Canadian Heritage Committee on April 27th, 2009

[Tim Uppal, Conservative, Edmonton—Sherwood Park, AB]

Thank you.

Now, on April 17, a news release was sent out saying that local news will become a major priority for the CBC with the reorganization of the news department. In a variety of newspapers across the country, it was noted that the reorganization and focus towards local news has been under way for some time—for about two years—and is now being revved up because of the economic downturn.

I understand that the details were sketchy and that you have plans to elaborate more in the summer, but can you please give this committee some of the details you do have? It has been in the process for about two years, so can you give us the details you have?

[Hubert T. Lacroix]

Sir, I'm sure you understand that I'm not going to describe here what we are going to do with respect to our programming and let our friends at CTV or at CanWest understand and prepare for the changes we're going to make. These changes have been under way for a long time—they go back three years, actually—because we understand that Canadians are consuming their news in a different way. We wanted to make sure that we connected Canadians to their news in a different way. You heard about the importance we give to live news. We want to go 24/7, and what we basically are going to do is use our platforms to deliver news to Canadians in a substantive way, with more depth, when they want it. That's what this reorganization is all about.

[The Vice-Chair, Liberal, Pablo Rodriguez]

Thank you.

That's all the time we have. Time flies when you're having fun.

I am going to change hats now and take advantage of the Liberal Party's next turn to ask a question. I am going to remain where I'm sitting, unless somebody minds.

Welcome, Mr. Lacroix. I'm going to ask you the question that I've been asking your colleagues from the private sector. You are all saying that the current situation was to have been expected, and that people saw that advertising income was going to drop. People saw these changes on the horizon. Yet I have the impression that none of you prepared for these changes, and now that you are dealing with the consequences, you are turning to the government and Parliament and you are asking for help. If I'm mistaken, please correct me, but if you were prepared, what did you do?

[Hubert T. Lacroix]

You are right. Some aspects of the drop in our advertising revenues were expected. Moreover, we have approached the CRTC several times since November 2006 and we have submitted several briefs to them since that time, and we have been constantly reiterating that the model is broken and that the earnings that came from a single source of funding for television, namely advertising revenue, were not going to allow private and public broadcasters to make it through the years ahead. In such an environment, we talked about the fragmented audience, about new platforms, and we attempted as best we could to become part of these strategies. For example, at CBC/Radio-Canada—and when I gave the example of the federal election, I mentioned how we covered it—we added services and we tried to ensure our presence using as many different kinds of media as possible. Of course, Mr. Rodriguez, the economic crisis exacerbated the situation but we never expected to face a crisis of such proportions.

[The Vice-Chair, Liberal, Pablo Rodriguez]

I'm going to take the liberty of interrupting you because we do not have a lot of time. Your shortfall for 2009-2010 is $171 million, and you have made up for it in two ways: you have slashed expenditures and sold off assets. Actually, I think that you sold some accounts receivable. Could you tell me what the $125 million in asset monetization is all about?

[Hubert T. Lacroix]

The source of this $125 million has not been completely determined. We are currently looking at various options that would allow us to generate $125 million in income. We have identified two possible solutions. The first is to begin or step up repayment of certain amounts that are owed to us as the result of various transactions. The amounts in question must be paid to us over many, many years. By stepping up the repayment schedule, we can bring in additional revenue, but of course, we are losing out.

[The Vice-Chair, Liberal, Pablo Rodriguez]

So you are selling a debt.

[Hubert T. Lacroix]

We are selling off debts. I'll give you a quick example. Let's assume that CBC/Radio-Canada sells something for $10 million, and the amount must be paid in instalments of $1 million per year over 10 years. After the second year of the agreement, $8 million still must be recovered, and the corporation now wants to get the $8 million. The corporation would like to get that money immediately, and to make that work, the debtor will pay $7 million instead of $8 million. That's how we speed up cashflow. That is one of the possibilities.

[The Vice-Chair, Liberal, Pablo Rodriguez]

If there is a shortfall of $171 million this year and you make up for it in this manner, next year, given the economic context, we can expect other difficulties, so we can expect another drop in revenue. Will you have to sell off assets and lay off employees?

