Canadian Heritage Committee on May 6th, 2010

[John Barrack, Chief Operating Officer and Chief Legal Officer, Canadian Film and Television Production Association]

Thank you, Mr. Chairman and members of the committee. Thank you for taking the time to hear us this morning.

The Canadian Film and Television Production Association, or CFTPA, welcomes the occasion to speak with you on the opportunities and challenges related to emerging and digital media. As was mentioned earlier, Mr. Séguin is with me here today. He's the association's senior vice-president of policy and I'm the association's chief operating officer and chief legal officer.

Our president, Norm Bolen, would have liked to be here, but he had a scheduling conflict as he is a board member of Hot Docs and his attendance was required at that festival.

As many of you know, the CFTPA is a national trade association that represents the most successful Canadian independent screen-based media production entrepreneurs working in the English language market in television, feature film, and interactive media. We have close to 400 members and they are located in every region of the country.

Together our members are responsible for a large majority of the more than $5 billion in production activity that occurs in this country each year, and the 130,000 jobs this work sustains. With a few exceptions, our members are virtually all small and medium-sized businesses.

We take this opportunity to congratulate the government for having committed this past March in the throne speech to launching a digital economy strategy for Canada. We understand, through media reports, that a national consultation process will be launched in the near future. The CFTPA and its members look forward to participating in that process.

We also applaud the standing committee for having initiated its own study on emerging and digital media. We believe it's important to have a broad and open discussion on this vital subject with as many decision-makers as possible participating in the dialogue.

Before addressing some of the specific questions outlined in this study's terms of reference, we will share with you our thoughts related to digital media in general and the national digital media strategy in particular.

Marc.

[Marc Séguin]

Who would have imagined ten years ago that one could access, online, a music store and legitimately download thousands of songs to a device so small you can clip it to your shirt collar, or read your daily newspaper on your cellphone, or access a program online that you may have missed when it was originally broadcast on traditional television?

The digital media innovations we have witnessed over the last decade are quite impressive, to say the least. And if you consider Moore's law, I think it's safe to say that ten years from now digital media will evolve to a point that is unimaginable today.

Indeed, in the not too distant future, a country's very prosperity and social vibrancy could very well be determined by its ongoing capacity to innovate and exploit the opportunities of the digital age. To be a globally competitive leader could mean a better standard of living for all Canadians; to fall behind could also mean a marked degree of uncertainty.

We believe that Canada can, and must, be a world leader in the digital age. All stakeholders owe it to the next generation of Canadians to work together to ensure that we do in fact succeed at being at the top of our international competitive game.

We think putting in place a national digital media strategy is a key element in the pursuit of this important goal. A number of other countries, like Great Britain, Australia, New Zealand, and France, have already done so. We must not fall further behind.

This national digital strategy must position Canada for both economic and cultural prosperity in the 21st century. It should seek to formalize key objectives and be supported by interconnected policies, strategies, and action plans, and it should span the public and private sectors.

To be successful, we believe this strategy needs to have four key underpinning objectives.

The first is to ensure that Canada possesses a broadband infrastructure that is second to none in the world. While perhaps simple in concept, we are not blind to the fact that there are many forces at play or the inherent cost of achieving and maintaining this objective. This goal is the modern-day equivalent of building the transcontinental railway or the Trans-Canada Highway.

As a second objective, we must guarantee that Canadians control this infrastructure that we build. While there is clearly a need to attract foreign private investment in the building of our broadband capacity, we do not believe the course of Canada's economic or cultural future should be charted by foreign interests.

Third, basic access should be a right. We believe that all Canadians should have an opportunity to participate in the digital age. There should be no geographic, economic, cultural, ethnic, linguistic, or even knowledge-based barriers to participating in the digital age. One of Canada's strengths has long been its diversity; ensuring that all Canadians can participate in the digital age will help promote and celebrate that diversity.

And lastly, our fourth objective is in many ways the most important, in our view. This objective relates to ensuring that professional content created by Canadians has priority on our broadband networks.

