             THE CHAIRPERSON:  I am looking at these quarterly reports.

6147             MR. MOTA:  Oh, yeah, it adds up to 2.4 million roughly.

6148             THE CHAIRPERSON:  Okay, I am sorry.

6149             MR. MOTA:  This is the year‑end number.  We are anticipating another, you know, 40, 50, $60,000.

6150             THE CHAIRPERSON:  2.4.  And so that is the year end?

6151             MR. MOTA:  Yes.  Any day now, we will get ‑‑

6152             THE CHAIRPERSON:  Quite right.  I added the wrong figures here.

6153             And for the cable, though, I think I added the right figures.  The top four cable companies, I have a figure of just under 2 million currently.

6154             MR. MOTA:  You are right.  And as you know, there is some material players out there with some share that they have also seen some significant growth in the last few quarters.

6155             THE CHAIRPERSON:  I got you.  Thank you

6156             Okay, and Telco TV, you are basing this currently operating are, what, MDS and Sas Tel?

6157             MR. MOTA:  That is correct.  There is a little bit of Aliant in there, because they have launched in Halifax, as you know, in some communities.

6158             THE CHAIRPERSON:  Right.  And that is all digital, so ‑‑

6159             MR. MOTA:  It is 100 per cent.  The only hybrid system here is cable, as you know, has the analogue and digital customers.

6160             THE CHAIRPERSON:  Right.  So currently at mid year, I don't have their numbers handy, but they are at quite a bit less than 115, are they not?

6161             MR. MOTA:  They are at ‑‑ if I remember my last number, it is probably in the 60, $70,000 range.

6162             THE CHAIRPERSON:  I thought it would be about 65, 70.  So you are predicting by year end in three months ‑‑

6163             MR. MOTA:  Absolutely  They have seen some very strong growth, and, as you know, Telus is on the verge of launching it.  Sir, it is our understanding that they will launch in November, and we think they will add another 5,000 or so before the calendar year end.

6164             THE CHAIRPERSON:  Okay.  And then for next year, you are predicting DTH to go from the 2.5 to 2.7, which is an increase of, what, about 7, 8 per cent?

6165             MR. MOTA:  Something in that nature.  We still see some growth for Express Vu next year given that its IPTV service is not going to be ramped up sufficiently in time.

6166             THE CHAIRPERSON:  Okay.  So in effect, according to you, the PWC forecast would be quite aggressive with that?

6167             MR. MOTA:  Keep in mind I will point out that DTH/others ‑‑ so the Telco TV, I am assuming, is bundled into their DTH numbers.  So it ramps it up a little bit higher, but even if you were to do the math, it is still a little bit higher forecast than our own forecast.

6168             THE CHAIRPERSON:  Right.  Okay.  And so then DTH, then we move over to the AEI forecast, which I learned today you endorsed, which I hadn't heard the other day.

6169             MR. MOTA:  Yes, we worked on that together today.  Essentially, we worked with the total number, and we backed our way back to give you that.

6170             THE CHAIRPERSON:  Okay.  Are you still comfortable with the 10 going forward?  Yesterday or the day before, you called it somewhat conservative.

6171             MR. MOTA:  The 10 per cent growth, you mean?

6172             THE CHAIRPERSON:  Yeah.

6173             MR. MOTA:  I think it looks conservative given the acceleration we have seen over the last year.  But as I mentioned, there are factors that may come into play in year five.  It could be year five.  In fact, I was talking to Michael Lee about these numbers, because he does subscribe to our report to kind of get a sense of where the market is going.  And one of the passing remarks he said was, "These numbers are very much in line with our own sort of sense of where the market is going"

6174             It is really those latter years in that hockey stick effect I told you.  I know people are waiting for those, because the question is unknown  There may come a point where the cable decides to shut off analog, and then that number takes off

6175             THE CHAIRPERSON:  I think it was Samuel Goldwyn who said, "The future is one of the toughest things to predict".

6176             MR. MOTA:  And even market researchers can't predict the future.  We try hard, but there is a lot of variables there.

6177             THE CHAIRPERSON:  Well, thank you very much.  That was helpful.  Those are our questions.

6178             Madame Secretary?

6179             THE SECRETARY:  Thank you, gentlemen.

6180             I would now invite Romen Podzyhun and Cal Millar on behalf of the Canadian Film Channel to respond to all the interventions that were filed to their application.

6181             THE CHAIRPERSON:  Please proceed, gentlemen.

REPLY / RÉPLIQUE

6182             MR. MILLAR:  Thank you very much.  Mr. Chairman, Commissioners, and staff, this has been a fascinating week for all of us.  We are delighted to have been able to participate in these proceedings.  I would just like to take one second to say thank you to all of our supporting interveners, the people who met with us through the summer, and all the Canadians who continue to bombard our website with encouragement an questions about when we may launch.

6183             We have only a few brief points to make this afternoon by way of reply  First, we would like to address the allegation that Allarco's Canadian channel will somehow deliver more to the system than the Canadian Film Channel  We take issue with this for two important reasons.

