Canadian Heritage Committee on April 29th, 2010

[Pat Martin, NDP, Winnipeg Centre, MB]

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Mr. Bruinooge, you have the floor.

[Rod Bruinooge, Conservative, Winnipeg South, MB]

Thank you, Mr. Chair. I'll attempt to be very brief to help you get back on schedule.

I really appreciate all the presentations today.

I'm going to try to open it a bit, but because of time, I'm going to maybe just stick to Mr. Perlmutter.

I really appreciated your presentation. As a student of film, I imagine Norman McLaren's collection and his influence on your organization continues to mould your philosophy for innovation. He's probably the filmmaker who's had the biggest impact, at least in the film circles that I hang in.

My question is primarily in relation to a few things you said. You mentioned that offering your content for free was paradoxically a prudent economic decision. That's a philosophy that I think some people share. However, others haven't come to that same conclusion. Perhaps you could expand on that a bit for everyone.

[Tom Perlmutter]

Just so there's no confusion about this, it is not about opening up intellectual property rights. This is a decision of the property rights holder to offer it for free, and there are two aspects to it. One is public policy. Canadian taxpayers have paid for this content; they've invested over 70 years, and they should have access.

The second thing is that it's available by streaming only. It's not to own. They can watch it, and watch it any time they want, but it's by streaming.

Third, it's industry-wide. That has been the case, for example, with Hulu and other aggregators. What they've done is they've started to build audience. What you want to do is build audience. If we had put up a pay wall right away, we would have gotten nowhere near the exposure, the connection, or the acclaim that we've had, or that ability to connect, particularly to younger audiences who don't know you. They're going to come and then they know you.

Now, what you can do is build on that. You can continue to offer a basic streaming service for free, but for those who want to buy to own, we can add that in. If we want to, we can add in a whole level of other kinds of forms of micropayment.

With YouTube we launched an interesting experiment. They were launching a rental system, a VOD service. They were trying to find their own economic footing and business plan, and one of the earliest things they did was to launch it with one of our films at South by Southwest. It was a revenue-sharing arrangement. We're doing that with other kinds of things.

What's key for the film world--and again, this is part of that--is that whatever the partnership arrangements that we're doing in this online world, what you really have to do is protect the brand.

Ian referred to brands. They are crucial, because in that wealth of content, the greater the recognition, protection, and awareness, the better. Given what the NFB represents--and I'm talking as a Canadian, as a Quebecker--it stands there, it means something, and it brings the world to Canada.

[Rod Bruinooge, Conservative, Winnipeg South, MB]

I have one last quick question. In the reference you made to Indonesia, I think you would probably--

[Tom Perlmutter]

Singapore, I think it was.

[Rod Bruinooge, Conservative, Winnipeg South, MB]

I'm sorry; it was Singapore.

I think you would likely agree that one of the benefits of that environment for the rollout of technology is the extreme density of population compared with Canada. Could you speak to that?

[Tom Perlmutter]

I mentioned Singapore because they were so out there, but they still made a decision to invest massively. Australia is investing millions and millions of Australian dollars in terms of broadband. In Britain there's Digital Britain, and they just passed their Digital Economy Bill. Again, it's infrastructure in terms of bandwidth and taking it out there. They're talking about 100 megabits per second getting across. They are all very aware of that digital divide.

In New Zealand it's the same thing. In France it's the same thing. Everyone is saying that's a starting point. That's the place we've got to start if we want to be in the game to ensure it's not just major urban centres. But how do we get that service? Canada has always had these difficulties. We had it with broadcasting. How do we get to the north? How do we reach out and across that? That's why we had Telesat and other satellite services.

We've got to keep pushing that, and there's going to be a cost to it. There's no way around it, but that's part of the cost of being Canadian.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

I apologize for the shortness of this session. As our day goes on, the next session will be even shorter.

Thank you for your presentations.

We will recess for two or three minutes while we get our next set of witnesses.

We do have some committee business that we will have to do, so this next one will go until 12:45.