A national digital media strategy must clearly recognize that our broadband infrastructure is a key vehicle for achieving both economic and cultural goals. Few people ever question the potential of this broadband infrastructure to contribute to Canada's economic future, but the cultural sector is a very key component in that economy and certainly in the economy of tomorrow.

A 2008 report entitled Valuing Culture: Measuring and Understanding Canada’s Creative Economy, which was done by the Conference Board of Canada in partnership with the Department of Canadian Heritage, valued the cultural sector's economic footprint to be $84.6 billion in 2007, or roughly 7.4% of Canada's total real GDP. It contributed 1.1 million jobs to the economy. This is significant, to say the least.

In our view, broadband infrastructure should be recognized as a public service that is essential to the maintenance and enhancement of Canada's national identity and cultural sovereignty.

We also believe that each element of the system should contribute, in an appropriate manner, to the creation and presentation of professional Canadian content. To ensure we continue to promote diversity in this country, we also believe that a large majority of that content should be provided by the independent sector.

I will now pass the floor back to my colleague John, who will address some of the specific questions you asked in your terms of reference.

[John Barrack]

Over time, the production businesses in Canada has matured and has become increasingly well established. Nevertheless, production companies must now deal with significant changes to their traditional business models. Long gone are the days when a producer could conceive of a program for a single exhibition window, and the days are also past when they could secure the necessary financing to produce that show by licensing the rights for a multitude of individual television broadcasters in Canada and abroad.

Production companies have been thrust into a position where they must now produce a program concurrently for several platforms, and they must do so with fewer domestic and international sources of financing. This has led to significant financial challenges.

Consolidation in the Canadian television broadcast sector is a large part of our financing challenge. With only three large broadcast corporate groups now in English Canada, there are effectively few selling opportunities in the television market for our members. Increasingly, broadcasters also want to undertake their productions in-house. When they do decide to commission work from independent producers, it's typically because the projects are much riskier to produce. They are using, and some might even say abusing, their dominant position in the market to secure unreasonable terms from Canadian producers. They are demanding more rights, including all digital rights, and often paying very little or no additional money for these rights.

We highlight that a broadcaster is also the trigger to access financing from the Canada Media Fund and also one of the main triggers to access the Canadian film or video production tax credit. This puts them in a very strong bargaining position.

Independent producers are often faced with a very serious quandary. They either accept the take-it-or-leave-it deal offered by these large broadcasters to keep their business alive, or they turn down the terrible terms and face the prospect of putting their business on hold, or even closing their doors permanently.

This kind of behaviour by broadcasters undermines the sustainability of independent production companies and, by extension, the many thousands of jobs they support. This is why we have been pushing fiercely for equitable and enforceable terms of trade with broadcasters.

Thankfully, the CRTC has recognized this issue and has repeatedly stated its expectation that producers and broadcasters reach real and meaningful agreements by 2011. We remain hopeful that an agreement with teeth can be achieved.

In addition to this particular challenge, foreign financing to Canadian-certified productions has significantly decreased, dropping from $407 million to $196 million between 2001 and 2008. Our co-production activity has also experienced incredible declines, dropping by more than half to about $390 million through the same period.

In our view, these downward trends can be reversed by updating our international policies and programs. Canada's official co-production treaties and new export promotion programs could be invaluable tools in these areas.

Despite the formidable challenges faced by independent producers, they have nonetheless achieved success. Some have consistently been at the forefront of exploiting the unique potential of the Internet to deliver Canadian programming to audiences on new platforms and in new ways.

In a number of cases, independent producers have collaborated with broadcasters to extend the reach of existing successful Canadian television series over the Internet. In other cases, independent producers have used the Internet as a primary distribution platform for their content, either through self-distribution or by entering into revenue-sharing arrangements with distributors such as Joost, Babelgum, and Sling.

Critically acclaimed multi-platform programs like the award-winning regenesistv.com from Xenophile Media and Shaftesbury Films, and the cutting-edge new media components of Degrassi: The Next Generation, from Epitome Pictures, are some examples.

Another example is Marblemedia's, thisisdanielcook.com. It's the companion website to the television series, This is Daniel Cook, which is sold all over the world. It puts preschoolers in control with bright symbols, spoken instructions, and stimulating games and activities. Here's what's incredible: thisisdanielcook.com achieves an impressive 1.7 million page views per month. That's a Canadian program being taken to the world.

