Canadian Heritage Committee on Feb. 23rd, 2016

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

Thank you, Madam Chair.

I was quite glad to hear Mr. Halucha's remarks, since the industry perspective is the one I am most interested in. As I said to Mr. Bernier and Ms. Kennedy earlier, the reality of two cultures and two languages is a paradigm we have long been dealing with. The challenges essentially revolve around the industry.

I have two questions for you.

We talked earlier about creating apps and replacing the postage subsidy. Nowadays, we are talking about the government subsidizing or supporting the development of an app to make the media service more accessible.

I think it's important to always draw the distinction between the cultural and heritage component—the diversity of voices and so on—and the marketplace. Regardless of whether a business sells lawnmowers or newspapers, it provides people with jobs and we want to do everything possible to keep those jobs. Do you offer the industry any type of modernization support, to help with the building of apps or other new technologies? Parliament is perpetually playing catch-up with consumers, who move much more quickly than politicians. That's my first question.

My second question is this. In light of the recent acquisitions, I can't help but be concerned by the media concentration Mr. Waugh was speaking of earlier. What might happen if one of the big players were to decide to sell one day? Obviously you would object. The Investment Canada Act also comes into play. That's another consideration that emerges. Is there a risk, or should I not be worried?

[Paul Halucha]

Those are two large questions.

In terms of whether or not we provide any subsides directly, we do have programming. We support innovation. We support it through NSERC. We support it through the National Research Council. We also support it through things like venture capital. The government announced the VCAP fund a couple of years ago.

My experience in talking with those who are trying to develop apps, especially those who are millennials, is that typically they're not looking for a lot of support from the government in terms of subsidies. They're looking for expertise, for assistance in getting into the marketplace.

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

I understand perfectly.

I have to cut you off as we're running out of time and I have just 30 second left.

The fact remains that today's companies probably need some sort of program support in order to keep up with the times. Do you provide anything to that end?

[Paul Halucha]

Yes. I understand the question.

I think the challenge for the existing industry is more in getting people to pay for their content online than it is in getting their content online. I think—

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

As things stand, it's people from the culture and heritage sectors who are providing the support here.

[The Chair, Liberal, Hedy Fry]

Thank you, sorry.

I would like to thank the officials from Industry Canada and from Canadian Heritage for coming this afternoon. Thank you very much.

We will suspend the meeting for a minute for this panel to leave and for the CRTC to come in.

Committee members, you should know that if you felt you didn't get all your answers here, we can always ask the group back as we move forward in the study. You can decide who you want to hear and how often you want to hear from them.

Thank you.

[The Chair, Liberal, Hedy Fry]

We will begin.

Welcome to members of the CRTC. You have 10 minutes to present, and then we'll have some questions and answers.

We will only go to a five-minute round on the questions and answers, one round only, so that we can make time for our 15-minute meeting.

Mr. Hutton and Mr. Craig, welcome.

Go ahead, Mr. Hutton.

[Scott Hutton, Executive Director, Broadcasting, Canadian Radio-television and Telecommunications Commission]

Thank you, Madam Chair, for inviting my colleague Michael Craig, acting senior manager for English television, and me, Scott Hutton, executive director of broadcasting with the CRTC, to appear before your committee.

We commend you and your members for focusing on media and local communities. It's top of mind for many Canadians, with repeated announcements of cuts to local newsrooms across the country. Coincidentally, this is a topic that the CRTC is currently examining.

In late January, the commission began a public hearing on television programming that is closest to Canadians: local news and current affairs, which keeps them informed of events and issues pertinent to their communities. This type of programming promotes the democratic process by keeping citizens informed and engaged. We are looking at the presence of this programming in order to ensure the future of local and community television in today's fast-evolving and increasingly fractured media environment.

There are limits to what I can say about this issue. As you know, the CRTC is an administrative tribunal with quasi-judiciary responsibilities. Since the matter is pending, and to preserve the integrity of our decision-making process, our appearance before your committee is necessarily confined to explaining the proceedings. Naturally, we will not be able to share the information gathered confidentially or to speculate on decisions or licence renewals that will follow.

