Canadian Heritage Committee on Feb. 8th, 2007

[Guy Mayson, President and Chief Executive Officer, Canadian Film and Television Production Association]

Thank you, Mr. Chair. Claire and I spoke earlier. We'll go first, and they'll go next. We have separate remarks, but we think they're related, so we'll kick it off.

Good morning, Mr. Chair and members of the standing committee. My name is Guy Mayson. I'm the president and CEO of the Canadian Film and Television Production Association, the CFTPA. With me today is Mario Mota, the association senior director of broadcast relations and research.

I want to start by saying we applaud the standing committee for initiating this emergency study on the Canadian Television Fund and thank you for inviting us to share our views about the critical importance of the fund to the continued existence of the Canadian independent television production industry.

Make no mistake, the CTF is an essential component of the Canadian broadcasting system.

The CFTPA, as I think you know, represents the interests of almost 400 companies engaged in the production and distribution of English-language television programs, feature films, and interactive media products from all regions of the country. Our member companies are significant employers of Canadian creative talent and assume the financial and creative risk of developing original content for Canadian and international audiences.

What exactly do the producers do? It's still a question, it seems. We develop the project. We structure the financing. We hire the creative talent and crews to help turn stories into programs, control the exploitation of the rights, and deliver the finished product. We create high-quality programming in the financially risky genres of drama, comedy, documentary, kids, and performance programming—what the CRTC calls priority programming.

We also create content for new digital platforms. Every day we provide Canadian television viewers with the choice of a Canadian perspective on our country, our world, and our place in it. As such, the independent production sector plays a vital role in the Canadian broadcasting system, as recognized in the Broadcasting Act.

In addition to the central role that independent television producers play in advancing Canadian broadcasting policy objectives, producers contribute significantly to Canada's economy and are responsible for a considerable portion of the more than $4.5 billion in production activity in Canada, which sustains over 120,000 direct and indirect full-time jobs annually.

I’m sure this committee shares our serious concerns about Shaw Communications' and Vidéotron's threats to withhold required payments to the CTF. We cannot stand idly by, and we believe this committee, the government, and the CRTC cannot stand idly by and watch some cable companies unilaterally destroy an entire industry by dictating the terms by which they will or will not live up to their regulatory obligations.

While the CFTPA was very pleased with last week's announcement from the CTF that it will continue to support all eligible productions for the 2006-07 year, we are very concerned about an anticipated reduction in the CTF's 2007-08 budget and program allocations as a result of Shaw's and Vidéotron's actions. The considerable uncertainty surrounding funding for television projects beyond 2006-07 is already having a major negative impact on projects and development and in terms of international financing. What we're hearing increasingly right now is that broadcasters, not knowing what kind of money they have to spend, cannot green-light any project, so there is a growing urgency to this issue.

In the CFTPA's view, Shaw's and Vidéotron's actions are unacceptable and irresponsible, and if allowed to continue would set a dangerous precedent that would have long-term repercussions not only with respect to the future viability of the CTF but with respect to the integrity of the CRTC's licensing and regulatory authority.

If left unchallenged, Shaw's and Vidéotron's threats to stop their required contributions to the CTF will have a devastating impact on the CTF, on Canadian television production, and on the independent production and creative sectors, resulting in the loss of thousands of jobs.

Section 29 and section 44 of the CRTC's broadcasting distribution regulations require medium and large cable distribution undertakings and direct-to-home satellite TV distribution undertakings, hereinafter referred to as BDUs, to contribute a fixed percentage of their gross annual revenues derived from the broadcasting services to the CTF. Further, CRTC's circular number 426 sets out the guideline that these BDUs make their payments on a monthly basis. It's pretty clear, I think.

Given the seriousness of the situation, the CFTPA has asked the CRTC to immediately put Shaw and Vidéotron on notice that their threat to discontinue supporting the CTF financially would put their cable distribution undertakings and Shaw's DTH satellite TV undertaking in contravention of the broadcasting distribution regulations.

