Canadian Heritage Committee on April 19th, 2016

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

You don't have a percentage that you'd want to put on the table today so we would know?

[Colette Watson]

It's difficult without knowing what the commission is going to do. Once they issue their decision, I'd be happy to come back before you and give you our plans after that.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

Thank you.

My next questions will be mainly for the representatives of the Fédération nationale des communications.

Ms. St-Onge, I really appreciated your presentation and the 10 recommendations you submitted to us.

Unlike Mr. Waugh, I would say that recommendations 2, 3 and 4 are the ones I am the most sensitive to. All three of them are related. You talk a lot about local programming, which I am extremely interested in. You talk about CBC/Radio-Canada and the need for the public broadcaster to have a stronger regional presence. You also mention high-speed service.

The budget we just presented contains additional funding for the affected sectors. Were you able to analyze future implications? What kind of an impact could this have on you, on us and on Canadians?

[Pascale St-Onge]

If we are talking about CBC/Radio-Canada more specifically, the fact that additional funding was allocated over a five-year period is a positive development. We hope that will enable the public broadcaster to turn even more toward new technologies while continuing to reach people with no Internet access who are still consuming information through television or radio. That's important to us.

We hope that CBC/Radio-Canada's management will adopt somewhat clearer positions because the problem, in the public broadcaster's case, is that we still don't know how that money will be invested. You will recall that, after the latest cuts, regional newscasts were reduced from 60 minutes to 30 minutes. Will the corporation's management reinvest in regional newscasts? That's clearly a priority for us.

We're still talking about cuts at CBC/Radio-Canada, as that was announced in the 20/20 plan. There seems to be no backtracking for the time being. This still seems nebulous to us, but I think it's in the hands of the CBC/Radio-Canada management. The corporation's executives will have to understand that they have a key role to play. We have noticed over time that, when CBC/Radio-Canada is present in the regions, others go there for the sake of competition, to get news, and so on. It's very positive, and we hope it will help revive regional news.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

Okay, thanks.

The committee will have to look into this because it's a key regional and local issue.

I wanted to mention that I really liked you pointing out that the former government was directly involved with the CRTC, which was not quite right. I agree with you.

Can you say a few quick words about programming and education? What could be done to improve those aspects? What are your comments and opinions on the issue?

[Pascale St-Onge]

When it comes to education, we feel that we must work with provincial partners because this issue comes under provincial jurisdiction. We have to educate Canadians, who are very confused by the information found on social networks. When we know that Facebook uses algorithms, for example, to control the information in order to comfort users and support their positions and viewpoints, we see that it is becoming even more essential for people to understand that they are mostly seeing things on Facebook that interest them in the first place. Therefore, they are not exposed to opposing viewpoints.

For instance, I work for a union and I have the impression that everyone likes unions. Of course, when I read other news, I realize that is not the case. There are still people who question our role. This is a glimpse of the problem posed by social networks. That is why it is important to have media that provide real information professionally, with codes of ethics and ethical duties in place.

[The Chair, Liberal, Hedy Fry]

Thank you very much.

I want to thank both groups of witnesses for coming. We appreciate what you had to say, lots of meat in what you gave us.

We're going to suspend now to move into the next session.

[The Chair, Liberal, Hedy Fry]

I call the meeting to order. We have before us two sets of witnesses.

We have Transcontinental Inc. and DBC Communications inc. They will share their 10 minutes, five and five. I will give you each a note when you have one minute left on each of your presentations, so you can finish on time.

We also have the Public Interest Advocacy Centre with Ms. Lau and Mr. White.

For DBC, we have Mr. Chartier and for Transcontinental, Mr. Olivier.

We will begin with Transcontinental, for five minutes, please.

[François Olivier, Chief Executive Officer, Transcontinental Inc.]

I want to thank the committee for having us here.

My name is François Olivier. I am the CEO of Transcontinental Inc., which is a Canadian public company listed on the Toronto Stock Exchange. We're active in two businesses at Transcontinental.

Just before we start, we're not exactly going to share five and five, but we are discussing the same issue.

