Evidence of meeting #134 for Canadian Heritage in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was content.
A recording is available from Parliament.
Liberal
The Chair Liberal Julie Dabrusin
You have a few seconds. In fact, we've already exceeded the allotted time.
Executive Director, Copibec
Nothing is happening in the rest of Canada. However, take the example of Quebec. The Quebec education system isn't at risk because of licences. The Ministère de l'Éducation et de l'Enseignement supérieur pays $4.29 per student per year to have the right to reproduce the material. This works very well. The SAMUEL system can also be used. This system works perfectly. There's no reason for the departments of education, universities and colleges outside Quebec to not use this system.
Liberal
The Chair Liberal Julie Dabrusin
Thank you to all of you for your testimony today. It was helpful and really grounded the issues for all the questions from the committee. I appreciate your time.
We are going to suspend right now so that we can switch to our next panel.
Thank you, everyone.
Liberal
The Chair Liberal Julie Dabrusin
Let's get started with our second panel.
We have with us Emily Harris, from the Canadian Association of Film Distributors and Exporters; and Brad Danks, from OUTtv Network Inc.
We will begin with Emily Harris, please.
Emily Harris President, Canadian Association of Film Distributors and Exporters
Good morning, Chair and members. Thank you for having me here today.
My name is Emily Harris. I'm president of the Canadian Association of Film Distributors and Exporters, or CAFDE, which represents the Canadian film distribution industry and its members on matters of national interest. We're pleased to be here today to present to this committee on its work related to supporting our artists and creatives, who are the backbone of the Canadian film industry.
CAFDE is a non-profit trade organization that serves to represent a variety of businesses, from small independent film distributors to large global media organizations. Our current members include CropGlass; D Films; Elevation Pictures; Entertainment One and Les Films Séville, which is the company I work for; KinoSmith; Métropole Films; Mongrel Media; Pacific Northwest Pictures; levelFilm; LaRue Entertainment; and mk2 Mile End. It's a diverse membership that represents independent films as well as large-budget features.
CAFDE members provide Canadians with the vast majority of theatrically released films in Canada, two and a half times more theatrical releases than the six major Hollywood studios combined. Our activities include government consultation, outreach and engagement, with an aim to bring attention to the challenges facing the film distribution industry and the cultural, social and economic repercussions of our changing landscape.
As it relates specifically to artists and creatives, my remarks that follow will focus on the essential role that we believe Canadian film distributors play in maintaining the current Canadian film ecosystem. It is CAFDE's perspective that without the regulatory framework that has existed for decades, the Canadian feature film industry would not be what it is today. Artists and creatives can only thrive and grow if their work is seen and discovered. The work of our members tries to bring that to the forefront.
Canadian films, as I'm sure you know, attract audiences at home and abroad. Canadian creatives are celebrated on the international stage. Most importantly, the Canadian film industry provides a unique platform for Canadian creatives to share Canadian stories. All Canadians benefit from a system that showcases and supports this diverse and important work.
The Canadian film distribution industry provides consumers with access to feature films. Our industry as a whole contributed $1.9 billion in revenues in 2017. However, in order to demonstrate the dominance of non-Canadian ownership in our industry, we need look no further than current box-office numbers. In 2017 box-office revenue was over $999 million, but of that amount, 87% of the market share went to non-Canadian distributors.
The industry includes 464 Canadian enterprises involved in Canadian film distribution, with profits of over $330 million and contributions of over $162 million to wages. The industry also employs over 1,300 Canadians across the country. However, all of these figures are a drop in the bucket compared with what non-Canadian companies are taking out of the industry. To maintain these jobs and opportunities and to retain talent in Canada, there is a need for a revived regulatory framework that deals with modernization of the film industry in light of digital changes and the declining commissions of Canadian content in our broadcast ecosystem. Without strong Canadian film distribution companies, we posit that there would be no Canadian feature films, which would impact all facets of the industry, including artists and creatives.
To that end, there are three key pillars that we think are essential to ensuring that the film industry in Canada is positioned to employ, empower and fund our feature film creatives—modernization of the existing film distribution industry policy, creation of a fair playing field for all parties, and specific film mechanisms included in our broadcast regulations.
In respect of the first pillar, the existing Canadian film distribution policy has established and allowed the film sector in Canada to thrive, which is essential for creatives to work and thrive in Canada. In 1988 the Canadian government attempted to put in place protections for the Canadian film distribution sector for fostering and growing the Canadian film industry in the face of foreign competition. To do so, it announced the creation of the film distribution policy. Until recently, this policy framework protected the 13% of the Canadian theatrical marketplace not controlled by Hollywood. For the most part, this policy was adhered to, but as technological shifts impact the industry, unfortunately this is less and less true.
