Canadian Heritage Committee on April 19th, 2016

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Now with the publishing industry, you've had some failures, and you've had some successes. Where is it going? You have a big umbrella here.

[Susan Wheeler]

We came here primarily to talk about the state of local television, but the challenges that are facing local television have been facing the publishing industry for a much longer period of time. We have tried to get ahead of that curve by introducing new products like Texture, which is our digital aggregation product. It's Netflix for magazines, as we like to call it. That has slowly been gaining traction in Canada, but it's a slow process, and firm business models have yet to be established.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

I have to move on.

Ms. St-Onge, we'll just talk. The one thing I didn't like at all in your proposal is that all government institutions should be encouraged to increase advertised spending. Why do you think it's the people of Canada who need to spend on your behalf?

[Pascale St-Onge]

We don't feel that the government has to increase advertising spending, but that it should begin by investing in Canadian and Quebec companies instead of in Facebook or other platforms, since that money goes to multinationals that do not pay taxes or help produce local and regional news.

The media will need support until they complete the digital transition. The government's role is also to support them.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

You know, and you said in your report, only 10% of local media revenues were derived from digital advertising. Nobody's making money in this country on digital advertising. It's cheap. You know it's cheap.

[Pascale St-Onge]

Yes, absolutely. That is part of the problem. The fact is that, to produce information, giants such as Facebook and Google do not have to bear the expenses the media have to bear. They reproduce information and can offer much lower advertising rates. We are asking for a level playing field for all the players. Whether we like it or not, Facebook, Google and other giants have benefits that others do not have. Certain rules force the media to reinvest money in content, while those large companies have no such obligations.

[The Chair, Liberal, Hedy Fry]

Thank you.

Now we're going to go to Mr. Nantel from the New Democrats.

[Pierre Nantel, NDP, Longueuil—Saint-Hubert, QC]

Thank you very much, Madam Chair.

The witnesses are right in saying that these are tremendous challenges. The Americans are currently making the most money, as they are not charging a sales tax on their advertising contracts. That's despicable, and I am among the clients who consume advertising on Facebook. Many people do this without even realizing it. It's part of modern life, but it is very problematic.

I want to begin by thanking all the witnesses for joining us this morning. I have a question for the Rogers representatives.

I especially appreciate the fact that you looked at the issue from two perspectives: the regulatory perspective and the television perspective. I am seeing more and more that all the industry stakeholders—artisans, producers, broadcasters and distributors—feel that the system is becoming flawed. Big players are coming out of nowhere with large trucks that create road ruts.

Can we count on the big players like Rogers to delegate representatives of various sectors, such as production, distribution, and home and wireless Internet? When the minister does her consultations, we will need to hear the point of view of all the players and not just that of one big, careful player that will say just about anything so as not to jeopardize their business. Do you think we can hope that Rogers will delegate all those representatives to contribute to the debate?

I have noted the same kind of discomfort among the other players many times. Theoretically, the 600-megahertz figure is to the advantage of some of your companies that can do more in terms of the Internet, but it is a huge problem for you as a producer and broadcaster. Do you think we can hope that everyone will do their part?

The same question is for the Bell and Québécor representatives.

[Colette Watson]

It would be our pleasure to do so. We are joined by our group of people from print media. There was a limit of two people, but if you want to create a task force with more representatives, we would be happy to participate.

[Pierre Nantel, NDP, Longueuil—Saint-Hubert, QC]

That's great. Thank you.

It's important for everyone to see that the boat is taking on water all over the place, and the situation is no longer funny. People may think that they can make money by selling patches for the boat, but that's not funny anymore. The hull can no longer be patched up, as water is leaking on the other side and there are bigger holes.

I have another very quick question to ask, as I would like to put some questions to the other witnesses. This may bring a smile to the the old timers' faces.

Radio was something that worked well and made a lot of money. It is doing the best job of withstanding the changes nowadays because its operating costs remain fairly low. Is the radio still a valid penetration tool for our regions?

[Colette Watson]

Our radio sector is successful, but each medium is facing challenges, which are starting to be recognized. New platforms such as Spotify and iHeartRadio are coming to the country, and that may lead to an erosion of revenues, but the situation is currently stable.

[Pierre Nantel, NDP, Longueuil—Saint-Hubert, QC]

Thank you for maintaining your point of view on the issue, as the goal of our study is to see how our small regional media—you have a lot of stations and I congratulate you on that—can do successful business and how the situation can be fun for everyone because that contributes a lot to our cultural diversity. With that in mind, I am still wondering why the Minister of Innovation, Science and Economic Development is not involved. It's fine and well that the Department of Canadian Heritage is dealing with this, but we are talking about business, and these people are facing business changes.

