Canadian Heritage Committee on May 25th, 2010

[André Bureau]

—but it also adds challenges. Our imperative is to find sustainable business models. We must adapt our TV and radio services in order to remain relevant in the broadcasting value chain in light of the emergence of new competitors; we must invest and progress in the interactive media and evolve in order to remain connected to our audiences.

We have followed the hearings of this committee over the past few weeks and have drawn two principal conclusions therefrom. First of all, the scope and complexity of the unresolved issues we all face, whether they be (a) public initiatives for the creation of a Canadian digital content, namely funds, tax credits for production, assistance in the digitization of content, assistance for the development of talent; (b) the current copyright scheme; (c) access to the new distribution platforms by both consumers and creators; (d) the adequacy of the current regulatory system in light of this new environment; (e) piracy; (f) Canadian ownership rules; and (g) the impact of international treaties on the ability to adopt measures favouring Canadian businesses. This situation is further complicated by the fact that the policies and rules originate from several stakeholders, organizations, or government departments, without the optimum coordination necessarily being present.

Secondly, while the debates have clearly been informative and have better enabled us to identify the collective issues, it is, we submit, unfortunately not in the space of several hours and individually in a one-hour timeframe that one can propose exhaustive solutions. It seems to us imperative that we take the time and take advantage of the existing expertise to find solutions together.

We have built the Canadian broadcasting system on a solid foundation based on public policies and with contributions of the pillars of the system: private and public broadcasters, independent producers, and broadcasting distribution undertakings. Our Canadian broadcasting policy has provided the necessary conditions to enable the creation of and access to content that reflects Canadians' distinctive perspectives and ideas. It has been a key measure in supporting a Canadian cultural sovereignty within the overall North American context. It has also enabled the development of an important and vibrant Canadian economic sector.

Sophie.

[Sophie Émond, Vice-President, Regulatory and Government Affairs, Astral Media Inc.]

Let's make sure that we do not lose the benefit of all that has been achieved in the latter sector, which provides a true showcase for Canadian creators and Canadian content.

What we submit to the committee today is that the time has come to consult and develop together a new comprehensive policy for the Canadian communications sector in its entirety, covering the broadcasting, telecommunications, and new media sectors, perhaps under the leadership of a new, unified communications department.

In this respect, we submit that an expert panel should be mandated with reviewing the current broadcasting policies, holding industry consultations and receiving expert studies in order to make concrete recommendations to the government, both with a view to developing an orderly transitional strategy and proposing a new national policy that is adapted to the reality of our global and multi-platform environment. Such panels have been successfully established, a few years ago, with regard to telecommunications matters as well as in the course of reviewing Canadian competition policies.

Until then, certain specific steps could also be taken, such as simplifying the management of copyright by the Copyright Board and the implementation of certain specific income tax credits and the long-term maintenance of the Canadian Media Fund.

By way of conclusion, Canadian broadcasters remain a key element in the landscape in order to ensure the development of a professional and high-quality Canadian content in new media. Let us, therefore, provide them with the best possible conditions for a successful transition toward this new multi-platform environment.

Thank you for your time.

[The Chair, Conservative, Gary Schellenberger]

Thank you very much.

We move on now to Corus Entertainment and Mr. Maavara, please.

[Gary Maavara, Vice-President and General Counsel, Corus Entertainment Inc.]

Good afternoon, Mr. Chairman Schellenberger and members of the committee. My name is Gary Maavara. I am executive vice-president and general counsel of Corus Entertainment. With me today is Sylvie Courtemanche, who is vice-president of government relations.

Mr. Chairman, members of the committee, Corus very much appreciates the opportunity to take part in this proceeding. We believe it is important for us to outline our perspective on digital interactive media markets in Canada and abroad. As you know, Corus is one of Canada's leading media and entertainment companies. We have extensive radio holdings across Canada that serve the ridings of almost all of the members of this committee. We have several national specialty and paid television services and three over-the-air television stations serving the communities of Peterborough, Kingston, and Oshawa.

