Canadian Heritage Committee on Feb. 14th, 2011

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Lacroix.

Go ahead, Mrs. Crombie.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Mr. Lacroix, like other organizations, CBC receives money from the government to cover salary increases for inflation. We know that about a year ago in the estimates you received your salary funding, but then when the budget was tabled, the government froze all salary increases for agencies and departments. And then when the supplementary (B) estimates came out, they deducted $13.7 million from the $60 million you received. Am I correct?

[Hubert T. Lacroix]

Yes.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

So how have you been able to deal with the clawback? Did you cut salaries? What did you have to do to absorb that $13.7 million clawback from the budget?

[Hubert T. Lacroix]

With regard to the clawback, the $13 million was actually dollars that were given to us in advance. That's why, and this is important, it's not like they took away money. It was clear from the budget that that was what they were going to do, and all agencies and crown corporations were treated the same.

The issue that creates for us, and I think that's the question you're raising, is that we have to fund, through our operations, the salary increases that we did not get for the employees. So for that 1.5%, we have to take our actual operating budgets and cut, or adjust the services that we render, in order to make sure that the commitments we've made to our employees are met.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

You just negotiated a multi-year collective agreement with that 1.5% increase, right?

[Hubert T. Lacroix]

Yes. We have a number of collective bargaining agreements that have been renewed. Actually, they were all overdue, and they had an assumption of a very basic 1.5% increase for our employees.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

In the strategic plan, you expect conventional revenue to increase 2.8%, but digital and other platform revenue will probably skyrocket, right? Are you pursuing other revenue growth initiatives and cost agreements? What are some of the new revenue streams you're--

[Hubert T. Lacroix]

Madam, in our environment, where every dollar that we can raise helps us balance our budget, it's a priority. It's top of mind constantly.

So, yes, the Internet revenues will double, but they will double from a very small number, so when you look at the overall picture of CBC/Radio-Canada in the short term, they're not significant. Over time, they will become more significant. People in our industry understand the business model of how to actually monetize the thousands and millions of hits on our websites.

Advertising revenues will increase, we think, because of the quality of the teams these two people have built and the quality of the programming that Kirstine and Sylvain have been able to deliver to Canadians. More people watch us than ever. That translates into better advertising revenues for us.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Great.

So the non-friends of CBC--and I'm not looking in any particular direction--may say this is déjà vu all over again. One of your predecessors, many years ago, Perrin Beatty, came to committee in 1995 with a similar plan. He said the CBC's funding had just been stabilized under previous cuts by the previous Conservative government, and staff had been slashed, etc. Back then, if you turned on CBC, you would have had a better chance of watching reruns of The Fresh Prince of Bel-Air —you can tell I never watched it—than you would of watching anything made in Canada. And his solution too was more Canadian content and more regional and local programming.

Here we are, 15 years later, with similar kinds of problems and a similar kind of plan. How do we know you're going to succeed this time?

[Hubert T. Lacroix]

We're going to succeed because we've proven over the last years how able we are to produce great Canadian programs. Whether it's on the Radio-Canada side—and we talked about being distinctive a few minutes ago—with a clearly distinctive programming schedule in prime time for television, or having our radio networks being listened to by an incredible number of people, or having millionaire shows now—and by millionaire shows I mean millions of people actually watching more than one show...and because they come to us, we think now that we have the momentum. We are listened to. We are watched. People actually care about CBC/Radio-Canada, and we think that if we do this plan and we focus on establishing the relationship that we need to establish with Canadians and the public broadcasters, we're going to be very successful.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Thank you.

[The Chair, Conservative, Michael Chong]

Mr. Wilfert, you have time for a brief question.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

Thank you, Mr. Chairman.

Mr. Lacroix, what data is CBC/Radio-Canada using to forecast its advertising revenues given the drop-off of revenue in 2009-10? And what accounts for the difference between the projections of the industry and those of CBC/Radio-Canada?