[Hubert T. Lacroix]

What we have done, Mr. Rodriguez, is that we've adjusted our costs accordingly, that is, to account for the fact that there will be 800 fewer positions at CBC/Radio-Canada. As a result, our costs have gone down. Our plans do not include an increase in advertising revenue for next year and only a very small increase for the year following that; we are not talking about significant dollars. And if advertising revenue does not continue to plummet, we believe that our financial models and our budgets will hold up.

[The Vice-Chair, Liberal, Pablo Rodriguez]

However, if the opposite occurs and advertising revenue goes down, you will have to take another look at layoff figures or at the—

[Hubert T. Lacroix]

Mr. Rodriguez, that's why we're here today. We have come here to tell you that CBC/Radio-Canada must not be excluded from the incentives program that the government or the CRTC are in the process of setting up.

[The Vice-Chair, Liberal, Pablo Rodriguez]

I agree with you. I have said it myself. I've even said publicly that any solution must include CBC/Radio-Canada.

[Hubert T. Lacroix]

That's why I am repeating the message loud and clear this afternoon.

[The Vice-Chair, Liberal, Pablo Rodriguez]

I see. I still have 30 or 40 seconds. If the CBC is entitled to fee-for-carriage, will you make a commitment to invest all these monies in regional development?

[Hubert T. Lacroix]

We have stated—and I'm pleased that you are asking me the question again—that any amount we would receive for fee-for-carriage, the infamous royalty so to speak, should go toward a priority that the CRTC has identified: Canadian programming, dramas, local programming. We are willing to make that commitment, for we have said we would and we have repeated that statement before the CRTC.

[The Vice-Chair, Liberal, Pablo Rodriguez]

Mr. Rodriguez, it's over. Already? Time flies.

Thank you very much.

Mr. Del Mastro.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you very much, Mr. Chair.

Mr. Lacroix, first of all, thank you for appearing today. I understand, and I can tell you the government understands, that these are challenging times we're governing in. And we are responding to these challenges. CBC is not alone; private broadcasters have also come here and indicated they are also experiencing difficulties with advertising revenues on the commercial side. So what you're telling us from that perspective is not out of step with what they've been indicating, and they are also being forced to make decisions based on that.

I want to get this on the record, because I didn't think this answer was clear. You requested bridge financing, but the bridge financing.... And I certainly have the quote from Mr. Richard Stursberg, who, I believe, is the vice-president of English operations.

[Hubert T. Lacroix]

Yes, he's responsible for all of CBC.

[Dean Del Mastro, Conservative, Peterborough, ON]

Now, he indicated that if we provided bridge financing you were still going to have to cut 800 jobs. Is Mr. Stursberg correct in that assertion?

[Hubert T. Lacroix]

The answer is that bridge financing would have helped us, sir. I think that's what Richard was saying also. Bridge financing would have been a method to reduce the number of job losses at CBC/Radio-Canada, because it would have meant gaining time. It would have meant perhaps not selling assets to be able to pay for—

[Dean Del Mastro, Conservative, Peterborough, ON]

Let me put it in a different way, then. His words were, to quote directly: “If they had given us bridge financing, we still would have had to cut 800 people.” Do you agree with that statement or not?

[Hubert T. Lacroix]

The answer to this statement...and I'm not sure what context his answer was in. I'm going to repeat my answer, sir: 800 jobs is the number of jobs that we have right now identified as cuts to CBC/Radio-Canada. Bridge financing would have allowed us to reduce that number, but it would have been an important—

[Dean Del Mastro, Conservative, Peterborough, ON]

Clearly you don't agree with Mr. Stursberg, who indicated that they would have had to cut 800 people regardless. This is a quotation from him.

That's okay; I'm going to move on.

I want to go back to something we were talking about, bonuses, to get some clarification. About 12 people received almost a million dollars here in Ottawa. It's now about half of that, so it's 12 getting half a million dollars, which is a little bit out of step with 550 getting about $4 million. But maybe we're just looking at the top end of it; I'm not sure.

Can you give me some idea what the average salary is at CBC? Do you know that number?

[Hubert T. Lacroix]

No, I don't offhand.