You may be asking why it is important for artists and creatives to maintain this 13% ownership. Ensuring that the Canadian distribution sector exists ensures that funds remain within our cultural ecosystem. It keeps revenues inside Canada, with companies that contribute to funding and programming, and supports the systems that allow Canadian content and Canadian content creators to thrive. With this revenue, Canadian distributors are able to invest in and fund Canadian feature films and ensure that homegrown jobs for creatives continue to exist.
It is CAFDE's opinion that we must formalize and modernize the existing policy framework. In the absence of legislation, it has been difficult to enforce the stated intent of the policy, leaving the door open to circumventions of that policy.
To preserve the long-term viability of the Canadian film distribution sector and ensure jobs and funding for creatives, it is crucial that the government prioritize and promote the policies that have existed to date and have built the feature film industry. These Canadian-owned taxpaying companies reinvest in Canadian production and content, ensure the public's access to Canadian films and employ Canadians.
The second pillar, levelling the playing field, relates to the regulation of OTTs. If the development, production and distribution in Canada's ecosystem and the creative sector jobs associated with it are to be maintained and grown, we need to ensure that our regulatory framework provides a level playing field for all participants. Non-Canadian broadcast undertakings, like foreign-owned over-the-top players, need to be required to contribute to the cultural ecosystem to ensure Canadian content is discoverable by Canadians. As the vertical integration of our broadcast system intensifies and new digital platforms emerge, the government must take steps to ensure that a diverse representation of Canadian content continues to be commissioned and acquired by all entities exploiting content within our borders.
CAFDE recommends that the OTTs, which increasingly make up the services Canadians are using to consume culture, commit to buying and streaming Canadian content, and in particular, Canadian feature films. We are also looking forward to the results of the broadcast and telecom act reviews to see whether there is broad support for companies that act as BDUs, broadcasting distribution undertakings, with more than 2,000 subscribers to contribute a percentage of revenue into the ecosystem, as is currently required of our Canadian-owned broadcasters.
The third pillar is that Canada has long supported the tool kit that prioritizes exhibition of Canadian content, both within Canada and around the world, and we need specific mechanisms to support film on broadcast. Content creators and distributors require broadcaster support to ensure Canadians can access films beyond the traditional theatrical window. I would note the theatrical window is becoming more limited with respect to the digital era. Unfortunately, support of Canadian feature films by broadcasters has been eroding over time.
Specifically, in both pay and free television, our members have seen a substantially reduced commitment to Canadian films by Canadian broadcasters over the last five broadcast seasons. This trend has been consistent across all broadcasters and appears to represent a change in strategic direction, with a direct impact on content creators and distributors in this country who focus on feature film.
To reverse the trends of decreased commitment to Canadian film and to strengthen the ecosystem for Canadian cultural productions, CAFDE recommends the government continue to create a home for Canadian feature films on television by reinforcing existing mechanisms that encourage the exhibition in prime time of feature films made in Canada.
This can be accomplished by mandating that Canadian broadcasters devote a given amount of their schedules and thus part of their required CPE, or Canadian program expenditures, spend to a new specific category 7(d) that is earmarked for Canadian theatrical feature films. To date, broadcasters have had the latitude to program within this category as a whole, and without any specific requirements for feature films, we have seen films get less airtime than television series.
CAFDE also proposes that the Canadian Broadcasting Corporation, CBC, as the national broadcaster, update its commitment to Canadian feature film and reaffirm a commitment to licensing a minimum number of Canadian theatrical feature films. Ideally, this would be at least one new film monthly, aired during prime time, for Canadians to discover and enjoy.
On the whole, we also urge this committee to ensure that the certainty inherent in existing copyright legislation be maintained. The ability to set budgets and have structure around residual and profit payments ensures stability for distributors in a vastly changing landscape.
Thank you again for having me here today and for considering CAFDE's recommendations, which will not only benefit Canadian creators, Canadian film distributors and the economy but will also ensure Canadian content is seen widely, here at home and around the world.
Thank you.
Liberal
Brad Danks Chief Executive Officer, OUTtv Network Inc.
Thank you, Chair and everyone, for having me here.
By the way, I feel very good that we've just completed a deal with Emily's company. We have acquired at least as many theatricals as she wants. I'm here with clean hands as far as she's concerned.
