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.

On the agenda

MPs speaking

Also speaking

Frédérique Couette  Executive Director, Copibec
Roanie Levy  President and Chief Executive Officer, Access Copyright
Sylvia McNicoll  Author, Access Copyright
Laurent Dubois  General Manager, Union des écrivaines et des écrivains québécois
Suzanne Aubry  President, Union des écrivaines et des écrivains québécois
Wayne Long  Saint John—Rothesay, Lib.
Sylvie Boucher  Beauport—Côte-de-Beaupré—Île d'Orléans—Charlevoix, CPC
Emily Harris  President, Canadian Association of Film Distributors and Exporters
Brad Danks  Chief Executive Officer, OUTtv Network Inc.
Randy Boissonnault  Edmonton Centre, Lib.
David Yurdiga  Fort McMurray—Cold Lake, CPC

12:45 p.m.

NDP

Pierre Nantel NDP Longueuil—Saint-Hubert, QC

Yes.

12:45 p.m.

President, Canadian Association of Film Distributors and Exporters

Emily Harris

—represent a broad requirement to air Canadian content, and there's no special head for theatrical feature films.

12:45 p.m.

NDP

Pierre Nantel NDP Longueuil—Saint-Hubert, QC

Oh, okay.

12:45 p.m.

President, Canadian Association of Film Distributors and Exporters

Emily Harris

We're finding that with the consolidation in the marketplace, we have good partners like Brad who are continuing to buy CanCon feature films, but other broadcasters are more focused on television series, which means it's harder and harder to get television broadcast eyeballs for feature films.

We advocate having a special head that's for feature film only within the CRTC mandate for exhibition of Canadian content.

12:45 p.m.

NDP

Pierre Nantel NDP Longueuil—Saint-Hubert, QC

Yes.

For example, if on CBC there's no more hockey night, there could be movie night in Canada.

12:45 p.m.

President, Canadian Association of Film Distributors and Exporters

Emily Harris

Absolutely. We're very supportive of that.

12:45 p.m.

NDP

Pierre Nantel NDP Longueuil—Saint-Hubert, QC

Mr. Danks, you mentioned something that intrigued me a lot. You said that the distribution model was going to be gone in two or three years. Maybe it was not the distribution, and that's what I'm interested in. You said that some things we rely on now will be gone in two or three years.

12:45 p.m.

Chief Executive Officer, OUTtv Network Inc.

Brad Danks

It's intermediation, really, which means acquiring premium American content and then reselling it in Canada, which is the primary business model of the major over-the-air broadcasters in Canada—CTV, Citytv and Global.

The supply of content is gradually getting choked off. The American studios are going to hold on to that for their own offerings. That means it will be more challenging for those networks to get the premium shows, the top shows, that they've always had in the past.

12:45 p.m.

NDP

Pierre Nantel NDP Longueuil—Saint-Hubert, QC

Oh.

12:45 p.m.

Chief Executive Officer, OUTtv Network Inc.

Brad Danks

In May every year, they go to the screenings in L.A. and they buy the best shows. I go there as well, and every year there are fewer and fewer products available. They're already gone. Such-and-such has already gone to so-and-so. It means that the premium aspect of those business models will be challenged.

What I'm really saying is that in 10 years, it's going to be almost extinct. There's a transition period we're going through right now, and it's going to cause a lot of stress.

12:45 p.m.

NDP

Pierre Nantel NDP Longueuil—Saint-Hubert, QC

How does your analysis differ? I'm sure it does. But what is your perspective on the very distinct television market in Quebec? Do you have the impression that some producers, some broadcasters like you share your points of view?

12:45 p.m.

Chief Executive Officer, OUTtv Network Inc.

Brad Danks

I absolutely think they do. It's interesting, because we work with some Quebec producers and we do some shows in Montreal. They do have the advantage of the second language. This is something that you see globally when you go into.... I was just in the Czech Republic, and they're not as worried about things in certain areas of Eastern Europe because the language is such. It's the English language that really sets the speed at which markets are penetrated by this, but it's coming everywhere. That's partly why we picked English-language markets for export, because we knew they would be the ones in the most trouble. You don't have the same.... Everyone talks about it. I was talking to someone in the Netherlands, where the English language level is very high in terms of speaking, and it's accelerating there faster than, say, in Italy, where it's not as high.

I think that's part of.... It's coming to Quebec, but it's going to be slower, and Quebec has a different system that will withstand a little more of this in terms of speed.

12:45 p.m.

NDP

Pierre Nantel NDP Longueuil—Saint-Hubert, QC

Thank you.

12:45 p.m.

Liberal

The Chair Liberal Julie Dabrusin

Thank you.

We'll now move on to Mr. Breton.

12:45 p.m.

Liberal

Pierre Breton Liberal Shefford, QC

Thank you, Madam Chair.

I want to thank the witnesses for joining us today.

Ms. Harris, my first question is for you.

I don't know much about the distribution and export of films. How are film distributors and exporters remunerated for their work? Is it a fixed fee or remuneration? Is it based on film revenue? Can you please explain this?

12:45 p.m.

President, Canadian Association of Film Distributors and Exporters

Emily Harris

The way the remuneration models currently work is that we partner with the producer of the film, who has entered into agreement with the creators, location managers and the like, and we are delivered a finished film or presented with a script and promised delivery of a finished film.

Our members review that film's prospects and come up with an amount they think they can guarantee the film will earn. The analogy we've used is that it's as if we were a real estate agent who has agreed to sell your house. We know the best buyers for your house and we know how best to market it; however, we will also guarantee you at least a certain amount for your home, and we put our revenue on the line as a starting point to guarantee that return.