At Transcontinental, we have two businesses. In manufacturing, we are the largest printer in Canada. We print everything from retail flyers for all retailers in Canada, including The Globe and Mail, and many others. We have revenues of $1.5 billion in manufacturing and our media sector revenue is $575 million, of which $235 million is in local media, local content.

We produce in five provinces: Quebec, the Atlantic region, and Saskatchewan. We own 159 community papers across those provinces. We have 143 websites that complement the paper product. We also produce a lot of local digital content.

We have more than 1,700 people who produce and work on that local content in those provinces, with more than 1,000 people in Quebec. We produce Le Courrier du Sud, where Mr. Nantel is the MP. In Newfoundland, we produce The Telegram, and in Granby, we produce Journal L'Express. In most of your ridings, we own a paper and cover your activities.

I will let Benoit introduce his company and who he represents.

[Benoit Chartier, President, Director General, DBC Communications inc]

Thank you, François.

I will introduce myself. I am Benoit Chartier, president and editor of DBC Communications.

I am appearing today in a dual capacity, as I am also president of Hebdos Québec, a group of independent Quebec editors.

I want to start by telling you about DBC Communications. It is a publishing group that publishes three newspapers and a monthly agricultural journal. One of DBC Communications' famous newspapers is Courrier de Saint-Hyacinthe, which is the oldest French newspaper in America. It is in its 164th year of existence. DBC Communications is a publishing group with about 100 employees and 20 journalists, and we are very engaged in our community in the Saint-Hyacinthe region.

I would now like to talk to you about Hebdos Québec, which is a group of independent editors, like myself. There are about 20 of us, representing some 30 newspapers. We are all independent. We do not belong to any newspaper chain. We publish 1 million copies a week. We have 1.5 million readers per week and 800,000 unique visitors a month on our websites. The advertizing revenue is estimated to be $52 million. We have 400 employees, of whom 111 are journalists and 33 are photographers.

Basically, in Quebec, TC and Hebdos Québec have ties to 99.9% of the province's weekly newspapers.

I yield the floor again to Mr. Olivier.

[François Olivier]

We will get right into what we want to share with you this morning. We want to share the challenges that our industry has faced since 2009-10.

I want to explain how our business works. Basically, a company like ours, or an independent like Benoit's, in the weekly business we solely live on advertising dollars. We have to pay for the content, the journalists, the salesmen, the printing, and we pay for the distribution that in our case is total market coverage for most of our product. We send a paper to every home, so we don't have any subscription revenue. The readers don't pay anything for the content. We live solely on ad dollars for our community paper.

Some of our dailies in Atlantic Canada would have about 20% to 25% of their revenue coming from readers paying through subscriptions or through the newsstands, but the bulk of the industry is living on advertising, as I'm sure you've heard. Advertisers for many years, for decades, have supported and paid for the local content that citizens enjoy.

Who are our advertisers and those businesses? They are local businesses, local and regional businesses, not the big retailer and the national retailer. Those people deal transcontinentally with different flyers for their deals and they tend to advertise less in weekly papers. Our advertisers are local in nature and our readers are local in nature.

Basically what we have done, moving to why we're here in a sense, is very well expressed on page 5. Since 2005, we have seen the Internet.... At that point it was about $500 million that they were capturing in ad dollars, and in 2014 it was $3.8 billion. So the Internet is capturing advertising dollars away from traditional TV, specialty TV, radio, and daily newspapers, and also community newspapers.

It's fair to say that community papers, with a lot of local content, have been less affected than the other media, but things have changed in the last 24 months. Where we were seeing a 2%, 3%, or 4% decrease three or four years ago, and daily newspapers were suffering a 10% to 15% decrease, now we're getting into the same zone.

From that graph, the blue bar, which is the advertising market for all community papers across Canada, you can see that all of our papers—our paper, Metroland papers, all the independent papers across Canada—at the peak in 2009 were capturing about $1.2 billion in ad revenue, and in 2010 it started to go down. You can see that in 2014 we had lost 36% of our ad revenue.