Another one of your questions addresses what producers can do to benefit from developments in the digital media and to prepare for the future. As I've noted, independent producers have been innovative and they continue to adapt to take advantage of new opportunities in digital media, and in the Internet more specifically.

Two days ago in Toronto we hosted a round table “kitchen cabinet” meeting to which were invited leading experts from several sectors, including independent producers, broadcasters, telecommunications and wireless representatives, web-based companies, as well as other industry organizations. We also invited a select group of regular Canadian consumers who are comfortable using digital media. The goal of this round table was to allow all of us to learn from consumers and identify their areas of common interest so that key stakeholders could work collaboratively on moving forward. We are organizing another similar round table in Ottawa with senior government officials from various departments.

No one has a crystal ball with which to predict with certainty the future of digital media, but there is one thing we do know. Having an environment in which all stakeholders collaborate is the only productive way of ensuring that we will achieve our shared goals to position Canada for prosperity in the 21st century.

You have asked what policies the federal government could implement to help Canadians and Canadian independent producers benefit from developments in emerging digital media. We conclude our presentation with our specific thoughts in this regard.

A national digital media strategy for Canada must be developed and implemented as quickly as possible. The strategy must recognize digital media as crucial to both the economic and the cultural future of Canada. It must deem broadband infrastructure as essential to the maintenance and enhancement of Canada's national identity and cultural sovereignty. It must enshrine the principle that each element of the broadband system must contribute in an appropriate manner to the creation and presentation of professional Canadian content and that a very large majority of that content should originate from independent sources.

Fourth, the strategy must recognize that the existence of meaningful terms of trade between independent producers and broadcasters is in the public interest and necessary to ensure equity and fairness in the system and promote diversity.

Fifth, the strategy must require that Canadians control broadband infrastructure, while also recognizing the need to attract greater private investment, both domestic and foreign, in our communications networks and in the creation of professional content.

Sixth, it must ensure basic access for all Canadians to broadband networks so that they may fully participate in the digital age.

Seventh, the strategy must renew the Canada Media Fund for five years. One- or two-year renewals create uncertainty and undermine the capacity for all stakeholders to develop long-term business plans.

Eighth, it must update existing support programs, like the Canadian film or video production tax credit or the Canada Media Fund to allow new distribution options to qualify a project for funding. Television broadcasters should no longer be the main gatekeepers for funding.

The strategy must revitalize CBC in light of the important role it plays in our system, and, last but not least, Canada's digital media strategy must incorporate a new export and co-production policy to stimulate the international segment of the independent production sector. The Canadian market alone is simply too small to stimulate any real growth, and therefore we must increasingly focus on opportunities in foreign markets. There is money there, I assure you.

That concludes our presentation. We would be happy to answer any questions you may have.

Thank you, Mr. Chairman.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

We'll move now to Mr. Lyman, please.

[Peter Lyman, Senior Partner, Nordicity Group Ltd.]

My name is Peter Lyman. I'm the senior partner of Nordicity Group. I want to clarify that I'm here on behalf of Nordicity itself and not with the CFTPA. CFTPA is a valued client of ours, among other clients, but we just happen to be, by coincidence, packaged together for this session.

I think what they have said, though, actually goes quite far into offering some specifics about a national digital strategy that we had considered in our publication of last fall, an issues discussion paper on a national digital strategy.

Just to give you a bit of background, our firm has been in business for 25 years, and we work for the CRTC, Canadian Heritage, Telefilm, all the agencies, the provincial governments, and so on, plus the telecom side of things, auctions, and spectrum valuations.

We've had a pretty broad exposure to a lot of the issues you're dealing with. About two years ago, we said to ourselves--with a bit of hubris, I suppose--that we could sell ourselves to the U.K. There's a similar structure, and we've been quite creative in Canada with a lot of our policy and tax initiatives, and so on, whereas they were to some extent stumbling along. We always had an international practice, but it tended to be more in the third world countries.

