Canadian Heritage Committee on Feb. 15th, 2007

[Steven DeNure]

There are two things, one of which Peter already said, and that's longer-term, stable funding so that there's some predictability to this. The second thing is the expansion of the fund to address what we call screen-based entertainment, to not just focus solely on television, and some of this involves really technical rules about how they administer the thing, but a general direction for them to engage in new technologies and to look at the production of screen-based entertainment as a whole.

When we produce television programs for children, we at the same time are developing interactive, web-based experiences. Kids' broadcasters and kids' television producers actually are really at the forefront of some of that stuff, because kids are the early adopters of that.

So I think those are the two things that I would say about it.

[Chris Warkentin, Conservative, Peace River, AB]

I think my time is probably up, but thank you very much.

[Monique Lafontaine]

Could I make a quick comment?

[The Chair, Conservative, Gary Schellenberger]

One quick comment.

[Monique Lafontaine]

In terms of the CTF supporting the new technologies, the DGC is certainly supportive of that, but what we would want to see is new moneys coming to the CTF so that the money that is there for programming doesn't get diverted to other streams, if you will.

[The Chair, Conservative, Gary Schellenberger]

I thank you, witnesses, this morning for your presentations and your answers.

I have one little statement to make. I have sat on this committee for a little over three and a half years, and something I heard from the very first when I got here was about long-term sustainable funding, and I think we will hear that probably from our next witnesses. One thing I've always hated was sunset. I love sunsets, but not when it comes to funding. If the program is good, I think it should be long term and sustainable. You should not be in a position where you're waiting until the eleventh hour to find out whether you have funding for the next year. So at least right now, I think the minister has come forward with two-year funding. I know that's not that long, but it's longer than one year.

So I wish you all the best. Thank you.

We'll recess for five minutes, thank you.

[The Chair, Conservative, Gary Schellenberger]

I call the meeting back to order.

For our second hour, I welcome our witnesses from the CBC.

Mr. Rabinovitch, if you would lead your group, please introduce everyone. That would be great, sir.

[Robert Rabinovitch, President and Chief Executive Officer and Acting Chair of the Board of Directors, Canadian Broadcasting Corporation]

Thank you, Mr. Chairman, and members of the committee. We are very grateful to speak with you today about the Canadian Television Fund.

I am here today with Richard Stursberg, who is the executive vice-president of CBC Television and a former chair of the board of the Canadian Television Fund; and

Sylvain Lafrance, Executive Vice-President, French Services.

Together we would like to talk with you about Canadian television production and the success of the Canadian Television Fund in building the independent production industry that makes those Canadian programs.

First I'd like to say a few words about what the CTF means to the public broadcaster.

I should note as well that in order to examine the CTF, you have delayed your review of CBC/Radio-Canada's mandate. We look forward to coming back in the near future to this committee when that review is under way. But as you will see from our presentation and our discussion today, the subjects are really all interconnected.

An essential part of our mandate is to offer Canadians Canadian programming. Last fall when we appeared before the committee, we talked about the importance of advertising revenues as one of our pillars. Government funding is another, and in particular the $60 million of additional funding that we have received each year for the past six years for programming. The third pillar is the Canadian Television Fund. Remove one of those pillars, and you fundamentally alter the ability of CBC/Radio-Canada to fulfill its mandate.

Think of programs such as the Rick Mercer Report,

Et Dieu créa... Laflaque, Rumeurs, and

Little Mosque on the Prairie. We are the only ones who offer Canadian programming, because we are the only ones with the space in our prime time schedules to offer these programs when most Canadians are watching television.

But I would add that we do not have nor do we want a monopoly on Canadian content. That is why an independent funding agency is critical to the health of Canadian broadcasting.

In front of you, you have two charts that show the evening television schedules for Canada's broadcasters in both the English and French markets. Canadian programs are in red. CTF-funded Canadian programs are indicated in green. Take away those programs, and you can see that you are left with a lot of holes. How are we going to fill those holes? With more American programs?

Recently some have said that the CTF is dead, that nobody watches those programs. In fact this is not true. Canadian audiences for CTF-financed productions are increasing across all genres. In English Canada, television audiences are up from 32% in 2003 to 34% in 2005. On French television, they are up from 32% to 56% in the same period.

Now, is every show that gets CTF funding a hit, as measured solely by audiences? Certainly not. Like any program on television, some succeed; some fail. For every success like Little Mosque on the Prairie or Les Bougon, there are others, such as René Lévesque or October 1970, that attract much smaller audiences. But does that make them less important? Our goal at CBC/Radio-Canada is not always to get the largest audience; it is to offer Canadians significant Canadian programs.