Chief Executive Officer, OUTtv Network Inc.
I want to talk about the opportunities portion of why you're here, because we have a bit of a different situation in what we've done. While I don't disagree with the notion of protection and things that we need to do within the Canadian marketplace, there are some things we've learned over the last few years that are very fundamental, I think, for the future and are things to talk about. Then I will talk about the artists' component of what you're dealing with.
Our channel is a small niche channel in Canada, but we were the first LGBTQ channel launched in the world, and we are now the most successful brand on the planet in our particular area, which is I think in some respects unique to Canadian broadcasting.
One of the things we've noticed over the last few years with digitalization is—and this is very important—that content markets are moving from vertical to horizontal. What I mean by this is that they're moving from national to international. Sadly, most of the Canadian strategies to deal with this have been to strengthen the vertical side of our business, not the horizontal side. In fact, the broadcasting system is in a crisis right now, primarily because of its strong verticalization. We created what I like to call the Maginot line of the digital world, and the digital went right around it, just like the Maginot line before World War II. That's what we're trying to deal with right now.
The other thing we're seeing is the rise of global platforms. Netflix was the first. They began to change the world, with Amazon, Hulu, Apple and others. A lot of U.S. studios will not be selling content through Canadian broadcasters after 2020. The world is going to change very quickly over the next few years. This is not just a Canadian phenomenon, although in many respects we're the canary in the coal mine due to our proximity to the U.S. and our dependence on U.S. programming by our major broadcasters.
What we've seen around the world is that there is a movement among strong local players, many of whom we have good relationships with, to fight back, and this is an opportunity for Canadians. I want to talk about that.
When we first saw the change in the landscape, we did three things that I think all Canadian broadcasters should do.
First, we developed a direct-to-consumer platform. It's called OUTtvGo. We launched it in 2016. It's the gay Netflix, as you might want to call it or do call it, and it's done well. I won't get into the subscriber numbers, but to give you some idea in terms of revenue, after the three big cable companies, it's our fourth-highest revenue per month within the Canadian system. It should be third within the next year.
That said, direct-to-consumer is very difficult. It's increasingly difficult when the technology is so strongly set by the high players—the Netflixes, the Amazons and so on—and in fact we feel direct-to-consumer works better for us in territories that we can't get into otherwise.
The second approach, of course, is the technology platforms themselves. I think everybody knows that Amazon is coming to Canada in a big way this following year. This will have fundamental impacts on the BDU structure in Canada and the Canadian system. OUTtvGo, our direct-to-consumer platform, is the type of thing that would sit well within those types of platforms. We've been platform agnostics in doing deals with all the major technology companies, which are, quite candidly, much easier to deal with than the Canadian BDUs for a Canadian channel.
The other thing we've done is that we've looked around the world and have said that there are the same phenomena going on, so there have to be opportunities abroad. We developed what I call the Goldilocks strategy, which is the strategy of not too hot and not too cold for us. “Too hot” would be the U.S. and the U.K., where content is expensive for us to launch into, but “too cold” would be Russia, where the politics just aren't quite right for us.
The three countries we targeted were Australia, New Zealand and South Africa. With the Commonwealth connections, we felt that co-production agreements and other similar situations would make sense. We've done that, and we've done well. We've launched in New Zealand with TV New Zealand, which is the largest player—sort of the CBC of New Zealand—and really the largest company. We're on their platform selling Canadian content.
In our first two months on TV New Zealand, of the top 20 titles that we sold in our branded platform, 15 are Canadian content, with 14 of those financed by the CMF. By the way, one of them is a French-language original with English subtitles. That was number two on our platform one month, which is telling you that there are opportunities even for French language shows. By the way, this is a show that would not get distribution in those countries without little OUTtv doing it for them.
It was the same thing in Australia—we ended up launching with the largest broadcaster in Australia, Channel 7. That would be roughly the CTV of Australia. We've done another deal with another broadcasting group, and a third with another one already.
Last month we did a month of preview with DSTV in South Africa. DSTV is the largest player in all of Africa. They are larger than Bell, Shaw and Rogers combined. They launched us in Africa for one month free. Their distribution is all of Africa up to the end of the sub-Sahara, because north Africa is part of the middle eastern buy in the television business.
It was a phenomenal experience. They did not launch us outside South Africa—we were warned by their partners to maybe hold off—but to launch an LGBTQ channel in South Africa, I can tell you, was something. It was really quite amazing. The response was overwhelmingly positive, and we're in the process of figuring out how to come back.