But when we got there, of course, it's a double-edged sword, or a two-way street. They do lots of things that we can learn from. When we read all about Creative Britain, and then a year ago there was the appearance of Digital Britain itself, we just said to ourselves that this was really neat. They've gotten together and collected themselves. Then we looked at other countries and found that, lo and behold, some of our major trading partners and western-based countries also had gone through the route of the digital strategy.

We looked a bit further and found that in all cases, the agendas of these countries were quite different. They all had digital literacy as a topic and something to do about it. They tended to have broadband access to the home and established various target levels, but they all were emanations of their own particular national characteristics. So it occurred to us that for Canada, it wasn't a question of just having a cookie cutter national digital strategy, but rather one that was fashioned along the issues that are pertinent to us.

So we were first going to do an op-ed page thing, saying let's get on with it, but the more we got into it, the more we figured that the best thing was to think through what all the issues would be in three what we call “buckets” or categories of concern, the first one being in a telecom or ICT area, the second one being in the cultural domain, and the third in the human resources and training side of thing. We put together this issues discussion paper and published it last fall, and now we are going through a process leading up to Canada 3.0 and other conferences that are having these sorts of debates.

At the law society conference two weeks ago in Ottawa, we gave a bit of an update on how far we have come in the six or eight months since we published the discussion paper. But the way it was fashioned, that particular debate, was again, what should be the agenda. That got us thinking about doing a little bit more than an update, and I can give the update in response to questions. You can see it.

Unfortunately, this is only in English, not in French, but we can get copies of the conference report.

So that is the kind of thinking we had, as a result of doing that, that the government seems to be approaching the national digital strategy with a bit of an assumption that we have an ICT broadband approach to it. And there it comes to, how do you frame the debate? How do you carve out the agenda?

If you start with ICT or broadband, even there, information and communications technology gives you kind of an industrial push. A broadband strategy, such as the Americans have—they don't necessarily have an ICT one and they don't have a cultural one—takes you down a certain road.

If you say, well, we should have a broadband or ICT strategy but bring culture into it, and with all the things that John and Marc have been talking about in specific terms, do you just sort of attach that to it? If you do that, you might end up really talking more about regulation. When you try to streamline regulation—and some people would seek to integrate the Broadcasting Act with the Telecommunications Act to make a new communications act, and so on—that's an issue certainly for debate, but you're led down that path if you say, “Let's do ICT, broadband, and branch into culture”.

If you start with the cultural dimension alone, we found ourselves thinking that there you have to look at the world as it's evolving. We've all heard about interactivity and the Internet and so on. That's obviously a characteristic that we don't need to talk about anymore, but it does feed back to what our assumptions are of what we're doing in culture.

Over the last two and a half decades of working in the cultural industry, the way I look at it is simply that we've created an independent production sector that's fantastic in the course of that period through a variety of interventions. So we've really created the creative industries. Why have we done that? We've done it for those economic reasons that Marc alluded to, the amount of GDP and jobs that are created, but we've also done it because of the essential cultural imperative.

Our way of expressing that often is that we want to have the means to tell stories to ourselves about ourselves, and in the connotation of that is kind of a one-way connotation. You create a story, you publish a book, you make a broadcast, and you tell your story—and that's great. But the way I think you have to look at it now is that the cultural expression in media is much more a participatory two-way street. So if you want to have a cultural first digital strategy, I think you have to examine how you frame the question at the beginning about what cultural values you're aspiring to. I would submit that you would have to now add some sort of notion about active engagement in global issues and global communication as part of the cultural strategy, not just that we create something and push it out there.

I could get into the agenda that we set up and say how far we are going on it, but I think I'll stop my remarks now and let it come up in questions.

Thank you very much.

[The Chair, Conservative, Gary Schellenberger]

The first questioner is Mr. Rodriguez, please.

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

Thank you, Mr. Chair.

Good morning to everyone, welcome.

How is co-production doing right now?

[Marc Séguin]

Over the past eight years, co-production has decreased a great deal. Approximately $390 million are being invested in co-production. In 2001, the figure was nearly $900 million. This sector has undergone a significant decline.

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

How do you explain that?

