Canadian Heritage Committee on June 17th, 2008

[The Chair, Conservative, Gary Schellenberger]

Welcome, everyone, to meeting number 37 of the Standing Committee on Canadian Heritage.

Pursuant to Standing Order 108(2), we are studying questions regarding the Canadian Television Fund.

This morning we welcome on video conference Valerie Creighton, president of the Canadian Television Fund; Stéphane Cardin, vice-president, strategic policy planning and stakeholder relations; and Paul Gratton, chair of the board of directors.

Congratulations, Mr. Gratton. I understand you're recently appointed, so my congratulations for that.

I have just one thing to say before we hear your short presentation. The other day when we were delving into the CRTC's report on the Canadian Television Fund and things, as we sat around the table surmising what it meant, it seemed to me there were a lot of summations and it seemed we were going all over. So we thought we'd bring some of the people to our meeting today, hopefully to answer the questions, so that we're not just beating around the bush, going in every direction.

So welcome.

Who is going to give the report? Mr. Gratton, would you like to go ahead, please?

[Paul Gratton, Chair of the Board of Directors, Canadian Television Fund]

Thank you.

First of all, I would like to apologize for not having a written report prepared. I understand it's tradition to have about a ten-minute written summary, which aids in interpretation. But we were invited to come here late Friday, and I have been in the job less than a week. I don't even have business cards yet. I invited two people who will keep me honest and be able to answer your questions. I think our presence here today, above all, is to answer questions that you might have.

I did want to, at the front end, make a couple of observations about the CRTC report, based on one week on the job and my preliminary dealings with various people. We've had one board meeting.

I feel that the CRTC spent a fair amount of time giving proper analysis and depth and consideration to the many complex issues that were presented to it. This was a well-considered and well-thought-out report in many ways. We are pleased with many of the recommendations, and we'll fulfill whatever the Department of Heritage decides in response to these.

Having said that, I think we're on the record at the hearing as having some concerns about the two-stream and two-board approach with a public-private split right down the middle. We are on record as saying we prefer a single stream, for a whole bunch of reasons, including the ability to coordinate the two sides.

It concerns us a little bit, as we go through the report, that there's not a lot of flesh on how the public side would be administered. There are many models that could be applied to a public side. You could return to a telephone-style evaluation based on artistic and aesthetic criteria. You could divide the public side into separate envelopes based on historical access only. You could divide the public side into envelopes that would change in size and nature based on some kind of measurement. It's very vague on what would happen on the public side. But on the private side, there seems to be a consensus that the broadcast or performance envelopes is the way to go and that audience growth will be the major criterion for recalibrating the envelopes year after year.

Consequently, the broadcasters who would be relegated to the public side have almost across the board reacted with some dismay to being, as they perceive it, ghettoized into a side of the fund that may or may not grow. I noticed that one of the proposals you've been considering is indexing the CBC's percentage of the broadcaster envelope, such as it currently is, to growth on the private side.

We saw a press release, a statement that came out from the educational broadcasters on Friday, decrying their own lot on the public side, should the recommendations of the CRTC be accepted by Heritage Canada. They, too, are fearful of being ghettoized, being trapped in a fund that does not grow.

So my first suggestion, just for the purpose of discussion, might be that if you are considering putting forth a recommendation on indexing, the indexing should apply to the entire public side of the envelope, so that it would grow in proportion to the private side.

My view is that if Heritage Canada, in its wisdom, decides to accept the CRTC recommendations and cut the public and the private into two completely separate funds, it behoves Heritage Canada at that point, if it accepts that recommendation, to accept the responsibilities that come with the splitting of the fund. Namely, it should be responsible for the funding of all the broadcasters on that public, not-for-profit side. It's inherent in accepting that recommendation. That's why I would suggest that an indexing of the entire public side so that it grows at the same time as the private side might make more sense than just saying that CBC deserves this but not the educational broadcasters or anybody else.

I realize there's some complexity there. Traditionally, educational broadcasters have been the responsibility of provincial jurisdiction. So there is some complexity, but I can't imagine a system in which the CBC would be allowed to be indexed while the educational broadcasters would be left by the wayside.

