Canadian Heritage Committee on June 17th, 2008

[Paul Gratton]

I really believe it's up to this parliamentary committee to decide the appropriate time and the appropriateness of your motions. I simply want to state for the record that whatever the Ministry of Heritage decides, we will implement. Even if it comes to my overseeing the dissolution of this board and my own position, if that is the decision of the Minister of Heritage in response to the CRTC, we will do that.

I'm only reflecting the reaction of the community in the ten days since the report has come out. They have fed back a lot of stuff to us. And as insiders who have seen a lot of change, we have a few warning lights that are going off in terms of the CRTC's recommendations. And we feel that providing numbers, so that Heritage Canada can make a very informed decision in response to these recommendations, is probably our primary role.

You called us in today to express some opinions, so I haven't hesitated to do that, but I want to reassure you that we understand the process and what our role will be after Heritage Canada makes its final determination.

[Ed Fast, Conservative, Abbotsford, BC]

I appreciate that.

So that I clearly understand what you mean by indexing, when you use that term are you referring to the CBC and the public side having access to the same increase in resources that the private side would have if in fact the CRTC's recommendations are accepted. Would I be correct in assuming that?

[Paul Gratton]

That is my understanding, yes.

[Ed Fast, Conservative, Abbotsford, BC]

You understand that the recommendation actually only deals with CBC; it doesn't actually deal with the public side completely.

[Paul Gratton]

I understood that as well, which was my little two cents' worth. I suggested it might be easier to defend if it referred to the entire public side, because at that point you're essentially saying there are two categories of public broadcasters, the CBC and the educational and the not-for-profit, and we don't care about them, because they would not have the same benefit of lockstep growth with the private side, and I'm not sure that's an easy-to-defend position.

[Ed Fast, Conservative, Abbotsford, BC]

Would you repeat for me what you expected to see in terms of the private side when it comes to increases in resources? I thought you quoted some figures. Was it 17%?

[Paul Gratton]

I see Valerie would like to answer that.

[Valerie Creighton]

Historically, the growth revenue on the broadcast distribution side was actually 9% last year, but it has averaged about 7% on an annual basis. We budget very conservatively. We only strike a program budget that's based on the actual revenue that we know we had from the BDUs in the previous year. Generally, we have seen that there's been that increase, so what we do at a certain point in time at the board--when we know the revenue has been higher than we budgeted, because we don't want to overspend revenue we don't have--is to reallocate that funding to programming.

I think your question also is.... Your motion, as I understand it, referred to only the CBC. Our concern is the entire spectrum of what might be considered placed in the public side, because we know there's already a shortfall there if you look at the other special initiatives that are directives as per the contribution agreement. We're assuming those would all be put in the public pot, so we're starting with a shortfall to begin with, and then if it were to be indexed and it would only be the CBC, the impact, not just on the educational broadcasters but all of those other very important programs, like the one Stéphane mentioned--French language outside Quebec, the aboriginal fund, etc.--would certainly take a very large hit. That is our concern.

I think the fund has always taken a view that our job is to provide support to programming according to our mandate, right across the country of Canada in all those different factions. So I think our worry on the indexing motion would be its limit to only the CBC at this point in time. Certainly there would be an impact on the other activities that would be, we suspect, funded under that public sector pot of money.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much.

Now Ms. Fry.

[Hedy Fry, Liberal, Vancouver Centre, BC]

Thank you very much.

Having been here for the Canadian Television Fund's review hearings, we heard, as you well know, the two particular companies that were contributing saying they felt they didn't have enough say, felt that the fund should be distributed in a different manner and wanted to have more of a say. Without putting words in the CRTC's mouth, not that I necessarily agree with the recommendations they made, I think they were trying to square that circle a little bit and keep them from walking away with their toys, and keep them in the fund.

I agree with you, however. I think that what it has created is a ghettoization. You're absolutely right, the most important part of ghettoization is going to be the lack of competition.

I must say that I wanted to hear your comment on the recommendation that says that increased emphasis be placed on audience success as a criterion for access to the new private sector funding pool. For me, that is precisely what both Shaw and Vidéotron wanted. They wanted blockbusters, they wanted things that could play to the public. It didn't matter whether the quality was there, or whatever, and that is a great concern to me.

I'd like to hear a comment on that, because what you have is public broadcasters locked into a place where they have to be forced to compete among themselves. This, in effect, is not a really good thing for them, because they are trying to do Canadian programming that is quality, that may not be necessarily popular, but is esthetically good and whatever the other criteria are. I think that particular piece that allows the public sector to go in a totally different direction, with totally different criteria from the private sector, is going to create a real problem down the road.

