Thank you, Madam Chair and members of the committee, for inviting us here to discuss the current challenges facing local media.
My name is Colette Watson, vice-president of television and broadcasting operations for Rogers Media, and with me is Susan Wheeler, vice-president of regulatory affairs for Rogers Media.
At Rogers, we are committed to innovation and the celebration of Canadian culture. It has been our legacy ever since Ted Rogers revolutionized radio in this country with the first FM signal. We honour a diversity of voices by delivering content to Canadians that enlightens, informs, and entertains.
On the local level, we operate under the City brand in seven markets across the country–Toronto, Vancouver, Calgary, Edmonton, Winnipeg, and Montreal, and in the province of Saskatchewan–and operate 51 local music and news/talk radio stations across Canada.
We also operate five local multicultural TV stations under the OMNI brand in Toronto, Vancouver, Calgary, and Edmonton. At OMNI, we provide programming to more than 40 distinct ethnic and cultural groups in more than 40 different languages.
Across our cable footprint in Ontario, New Brunswick, and Newfoundland, we have 41 community TV channels offering coverage of local events and issues in both official languages. In fact, in 15 of these 41 communities, Rogers TV is the only source of local TV news and information content, and last year, close to 30,000 community groups participated in the creation of this community content.
As you have no doubt heard throughout these hearings, the Canadian media industry has been in a state of transformation for a few years. The economic model for local television is under significant pressure as advertising dollars shift from linear to digital platforms. We've had to adapt to the new realities of this changing economic model over the last few years, not just for financial reasons but also to meet changing audience demands and trends. As Canadians we lead the way in data consumption globally. We want to consume content where we want, when we want, and on the device of our choosing. There is no doubt the consumer is firmly in the driver's seat.
As broadcasters, we must move with this changing tide and the successful companies will be the ones who adapt the fastest. While the industry is still in a state of transition and new business models have not yet been firmly established, we believe there are three immediate actions the government and its legislative arms can take to help navigate the digital transition.
One, fully compensate local broadcasters for costs associated with the government's plan to repurpose the 600 megahertz spectrum and create a fund for local programming with a portion of the auction proceeds.
Two, modernize the government's funding tools and programs to reflect Canada's digital reality.
Three, ensure sustainable financing for local news and information programming resulting from the CRTC's review of local and community television programming.
First, allow me to give you a sense of the economics of the broadcast industry today. Based on the CRTC's latest statistical and financial report on conventional television, the private over-the-air, or OTA, television sector in Canada has experienced a 16% decline over the past four years.
In 2014, profits before interest and taxes, or PBIT, for private local television stations dropped industry-wide to minus $138.7 million, and the PBIT margin decreased to minus -7.7%.
As the smallest conventional television group, Rogers stations have been disproportionately impacted by this decline with a PBIT margin of minus -37.2% in 2014.
For niche stations like OMNI, the situation is dire. Since 2011, OMNI has experienced a cumulative decline in revenue of 74%. That is a drastic and unsustainable decline, a decline that has forced us to take costs out of the business in an effort to keep these stations on the air. While these challenges are real and significant, we do remain committed to finding a new business model for the production and dissemination of local news and information programming. One that reflects how, when, and where Canadians consume the content they trust and rely on.
The 600 megahertz spectrum is currently occupied by local OTA television stations. In August of last year the Department of Innovation, Science and Economic Development issued its decision to repurpose a good portion of this spectrum band for mobile broadband use.
Rogers supports the repurposing of this spectrum, but we have deep concerns about the impact it will have on local television. We have expressed these concerns to the department directly and through our trade association, the Canadian Association of Broadcasters. It is important for this committee to know that the cost of relocating to new channel allotments will be significant and, in some cases, totally prohibitive for certain broadcasters.
For us alone, we estimate the cost to relocate our stations to be over $20 million at a time when we have yet to fully depreciate the major investments we made to convert to digital transmission in 2011. On an industry basis, the cost could be anywhere from $520 million to $1.25 billion, depending on the complexity of the transition. The timing, quite frankly, couldn't be worse.
Given the fragile state of the OTA television sector here in Canada, and that the auction for this sector will likely generate more than $5 billion in revenue, we urge the federal government to fully compensate affected broadcasters for their relocation costs, and create a fund for local television programming from a portion of the proceeds of this auction.
South of the border, we note that the U.S. Congress has already agreed to compensate local broadcasters in full for their relocation costs. This was made clear to local broadcasters well before the commencement of the U.S. auction in March of this year. Unfortunately, we have yet to receive a response to our requests for compensation. We hope this committee will help bring attention to what risks being a very serious and immediate threat to the availability of local television in Canada.
Our second proposal is the suggestion that as part of the minister's upcoming digital consultations, this committee recommend a full review of its current cultural funding tools and support programs. The policy objectives of the funds are still very valid, but the framework is outdated and has not kept up with the rapid change of pace in the industry. We would welcome the opportunity to participate in such a review.
Finally, our third proposal is one we presented to the CRTC as part of its proceeding on local and community television programming. In that proceeding we proposed a model that would allow companies like Rogers, Quebecor, Bell, and Shaw/Corus that own both cable and local television stations to reallocate funding from the community channels they operate in major markets towards either OTA stations or community channels in smaller markets. This would, for example, allow us to reallocate funds from our Rogers TV station in Toronto, a market that is well-served by local broadcasters including City and OMNI, and direct these funds to a small market like, say, Bathurst, New Brunswick. Bathurst is a bilingual community that is not currently served by a local OTA station, and this would ensure that people there are given access to truly local news and information in both English and French.
We recognize that these suggestions are not long-term solutions to the current challenges facing local television, but we believe they do offer local broadcasters an immediate path that can help navigate what are currently very turbulent and financially difficult times in the traditional media space.
We hope our suggestions today will encourage further discussions on the development of new and creative policies that will result in the continued availability of local content in markets large and small across Canada.
Thank you.