The producer is then able to take the amount that has been guaranteed and go to a bank, funding agency or private equity funder and say, “We have interest in the Canadian market to the tune of this amount.” That's how the producer secures the remainder of the funding for the film's budget.

When the film is delivered, we are then responsible for taking it out to the market, approaching the theatrical exhibitors and the Amazons, Netflixes, Bells, Coruses and OUTtvs of the world and earning licence fees, revenue splits or transactional amounts for the exploitation of that film.

As those funds come back in, we recoup some percentage of the fee for ourselves. We recoup the expenses we incurred so doing, and the guaranteed amount as promised. All remaining funds, for the most part, will be paid back to the producer to then go back to their profit participants, however that has been negotiated.

We ask for a little as a middleman, but a middleman with financial risk associated with our investments. It's that risk that then allows Telefilm or whatever funding agency is involved to feel that, yes, there is market interest for this feature film, and their equity investments will be recouped.

12:50 p.m.

Liberal

Pierre Breton Liberal Shefford, QC

That's very interesting, thank you. You clearly explained how this works. It's certainly not easy for everyone to understand. I don't know whether other people knew how this was done.

I don't know whether I have much speaking time left, but I have one final question.

Many people have spoken to us about piracy. We spoke very briefly about it today after you arrived. Ms. Harris and Mr. Danks, how would you describe the current situation? I imagine that the situation has worsened, but I want to know your opinion on the matter.

12:50 p.m.

Chief Executive Officer, OUTtv Network Inc.

Brad Danks

In my opinion, it's an ongoing problem. It's something that falls out of the realm of what we talk about, but it is really a huge issue.

The notion that “free” is a business model has leaked into the idea that you should be able to stream stuff. We can't calculate what we lose every year, but we know that some of our premium shows are up online.

For example, we have one show that was mentioned, RuPaul's Drag Race. Probably 10 or 12 sites will have a new episode of that show on YouTube within about an hour of it being released, so you have to write to YouTube and have them take it down.

It's a very real problem for the whole industry. If there's one thing we can all agree on, it's that piracy is a problem and we are bleeding a lot more money than we should. Also, we're not correcting that problem around getting content for free. We should be working at coming up with micropayment models and things that begin to fill that hole.

It started in music, with iTunes and so on. We need to explore that more and make it easier for micropayment models to emerge. That will help stem the piracy as well.

12:50 p.m.

President, Canadian Association of Film Distributors and Exporters

Emily Harris

I completely agree. We were very supportive of the FairPlay application that was made to the CRTC, because as Brad indicated, it can be very expensive to try to rid the Internet of something that is made available on a myriad of sites. The challenge of the current structure is that you have to go site by site to take down whatever is listed. It's very expensive; it's very time-consuming, and if you are successful, it's like Whac-A-Mole. It will pop up in another area.

We were supportive of some sort of streamlined structure that would create a system by which someone who is a content owner, content distributor or licensee of content has an easy way to apply to help protect that content within the Canadian system. We were disappointed that it wasn't what the CRTC accepted, but we think there needs to be some solution for piracy, because the impact reaches everyone—creators, performers, broadcasters and distributors—and we're not doing enough to stem that tide.

12:50 p.m.

Liberal

Pierre Breton Liberal Shefford, QC

Thank you.

Mr. Boissonnault will use the rest of my allotted speaking time.

12:55 p.m.

Liberal

The Chair Liberal Julie Dabrusin

Okay.

12:55 p.m.

Edmonton Centre, Lib.

Randy Boissonnault

I like this idea of micropayments, and maybe you could give us a sense of that. I don't have a lot of screen time left—maybe on my journey back home—but I started tracking and going to the premium shows, because they're on iTunes, and they're on other....

I pay for the episodes now. Sometimes I buy the whole season. I track my spending, and even when I pay per show for the whole season, for the shows that I want to watch, it's still less than what the cable would cost me per month. I get to pick my own menu. It's not free content, and I don't stream.

How can we as a government encourage the regulators and industry to make these micropayments more accessible?

12:55 p.m.

Chief Executive Officer, OUTtv Network Inc.

Brad Danks

I think there are two issues. We need to develop the technology better and bring it in, but we also have to open ourselves up to more price discrimination.

The problem in the broadcasting system, for example, is that you negotiate your fee with a BDU; you don't negotiate with a consumer. It's a real problem. Every show has its price discrimination.

You mentioned RuPaul's Drag Race. When it comes out in a few weeks, it will be the number one show in Canada on iTunes for at least one month. It will be the number one show for us on broadcast, and the number one show on our OTT.

Consumers are very platform-first. You were talking about platforms. They start at their platform, and then they go and find the content that they need. Access is number one on the content side. I think that if Let's Talk TV were really consumer driven, they would have opened up the wholesale market and given consumers more content but would have changed the pricing structure so that it wasn't done at the negotiating place.

If somebody looks at a package of 10 channels they've just spent $10 for, they think they're paying $1 per channel, but really they're paying $9.50 for one channel—probably owned by the BDU—and everybody else gets about 5¢. That's not seen by the consumer.

It's about breaking that barrier down and creating pricing models. You have shows where people will pay transactionally, where they'll pay in a bundle under a subscription, and they'll pay in advertising. Our job as broadcasters is to find the price that works for each consumer and to do it as quickly as possible. The more the system is congealed the way it is right now, the harder it is to break out and create new pricing models that make sense for the consumer.

12:55 p.m.

Liberal

The Chair Liberal Julie Dabrusin

That's the note we're going to have to leave this on.

Thank you to both of you. That was really interesting, and there were a lot of questions generated.

That will bring this meeting to an end.

The meeting is adjourned.