I can tell you what the number is in 2015, and I am running the business in 2016. I can tell you now, to make a round number, that we have lost about 50% of our revenue.

If your business is living on only ad dollars and you lose 50% of your revenue, whether it's media or any kind of business, you need to react. You cannot lose half of your revenue and run the same business model.

Where is that money going? It's going to people who produce zero local content; people like Facebook, Google, all those guys. They are aggregators of content and they are people who do social media which is, in French we say les discussions de perron d'église. This is not a church porch discussion, this is not curated content. They don't produce content but they capture a lot of the ad dollars.

What have we done as an industry? For sure, we didn't come here to ask you to do our job. We've been doing our job in the last five years and when you lose 50% of your revenue, you have two things you can do. You try to catch the digital wave, so we invested a lot in digital, and produced a lot of digital product around content, some not around content, some around advertising.

For Transcontinental, we capture about 10% of our business, which is now digital. On $240 million we generate $24 million of digital revenue. Our digital products are very much liked by the community, but you can see the relationship. You lose 50% of your revenue. And when you capture the wave of trying to create new revenue, you create only 10%, so you still have a big gap.

The second thing we've looked at is our costs, and if we cannot make the shortfall on revenue we have to look at our costs. Transcontinental being a consolidator in that industry helped a lot in making sure that we took a lot of costs out of the system through economies of scale, best-practice sharing, and stuff like that.

In a sense, the fact that we are a large group saved a lot of papers that would have died on their own, not having the means of a large corporation. We cut on the printing costs, on the distribution costs, on the administration costs, on the sales costs. The only place we cannot cut is on the content because the content is the heart of what we do. If we cut there, we don't have a product. We're done.

Basically, also we have a lot of challenges—

[The Chair, Liberal, Hedy Fry]

You have one minute left.

[François Olivier]

Just one minute. Okay.

I guess I will finish my presentation in the question period. Basically we moved from a single-product organization producing one product on paper to a multiple-product organization selling very complex products on the Internet. This is a very tough transition.

Also, a lot of our weekly papers moved from an organization that was creating content once a week—once a week—where you have a week to produce your story, a lot of time to do interviews, to a news organization that needs to produce content every single minute. It's a big challenge and a big task for our journalists.

Our business is changing a lot. I'll speak about the content later. Basically, what we're asking is for help in the transition year period. We've been supporting this for five years, but we're at the point where we will need to cut the content or some products will disappear because we don't have enough time to make this transition to the Internet.

We're asking, on the last page for various parts of the government to give us maybe a transition period—I think these are the key words. We're not asking for help forever. We know we need to be a stand-alone business, but we think that Canadian Heritage can maybe help for a period of three to maybe five years to help news organizations that support journalists, support content, and regions to give us the time to make that transition. If not, the paper will disappear—that would be my guess.

[The Chair, Liberal, Hedy Fry]

Mr. Olivier, thank you.

Now we go to the Public Interest Advocacy Centre, Ms. Lau and Mr. White. Will you be sharing your time, or will one of you speak?

[Alysia Lau, Legal Counsel, Public Interest Advocacy Centre]

We'll be sharing our time.

[The Chair, Liberal, Hedy Fry]

Then be mindful, please, of the time. Thank you.

[Alysia Lau]

Good morning. Madam Chair, honourable members of the committee. Thank you for inviting the Public Interest Advocacy Centre, or PIAC, to appear this morning to discuss the media and local communities. My name is Alysia Lau, legal counsel at PIAC; and with me is Geoff White, external counsel to PIAC.

PIAC is a non-profit organization and charity that provides legal and research services on behalf of consumer interests, including vulnerable consumers. In communications policy, PIAC advocates for fair and affordable access to a diversity of programming that serves Canadians' needs. PIAC has intervened extensively in CRTC proceedings relating to broadcasting policy and on numerous broadcasting licensing and acquisition matters, and in television in particular.

PIAC has one key message for the committee today. Local television is important, and it can flourish in the future. To achieve this, PIAC has three specific recommendations.