We employ people across Canada, from Quebec to B.C. We also own Nelvana, one of the world's premier producers of children's animation programming. Our program library currently comprises some 3,300 half-hour episodes of Canadian-produced and co-produced content.

Kids Can Press is Canada's largest publisher of materials intended for children. Some of our brands in that book company include the popular Scaredy Squirrel and Franklin the Turtle, and the iconic Babar, who is everyone's favourite elephant.

Over the past several years we have been exploring new and innovative ways to capitalize on new technology-driven markets. To accomplish this we have been continually upgrading our physical plants and training our employees so that we can remain relevant to Canadians. For example, we are two days away from moving into Corus Quay, which will become part of the rebirth of the east end of Toronto's waterfront. The mega-million-dollar investment will establish one of the world's most sophisticated media centres.

We are making this investment in recognition of the fact that we need to be able to compete with the best that the world has to offer. We are competing with the world, and the world competes with us right here in Canada.

Corus provides Nelvana-owned Canadian content to multi-platform channels such as KidsCo in Europe, Asia, and Africa, and qubo in the United States.

We also have a direct-to-consumer digital download strategy. The result of all this is that today, our productions are available in more than 160 countries worldwide in more than 40 different languages.

Why are we talking about foreign markets, you ask? Of course because that is where the market is that will allow us to expand our Canadian presence. New technologies are not just about threats; they provide us all with opportunities. But we must be thoughtful, nimble, and strategic to succeed.

[Sylvie Courtemanche, Vice-President, Governement Relations, Corus Entertainment Inc.]

In our recent appearances before the CRTC, we have argued for an approach to policy and regulation based on what we call the Corus “big six”. We think that our big six principles are particularly relevant to this proceeding. Allow me to list them one at a time.

The first principle is to embrace the merits of fostering a Canadian-owned but globally competitive industry. It must be explicitly recognized that we compete in the world market. Of course this has always been the case in traditional broadcasting. Our policies are built upon the realities of our small market, which evolves in juxtaposition to a huge market. Digital media simply broadens the scope of the problem. The adjacent market is now the whole world.

Government and regulatory bodies must align their domestic policies and rules so that we can have a Canadian-owned system that is globally competitive. We can no longer shelter our domestic market. The barriers that we have built to protect Canadian media can become a confining trap if we are not mindful of the change.

The second principle is to increase the probability of success of the Canadian media industry by encouraging the creation of larger and stronger enterprises.

Corus is a significant player in the Canadian market, but we are very small on a global scale. Google spent roughly US$1.5 billion on research and development in 2007. That amount is greater than the revenue last year of the entire Canadian radio industry. So we must all recognize that the problem is worse in the digital realm than it was in traditional broadcasting. This makes it very challenging to fully participate in the new media world.

The third principle is to develop a Canadian industrial strategy for our sector. As has been the case in other industries, we need to look at our business from a strategic perspective. Strategic thinking means making decisions about what the priorities are for the system. That was one of the themes raised during the Canada 3.0 Conference.

As an immediate first step, we recommend the creation of a panel of experts to report on the state of the media environment and about what government should do. This approach was successfully implemented with the recent telecommunications review panel, as well as with the process that led to the Caplan-Sauvageau report in 1986.

The fourth principle is to recognize that private media enterprise success is what will lead to a stronger cultural system, not the current system of progressive fees, conditions and tariffs.

Imposing a regulatory system of conditions, tariffs and quotas on new media participants will not promote a greater Canadian presence in new media. In fact, it is likely to have just the opposite effect. Furthermore, the commission should make no attempt to regulate the new media activities of Canadian broadcasters. As we have said, this would only inhibit, not enhance, our ability to prosper in the digital universe.