[The Chair, Conservative, Gary Schellenberger]

I call the meeting back to order, please....

If you'd like to hold extra meetings, please hold them out in the hallway.

[A hon. member]

Order, order! Order in the court.

[The Chair, Conservative, Gary Schellenberger]

Right.

I apologize in advance for the shortness of this meeting. This part of the meeting will be over at quarter to one.

We have Trevor Doerksen from MoboVivo Incorporated, and Richard Paradis from Groupe CIC.

Mr. Doerksen, please, you're first.

[Trevor Doerksen, Chief Executive Officer, MoboVivo Inc.]

Thank you very much.

I believe my presentation materials were part of the problem this morning. I apologize for that. They were just a set of speaker notes.

Thank you, Mr. Chair, and thank you, committee. I am the CEO of MoboVivo. We are an Alberta-based company that enables producers and broadcasters to market and distribute TV shows on mobile phones, laptops, and Internet-connected TVs.

What we do is we allow them to monetize, syndicate, and distribute through multiple sales channels and devices. This background on the company is a brief section of my presentation. I wanted to focus more on what the committee is considering.

Really, this includes social media, or the Web, as the two of those converge, and Internet television, something that we haven't seen a lot of yet but will surely see soon. If you walk into a Best Buy, you'll see one on display. There are mobile apps, of course, and computers.

What our company does is allow people to do what we call “screenshift” to all of those devices, whether they're computers, mobile phones, mobile media players, television media devices, or Internet-connected TVs. This is a particular challenge. There's technology behind it, a nice algorithm that we developed, a patent that we filed, and some things that investors like. So we've focused on that, and we've presented the result of that in various ways that lead to this monetization, syndication, marketing, and distribution of content.

Of course, one of those areas is around mobile apps. It's a very interesting space these days; I can't get enough of them on my new iPad. This is what you start to see with mobile apps: you start to see a very potential future, one that may come very quickly.

That was a little bit about the company. Just for context, we do have offices in Toronto and Halifax as well.

The next section of the presentation is a little bit more dense. I'll go through it quickly. I hope you have both the French and English versions. It's not something that I present to investors; I avoid that kind of density with them. Hopefully you'll be able to parse through this.

The thing that is going on here is that there are lots of devices. Consumers are changing, they're showing a willingness to pay for content, and ad-supported models are weakening every year. The recession that we just went through has really accelerated that point perhaps.

There are a number of data points. Apple is selling a lot of TV shows--I'm sure it's both Canadian and American content--to Canadians and of course worldwide.

Surveys are showing that more and more people are willing to pay to avoid ads. We see that when we go into a video rental store. We see a ton of TV shows on those shelves. It's 49%, up from 30% a few years ago. There are a lot of reasons for this. A lot of people are watching them on more than one device.

I'll skip a couple of data points; you have them in your notes.

I will focus on one data point--unfortunately, it's U.S.--that 73% of Americans watch shows on more than one device. One of the fastest-growing activities on the Internet.... This was a 2008 data point from the Pew Internet usage survey, again a U.S. number. It may even be faster in Canada, I don't know, as we don't have the same kind of coverage on this issue.

At any rate, more than social networks, more than any other thing in 2008, the fastest-growing thing was downloading television--not streaming television, not apps, not social networks, but downloading television. In 2008 there weren't really many apps going on. Downloading television is a very significant activity.

So why is that? I think one of the reasons is that the current broadcast delivery system is being attacked by over-the-top delivery models, meaning not your cable systems coming over the Internet. These are driven by apps. One of the things that is quite possible is that the app that carries a channel with TV shows.... The app that carries CBC or CTV or NFB will replace a TV channel. You won't have to flip the channel very soon. If you go into Best Buy today, and if you have an Internet connection behind your TV, you don't have to flip channels. You just have to launch apps.

Now, not all of those apps exist, and there's not a lot of content there, but this is something very easy to respond to. This is something that within a few years--maybe even 18 months--could be a very popular activity and a way of consuming content.

