Canadian Heritage Committee on May 3rd, 2016

[The Chair, Liberal, Hedy Fry]

Thank you very much.

I agree with you. I think what we're looking at here is not simply local news but the effects of media consolidation, and this was a question on media consolidation. I'm hoping that other members will get an answer to that question if they bring it up. Thank you very much, Mr. Vandal.

Now we go to Mr. Maguire for the Conservatives.

[Larry Maguire, Conservative, Brandon—Souris, MB]

Thank you very much, Madam Chair.

Thank you very much for your presentation this morning.

I think one of your key comments was that this is about media. You're not delivering the TV side of things at the present time, other than what you already do in Manitoba, and thank you for that.

Specifically, I want to know more about some of your lunchtime and suppertime newscasts and that sort of thing. Are they continuing to lose listeners and viewers in terms of what's happening across the country? You've indicated that advertising-dependent areas are having trouble and struggling, but are your local lunchtime and suppertime news broadcasts losing that audience as well?

[Wendy Freeman]

The interesting thing is that our ratings continue to remain high. It's the advertising revenue that we're losing. Most of our local newscasts are still doing quite well. It's really the revenue that's going down. There are still a lot of eyeballs on the shows.

[Larry Maguire, Conservative, Brandon—Souris, MB]

You've indicated that you have five that are still profitable, whereas the rest are not. Can you give us some examples of what makes those kinds of affiliates profitable?

[Wendy Freeman]

Richard may help me out on this, but they were mostly in the larger markets—Toronto, Ottawa—those markets that are still doing quite well. What's happening is that advertisers are now moving over to digital. We're trading in big advertising dollars for digital dimes. They're moving their money over to digital, so we're getting dimes now instead of dollars, even though we still have a lot of eyeballs on all of our shows.

[Richard Gray, Vice-President and General Manager, Radio and TV, Ottawa and Pembroke, and National Head, CTV Two News, Bell Canada]

To provide you with a little more depth with respect to your question about the profitability of our stations, Ms. Freeman is entirely correct. It is all in larger markets, and it happens in larger markets because we're able to achieve greater economies of scale.

Our television station in Toronto, for example, is supported by a number of our other operations. Our television station here in Ottawa is supported to some extent by our local radio operations. In Vancouver, we cohabitate radio and television together, so there's a blended management team.

As a result of all of those actions, we're able to avoid the problem in larger markets that we've seen hit smaller markets, but I don't think that is something that's going to be sustainable in the long term.

[Larry Maguire, Conservative, Brandon—Souris, MB]

Thanks.

A lot of younger people today are telling me that they're cutting the cord on cable. I'm just wondering about this. You have these markets that are innovations, and I'm wondering if you're making any innovations or modifications to the local news programming in some areas, in an attempt to keep.... You're indicating that the ratings are up but profits are down, but also, just to continue with the ratings side of it, what have they done to adapt in the new media environment?

[Wendy Freeman]

We have adapted and we continue to adapt. We have digital-first cultures in all our newsrooms now. The problem is, though, that we have to be everything for everyone. We have to be on every device.

I always give the example of my family. We have to be on Snapchat and on YouTube for my 17-year-old daughter, who watches news. We have to be on Facebook for my 20-year-old son. We have to be on a laptop for my husband, and then we still have to be on at six o'clock for my 70-year-old parents. We have to be everywhere on every device with everything possible.

We have a digital-first mentality now in all newsrooms, because the fact is that mobile is key and digital is key moving forward. We use also the behemoths such as Facebook, YouTube, and Google to try to get as many eyeballs as we can on our digital sites and our mobile devices, so that we can bring the most eyeballs possible to our sites. Again, what's happening is that we're trading dollars for dimes.

[Richard Gray]

To talk about the adaptation process, probably the biggest change that has occurred is the manner by which our staff in our newsrooms functions. It used to be that a reporter working in a newsroom would work on one story all day long. They would file that story for six o'clock, and their day would effectively be over.

