Mr. Chairman, members of the committee, ladies and gentlemen, my name is John Cassaday, and I am the president and chief executive officer of Corus Entertainment. Thank you for the invitation to speak.
Before I begin, I'd like to introduce the team with me today. Michael Harris is the vice-president and general manager of CHEX-TV in Peterborough and CHEX-TV-2, which serves the people of Oshawa, Ontario. Sylvie Courtemanche is our vice-president, government relations. And Gary Maavara is our general counsel.
Corus Entertainment is one of Canada's largest media companies. This includes local broadcasting in both radio and TV. We have 52 radio stations, and we are Canada's leading operator of news or news-talk format stations in both English and French language markets. For example, these stations include CJOY in Guelph and CFPL AM 980 in London, which serve your constituents who live in the Perth--Wellington riding. Over-the-air television stations serve constituents in ridings of two cabinet members, and one member of this heritage committee, Mr. Del Mastro.
Each of our broadcast stations is an important source of local news and community information. We are an important part of the local community, serving audiences, local business, and governments.
In times of local emergency, such as the Manitoba floods this year, or in Peterborough in 2004, we are the most reliable source of timely emergency information. The flu situation is of great concern to us all. Corus has had a pandemic flu strategy in place for some time, and we are currently operating at a preparedness level 5, in step with the WHO status. We are doing so to preserve our ability to carry on business and to keep ourselves in a position to disseminate information to the public in a timely and accurate fashion.
Our stations are also important contributors to local charities such as the United Way, Easter Seals, local hospitals, and countless others through special programming such as telethons, as well as free promotion and coverage of their events.
Our stations are deeply involved with their communities. Our suppertime local news programs attract almost half of the people watching TV in these communities during that time period.
These local TV stations have had partnerships with the CBC for 54 years. We distribute the CBC national news service to our audiences and add a strong element of local news, public affairs, and other community-oriented programming to the national content.
If CBC severed this relationship, our viewers would probably be forced to watch signals delivered from Toronto or Ottawa containing little or no local reflection. We took some comfort from the statement to this committee by Mr. Lacroix last week that the CBC was prepared to maintain an affiliate relationship, although the terms are not yet clear to us. We look forward to discussions with them.
For local small businesses we are a crucial advertising partner. We create and distribute the ads that help them to compete with the large multinationals that also serve their markets. Without this relationship they would face greater hurdles in reaching their customers.
Corus also operates more than a dozen specialty and pay television services. Corus leads in programming to children through such channels as Treehouse, YTV, and Teletoon. We also program to women through the W Network, Viva, and Cosmopolitan Television.
We own Nelvana, which is one of the world's premiere producers of children's animation programming. Corus has invested more than $1 billion in the production of Canadian content programming, and we are proud of the fact that our pay and specialty networks show the best in Canadian drama in volumes not matched in the industry.
Over the past several years we have been exploring new and innovative ways to capitalize on these new technology-driven markets. Our goal is to use a variety of digital platforms to deliver our content directly to viewers, not only in Canada but around the world. Corus provides Canadian content to multi-platform channels, such as KidsCo in Europe, Asia, and Africa; and qubo in the United States, where we are equity investors.
Corus is also Canada's largest publisher of books for children.
The result of all this is that today our productions and books are available in more than 160 countries worldwide in more than 40 languages.
In this context, we appear before the committee today as a company that plays a variety of roles in the Canadian economy. Corus is a distinctive Canadian company. We are a broadcaster here and around the world, but we are also a major producer of content in a variety of forms.
The key purpose of this heritage committee hearing is local broadcasting. But local broadcasting is no longer alone. Television and media markets have become enormously complex. The companies like Corus that operate local TV have other operations that try to succeed in these markets. In this context, Corus believes that the key question should be: what can government policy do so that the Canadian television industry has the strength and flexibility to stay relevant to Canadian viewers, subscribers, and advertisers as we enter the digital age?
We come before you today with some proposed solutions and hope we can be helpful in this process. Corus is confident about its future. Television is not broken, but we believe it is time for a strategic policy direction from the government to the regulatory agencies such as the CRTC and the Copyright Board of Canada. In our recent appearances before these agencies and departments, we have argued for an approach to policy and regulation based on what we characterize as the Corus Big Six. We list them one at a time, followed by some specific policy recommendations.
