Canadian Heritage Committee on May 6th, 2009

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Do you see anything on the horizon that would offset the loss of that fund? Absolutely nothing. All right.

I'm still speaking to the documentary representatives. You had a number of criticisms of the Canada Media Fund, particularly as regards governance. Do you have any recommendations to make?

[Jean-Pierre Gariépy]

With respect to governance, I have no specific recommendation, since we don't yet know all the details of the process. We know that five members will be appointed by the distributors and that two will be appointed by Canadian Heritage. We'll obviously take part in all the consultations. We criticized the Canadian Television Fund for having conflicts of interest in its governance. From what I hear and what I see coming, there is serious conflict of interest potential.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Thank you.

[Daniel Margetic]

It we may bring up a point, we do think that if the government is truly committed to a fund that has an independent board, then that board should be composed of completely independent members. That means that people who sit on the board and decide how the funding is appropriated and apportioned cannot also, at the same time, financially benefit from that fund.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

In a study that focuses more specifically on the future of television, which is a very broad question... I'm pleased to see you here because this gets us out of the conventional debate between television networks, general interest or specialty, and the cable companies. It's very interesting to hear another point of view. What recommendations could this committee, which is looking at the future of television, make to assist the documentary sector and creators?

Mr. Gariépy.

[Jean-Pierre Gariépy]

Ratings are the number one fear of the entire industry. If a ratings weighting system is not introduced, we'll be heading toward a stifling of local creation. Yes, ratings are essential, the industry has to operate and reach the public, and it does so very well. However, certain genres, such as children's television, documentaries and certain arts and culture programs, can't fall within the ratings evaluation model. It's impossible. Those genres can't compete with general public programming, which is also of high quality. We need a weighting system that compares apples with apples.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Thank you, Mr. Gariépy.

Ms. Parker.

[Maureen Parker]

Thank you for asking that question.

During the rushy part of my presentation—because I was over my time—we listed our recommendations. We tried to specifically look at what this committee could do, as legislators. We understand that you do not have the powers of the CRTC, but we certainly think there are things you can do, such as ensure the CRTC has the teeth and the ability to enforce Canadian-content provisions.

And if local is truly the problem—if you decide in your wisdom that is the issue—then there are things within our recommendations and things others have said that can address the lack of funding for local programming. We just think regulation is important and we should be focusing on Canadian content rather than on quick fixes for broadcasters.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Madame Lavallée, please.

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

Thank you very much. I am very pleased to see you. This is a change from the debate of the broadcasters who are short of money and the cable companies that have it but don't want to share it.

We're very pleased to see you, to see crafts people, creators, producers and directors, who are content people and, I imagine, thinking people. In that connection, one of the goals of our committee is to examine the evolution of the television industry and local television. I hope you will help us reflect on that. I'm going to ask you a series of questions. I'll toss them out and the bravest among you will answer them. Then the others can write or telephone me; I'll give you my telephone number.

I think the thoughts I'm hearing here are extremely important because the broadcasters currently have indirect control over our cultural development. That's also the case of the cable companies, and when I say cable companies, I'm also talking about satellite broadcasting. They have indirect control through the choices they offer people. I find that extremely important.

Since the general interest television networks lack money, I wonder whether general interest television is here to stay. Is reality TV here for good or is it just a passing trend? Is the position that CBC and Radio-Canada were to occupy, as defined in our report from last year, still the right one? Is it realistic to think of local programming apart from information? Do you really think it's possible to engage in local television that isn't just information? Despite all the financial means and money in the system, broadcasters are having trouble producing two news bulletins a day, and Radio-Canada has just cancelled some, as a result of which there are only two left.

Does the CRTC have to intervene in all that? Do we need a softening of the rules, a toughening of the rules or a change in the CRTC's mandate? Those are very broad questions that I'm considering.

Go ahead, Mr. Légaré; you seem to be so brave.

[Yves Légaré]

Your question is very broad indeed. First of all, I think that general interest television networks, which most often have created priority programs, are now competing with the specialty channels, and they have fewer and fewer resources.

