Canadian Heritage Committee on Feb. 20th, 2007

[Luc Lavoie]

If I may add something, sir, there is a coexistence of private and public interests, and that's between the public broadcaster and the private broadcasters. Why is it that the private broadcasters, or the private entities like ours, should put their money into a pot so that it becomes part of some kind of a socialist approach to the way we fund programming? I don't think it's ideological. I think it's fundamentally a strange way of running a business.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Madame Bourgeois.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Good morning, gentlemen.

Would all of the $109 million that you would like to invest go to programming for the Quebecor Media group? Is that correct? That is my first question.

If that money were for the sole use of Quebecor Media, would that not give you a monopoly?

If you have a monopoly, then how would you bring together all of the producers in Quebec?

[Pierre Karl Péladeau]

I'll start by answering the first question. What was the purpose of the legislation? What was the legislator seeking to do by creating obligations for the cable distributor which was, at the time, a monopoly? Well, this monopoly has completely disappeared. As you know full well, Canadians benefit from a communications system that is this effective because billions of dollars were invested in it. Mr. Shaw referred to that.

The same applies to us. We invested $750 million in Videotron. We will also be investing $1 billion over the next three years to ensure, once again, that Canadians may enjoy the most recent technologies, a competitive environment and telecommunication services at the most competitive prices.

Originally, the objective of the legislation was to contribute to Canadian programming or to what was referred to as the Canadian broadcasting system. Well, that's exactly what we want. We want to do so more effectively than the bureaucratic structure which is in place currently does, but because of the persnickety rules in place, it has been more of a hindrance than anything else.

My colleague Mr. Lavoie mentioned it earlier. It's been a while now that we have been raising the issue of new platforms.

Why isn't the Canadian Television Fund able to think further ahead than this? For a very simply reason: independent producers are not interested in it. They are not interested in ensuring that new distribution channels are strong—for the Canadian industry as a whole and over the medium and long term.

Why would an independent producer, receiving 20% of production costs, and therefore having no real financial incentive to create quality products at the best possible cost be interested in changing the system? There is no incentive in it for him.

You need to know that what triggers the CTF contribution is the general-interest channel, only if it holds a broadcasting distribution licence on the general-interest channel. Any other distribution licence would only hold up the triggering of the CTF contribution. These are technical details, but they are extremely important. Unfortunately, that is where the problem lies.

[Luc Lavoie]

May I add one thing with respect to the monopoly you just mentioned?

Currently, TVA has approximately 28% of the Quebec market share. I didn't do the calculations, but if you add all specialty channels to the mix, representing perhaps 5%, it amounts to 33%. So this is far from a monopoly. If you look at the nine other specialty channels, which have a 39% market share, Radio-Canada—I haven't seen the most recent figures—whose market share is approximately 18% to 20%, the proliferation of Internet channels, like tetesaclaques.tv or YouTube, you can't say there's a monopoly. On the contrary. It is total market atomization, Madam.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Thank you.

[The Chair, Conservative, Gary Schellenberger]

The question was a little long and the answer was long. It has taken up the rest of the time, so, Mr. Warkentin, you're not going to have a question. But I thank you for your long answer.

I am now going to take a recess while we get our next witnesses here.

Thank you.

Welcome back, everyone.

To our new witnesses, welcome. Mr. O'Farrell, if you'd like to start your presentation, please do so.

[Glenn O'Farrell, President and Chief Executive Officer, Canadian Association of Broadcasters]

Thank you very much.

Good morning Mr. Chairman and members of the standing committee. My name is Glenn O'Farrell and I'm the President and CEO of the Canadian Association of Broadcasters. With me today is Susan Wheeler, the CAB's Vice-President, Policy and Regulatory Affairs (television).

We thank the standing committee for inviting us here today to discuss the Canadian Television Fund, the CTF.

Mr. Chairman and committee members, our remarks today address three points: first, the role of the CTF in the regulatory framework for Canadian programming; second, the future direction of funding mechanisms and the importance of keeping pace with changing realities in the broadcast and communications sector; and, third, short-term measures that should be taken to restore stability in the current funding model for Canadian programming and help identify longer-term solutions as well.

