Canadian Heritage Committee on Nov. 25th, 2010

[The Chair, Conservative, Michael Chong]

Welcome to the 32^nd meeting of the Standing Committee on Canadian Heritage, this Thursday, November 25, 2010. Pursuant to Standing Order 108(2), today we are studying the impacts of private television ownership changes and the move towards new viewing platforms.

We have with us Mr. Sparkes, from CTV Inc., and Mr. Bibic, from Bell Canada.

We will begin with an opening statement from Mr. Sparkes.

[Paul Sparkes, Executive Vice-President, Corporate Affairs, CTV Inc.]

Thank you, Mr. Chairman and members of the committee. My name is Paul Sparkes, and I am executive vice-president of corporate affairs for CTV.

As Canada's largest broadcaster, we are pleased to be here today to comment on the implications of vertical integration for the broadcasting industry. At the outset, I should point out that while we are appearing together here today, CTV and Bell are not one company yet. The BCE and CTV transaction still has to be approved by regulators.

At CTV, we are proud of our legacy as Canada's number one private broadcaster. We are passionate about what we do and believe in the enhancement of our national identity through high-quality Canadian programming. Our track record in this regard speaks for itself.

We have created many popular Canadian shows that provide a shared experience for Canadians from coast to coast, programssuch as Degrassi, Corner Gas, Dan for Mayor, Flashpoint, Canadian Idol, eTalk, So You Think You Can Dance Canada , and many, many more, including coverage of some of our greatest awards celebrations, such as the MuchMusic video awards, the Junos, and the Gillers. All distinctly Canadian, these programs have provided an opportunity for us to celebrate who we are and to unite our viewers in a common shared experience.

Our Canadian programming is not restricted to our own airwaves. Many of our shows, including Degrassi and Flashpoint, are currently putting Canadian talent on the global stage.

We are also proud to be the home of Canada's number one national newscast, CTV National News, with Lloyd Robertson. Our local newscasts are also number one in all but one market. Our 24-hour all-news network, CTV News Channel, provides information on breaking news, current events, and politics with Power Play, all of which draw on our news organization, CTV News, to deliver breaking news the second it happens from communities across this country and around the world. In addition, CP24 remains an integral part of the Greater Toronto area as a premier source of news and information.

Sports is also a major component of the programming we offer, both on conventional television and through our specialty properties, including TSN and RDS. One of our foremost achievements, and one that we are very proud of, was being the official broadcaster of the 2010 Vancouver Winter Olympic Games. Our commitment was to tell the stories and make Canada's athletes household names in both official languages. I think you will agree with us that we succeeded on all these fronts.

With Bell buying CTV, we will be able to continue and even improve on this legacy. The reason we have remained a leader in our business for so long is that we have successfully stayed ahead of our competitors and the changes in our industry. As you are aware, the communications sector is being reshaped by technological change. Unregulated media and over-the-top services like Netflix, YouTube, and AppleTV are changing traditional business models.

In response, cable companies and telcos are acquiring content providers to help them differentiate their product offerings. For CTV to survive, we must be part of this change. Cable companies and telcos owning broadcasters is not a new phenomenon. The CRTC has allowed them to own conventional television since the mid-1990s, and specialty and pay services since 2001. Virtually all of our traditional competitors are now vertically integrated, including Rogers, Shaw, and Quebecor. But this is not solely a Canadian phenomenon.

Vertical integration is the new norm internationally as well, particularly in the U.S. But why is all this occurring now? It is a response to changes in the competitive environment and consumer behaviour. Whereas broadcasters could once rely on "appointment viewing", the same content is now available across multiple platforms from numerous sources, regulated and not. This is causing audience fragmentation and revenue erosion. And while CTV is trying to compete by making its programming as widely available as possible, without access to distribution infrastructure we are at a significant disadvantage.

In light of all of this, the best path for CTV to remain a leader is to align ourselves with a company that has a strong presence in broadcast distribution and telecommunications. Companies that both create the content and distribute it will be able to maximize the consumer experience and remain relevant in the media landscape moving forward.

This brings me to Bell's proposed acquisition of CTV. Without doubt, this is the right move for CTV, our viewers, consumers, and the Canadian broadcasting system. Why? Because it allows us to continue to do what we do best.

