Thank you, Chair. I will stick to the 10 minutes you suggested.
Friends of Canadian Broadcasting is an independent watchdog for Canadian programming in the English-language audiovisual system, supported by 100,000 Canadians. Thanks for granting us an opportunity to appear today.
The conventional over-the-air television model--acquiring U.S. network programming, wrapping Canadian ads around them, and subsidizing Canadian programming with the resulting profits--is failing. Canadian over-the-air broadcasters are competing to bid up the cost of U.S. programming at the same time as their audience is declining. And now they also report that local news programming is no longer profitable.
As you know, advertisers follow audiences. Over the past decade, a major shift has taken place within the advertising pie. Web advertising has increased in Canada from $25 million in 1998 to $1.5 billion in 2008.
CRTC data confirm that profits for private over-the-air television have been falling steadily to the point where, by mid-2008, the entire industry delivered negligible profit. What might initially have been considered a cyclical downturn has now emerged as a major structural change, threatening the viability of over-the-air television. The over-the-air broadcasters are telling the CRTC and your committee that audience is down, advertising is down, costs are up, transition to digital is not affordable, and Canadian programming obligations are unsustainable.
While some have questioned the need for over-the-air television delivery in future, Parliament and the CRTC have a responsibility to consider the needs of three million Canadians who rely on over-the-air reception. In a report commissioned by the Department of Canadian Heritage, Canadian Media Research Inc. concludes that “given the slowing trend in the past 4-5 years, it seems unlikely that the OTA segment will decline by much in coming years”. In other words, over-the-air viewing by millions of Canadians will continue to be a feature of our audiovisual system well into the future.
Cities with over-the-air viewing exceeding the Canadian average include Windsor, at 27%; Saskatoon, 15%; Montreal, 14%; and Quebec and Sherbrooke, 13%. Even in cities with a lower proportion of over-the-air viewing, the number of viewers is substantial; for example, Toronto, 477,000; Vancouver, 138,000; Edmonton, 113,000; and Ottawa, 111,000. CMRI also reports that even in households subscribing to a cable or satellite service, not all television sets are hooked up to the cable/satellite service. Over-the-air viewing accounted for 25% of TVO's audience in 2006, 16% for CBC English television, 14% for CTV, and 8% for Global.
With the advent of digital over-the-air conversion in 2011, many of these Canadians will have an incentive to become cable or satellite customers, although the CMRI study indicates that 26% of over-the-air viewers cannot afford the cable or satellite charges. Digital conversion may be expected to increase the profitability of the distributors at a time when over-the-air television providers are in crisis.
As you know, in the United States of America the federal government provided a coupon program to subsidize the purchase of digital converters. Why has no similar program been announced in Canada? And what about financial assistance to over-the-air broadcasters to help with the one-time cost of digital conversion? Even a small portion of the revenue from reselling the vacated analog frequencies would easily pay for this.
Public policy should recognize the vital contribution that Canadian over-the-air stations make to the cultural fabric of Canada and create the conditions for sustainable, therefore profitable, over-the-air services. This can only be done by ensuring that over-the-air television has the financial capacity to produce local Canadian programming.
Canadians rely on their local television stations for news about their communities, the kind of local coverage that specialty channels cannot provide. In April 2008, Friends and several partners commissioned and submitted to the CRTC a Pollara study, Canadians' Views On De-regulating Cable and Other TV Distributors, which reported the results of a survey of 1,200 cable and satellite subscribers. Page 32 demonstrates that Canadians consider local news their top television priority. And there's a graphic, Mr. Chair, that makes it clear.
At a policy hearing last year, the CRTC heard evidence from Nanos Research that 78% of respondents indicated that having local news was of high or very high value of them. The CMRI 2008 TV Trends and Quality Survey, a report on Canadians' attitudes toward TV, to which Friends subscribes, offers corroborating data. I won't go through it, it's there. Local news, among anglophone viewers at least, is by far the most important service available on television.
As you know, local programming is most threatened in smaller and medium-sized communities, where there is often only one local source. Maintaining local programming on over-the-air television requires a change in the economic model. The CRTC's local programming improvement fund, though a laudable initiative, is far too small to address this challenge. Pollara found that a majority of cable and satellite subscribers would be willing to pay $3 more per month to protect and enhance Canadian programming. You can see the data in the graphic.
Friends believes that over-the-air television should be resourced on a level playing field with the specialty channels. Over-the-air television networks should have access to the second revenue stream, a fee-for-carriage, provided they promise to use at least a portion of the money to maintain and enhance local programming. We propose that the networks commit to a three-way split among local or drama programming, digital conversion costs, and the bottom line until 2011. Thereafter the split should be two-thirds to drama or local programming and one-third to their bottom line.
Cable monopolies should not be permitted to generate very substantial profits from the sale of their cable profits driven by the over-the-air stations without being obliged to pay for the services that they then resell. Friends recommends that cable monopolies should be permitted to pass along this charge to their subscribers only if their profit before interest and tax were to descend below 15%.
We also propose that the CBC should abandon ads on TV except during professional sports coverage. Reducing the supply of advertising avails would assist the private television business. In return for vacating ads on non-sports programs, CBC Television should be refinanced either by a levy on cable or satellite distributors, to be determined by the CRTC, or through general government revenues or by some combination of the two. This would transform CBC Television into a genuine public broadcaster. This new approach could be phased in over several years, and there is substantial evidence that Canadians would approve of this reform.
A number of current members of this committee participated actively in a year-long review of the future role of the national public broadcaster during the last Parliament. You, Mr. Chair, were the chair of that committee. Last year your committee recommended in the report “CBC/Radio-Canada: Defining Distinctiveness in the Changing Media Landscape” that per capita annual funding for public broadcasting should be increased from $33 to $40, which, by the way, would bring Canada to half the average in western democracies.
Last month, in a poll of 3,361 Canadians, which Friends commissioned, Pollara found that 54% of Canadians support your recommendation, 26% reject it as too high, and 20% consider it to be too low. In other words, three-quarters of Canadians believe annual support to the CBC should rise to at least $40 per Canadian per year.
We also want to share with you a second finding from the recent poll. Pollara asked the following question: “Assume for a moment that your federal Member of Parliament asked for your advice on an upcoming vote in the House of Commons on what to do about CBC funding. Which of the following three options would you advise him/her to vote for?” One was to increase funding to the CBC from current levels, a second was to maintain funding for the CBC at current levels, and the third was to decrease funding for the CBC from current levels. As you'll see in the graphic, 47% of Canadians would advise members of Parliament to increase it, 31% would keep it the same, 9% would decrease it, and 13% have no view.
Now, Mr. Chair, I want to conclude by saying that you can imagine our concern when we recently learned that Minister Moore's April 29 assurance regarding the CBC cuts does not square with the facts. That concerned us greatly.
Thanks for your attention, and best wishes in your important deliberations.
Thank you, Chair.