The creation of the CTF in 1996 as a private-public partnership was, in our view, a very clear expression of political will to build and support a strong foundation for the creation of distinctively Canadian programming in English, French, and the aboriginal languages. This political will remains strong, as evidenced by the renewal of the government's $100 million contribution. In fact, we note that in the midst of the current discussion, the Minister of Canadian Heritage demonstrated this government's significant support for the production of Canadian programming by announcing another two-year commitment to the CTF ahead of the regular budget cycle.

Canada's private television broadcasters thank the government for this tangible expression of confidence in the industry's ability to deliver on key cultural and industrial policy goals that are relevant to Canadians and that help foster our regional and national identities.

To fully appreciate the role of the CTF in the broader regulatory context, we think it's important to correct the record on certain issues that have perhaps been misinterpreted or misrepresented in recent weeks. First, private television broadcasters are, without question, the largest investors in Canadian programming and have continued to increase their investments year after year. If you take 2005 alone, Canada's private television broadcasters invested close to $1.4 billion in Canadian programming, such as drama, comedy, sports, and public affairs content.

Secondly, under current policies, private broadcasters do not receive money directly from the CTF. Yes, the CTF provides funding to independent producers in the form of a licence fee top-up and equity investments after securing a broadcast licence commitment. While audiences to Canadian programming must be a key priority, it is also important to note that the CTF investments in Canadian programming support the entire creative industry and cannot be measured in audience numbers alone, albeit they are important. As the CTF stated in its appearance before you last week, for every $1 spent by the CTF, another $3.50 in production spending is triggered.

Jumping to third, the CTF does indeed fund programs Canadians want to watch. Let there be no doubt that the pooling of public and private resources in the Canadian Television Fund has yielded impressive results by any standard of measurement in the form of quality Canadian programming that speaks to audiences of all ages from all regions of the country.

We should be very proud of this public-private partnership and its success in helping the industry advance the nation's cultural policy goals. We think it truly is an example of cooperation other jurisdictions should and can learn from. Although there is no question that building audiences for Canadian dramatic programming in English Canada remains a significant challenge, CTF-funded programs in both official languages are among some of the most watched and loved programs private broadcasters have to offer. Don't take my word for it. Let me give you some factual examples.

If you look at CTV's movie of the week, One Dead Indian attracted over one million viewers, and its documentary, Ice Storms: Scandal at Salt Lake, garnered 1.2 million viewers. Its regular series, DeGrassi, is Canada's most watched English language drama series and is sold in 150 countries worldwide. On Showcase, the cult hit Trailer Park Boys—-we've all heard of it—attracts total audiences of 1.5 million viewers. This is a truly successful story. Not only is Trailer Park Boys carried internationally, demonstrating its resonance both with Canadian and foreign audiences, but the series also led to the spinoff of one of the top grossing Canadian feature films ever, with a total box office in Canada of $4 million. CHUM's Godiva's and Charlie Jade are other examples. Global's new dramatic series, Falcon Beach, launched to a national audience of 575,000 people. Of course, Canada continues to be a leader in the production of children's programming, with popular kid shows, such as Tree House's Daniel Cook and YTV's Jacob Two Two, both ranking regularly among the top ten programs for their demographic and producing a number of spinoff initiatives, including a children's book series and DVDs.

It's not just the larger stations that have been able to find significant audience for their CTF-supported programs. Many other specialty channels, including services like the Aboriginal Peoples Television Network and religious broadcaster VisionTV have had success in building audiences in Canadian programming.

French-language broadcasters have enjoyed remarkable success with Canadian programs which are normally among the top 25 most watched programs in Quebec.

The CAB also noticed that 10 out of the top 25 most watched programs in Quebec were funded by the CTF. And this success is across all genres of programming. 50% of viewing to children and youth programming in the French market is through CTF-funded programs and CTF-funded programs capture 37% of all viewing to drama programming in prime time and 59% of all viewing to variety and performance arts programming. Here are some numbers.

TVA's CTF-supported drama such as Nos Étés and Laura Cadieuxwhich are the most popular in Quebec, consistently attract average audiences of 1.2 to 1.3 million viewers each week.

TQS has also had tremendous success with its CTF-supported sitcom 450, Chemin du Golf and Bob Graton, ma vie, my life which attract average audiences of 600,000 and 1.4 million viewers respectively. French-language specialty services have also been successful in attracting audiences to their CTF-supported programming.