6184             First, the Canadian Film Channel will be available to more than 22 million subscribers on the day of launch, which is more than 12 times as many as their projections for the first year of 175,000 and considerably more than their year seven projection of 1.5 million.

6185             Secondly, and more importantly to us, particularly with respect to Canadian feature film is our approach to promotion.  Not only is our third party direct promotion higher than theirs, but promoting Canadian programming is all that we will do.  Indeed, all of the other applicants have stated that they need to focus on Hollywood output in order to succeed.

6186             Our second principle point, you have heard concerns that $500,000 is too low for a feature film project.  In our oral presentation, we have reviewed with you our revised thinking on the budget point.

6187             We tend to agree with Karen O'Donnell, who spoke to you from the perspective as of a career incubator and educator and independent filmmaker, who confirmed our view that good stories make good films and that good films are achievable within our price range.

6188             The feature film project of the Canadian Film Centre has, over a ten‑year period, made 16 films in the 400 to $800,000 price range.  One of these, "Cube", was a breakout international hit.  The National Screen Institute based in Winnipeg has launched ten feature film projects within our price range.

6189             We can see that the larger and more established production companies might not have an interest in making a $500,000 feature, but this part of our model is not intended for them.  Our primary interest is to support emerging talent, and this aspect of the system is fundamental to regenerate the successes of the past.

6190             We have to invest in the Julia Quans of today in order to recoup that investment in the Guy Maddens and Deepa Medas of tomorrow.  We are completely confident that we will have a tremendous choice in this area and that the film we will order through our licence fees will make successful and compelling programming for Canadian audiences.

6191             And, finally, Astral has said that our application is poor public policy, and that an amendment of conditions to licence needs to be tempered with meeting public policy objectives.  I am going to ask Doug to make a comment here.

6192             Doug?

6193             MR. BARRETT:  The Canadian Film Channel application focuses on two important public purposes.  The first is to unlock the vault of Canadian features, and the second is to support the growth of emerging talent  Those two things are central to what this project is about.

6194             There seems to be some controversy about whether or not it is appropriate for private sector organisation to achieve a public purpose  And I guess what I wanted to do was reflect for a minute on the Commission's record in the past on this.

6195             In my view, the principle preoccupation of the Commission over almost a 40‑year period in the broadcast side has been to the regulation of the private sector to achieve public purposes  From the introduction of first commercial television services and communities across the country to the licencing of first networks to the licencing of second services and so on to the introduction of analogue specialities and the fragmentation of themes to the introduction to the digital age, the Commission in each case has focused on finding a balance between having the private sector entities that come before it achieve the public purposes that the Commission is seeking to achieve under the provisions of the Broadcasting Act.  And some of those broadcasters have done extremely well financially by it, and so they should.

6196             One particular licence I would just like to mention has to do with Show Case.  Show Case was licenced in 1994 specifically for the purpose of focussing on Canadian television drama and for focusing on drama produced outside of the United States.  So there were the two conditions of the licence:  95 per cent drama, 95 per cent outside of the United States

6197             As late as 2003, in its decision relating to Show Case, the Commission said, "The Commission notes while Show Case's primary purpose is to provide a second window for programming, it is also permitted to broadcast first‑run programming.  The only limit is that first‑run broadcast cannot be produced by Show Case Television shareholders.

6198             So here is a licence that was essentially specifically tailored to rerun Canadian television drama  Interestingly, I think we would say that the amount of unseen Canadian drama at the time Show Case was licenced would be considerably less than the number of feature films from the vault that Canadians have not had regular access to.

6199             Now, this same thing has occurred with RTV, which focuses on the Quebec culture scene, and is also a share capital corporation, although it does have a couple of public shareholders.  It goes on with Teletoon, which brought animation to the system, the Canadian Learning Television, which brought adult education to the system.  And each of those involved a transfer in that they had a regulated wholesale subscriber rate from the BDUs.

6200             Now, we acknowledge that the proposed transfer here is not from a BDU, but we do not believe that the nature of what this is is any different, nor does it ask the Commission to do anything that it has not done often before.

6201             SPEAKER ONE:  Thanks, Doug.

6202             I actually remember the brouhaha when Bravo was licenced  Arts was a sacred trust.  Many argued that only the CBC should be entrusted with it.  Later, the same people were quick to admit that Chum had done a great job.  But why did they do a great job, besides the fact that these guys are thorough professionals?

6203             They did a great job, because the bundle of Bravo's licence conditions gave the Commission the reliable assurance that the licencee would achieve the public policy objective for which it was licenced.

6204             Similarly, I think that we have presented to you this week a bundle of licence commitments that will reliably deliver to Canadians the service described by us in our application.

6205             I want to thank you for your time and quickly thank staff that we worked with through the summer for their help through this process.  Thank you.

6206             THE CHAIRPERSON:  Commissioner Del Val.

6207             COMMISSIONER DEL VAL:  Thank you for your presentation.  I just have one point of clarification on the funding of your productions.  If a production were funded by your street films or the digital cineworks funds, does it preclude that production from obtaining funding from the public sources?

6208             SPEAKER ONE:  It does not preclude the producer from obtaining public funds.  However, we would not approve a project in excess of $500,000, which has not yet secured the rest of its funding in such a way that it would be able to trigger public funding.