That brings me to the envelope. Thirty-seven per cent of the CTF is dedicated, not to the CBC or Radio-Canada, but to independent producers who make programs that our two networks commit to broadcast. To look at it another way, approximately two-thirds of the CTF goes to programs that run on private commercial networks. There's been a lot of confusion recently about CBC/Radio-Canada's envelope, so I'd like to take a few minutes to talk about it.

First, the envelope recognizes that CBC/Radio-Canada is the only broadcaster with the shelf space to offer mostly Canadian programs when Canadians are watching television—that is, during prime time. This has always been one of the key objectives of the CTF.

The stability of having an envelope also helps ensure that we have the ability to plan long-term for Canadian productions on our airwaves. The envelope also recognizes that the mandate of a public broadcaster is different; it should not simply offer programs that can chase the largest audience, in competition with private broadcasters. Instead, offering high-quality Canadian programs is our mandate.

Programs such as St. Urbain's Horseman, The Englishman's Boy, and Barney's Version, are all part of the literary adaptation series From Page & Stage,

and programs such as Minuit, le soir, Grande Ourse and Les hauts et les bas de Sophie Paquin.

Dedicating a portion of the fund to programs on CBC and Radio-Canada is not new. In fact, the 37% envelope also reflects the average proportion of CTF-funded independent productions on CBC and Radio-Canada over the last 10 years. When the CTF was established in 1996, 50% of the CTF was dedicated to programs destined for the public broadcaster.

Last week a former Minister of Canadian Heritage wrote in Le Journal de Montréal and in the Ottawa Sun that when she created the CTF, she considered simply giving the government's portion of the fund, $100 million, to CBC/Radio-Canada. Instead, 50% of the fund was dedicated to ensuring that the public broadcaster teamed up with independent producers, and that is what we have done. As a result, CBC television has moved away from an emphasis on in-house production, and an independent Canadian production sector is flourishing in this country.

I have one final point. While the most recent CTF data predates the formal envelope, it is clear that CBC and Radio-Canada are delivering audiences to Canadian programs. If you look at the Canadian drama category, for example, CBC television received about one-half of the CTF-funded programs, yet it delivered two-thirds of the total audience to CTF-funded drama. In other words, investing a portion of the fund in projects on CBC and Radio-Canada is paying off with Canadian audiences.

You can see what I mean by saying that the CTF envelope is an important pillar for CBC/Radio-Canada. Take that pillar away, and those programs disappear. In fact, there is no good reason to get rid of the fund, because it is working.

The CTF's objective is to preserve and build Canadian culture and identity. Canada's small market cannot, in normal business terms, support the high cost of quality television. Without the support provided by the CTF, there would be very little Canadian television capturing Canadian experiences, sensibilities, and perspectives, and showcasing Canadian actors, writers, and directors. In English Canada, we would be a nation entertained almost completely by the stories, experiences, and stars of other nations, primarily American.

On the French side, the fund affords the maintenance of a public-private balance, and diversifies the television offer, whether it is in drama, documentaries, or children's television, in keeping with the spirit of the Broadcasting Act.

Because of the CTF, there now exists a vibrant television production sector across the country employing over 16,000 people and creating 2,300 hours of prime-time Canadian programming.

It is fair to say, Mr. Chairman, that the CTF is a central financial element of Canadian programming, but is the fund perfect? Even representatives of the CTF told you last week there is room for improvement in the way the fund operates. In response to the Auditor General and to departmental reviews, the board of the CTF continues to improve both the management and the objectives of the fund, and all the board members--I emphasize, all the board members--have been involved in this work.

We believe that the current crisis in the CTF was triggered by statements from two companies that they would withhold their contributions to the fund. These are rules that the industry agreed to in return for an increase in cable rates that was double their actual contribution to the fund.

We are very grateful to see that the Government of Canada has shown leadership and renewed its contribution to the Canadian Television Fund for the next two years. It not only guarantees the stability of the government's portion but it sends an important signal about the government's commitment to the fund. We also agree with Minister Oda's statement earlier this week that all stakeholders in the broadcasting system must play by the rules and respect their regulatory obligations. The opposite would have a devastating impact on the industry.

Faced with the threat of regulations by the CRTC, Quebecor has now signalled it will resume its monthly payments. And that is a good thing. However the stability of the fund must be assured for the future.

I would only say that given the significance of the CTF to the broadcasting system, it is vital that CBC/Radio-Canada, as well as the independent producers, be part of any discussion that may affect support for Canadian productions and the opportunity for Canadians to enjoy these productions in prime time.

We will now be pleased to answer your questions. Thank you, Mr. Chair.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much for that presentation.

Ms. Fry.

[Hedy Fry, Liberal, Vancouver Centre, BC]

Thank you very much.

I'm glad you clarified a lot of stuff we've been hearing, especially with regard to the dedicated funding that we hear goes to CBC only to find out that it isn't going to the CBC but is going to independent producers, but also that you have the slots that have been committed and dedicated to this. That's a very important clarification to make.

