Canadian Heritage Committee on May 4th, 2009

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

As you well know, some people say that Astral Media, among others, does not need those fees. Could you survive without them? I do not think so; you would go bankrupt. You would have to shut down.

[André Bureau]

Absolutely not. The carriage fees amount to 60% of our revenues, and 100% in the case of pay television.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

I have a question for Telefilm officials. I would like you to talk about the New Media Fund. With regard to its current and future operations, will you be involved in the new regulations, and in what way?

[Michel Roy]

Ms. Lavallée, that is an excellent question. That is also of some concern to a number of people these days.

Under its agreement with the Department of Canadian Heritage, Telefilm Canada has been administering the New Media Fund for approximately 10 years. As well, under its agreement with the Canadian Television Fund, Telefilm has been administering the guidelines of that fund for the past two years, if I am not mistaken.

A few months ago, Minister Moore announced that the two funds would be merged into a single one, which would now be called the Canada Media Fund. We salute that decision and direction because we feel that it will allow television content broadcasters to become familiar with and make better use of other platforms, especially to broadcast their own productions.

We have heard that the new board of directors will be struck over the summer, and we all know that the fund is expected to be up and running by next April 1. That is all we know for the time being. We are convinced that given our experience and expertise—

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

I apologize for interrupting, but the clock is running.

Will you be administering the new fund?

[Michel Roy]

We will have to negotiate with the new board of directors. We will be proposing our services and we are convinced, given the expertise and experience we have developed, that we will be chosen to administer the new fund. The decision will be made following the negotiations that we will have to undertake with the new board of directors.

Telefilm is a financial instrument, it is not a pressure group. We manage funds. As such, we have all the resources needed, especially with our new board of directors, to administer any fund that the government will entrust us with, in order to support part of the Canadian audiovisual industry.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Angus, please. We might go just a couple of minutes past, because I want to make sure everybody gets a first round.

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

Thank you.

At the outset, I offer my apologies for not being able to ask as many questions as need to be asked, because these have been excellent presentations, and many of the recommendations are things that I think we're going to have to come back to. So I'm just going to have to make a few scattered attempts to draw a narrative.

Mr. Cassaday, when we've been looking at this, some of the issues that have come up have been about the vertical integration of various broadcast players and the BDUs. Are you a subsidiary of Shaw? What's your relationship to Shaw?

[John Cassaday]

We are an affiliated company. We're not a subsidiary. We're a stand-alone, independent company traded on the New York and Toronto Stock Exchanges, but we are not a subsidiary of Shaw.

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

So by being affiliated, do you work any synergies? They certainly have a lot to offer in terms of their BDU offerings.

[John Cassaday]

Yes. These companies are totally separate.

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

They're totally separate.

Mr. Bureau, I wanted to ask you this, because you said that you're finding a situation now where the BDUs are actually in competition because they're offering services as well. Is there transparency in terms of the bundling of their television offerings? Does this need to be made clearer in the conditions of licence to make sure there aren't any conflicts?

[André Bureau]

We don't think there is a need for additional rules at the present time. We negotiate with them.

We know very well that they are, by their nature, our competitors in some instances, but we find solutions. If we don't, then there is the mechanism of the CRTC, where we can go and explain what are the disputes between the distributors and us. Fortunately, we haven't had to use that in recent years.

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

That's excellent to know.

Mr. Cassaday, you made some very interesting remarks on the move to the new platforms, the digital and the digital development, which I don't think we've heard too much about. I was interested in a couple of your comments. You talked about needing to get beyond the idea of sheltering our product and actually promoting our products and our culture. I think that's something we certainly totally support.

Then you mentioned the need to experiment so that we can create this. I think we had this conversation, probably back in the television study, that you can't make good television unless you're able to make bad television, and you can't make bad television unless you have the money to invest to be able to make mistakes. Otherwise, you end up with very mediocre television.

First of all, with your company, do you have the resources necessary to do that kind of experimenting to start finding out what actually works and to promote it? Does that exist with your company?

[John Cassaday]

Yes, to a small degree. Our strategic plan has been coined as “core and explore”. The focus of our business is on the core piece of it, but we're also exploring a lot of new initiatives.

Unfortunately, because of our scale, we can't make the major efforts that the likes of News Corp. and Google have in terms of buying up companies in an experimental way. So from a policy perspective, we encourage the government to think about allowing for the creation of larger media enterprises so they have the scale to make mistakes.

All of our experimentation, and it's plentiful, is being done on a very controlled basis. We're on the on-demand platforms, many, many digital platforms around the world, and all kinds of own broadband services whereby people can rent and buy our product, but we have not been able to roll the dice and do the experimentation that the big U.S. companies are able to do.

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

I just have a last question on that. YouTube started with two guys in a garage, was ridiculed at first, was then called a pirate haven, and then suddenly was being sold for a billion dollars. Do you have the resources to track all the crazy little startup things that people are thinking are very silly now but that in two, three, or five years might become the mode of communication? Do you have those kinds of capabilities, or are you looking to develop that?

[John Cassaday]

We look at a lot of deal flow on a regular basis. People always say, “Look, why didn't you guys do YouTube?” The reality of this is that for every YouTube there are 5,000 companies that fail--and it might be five million--and that have started in someone's garage. The question lies in trying to find that one bright light and driving it to success. But we would look at a lot of deals, we bid on activities, and we have bought companies in this space prior to appearing here today.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much.

Mr. Del Mastro, please.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chair.

Mr. Cassaday, first of all, thank you for appearing today with your colleagues.

First I want to thank you. You mentioned a couple of times about the investments you make into Peterborough and the contributions that Corus has made. I just wanted to acknowledge that. CHEX-TV, The Wolf 101.5 radio, and KRUz radio are substantial contributors to our local community, as are the CTVglobemedia stations that operate in Peterborough as well.

You made six specific recommendations. I note that none of them are fee-for-carriage, but you're operating in the same space as CTV and Canwest, with both specialty and over-the-air. You don't believe the model is broken.

[John Cassaday]

We don't. We believe there certainly is a sectoral issue here. They are being fragmented, just like Henry Ford's black Ford was being fragmented by new car designs and new colours. The answer in our mind is portfolio balance. We encourage companies to invest in new digital channels, new digital platforms, and to create the critical mass they need to succeed by building up a strong portfolio of assets around that strong core they have with conventional....

[Dean Del Mastro, Conservative, Peterborough, ON]

So you actually are considering the company as a whole, which is an argument that we've heard. Some companies have come in and said, “No, you just have to look at our over-the-air. Don't look at what we're doing on specialty, even though we're in that business.” They just want us to look at over-the-air. You're actually looking at a balance of your entire offering and looking at how you're balancing that operation. Is that correct?

[John Cassaday]

Yes, we think that's the way most people would look at their portfolio. From a financial investment perspective, you might be very upset about a particular investment but would take comfort in the fact that overall you're outperforming the market. I think that's why people choose to invest in portfolios, as opposed to single stocks. The same applies here.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you.

Mr. Harris, it was mentioned in Mr. Cassaday's presentation that local news in the six o'clock hour has in excess of a 50% share. Is that your experience in our local market?

[Michael Harris, Vice-President and General Manager, Corus Entertainment Inc.]

Yes, it's over 45%.

[Dean Del Mastro, Conservative, Peterborough, ON]

In terms of advertisement revenue and so forth, the rating you're getting from that would seem to be pretty important to the station.