That brings me to your 10 recommendations, all of which I find very worthwhile. The industry is fed up and has numerous challenges to deal with. I would like to discuss your 10 recommendations, but I can only talk about the last 9 because I unfortunately missed the first one. I asked our clerk why we did not have a copy of your presentation. I hope we will all get it, in English and in French, as it is crucial for everyone to be familiar with your overview, which seems very complete to me. What was your first recommendation?

[Pascale St-Onge]

It was to put on the table all the economic assumptions to support the digital transition of media companies. Our preferred solution is payroll tax credits because we believe that is the quickest way to do things and it would place the media at arm's length from the government.

Many people may say that those tax credits should be used mainly to hire journalists or be applied to their wages, but we believe it should go much further because there are two difficulties involved. The first one has to do with the development of new technologies. Companies have to be able to hire programmers, web integrators, and so on. The second issue is that a diversity of audiences has to be ensured and new directions have to be explored in terms of advertising in order to generate revenues. Of course, we want those measure to be temporary to give the industry a new lease on life and new business models.

[Pierre Nantel, NDP, Longueuil—Saint-Hubert, QC]

You used the term “industry”. There are challenges in terms of research and development. It's not a matter of weaving a sash, but rather of creating new business models. The costs associated with those new platforms also have to be considered.

You talked about government advertising. I know that my colleague is always worried that we are spending too much. I would like to come back to the point raised by the Minister of Canadian Heritage. She said that official language responsibilities should be shared by all departments, so that everyone would be promoting official languages in Canada. That is not the concern of a single minister, but of all the ministers. Similarly, support for regional media should be the responsibility of all departments, which should concern themselves with regional markets. You made a relevant analysis.

I agree with you about managing what is commonly referred to as GAFA—an acronym that stands for Google, Apple, Facebook and Amazon. Unions could be asked to contribute to the debate by providing a practical analysis worthy of the Observatoire de la culture du Québec, like the one you provided.

Regarding GAFA, do you believe the solution lies internationally?

[Pascale St-Onge]

Part of the solution is definitely international. We are actually very worried about the Trans-Pacific Partnership, which will prevent signatory countries from adopting legislation....

[The Chair, Liberal, Hedy Fry]

Ms. St-Onge, can you wrap up, please? Finish your sentence.

[Pascale St-Onge]

It will prevent signatory countries from adopting new legislation that would help us regulate the web giants a bit more.

[The Chair, Liberal, Hedy Fry]

Thanks very much.

Now we go to Mr. Vandal for the Liberals.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

My first question is to Rogers. In your presentation you stated a few times that under modernizing tools and programs, the policy objectives of the funds are still very valid, but the framework is outdated. You said the frameworks don't move with the industry evolution, I believe, a few minutes ago.

Could you speak more on that? I think you have started already, but I'm having trouble with the echo in the room. Could you just say more exactly what that means, that the frameworks are outdated and the frameworks don't move with industry evolution?

[Susan Wheeler]

There are three primary funding mechanisms for the content we currently provide: the Canada Media Fund, CAVCO tax credits, and the Canada periodical fund. All of those programs right now don't necessarily support digital distribution, where we believe the industry is moving.

On the CAVCO side, it requires you to exploit the content first on a linear platform, so if you have a first-window digital distribution, that's not something you're going to get tax credits for.

On the CMF, a lot of their funding formula is based on total hours tuned, so that's a linear metric that really measures and rewards volume of content being repeated and watched. We know that linear viewing is obviously decreasing, and people are watching more content on demand. The funding mechanism should reflect that.

On the Canada periodical fund, right now there is no support for digital distribution. They measure content on the physical space on a page. That's obviously not something that's a relevant metric going forward in a digital environment.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Several months ago, or maybe six weeks ago, we had a representative of the CRTC that was in delegation, and they said that there was more than enough money in the system to support the creation of news and local information programming.

Do you agree with that position?

[Colette Watson]

I would say that there's an opportunity to reallocate within the existing system. More than enough might not be the description I would use, but things can be made better with the proper reallocation within the system.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Regarding your first position that the framework is outdated, is that not contrary to what the CRTC are, in fact, saying? They're saying that there's more than enough money and resources in the system to adapt to help the broadcasters and the media industry going forward. Is that not a contrary position?

[Colette Watson]

There's enough, not necessarily more than enough. Within the current pie I think the proper reallocation would alleviate many of these things. We've tabled a proposal with the CRTC and we believe that solution would solve many issues.

There are a lot of opportunities to update and modernize and change, but I do agree with the commission that we don't need to increase the amount of money required through the 5% fund that exists today.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Is the proposal that you tabled with CRTC the same presentation you've made this morning or are there changes?