I suppose we could go on and ask the same questions about whether the minister will enforce the CRTC regulation, etc. I don't want to go there, because everyone's been asking the same questions.

What we're talking about is staving off on a temporary basis; holding the funds until another threat comes up. When is that threat going to come up? Is it next year? We're really buying time more than anything else. I would like you to suggest to us a way of....

First and foremost, I don't even think we should be debating whether the minister should intervene. It's my understanding that this is a legal obligation on the part of these two companies, who agreed, in exchange for being able to put money into infrastructure and increasing their subscriber rates. If you make a contract, you make an agreement; you don't break it.

But the bottom line here is that somewhere along the way this is going to keep happening. How do we find a permanent solution to this? What do you think are the best ways we can ensure that there is a vibrant fund here for both children's programming, as we heard from the children's broadcasters earlier on, and of course for adult Canadian broadcasting?

I must say--and I'm going to wear my heart on my sleeve for a minute--that I think the CBC is an extraordinarily important institution for Canadians. Among countries that have become very famous for extraordinary television programming and extraordinary filmmaking, we have to look at the U.K. and at the vibrancy of a strong BBC; at South Africa, which is beginning to grow in strength in television in Africa and in filmmaking, and at a strong South African Broadcasting Corporation; and at Australia as well, and at how strongly they value their public broadcasting arm.

I think this is key. We of all countries have a huge challenge because we are so close to a very big producer of film and television next door. We need to have extraordinary solutions put in place to ensure that we are able to hold our own and have the kind of excellence we see going on in Britain and in South Africa and in Australia.

I would like to ask you what you see as a long-term and permanent solution, so that we don't have to keep worrying every two years and fight the little fights. I call these little fights, because they really aren't solving any problem; they're just keeping our heads above water. What do we do to be strong and to be vibrant? What are your solutions for that?

[Robert Rabinovitch]

There is no question that if you're going to have a successful indigenous industry, the first step must be to ensure the financial stability of that industry. What the government did a couple of weeks ago, when Minister Oda announced that their $100 million contribution at least has been stabilized for two years, is an extremely important step.

One has to recognize—and I'd like Mr. Stursberg to jump in, if you don't mind—that basically we in the industry thought we had a solid deal with the cable operators, with the funders, which together with the government's contribution would result in precisely that: a stable Canadian television fund, and one that would grow slowly with the growth of the population and the growth of the take-up rate of cable and DTH. And the government would also, we hoped, maintain its contribution, which it has done.

These are the minimum conditions. But there's a lot of history here, and it's worth perhaps looking at the history, because we shouldn't be having this discussion at all. In fact, since I've been at the CBC, the discussion's been around two things: the CBC's getting stable funding, because without that funding we can't even access the fund; and the government's commitment, over the years, of its $100 million contribution.

But perhaps I should ask Mr. Stursberg to elaborate, Mr. Chair.

[Richard Stursberg, Executive Vice-President, Television (English), Canadian Broadcasting Corporation]

Thanks. I think it's sometimes helpful to remember the history of how this fund was put in place in the first instance.

What happened is that in the old days when the cable companies wanted to make an improvement to their capital infrastructure, whether they wanted to build more transmission capacity or put in better equipment or what not, they would go down to the CRTC and they would say, “We would like to do this. If you approve it, please also approve an increase in the basic cable rate to finance it.” The commission would say fine. The deal always was that when those capital improvements had been paid for, then the basic cable rate could go back down again, because now they had been paid for.

So in about 1993, when all of the basic cable rates were supposed to go back down again, the cable industry came to the commission and said, “Listen, we have a good idea. Instead of sending the money back to the cable customers, how about you let us keep the money and we will split it fifty-fifty. We'll keep 50¢ of every dollar by which the rates should have gone down and the other 50¢ we will put into the fund”.

Now, the commission said, “That's a good idea.” The long and the short of it is, first of all, that the entire dollar was originally scheduled to go back to the consumers. The 50¢ that the cable companies got to keep has probably put into their pockets somewhere between $750 million and $1 billion that they otherwise would not have had. And the other 50¢ that went to the fund, of course, was never their money in the first place.

After the deal was made, the commission then decided that they would strike the whole thing in regulation. So they put it in the regulation, and it's been in the regulation for a considerable period of time. CRTC regulations have the force of law.

So I'll come back to your question: what is the right solution in the longer term? It is to insist that people respect their regulatory obligations and that they respect the law. And if they do that, then these kinds of up-and-down crises of people pretending that somehow or another they can withdraw their money when they are in fact obligated to put it in will go away.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Kotto.

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

Thank you, Mr. Chairman.

Good morning and welcome.

At the outset, I would like to ask you a simple question. You are not able to stem the brain drain, this exodus of brains that flee journalism to become embroiled in the pitiless world of politics.