[Marc Séguin]

There are several factors. First of all, our co-production treaties—many of them were signed a very long time ago—are no longer up-to-date. Secondly, in Europe, over the past few years, countries have signed co-production agreements amongst themselves. We have now reached a point where, as far as the Europeans are concerned, it is more advantageous for them to produce amongst themselves than with Canada.

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

So we are no longer really competitive in this sector for internal reasons in Europe, but also for our own reasons. As far as our reasons are concerned, is it relatively easy or quick for the government to make changes, whether they be regulatory or legislative, which could in relatively short order enable you to enter into co-production agreements and attract investment again?

[Marc Séguin]

It seems to me that several proposals have been made by a number of groups in Canada over the past few months, if not years. To some extent, I think it always come back to the issue of financing. With co-productions, a Canadian producer has to bring something to put on the table. There is not a great deal of money in the system for feature films. It is tremendously difficult to fund a production.

With respect to what we could do, we obviously could update our treaties with other countries, we could establish some funding programs earmarked for co-production which, at the same time, would ease the pressure on already existing funds; we could do that type of thing. There are also some administrative things that we could do to speed up—

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

So we have to update our regulations, our funding and our export programs.

[Marc Séguin]

Absolutely. Co-production obviously also depends to a great extent on the relations we develop with producers from other countries. It is not necessarily easy for a Canadian producer to go abroad—it is also expensive—in order to cultivate those relationships and develop projects.

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

Please be very quick, Mr. Lyman.

[Peter Lyman]

There are probably other things. As you know, co-production treaties have been around for 30 or 40 years. We--government, etc.--have been trying to revise them and modernize them and update them. There are certain provisions in there that would make it easier for producers to engage in co-productions. Within the European context they've made some very small but important measures. As an example, a scriptwriter from a third country is permissible in certain co-production treaties, but not typically between Canada and those countries. What you run counter to immediately is on the creator's side; it's a bit at their expense.

I think there are also some fixes in terms of the ownership of the equity in a production. Suffice it to say that there are a couple of points.

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

A little earlier, you mentioned that some people were talking about merging the Telecommunications Act and the Broadcasting Act, given that these two sectors are becoming more and more integrated, but you did not give your opinion. Can you tell me what it is?

[Peter Lyman]

I've sat in front of a panel of communications lawyers--and I'm not a lawyer--on the issue of whether fusion is a good idea or not. They all said, “Well, if you fused the two acts, you'd still have to create a broadcasting act within the same one, and they go through the legal and parliamentary system. It would take a few years before you'd get a fusion, so why don't we do some quick fixes?”

When people talk about a fusing of telecommunications and broadcasting, what they really mean is ripping out the broadcasting provisions so that we don't have to mess around when we're getting into these difficult areas of what constitutes broadcasting and what does not constitute broadcasting. That's a very messy area. An easy way to do it is to fuse the two--just have a telecommunications act and dispense with the Broadcasting Act--but I don't think this country is going in that direction.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Go ahead, Madame Lavallée, please.

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

I have some reservations about what you just said, Mr. Lyman. Merging the Telecommunications Act and the Broadcasting Act would also result in some extremely important advantages from the cultural perspective, which would include the ability to regulate wireless, which is already in play, and increasingly, the role of broadcasters. However, that is not what I want to talk about now.

I would like to talk about your excellent study entitled: "Towards a national digital strategy". This is the only study I personally am aware of that really gives an overview for a comprehensive strategy, but there are no doubt others as well. Canada needs a comprehensive strategy, but it does not have one yet. Of course, you discussed human capital, cultural issues and, naturally, the Copyright Act, consumer access to broadband service and digital television. After all, the digital television deadline is only one and a half years away, but we are not at all ready. No one seems to be thinking about it at all.

I would encourage everybody to read this study, particularly Conservative party members. I would encourage you to read this excellent study, because it will give you some good ideas about how to go about drafting a comprehensive strategy. I will now talk about the conclusions. You talked about the need to establish a high-calibre panel. I would like you to clarify what type of panel you mean and how it could work, so that we can achieve a comprehensive strategy as quickly as possible.

