Evidence of meeting #4 for Canadian Heritage in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was programming.
A recording is available from Parliament.
12:45 p.m.
Bloc
Maria Mourani Bloc Ahuntsic, QC
My question goes to Mr. Rabinovitch, and is about advertising.
Last May, the CRTC approved an increase from 12 minutes to 14 minutes in prime time. How many minutes has CBC reached? Are you looking at increasing the number of minutes because of the financial needs you mentioned earlier?
12:45 p.m.
President and Chief Executive Officer, Canadian Broadcasting Corporation
It is more than that. The CRTC approved an increased number of minutes all day, not just in prime time. So it went to 14 minutes this year; it will go to 15 minutes next year, and after that, it will be completely open.
On the French side, we think that that is too many minutes, even for the private sector. So it is exactly the opposite. We are looking for different ways to find the $110 million that we need on the French side. We are ready to try different approaches, but frankly we think that increasing the number of advertising minutes is a dead end.
12:45 p.m.
Executive Vice-President, French Services, Canadian Broadcasting Corporation
It is true that it is a good solution for English broadcasters who are plugging in American programs. It could work. However, in Quebec, as Robert says, there really is too much inventory. No television company, public or private, has taken that route, because there is surplus inventory and adding more commercials would simply drive advertising rates down. That would get us nowhere.
We really are looking in the opposite direction at the moment. We are wondering if it is possible. There are a lot of factors to consider. The economic model of broad-based television funded by advertising no longer holds good. The television stations that are profitable today are specialty channels that charge subscription fees. For broad-based television, the problem is huge. The advertising market is stable in Canada, but it is slightly dropping in Québec. It is a difficult situation, but increasing the number of advertising minutes will not solve it, that's for sure.
12:50 p.m.
President and Chief Executive Officer, Canadian Broadcasting Corporation
I must say that the CRTC policy was designed for the private sector. It does very little for us. Perhaps Richard could find a minute in Hockey Night in Canada, but it will be very difficult. If we want money that does not come from the government, we absolutely have to charge what is called a fee for carriage. That is what they are beginning to do in the United States.
In the United States, more and more people are being paid to give their signal to a cable operator or a satellite operator to deliver. Why? Because the cable and satellite operators make money on that because they're delivering the signal.
We believe that in the future—and the CRTC has reopened it again for hearings in April—at least for the public broadcaster,
but also for companies like TQS,
without a fee for carriage and given the flatness in the advertising market, we're all going to be very hard-pressed.
12:50 p.m.
Conservative
12:50 p.m.
Executive Vice-President, English Services, Canadian Broadcasting Corporation
I was going to say to Sylvain's point with respect to these extra minutes that the only place they will provide an advantage in English Canada will be with U.S. shows that command big premiums. The danger is that more of the advertising revenue will migrate to those U.S. shows. When that happens, they will migrate away from lower-value shows--i.e., English Canadian shows.
12:50 p.m.
Conservative
The Chair Conservative Gary Schellenberger
Thank you for that.
I have a question. The issue of broadcasting rights for new broadcasting platforms has been identified as a major issue for CBC/Radio-Canada. First, how has the CBC-SRC approached the negotiation of cross-platform rights to date? Second, what are the greatest challenges?
12:50 p.m.
Executive Vice-President, English Services, Canadian Broadcasting Corporation
This is complicated.
When it comes to those properties that we build ourselves, by and large the rights issue doesn't arise because we're making them ourselves. We control all of the rights from the very beginning. Where the issue arises is when we're working with other people, particularly independent producers.
The position we took originally with respect to the independent producers was as follows. We said look, nobody knows how this is actually going to work. We don't know. Because all these platforms are so new, we don't know what the costs are going to be in terms of exploiting them, nor do we know what the revenues will be going forward. What we do know is that we have to be there because we have to be wherever it is that Canadians are going if we're going to continue to be successful with Canadian shows.
We had proposed to the producers originally that we do this as a kind of joint venture. We said we were happy to distribute, whether on the television platform or to the other platforms--mobile platforms, Internet platforms, whatever it happens to be--and we'll treat it as though it was a program sale. We said that we'll split whatever revenue arises over and above the costs associated with distribution. That is what we put to them.
The producers have so far said, well, we don't know how comfortable we are with that so why don't we do something different. Why don't we do this: producers who are comfortable can say fine, we'll go ahead; those who are not will split the negotiation in two pieces: one piece around the television rights, and then later on, once they're concluded, a piece around the ancillary rights.
To be perfectly honest, this is not a terribly effective way to go at it. If you're building things that from the very beginning are designed to be exploited across all of the different platforms, then it's very difficult to separate the negotiation into platform pieces without finding yourself in difficulty.
I think that what is very, very important—and this is very difficult, very tricky—is to find models that will allow both parties to participate in the revenue in a way that is fair, recognizing that a lot of this is completely new territory and we have to actually explore it together.
12:55 p.m.
Executive Vice-President, French Services, Canadian Broadcasting Corporation
Can I add something? You brought up the matter of the issues we face. The big issues that we face are an extremely important subject in the world of media and it is being discussed everywhere.
Richard ended by talking about complex issues. A very important one is the issue of intangible assets, things like rights, brands, our employees, recruitment and training. All that is intangible, and is quite complex. The question of rights is an international one that affects artists' unions. But the majority of issues that large Canadian cultural companies will have to deal with, media companies specifically, private and public, are issues surrounding the management of intangible capital. It is extremely complex, but it is absolutely essential for our future.
My view is that the major issue in our business is to know how we are going to make sure that employees have the training required to handle all the new technologies, that we have all the new staff we need to deal with it, and that we are able to manage our brands and our rights. This will require a number of different disciplines. A new understanding of management is going to be needed to get through the next five or six years.
When you bring up that issue, I get very interested. I feel that one of our main challenges is to change our concept of management so that we can successfully manage the intangible.
12:55 p.m.
Conservative
The Chair Conservative Gary Schellenberger
Thank you.
I must say, we really appreciate your testimony here this morning. I think it's been very beneficial to the committee.
Again, Mr. Rabinovitch, thank you very much for the service you have given the people of this country over the last eight years. May your journey ahead be bright and successful.
12:55 p.m.
President and Chief Executive Officer, Canadian Broadcasting Corporation
Mr. Chair, thank you very much.
I want to repeat again what I said in my open remarks. I have really enjoyed the exchanges at this committee. They have been intelligent, and the questions have been legitimate and on target. I think we all come out of each of these sessions thinking about things again and wondering about different things. I look forward--perhaps I'll be on a ski hill somewhere and I'll read it--to the mandate review. I do hope that it will be a forward-looking document, because I think we really need your guidance.
Thank you.
12:55 p.m.
Conservative