Should Shaw and Vidéotron not make their contributions on a monthly basis, we believe that they would be violating, at minimum, the spirit of CRTC's circular number 426.

We have urged the CRTC to take whatever steps are necessary to ensure that Shaw and Vidéotron comply with the regulations and the circular.

[Mario Mota, Senior Director, Broadcast Relations and Research, Canadian Film and Television Production Association]

Let's not forget the origins of BDU contributions to Canadian television production. In 1993 the CRTC held a structural hearing to review the evolving communications environment. One result from the hearing was the identification of a need to provide “aggressive encouragement to the production and distribution of more and better Canadian programming”.

The commission called for comments on what form a new funding mechanism should take. The Canadian Cable Television Association proposed at the time the creation of a new fund financed with contributions from the cable industry, which would provide top-ups to the licences paid by broadcasters to independent producers for certain types of under-represented programs.

Reaction to the proposal by most parties was generally favourable, so the CRTC accepted it, with some modifications. Cable companies benefited greatly, because they were able to keep 50% of subscriber fee increases tied to capital expenditures. The arrangement was slated to sunset that year. Some cable companies have tried to undo that initiative ever since, and Shaw and Vidéotron's actions are another attempt to achieve that goal.

Over the years, cable companies asked for and won the right to direct up to 40% of their contributions to help fund their community channels. DTH satellite TV distributors were later permitted to allocate 0.4% of their contributions to support small-market conventional television stations in lieu of performing program deletion. The CFTPA was alarmed by proposals made at the CRTC’s recent review of its regulatory framework for over-the-air television that any additional financial contributions that BDUs might be required to make should be taken from their existing mandatory contributions to Canadian programming production.

In our view, it is time for the CRTC to restore the full 5% BDU contribution to independently administered funds intended for independent production. Doing so would help alleviate the CTF's inability to meet all the demands on its funds and would balance the additional financial input we have asked conventional television broadcasters to make to original Canadian programming. The CRTC has stated on numerous occasions that such financial contributions to production funds provide essential support for the production of Canadian programming. The commission has also considered it important that funding not be diverted further from the Canadian Television Fund.

[Guy Mayson]

We will not refute all of the arguments made publicly by Shaw and Vidéotron about what they deem to be the CTF’s “failings”. In our view, they show a surprising lack of understanding of and respect for a funding body they helped create and direct, and near contempt for Canadian programming and audiences.

Shaw and Vidéotron have expressed their dissatisfaction with the CTF’s “performance, operations, and governance”. In this regard, we point out that sound governance of the CTF was recently noted by both the Auditor General of Canada in October 2005, and more recently confirmed by an independent review by Renaud Foster of Ottawa in June 2006. In our view, the CTF’s comprehensive board composition, including representatives from the broadcast distribution sector since the fund's inception, has allowed it to be responsive to all industry stakeholders. It’s also worth noting that several past chairs of the CTF board of directors have been representatives from the cable industry—very able ones, I may add.

Shaw has suggested that CTF-supported programs are watched by few people and have no commercial or exportable value. The CTF, whose funding decisions are increasingly driven by audience success, has made possible many highly successful Canadian programs, such as Shania: A Life in Eight Albums, a movie of the week with 1.2 million viewers; One Dead Indian, a movie of the week with 1 million viewers; Degrassi: The Next Generation, a huge success story averaging 737,000 viewers; and Little Mosque on the Prairie, recently averaging 1.5 million viewers. These and many other CTF-supported programs are watched and loved by millions of Canadians, and are proof that Canadian programs can attract large audiences.

