Evidence of meeting #155 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.
3:25 p.m.
Liberal
The Chair Liberal Julie Dabrusin
We are beginning our 155th meeting of the Standing Committee on Canadian Heritage. Today we have a briefing on the Canadian Radio-television and Telecommunications Commission's report. It is not named here, but I believe we are referring to the “Harnessing Change” report.
With us from the CRTC, we have Scott Hutton, executive director of broadcasting, and Sheehan Carter, director of television programming. Please begin with your presentation.
3:25 p.m.
Scott Hutton Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission
Thank you, Madam Chair, for this invitation to discuss the report titled “Harnessing Change: The Future of Programming Distribution in Canada”.
I'll skip the introductions, as the chair already went through them, but I'll just underscore that Sheehan is pronounced “Shawn”.
We are pleased to support the committee's important work on shaping the future of Canada's media industries. At the government's request, the CRTC prepared the Harnessing Change report to evaluate the future of our environment and how it would support a vibrant domestic market for the creation and distribution of audiovisual programming. The report is intended to inform the government's review of communications legislation and the work of the legislative review panel.
It describes the many benefits and opportunities generated by digital technologies. Canadians can now access more content from more places around the world than ever before. Innovative services succeed by catering to this demand. New digital tools make it easier to create high-quality audio and video content and make it available globally. The number of content buyers continues to increase, and data analytics make it possible to learn more than ever before about the relationship between content and audiences.
The report analyzes traditional and digital platforms in terms of the relative level of maturity and long-term sustainability. In the audio market, for instance, radio is mature and is adapting to the shifts in consumer habits. However, new online services such as Spotify are experiencing rapid growth.
The market for video content is also fragmented. Conventional broadcast television is on the decline, while online services and user-uploaded content continue to attract a growing number of subscribers.
Mature distribution models such as cable, satellite and fibre services will face increased competition, but they are making investments in new technology.
As online markets and distribution models for both video and audio continue to change, it will become increasingly difficult to divide them into clear-cut categories.
And while there are numerous opportunities for Canadians, the content they make and enjoy watching risks being lost among all the digital options at their fingertips. Moreover, as we watch less traditional television, there may be impacts on the underlying support systems used to create much of the video content we enjoy today, including news programming.
One of the report's key findings is that video and audio streaming account for two-thirds of all online data traffic on North America's fixed networks and one-third of all data on mobile networks. We expect that these percentages will only continue to grow, as more Canadians have access to faster broadband service and larger mobile wireless data plans.
The preferences of people under the age of 35 give us a sense of what the future holds. This group is three times more likely than older Canadians to watch video online, for instance. And younger people are less likely to subscribe to traditional television services, such as cable and satellite. At the same time, streaming services such as Spotify and Netflix continue to draw greater numbers of subscribers both young and old.
Digital services are clearly on a growth trajectory and will play a more important role in the years ahead. It is important to keep in mind, however, that traditional services are mature businesses. Despite recent declines, they are popular with Canadians, and will continue to evolve and remain viable for the foreseeable future. The main area of concern is for services whose business models are declining. Conventional television, for instance, is facing considerable challenges and may not remain viable due to the erosion of advertising revenues.
These trends have serious implications, not only for Canada's media industry, but on our regulatory and policy framework's ability to meet its objectives. In essence, the current framework was designed for another time—a closed system of traditional broadcast services.
It is not sufficiently adaptable to meet the challenges of an era marked by ready access to streamed content.
As the members of this committee recognize, the CRTC and the report we produced view these through a regulatory lens. Canada's regulatory regime strives to achieve specific policy goals, such as to foster the production and accessibility of Canadian content, including news programming.
Licensing is the principal mechanism used to achieve stated policy goals. Licences for most television service providers, for instance, require the investment of prescribed percentages of revenue in the production of Canadian content.
Given these realities, the report considers four regulatory approaches: the status quo, deregulation, applying existing rules to digital players, and designing and implementing an entirely new approach.
The report concludes that the first three are inadequate in light of the current and emerging challenges. New tools and approaches are required to ensure a vibrant Canadian media production industry—innovative tools and techniques that exploit the opportunities presented by current and emerging technologies.
The process to design a more effective regulatory regime must begin by identifying clear policy goals. The Harnessing report suggests three.
First, we need to foster both the production and promotion of Canadian content, including news programming. Moreover, in a digital age, discoverability is essential to success.
Second, we must recognize that there are social and cultural responsibilities associated with operating in Canada, and all parties should contribute to ensure that Canadians benefit and that all players can compete fairly and effectively—however, in an equitable manner.
Furthermore, and third, we need to create a nimble and innovative regime that can be readily adaptable to change.
The last of these goals is particularly important over the long term. Just as those who designed Canada's current regime could not have imagined today's digitized world, we cannot foresee all of the changes that will arrive in the future. We must have flexible tools to adapt to new realities.
The report concludes by describing a series of potential policy options—new mechanisms that could help achieve the stated goals. To be effective, the new policy requires legislative support, including the regulatory authorities needed to ensure compliance. This could include the authority to impose administrative monetary penalties in instances of non-compliance.