However, I am pleased to provide an overview of the state of local media and the motivation for our current review. I'll focus primarily on TV, although I'll briefly highlight radio stations too. I can also shed light on local broadcasters' regulatory obligations when they receive a licence from the CRTC.

With regard to radio there are more than 1,100 radio stations in the country that are inherently local and focused on the needs of their communities. Local news, weather, and sports are the key elements of private radio operations. The talk radio format is especially popular in most urban centres, yet the radio sector must contend with the growing impact of music streaming services and the widespread availability of connected cars.

While radio's challenges are great, those facing TV are even greater in the age of Netflix, Facebook, and YouTube. That's why we launched our comprehensive Let's Talk TV review of the entire television system in October 2013. We engaged with 13,000 Canadians during the course of the review, which included a public hearing in September 2014.

It was during this process that the CRTC identified a number of challenges faced by local and community television in an increasingly fragmented media world.

More and more, Canadians are utilizing different platforms to consume information and entertainment content, and even to broadcast their own. The fact that certain dailies have ceased their print versions and moved online is proof of this new reality.

Putting additional pressure on broadcasters, the advertising revenues derived from local television news have fallen sharply in recent years.

These shifting realities notwithstanding, the commission believes profoundly that the Canadian television system should encourage the creation of compelling and diverse Canadian programming. This programming should include news, analysis and interpretation to ensure a local perspective on current events—whether that programming is produced by the private, public or community component of the system.

When we look at broadcasting policy, we strive to accomplish a number of outcomes: empower Canadians to be at the centre of the broadcasting system; place the focus on the creation and promotion of world-class programs made by Canadians; and remove barriers to innovation.

People's attachment to local TV stations was apparent during the eight days of hearings that ran from January 25 to February 3, and we have the evidence of that here with us today. Canadians told us they value local news for its capacity to connect them directly with their communities. Local news also helps them make sense of world events and enables them to participate in Canada's political, economic, and cultural affairs.

Many echoed the sentiment expressed by Kirk Lapointe, who appeared before the commission during the said public hearings. The former head of CTV News, and the founding executive editor of the National Post, Mr. Lapointe said:

We are too small of a country to permit broadcasters to further dim the lights in their news studios town by town.

Yet, that's exactly what has been happening. An alarming number of television stations have reduced the length of their newscasts, cut back on staff, or centralized the production of their news programming.

That's in large part because of declining advertising revenues. Data collated by the commission indicates that the cost of producing local news television content was 22% higher than revenues in 2015.

Needless to say, these are concerns the commission takes seriously. That's why we asked for public input on a number of questions as we determine how best to support local media in local communities.

You may have heard about the speech given by Jean-Pierre Blais, our chairman, at the Canadian Club of Toronto last week. It focused on TV news in an era of change. The chairman's message was clear. Even if the old way of doing business is no longer sustainable, there is no shortage of opportunity to make great content that will continue to draw viewers however Canadians choose to access such programming. He also underlined that there is a massive amount of money in the television system that should be put to work to resolve these issues. Our research in the Let's Talk TV review found that support for Canadian television production is worth more than $4 billion annually.

When the CRTC issues local broadcast licences, they come with conditions—one of the most critical being that they produce and provide local TV programming. In exchange for the right to sell advertising and use the public airwaves to bring their productions into the homes of Canadians, broadcasters have a duty to serve the public interest, because our democracy depends on it. Local programming promotes the democratic process and the public good by keeping citizens informed and engaged.

English language stations owned by the largest ownership groups are required to broadcast at least seven hours of local programming per week in non-metropolitan markets and at least 14 hours per week in metropolitan markets.

In 2014, TV stations spent more than $470 million on local programming and news, while broadcasting distribution undertakings spent $115 million on community televison channels. The commission is convinced there is enough money in the system to support the creation of news and local information programming.

Canadians have been clear throughout our public consultations that they expect us to pay close attention to the quality and quantity of local news and public affairs programming.

We've sent an equally clear signal to the TV industry that we'll hold major broadcasters to account when their licences come up for renewal in 2017. If they fail to live up to their end of the bargain, the CRTC will not hesitate to take action.