Don’t just take it from us. CTV’s CEO, Ivan Fecan, told the CRTC’s recent review of over-the-air television that CTV’s “Canadian programming currently gets very good audience response”. In terms of exportable value, CTF-supported dramas, such as Degrassi: The Next Generation, Da Vinci’s Inquest, and Cold Squad; and children's and youth programs, such as Life with Derek, Franny’s Feet, and Renegadepress.com, are seen and loved, in some cases, in well over 100 countries around the world. The list of programs in these and other programming genres that have found export markets is a very long one. Recently, Da Vinci’s Inquest, for example, received an average 3.4 million viewers in the U.S., outperforming the popular CSI: Miami in syndication.

We could spend the entire day here providing examples of successful CTF-supported shows. The bottom line is that Shaw is just plain wrong when it claims that Canadian programming is of low quality and non-exportable.

It's interesting to note that more than 30 television programs have received funding support in the last couple of years alone from both the CTF and the Shaw Rocket Fund, the independent production fund set up by Shaw in 1998. Presumably, if these projects are worthy of support from the Shaw fund, then they are equally worthy of support from the CTF.

This morning the CTF provided an overview of some of the key accomplishments over the years. We won't repeat all of these, but we would like to point out that since its inception, the CTF has provided $2.2 billion in funding support to 4,470 independently produced Canadian English and French-language productions in the genres of drama, children's and youth, documentary, and variety and performing arts. That financial contribution from this unique partnership has helped create over 23,000 hours of great Canadian television, triggering total production budgets of $7.4 billion. For every dollar the CTF has invested over the years, it has leveraged an additional $3.3 from other sources. The leverage fact of this fund cannot be overestimated.

An estimated 21,000 full-time equivalent jobs out of 46,700 jobs in the television production sector are the result of CTF-supported productions. It's a powerful statistic. Would any government let a company employing more than 21,000 people simply close its doors without trying to do something about it?

Put simply, without the CTF independent producers could not afford to make their programs. The Canadian market is simply too small to finance the high cost of these shows. Without the fund, Canadian broadcasters would not have been able to exhibit the amount of high-quality, distinctively Canadian television programming they have presented over the past decade.

The CFTPA has two representatives on the CTF board. Over the years, our representatives have been vocal in expressing the views of the independent production sector on the fund’s workings. The CFTPA considers the CTF to be the single most important initiative supporting distinctive Canadian television production, and we remain committed to the fund and its overall objectives.

In closing, we were extremely pleased with Minister Oda’s January 26 announcement of the government’s contribution of $200 million over two years to the CTF, and for confirming the government’s commitment to the Canadian television production industry and a strong broadcasting system. Now it’s up to Shaw and Vidéotron to hold up their end of the bargain, and for the CRTC to ensure that these licensees resume timely payments to the fund.

We appreciate the standing committee’s interest in this issue, and encourage it to express its support for the Canadian Television Fund in its recommendations.

Thank you for your time. We'd be pleased to answer any questions.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Ms. Samson.

[Claire Samson, President and Chief Executive Officer, Association des producteurs de films et de télévision du Québec]

Mr. Chairman, members of the House of Commons, Mr. Vincent Leduc, Chairman of the board of directors of the APFTQ and myself, Claire Samson, President and Chief Executive Officer of the APFTQ, thank you for inviting us this morning to present our perspective on the current crisis surrounding the Canadian Television Fund.

The APFTQ represents the vast majority of independent television and film production houses in Quebec, that is more than 130 businesses.

As we expressed in the press conference held Tuesday in Montreal with five associations of the Quebec industry, the APFTQ considers that the decision by cable operators Shaw and Vidéotron to cut off their mandatory contributions to the Canadian Television Fund is unacceptable and holds the entire Canadian broadcasting system hostage.

By mid-February, the Canadian Television Fund must determine the amounts of the envelopes to be allocated to each broadcaster's programs. If the Canadian government and the CRTC fail to take rapid and appropriate action to force these two companies to respect the law, they will be sending a message to all companies, distributors and programmers alike, that they too are free to ignore any regulated obligation that does not suit them. Ultimately, this could lead to the collapse of the entire Canadian broadcasting regulatory framework, which would have disastrous consequences and be totally unacceptable.