You are also right, and I would like to hear what suggestions you may have with regard to the fact that the piece that comes out of Canadian Heritage, as you said, is yearly. Do you think it would enhance matters or make matters better if there were a five-year fund now, a five-year program? Do you think the $120 million is enough, or should it become greater? What do you see happening to that fund over the next five years? Do you see that fund being restricted only to the private sector, or should it go into the big pot, the CTF?

[Paul Gratton]

Again, I think it comes down to structure and how the heritage minister responds to the CRTC recommendations.

What I've tried to suggest today is that there's a certain logical flow that comes from accepting the recommendation that there be two completely separate funds. I think at that point Heritage is accepting the responsibility. Whether it wants it or not or whether it's appropriate or not is a different debate, but it has to accept the responsibility for continuing to fund the public side if it agrees with the split between the two sides. It's just a corollary, to my mind, if you accept that structure. At that point there has to be the avoidance of a penalty to the people who are functioning on the public side.

Valerie's right: there is no consideration that's purely cultural, with complete absence of audience. I ran Bravo! for 13 years, and I can assure you that although we were trying for the highest quality in terms of reflecting the arts and much of it was very esoteric and not aimed at a broad audience, it was still aimed at an audience, so I would take a documentary on a painter and still decide whether it had succeeded or not within the relative goals that I had set for it.

There has to be some measure of success. Broadcasters do not operate disconnected from their audience. That's true for CBC, that's true for Knowledge Network, and that's true for everyone in the system.

I would argue that even on the private side, by the very nature of the fact that these are ten out of ten Canadian-content productions, there is, by definition, a cultural aspect to it. We're not doing co-productions with little aliens set in Seattle but shot in Vancouver. The rules of the fund impose a certain high-end Canadian content that in my view is, by definition, cultural in its aspects. A program that is set in Canada, performed by Canadians, and written by Canadians, to me, has a cultural impact, even if it's about hockey.

People in Quebec get that. Les Boys is inherently cultural, even though it's a huge mass-market commercial success. In English Canada we tend to twist ourselves up in pretzels, but I would say that the CTF, by virtue of being able to access it and even if it's audience-driven, has a cultural aspect on every single program.

I don't know if I've answered your question.

[The Chair, Conservative, Gary Schellenberger]

Go ahead, Ms. Creighton.

[Valerie Creighton]

The emphasis on the private fund in the report tries to direct criteria that would predetermine what a hit would be, and that's a very difficult thing. It's almost impossible to predetermine the success of a program in this business. Corner Gas would be an example of that. I was in Saskatchewan at the time, and I don't think anyone at the beginning of that program really anticipated the level of audience and commercial success that show would receive.

It is true that once an ongoing series has had its first run, you can pretty well determine what the audience response was and have a little more sense of whether you might have a hit on your hands. It would be a fairly simple thing to look at a show like that and ensure that it received financial support to continue and to continue to build that audience, but frankly, it's pretty tough. If we all knew the answer to what a hit would be, we probably wouldn't be working in this business in Canada; we'd be working for somebody in the U.S.

I just wanted to make a point, Ms. Fry, in relation to your question about whether the $120 million is enough. We've never really had that conversation for a while, but I'll just point out to you that the issue of oversubscription in the industry largely has not gone away. With the broadcaster performance envelope, what we've been able to do at the fund is eliminate oversubscription from the fund itself because we know how much money we've got to work with and those resources are finite, but the oversubscription question has just moved to the door of the broadcaster. We still know there are about 50% more really worthwhile, good, potentially commercially successful projects and stories and ideas out there that will never see the light of day because the amount of resources has been completely finite for a number of years.

Would it help if the fund were extended? I think it certainly would. That conversation has been around for a long time. A number of lobbies by the industry itself have tried to have the fund renewed for more than a one-year period, but those decisions are outside the scope of our ability to answer that question. They really do remain with the federal government and with Canadian Heritage.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

We'll have Mr. Malo, please.

[Luc Malo, Bloc, Verchères—Les Patriotes, QC]

Thank you, Mr. Chair.

Good afternoon, Mr. Gratton. First of all, my congratulations on your appointment as Chair of the Board of Directors.

I would like to go back to the fact that the CRTC made this proposal to the minister. That was not by accident. There was a crisis, actually, and, in my opinion, the CRTC tried to find a solution. Your comments indicate that this solution is going to create other problems, as I see it.

Do you think that the CRTC could have made another proposal which might have resulted in a broader consensus?