In all three situations, the strong backbone of Canadian content is being distributed into those territories, and the story is really simple: If you're in New Zealand, Australia, South Africa and 20 other countries that we're talking to right now, you're seeing a retreat of American content.
You're also seeing the premium content prices go up dramatically. The world of intermediating foreign content as a primary strategy is over. It is going to end really quickly over the next two to three years. It's going to leave a lot of the business models that we have in this country in trouble. The faster we change our model and move it around, the better.
This is an enormous opportunity for Canada. We have one of the best ecosystems, one of the best industrial complexes of producers and filmmakers and so on in the world. I live in Vancouver, which is the world's third-largest production centre. Toronto is the fourth; Montreal is very high.
When you're sitting in Johannesburg or Sydney or Auckland or Stockholm and you're talking to people there, they envy Canada's opportunity. We spend too much time looking at the United States, saying we have to be just like them. There is enormous opportunity if we're just us and we get this right.
I did want to address some of the issues before you in regard to what Canadians need in content and creative, and then what we need in protecting our artists.
We have taken a different path with our model. We partner with a lot of our producers, and by “partner” I usually say to them I have good news and bad news for you—the good news is you're our business partner; the bad news is you're our business partner.
What that means for us is that we share risk with the producers, but we also provide them with transparent reporting on things. We pay them very quickly, and we also show them what is going on in the markets and the revenue values.
I was an entertainment lawyer for 12 years, and I used to always say to my clients to never do a revenue share and never do net profit, because you never get paid. However, what has emerged over the last number of years is a change within the digital world.
I have one minute. I'll go through the rest quickly.
What do we need? We need access to markets and assistance. We need to build global service providers. We need to provide accurate reporting for artists, direct payments, and transparency, and one of the things we really have to look at is some of the changing technology.
Free is not a business model, and for anybody who has been sitting here and listening to it, free is great if you're an Internet giant and you have a complementary business—if you're Google on search or Facebook on social—but it will never be a business model for artists. It doesn't make sense.
There are new emerging models. For example, Amazon in the U.S. would have 12¢ an hour for your video payments. On one of our shows, we almost got the budget back just on that pricing. It doesn't sound like much, but it will add up with a lot of views. Micropayments and such will emerge.
One of the best developments is in blockchain technology for video. Blockchain technology will allow the tracking and transparency of video content and how it goes around the world and how things perform. As we develop that, we'll be able to develop more business models for artists out there. If we can do one thing, it's to encourage the development of those technologies for artists and understand that a micropayment structure in the future is a whole lot better than free.
Thank you.
Liberal
The Chair Liberal Julie Dabrusin
Thank you.
We are now going to the question-and-answer period.
We are beginning with Mr. Boissonnault for seven minutes, please.
Randy Boissonnault Edmonton Centre, Lib.
Thank you very much, Madam Chair and colleagues.
Thank you both for your presentations.
Brad, as an openly gay member of Parliament, the first elected to this Parliament from Alberta, I thank you for taking a struggling asset as an ally and using your business acumen to turn it into the top four—soon to be top three—niche player in the industry against some giants who, I will say and you can confirm, probably didn't want you in the market when you were starting out. It would have been easier for them to eat your lunch, but you're now dining at the same table.
Thank you for exporting the best content. I think if some of my people were here they would say thank you for bringing RuPaul's Drag Race to Canada and allowing people to watch it on their devices, because it's fabulous. That includes all our allies.
You have a long career of taking the CRTC to court and winning. That may be another study for another day on our side. I know there is the tyranny of the CMF and the big players and how we could create more access, but I see you as a visionary who sees the models before the rest of us see the models.
What do we have to get right in copyright, from the perspective of the artists? You can talk to the indie people who are going to defend the industry, but what do we have to get right in copyright to make sure that the writers, the screenwriters, the creators—all the creatives who help you develop that talent and the creative content that's going to go to South Africa and New Zealand and Australia—get their fair share to make sure their mortgages and their groceries are paid, and they can keep creating?
Chief Executive Officer, OUTtv Network Inc.
First and foremost, all of the digital platforms that are emerging have to provide you with exact and precise information on what's actually happening on the platform.
Most of what we've done in the past is.... I know we've created these barriers in scale in terms of things like terms of trade and other stuff. That makes sense in a world that doesn't exist anymore, but we really need to focus on figuring out what the ultimate values of content are.
