Canadian Heritage Committee on May 13th, 2010

[The Chair, Conservative, Gary Schellenberger]

Enough hockey; enough hockey right now. Remember, we're only halfway through the playoffs.

I call the meeting to order. This is the Standing Committee on Canadian Heritage.

This is meeting 15 of the Standing Committee on Canadian Heritage, held pursuant to Standing Order 108(2). The orders of the day are the study on the emerging and digital media: opportunities and challenges.

This morning, for the first hour, we have two gentlemen as our witnesses: Tom Jenkins, executive chairman and chief strategy officer from Open Text Corporation; and, from Score Media Inc., John Levy, chairman and chief executive director.

With that--

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

Mr. Chairman, as a point of information, are we discussing motions today?

[The Chair, Conservative, Gary Schellenberger]

No, there are no motions today.

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

Thank you.

[The Chair, Conservative, Gary Schellenberger]

Mr. Jenkins, go ahead if you would, sir.

[Tom Jenkins, Executive Chairman and Chief Strategy Officer, Open Text Corporation]

First of all, thank you for inviting me to come and speak before you.

Looking around the room, I don't think any of you know me, and I don't know you either, because I don't come from the cultural world, per se. I'm a Canadian but I'm an engineer, a techie--one of those digital guys--and I've spent most of my career working in the digital world.

The company I'm part of is located in Waterloo, but it's based in many other centres throughout Canada. It's Canada's largest software company. What's interesting about that is not that we're a software company, but I've spent most of my adult life outside of our country; we're a billion-dollar firm, but 95% of our revenues come from outside of Canada. So we're a so-called 5/95 company.

I've spent probably the last 25 years working in the Internet to enable a lot of other cultural industries and nation-states and what have you. We make software that probably about one in three people use every day on the Internet. We make it for companies like BMW or the BBC or FOX News or Canal 5, etc., so we do this throughout the world.

That led me to getting more engaged in Canada, because a few years ago I realized that when it came to digital technologies, Canada was not adopting them as rapidly as I was seeing them being adopted elsewhere in the world, or in the different ways that were occurring elsewhere. So I got involved with several initiatives, one being a federal centre of excellence that was created two years ago, called the Canadian Digital Media Network. It was a so-called CECR, a centre of excellence for commercialization and research. The idea was to bring together all the various types of organizations in the country--from universities to private sector to public sector and so on--to start talking about this and start sharing research and what have you.

Perhaps the most compelling thing that's occurred in the short time since this centre was created is that it has run two national conferences. I've just come from the second conference, called Canada 3.0, held in Stratford just in the last two days. What I found very interesting--and I hope this will give everyone on this committee encouragement--was that it was like going to Woodstock; not that I'm old enough to have gone to Woodstock, although I'm almost old enough. There were many passionate Canadians there. There were 2,000 people there. The first year we were expecting 500. This year we expected around 1,000. We had so many people come, and yet we had not really advertised this conference, not through all the normal means. It was certainly adopted virally. We had a lot of people come.

I thought I'd share with you some of the things I heard. The sharing is just to give you an idea. There will be more fundamental documentation available to you as well, but the conference occurred just 48 hours ago. However, in keeping with the digital media theme, the viral or virtual aspects of the conference were available to all Canadians. We had more than 2,000 people participate online. If you want to go through the tweets right now and the blogs and what have you, you're welcome to do that. All the videos are up on the various sites to do with the conference.

Formal documentation will be created in three waves. Neither I nor the Canadian Digital Media Network is advocating anything. We're just trying to have a conversation about the impact of digital. In terms of the three waves that you'll see, in the next few days the conference chairs are going to create a communiqué that will be published for everyone to see, which will basically summarize what I hope to summarize for you right now. In about a month's time, the group will provide a written summary that's more fulsome, about 40 pages, that summarizes all the debates.

Just to give you an idea, there were 2,000 people, and they were broken up into five session themes, and there were session chairs who ran each of the session themes. So it was a very collaborative conference. You'll see that if you have a chance to read all that stuff.