Ultimately, to ensure that the broadcasting industry continues to thrive, Canada must have a regulatory regime that encourages innovation and delivers the content that Canadians want.
While the panel conducts its review, the CRTC continues to look forward and fulfill its mandate for the benefit of Canadians. Our current activities are focused on assisting the broadcasting system to adapt to the digital environment and develop new approaches and tools. These activities include a review of the policy for indigenous broadcasting to ensure that indigenous communities have access to content that reflects them as well as the tools to produce it.
As a radio transforms itself in the digital environment, the CRTC will also review its commercial radio policy with the intention of developing renewed approaches that will more effectively support artists and content development, including news and information. Work is also underway to implement a digital monitoring system for radio and update the policy on Canadian programming expenditures in light of digital media. These are essential steps in improving the ways we monitor and understand how the digital environment is evolving so as to regulate as effectively as possible in the future.
In addition, we will soon initiate the process to renew the radio and television licenses of the CBC and Radio-Canada. This will enable us to examine ways it can move forward in the digital environment while continuing to fulfil its mandate to Canadians.
We'll do our best to answer your questions. Thank you.
3:35 p.m.
Liberal
The Chair Liberal Julie Dabrusin
Thank you.
Before we begin questions and answers, I first would like to welcome Rob Oliphant and Rosemarie Falk to our committee for today and also let everyone know that MP Steven Blaney is listening by telephone. He is not asking questions today, but he is on the telephone with us.
On that note, why don't we begin with MP Randy Boissonnault?
3:35 p.m.
Liberal
Randy Boissonnault Liberal Edmonton Centre, AB
Thanks very much, Madam Chair.
My thanks to the witnesses for their presentation.
As I read the report, I find that one fact is clear and it gives us cause for alarm.
Everybody is going very quickly to new online platforms.
You can send us these numbers later on, if you need to, but I'd like to know the following. Do Canadians consume more traditional television or more Internet television?
Go ahead, Mr. Carter.
3:35 p.m.
Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission
I'll start. We're just conferring on what data we do have with us.
Right now, as you have properly noted, it's a question of the pace of change.
3:35 p.m.
Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission
What we're seeing in our market today is that over the long term, digital products will clearly be taking over. Digital forms of delivery will represent the future. Currently, by a vast majority, the consumption of television programming, for example, is done on traditional platforms.
3:35 p.m.
Sheehan Carter Director, Television Programming, Canadian Radio-television and Telecommunications Commission
I would say it's closer to 85% versus 15% between those two types of platforms.
3:35 p.m.
Liberal
Randy Boissonnault Liberal Edmonton Centre, AB
What percentage of Canadians is reached by Internet television? Would it be 50%, 60%, 75%...?
3:35 p.m.
Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission
In terms of the consumption levels, the reach levels, as opposed to the number of hours, which was what we were answering in the previous question, are very high.
3:35 p.m.
Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission
I believe so. It's in that zone.
3:35 p.m.
Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission
Yes—and growing.
3:35 p.m.
Liberal
Randy Boissonnault Liberal Edmonton Centre, AB
Do you have an idea of the number of streaming hours versus television hours that people watch? Where are Canadians getting more?
3:35 p.m.
Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission
We can get you that, but just from memory, for traditional platforms it's about 26 hours a week. At the time of our report, it seemed to be about four to five hours online.
3:35 p.m.
Liberal
Randy Boissonnault Liberal Edmonton Centre, AB
I'm part of this, at home, so I'm interested in the percentage. What percentage of Canadians who watch TV do so exclusively online?
3:40 p.m.
Director, Television Programming, Canadian Radio-television and Telecommunications Commission
In terms of the most recent numbers we have access to, we can get you the specifics, but from memory I believe it's 17%.
3:40 p.m.
Liberal
Randy Boissonnault Liberal Edmonton Centre, AB
So 17% would watch only on digital platforms and not have access to cable or satellite. When I'm in the hotel here, then, it's a different paradigm, but okay.
Would you say that the revenues from broadcasting distribution undertakings are in decline?
3:40 p.m.
Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission
Yes, definitely. Both subscribership and revenues have been in decline in the last couple of years.
3:40 p.m.
Liberal
Randy Boissonnault Liberal Edmonton Centre, AB
I was in business before I was in politics, so I'm interested in knowing the bottom line. Are the broadcasting companies still profitable, even though the revenues are in decline?
3:40 p.m.
Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission
It's a general question. Generally, yes, broadcasting properties are profitable. Each sector, as the report indicates, is going through different changes. One that is no longer profitable is conventional television as a whole.
3:40 p.m.
Liberal
Randy Boissonnault Liberal Edmonton Centre, AB
So Bell, Rogers, Corus are not in danger of going bankrupt tomorrow. They're healthy. They are turning profits.
May 2nd, 2019 / 3:40 p.m.
Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission
Overall, those companies do turn profits in the overall market. Now they operate in both the telecom and broadcasting fields, and their distribution units are more profitable, although less than they were in the past, than their media outlets, as I understand the difference between the two.