As things stand, the CTF can no longer rely on private distributor contributions and could lose 60% of its funding—$150 million in fiscal year 2007-08. For the public, that will mean 60% less Canadian drama, documentaries, youth and variety programing. It will mean 60% fewer jobs for Canadian television writers, directors, performers, technicians, and composers, and undoubtedly many independent production companies will have to close down.

How can Canadian broadcasters be expected to plan their upcoming fall and winter schedules with this sword of Damocles hanging over their heads? How can they present their future programs to potential sponsors in May? Without sponsorship most channels will be unable to survive and fulfill their own conditions of licensing.

Vincent.

[Vincent Leduc, Chair of the Board of Directors, Association des producteurs de films et de télévision du Québec]

Vidéotron and Shaw are behaving like bad corporate citizens in attempting to impose their views not through dialogue, discussion, and negotiation with their partners, but with an irresponsible show of power apt to destabilize the entire financing system for Canadian independent programs.

It is imperative not to encourage this attitude and to refuse any hasty negotiation of CTF reform with a gun to the head, especially since the argument advanced by Quebecor media to justify its attitudes is far from convincing.

The media have reported that their distribution subsidiary, Vidéotron, pays some $15 million a year to the CTF, while its TV programing subsidiary enjoys an annual $18 million envelope from the same fund to finance its programing through independent producers. Where is the injustice?

Notwithstanding these arguments invoked by Quebecor and Shaw, contributions to the CTF are not voluntary payments that these companies can arbitrarily decide to cut off, but regulated obligations that they must respect.

Moreover, the privilege of holding a cable distribution licence gives these companies important financial advantages, not the least of which is the fact that cable subscribers are still unable to choose their supplier since only one cable undertaking is authorized per territory. Cable operators have no more right to enjoy a licence while stopping their payments to the CTF than their customers have to enjoy continued access to cable service while withholding their fees.

[Claire Samson]

The Broadcasting Act as well as other support measures for the industry were put in place particularly to promote the development and broadcasting of our culture in light of the omnipotence of our American neighbour. The goals of this legislation are more relevant than ever in an international context where the promotion of cultural diversity represents a battle we have yet to win. This battle only makes sense if the cultural diversity in question is first of all asserted and promoted on a national basis.

Furthermore, one of the goals of Canadian broadcasting policy is to call freely on independent Canadian producers in order to ensure the greatest diversity in creation locales. Other measures were implemented to allow for a balance between the public, private and specialty channels. Canadian content quotas were established to ensure our programs had a dominant place on our screens. Financial support measures for our productions were established to respond to the demand. Rules regarding the ownership and control of Canadian broadcast distribution undertakings exist for the overall protection of the system.

The Canadian broadcasting system is a model around the world. The success of Quebec television would never have become a reality without a range of support measures. For 25 years our system has promoted the protection of French-language broadcasting, the great popularity of our programming and a quality that is recognized on an international scale.

The promotion of our culture is a societal choice that Canadians have maintained over the years. It would be irresponsible to challenge these policies without thinking about the very grounds for their existence. This debate concerns the entire population, and not just a few businesses that are dissatisfied with certain rules of the game.

[Vincent Leduc]

A giant like Quebecor Media, whose annual turnover is $2.7 billion, already enjoys a very favourable position in the Quebec market where it benefits from a very high level of media concentration that could threaten the diversity of voices. There is Videotron, TVA, JPL Production, Illico, Canoë, the Journal de Montréal, the Journal de Québec, to name a few.

One can surely wonder if a business of that size, so dominant in its market and enjoying such a level of multimedia cross-ownership, is contributing enough to the support of Quebec and Canadian culture from which it draws a great deal of its wealth. Let us not forget that Quebecor Media benefits from tens of millions of dollars per year in direct and indirect public funding, particularly thanks to programming broadcast on TVA.