[Gary Maavara]

Five, allow Canadians to experiment. Recognition of this principle is also key to new media. By their very nature, new media initiatives are risky, business plans are uncertain, and ultimate success is very much a matter of trial and error. In that type of dynamic, rapidly moving environment, we must be able to experiment, to innovate, to try out new ideas. We must be nimble and able to react quickly to take advantage of new opportunities when they arise. Regulation of our new media activities, no matter how well intentioned, can only hinder our participation in the new markets.

Six, recognize that our small market requires that government continue its support of the research, development, and implementation of intellectual property. One of the observations made at the Canada 3.0 conference was that technology is only as good as the people using it. Yes indeed, and we need to invest in the training and research to better understand how we will implement these new technology tools.

Mr. Chairman and members of the committee, those are the Corus big six. In short, we need to be able to experiment, to innovate, and to react quickly to new opportunities. That is the only way we will find out what works and what doesn't work with consumers. In our view, many of the current regulatory approaches are counterproductive. We fear that they stifle innovation and creativity and make it even more difficult to assure a meaningful Canadian presence in the content delivered over new media platforms.

Based on our experience and successes to date, we believe this is exactly the wrong approach. Instead of trying to regulate new media broadcasting, the government should be attempting to better understand it, and it should be aiming to identify and remove existing policy and regulatory barriers that limit the ability of the existing broadcasting system to fully exploit digital interactive media markets.

Mr. Chairman, that concludes our remarks. Thank you for your attention. We would be pleased to respond to your questions.

[The Chair, Conservative, Gary Schellenberger]

Great. Thank you.

I think going forward we're just going to have one round. It will be seven minutes, and we'll stay to the seven minutes. You can share, split time, or whatever.

Ms. Dhalla, you can go first.

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

Thank you very much to our witnesses. Due to our limitation, I'm actually going to be splitting my time with my colleague, Scott Simms.

First of all, I want to thank both of you for appearing before the committee. I think that in your own respective ways you have been visionaries and have provided a lot of leadership to the industry.

I actually want to address this question to Mr. Bureau, who I guess is viewed in some ways as a pioneer for his leadership and vision within the broadcasting and telecom industry. One of the initiatives you have been pushing for quite a while is a unified communications department to take a look at the way government is doing things now and perhaps provide the innovation, creativity, and leadership to do it differently.

You've mentioned a couple of those ideas within your presentation as well, some short-term ideas and also long-term goals. Could you perhaps provide to the committee an expanded approach to your vision of having a unified communications department, what that would entail, what it would look like, and why you think it's necessary now?

[André Bureau]

Thank you for the question. Thank you for calling me a pioneer and not a patriarch.

[Voices]

Oh, oh!

[André Bureau]

I've lived through different governments, whether I was at the CRTC or in business, always in the media business. I've seen the benefits of having one department in charge of both telecommunications and broadcasting at the time, and having one vision for the future.

As a matter of fact, the rest of the world came to see how it worked here and couldn't believe that we would have one regulatory authority, for example, for both telecom and broadcast when they had separate ones in most of the countries of the world, and the same thing at the level of the department. It's too bad that at some point that's been split—not because of the individuals involved at all; I'm talking about the vision of the government, the possibility to look ahead and have a coherent approach to all the issues that are coming up.

When we listed some of them that you've heard here during these hearings, we recognized easily that they all are interconnected, that they all have an impact, one on the other. To have different departments, different organizations taking care of these inevitably brings complexity, difficulties, and double approaches that are sometimes in conflict.

So we believe it's already complex enough. It's already going so fast that we need to have one department that will look at all these elements together.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

I'll direct my questions toward Corus, and please weigh in if you wish to.

Content is king, or at least it is about to be. In a submission on February 26, 2009, you talked about new revenue models. You talked about less regulation, which you've talked about in your discussion here. But here is a situation. The way I see it is that with less regulation you have more of an open free market, which sort of bypasses many cultural norms, or cultural ways of communicating. Let's say we open it up and there are no regulations whatsoever, so Fox in the United States decides they are going to open up a new affiliate, Fox Toronto. Global loses The Simpsons and the rest of the programming on Fox. You, in effect, would lose--I am assuming, and correct me if I'm wrong—all broadcast rights to HBO, because you are HBO Canada. Are you willing to sacrifice that?