First of all, we recommend that the government embrace the merits of fostering a Canadian-owned but globally competitive industry. It must be explicitly recognized that we compete in the world market even at the local broadcasting level. Of course, this has always been the case for traditional broadcasting. Our policies are built upon the realities of our small market beside a huge market. Digital media are now enlarging the challenge. Our adjacent market is now the whole world, even in small communities such as Peterborough or Timmins. Government and regulatory bodies must align their domestic policies and rules so that we can have a Canadian-owned system that's globally competitive. We can no longer shelter our domestic market. The barriers that we have built to protect Canadian media can become a confining trap if we are not mindful of this change.
Second, we encourage you to increase the probability of success of the Canadian media industry by encouraging the creation of larger and stronger enterprises. Corus is a significant player in the Canadian market, but on a global scale we are very small. Google spent roughly U.S. $1.5 billion on research and development in 2007. This amount is greater than the revenue last year of the entire Canadian radio industry. So we must all recognize that the scale problem is worse in the digital realm than it has been in traditional broadcasting. This makes it very challenging to fully participate in the new media world. Corus must invest in digital broadcasting, which means towers and digital origination equipment. But to participate in digital markets, we must also address the critical issue of the management of these digital rights. We need to make a huge investment in technology to track and protect our rights, and we need to train our employees to use this technology.
Third, we need to develop a Canadian industrial strategy for the production of Canadian content. As has been the case in other industries, we need to look at the business from a strategic perspective. Strategic thinking means making decisions about what the priorities are for the system. For example, we need to consider a policy priority that supports the creation of high-quality Canadian content from all Canadian producers, including producers that are affiliated with Canadian broadcasters.
Fourth, we should recognize that private media enterprise success is what will lead to a stronger cultural system in Canada, not the current system of progressive fees, conditions, and tariffs.
Fifth, we need to allow Canadians to experiment. Recognition of this principle is essential in the digital media world. By their very nature, digital media initiatives are risky, business plans are uncertain, and ultimate success is very much a matter of trial and error. In this type of dynamic environment, we must be able to experiment. Regulation of our digital media activities, no matter how well intentioned, can only hinder our participation in these new markets.
Sixth, we should recognize that our small market requires that government continue to support its industry through research, development, and implementation of intellectual property. In the context of this strategic perspective, we have a number of specific tactical recommendations or solutions that we would like to leave you with today.
First of all, our investment in digital rights management technologies and their implementation should be eligible for Canadian programming expense credit.
Second, our capital investments in towers and other digital broadcasting technologies should be eligible for accelerated capital cost tax treatment as well as government funding.
Third, the committee should recommend the elimination of artificial quotas requiring broadcasters to acquire large percentages of their programming from independent producers. At the very least, Canada's media companies should not face barriers to creating and distributing the high-quality Canadian content that is contemplated by the Broadcasting Act. We can create a viable production industry, and the beneficiaries will be Canadian viewers, writers, performers, and the economy.
Fourth, we recommend the abolition and reimbursement of the CRTC part II fees, which would be a positive step that would benefit local broadcasters and the rest of the system.
Fifth, we recommend the relaxation of the prohibition on advertising of pharmaceuticals. Canadians already see a plethora of these messages on foreign services. Permitting this in Canada would not only establish another revenue stream, estimated at $400 million, but would also make these messages subject to Canadian law and Canadian industry standards.
Sixth, we recommend a temporary, one- to three-year advertising tax credit of 10% on all Canadian media advertising. This would serve to stimulate the economy as a whole and be a huge help to local broadcasters.
Seventh, we encourage the CBC to maintain their local affiliation agreements. This will ensure that the CBC stays close to its constituencies of local Canadian taxpayers.
Eighth, the sale of local television advertising should remain with private broadcasters. The proposal to allow carriers to sell local Canadian advertising on foreign channels would have a huge impact on local broadcasting, both in television and in radio.
Ninth, the committee is aware of the dedication of local stations to community and charitable efforts across Canada. Broadcasters should be able to deduct airtime donations as a charitable expense under the Income Tax Act.
These are some of the things that this committee could recommend that would help to keep Canadian broadcasters competitive and relevant.
On the subject of fee-for-carriage, any change will require a fulsome analysis and discussion of all of the elements of the system, as my colleague, Mr. Bureau, has said. Negotiation of a fee regime should be made in that context. It's not something that should be imposed in a vacuum.
In closing, we should note and congratulate the Minister of Canadian Heritage for the commitment to the Canada Media Fund. This funding, and the manner in which the fund is changing, ensures that we can continue to tell Canadian stories in the new digital environment.
Mr. Chairman and members of the heritage committee, these are our submissions. We look forward to your questions.