I walked here and I passed a construction site, and if I asked anyone who worked on that site how much the condo units sell for, they would know. There's transparency in that market. They know if the prices go down, their wages go down, if they go up, they go up. Artists have no idea what the ultimate value of the content is, and it's as if that should be the case. It's not, so we need to work on structures that develop that. We have to work on helping invest in technology.
I mean little things. In a broadcasting system the set-top box information is...I don't have it. Apparently Corus does, but I don't have it. I could use that information to determine what Canadian content is doing better and where to make our investments.
The biggest problem we have is it's not what we can afford; it's what can we monetize.
Edmonton Centre, Lib.
Could the government compel Corus to share that information with you?
Chief Executive Officer, OUTtv Network Inc.
The BDUs. They'll give it to Corus, apparently, but they don't give it to us.
I would like to see what's being seen the most, but I get Nielsen's ratings, which is in one in 1,000 homes. That information is available, but the CRTC is moving at.... They have a two-year set-top box, and these things move very slowly.
The battle in something like that is always the same. It's one side wants the data because they want to be able to charge addressable advertising and stuff. The other side wants to see what they can do in terms of content. The data side has been winning now for a decade, because somewhere out there we came to believe when the Internet was launched that there was a business model, and free, and there were books on it and all of that. It's not true. There will never be a business model around free, except potentially for companies that are reselling the data, and I don't know how long that world's going to last either.
We need to work harder to get back to the point where we figure out how we measure things and then how we build business models on those measurements.
Edmonton Centre, Lib.
I'll say it: I'm here on the side of the artists and the creators. I've said it many times and I'll keep saying it. This committee has heard a lot of doom and gloom and we've heard a lot of pain and suffering because of the changing models. You have painted a slightly rosier picture, maybe even a rainbow picture, about the future in terms of opportunity. What is the opportunity if we get this right for Canadian content? Do people like our stories? Do they like our diversity? What is it about Canadian productions that the world likes so much?
November 29th, 2018 / 12:30 p.m.
Chief Executive Officer, OUTtv Network Inc.
We forget that we function on such a high level. You talked about my career. I met 16-year old Ryan Gosling on a show. I knew Nelly Furtado when she was 18. You work with a DOP, a director of production, like Greg Middleton who does independent shows in Vancouver. Last year he was the DOP on Game of Thrones, the largest series in the world, a Vancouver guy.
Chief Executive Officer, OUTtv Network Inc.
We forget how much talent we have in this country. We have done everything possible to destroy the innovative side in the last decade in order to try to protect what we had and keep us more insular. We need to open up and say, “You know what? We can play really well.”
It's like the Olympics. I'd be pretty happy if I won a bronze medal in the Olympics. You don't have to be the number one country, but world content markets are enormous. It may be the biggest business opportunity in the world. We keep acting like we have to keep it more insular. We can't. The world doesn't work that way anymore, not in the digital environment, but if we create a strong base for Canadian artists at home, then we can export from there, and that's going to be the opportunity.
Canadians can do it. We have great co-production agreements with countries around the world. We have a great reputation. We have incredible talent. We just have to think in that direction, instead of trying to worry about what little bit we can keep, the scraps on the table now.
Edmonton Centre, Lib.
It's a good day for metaphors. I liked your reference to the Maginot Line.
I've got about a minute and a half left. What should we know at the heritage committee about tweaks to the CMF to allow niche players like you to actually continue to punch above their weight?
Chief Executive Officer, OUTtv Network Inc.
The CMF has to be, I believe, realigned—by the way, I was in front of them this morning. They have to be realigned to fit with the government's goals, which are around export and creating these opportunities.
Right now the way to increase your CMF envelope is to replay Canadian content over and over and over again on the 20 or so channels you have that nobody watches. That's not really good for Canadian content. That's not the way it should be.
Canadian producers are screaming about a lack of commissions, but we have zero in our CMF envelope. We'd be more than happy to commission that full amount. I think Corus this year had more money left in their development fund that they didn't spend than OUTtv has had since 2001; it's the same amount, just to give you some idea.
I would be able to spend that money really well, but we've been concentrating it. I know there's a lot of pressure from the BDUs, particularly those that put money into the system, to get that money back out through their companies, but that's not what the CMF was designed for. I think if more independent broadcasters had a larger amount, something significant—more than $50,000 or something like that, a base number to start from, based on exports or based on these types of things—then I think we'd see a real movement in that direction.
Edmonton Centre, Lib.
You would take that money, develop it and it would have a multiplier effect, as opposed to it sitting in an account not being used?