As Ms. Freeman explained, we have adopted a digital-first approach. What that entails, what that involves, is that the reporter who used to work and file one story during the course of the day is filing multiple stories across the entirety of their eight-hour shift. They are keeping viewers, listeners, and folks who are tuning into our digital sites up to date on nuances and developments in that particular story. Effectively, their job has turned into one that is very much like working for a 24-hour news operation instead of a local television station.

[The Chair, Liberal, Hedy Fry]

You have two minutes left, Mr. Maguire.

[Larry Maguire, Conservative, Brandon—Souris, MB]

Thank you, Madam Chair.

I wanted you to speak about the specifics of the CRTC regulations. You mentioned the Super Bowl and the simultaneous substitution there. Are there other regulations that inhibit your ability to enhance or distribute local news that could be changed as well?

[Kevin Goldstein]

I think the main one is the structural set-up of over-the-air television, and its being an advertising-only medium.

The other types of services that the CRTC licenses, whether it be a specialty service or a pay channel, have access to a subscription revenue stream, including our own CTV News Channel or CP24, which is our local specialty service in Toronto. It completely changes the business reality for producing news when you have the ability to draw from two different revenue streams. I think that's a structural issue.

We've advocated in the past moving away from an over-the-air model to a local specialty model, such that you could shore up the finances of this medium but continue to provide the same programming depth. That hasn't been accepted, but I think that's the most important one I would mention.

[Larry Maguire, Conservative, Brandon—Souris, MB]

You've mentioned that, but also, it must impact your business when the government subsidizes the CBC by adding $100 million back into their coffers. Do you feel that this situation will impact your ratings in the private sector? How do you compete with that? Are there other ways that you could have an impact and encourage the private sector to promote more local news content as well?

[Kevin Goldstein]

In terms of the CBC and the investment, I think we'll have to see how those dollars are used in terms of whether or not they'll have an impact. I think the CBC is an important cultural institution.

For us, it is a challenge. Essentially, you could argue that CBC gets two revenue streams as well. They have access to advertising and they also get a government subsidy, whereas our stations just have the one revenue stream. There have been funds in the past, whether it was the LPIF or something else, that helped support local news for private television stations as well. As we indicated in our opening statement, it's something that we think is important to look at going forward.

[The Chair, Liberal, Hedy Fry]

Thank you very much.

Now I go to Mr. Nantel for the NDP.

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

Thank you, Madam Chair.

My thanks to the witnesses for joining us today. The fact that you are here in great numbers for the entire hour speaks well to the extent to which you participate in the industry in this country.

Do you agree with my position that we are living in a time when the system is being seriously questioned? You rightly noted that a lot of people are blaming you. Your company is the major player and it often gets the blame for a number of things. However, I feel that it is appropriate for a business to make money. That is why you exist, and your shareholders are happy to see a return on their investments.

Clearly, we must all pay attention to the health of our system. In your presentation, you brought up some points in support of the fact that things are getting difficult, even for you. At the very end of your presentation, you said that you could not agree more with someone who said that traditional media were experiencing very considerable losses in advertising.

Do we agree that the system is based on the fact that the public airwaves are managed by a government agency to make sure that the country is represented and it is all based on an advertising market so that content can be provided at the best cost? With that said, do you wonder how, in our system, we can come to a decision such as the one the CRTC made to broadcast the Super Bowl including the American commercials?

Everyone here must have the health of our system at heart. Everyone involved has to make money, whether it is the performers, the reporters, the broadcasters, the distributors or anyone else. Everyone has to earn a living and to do so in the best interests of the country. However, how do we explain that we have reached the point where the CRTC chair can suggest something like that? Seen from that perspective, we wonder what is in it for you and for Canadians, except to see the Super Bowl's super ads.

[Pierre Rodrigue]

We appealed that decision because we really do not understand it.

The Council seems to have been persuaded by the argument that the commercials are part of the Super Bowl programming. I feel that we have to distinguish between the current situation and the one five or seven years ago, when the commercials were not accessible except by watching the game. Today, some of the commercials are often available online the night before the game and certainly on the day of.