6209             MR. DOUG:  And if I could add, if the budget of the film was under 500,000 ‑‑ or in the case of the other genres, under the specified amounts in the application ‑‑ it would preclude other sources of funding.  So what we've said in the opening statement was up to 500,000, we would be the sole source of funding, provide all the cash flow, and ensure the completion of the project.

6210             If a producer wishes to go beyond that, we are happy to listen to him, and the producer could access other sources of funds.  But our primary preoccupation is to make the films in the lower budget end, and we would not ‑‑ if they are under 500,000, we would preclude people from going to other sources.

6211             COMMISSIONER DEL VAL:  Thank you.

6212             THE CHAIRPERSON:  Thank you very much, gentlemen.

6213             Madame Secretary?

6214             THE SECRETARY:  Thank you, Mr. Chairman.  I would now invite the Spotlight Television Limited to respond to all the interventions that were filed to their application.

REPLY / RÉPLIQUE

6215             MR. BURGER:  Good afternoon, Mr. Chairman  My name is George Burger.  With me today is Peter Grant, our regular foreign Counsel, and Craig Gibson, our financial advisor.

6216             Before we start our reply, I want to respond to a number of questions the Commission left with us when we appeared before you on Monday.  Once we have done this, we have a very brief reply.

6217             In addition, let me correct the record on one small point  I misspoke when I suggested that Alliance Atlantis or CTV or CBC supported our application.  In fact, I made reference to them to contrast the fact that Chum and CanWest had intervened directly against us, and they had not.  And that was the only point of differentiation that I really sought to make.

6218             Our first deliverable was to provide you with a mock‑up of a two‑week schedule of the Spotlight pay TV service assuming it was up and running today.  We provided that to the staff yesterday.

6219             To summarise, the schedule includes a number of first‑run paid window titles from the same Hollywood studios that supply Show Time, the second largest US pay service.

6220             The schedule then adds some second‑run titles and also adds a selection of festival and other independent titles from around the world, as well as a few movie classics.  As requested by the Commission, the Canadian blogs are left blank.

6221             As you will see, our proposed schedule is quite attractive, and would be completely different from that of the Incumbents in a competitive environment.  Accordingly, it would provide a huge incentive for people to purchase both services, not just one.  So instead of cannibalising the Incumbents with a service that is basically the same, we enhance penetration by giving consumers something that is quite different.

6222             One other point is worth commenting on.  We show in the last tab of the document the large volume of movies available to the service for the second pay window.  In other words, movies that are two to five years old, recent movies that are past their first pay window but too recent for inclusion in Movie Pics or Encore Avenue.  These movies are frequently included in the mix for US premium movie services, and the Incumbents acknowledge that they don't run any of them

6223             Astro would have you believe that these movies are already shown on Canadian speciality or conventional services, but Mr. Riley's numbers do not count the number of those movies that are two to five years old, the second pay window movies we have identified in the attachment.

6224             As I have noted before, only 43 of those movies ‑‑ and that includes not just studio movies but foreign films and other independent films in that time frame ‑‑ were scheduled in prime time in September by conventional or speciality services in Canada.

6225             So this is a body of popular movies that are utilised by premium pay services in the US but are mostly not being shown in Canada.  And even if some of those movies show up on a specialty service, viewers interested in movies will appreciate seeing them in a commercial‑free environment.

6226             The second question was to tell you what we could undertake as our Canadian programming expenditures by the end of the first full year of operation.  Assuming that our undertaking to spend $35 million by the end of our second full year did not apply, because the CRTC declined to give us must‑carry status or to address the potential of use of dominance by the Incumbents.

6227             Our answer to that question is that we would still undertake to spend at least $4 million on Canadian programming by the end of our first full year of operation.  Then going forward in subsequent years, we would spend at least 32 per cent of the previous year's revenues in Canadian programming

6228             In looking at these numbers, we should clarify that the obligations will relate to broadcast years of operation, not to calendar years in order that our reporting and spending obligations will be on a level playing field with the Incumbents.

6229             We should also note that we expect to start our spending on Canadian programming before the beginning of our first full broadcast year of operation.  Such spending will occur, for example, if we launch partway through the broadcast year.  It will also occur even before we launch, particularly in regard to script and concept development

6230             We wish to clarify that that spending should be able to be counted toward the spending required to be made by the end of our first full broadcast year of operation.  That is why we characterise the minimum spending obligations as having to be made by the end of the first full broadcast year of operation, not to be made during that year.

6231             A third question related to the table we provided in our response to deficiencies, dated November 5, 2004.  Yesterday, we provided the Commission with an explanation of that table in a separate attachment, and we have provided a supplementary document today.

6232             A fourth question was whether we could find video rental numbers comparing the United States and Canada.  We regret to say that although there are estimates for US video rentals, the numbers for Canada are not collected and published in any way to our knowledge, nor are they disclosed by the distributors

6233             Next, we come to the issue of Section 6.1 and the abuse of dominant position.  There has been considerable discussion about how the Commission should approach this question in terms of number of studios, time period, existing or new contracts, so on and so forth.  In order to address this, we have provided a form of wording to the Commission that we think should cover the ground.