One thing is clear: the annual contribution that its Videotron subsidiary must remit to the CTF, which represents 0.006% of Quebecor Media's revenues and that it gets back entirely through another subsidiary, TVA, in no way justifies such a business defying the law and putting the entire Quebec independent television production world at risk.

The stability of an entire industry is at stake. If all of the cable and satellite companies were to withdraw their contribution from the Canadian Television Fund, that would represent a loss of 8,500 jobs in Canada, more than 2,500 of which would be in Quebec.

[Claire Samson]

Priority must now be given to resolving the crisis and reassuring the industry and the population at large.

Currently, there is a lot of equivocating over the degree of illegality of the Quebecor and Shaw decisions. Some experts maintain that by suspending their monthly payments, Vidéotron and Shaw are still within legal bounds. Although the broadcasting distribution regulations obligate cable operators and satellite distributors to devote 5% of their annual gross revenues to local expression and Canadian programming, a part of which goes to the CTF, they do not set out a schedule or procedures for remitting the annual mandatory contribution.

Many experts agree that Vidéotron and Shaw will be clearly in default of the regulations if by the last day of the current broadcast year, which is August 31, 2007, they have not fully remitted this year's required contribution to the CTF.

Given the situation, we have two proposals for resolving the crisis.

First, we ask that the Minister of Canadian Heritage take steps to have the Canadian government provide the Canadian Television Fund with an interest-free loan in the amount of the contributions unpaid by Vidéotron and Shaw until such time as these companies begin making monthly payments again and settle their arrears. In this way, neither the public nor the broadcasters, producers, musicians, technicians, performers, or directors will be held hostage and the CTF will not be obliged to borrow against the budget of its next fiscal year. This would allow any discussion of possible changes to the fund's rules of governance or guidelines to take place in a climate of calm and with the necessary time for reflection. However, prior to any discussion with Quebecor and Shaw, the government should make it a sine qua non that the current rules be respected.

Second, we ask that the CRTC immediately notify Vidéotron and Shaw that if by the end of the current broadcast year they have not fully remitted the annual contribution due to the CTF under the provisions of the broadcasting distribution regulations, the commission will take the appropriate steps to ensure that its regulations are followed, failing which it will impose the penalties prescribed by the act.

No one is above the law or its regulations. The CRTC cannot tolerate that Vidéotron and Shaw have taken it upon themselves to decide that they are exempt, thus affording themselves financial and competitive advantages over the other distribution companies that respect the act and its regulations.

In conclusion, Quebecor and Shaw's gesture cannot and should not be tolerated. We urge the appropriate authorities to assume their responsibilities and to act as quickly as possible. What is at stake here is the place of our culture on our screens and the ability of the Canadian broadcasting system to defend it.

I thank you for your attention and, of course, we are ready to answer your questions.

[The Chair, Conservative, Gary Schellenberger]

Thank you for those presentations.

I must stress to everyone that we are going to stick to five minutes around the table. I think we have time for four five-minute goes.

We start off with Ms. Fry.

[Hedy Fry, Liberal, Vancouver Centre, BC]

Thank you very much, Mr. Chair.

This is going to seem to be a redundant question, but I am going to ask it anyway. Given that these are regulations under law and therefore this is not a voluntary contribution, as you have all said so very clearly, have any of you met with the minister?

I would like to know why the minister has not done her job, which is to actually make Shaw and Vidéotron uphold the regulations. I would like to know why the minister has not done that. Has she said she would? Has she said that she hasn't?

I remember the history of this minister when she was with the CRTC. The CTF was beginning to be considered and she wasn't particularly in favour of this type of funding.

I would like to know if any of you have discussed with the minister why the simple act of upholding regulations hasn't occurred. Do you have any answers? Have you asked this of the minister? We have not been able to get those answers ourselves.