Number one, private broadcasters must fulfill their promises to provide local programming, and especially local news. Any funding support should be allocated in a way that is accountable; prioritizes small, independent stations; and focuses on encouraging local stations to develop sustainable business models.

Number two, CBC/Radio-Canada needs to be a strong public broadcaster with a mandate to be engaged with and even extend service where necessary to local communities.

Number three, the importance of non-profit community media must be recognized in policy and supported in funding.

Despite changes in the way Canadians access local programming and local news, local television remains important to Canadians. This is especially so for many rural communities that may not be connected to broadband. Local television continues to be a vital link to the rest of the country.

A 2014 poll commissioned by the CRTC found that 81% of Canadians said local news was an important type of television programming, and 53% said that local programming generally was important.

In the U.S., a 2015 Pew Research Center study found that nearly nine in 10 residents follow local news closely, and local TV was still the dominant source of local news in all three cities studied. The majority of respondents accessed local news on local TV combined with or separate from the web or social networking sites.

Even with the growth in online-only news sources, news produced by so-called traditional media such as print and television still played the dominant role in keeping democratic institutions accountable. Even the top news websites in Canada are online versions of traditional news media, such as the CBC and the CTV.

[Geoff White, External Counsel, Public Interest Advocacy Centre]

Good morning.

The Canadian television market has experienced significant ownership concentration over the last 15 years, and 79% of commercial television revenues are now controlled by four vertically integrated private broadcasters. Many of these also control massive stables of radio stations. Yet the major broadcasters, although continuing to operate profitable television media assets, are letting down local communities outside major urban markets and marginalized communities within urban markets.

They've significantly cut staff, especially at their local stations. Bell Media cut 380 positions last November. Rogers Media cut 200 jobs in January. Shaw has adopted a model that centralizes the production of all newscasts in one location, primarily Toronto. Rogers has completely eliminated multilingual newscasts across all of its Omni stations, ending access to over-the-air multilingual news for ethnocultural communities. This is despite the fact that during the 2014 licence renewals before the CRTC, Omni acknowledged that these programs played an important role in the communities that Omni served.

PIAC recognizes that conventional station advertising revenues have indeed fallen over the last few years. At the same time, other pay and subscription-based channels owned by the same national broadcasters are doing very well. Many of these broadcasters, upon acquiring local stations, promised that they would use their size, scale, expertise, and diversity of broadcasting and distribution assets to continue investing in local television. That generally hasn't been happening. The national, private, conventional broadcaster should continue to have obligations to produce and air local programming and especially local news.

PIAC recognizes the challenges faced by smaller independent local stations, and to the extent that any fund may be created to support local stations, that fund should prioritize these independent stations and focus on helping all stations develop sustainable business models. Such a fund could also draw on the proceeds of the planned repurposing and auctioning of the 600 megahertz radio frequency spectrum band, which will displace many local over-the-air stations.

PIAC supports the creation of a fund to assist those stations that would be reassigned. Given the importance of the issues raised in this committee consultation, this fund could also be earmarked for the production of local programming, particularly local news.

On the subject of CBC/Radio-Canada, the public broadcaster has a very important role to play and PIAC believes that the federal government's budget proposal to invest $675 million in CBC/Radio-Canada over five years is a welcome step towards Canada having a strong national public broadcaster. However, PIAC believes this funding and any strategic plan for CBC/Radio-Canada should not fix all its attention on the transition to digital media. It should also ensure that local communities are adequately served by CBC stations, particularly where broadband access isn't available, reliable, or affordable.

[Alysia Lau]

Even with the popularity of digital media, independent non-profit community media still play a vital role in informing, engaging, and empowering local communities and marginalized groups. This is especially true in Canada where many communities do not have a local over-the-air station.

At the recent CRTC review of local and community television, numerous community groups and associations passionately described the ways they are trying to step up to provide programming that informs and engages their communities. Independent, community, and campus radio stations have emerged and developed throughout Canada, with approximately 105 community and 46 campus radio stations in operation in 2014. However, in television, more space must be created for the establishment and growth of non-profit community stations that understand and can serve the needs of their communities.