The timing is, of course, the ultimate question. It's the one my investors ask constantly, and potential investors. Unfortunately, I don't know the answer for them either. It's very unfortunate I don't know the answer for them. I think my job would be a lot easier.

As we look at bundled content, our current cable subscriber model, there is resentment and changing attitudes towards that. We have more of the same shows on multiple channels, things you've probably heard before. We have other pressures like free over-the-air HD. And free over-the-air HD will be higher quality than cable. In fact it's already higher quality. It's delivered at something like a 1080p resolution. Our leading cable providers deliver this same content, with a cost, at 720p. “You just bought a brand new TV and you want it decked out? If you want high quality, you get more for free.” It's that kind of thing.

There's lots of fragmentation going on there, and bundling of content. Again, I think some resentment is about to build as we make our switch to HD.

The ad-dollar drain to the U.S. was mentioned.

I've been listening to some of the proceedings. Something that wasn't mentioned yet, that I'm aware of, is unused rights. The rights to content are not being exploited fully to monetize them fully. This of course affects our company. It affects Canadian consumers, but what it really does is it drives illegal consumption. If you can't get it from a legal source and you want to consume it on your phone or your computer, there's a ready-made illegal source of that content, and it's pretty easy to use and it leaves money on the table.

The lack of clarity around copyright drives that. If the Canadian consumer doesn't know that this activity should be frowned upon.... I don't want to make them feel like criminals, but I would like to make them appreciate the content enough to pay for it.

How do we stifle innovation? It's been mentioned already. If we fall any further behind on broadband speed or penetration or affordability, there are great risks, I believe, to companies like ours and others. They will surely head south, where those situations are easier, and of course the consumer impact will be obvious as well. I made the point about HD content not being supported, and the high wireless costs.

Maybe I'll finish off on this point. It really isn't being possible, for two primary reasons, for a YouTube to emerge in Canada under the current situation. There is not enough venture capital. There is not enough inexpensive broadband.

No matter what we wanted to do, what I wanted to do as an entrepreneur, or what anybody else wanted to do, we couldn't have created YouTube with the venture capital situation and the broadband situation in the country.

I'll leave it there. You have the notes on other things. I hope that's all right.

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Paradis, please.

[Richard Paradis, President, Groupe CIC (Communication, Information, Culture)]

Thank you, Mr. Chairman, members of the committee, and staff.

My name is Richard Paradis, and I am president and CEO of Le Groupe CIC, a communications and telecommunications consulting firm based in Montreal, with clients in broadcasting, telecommunications, and the cultural sector. At both the University of Montreal and HEC Montréal, I also teach courses on communications policy, social research methodology, and the history of media. During my career, I also worked at Bell Canada, the CRTC, the department of communications in Quebec City, and Heritage Canada here in Ottawa.

I’m going to cut out a bit of my text on the historical perspective just to save time.

Much has changed since the early days of Bell Canada in Canada, and we all have to recognize that the speed with which communications technology is evolving is quite amazing. Nonetheless, I am sure you will agree this speed of change in communications is more and more difficult to understand, both in terms of its impact on each of us, as individuals, and, more broadly, on our socio-economic and cultural well-being. The challenge for all of us is to determine as quickly as possible how we can harness all of these technological innovations in the interest of Canadian business, Canadian cultural industries, and Canadian consumers from coast to coast.

As the committee knows, communications is now at the core of just about everything we do, from waking up and checking the e-mail and cellphone calls in the morning, to listening to music on mobile phones and iPods, or watching the news and our favourite television show on our iPhone or iPad.

How fast is it moving? Well, as you've heard from many who have appeared before you, it’s moving at high speed, and not just in the fibre network that is getting closer and closer every day to your home.

But let's get down to what your committee is trying to grapple with through your current consultations. I will speak briefly on each of the questions raised in your terms of reference.

First, how are developments in emerging and digital media affecting Canadian cultural industries?