Canal D's documentary programs Un tueur si proche and Danger dans les airs attracted average audiences of 358,000 and 272,000 respectively while TV's youth programs Une grenade avec ça? and Dans une galaxie près de chez vous attracted average audiences of 448,000 and 481,000 respectively.

Impressive numbers for a market of only 6 million. It is also important to note that in today's French-language market, audiences to Quebec-based productions far surpass those to foreign programs. In order to remain competitive broadcasters will need the ability to provide content across all distribution platforms and the flexibility to pursue various programming strategies that reflect their operational environment and business needs.

[Susan Wheeler, Vice-President, Policy and Regulatory Affairs (Television), Canadian Association of Broadcasters]

Thank you.

Our second point is that funding mechanisms must keep pace with changing market realities. All licensed broadcasting undertakings have a responsibility to support Canadian programming as part of their regulatory covenant, a stated objective of the Broadcasting Act. This includes DTH and cable undertakings, which have benefited greatly from the regulation of the sector.

No one player can decide to unilaterally withhold payments when it no longer suits their purpose. Broadcasters make commitments to Canadian programming based on a larger regulatory framework in place for the industry as a whole, including available funding mechanisms such as the CTF. Clearly, a regulated system, in order to operate in an orderly manner, requires all players to play by the rules. The minister made this point when she appeared before you, and it was reinforced by the chair of the CRTC in his public statement last week.

Having said this, the CAB certainly sees merit in having a public discussion that evaluates the use and effectiveness of contributions from government, distributors, broadcasters, and of course producers of Canadian programming.

We note that the chairman of the CRTC has already indicated that this is an issue worth further study. However, the CAB suggests that such a discussion should not be limited to the regulated environment, but widened to include a broader dialogue on how all players in the system, regulated and unregulated, can contribute to furthering Canada's cultural and industrial policy objectives.

We live in an extremely fast-changing media environment that experiences new content and distribution choices being made available to consumers every day, an environment in which regulated and unregulated media compete head to head, all vying for Canadians' time and attention. To put this into perspective, the attached charts that we provided to you today provide a snapshot of the regulated environment to 1996. We've provided the breakout in the English and French language markets. We've also provided a snapshot of the media landscape today, in 2005-06. Clearly, these charts testify to the radical change and fragmentation in the media landscape.

Now consider the plethora of unregulated media also available to Canadian consumers and operating in the same space, including services like MySpace and YouTube, which we've heard so much about lately.

The first step the CAB recommends in evaluating the public–private partnership in this new reality should include a comprehensive and inclusive review of how funding mechanisms can keep pace with changing market conditions, so that they will assist the industry in remaining competitive, not only at a domestic level but also globally. Without question, the first principle of this review must be the creation of great Canadian programming that attracts audiences on all platforms.

Glenn.

[Glenn O'Farrell]

The CAB is pleased with Quebecor's recent announcement that it will reinstate funding to the CTF until there is an opportunity for the CRTC to consider the Quebecor proposal for a new fund.

You discussed it with them at some length this morning.

The CAB is also pleased to hear Shaw's testimony this morning, announcing that it was reinstating its payments to the CTF.

As stated earlier, the CAB agrees that ongoing evaluation and consideration should be given to production funding mechanisms to ensure they are keeping pace with the changing realties of the broadcasting and communications sectors.

From a public policy perspective, however, the CAB believes it would be more constructive to broaden the discussion to include the role of all television production funding mechanisms and not just those proposed by individual licensees. To this end, the CAB believes there are two specific measures that should be taken to address the uncertainty caused by recent events and provide a framework for a longer-term solution.

First, in pursuit of the longer-term solution that addresses the concerns that we and others have expressed—and you've heard testimony here again this morning and in previous hearings of this committee—production funding mechanisms need to keep pace with market changes, and this is top of mind. We recommend that the government use its power under section 15 of the Broadcasting Act to direct the CRTC to hold a hearing and/or make a report on matters related to production funding mechanisms. This initiative would ensure a more fulsome discussion of the role and impact of funding mechanisms on all players in the system. In other words, what are we going to fund, by whom, and for what purpose?