Finally, there is a virtual site to which there are more than 3,000 people blogging and collaborating in a social media context--sort of like a Facebook--about the impact of digital on the country from a whole variety of perspectives. Just to give you an idea, of the 2,000 people who were there, there were 500 youth from either the university or high school level. Of the remainder, about one-third was from the public sector, one-third from the private sector—that's from the creative community and the like, toolmakers and tool users—and then one-third from the public sector.

Among the things that were debated was the issue that people generally thought our country needs a goal that encapsulates digital as a means of delivery. We've--maybe clumsily--referred to it as a “moon shot”. Some of the people at the conference said that's an American reference, and maybe this should be “beyond the next spike” or something like that.

The point is that to captivate all Canadians in this and to really explain to maybe the non-digitally literate, it would be wise for us as a country to have a goal. What that goal might be is something open to debate, obviously, but we did talk about some of the things that might be in such a goal.

The other thing that was interesting about this conference was that there was a measure of frustration--these are people who obviously are already very engaged in the digital world, which is why they came--and there was a lot optimism about the opportunities for the future. So it was a mixed bag.

The other thing I found very interesting in the group was if you're under 25 years old now, you don't measure yourself perhaps the way the above-25 do. They have a very interesting split of being Canadian but also global. Again, I'm not a social scientist, etc., but it's a fascinating thing that you could easily notice in this conference that they have a different perspective perhaps from the over-25 crowd.

The other thing that became very clear is there are new and old business models that are completely in conflict with each other, the so-called long tail of how to recoup any kind of endeavour, whether it's cultural or any other. These business models are different and there is a transition, and it's a pretty brutal transition.

There was a great concern at the conference that if we didn't act soon on some things we would become a digital colony, and a colony not unlike the country experienced maybe 40, 50 years ago prior to the formation of the tri-councils and all the efforts that were made during the 1960s and 1970s. So there's a great angst about that, because one of the great data points we had presented to us is that depending on how you measure it, between 1% to 4% of all the content in Canada is digital, and that means either 99% or 96% is not. That's something I've noticed as I've travelled the world. Other nation-states have pretty substantial digitization efforts under way and we do not. We are not going to pass on our culture if we do not have it digital. If you're under 25 and it's in a book, you don't read it. You go online.

We have some great debates about connectivity in the country, but if we're just simply connecting to content outside our country, maybe we have to think about our goals a little bit more.

Digital literacy had no debate at all. It was clear: we need a program of digital literacy, very much in the same way that we would have thought of literacy 100 years ago as we moved from the farms to the cities and started to require people to become knowledge workers and to be able to read.

There was a big debate on the goal, about whether the goal's aspirations should be about economy or about our country as a nation. Again, it was a debate, and I think it was a fascinating one.

Something that I think you might find interesting, because I know you have a cultural focus, is that unlike other efforts...and this perhaps is the most important thing to remember, if anything, from anything I've told you. In the past, when we had radio signals or TV signals, you could discriminate what was cultural against what was business, etc. Take phones; you could maybe torture it and say they were both cultural and business. In the data world, with digital bits and bytes, if I'm sending an accounts payable invoice, or if I'm sending a song, it's on the same conveyance.

This goes to the heart of productivity and our country itself. How do we organize ourselves digitally? It's not an easily defined thing. Perhaps that's the greatest challenge with digital: it impacts everything. There is just not one part of our socio-economic structure that is not being impacted by this. So it is very much a centre-led type of thing, and I think that perhaps is one of the great challenges.

Along with productivity as a benefit, at the conference everyone talked about health care, and how health care in general in our country could benefit greatly by the adoption of digital.

The last thing to leave with you is this. There did seem to be a consensus among people that there were three themes that needed to be dealt with in the digital world and how it impacts culture. It came down to connectivity, content, and collaboration. They were cute to use three Cs, but what they meant by it was that, first, connectivity refers to speed and the fact that it's available; content refers to digitizing something or else it just does not exist in this world; and collaboration refers to the ability of people to have access and to have the digital literacy to be able to make use of those tools.

I'll stop there. I'd be happy to take any questions about these activities and my experiences.

[The Chair, Conservative, Gary Schellenberger]

Thank you for that.