6234             It is noteworthy that although the Incumbents have suggested that the use of Section 6.1 raises legal issues, they have not provided any legal opinion to rebut our position that the CRTC has all the jurisdiction it needs to address this issue in the way we have asked.

6235             Finally, the Chairman asked us to address and comment on certain assumptions made in the CMI study filed as part of the Astro and Chorus interventions.  I will ask Peter to speak to this issue.

6236             MR. GRANT:  Thank you, George.

6237             You asked us to comment on a number of the assumptions made by Mr. Goldstein in his report and directed our attention to pages 27, 28, where he gives us monopoly market assumptions, and pages 32, 33, where he focuses on the impact of competition

6238             We think many of his assumptions are flawed and undermine his conclusions.  First, the argument about early adopters.  Basically, the argument here is that new digital subscribers are less likely to be interested in premium services than their predecessor.  Taken to the limit, the argument is that everyone who is interested in premium services has already subscribed.

6239             All the evidence before you suggests that the contrary is true.  Gary Smith, president of Bell Express Vu, told you about the UK experience.  As he noted, over ten years, the per centage of new digital customers taking the premium movie services has stayed about the same

6240             We agree that the UK environment is different from ours in a number of respects.  The free view numbers are irrelevant, because they do not carry pay TV movie channels like Sky movies offered by B Sky B.

6241             But the key number is worth noting.  More than 5 million subscribers subscribe to Sky Movies, a huge proportion of Sky's customer base of 7.5 million.  Sky offers 450 movies per week on 11 channels.  TMN offers 150 movies per week on five channels.  Compared to both the US and the UK, it is clear that the appetite for movies is simply not being satisfied by Astro and Chorus.

6242             The argument about early adopters is also rebutted by actual growth rate of the Incumbents.  As we heard from Mr. Riley and Mr. Robertson, the growth of pay has not slowed down  In other words, this is not a market in which only the early adopters are interested in movies.

6243             The second assumption relates to technology.  Mr. Goldstein says we will be awash in internet downloads of movies and VOD, which will hurt pay TV.  There are two answers to this.  First, he's confusing the rental market at 4.95 a title with the subscription market, where you get hundreds of titles for unlimited viewing over an entire month for only 12 to $15.  The rental market has been in place for 20 years, yet pay TV has prospered.  People see them as two distinct markets, and renting movies on the internet at 4.99 a title is not going to change this.

6244             The second answer is that technology will help pay TV, not hinder it.  You heard about the stickiness of pay TV once you add subscription VOD to it.  The same applies to the personal video recorder and to high definition.  These are technologies that will make pay TV more valuable, not less so.  They will enhance pay TV, not hurt it.

6245             The third assumption that you have asked us to address relates to Mr. Goldstein's assumptions about the decline in wholesale rates.  He argues that without competition, the Incumbents' wholesale rate will drop from 8.50 to $8  But with competition, if you look at his Table 13, he argues it will drop further to only 5.60 by year seven.

6246             We have a lot of problems with his wholesale rate assumption  Listening to him describe his research, it sounded a lot like a dart board in action.  We do agree that wholesale rates will drop with competition.  That is factored into our business plan.  But Mr. Goldstein underestimates the benefits of incumbency.  In our view, there is no reason why their stand‑alone rate needs to drop by the amount he suggests.

6247             But the real issue is not the level of wholesale rates  The issue is the likely growth of the market with competition.  And here we come to a matter where Mr. Goldstein's report is clearly in error.  At page 32 of his study, he states, "that the total number of households subscribing to one or more pay services would be 5 per cent higher in each year from 2007 to 2013 than would have been the case without the introduction of the competing service".  That suggests that he's not far from the Spotlight assumptions, which propose a 6 per cent increase in the number of pay households by reason of competition in year one, and 5 per cent in year two, 4 per cent in year three, then 2 per cent in years four and five, and finally 3 per cent in years six and seven.

6248             But if you look more closely at Mr. Goldstein's report, you find that his statement is very misleading.  The actual numbers are shown in his Table 13 at page 44, and there you will find that he assumes that there will be a 5 per cent growth caused by competition in year one ‑‑ that is about an additional 100,000 households ‑‑ and then 0 per cent real growth in each of years two to seven by reason of competition.

6249             So, again, let us see what he is proposing.  He has modest growth numbers in his monopoly model.  But if there is competition, he says there will be further growth of 5 per cent in year one and 0 per cent in years two to seven.

6250             Now, elsewhere in his table, he says wholesale rates will drop throughout the seven years.  So he has the Incumbents with a wholesale rate dropping down to only $7.22 in year one to 6.76 in year two, and further to 6.30 in year three, then 5.81 in year four, and by year seven, he has them down to 5.60 a month.  In all, he projects a 30 per cent decline in seven years.

6251             Just stop for a second and think about this.  Here is a newly competitive market with two distinctive services with an entirely different slate of attractive movies.  We have tons of marketing money.  According to Goldstein, 30 per cent lower wholesale rates by year seven.  And yet how many additional subscribers does he suggest will be interested in pay TV?  Look at Table 13.  He suggests just 100,000 more in year one, and then that is it.  No more growth because of competition for the next six years.