As I said, our first position is that we would prefer a single stream with one board. I would say that if two streams are the adopted method, our second position is that we would still prefer to have one board that could break up into two subcommittees. We have a model like that at Telefilm currently with the feature film advisory committee, on which I have sat for the last couple of years. We meet as a group. We discuss matters that are of common interest. Then we break off, and we follow our asymmetrical obsessions and concerns because the two markets in French and English Canada for cinema are not completely different, but they are very significantly different. Then we get together at the end of the day and make sure that one side hasn't made decisions that somehow confuse or affect the overall balance in the system.

I would suggest that having one board oversee two streams, if two streams is indeed where we end up, would have a tremendous number of advantages, because the complexities here are immense. One of the biggest crises, and there have been a few in the history of the Canadian Television Fund, was when we had licence fee top-up programs administered by the CTF and an equity investment program administered by Telefilm with different deadlines and different criteria for evaluation. Producers were caught between two doors and chaos ensued, and it was really in response to that that Heritage Canada had to decide what were the specific and respective roles of Telefilm and the CTF.

I suggest to you today that if you had two completely separate boards that went off and established completely separate criteria for the administration of these two pools of money, you would probably end up, despite the best of intentions, with all kinds of unintended crises, because there would be no central coordination.

I'll give you a simple example of what happens to a producer who wants to do an arts program and license his first window to CBC on the public side, according to rules that we can only guess at, and a second window on the private side. How does that affect measurement? How does that affect access? Can you guarantee that the two sides will coordinate?

My preference, if we actually go to two streams, would be to kind of still have one central board that would coordinate, so that there is coordination between the two sides and not chaos. That would still respect the spirit of the CRTC recommendation.

As I said, our first preference, though—and nothing really has changed our mind—is to have the single stream we currently have, which is in many ways a successful public-private partnership. Despite all the history of the CTF, at the end of the day we have managed to react very positively to almost every challenge that's been presented to us. I mentioned in my acceptance speech at Banff that the CTF has been the flashpoint for every sectoral battle that could possibly occur between BDUs and broadcasters and public and private and French and English and producers, and yet at the end of the day we have always resolved our differences, buried the hatchet, come up with ever-improved rules, and moved on.

In some ways the history of the Canadian Television Fund, fraught with many crises and many unexpected results, has always managed to recognize that the sectors are captive of each other's goodwill, and the fund we have today and the general endorsement we got from most sectors of the industry at the CRTC hearing is tribute to the capacity of people to think reasonably and proceed on a mutually advantageous basis, recognizing that no one is going to get exactly what they want out of this. There is no perfect methodology for delivering money, but year after year we have perfected the model and come closer to it.

The danger right now with splitting it in two is particularly a public side that has no guidelines and no idea of how it would be administered and how to make sure it doesn't cause unintended problems with the private side that seems to be kind of functioning well.

I'm rambling on. I hope the interpreter could keep up.

That is my general observation after one week. I brought along people who could answer your questions in case I can't.

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much for that.

Our first question will come from Mr. Coderre, please.

[Denis Coderre, Liberal, Bourassa, QC]

Thank you very much, Mr. Chair.

Mr. Gratton, Mr. Cardin, Ms. Creighton, it is once more a pleasure to meet you again. You learn a lot when you go to the Banff World Television Festival. You can take the pulse of everything that is going on, so, as a result, we have news about the future of the Canadian Television Fund.

We Liberals are a little concerned, as you are, to see two different bodies. It seems to us to be a ghettoization of the airwaves. On one side, we have the private sector and on the other side, we have the public sector.

One of the reasons you are here today is that there is a valid motion from the Bloc Québécois on the future of funding to CBC/Radio-Canada from the Canadian Television Fund. I have to say that I share your view on the future and on the nuts and bolts of the fund itself. But I think that we should discuss a few points.

What do you understand by historical access? I agree to guaranteeing CBC/Radio-Canada's 37%. But when you say historical access, does that mean a percentage of the entire envelope, or does it mean exactly the same amount as before with indexing covering the shortfall which Heritage Canada would look after? Is that what you understand, Mr. Cardin?