Now we move on to Mr. Levy, please.

[John Levy, Chairman and Chief Executive Officer, Score Media Inc.]

Thank you very much.

Just to start out, I'm not a techie, I'm a sports guy. What's interesting is that Tom and I just found out that we live in the same neighbourhood. Tom works out of Waterloo--and lives there as well, I presume--and I'm from the city without a hockey team, being Hamilton. We did have some connections there, because one of the other guys in his neighbourhood almost brought a hockey team to Hamilton, which we probably all remember.

So it's nice to see sports shirts in this room.

[An hon. member]

Especially the red ones.

[An hon. member]

Hey, easy.

[John Levy]

Listen, I'm from Hamilton, so I don't really care about the blue ones either.

[Voices]

Oh, oh!

[John Levy]

So good morning, members of Parliament and committee staff. My name is John Levy, and I am the chairman and CEO of Score Media Inc.

I'm here to talk about developments in emerging and digital media, how they are affecting Canadian cultural industries, and what federal institutions can do to assist Canadians and Canadian cultural industries to benefit from these developments.

Before I do so, I'd like to tell you a little bit about my background and about Score Media, because it's entirely relevant to why I'm here today.

I'm one of the few people in the Canadian communications industry who has had the privilege of being both a small cable system operator and a small broadcaster, thus bringing a unique perspective to this hearing. Before founding Score Media in the late nineties, I was the controlling shareholder of a company called Cableworks Communications, which was one of Canada's first cable TV systems. Cableworks was in fact founded by my father in 1959, and it grew to serve over 65,000 subscribers in the Hamilton area. I literally grew up in the Canadian cable and broadcast industries, and experienced first-hand the growth and transformation that was spurred by the introduction of specialty and pay-TV services and new technologies, including microwave transmission, fibre optics, and satellite communications.

At Cableworks, we were also one of the first Internet service providers. We launched a dial-up ISP business to prepare for the rollout of high-speed Internet over cable, which has become ubiquitous in less than a decade. As I will discuss later in my remarks, the proliferation of Internet access and the resulting ability of individuals to connect and share content instantaneously is, in my view, the most fundamental technological shift we will ever experience in our lifetime.

At Score Media we have invested heavily to make sure we are present and relevant at every important media platform, because that's largely where our 18- to 34-year-old fan community lives. Our core assets include The Score Television Network, which is a national sports, news, and information specialty service available in 6.7 million homes across Canada; Hardcore Sports Radio, which is a sports talk radio channel distributed across North America on Sirius satellite radio; and Score Media Ventures, our digital media division that operates our website, thescore.com, our mobile applications, which we're going to talk a lot about, and our interactive TV applications.

While we've enjoyed significant growth from all of our new platforms and from our TV network, we are particularly proud of our mobile application. In June 2009 we launched ScoreMobile for BlackBerry smartphones, a product that has significantly propelled our brand both at home and internationally. A huge success in North America, with over 70% of our ScoreMobile users now coming from the U.S., our BlackBerry edition of ScoreMobile now has over two million downloads, which is a significant milestone for a Canadian corporation playing in this highly competitive industry. In fact, ScoreMobile on BlackBerry is currently the number one free sports application on BlackBerry anywhere in the world--and we're obviously very proud of that.

We have also had great success with our iPhone application, which has generated over a million and a half downloads since we launched it in July 2008, with over a third of these downloads coming from the States.

Combined, the applications generate--this is how we're measured, and this is how we sell advertising, which we'll talk about in a second--more than 1.3 monthly unique visitors, and we have over 50 million monthly page views.

Our new media platforms are an integral part of our operations and of our growth strategy. We very much consider them as independent platforms for growth in their own right, both inside and outside of Canada.

In addition, from a financial perspective, our revenue growth is reflective of our focus on these platforms as meaningful businesses. Nearly 10% of our advertising revenue is currently generated through our new media platforms, and we expect to grow and accelerate these exponentially in the years ahead. Our new media platforms are also meaningful, positive contributors currently to our operating profit.

We're an innovative company that is constantly moving and changing to stay ahead of the curve. In order to compete both internationally and globally, we have chosen to focus on digital and emerging technologies as the touchstone for our growth strategy.