PIAC recommends that the committee recognize and support the ongoing importance of independent non-profit community media, from both a policy and a funding perspective. This could include a heritage study on community media, a national community media strategy, resources that provide training and administrative support to community stations, and initiatives that could provide some ongoing funding to community stations.

In sum, local television is important and can flourish in the future. Even in a digital era, local communities should be able to access programming that serves their needs through as many platforms as possible including, at this time, traditional local television. This will take an approach in which public, private, and community broadcasters all draw from their strengths and resources to fully serve Canadian communities.

Thank you for the opportunity to appear today and we welcome any questions you may have.

[The Chair, Liberal, Hedy Fry]

Thank you very much.

Now we're going to go to our questions.

The first round is a seven-minute round, and that seven minutes includes questions and answers. I would like everyone to be as succinct as they can possibly be. We now begin for seven minutes with Mr. O'Regan from the Liberals.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

Thank you, Madam Chair.

I would like to thank the witnesses for their presentations.

I will start with you, Mr. Olivier and Mr. Chartier.

Real-time analytics, I have been reading about this. From what I understand, it's revolutionizing the newspaper industry because now newspapers and editors can know how many people are reading their work, how they're reading it and through what devices, what sites they're going to, how long readers are sticking with those articles, and what ones they're ignoring. Newsrooms, like the New York Times and the Washington Post, are completely fixated on this. One quote I read said, “the biggest and least talked about development in traditional print media as it moves to digital is ratings”. It now has ratings. Newspapers now have ratings, which only television had previously.

I wonder if real-time analytics is something that's affected your business.

[François Olivier]

Yes, we do sell that in the local community because we're a large corporation. We own some of these companies that are like a market of digital advertising. You could buy this in real time and—

[Benoit Chartier]

Real-time bidding.

[François Olivier]

—we do that at Transcontinental. We have developed a product for local communities, which has nothing to do with our content. Basically what we do is take the call to action that the advertiser wants to put on the paper on our websites, and we make this appear. We are able to buy or locate traffic around that community and make their ad appear on various websites through programmatics. This is a service we are offering in the community for the advertiser that has nothing to do with our content business.

We have free products you could advertise in the paper, or advertise on our websites, or have your ad appear on other people's websites that we're buying because we are a large corporation. We have access to this so that the calls to action of local retailers can be seen in the house where they do business or on various websites that are non-Transcontinental websites. We offer that service, but we have a lot of new competitors on the web that offer advertising to our local businesses.

The challenge is that a lot of the local businesses face their own challenge and their own competition. When Walmart builds a huge centre in a community, some local businesses that tend to be very supportive of our community paper often die. Walmart has other means to advertise, which is not these papers. It's not only our problem. It's also that if the local business community gets weaker, then we get weaker also.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

What's interesting with these analytics is that they're starting to get results across the industry. A lot of it is not surprising, and it's consistent. Videos and podcasts are very popular. Short items of interest that can be easily read on smart phones, and almost anything that has the words Donald Trump in it apparently do very well.

I think what's heartening for me is that, perhaps counterintuitively and surprisingly, deeply reported features and investigative pieces do well. For instance, the New York Times had some long-standing coverage on ISIS and their barbarity, and that drew an incredible amount of traffic. In fact it drew readership levels they never would have gotten through print. What doesn't do well are those 600-word pieces about yesterday's news. One quote I read said, “this is the talk that you hear in newsrooms across the world”. It's a great cause for concern that those pieces aren't getting attention because if you look back, Watergate began as a story of a burglary.

It was featured by anybody who saw the movie Spotlight, which just won best picture. That was a huge story that unearthed child sex abuse in the Catholic Church in the United States and for that matter around the world. It began with one small story about one priest. Therein lies the rub. People want to read deeply investigative articles, but they only begin with short articles.

You obviously want an audience. You want an audience that's going to stick. You want an audience that is going to subscribe. How do these fairly recent findings...I'm reading this in the New York Times article that only came out on Sunday. How does that affect your business?