[Stéphane Cardin, Vice-President, Strategic Policy Planning and Stakeholder Relations, Canadian Television Fund]

The contribution agreement with the Department of Canadian Heritage presently applies to our funding as a whole. The contribution agreement stipulates that 37% of Canadian Television Fund resources will be allocated to CBC/Radio-Canada. So that means 37% of all funding from public and private sources together.

Last year, using 2007-2008 figures, about $96.5 million went to CBC/Radio-Canada, including some special initiatives. I understand, therefore, that the motion deals with the base funding amount, which at present is about $96.5 million, and that it would be indexed.

[Denis Coderre, Liberal, Bourassa, QC]

So, in your view, the expression "historical access" means that the 37% applies to the entire envelope and that, even with one private-sector fund and one public-sector fund, the amount received by CBC/Radio-Canada should equal that amount.

[Stéphane Cardin]

In dollar terms, that would be so; in percentage terms, it would be in the order of 75% to 80% of the public-sector fund.

[Denis Coderre, Liberal, Bourassa, QC]

Personally, I am a friend of CBC/Radio-Canada, as are all members of the committee. But I do not want the future direction to be determined like an à la carte menu.

If we look at what the CRTC is recommending, we are almost asking other television broadcasters to choose which family they want to be part of. Vision TV and TV5 must decide if they want to be public or private. But there is a problem with APTN, the aboriginal channel. We could say that, when it is broadcasting in English or French, it should be on the private side. But when it is promoting aboriginal languages, it should be on the public side.

Do you not think that there could be a danger in separating public from private in this way, and having two separate boards? If we guarantee historical access to CBC/Radio-Canada, the losers will be the education broadcasters and anyone else who could seen as public television, unless the government decides to give them an equivalent amount to prevent any losses.

[Paul Gratton]

I think that is a real danger, and it is precisely why no broadcaster in the public-sector group has reacted positively yet. Everyone is negative. No one wants to be caught in a sector that will not grow when they see annual growth on the other side.

[Denis Coderre, Liberal, Bourassa, QC]

Mr. Gratton, I find it interesting that the recommendation is to force cable distributors to pay. So there is no question of creating their own fund. But there is a problem.

There's a different stream now. We're talking about private and public, but we have to address the issue of new media. It's going to be huge, and it's the future.

We cannot only ghettoize between public and private--there's the language issue. There is a different sensitivity regarding the anglophone, aboriginal, and francophone productions. There are different levels or sensitivities, even if you have the same kinds of criteria specifically for private. But do you believe that one of the reasons why we shouldn't have two boards is exactly because there's a third stream called new media?

[Paul Gratton]

Because there is no source of funding for the new media, I think an overseeing board could go off and find little pockets of money to try to fund this, in the absence of new money coming from the government.

One board with a sort of overseeing function has more flexibility to address crises and to coordinate the roles on the two sides, even if they're very different in approach, to make sure there are no conflicts. And it could address simple things, such as what happens when CBC buys a private sector specialty channel. What is the impact of that? A board overseeing that would address it.

Quite frankly, even what happens on the public side remains of interest to the people who wouldn't structurally be on the board as it's presented. Private broadcasters would have a say, in that instance, and should have a say in the overseeing of the board. By the same token, you know about our double majority and how the independent committee would make the final decision.

So I see some advantages to a single board, if we go with the two streams. There are still more advantages to having a single stream and being able to provide an architecture for how we're going to go forward. It gives you more flexibility, even. But again, if double stream is the wisdom, I still think one board that makes sure there are no fundamental contradictions and disconnects between the approaches of the two sides is fundamental.

[The Chair, Conservative, Gary Schellenberger]

We've stretched our time here a wee bit, but Ms. Creighton, was there anything you wanted to say on this at this particular time? I don't want to ignore you.

[Valerie Creighton, President, Canadian Television Fund]

I can't see when Paul or Stéphane are going to speak, so I didn't want to jump in on top of them.

As we look at this, if we step back and look at a bigger-picture policy question, the question for us at the CTF is always what it is we're trying to achieve. As we mentioned in our presentation, we believe that the system the CTF has meets the objectives of both the Broadcasting Act and a market-driven system.

If you look at the kinds of projects we fund—and I know that since the CRTC report came out, we're all very focused on which broadcasters go into which potential of the two streams—we need to remember that the CTF's legal obligation is with the actual producer.