I've taken the liberty of looking at a couple of the questions that were asked, and in advance of questions, I'll try to respond to some of them.

First, how are developments in emerging and in digital media affecting the Canadian cultural industries? Of course there are countless ways in which new media affects all industries, but we believe that the most important of these, with respect to Canadian cultural industries, is that technology has democratized the distribution of knowledge and of authority.

It is axiomatic that the barriers to entry for content producers have been eliminated. Anyone who has a desire to become an expert online and develop an audience can do so without a need to convince a traditional middleman--i.e., the broadcaster. That person can directly access his or her own audience and build trust and authority independent of mainstream media. This is unprecedented in modern history.

The key is for cultural businesses and industries to find ways to take advantage of these opportunities that afford this opportunity, rather than remaining mired in old models. For example, The Score has leveraged this phenomenon by using the Internet as a discovery mechanism for new and emerging talent. Some of these examples are The Basketball Jones, which is a group of four comedic basketball experts who have developed a substantial online following for their clever, cutting-edge video and podcasts; Paul Brothers, an individual who won a contest we ran called “Drafted”, which was an innovative cross-platform search for Canada's next top sportscaster, and we did this in partnership with Procter and Gamble; and lastly, the bloggers in The Score Sports Federation, which is an aggregation of the best sports blogs all across this country.

These individuals, whose offerings now form the core of our web content, were brought to The Score because they used the Internet to grow their own brand and their own profiles. The reality is that we, as the broadcaster, need them more than they need us; I hope they aren't listening to this. But this represents a fundamental shift in the balance of power and this is why we say that knowledge and authority have become democratized in a totally whole new way. This shift must be recognized and in fact embraced by all cultural institutions. Any institution that does not embrace the web as a wide-open democratic playing field will, we believe, quickly become irrelevant, and those who have learned to how to maximize the opportunities afforded by this new openness will take their place.

New technology has transformed media into a utility. Specifically, technology now allows media to be manipulated and shared. Traditional media that, via passive consumption, cannot be manipulated is quickly losing its appeal to today's audiences. For example, the Internet is a perfect environment for reward and response. At our company, we can track who “fans” us, who shares the content the most, and which Score talent has the most engaged followers. Technology turns media into a two-way conversation. It's a current. Our fans can become talent, and our talent become our fans. This, again, is a phenomenon that needs to be embraced by cultural institutions if they want to remain relevant.

Finally, we would like to comment on the policies that the federal government might adopt to help Canadians and Canadian cultural industries benefit from developments in emerging and digital media, and we've talked about this in front of our regulator, the CRTC.

Specifically, we believe that net neutrality must be a cornerstone of the Canadian communications and regulatory policy so that a level playing field exists for all content producers, whether they're vertically integrated with Internet service providers, ISPs, or not.

As a small, independent Canadian sports player, we have learned how to be nimble in a business where our competitors are huge sports media giants and vertically integrated distributors, and with businesses where sports leagues often hold most of the bargaining power to operate their own platforms.

In this environment, our success has come from respecting our audience, tapping into communities, and providing honest, authentic content. But we would have had no opportunity to succeed if we didn't have access.

When life began for The Score over 10 years ago as a speciality service, it was the CRTC's access and must-carry rules that ensured that this upstart sports network had a chance to find its voice. If our right to carriage 10 years ago had been left to the discretion of the BDUs, the distributors, this independent voice would not be participating at this hearing today.

In the new media world, the organic and explosive growth of the Internet has created an environment where small companies like Score Media can, with a little creativity, create a global business. Anyone anywhere with access to the Internet is a potential fan. However, as they say, the more things change, the more things stay the same. Today, again, access is critical to survival. In recent years, the power to grant access to the Internet has become increasingly consolidated in the hands of a select few. These ISPs have the power of life or death over every content creator who relies on the Internet to access the users. Many of these ISPs are integrated with content providers, and they have every incentive to use the power they have.

In conclusion, our goal through this presentation was to give some insight into our experiences with emerging and digital media and how we might help foster innovation within Canada.