[Paul Gratton]

It is very difficult for me to comment on results that are different from these. But I can say that, in my opinion, the entire process, including the results, has been well thought out. A lot of thought has gone into the document. Of the 11 recommendations, there are perhaps two or three that we have questions about, and even there, they are about small details. That is where the devil is always hiding.

I feel that it is very difficult for objective people, looking in from the outside, to foresee every hitch that could occur as things play out after structural changes, big or small, have been put into place.

A number of views that have been expressed date from years back. Finally, the CRTC has made the decision that we have before us, and it is not my role to criticize it. Our role is to look at the potential difficulties and to try to advise the Minister of Canadian Heritage when it comes to the final decision.

[Luc Malo, Bloc, Verchères—Les Patriotes, QC]

We are talking about a historical threshold of 37%. Ms. Creighton said earlier that, in the past, the proportion of funds going to Radio-Canada and CBC from producers was actually 50%. My only question is why there is a gap of 13%. Is it because no productions went to private broadcasters or because the public sector productions were of higher quality or were better regarded?

[Paul Gratton]

Historical factors come into play there. First, the 50% figure varied greatly depending on the envelope and the genre. It was over 50% for drama. At one stage, CBC, in English Canada, became less interested in children's productions. Valerie was right when she said that, in some cases, it was more than 50%, but the percentage was not necessarily the same right across the board.

At one time, a number of decisions were made at Telefilm Canada. Under those circumstances, it was a different kind of competition. The emphasis was on the quality of the subject matter and so on. Knowing that there was not enough money for all the programs they were interested in, the broadcasters issued a lot of licences. The important thing was to spend money on one's own airwaves. Throughout that period, Radio-Canada and CBC were very aggressive when it came to licences. Their percentage went up, especially for dramas.

It is not quite correct to say that the percentage was 50% across the board for all genres. As I recall, that was not the case. When the decision was made to establish the percentage at 37%, that did not mean a gap of 13% in all cases. It would just have been in certain envelopes and for certain genres.

Is that correct, Valerie?

[The Chair, Conservative, Gary Schellenberger]

Go ahead, Valerie.

[Valerie Creighton]

Thank you.

It depends totally on the type of programming that's done, because it's the producer who has a show, in whatever genre is being produced, who will go to the broadcaster with the mandate closest to what the show is about to try to seek a licence. Whether that's public or private doesn't really make that much difference. The producer's need is to get that licence.

So my point was that over the years, historically, the amount of money the CBC has drawn from the fund has varied. It has gone as high as 50% in some cases, in some genres. The 37% was just the number we were given. I believe that may have been the last four-year average or something like that, which Heritage Canada may have calculated in bringing that number to the CTF in their contribution agreement.

But it's totally dependent on the type of programming, what audiences are interested in that year, and really, what broadcasters are looking for. Producers will develop projects that meet those criteria.

[The Chair, Conservative, Gary Schellenberger]

Mr. Abbott.

[Jim Abbott, Conservative, Kootenay—Columbia, BC]

Thank you.

This has been exceptionally informative, and I thank the three of you very much.

One of the things I am trying to understand is growth in the private sector, and what you mean by that. At least I believe that's the term used a few minutes ago. There's an implication in the fact that most commercial broadcasters will be wanting to expand their stable of things, their inventory of programs they can put on the air.

Is that what we're talking about? Help us understand growth in the private sector.

[Paul Gratton]

What we're really talking about is the percentage of money the BDUs will be contributing to the CTF every year. Based on measurement in the last few years, there has been an anticipated growth of about 7%. Every year there are more satellite customers and more cable customers and we get a percentage of that, and that is what we mean by growth. We weren't looking at it from the point of view of the broadcaster. It's really just how much money would be coming in on the private side. The fund has generally grown year after year because of the growth in BDU contributions year after year, which is a percentage of the revenue. That is what we meant by growth.

[Stéphane Cardin]

To give you an indication, over the last five years, starting in 2003-04, it has grown from $119 million to $127 million, to $138 million, to $149 million, to $165 million last year in 2007-08. It has been a steady growth of contribution from the BDUs to the CTF over those past five years.

[Jim Abbott, Conservative, Kootenay—Columbia, BC]

Of course, at the risk of reciting Jim Shaw or reminding us of his commentary, nonetheless there is the factor of the commercial broadcasters wanting to say they want to be able to use that money in order to make money by having high-value shows.

How does that relate? In other words, I guess I don't fully understand what has been proposed by the CRTC. All of us conceptually have a big idea of what it is. If it didn't go that way, if the minister said we were not going to follow that particular advice, what advice would you have in terms of how to satisfy what is, at least on the surface, a fairly legitimate concern on the part of the private broadcasters, the private producers?