Now, the producer has to have a broadcast licence, so it might be determined that if a project is more commercial in nature it would go to the private side. But the odd thing is that I don't think any broadcaster in the country, whether public or private, sets out to make a production that isn't going to reach an audience and be commercially successful. In fact, if we look at the CBC, many of their recent productions have very high audience numbers, certainly high enough that they could compete on the private side.

So although with the 37% that was directed to the fund by the contribution agreement.... And I think Mr. Coderre asked about historic access. That number was given to the CTF in the contribution agreement. If we look back at the history of CTF financing prior to the administrative change, when we provided the programming administration to Telefilm, CBC often drew as much as 50% of the funding allocation from CTF, for various projects that we finance through the producer itself, which happen to have a CBC licence. We ourselves aren't sure what the rationale for the actual 37% was, because if you look at the history of the CBC's draw, it has often been higher than that.

But we can make anything work. It just seems to us that from a logical, administrative-efficiency perspective, we have a system now that, as Paul has said, can look at the whole industry and provide the oversight and the overview, and we try to meet the current requirements of the contribution agreement on the language split, aboriginal financing, regional, etc. We'll certainly look at the two streams.

Obviously, like everyone, we have just received the report. We're starting to do a number of modelling exercises based on what the report has recommended, to see whether we can determine and predict any unintended consequences, so that when we respond to Heritage Canada, we can give them some concrete statistical information on the impact of APTN being split in the way they've suggested, the impact of the tax credit recommendation, etc. From a technical perspective we'll be doing all that work.

But philosophically, for us it's about doing the best program in the country of Canada and getting it to the widest audience, regardless of who the broadcaster is.

[The Chair, Conservative, Gary Schellenberger]

Thank you for that.

Now we'll switch over to Ms. Mourani, please.

[Maria Mourani, Bloc, Ahuntsic, QC]

Thank you, Mr. Chair.

Good afternoon, madam. Good afternoon, gentlemen. Thank you for your information. I have some questions for you.

Mr. Cardin, you said earlier that CBC/Radio-Canada's 37% represents about $96 million. I assume that covers both French and English productions.

[Stéphane Cardin]

Yes, it does. It is the sum of the two: CBC and Radio-Canada, as well as the affiliates like RDI, Newsworld, and so on.

[Maria Mourani, Bloc, Ahuntsic, QC]

All the specialty channels, right. How is the amount of $96 million divided between French and English productions?

[Stéphane Cardin]

SRC receives $32 million and CBC receives $62 million.

[Maria Mourani, Bloc, Ahuntsic, QC]

So the amount provided for English productions is much larger.

[Stéphane Cardin]

Under our contribution agreement with Canadian Heritage, our funding is divided two thirds to English-language projects and one third to French-language projects.

[Maria Mourani, Bloc, Ahuntsic, QC]

Fine. The division of funding into a public-sector stream and a private-sector stream, the $96 million, or whatever the final amount is, may reduce the percentage below 37%, which should be looked at again because it will be one public-sector fund. You said that it would not be 37% any more, that it could be 75% or 80%, since...

[Stéphane Cardin]

I was just calculating $96 million from the government's contribution of $120 million.

[Maria Mourani, Bloc, Ahuntsic, QC]

If the amount remains the same and the government adds no more money, will this division in funding lead, in some way, to fewer public-sector productions?

[Stéphane Cardin]

The division of the funding into two sections aside, there are the recommendations from the CRTC report last year. It recommended that all the special initiatives that we support, like French-language productions outside Quebec, productions in aboriginal languages, project development and assistance for dubbing and subtitling, adding up to about $23 million, be part of the public-sector fund. Looking at last year, we calculated that the shortfall in the public-sector fund would now be in the order of $7 million. So costs would rise to $127 million, with available funding of $120 million.

The fear has to do with the fact that we do not know what the government contribution will be. What we do know, however, is that in recent years, revenues from BDUs, like cable and satellite companies, have increased by an average of 7% per year. If you project for a certain number of years, private-sector fund revenues would be indexed, whereas, at the moment, there is no guarantee that the revenues in the public-sector fund would be.

[Maria Mourani, Bloc, Ahuntsic, QC]

What would a five-year forecast for the shortfall be?