6252             Now, let us recall Mr. Goldstein's statement when he was up with the Chorus panel.  He said, "You can get a higher subscriber total if you drive the subscriber price down".  Those were his words.  And, of course, that is Economics 101.  Lower price, higher demand.

6253             But he failed to take his own advice when constructing Table 13.  He has the wholesale rates constantly dropping over seven years, and yet he has no growth because of competition in years two to seven.  In other words, his Table 13 is inconsistent with the most basic of economic principles.  He states that prices will drop, yet he argues that demand will be static in years two to seven compared with the monopoly model.

6254             This single error in Mr. Goldstein's analysis is not a small one  If you replace his static growth assumptions ‑‑ 5 per cent followed by 0 per cent for six years ‑‑ with your conservative growth assumptions ‑‑ 6 per cent in year one, 5 per cent in year two, 4 per cent in year three, then 2 per cent or 3 per cent in the out years ‑‑ but keep all his other assumptions, flawed as they may be, and do his Table 13 again, what do you discover?  You discover that the net benefit to the Canadian Broadcasting System changes from minus 67 million to plus 40.3 million.

6255             Now, as we said, we dispute some of his other assumptions.  But using his own worst case assumptions but correcting for his obvious error, we come up with a benefit of over $40 million.

6256             We think the benefit is over 107 million.  We think he underestimates wholesale rates, per centage of dual subscribers, and other factors.  But his own numbers, corrected for the obvious flaw, end up supporting our application

6257             MR. BURGER:  Thank you, Peter.

6258             That completes our response to your questions, Mr. Chairman.  As to our reply, we have already filed a lengthy written document which addresses all the written interventions.  We have very little to add at this time except to make a few points.

6259             First, we agree with what Mr. Lee said on the CCTA panel.  Namely, that to argue against competition is to argue against gravity.  Competition in the pay sector will undoubtedly grow the pie.  That, as you have noted, Mr. Chairman, is observed behaviour in competitive markets.

6260             The launch of Spotlight will make the sector more attractive so that as digital penetration rises.  As Mr. Lee said it will, there will be compelling and distinctive movie services available for purchase

6261             Second, we agreed with what Mr. Miller said on behalf of Chum; namely, that the genre protection policy was never intended for general interest and movie‑based services like premium pay TV.  We devote some time to this in our written reply.  In our submission, our application is not an exception to the genre protection policy, because the policy does not apply in these circumstances.

6262             But even if it does, we believe the benefits we offer amply justify granting our application.

6263             Third, we want to express our appreciation for the many producers, distributors, and creators that express support either directly for our application or for the notion of competition in this sector.  They eloquently underlined the point that a new, well‑funded green light is needed for long‑informed drama in this country.  Granting the licence to Spotlight is the best way to achieve it.

6264             And now if the Commission and my advisors don't mind, I am going to go off piece just for a second.

6265             I think that several things have happened in the last couple of days which bring forth probably what, in my mind, is maybe the most important issue that has not been adequately addressed.  Part of it came as part of, someone else mentioned, doing our homework.  It was actually a bracing experience to put together the programming schedule.  I am not a programmer, although by now, I may be able to apply for such a job.

6266             But as I went through that process and went on the internet looking for titles and dates and studios and so on, I also sat back and thought, "Well, if I had a channel, what would I like to watch?"  And then I was reminded about all the movies I like to watch throughout my life, and I realise that perhaps we have not talked quite enough about that

6267             And then I sat down with the five people who came and spoke on our behalf.  And apart from anything else, I am overwhelmed by the fact that they took the time to come here and speak on our behalf.  But more importantly, I was again amazed by the level of passion and desire and interest that they have in the making of movies and drama, and that is really what this is about.

6268             So I think I should say just one or two things about myself and my views about that, because I think that is probably as important as anything else in considering this matter.

6269             Being here is the culmination of my professional development, my executive experience, my ambitions, and my dreams.  The professional portion and the executive experience is obvious from my résumé, and my ambition probably is somewhat obvious from our efforts in this regard.  But perhaps my dreams are a little less obvious.

6270             When my family came to Canada, my father learned English by going to the theatre in Montreal, where, for 25 cents, he wound up getting two second‑run Hollywood movies.  ESL schools were not particularly ubiquitous.  And being a life‑long lover of motion pictures, it was heaven for him.

6271             That is a desire that he passed on to me.  And through most of my life, I thought that I would wind up in the movie business until I had to make a career choice.  At that point, I could choose between going to graduate school in film at USC or going to law school.  You know the result.

6272             But I guess destiny has its way, and so here I am now.  And I think it is that very passion that probably is as important than any other consideration.  In particular, much has been made about the issue of points of differentiation between ourselves and the Incumbents.  Certainly that principle focus has related to matters of programming.

6273             But I think that the principle point of differentiation that really should matter the most in my view is attitude and approach.  I think that our attitude and approach to a variety of matters is probably what distinguishes us most and arguably is what is most needed in the system today.