Well, I think a number of the groups that have preceded me, including the National Film Board earlier, recognize that emerging digital media offer great opportunities for the Canadian cultural sector; however, the most critical points to be considered in this context are how we are going to be able to ensure sufficient Canadian content and shelf space in this new electronic environment that seems to have no limits in terms of reach and depth.

Cultural industries have to scramble to adjust to technology, even more so today, when everyone is overwhelmed by the onslaught of different communication technologies, technologies that are front and centre in our economy and our way of life. The good news is the multiplication of windows or platforms available for cultural products to be distributed, but what is less evident is the capacity to maintain revenue streams for the cultural sector from each of the new distribution options.

Yes, technology is increasing opportunities to consume cultural products, but it is also fragmenting audiences, which can seriously affect the value of a cultural product from one platform to another and its overall economic value in the marketplace.

What can Canadian cultural industries do to benefit from developments in emerging and digital media? The short answer is that we have to ensure that we can continue to develop Canadian content, and, more critically, access the different platforms.

Is there a way of ensuring that creators of artistic and cultural content are compensated for their work? Yes, through long-awaited changes to the copyright regime in Canada to reflect what has been happening in Europe for a number of years.

As I often mention to my students at university, the important consideration to always keep in mind is to respect the rights of authors and creators. I explain to them how many individuals actually benefit from a cultural creation of a book author, a filmmaker, an author-composer of music, a choreographer. When a creator develops his or her work, a multiplier effect sets in, creating numerous jobs in the economy.

The bottom line is that we have to ensure that our copyright legislation provides for appropriate compensation to authors for their works that are available on multiple platforms, be it mobile, web, or conventional broadcasting.

What could be done to ensure that Canadians, including those working in the cultural industries, have the right skills? Well, I think we have a number of good academic programs across the country to develop creative talent and especially technically savvy individuals who can interpret creative ideas into productions.

However, we cannot expect to be able to do this by cutting funding to our film schools, the way the federal government did recently, seriously affecting the operations of L'INIS in Montreal and shutting down the Canadian Screen Training Centre in Ottawa, just to name two.

This is an example of what not to do in relation to technology change and the need to ensure that we can develop attractive programming choices for Canadians and, ultimately, a world audience.

What could be done to ensure that all Canadians, no matter where they live or what their socio-economic status is, have access to emerging technology?Well, we have to develop, as many have been asking for a number of months now, including the NFB this morning, a national digital strategy. One of the most important things we have to do is ensure that all Canadians have access to high-speed Internet. This has to become a national priority. Other countries--Britain, for instance, and the European Community--have recently developed a clear digital strategy. High-speed Internet has to be considered much like a public utility, a must-have for all Canadian households, no matter where they live and work.

High-speed Internet can be a key component to an effective economic and cultural development strategy in all regions in Canada, both in the cities and in rural areas. High-speed Internet will be, in many ways, more important to our regional and national socio-economic and cultural development than the train was in the early years of our great country. With high-speed Internet, local creative talent can be developed and have ready access to far away markets quickly via a multitude of digital platforms.

What policies could the federal government adopt? At some point in the near future, the government and Parliament will have to consider what is being looked at right now by the European Commission, and that is some financial contribution from Internet users toward supporting local cultural sectors to develop content for all of the digital media applications. Other than the United States, where the audiovisual sector is the country's biggest exporter, most economically developed countries of the world are struggling with how to finance the creation and distribution of local creative cultural content in a new digital universe.

What would be the impact of foreign ownership? Pretty disastrous. Our historic approach to Canadian ownership in this area is directly linked to the social, cultural, and economic development of the country, and in my view should not be handed over to foreign interests without some serious thinking about how we got to where we are, and, more importantly, where we want to go in the future.