Without this transaction, we would most likely have been broken up and sold piecemeal to our competitors. This would not only have been bad for the Canadian production community, consumers, and viewers, but it would also have negatively impacted the diversity of voices that Canadians have access to today.

Most importantly, this represents a tremendous opportunity for us at CTV. It will allow us to showcase our content on more platforms, providing an even greater experience for our viewers.

And why Bell, you might ask. Because they know us, and we know them. They have been a shareholder of CTV for a decade. We have a history together. We most recently partnered with them during the Vancouver Winter Olympic Games, where Bell provided mobile video streaming. This included coverage of both the men's and women's hockey games, as well as recaps and highlights of numerous sporting events. Through this partnership with Bell, we had great success building audiences on alternative platforms.

This transaction will provide us with the stability and the confidence to compete with both our regulated and non-regulated competitors, and it provides us with the knowledge that we will be able to continue to bring great Canadian stories to the screen.

Thank you very much for the opportunity to appear, and I'm happy to take your questions.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Sparkes.

Mr. Bibic.

[Mirko Bibic, Senior Vice-President, Regulatory and Government Affairs, Bell Canada]

Thank you, Mr. Chair, and good afternoon, members of the committee. My name is Mirko Bibic, and I'm senior vice-president of regulatory and government affairs at BCE.

First, thank you for providing this opportunity to present our perspective on the important changes taking place in broadcasting. By looking closely at the profound and fast-paced changes under way, we're confident you will see the tremendous benefits for Canadians. More specifically, we're sure you will recognize that our resumption of a controlling interest in CTV, building as it does on a long-standing relationship between BCE and Canada's number one media company, will benefit consumers and add huge value to the broadcasting system in terms of investment and innovation.

The communications landscape has changed dramatically over the last five years. Even over the last 24 months we've witnessed unprecedented developments. Consumers today are able to receive digital content on multiple screens from multiple suppliers through multiple networks.

A seemingly infinite number of choices with respect to content are now available, whether it's for a TV, a laptop, a smartphone, or a tablet. As a result, consumers now have the ability to easily program what might best be described as their own perfect media mix. Our world is changing, posing huge challenges, but at the same time presenting big opportunities for communications and broadcasting companies.

For Bell, video has been an important part of our business for well over a decade, and it remains a key imperative for us today. Since 1997 we have brought tremendous value to the Canadian broadcasting system. Our Bell satellite TV business opened up the 500-channel universe to thousands of rural communities across the country and introduced competition to a sector still largely dominated by cable companies.

Today, video accounts for approximately 40% of Bell's residential wireline revenues, more than our home phone service, quite a story in itself when you think of this company's long history and roots. Just as we led the way there by propelling competition and innovation with the introduction of satellite TV, including the shift to digital, high definition, and personal video recorders, as well as by contributing over $100 million each year to the production of Canadian content, we continue to see ourselves as a leader when it comes to enabling consumers to create their own perfect media mix.

We are achieving this by continuing to invest billions in network infrastructure and by continuing to be a national leader in R and D spending. Over the last two years alone, we have invested over $6 billion. We are continually enhancing our national Bell satellite TV service, we continue to upgrade our world-class wireless high-speed broadband network, and we are well on our way toward connecting more than five million homes using an advanced fibre-based Internet network capable of supporting our recently launched IPTV service, Bell Fibe TV.

As a direct result of the ever-advancing state of our infrastructure, Canadian consumers are truly at the centre of the new dynamic that is emerging. It was reported earlier this year that each month more than 30% of Canadians are choosing to watch a 30- to 60-minute TV show on a website, and more than 20% of Canadians with cellphones or smartphones watch a video clip. The direction is plain to see.

For Bell and CTV, as Paul mentioned, the 2010 Winter Olympics experience demonstrated beyond a shadow of a doubt that by working closely together Canadian distributors and broadcasters can achieve amazing results. But a major question we have to ask is how do Canadians continue to distinguish themselves and be a part of the shifting media mix every day?

The challenge is particularly acute for Canadian broadcasters, especially because of the massive disparities in scale between themselves and similar companies in the U.S., where consolidation is well entrenched. Disney and ABC, Universal and NBC, Sony and Columbia, Viacom and CBS, Fox and News Corp., each of these companies produces popular content and makes it available around the world.

At the same time, a spate of companies, some massive and some relatively small but all unregulated, are entering the Canadian video space. Netflix and Apple TV, the latter part of a $280-billion company, are stockpiling huge catalogues of TV programs and movies and making that content available online via streamed video.