In summary, our recommendation to the federal government is simple: embrace the democratization of information and authority that the media engenders, and please help keep the Internet open. We are very concerned about the ability of Internet and wireless service providers to act as gatekeepers, either because they are vertically integrated and have an incentive to prioritize their own content, or because they are partnering with major media players and providing preferred access. If we seek diversity of Canadian voices in new media, the Internet cannot become a pay-to-play zone.

Thank you very much. I'd be delighted to answer any questions.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much for those presentations.

We don't have time for two rounds of questioning this morning. What I will do is allow seven-minute questions, and perhaps you'd like to share them amongst yourselves.

First of all, Mr. Rodriguez, I'm giving you seven minutes for questions and answers.

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

Thank you, Mr. Chairman.

Thanks to the witnesses for being here today.

Mr. Jenkins, I'm going to ask you a general question. Which of all the changes that are occurring at a dizzying pace are the main ones that will affect the media world?

[Tom Jenkins]

Again, I'm an observer of the media world, and he's in the media world.

As an observer of the media world, the single biggest thing I see across every country, everywhere I go, it doesn't matter where—Europe, America, Asia—is that the media companies are grappling with what we call the “long tail”. This means that when you sell advertising in the newspaper, you get so many hundreds of thousands of dollars, or $10,000 or whatever...or advertising in TV. But on the web, the long tail refers to the eyeballs that you get for many, many years from that content, and the digitization value is very small.

This is a huge issue for all media companies--all of them. It doesn't matter what regime or what regulatory environment they're in, this is a huge change in the business model.

That's easily the biggest thing I've been able to observe as a toolmaker to the media people.

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

Mr. Levy, quickly.

[John Levy]

I just think everything is upside down. There are no gatekeepers anymore. The end user has complete control of the situation now. Unless those who are facilitating this embrace that, they're going to become redundant. What will happen is the same thing that happened in the record industry, where one minute they thought they could control how people were going to listen to music and what music they were going to listen to, and the next minute those companies were broke. The same thing's happening in the broadcasting industry.

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

Do you two think that we in Canada have the necessary labour force and capacity to train the next generation?

[Tom Jenkins]

Let me first say yes, absolutely we do, but let me then qualify it. We are very fortunate in Canada that we have a very sophisticated.... I don't know how to describe it any more than to say that we have a very sophisticated people. They are as good as anyone in the world. And I know all the people all throughout the world doing this; our people are very good at this, so yes. However, we have many challenges in our country to give them the tools by which to further and keep up. We are a huge country and very sparse, so many of the issues we have are about access. A country like Singapore has a very simple model. If we were just all aggregated together within 10 kilometres of each other, it would be a simple story.

So we have the people, but our challenge is that we need the leadership from the centre, from government, to overcome some of the inherent challenges we have with the tools. Digitization is a big issue. You can be digitally literate, but if we do not have a program to get what makes us Canadians online--

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

With your permission, that leads me to my next question. You mentioned that between 1% and 4% of our content is digitized. That seems very low to me. Exactly what are you referring to?

[Tom Jenkins]

This was a study done as part of the Canadian Digital Media Network and Library and Archives Canada. It is basically the repository of the country. In our country, by act of Parliament—again, I'm not an expert on any of this—after World War II in the early 1950s, we had to microfiche everything that was produced in the country, whether it was books, newspapers, etc., and we started to build an archive. A fantastic archive was built. The trouble is that it's an archive of yesterday. It's not an archive available to our children or to the very same people we are talking about who are digitally literate. We need it updated.

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

If we compare ourselves to other industrialized countries, we have ground to make up. That's what you're saying.

[Tom Jenkins]

There are many opinions on this. Are other countries launching digitized efforts?

First, let me say that the other countries have the same problem we do. They're facing all these issues. Are they a few years ahead of us or a few years behind us? It depends on where they are. You could say Digital Britain understands it, you could say the Bibliothèque nationale de France understand this very well, the Germans understand it, under the Obama administration they've started to make moves on this.

I can't give you a specific credible benchmark. They all have this issue. Some of them are starting to move on it.

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

Mr. Simms also has some questions.