The financial issue under study could be resolved by allocating subscriber fees to those general interest television networks, but the regulatory issue may also be very important. TVA, for example, doesn't have any financial problems right now, but it produces reality TV programs, variety programs and so on. As a result of the regulatory flexibility, broadcasters, particularly those that don't have a public mandate, will opt to increase their profits, if only for the benefit of their shareholders, and that's normal. If they can produce less costly programs that have good ratings, they'll opt for those programs. So the regulatory framework has to take into account the importance of certain programs and require those programs to be broadcast. The specialty channels have been in a good position for a number of years. They are making a lot of money, in some cases, and their regulatory obligations are not demanding enough given their revenues. They may not be as solid as a general interest network that has a 30% market share, but, even with their current market share, they could increase their television offerings. More should be required as soon as profit margins reach a certain threshold.

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

I have another question—

[Maureen Parker]

Can I just jump in on the question of conventional TV, Madame Lavallée?

It's an interesting question, whether it will survive. We think it's really important to look at the broadcasting industry in sectors. Conventional television is mass market programming. It is big budget, big drama, and it's looking to attract big audiences. It is not the same as specialty channels. Specialty channels offer Canadians—as they do in the U.S. system as well—niche programming, or programs specific to their terms of service. So conventional television will always have a role, but it has to be true to its role, and it has to offer those mass market types of programs that will draw those sorts of eyeballs.

Will advertising change? Will the ad business change? Yes, it will, and I think we're looking at that now. I know that many of us now watch programs on our PVR. I think the advertising world will change. Perhaps it will move to a sponsorship model, and maybe ads will be embedded, but there will always be some form of conventional TV.

I think the CRTC is a smart organization. It looked ahead and could see the changing broadcasting industry and decided to approve consolidation, with both specialty and conventional broadcasting, to allow these broadcasting entities to balance out their interests.

Finally, in terms of flexibility, they have it in spades with the priority programming definition. They can make it in the regions, and they can make low-budget entertainment magazines. There is flexibility in the system already. In fact, our point is that they've gone too far the other way.

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Mr. Angus, please.

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

Thank you for your excellent presentations, everyone. I only have five minutes, and I'm sorry I'm not going to be able to get to the issues.

I often wonder if I have the wrong TV set, because I've heard time and time again that Canadian content is this terrible basket case, this burden that the broadcasters have to carry around with this heavy chain because of their moral rectitude.

When I watch TV at night, I watch the great American news television and I'm seeing peeper porn on Thursday nights at 8 p.m., I see serial killers every night of the week, I'm seeing circus news, and then I end up watching Stroumboulopoulos, or This Hour Has 22 Minutes, or some of the great variety shows we get on our French service out of Quebec, and I keep thinking, what's the problem here?

Is it true...? We've been told they have to have all this American programming, that not only is it better, but it has to sustain all the substandard Canadian product. Do they sell Canadian shows to advertisers at a discount, and are there any Canadian shows they will put into a prime-time slot?

[Maureen Parker]

We did examine this in our study. Yes. In fact, right off the top Canadian shows are discounted; their ad sales are discounted. There's something called the Canadian discount. So that is right off the top.

I think the interesting thing--and we're waiting for a final draft of the study, but when it's ready we will distribute it--that I learned is that ad rates fall substantially on Friday and Saturday nights. So if you air your program on a Friday or Saturday night, the ad rates are lower. It makes sense: there are fewer eyeballs. Because there are fewer people watching TV, you will make less money.

I guess the point is that broadcasters make a decision when they program Canadian shows, when they put them in off-prime or on Friday or Saturday nights, which we call shoulder periods, or they put them on in the summer when there are fewer people watching. So you make those decisions.

Everyone in this room knows that the best hours for watching TV are Sunday to Thursday, 8 p.m. to 11 p.m. That's prime time. It's very disheartening for creators in this country to know that when they're creating a show they may never get a prime-time slot. When they're writing that cop drama, they have to think about how many slots are open in Canada for prime-time series--maybe one, maybe two, because they all go to U.S. shows. Even if you get a prime-time, you can bet it will be a Friday or Saturday or on in the summer.

