Thank you very much.
Good afternoon, Mr. Chairman and committee members. Thank you for inviting us to provide our input into your study on the state of local television in Canada.
My name is Peter Viner, and I'm president and CEO of Canwest Television.
Joining me today is Charlotte Bell, our senior vice-president of regulatory affairs.
Our comments today will focus on the financial state of local television, the challenges we face as an industry, and what we believe some of the solutions are.
You've asked us to comment on the appropriateness of a fee for carriage for local stations, so let me begin there.
We believe that local broadcasters should be paid for the use of their signals as part of a cable and satellite package in the same way that Canadian specialty services like TSN, the Food Network, TELETOON, and others are, and also U.S. cable channels like CNN, A&E, and Spike TV.
Under the banner of regulatory reform, there are many other things that can and should be done, but in our view, a properly designed fee-for-carriage regime would put Canadian local broadcasting on a sustainable footing and would go a long way in addressing the ongoing decline in the sector.
Now let me talk about the state of local television in Canada. This crisis is real. The conventional television business model is broken, and it's been broken for some time. Some are suggesting that this is merely a short-lived decline in the advertising revenue that will rebound with the economy. The facts suggest otherwise. A weak economy has only accelerated a trend that began years ago.
Local broadcasters have been warning the CRTC for many years that a crisis was inevitable. It's extremely frustrating that it took an economic downturn to validate these concerns. Over a thousand people have lost their jobs, and the very existence of many local television stations is now at stake. It didn't have to be this way.
By all measures, the signs of deterioration have been here for some time. Our advertising revenues have been flat to declining for the past three years. Profitability for the sector sank to single digits and reached an all-time low of less than half of a per cent last year. This all happened in a healthy economy. Quite simply, this happened because we've gone from a few stations reaching all Canadians to literally hundreds of stations reaching all Canadians. In other words, the amount of advertising money available is now divided among a much larger group of stations, and that doesn't take into account the growing proportion of the advertising market going to the Internet.
Some have suggested that the debt incurred by broadcasters as a result of a consolidation is to blame for the crisis. But debt doesn't account for the worst three-year performance in recorded history of local television or last year's meagre profitability before the economy began to really slide. Debt didn't reduce the value of CTV's local operations by 75% or cause Canwest to take a billion-dollar writedown on its local stations. It also didn't cause Rogers to record a $294 million loss on its local stations some 18 months after they purchased it.
The conventional television business model is broken. Consolidation was a necessary response to fragmentation caused by years of over-licensing and authorizing too many foreign signals in Canada. Consolidation didn't break the local television business model. In fact, consolidation only delayed the inevitable.
The crisis was predictable, and it has been well documented. As far back as 1993, broadcasters, economists, and others warned that local television was at risk unless measures were taken to address the structural imbalances within the system. One could say that the proverbial chickens have now come home to roost.
Charlotte.