6274             First of all, our attitude and approach to the future of pay television is radically different.  They see erosion.  They see markets slowing down.  We see opportunity.  We think that HD is a God send  We think that the windows that precede pay TV are, in fact, narrowing, so that films will get to pay TV earlier.  We also think that free television and credential TV are showing less movies than they used to, which potentially makes pay television an island for movie lovers of all kinds.

6275             Now, in addition, we also think that the price point is probably the most satisfying one.  People spend all sorts of money on downloading ring tones and everything else, and at the end of the day, we think that the price differential in bundling packages together is not going to be a material impediment to the acceptance of this product by the general market

6276             So I know the baseball season ended yesterday, but Yogi Bear is always worthwhile for a quote or two.  And in this case, we think that pay television is an entertainment platform whose future is still ahead of it

6277             Secondly, we have a different attitude toward getting and keeping subscribers.  We think that marketing is critical.  I think that it has got to be a consistent effort.  I think that the appetite has to be created so that people know what is on, and they are comfortable in knowing that what is under our brand is always going to be worth watching.

6278             In addition, we are going to make great efforts not only to acquire subscribers but to keep them.

6279             Finally, it is going to be our attitude and approach to the feature film community and original drama production.  That is, essentially, what this is all about, and I hope to make every effort to make sure that Spotlight is going to be a long‑term partner for the feature film community and the drama film production community  That will be our commitment.

6280             We have a great team with a staying power, the expertise, the financing, and the determination to make this a success, and yet my passionate commitment to see it through to the benefit of both Canadian consumers and Canada's drama producers.

6281             Thank you, Mr. Chairman and members of the Commission and staff.  That completes our reply.

6282             THE CHAIRPERSON:  Thank you.

6283             Mr. Grant, I think I followed your remarks, but I wonder whether you could turn to Table 13 if you have it there, because I would like to see whether I am following you.

6284             MR. GRANT:  Yes, I have it.

6285             THE CHAIRPERSON:  Okay, so I am looking at your comment where you are that Mr. Goldstein just adds 100,000 subscribers more in year one, and then that is it, no more growth because of competition for the next six years.

6286             MR. GRANT:  This is growth in the number of households taking at least one pay service, yes

6287             THE CHAIRPERSON:  Right.  So if we look at the MCM plus TMN, if no new service licenced, those are the numbers that you objected from earlier.

6288             MR. GRANT:  Yes.

6289             THE CHAIRPERSON:  Now, he says if Spotlight added projected pay, households run from 2023 to 2560.

6290             MR. GRANT:  Yes.  What he has done is effectively he has added 5 per cent in year one.

6291             THE CHAIRPERSON:  Right.

6292             MR. GRANT:  So that is about 100,000.  And then he just carries that 100,000 as an addition, carries through for years two through seven.  So there is no net addition in year two or three or four.  He is just making that one 5 per cent increase as a one‑shot increase and then carries it through.  So you see by the end of the year ‑‑

6293             THE CHAIRPERSON:  Initial increase is ‑‑ yes, I see what you are saying.

6294             MR. GRANT:  So by the end of the period, he is still only about 100,000 higher than his monopoly model.

6295             THE CHAIRPERSON:  Okay.  So then how do you interpret the next two sets of boxes:  MC plus TMN, where you go to the total subs line, and he gets a number of 1,871 at, say, 2,013, and then total subs for Spotlight at 1,969, which would add up to, what?

6296             Mr. Grant:  Well, that is a different calculation.  That is the number of total pay units, which is driven by ‑‑ of course, there is an increase there, because he suggests there will be a gradual increase in the people taking dual pay as opposed to single pay.

6297             THE CHAIRPERSON:  Right, right.

6298             MR. GRANT:  But I guess the point we are saying is that suggests that his growth is only on the idea that a person who is taking one will now take two.  But he doesn't have any growth for the people who take zero to escalate to take one.

6299             THE CHAIRPERSON:  Well, he has some limited growth.  I mean, I guess ‑‑

6300             MR. GRANT:  Yes, all in year one, though.

6301             THE CHAIRPERSON:  Yes.  Well, I guess that is right, but, of course, allowing for churn, you might.  I mean, those numbers aren't the exact numbers.  I guess what I am trying to figure, if you are looking at subscriptions, which is the factor that you would multiply wholesale rates by, you would come up with a number that is about 33,800, 3 million 840 of those two, the number of subscribers.

6302             Now, because of the single subscriber/dual subscriber, you would have lower rates, presumably, as everyone acknowledges.  But I don't see that you can just take the 100,000 households and multiply those by any kind of blended rate and get at what he is trying to show here.

6303             MR. GRANT:  Yes.

6304             THE CHAIRPERSON:  You know, he is taking subscribers, subscriptions, single, dual, and the number goes up from about 2 million 20 ‑‑ well, it's 1,899, so about 19, 22, 25 to 3,840 over the period.

6305             MR. GRANT:  Yes.  Oh, no, that is true, and that is accounted for by the fact that there are dual subscribers.  But the real starting point is how many households are out there that do not now have pay television?