One of the various proposals we came up with involved a site specifically for those commercials. You are correct that the system is being questioned a lot these days. Is this the straw that breaks the camel's back? I do not know, but it is one of the straws that will.

The advertisers' appetite for digital solutions also requires us to offer them. However, they are in their very early stages and they are extremely expensive. As Ms. Freeman said, the production cost is the same. Certainly, each dollar that comes out of the classic broadcasting system and goes into the digital system makes the overall system poorer.

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

In that context, I would just say that, in 2015, you declared operating income of $21.5 billion. Things are going pretty well. No one can say that things are not going well.

So the consolidation of your company, its vertical concentration, enables you to support less profitable activities, such as those of the generalist CTV television network. It is the most popular network, but its advertising revenues are in decline. How does the subsidiary that distributes Internet services benefit from that? The fact that people are flocking to the Internet is good for your business, isn't it?

[Kevin Goldstein]

I think ultimately every business division needs to stand on its own. I think historically in the media division the specialty and pay operations helped to prop up conventional television. The situation we're discussing today isn't something that has emerged over the last 18 months. This is something that has actually been occurring over the last 10 to 15 years. The specialty and pay business, which was healthy, helped to support that business. There were a bunch of reasons why that made sense at the time.

Unfortunately, as we're watching certain developments in the media space—for example, people exiting the regulated system, cutting the cord, cord shaving in terms of taking less services—that has put pressure on that profitable specialty and pay business. In fact, we have a whole new regulatory regime that is now allowing Canadians much greater choice in terms of how they subscribe to all of those channels.

We're not saying that's a bad thing. It just puts pressure on those assets that would have been in a position to support the money-losing asset in the past. You have a situation where you had one healthy division and one less healthy division, and now the healthy division isn't as healthy and the less healthy division is even less healthy. There comes a point in time when, if you continue to subsidize, you actually aren't just throwing good money after bad; you're actually impairing the business in terms of subsidizing.

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

So let me ask you another question.

In your brochure, specifically point 7 of the 2016 report, dealing with material risks for investors, there is a sentence that I would like someone to explain to me. It says that one of the risks is “the adverse effect of the emerging fundamental separation of content and connectivity, which is changing our TV and media ecosystems and may accelerate the disconnection of TV services and the reduction of TV spending, as well as the fragmentation of the advertising market”.

Given that BCE subsidiaries are grouped together in terms of share ownership, how do you present the market we are heading towards to your shareholders?

[The Chair, Liberal, Hedy Fry]

Mr. Goldstein, you look poised to answer that question. I think you might be able to do that at some point when you have another question.

Mr. Nantel, your seven minutes are up.

I'd like to go to Mr. Samson for seven minutes, for the Liberals.

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

Thank you, Mr. Chair.

Welcome, Mr. Goldstein. Thank you for being here today. It allows us to get a little feedback. I have to mention that I was the only Nova Scotia Acadian elected to the House last autumn.

I have several questions for you. The first is about the Internet and it follows up on the questions from my colleagues.

On April 19, you appeared before the CRTC. At that hearing, you indicated that Internet access was not a matter of money or affordability, but rather a poverty issue. Can you explain a little more what you meant by that?

[Kevin Goldstein]

I wish I could. I think you're referring to our appearance at the basic telecommunications services hearing. As I indicated on an earlier question from one of your colleagues, this is the media group. I run the regulatory group for media and for Bell TV. I'm not as familiar with that proceeding or that file, so I apologize.

We'd be happy to follow up in writing, if that's helpful to the committee, but it's not an area on which I feel competent to comment here.

[The Chair, Liberal, Hedy Fry]

Yes, that would be acceptable to the committee.

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

Okay.

At your appearance at the CRTC public hearings on January 25, you made a presentation and proposed the creation of a local news fund. How would that fund be financed and what does it mean for your company?