In the CAB's view, this would also send a clear message that individual licensees alone should not and cannot dictate the future of the regulatory framework. This review should produce clear policies and recommendations for government to consider regarding the future direction of proposed production funding in both the English and French language markets. In particular, given recent discussions, we need to revisit the eligibility of public broadcasters to available production funds, such as the CTF.

In addition, given the degree of fragmentation, which the charts we were pointing out to you earlier clearly demonstrated, the emphasis must squarely be placed on audience, not on who makes the content.

To this end, the proposed review should also discuss the eligibility of affiliated producers to available funding mechanisms. The CAB suggests that if the section 15 approach is adopted, it should be undertaken before the commencement of the next broadcast year, which, as you know, begins in September 2007.

The second initiative that we suggest this committee consider is that under paragraph 10(1)(k) of the Broadcasting Act, which gives the CRTC the power to make regulation in furtherance of the objectives, the CAB strongly urges the commission to take immediate action to amend the broadcast distribution regulations to codify payment schedules by distributors to independent production funds.

This action would clarify the payment schedule and provide further stability to the Canadian television production sector. The CAB's understanding is that these amendments could be affected expeditiously within a 60-day timeframe, taking into account all relevant procedural considerations.

We understand that the commission's new chairman indicated as much last week, or at least gave an indication of his willingness to consider that.

We hope the committee will support us in our call for these two immediate short-term measures.

The CAB thanks the standing committee for the time and the welcome that you've afforded us this morning, and we would be pleased to try to answer any questions you may have.

Thank you very much, Mr. Chairman.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Because we have a committee following us, we have to be completed by 11 o'clock, so each party will have one question.

Try not to make it a multi-question, and be specific, so we can get a specific answer back. I apologize for the shortness of time for questioning.

Ms. Keeper.

[Tina Keeper, Liberal, Churchill, MB]

I'd like to thank you for your presentation, which was excellent in terms of the impacts of the changing media landscape that is before us.

Because of these challenges, the television production industry is in an even more precarious state now.

I'd like to ask how critical do you think it is that we look at your second recommendation? As we heard today, it seems that it's uncertain as to whether we will move ahead without another bump in the road impacting our industry.

[Glenn O'Farrell]

Thank you for that.

We think it is critical, because, frankly, the situation we have just experienced over the past number of weeks shows how volatile and how fragile the system is. Having said that, I don't think we can sit back and just assume that all will unfold, as you've indicated, in the most stable of circumstances.

The reason why we suggest that the regulation should be amended is to provide that stability initially. I believe the new chairman has indicated a willingness to do that. A recommendation from this committee would be helpful in taking that further.

The next point, though, and one that is more perhaps critical on one level but equally critical on another, is where we go from here. We stabilize these regulations or we make the payment schedule more clear, but where are we going from here? We think the government has the opportunity, under section 15—it has been done in the past—to ask the commission to consider some questions of implementation of policy or questions regarding the development of policy and to report back.

Most recently, the commission was asked by Minister Oda and government, under the recent order in council, to do a fact-finding mission on the changing realities in the broadcast landscape. Equally important is a precedent that is perhaps more germane to this issue, and that is one that goes back to 1994, when Order in Council P.C. 1994-1689 was issued by the then government. It asked that the commission look at the question of telecom interoperability and the interconnection between telecom networks and cable networks, with a view to implementing more interoperability between the two in order to offer consumers more choice. The commission issued a report, conducted a process, and reported back to government, and government acted on implementing changes.

We think it's all about where we go from here, fixing the short term by way of the regs, but then, from there, bringing a process together quickly to look at all of these proposals and some of the questions. We need a tangible vehicle, which is why we've made this suggestion.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Ms. Bourgeois.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Hello, Mr. O'Farrell.

Earlier on we heard from a representative of Shaw Communications Inc. What should we say to this gentleman who claims that shows produced or supported by the Canadian Television Fund are not quality programs and do not attract the attention of Canadians?