6306             In his model, he has a certain assumption as to how many are taking pay now and how many will be taking it in seven years' time.  And then you ask the question, well, assuming we introduce Spotlight and all this new, exciting service, and the wholesale rates drop by "X" amount, how many more households are likely to take pay television?

6307             And his answer is it will be 100,000 more in year one, and that is it, because if you take a look at the last year, the number of households he projects with pay will be 2.4 million.  And when we add, it is 2.6, 2.5 million.

6308             THE CHAIRPERSON:  Yes.  But what he is doing, in effect, is working with your assumptions, in part, is he not?  You were the ones who projected 80/20.

6309             MR. GRANT:  No, he has actually used quite different assumptions.  He is assuming that the dual pays will only show up in the last year or so.  You know, you can see his growth rate for duals is quite different than ours.

6310             THE CHAIRPERSON:  It is on the previous page.  He says, "The number of households that have dual subs has been assumed to grow from 10 per cent in 2007 to 50 per cent in ‑‑

6311             MR. GRANT:  Yes, that is quite different than our assumptions.

6312             THE CHAIRPERSON:  That is different from your assumptions.

6313             MR, GRANT:  Yes  Perhaps Mr. Gibson could clarify this.

6314             THE CHAIRPERSON:  Sorry?

6315             MR. GRANT:  Mr. Gibson might clarify this.

6316             MR. GIBSON:  If you are trying to work back to his numbers, Mr. Chairman, and if you take the 2023 subscribers in year one, for instance, that he is saying in 2007 that his is saying is projected pay households ‑‑

6317             THE CHAIRPERSON:  Right.

6318             MR. GIBSON:  ‑‑ he has given himself 1,697 pay singles, and that leaves ‑‑ when you take that number away from 2,023, you get 426, and that is the number of our total subs by default is how he has gotten that.

6319             He has then said, "Okay, of the 2023, 10 per cent are going to be dual, so each of MC and TMN and Spotlight are going to get 202; i.e., 10 per cent of the 2 million 23.  And, therefore, by calculation since we can only have 326,000 subscribers, we must only have 124".  He has kind of backed into that 124.  And that is what he has carried out through the whole piece.

6320             But I think the easier way to understand it is this:  if the slope of his monopoly line is like this, all he has done in looking out with competition is he has moved the whole line up but not changed the slope.  We are arguing that growth will be steeper going forward.  It is that slope issue that is what Peter is trying to get at.

6321             I hope that is helpful and not more confusing.  I know it is very difficult.

6322             THE CHAIRPERSON:  No, it is not.  I am really trying to understand both what he is trying to say and what you are.  And I take Mr. Grant's point about no increase in households after the first year, and why wouldn't there be an increase in household penetration.

6323             And yet the numbers he is using to drive his figures at the end, Mr. Gibson, I don't know whether you would agree with that, seem to be the numbers that key off the number of subscribers rather than the number of households.

6324             So then when you do your calculation, you say that it is not minus 6.7, it is plus 40.  Actually, he says minus 6.45, not 6.7, and you say it is 40.3.  Are you working it on the basis of households, or are you following his method of calculation to do it?

6325             MR. GIBSON:  No, I am following his method completely.  All we have tried to do there, we were trying to keep it simple.  There are so many variables in the piece.  There is price, there is split between duals and the singles, there is a dropping average rate through the piece that he has got.

6326             So all we said was, "What one assumption can we change that we take umbrage with, quite frankly, that would show the Commission in the easiest way possible that the minus $6 million isn't right?"  And all we changed was we said, "Let us not assume that the growth is 5 per cent in the first year, and then nothing else from competition going forward"  We will just add a few subscribers every year based on our projections being 6 per cent, 5 per cent, 4 per cent, et cetera and run through the same numbers and assume all those additional subscribers are at the lower rate; i.e., I didn't want to get into saying how many would go to Spotlight and how many would go to Movie Central and TMN.  I put them all on the low rate of Spotlight  And doing that ‑‑ and we can certainly provide the detail to staff, if they need it.

6327             THE CHAIRPERSON:  Well, I wouldn't mind you doing that and working back with his methodology back from the bottom line up.

6328             MR. GIBSON:  Yes, well, we offered to Andrew that if he wanted it on soft copy, we would certainly be happy to do that for him, because it will show the calculations on the Excel spreadsheet, which drive it.  I know it is a very confusing schedule.

6329             THE CHAIRPERSON:  But that is different.  That is your Chart "B" that you are talking about.

6330             MR. GIBSON:  No, no, I took his chart and replicated it.

6331             THE CHAIRPERSON:  When you say "schedule", you mean "table"?

6332             MR. GIBSON:  I am sorry.  Table.

6333             THE CHAIRPERSON:  Okay, I understand.

6334             MR. GIBSON:  I misspoke.

6335             THE CHAIRPERSON:  You mean Table 13?

6336             MR. GIBSON:  I do.

6337             THE CHAIRPERSON:  Okay.  That might be worth having a look at.  And I guess, you know, I mean, I think that it may be unusual, but if we are talking about ‑‑ I guess on the public record, the interveners will have a chance to look at it just and, I suppose, comment on your calculations.  It is unusual, but then I think it is only fair since they are not getting a chance to reply to this.  And I think this is an important issue for us to straighten out, as is the underpinnings of your Chart "B", and I know you have been back and forth with our staff on that, and we will have the same, I think, exercise.  We will allow parties to comment on this.