What I'm saying is that you have Teletoon. You have these networks that cherry-pick from American programming. I'm not trying to be aggressive or adversarial, but I'm not sure this is the way to go completely, although I congratulate you on what you are doing on content. Are you saying you want to throw all of this out?

[Gary Maavara]

No, we're not saying that at all. We don't have the time today to get into the details of what we're looking for in terms of regulatory improvements and what we think should be set aside--

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

You mentioned here that it's stifling and not very innovative. What exactly are you talking about?

[Gary Maavara]

In the new media sector, for example, we're facing a process right now under which we're being asked to report on our new media activities. Reporting is inherently inefficient, and it requires us to devote attention and resources to making reports, when, frankly, first of all, the information we'll be giving to the government is irrelevant and, second, doing so will cost us resources.

Let me get back to your question about Home Box Office and channels like that. First of all, Fox is already here. They're available for the most part on every BDU market in Canada. But let me tell you about a practical change that has occurred in the industry. I've been at this since 1973 and have spent a lot of my career offshore working in other markets. One of the things that used to happen when we went to New York was that people were very polite with us. At the end of the day, they didn't really care about what we thought very much. As long as the cheque didn't bounce, everything was terrific.

There has been a sea change in that, and the thing we have to understand about Canada is that we are really, really, really very good at this. We are among the best storytellers in the world. The only constraint we have in Canada is the size of our domestic market. When we go to New York, we have a partnership, for example, with Hearst on Cosmopolitan Television. We're running the only English language channel of its kind in the world. There isn't one in the U.S. now. People really pick our brains. Whenever we have a board meeting, for an hour and a half after the meeting people are asking about how it's going.

We have partnerships with Viacom. When Astral and Corus did the deal with Home Box Office, Home Box Office did that deal because they understood that we understood this market better than they did, and this notion of them just dropping a program service into Canada wasn't necessarily the best way to go. It is better to have a local operator who really understands markets. So on the one hand, yes, we want to continue some of those roles, but the only way ultimately that we are going to succeed in the Canadian market, or in any other market, is by providing the absolutely most interesting service that those consumers want and need.

[The Chair, Conservative, Gary Schellenberger]

I have to cut you off because we've gone to seven and a half minutes. I'm sorry for that. You might be able to ask a question later.

Mr. Pomerleau, go ahead, please, for the next question.

[Roger Pomerleau, Bloc, Drummond, QC]

Thank you, Mr. Chair. I would also like to thank the four witnesses for their presentations.

Mr. Bureau, you have spoken in quite some detail about the complexity of the various questions we are addressing as part of our study, whether it be copyright or other rights, regulations or international competition. You have drawn up an extensive list. All of that goes to show that this is a truly complex issue.

Under the circumstances, the solution that seems to be your priority—which seems to be shared by Corus—is the creation of an expert panel to make concrete recommendations to the government following an in-depth study.

Who do you believe should be part of that panel? Who would be the most suitable candidates, taking into account that they would have to remain impartial?

[André Bureau]

I think we need people like Tom Jenkins to be part of such a panel; people who have the expertise needed to understand the development of new media, and people who have had or who have good knowledge of our broadcasting system and today's new telecommunications sector. They have to be able to combine the two, so that action taken in one sector does not harm the other, in order to support even more stimulating development in the future.

I obviously do not have any names to give you, but I do think we need those three types of experts. There is no need to have 10 of them, perhaps a maximum of 6, but at least three should have that kind of expertise. We might also like to see someone with an in-depth understanding of all things financial, as well as someone who is more versed in the policy side, in order to consider how tomorrow's policies should be crafted.

[Roger Pomerleau, Bloc, Drummond, QC]

Very well, that answers my first question.