Why are we thinking of opening the door to more foreign ownership? Are our telecommunication companies suffering from lack of investment funding? Are they seeing dwindling revenues and profits? The Canadian telecommunications industry revenues for 2008 were $40.3 billion, with a reported $6.3 billion EBITDA and a margin of 29.1% EBITDA. For the cable sector, which also comes up on occasion talking about foreign ownership, the latest industry data released by the CRTC saw revenue growth of 11.9% in 2009 with revenues of $11.4 billion, a PBIT of $2.3 billion and a PBIT margin of 25.1%. These aren't companies that are suffering from the difficulty of finding financing.

So why, after we have invested as a country for decades in developing one of the most impressive telecommunications and broadcasting sectors of the world, do we want to hand them over to others? More importantly, how will we ensure that we are getting the best out of our communications sector if its business decisions are taken in Dubai, Chicago, or Beijing? The ultimate decision factor is where is the most return on investment? Certainly not the priorities or social and cultural preoccupations of the host country.

But let's move on from there and look at the need for reviewing existing legislation, which was brought up earlier. I am one of those who strongly believe that in today's world of convergence, government should be taking seriously the numerous calls we are hearing to review the existing broadcasting and telecommunications legislation, in order to reflect the convergence we now have with large corporations, which not only have concentrated ownership but are also highly integrated both vertically and horizontally.

Whether we speak of Rogers, Shaw, Quebecor, Bell, or Telus, all of these companies deliver a variety of communications services to Canadian consumers. They are at times radio or television broadcasters, newspaper publishers, local telephone IP providers, offering mobile phone service and audiovisual content.

More importantly, these companies have become important gatekeepers between content providers and consumers. In some instances, they are also competitors at the content level. This ultimately places them in a conflict of interest with the power of life or death over new Canadian programming services.

Why should we be concerned? Because it represents a shift in the regulatory function, and even though the CRTC licenses services, the BDUs can ultimately decide the fate of a newly licensed service, and even decide to favour their own programming services, with little effective regulatory intervention under present rules. The chairman of the commission has been before this committee twice to ask for changes to the Broadcasting Act, and he recently repeated this plea before the industry committee.

This completes my presentation, Mr. Chair.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

We don't have enough time to have reasonable questions around the table. My suggestion is that if anyone has a question of our witnesses in this session, they should send the question to the clerk. The clerk can contact our presenters. The response can come back through the clerk.

I'm sorry; we got off to a slow start, and that's the way it goes.

We have some committee business that we have to do.

Thank you for your presentations.

[Proceedings continue in camera]

[The Chair, Conservative, Gary Schellenberger]

We're back.

Carry on.

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

As an introduction to the motion, I would simply like to tell you that last year the members of this committee agreed on three issues relating to community television. We agreed that community television should be entitled to all of the grant programs of the department of Canadian Heritage, that they should be included in cable companies' basic programming and that the CRTC should relax the restrictions on local advertisements on community television. That is laid out in our report entitled “Issues and challenges related to local television“, that we adopted in June 2009.

I am coming back to it as a follow-up to the motion passed unanimously at the National Assembly. As I stated earlier, in the part that says “played by independent community television“, I would add the word “Quebec's“ after the words “independent community television“, to make it more precise.

[The Chair, Conservative, Gary Schellenberger]

We've heard the motion.

All those in favour of the motion, please signify.

[Ruby Dhalla, Liberal, Brampton—Springdale, ON]

Is that an amendment to the motion? We need to vote on the amendment first.

[The Chair, Conservative, Gary Schellenberger]

Do we have the amendment?

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

All that is involved is the addition of the words “Quebec's“ after “independent community television“.

[Ruby Dhalla, Liberal, Brampton—Springdale, ON]

Madame Lavallée wants “Quebec” inserted. We just need to know where, so that we can vote on that particular amendment.

[The Chair, Conservative, Gary Schellenberger]

Okay.

Mr. Del Mastro.

[Dean Del Mastro, Conservative, Peterborough, ON]

Perhaps Madame Lavallée would entertain an amendment that indicates that this motion pertains to the system in Quebec and is not to be confused with the CACTUS presentation presently before the CRTC.