6338             We have a two‑week extension for comment area on the programme  I think we will take that same opportunity to comment on these calculations.  I mean, it is a key issue and goes to the notion of will the pie increase, which is one of the central issues on the hearing, as you know.

6339             So if nobody has any objection to that, I think that would be the best way to seek clarification through the adversarial process at its best.

6340             MR. GRANT:  Excuse me, Mr, Chairman, if I could just amplify one aspect of it which has not been mentioned?  In the materials that we have submitted, we gave greater amplification about our market research.  And I think that before we leave this, I just want to put the specific number of 100,000 into perspective.

6341             In our market research, out of the 4.9 million DTH and digital cable homes, we removed from that to approximately 1.6 million homes which currently have pay television.  We were left with about 3.3 million homes.  Of those, according to our market research, 57 per cent said they would be interested in getting pay television if we moved to a US type model.  That 50 per cent represents roughly ‑‑ I guess working backwards ‑‑ 1.4, 15 million potential subscribers.

6342             And so if you look at just that segment alone in terms of the potential universe of homes that we could be approaching, the 100,000 on a one‑aught basis when you take into account $45 million advertising spent over two years, it just strikes me of being a bit conservative.

6343             In our point of view, we found our numbers to be somewhat conservative.  And just to run down through them quickly, they never exceeded at any particular year in terms of incremental growth new homes in each year.  It never exceeded 125,000.  So in our first year, we expected 125,000 new subs, the same in the second year, 100 in the third  This is all laid out in detail in our materials.

6344             THE CHAIRPERSON:  No, and I took that point that Mr. Grant made.  My problem is linking it to the table.  And so you are going to help us by providing everything in your proposed revision.

6345             MR. GRANT:  So just to conclude, Mr. Chairman, Mr. Gibson will provide the spreadsheet analysis, and this can be distributed to parties, if they seek it

6346             THE CHAIRPERSON:  That would be helpful.

6347             MR. GRANT:  Yes.  Thank you.

6348             THE CHAIRPERSON:  In effect, what I am anticipating ‑‑ tell me if I am wrong, Mr. Gibson ‑‑ is you will do your Table 13.  What lines will you be changing in that one?

6349             MR. GIBSON:  No, that is not what I was anticipating  I recopied his Table 13 and put in the underlining logic.  And then I have just added a section at the bottom which simply picks up the additional growth that we have forecasted in ours.  Just the one assumption changing.

6350             If I changed everything, it would be too confusing.  We won't know what would be driving the differences above.

6351             THE CHAIRPERSON:  Which line can we look to seeing changed in here?

6352             MR. GIBSON:  The only line you will see changed is the line that is Projected Pay Households, the 2023 growing to 2560.  This is the only line we have changed in the model.

6353             THE CHAIRPERSON:  Okay.

6354             MR. GIBSON:  All the rest remains the same.

6355             THE CHAIRPERSON:  Thank you.

6356             Mr. Keogh?

6357             MR. KEOGH:  Just sort of along the same lines, just trying to get a handle on some of the numbers that we have.  You have provided us with further information today with respect to your response of November 5th, 2004, specifically the table on page 3.  And with respect to the last column, Loss of Subscriber Revenue Forecast to be Experienced by Incumbents, I wonder if you could provide us with ‑‑ and if you would like to take an undertaking on this, that would be fine.  But what we would like to get from you is the assumptions that you use to establish the wholesale rate that then drove the loss number there  So you had a rate for the Incumbents that helped you drive this loss, and there would be certain assumptions as to how that rate was arrived at.  We want to understand what those assumptions were.

6358             MR. BURGER:  That is fine.  We will provide that.

6359             MR. KEOGH:  Okay.

6360             And with respect to that and also the undertaking that Mr. Gibson was speaking to the Chairman about, would it be possible ‑‑ I am just conscious of the timetable that we have got for comment and reply.  Would it be possible to provide those by end of day Monday?

6361             MR. BURGER:  Yes, we can undertake to do that.

6362             MR. KEOGH:  Okay, thank you

6363             That is all, Mr. Chairman.

6364             THE CHAIRPERSON:  Thank you very much.

6365             Madame Secretary?

6366             THE SECRETARY:  Merci, monsieur le président.

6367             This completes the consideration of Items 1 to 4 on the agenda.  I would like to indicate that we have three other non‑appearing applications on the agenda of this public hearing.  Interventions were received on some of those applications.  The panel will consider the interventions along with the applications, and decisions will be rendered at a later date.  And now this completes the agenda of this public hearing.

6368             THE CHAIRPERSON:  Thank you very much.

6369             I do want to, on behalf of myself and my colleagues, thank staff for the tremendous work that it did in helping us prepare for this hearing.  Thank you very much.  And on my own behalf, I thank my colleagues for their patience in sitting here with me.

6370             This ends our hearing.  Thank you very much.

‑‑‑ Whereupon the hearing concluded at 1750 /

    L'audience s'est terminée à 1750