I would have another one for officials from Corus, whether Ms. Courtemanche or Mr. Maavara.

You indicated, as part of your fourth principle, that we should not look to increase the current level of regulations. You said that: “Imposing a regulatory system of conditions, tariffs and quotas on new media participants will not promote a greater Canadian presence in new media. In fact, it is likely to have just the opposite effect.”

Could I ask you to clarify your thoughts?

[Sylvie Courtemanche]

That is in the context where we have to compete with the rest of the world. If we are required to follow rules that will compromise our ability to compete globally or have quotas that are higher than those of any other industry stakeholder, who would have free rein in our market, then that would really compromise our capacity, since, financially speaking, we would have obligations that would be greater than those of our competitors.

In the past, we had a national system, one that was truly and practically closed off to the rest of the world, and which allowed for the setting of quotas and obligations to be met by all industry stakeholders in Canada.

In the new media environment, where we must compete globally, that would put us at a disadvantage and really impede our ability to innovate and prosper. As Mr. Maavara said, ultimately, the way to reach consumers and audiences—and this is what we are trying to do—is to offer them excellence in programming. It is the excellence of our products that will set us apart from our competitors, and we will only achieve that objective if we have the freedom to innovate and experiment.

As things stand, we have no idea of what our business model will be; no one does, but we do know that we have to take risks and give it our best shot. That is how we will achieve our goals. However, if we are not given that freedom to take risks, because we have to meet all kinds of obligations, then that could have a really detrimental impact on our environment.

[Roger Pomerleau, Bloc, Drummond, QC]

I have time for one more question.

Mr. Bureau, you have spoken about money—well, everyone has spoken about money, but you spoke about it more specifically in your last answer. From what I've heard since we started studying this issue of digitization, we are facing a revolution of sorts, somewhat like the industrial revolution of the 19th century, where money had to be invested in very risky propositions, for example the railway. Building the railway was not an easy task, but we know that Canada was finally built on the railway: cities, land, buildings, migrations, the building up of the territory. The consequences of this were extraordinary, but it cost a lot of money. I think that we are facing a problem of this nature.

How come you're having so much trouble getting venture capital from financial institutions?

[André Bureau]

I wouldn't say we're having trouble. When you have a solid proposal, you don't usually have trouble obtaining money to finance acquisitions or new projects. What I believe we should have is more incentives to undertake this kind of project, to take this kind of risk. This does not mean that we should replace funding by private financing, what we should have is an incentive so that people are willing to take this risk and to launch new products or to enter new fields.

In Canada, the communication sector is probably one of the strongest in economic terms. It is a sector that employs a large number of Canadians. Canada is lucky to have a very robust economy, especially in communications and related fields.

We're not asking the government to pay us to grow the system. What we're saying is that there should be more incentives which would encourage us to take risks. Those who normally provide funds to us and who trust us will come along.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Angus, please.

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

Thank you.

This has been a very interesting discussion.

Mr. Maavara, I really liked your issue about the need to allow for experimentation. I mean, if we're going to make good television, we have to make bad television.

But it seems to me that what's impeding innovation is not any CRTC obligations; it's mostly that the big broadcasters don't want to spend any money on anything that's risky. So what we get are cookie-cutter shows that aren't going to offend anybody. We get something that's generally boring because it will pass enough focus groups, and then, by and large, new audiences stop watching because they can actually go online and see all kinds of interesting and different stuff.

How do we make sure, if we're going to maintain a system with the tax credits we have in place and with the enormous investments we make, that we're actually going to get quality products, so that some of it's going to be great and some of it's going to be really bad, but people are investing in it? I don't see that happening in the broadcast field right now.

[Gary Maavara]

Well, I'll have to take issue with that.

First of all, on the spending, Astral has numbers, but I can tell you that just on the 3,300 episodes I talked about, our expenditure was $1.1 billion—billion—and those programs are seen around the world. We have the number two and number three most popular kids' shows in the United States market. We have--