[Peter Lyman]

We got into the whole question of machinery in our paper because we felt you can't just say what the issues are; you have to sort of point to a way to resolve them. So you had on the table a suggestion of a royal commission from the CRTC chair at the time. We feel that's a little bit of an outdated concept for this.

We looked at the information highway task force that was in place a few years ago, and arguably it did its job of kind of educating Canadians and getting some initiatives under way, but we thought in this case, because things happen so quickly, and in view of particularly the British experience, where they managed to wrap the whole thing up within nine months.... They appointed somebody--and it all comes down to the key person you appoint to really lead it--who put a panel together and had deliberations. They used the media to get feedback from people, so everybody chimed in on it, had an interim report that got feedback, and they actually made a lot of changes, particularly related to the cultural area.

So we thought something of that kind could work, but there are many ways of making it work both within a system like Canada's and also within the particular circumstances of when our Parliament and government is in session. But that's the way we thought it had to be--nimble, quick, get in, expertise brought in--quite all-encompassing in it's purview, because all these issues are so interrelated. But at the same time we're not trying to boil the ocean. You know you can't, as we consultants say, try to do everything at once. But you had to set down what things you wanted to do immediately and what things were left to other processes. For example, you get traffic shaping or the net neutrality issue, which is.... We put it on the table, but since then it's largely been dealt with in Canada, to some considerable positive effect, from what most people think, and ahead of a lot of other countries.

So on that particular issue, we have to watch it, and there will be evolutions. As John was mentioning, you've got the gatekeeper question in there. That has to be--on the cultural side--looked at, but there are things that we could move on to. So a nimble, quick panel. That's how we recommend it.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much.

Mr. Angus please.

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

Thank you.

I find this discussion fascinating. We tried to set up this hearing to look at the opportunities of how we can start to reshape where we're going culturally. In terms of national digital strategies, there are a number of models out there.

In Brazil, they've gone bottom up. The great Brazilian culture minister, Gilberto Gil.... In the barrios they put in all kinds of cultural digital stuff, and kids in the barrios are creating their own culture.

Another model is England, where they've taken it out of the BBC, a well-funded public broadcaster. They've paid good money for really strong productions, and they market it internationally.

In Canada, it seems our thing was always “let's just hold our own”. We have two or three markets to sell television to in English Canada and two in Quebec. As long as we managed to have some Canadian content, it seems that made politicians and the regulators happy. As Bruce Cockburn says, “The trouble with normal is it always gets worse.”

I'm thinking that for years we've seen this continual decline in terms of commitment from broadcasters and what they're willing to put out. They feel that as long as they have something Canadian on, we're happy.

But you talk about the possibilities with the foreign markets now, as independents. Can you explain to me how you see, in a digital age, instead of being on the defensive all the time, we can actually go on the offensive and get some of our great cultural products out there in a way that was never possible before?

[John Barrack]

Thank you very much for that question. That's really the essential question we're grappling with, as an association.

One of the things, quite frankly, we turned our minds to about a year ago was to consider how we could take Canada to the world. There are limits to the domestic market. Obviously, it's about quality. Obviously, it's about professional content.

We talked about this gatekeeper function again. Right now, so many of our structures, like the Canada Media Fund, for example, require a broadcaster to be involved to trigger anything from the tax credits on through to accessing moneys from the Canada Media Fund. We think that's a little wrong-headed, quite frankly, because we think if you want to take Canada to the world, if you really want to grab that market, Canada has a very unique opportunity to do so. Why is that? It's because we have been producing at price points and at quality points that make us very nimble. Back to Peter's point, it makes us very, very nimble as a production environment. We are an excellent production manufacturing environment. We can work with small and intermediate-sized budgets; we can turn around high-quality content; we have the talent; we have the crews; we have all of the infrastructural inputs to be able to do that. But we can't be hamstrung in our own country by having these gatekeepers effectively holding that money up in an environment where, frankly, there's a real constraint on shelf space.

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

So you're saying we should change the regulatory requirements in terms of independent production being able to access the tax credits to all the video funds, because right now you have to get the deal with the broadcaster. Once again, you have to go and live in the castle with the feudal lord and get what he gives you.