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

I want to have that clarified. You could put a major investment into a top-notch Canadian show that will eventually be watched in the U.S. and sold there, but it's being sold at a discount on a Friday night when you're getting less revenue. So when they tell us they're carrying the great burden of Canadian programming, they've already discounted it as compared with the American ones.

I need to ask another question before my time runs out. It refers to subsection 19.1 of the Income Tax Act. If I'm a business in Toronto or Windsor, I might want to advertise in Buffalo or Detroit. I can't do that because of the Income Tax Act. I have to put my advertising on a Canadian network. It's an obligation; it's a regulation; it's not optional. It's worth hundreds of millions of dollars a year in a protected market.

Why is it that if broadcasters are in non-compliance with their licence, that's optional? There are no penalties for being in non-compliance. I'm looking at some of the records of the testimony before the CRTC, and there are clearly frustrated companies who are allowed to be massively consolidated, make commitments to show programming, then simply don't. The only tool the CRTC has is execution. You're not going to use the execution tool very often, if that's the only tool you have. Why is it that compliance with a licence for a public service should be voluntary, whereas for Joe Businessman who wants to advertise in Buffalo, there's nothing voluntary and he's stuck and has to advertise in a protected market? Is that the case?

[Maureen Parker]

That's one of the things we're bringing forward. It's not the first time this has come up in our industry. We have discussed this before. It's a recommendation of something called the Dunbar-Leblanc report that was commissioned by the CRTC about 18 months ago. The CRTC needs the legislators' help in order to make it work properly. If the only tool you have is to yank someone's licence--and we did see that with CHOI-FM about two years ago--that's very harsh, and you'll think many times before doing that.

So that's why when we were talking about the instances that we've spotted of non-compliance, with entertainment magazine shows and the history showing CSI, we filed the complaint as our own organization and basically, after a year and a half in each case, they had to be encouraged to comply.

That's something I very much see you could do at this committee, come up with a recommendation that there be fines and non-financial penalties. Maybe to really irk them, you could make them do more Canadian content if they go short.

[The Chair, Conservative, Gary Schellenberger]

Very quick.

[Jean-Pierre Gariépy]

Thank you.

That's an excellent comment. At the Documentary Network, we tend to consider the CRTC as one of the greatest Canadian inventions. With time, however, we're witnessing an erosion of its power, of its ability to regulate and of its arm's length position. Upstream from this entire discussion, we must, as Canadians, restate the fundamental importance of the CRTC and of the distance it must maintain from the government in order to set rules that benefit Canadians.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Del Mastro, last question, please.

[Dean Del Mastro, Conservative, Peterborough, ON]

Mr. Bruinooge will be taking my time.

[The Chair, Conservative, Gary Schellenberger]

Mr. Bruinooge.

[Rod Bruinooge, Conservative, Winnipeg South, MB]

Thank you, Mr. Chair.

Thank you to the witnesses today. It's been an excellent study so far, and you've definitely added to our discussion.

I'll ask the first couple of questions, and I apologize if I interject, but as you know, we have only a short period of time. I'd like to ask the Writers Guild of Canada a few questions.

Of course we've heard a lot from the broadcasters as they've come before us, and they've indicated in part that producing Canadian content is rather expensive based on some of the licensing provisions they have with some of the actual developers of that content. So perhaps you could share some opinion as to whether you think they have a case to be made there in terms of how they're unable to resell certain shows, as some of their American broadcasters can.

[Rebecca Schechter]

I'm going to let Maureen deal with some of the bigger rights issues.

Our broadcasters pay a smaller licence fee for their shows than almost any broadcasters in the world, as a percentage of the budget. I'm not just talking about the U.S.; I'm talking about all of Europe, where they have subsidized industries. In Australia, broadcasters will be paying 50% or more of their costs, and ours are always under 50%.