[An hon. member, Conservative, Jim Abbott]

You are on my list.

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

Let's get down to business. Certain matters are at issue, including the 37% guarantee for Radio-Canada, which was challenged by the two, so as not to use another word, dissidents. The growing number of platforms that are not eligible for the fund money in terms of production and resale rights also constitute a problem. These resale rights remain the property of the producers and cannot be used for these new platforms. Unofficially, we know that this is the cause of the crisis.

In your opinion, do you feel that the criticism regarding the management of the fund is legitimate?

[Sylvain Lafrance, Executive Vice-President, French Services, Canadian Broadcasting Corporation]

First of all, the Canadian Television Fund or CTF has evolved since its creation and it has mechanisms by which it can continue to evolve. It is true, it is stating the obvious, that the new technological platforms are changing the rules of the game. This is recognized around the world. These new platforms have a significant impact as far as law and financing are concerned.

However, the solution must be found by all of the industry stakeholders because it is not so simple. Weakening the television system on the pretext that new platforms will arise is somewhat risky and shortsighted. There are certainly other ways to proceed, and the problem must be considered in its entirety. The CTF certainly has the tools to adapt that will allow us to confront these changes. Whatever solution is found, if we respect the spirit of the Broadcasting Act, that solution will be found by all the industry stakeholders. We cannot go off separately and try to impose our own custom-made solution.

The fund remains the best forum in which all of the stakeholders who are part of the creation of the television cultural industry advocate their interests. In that regard, it is extremely important that it remain, because those negotiations allow not only for the growth of a very strong independent production industry that guarantees diversity of creation, but it also ensures the diversity of genres. It ensures that there will be documentaries, youth programs, etc., as the president was saying earlier. The fund allows television to not be completely abandoned to the simple laws of supply and demand. It ensures true diversity in Canadian production, which in my opinion is consistent with both the spirit and the letter of the Broadcasting Act.

I will conclude by emphasizing that all of the new platforms and the new opportunities—and the Canadian Broadcasting Corporation is a player in almost all of those platforms—constitute a real issue. The letter and the spirit of the current Broadcasting Act allows us to find solutions while maintaining a strong independent production sector, a strong public service and strong private broadcasters. We will therefore find a solution with all of the stakeholders, because the fund has the tools to do so.

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

I will play the devil's advocate. In light of what we know today, was it not to bring this debate out into the light of day that Quebecor was playing hardball? I know they resumed their contributions to the fund; I'm not sure what the situation is with Shaw. They were not being listened to by the people at the fund over the last two years, nor probably by the CRTC.

[Robert Rabinovitch]

That is not really why they decided to play hardball. I know that mechanisms exist, particularly the CTF's board of directors, which would allow for a discussion on changing the rules and improving the situation. In fact, every year things must be changed, because our industry is constantly evolving. We accept that, and changes absolutely must be made. We do it through the fund's board of directors.

[Sylvain Lafrance]

Moreover, discussions had already taken place between the broadcasters, within the context of the fund, on the different ways of managing this new environment. We were talking amongst ourselves about how to adapt to it. Discussions between the partners have therefore already been entered into on the ways to solve the problem. All of the stakeholders are aware of the evolution of the technological environment.

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

Beyond all of the points that you have just raised, is there not also an unspoken rivalry between your institution, the Canadian Broadcasting Corporation, and Quebecor?

[Robert Rabinovitch]

That happens often enough, not only with Quebecor but also with certain people. There is nothing unusual about it, but the decision must be taken by Parliament and not by a private company or by the CBC. Some people think that the Broadcasting Act must be changed and that there is no need for a public broadcaster today.

Personally, I believe the exact opposite. We will no doubt have the opportunity to discuss that when the committee begins deliberations on our mandate. Today, there is a lack of competition in the market because of company mergers. It is therefore more and more important that there be a public broadcaster in a position to offer programming at prime time, not in order to increase audience share, but to present for example documentaries or youth programming. This is not programming we can make money on, but these are programs that are very important to our population.

[Sylvain Lafrance]

It is nice of you to say that the rivalry between us is unspoken, but I can tell you why you felt the need to be so present. First of all, it is because this financial issue is extremely important to the fund, and secondly, because Quebecor's argument that they are funding the CBC is completely false from every perspective.

Firstly, the money goes to independent producers. Secondly, Quebecor receives more money than it invests. Therefore, they're doing nothing more than financing their own business. Over the last year, they paid $15 million into the fund and received $18 million from it. Therefore, Quebecor did not fund the CBC nor any other player. In our opinion, that impression must absolutely be corrected.

If you do the math, there is approximately $100 million that is paid into the fund by taxpayers and approximately $96 million comes back to the public broadcaster. Therefore, the private sector is not funding the public system. What they are saying is not true. That central authority was set up so that everyone would know the rules of the game.

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

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much.

Mr. Masse is next.