[The Chair, Conservative, Michael Chong]

Go ahead, Monsieur Lacroix.

[Hubert T. Lacroix]

Sure.

We have a number of ways of measuring, and we follow the advertising revenues we have. We look at trends. We think we can beat the 2.4% industry average, because, as I said a few seconds ago, we're doing well and people are watching us. Based on that, and based on simple averages of what we know, we think the 2.8% that is in the budget is absolutely reachable and feasible.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Wilfert and Monsieur Lacroix.

You have the floor, Madam Lavallée.

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

Thank you very much.

I want to come back to the question I asked you earlier about the budget, since your response was incomplete.

I asked you whether, in exchange for stable government funding, you would be prepared to give up a portion or all of your advertising revenues. You replied that it would cost in the neighbourhood of $400 million to replace the $300 million you take in advertising revenues. However, you didn't say that there was in fact an imbalance in advertising revenues among general broadcasters, especially in Quebec. As you know, the Bloc Québécois is more concerned about Quebec's interests.

In your opinion, does an imbalance currently exist? Could you do without advertising revenues? You indicated what the financial implications would be. Have you ever calculated the cost per capita?

[Hubert T. Lacroix]

No, but I would assume that could easily be done by dividing $500 million by the number of Canadians. However, the point is that stability and a long-term commitment are critically important. It would be extremely difficult to take away from the CBC/Radio-Canada its ability to generate revenues and control its own future though its own activities without making a commitment to funding for more than one or two years. As you may be aware of, funding is committed for 10 years in England, and for three years in Australia.

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

I understand what you are saying. The Bloc Québécois believes that the corporation should receive stable, predictable funding so that multi-year planning can be done. The Bloc has made it position known in several reports, including the one released last year. In our study on the television industry, we recommended that the corporation receive per capita funding and that it end its dependence on advertising revenues.

If the government committed to providing predictable, stable funding, do you think the CBC/Radio-Canada should then no longer rely on advertising revenues?

[Hubert T. Lacroix]

We would have to weigh the implications and the government's commitment to provide funding. We would have to see how programming would be affected and have some assurance that funding levels would not change during the licence term.

[Sylvain Lafrance]

There is no rule of three that says that private broadcasters would benefit if the CBC/Radio-Canada ended its reliance on advertising. France Télévisions' recent experience illustrates this perfectly. The advertising that France Télévisions no longer sold did not automatically translate into more advertising for private broadcasters. That wasn't the case. Everyone in France was taken by surprise. So then, we need to be careful when making these kind of calculations because the broadcast world is constantly evolving and no one really knows what changes of this magnitude might bring about. France Télévisions officials went against the grain on this issue.

[Hubert T. Lacroix]

Taking money away from the CBC/Radio-Canada does not automatically mean that other broadcasters will immediately receive more in the way of advertising revenues.

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

I'd like to discuss the subject of hyperlocal news. My riding of Saint-Bruno—Saint-Hubert takes in part of Longueuil. There is talk of providing hyperlocal news content. I want to know what exactly this would mean. Would CBC/Radio-Canada journalists start to cover the press conferences of the elected representatives of Saint-Bruno—Saint-Hubert?

[Sylvain Lafrance]

As far as Longueuil and the North Shore/South Shore initiative is concerned, we feel that the CBC/Radio-Canada is not active or present enough in these heavily populated regions. Not only do we need journalists, we need something else as well. Increasingly, residents of the communities on the South Shore live their cultural, economic and social life on the South Shore. They have transportation problems that other people do not have. From a sociodemographic standpoint, the region is home to many young families.

We feel that we need to put in place services that are geared to these residents, and to reflect the local and regional politics of these two major population centres, namely the North Shore and the South Shore. We are looking into ways of doing just that. We will achieve this objective largely because of digital technology. Our focus is not merely on news stories, but on the social, cultural and political life of the residents of these regions.