[Guy Mayson]

We had a broad-based meeting with the minister, actually just yesterday. The minister said she is in information gathering mode. She seems to be meeting with stakeholders individually. The creative community had a meeting yesterday.

She indicated she'd like to maintain an aspect of confidentiality with what has been discussed, and we've all agreed to respect that.

Certainly it's fair to say that she heard clearly from the creative community that there is real urgency here and that a signal from her regarding the fund would be extremely important in the near future. I can't overestimate the importance of that. At the same time, we're trying to respect the discussion we had.

[Hedy Fry, Liberal, Vancouver Centre, BC]

It's a reasonable thing to say, that you don't want to betray any confidentiality. However, I think it's appropriate for the minister to meet with stakeholders and discuss with them all sorts of things. At the same time, the minister is supposed to uphold the regulations of the CTF, which is within her department, but without any question, upholding regulations has absolutely nothing to do with deciding how the fund will continue in the future and what people think would be a better way for it to manage itself.

We're not discussing the management of the fund at the moment. We're discussing people who are holding the fund hostage and who are therefore, in doing so, breaking regulations. It would seem to me that it has nothing to do with confidentiality; it has to do with the minister upholding regulations under her department, which is a simple thing to do.

So it may be a rhetorical question, but I'm asking it anyway.

[Guy Mayson]

I wouldn't disagree with what you said. It probably would be timely that there be some kind of more public forum now. Perhaps the minister could bring the stakeholders together and have a true public discussion of this, including with the companies in question.

[The Chair, Conservative, Gary Schellenberger]

Ms. Keeper.

[Tina Keeper, Liberal, Churchill, MB]

Thank you, Mr. Chair.

I'd like to go back to a lot of the comments you made and a lot of the points you made about being a producer in Canada, which I know is very difficult. You talked about the CTF as being a leverage factor for producers who are putting together their budget. It's quite a complex process, putting together your budget.

One of the recommendations you made was that there should be an interest-free loan, or that the minister should guarantee the loss. I want to ask you, what does losing that contribution mean for the domestic television industry in Canada?

[Vincent Leduc]

If I may, I'll give you the reason we're asking for this particular recommendation. During the next few weeks, broadcasters will be making their programming for next year. For the past few years they've counted on the CTF as a provisioning factor, if you will, or a stability factor. They have envelopes that they can access through independent producers. But that has to be done now if they want production to be done within the next few months and then be programmed later on in the year, in September and January.

The CTF has indicated that they will not overcommit, as I heard this morning, but will commit only to the money they are sure of having, which is Heritage Canada money. They mentioned 27% in English, and I think 33% in French; I'm not sure of those numbers.

The broadcasters will therefore not access any of that money through independent producers. So in asking for a bridge loan, if you will, maybe interest-free, who knows—

[Tina Keeper, Liberal, Churchill, MB]

At this moment, the minister's inaction is putting the domestic television industry at risk.

[Vincent Leduc]

Well, I won't qualify it as the minister's action or inaction, but it would be a good time to act overall.

[Tina Keeper, Liberal, Churchill, MB]

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Mr. Kotto.

[Maka Kotto, Bloc, Saint-Lambert, QC]

Thank you, Mr. Chairman.

I would like to go back to the two recommendations you presented to us earlier on:

First [...] that the Canadian government provide the Canadian Television Fund with an interest-free loan in the amount of the contributions unpaid by Videotron and Shaw until such time as these companies begin making monthly payments again—

Have you made the minister aware of this proposal? If yes, what was her reaction?

[Vincent Leduc]

You can complete the answer, Claire.

We had a press conference with the sectoral associations, not only the employers' association, but also the union association, the directors' association, the technicians' associations and, of course, l'Union des artistes, of which you are perhaps still a member, Mr. Kotto.

[Maka Kotto, Bloc, Saint-Lambert, QC]

Yes, I still am.

[Vincent Leduc]

Last Tuesday, we publicly made this recommendation. I have heard nothing back. I do not know if—