Canada's leading cable companies and Bell's main competitors are also acquiring content. Vidéotron has owned TVA for years, Rogers purchased Citytv in 2007, and Shaw of course recently purchased Canwest.

The key point is that our transaction will enable Bell and CTV to achieve a measure of scale and scope that will support further network investment and innovation. It will also help to ensure the production of more and even better Canadian content. Producing high-quality, popular content can be expensive. The more screens on which that content is available, the more chances you have of attracting the largest possible audience. And the greater the audience, the larger the advertising revenue.

As this unfolds, consumers continue to be in control. They can watch their favourite show at the scheduled time on TV or record it for viewing later. They can subscribe to video-on-demand. They can stream the show on a laptop or tablet when they want to watch it, or they can watch it via a mobile phone.

There are even more options, such as downloading shows from iTunes or buying an entire season at a local retailer. The fact that so many choices exist indicates that today's marketplace is clearly working. And it will remain a dynamic marketplace.

In such an environment, innovative niche content and applications could well be what consumers rely on to differentiate one company from another. And service differentiation has many proven benefits—it enhances competition across the board, forces all players to innovate and provides better choices for consumers.

As an example, Bell is offering customers who are Montreal Canadiens fans access to a half-hour reality show about the players. Starting this weekend, the show will first be available to Bell customers on all three screens—mobile, online and TV—before it is more widely broadcast on TV networks in January. This enhances the viewer experience, gives them more choice and stimulates competition in the online and wireless markets.

It is good for fans, as well as the producers of the show and all those who work behind the scenes.

Another example is a new partnership Bell has with Radio-Canada to offer leading French-language content on Bell Mobility smartphones, Bell Fibe TV On Demand and the Sympatio.ca Internet portal. It is a commercial arrangement that offers clear benefits, especially for consumers.

By combining assets and expertise from two distinct areas of business, Canadian broadcasters and distributors can continue to do more of these things, experimenting with initiatives that help Canadian companies stand out in a world of near-infinite content.

The changes to the broadcasting landscape are therefore certainly positive and should be encouraged. And if any regulatory or competitive issues were to arise, the CRTC retains all the power it needs to respond as required.

In conclusion, committee members and Mr. Chair, broadcasting today stands in stark contrast to the days when Canadians were limited to a few channels delivered to a finite set of receivers, televisions, and radios. Consumers are driving the content bus, stopping at the destinations they choose. But how far that bus travels within Canada and how large the map will be with respect to Canadian points of interest depends on whether or not Canadian broadcasters and distributors have the flexibility and scale to build the destinations Canadians want to visit.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Bibic.

Mr. Simms.

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

Thank you, Mr. Chair, and my thanks to our guests.

Earlier, Ms. Crombie probably brought out the most relevant question to every politician: who's hosting Power Play?

[Mirko Bibic]

You are.

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

With a moustache like this, I can. That's nice to know.

When I was in the industry, I remember going to the conventions, CCTA and CAB. The room was big. There were people, all from different places, different backgrounds, and that room was a lot smaller. As a matter of fact, we could all fit in this one room at one convention.

You mentioned that there is an array of choice for the consumer. There's no doubt about it. I appreciate the investments that you're making across all the platforms for Canadian content. If I'm a producer, if I'm a small television station, if I'm somewhere out there but not part of this large movement towards vertical integration, I have to be worried.

Can you tell us what you are doing to increase the amount of Canadian content and to allow these smaller producers to make a living, so that we can keep all these people employed and doing what they want to do?

[Mirko Bibic]

Let me start with a couple of comments, and then I'll turn it over to Paul.

First, when it comes to this particular transaction, there is no level of media concentration at all. People say that quite quickly, but in this case it's not the case at all. Bell has had an ownership position in CTV for the last ten years. It so happens that we're going from 15% ownership today back to 100%, where it was ten years ago. In the meantime, we don't own any other content assets, so it's not as though we're horizontally merging two broadcasting companies and reducing them to one. It's not reducing that diversity of voices. There are actually a lot of players in the marketplace, large and small.

And I'll give you my distributor perspective, because we operate Bell Satellite TV. We want to carry as much content as we possibly can, given the capacity that we have up in the sky through our satellites. We have hundreds of Canadian services from both large and small producers, and we want to deliver what consumers really want. By marrying this content and content from others with our world-leading networks, we're going to put Canadian content at the forefront.