[Glenn O'Farrell]

My response would be positive: the fund's successes have been numerous, the figures speak for themselves, on the Quebec television side as well as on the anglophone TV side. Could there be improvements? Absolutely. Would it be worthwhile to think about creating a production sector which is stronger and better adapted to the new reality? Absolutely. That is why, Madam, we call on the government to support the idea behind the process we suggested this morning. The purpose is precisely to listen to all of these good suggestions, from Shaw Communications Inc. as well as from Vidéotron, Quebecor, producers and all third parties having an interest in English-language Canadian content, French-language Canadian content or in any other language. When it comes to serving Canadians, we believe that a process which brings about performance enhancements is in the interest of all, be it in Mr. Shaw's interest or in the interest of the broadcasters we are here to represent this morning.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Angus.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you for your very interesting discussion this morning, and your recommendations as well.

I was pleased to hear the spirited defence of the programs that have been put out by the CTF following the previous attacks that we've heard on it. But even being honest, English television is challenged in this country. The question that we have to address as a committee is what steps we need to take to ensure that we can actually maintain a viable English television market.

Mr. Shaw says the cable companies have done their share. He basically seems to be saying it's the broadcasters who have dropped the ball. When I look at prime time from night to night, I don't see Canadian programming. I'm sorry, but to me, Ben Mulroney interviewing Britney Spears isn't Canadian drama.

So the question is, have broadcasters not been up to the plate here? Have the cable companies carried their share? Is it time for broadcasters to step up to ensure that we maintain a strong and viable industry that can stand on its own feet?

[Glenn O'Farrell]

We are spirited defenders of Canadian programming because we have a lot of skin in the game. Broadcasters have the most skin in the game. We said in our presentation that if you look at the contributions made by way of financial measures, broadcasters surpass any other sector by virtue of $1 billion-plus per year in the last year on record.

Is it attracting all the audiences that we would hope it would, and is it as successful? In an ideal world, of course, one would always say there's room for improvement, and we hope to strive toward attaining those more lofty goals of higher audiences for all program categories. But I would simply go back to one reality to hopefully guide your committee in thinking about these things.

If this committee, just for a moment, spent only five minutes in absorbing what these four charts tell you, the four charts basically are defined to show 1996—at the creation of the fund—and last year. They provide a picture of English language television then and a picture of English language television now. The same is true for the French sector, then and now.

The charts give you a sense to absorb the degree of fragmentation that has developed in the system. I think you would then be capable of moving onto the next step, which is where we do go from here in light of that fragmentation.

I would add one additional comment, Mr. Chair. This is the regulated system only. It takes nor makes no account of unregulated services that are equally vying for Canadians' attention in growing numbers.

[The Chair, Conservative, Gary Schellenberger]

A very short question, Mr. Warkentin.

[Chris Warkentin, Conservative, Peace River, AB]

Just to follow up on Mr. Angus' point, obviously we know the industry is in jeopardy here in Canada, especially in the English language, because of the fragmentation that you've laid out for us. You have therefore made the recommendation that if there's going to be any change to this structure, it should be very solidly tied to viewership.

Explain this to me. Are you suggesting that we fund successful shows that have strong viewership? What is it exactly that you want to see happen there?

As we become more and more subjected to these other media, that competition is going to increase. We don't want a production industry in Canada solely so that we can have a production industry in Canada. We want a production industry in Canada so that we can espouse Canadian values and so that people in Canada actually watch this stuff.

It's not simply for the sake of saving jobs. We also want people to watch this stuff. So what exactly should be done to follow through with your suggestion that somehow the funding be tied to viewership?

[Glenn O'Farrell]

In a word, we have to prioritize. We have to become strategic. We have to recognize that there isn't going to be necessarily enough money even in a public–private partnership that is aggrandized. We would hope that in terms of the funding available at the end of the process that we suggest, there would be more money available.

Even with more money available, we will not be able to cover all the landscape. That will require some strategic decisions and some prioritizing about how we effect and deploy funding.

There are a number of very innovative and interesting ideas that have already been floated about as a result of the discussion that this committee has been in the centre of for the past weeks and months now. It's through a process like the one we are suggesting that we will give the opportunity for people to come forward, allow for the best ideas to bubble up, and allow for us to form recommendations that the commission can then bring back to government, so that government can take forward its initiative.

Funding clearly has to speak to the issue of people watching. If it's not about people watching, what is it about?

[Chris Warkentin, Conservative, Peace River, AB]

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much.

I thank our witnesses.

I thank our members around the table for your great questions this morning.

The meeting is adjourned.