I have one last point before I turn it over to Paul, which is that this is the reason in our opening statement we pointed out our deal with Radio-Canada. We're obviously not going to have an ownership position at Radio-Canada, but we want their content on our platforms because consumers want to watch it.

[The Chair, Conservative, Michael Chong]

Mr. Sparkes.

[Paul Sparkes]

I agree with Mirko. The current media landscape is staying intact with the Shaw transaction, the Bell transaction. So there will be lots of opportunities for independent producers.

In terms of the smaller independent broadcasters that are in all parts of the country, they serve their markets very well. The consumers--their viewers--rely on them for local news, and I can't imagine they would go elsewhere. I think they're very important to their communities.

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

Just the other day my colleague Mr. Del Mastro said that fee-for-carriage is dead, and that value-for-signal is dead. We went through several months, if not years, of this. Is it now dead?

[Mirko Bibic]

Shall I start? We're here shoulder to shoulder. We're friends, not enemy agents here.

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

I know you're engaged and not married.

[Mirko Bibic]

Obviously, fee-for-carriage, value-for-signal--call it what you will--was a pretty hotly contested issue, and we had our respective positions, and they were diametrically opposed. But the fact is, right now the fate of fee-for-carriage rests with the courts. And we'll be guided by what the courts say. It would be premature to try to determine what the courts are going to do. Whether it's dead or not will depend on what the courts say.

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

Okay.

Mr. Sparkes.

[Paul Sparkes]

My position, CTV's position, has been pretty clear throughout the whole debate. And we were quite pleased when the CRTC made its decision on value-for-signal.

As Mirko said, its fate now rests with the courts. For us, as a broadcaster, we've always said that we need value-for-signal to be able to have the stability in the industry that we need to continue to do the things we do. We're going to be, in the Bell world, a business unit on conventional television. We'll have to stand on our own, and we want to be able to contribute to the success of the Bell family. And hopefully value-for-signal, if it is implemented, will allow us to do that.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Sparkes.

Thank you, Mr. Simms.

Madame Lavallée.

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

Thank you very much.

It is interesting to meet with two companies that are teaming up with one another, as you mention so eloquently in your brief. An example of convergence.

You showed—and please tell me if you disagree—what an important role general-interest TV plays. We can really see that broadcasting distribution undertakings, such as Bell, need cultural content. BDUs without cultural content do not hold much value for consumers. Between us, that becomes clear pretty quickly, but it is still hard to get people to admit that, when it comes to certain issues. That also underscores the role of general-interest television, which serves as a springboard for most of the other platforms. No matter how much focus there is on the Internet, on mobile television, once again we are reminded that production originates with general-interest television.

Do my comments resonate with you? Did that idea not lead to your engagement and soon-to-be-celebrated marriage?

[Mirko Bibic]

Thank you for your question, Ms. Lavallée.

We decided to buy the number one media company in Canada, and we want to keep it at number one. The fact that it was a general-interest TV company was a major consideration for us. We intend to support general-interest TV. We will also be able to expand distribution of CTV's products, whether of general-interest or specialty content, by distributing them to our subscribers with mobile phones and tablet PCs, such as this one. That opens up a lot more opportunities for the company, with more TV viewers and more revenue. We are thoroughly excited about this opportunity.

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

I have a question for Mr. Sparkes.

If fee for carriage had come to fruition, as was suggested last year—certainly a very hot topic—would you have talked to Bell about teaming up?

[Paul Sparkes]

Absolutely. Our shareholders were looking to exit, and Bell wanted to come in and increase their ownership with us to what it was back in 2000. We were very happy with that. So regardless of that debate, we would still have those conversations. But that debate happened.

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

Why were your shareholders looking to exit?

[Paul Sparkes]

It's not that they wanted to abandon us; they didn't see us as strategic in their vision. We had a number of shareholders. Bell was one of them. Bell had the opportunity to purchase us because they were at the table—this is all public information—so the timing was right.

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

Mr. Bibic, the day before yesterday, Claire Samson, from the Association des producteurs de films et de télévision du Québec, told the committee that broadcasters that had partnered with BDUs and that were broadcasting convergent content were making unreasonable demands in terms of production.

Did you hear what she said?