As CRTC chairman Jean-Pierre Blais warned the TV industry last week, television news belongs to the marketplace of ideas, not to the marketplace of higher dividends for investors. We certainly hope the message got through.

Madam Chair, this is what I can safely say prior to the release of our decision on local and community television.

Of course, both Michael and I would be happy to respond to your questions to the best of our ability.

[The Chair, Liberal, Hedy Fry]

Thank you very much, Mr. Hutton. You came in under 10 minutes. That's very good.

We're going to begin the questions. We're going to one five-minute round only because of the in camera meeting we will have after this.

The first person will be Mr. Samson.

You have five minutes, please, Mr. Samson.

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

Thank you, Madam Chair.

I have a question about the impact of the decisions and the changes that will take effect on March 1. Mr. Hutton, what are the first signs you are seeing? Do any problems seem to be emerging?

[Scott Hutton]

Our information indicates that some broadcasters have already begun to implement measures further to our decisions. Those measures include a $25 basic package, small pre-assembled or custom packages, and pick-and-pay service. From a technical standpoint, the services seem to be emerging, and we believe that all broadcasters will be ready for March 1 implementation.

Broadcasters also have until the end of the year to fully implement the service, in other words, make it available to all Canadians on both a pick-and-pay and small package basis.

Over the past few years, we've done a lot of work behind the scenes, mainly in terms of managing the transition. All of these efforts are facilitating the transition to a new age—one that Canadians are already living in, one where they expect to choose and watch what they like when they like where they like.

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

Thank you.

Tying into that question, I would like to know whether the basic service packages include categories that will protect the diversity of minority communities. My region has a problem in that respect. TFO broadcasts educational French-language programming for young people. And some companies don't include it in their basic service offering.

What safeguards are in place to protect small rural areas with minority communities, in other words, the diversity of voices, to make sure that this programming is included in basic service packages?

[Scott Hutton]

Technically speaking, the government focuses on communities, as they are indeed official language minority communities.

We put in place a variety of measures aimed at cable and satellite distributors to ensure they provide a minimum level of service to minority communities. And that service must be available on a pick-and-pay and small package basis, so that families can subscribe to what they like.

We also made sure that, as part of the changes being rolled out on March 1, it would be possible to add French-language services to the basic package in some cases. You mentioned TFO. It's now possible to offer that programming to the entire country, which didn't used to be the case. We also made sure that the basic service offering took into account minority groups.

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

There is no guaranteed protection in the basic service package.

[Scott Hutton]

There is a guaranteed service offering on two levels.

First, local TV stations provide certain services, including CBC/Radio-Canada, which serves minority groups across the country. That service has to be included in the basic package.

Second, there are also a certain number of mandatory services. Accordingly, the $25 basic package must include TVA, which provides services across the country, and other services such as the Unis TV network, which serves and represents minority groups. So a core group of services is available in the basic package. I was simply referring to TFO, the Ontario broadcaster, which would benefit from going further.

[The Chair, Liberal, Hedy Fry]

You have a few seconds to wrap up.

[Scott Hutton]

We changed our rules in the specific case of TFO, but other services are mandatory.

[The Chair, Liberal, Hedy Fry]

Thank you.

Mr. Waugh.

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

I've read lots about you in the last five years. You must be tired of this subject.

I'm going to quote Charlie Rose, if you don't mind. He said that if you don't have local news, you have nothing. He said you could go out and buy any show in North America, including Canada, but if you didn't have local news, you wouldn't have the local ratings and you wouldn't have the ads and the money coming in.

I thought I would share that with you, because it is the local newsrooms that have felt the wrath of the cuts we have seen coast to coast to coast in the last six or eight weeks in this country.

Who regulates the quality of television on each station? We've talked here today about the ads and the money, but who is actually going over it? Where I used to work, we had five and a half hours of local programming a day. Was it good? I'm not sure it was great quality, but it did fill black and it gave us five and a half hours of local Saskatoon or Saskatchewan quality. Who regulates this?

When I see, as you've heard me say before, someone in Toronto giving me the news in Saskatchewan, who's regulating the quality and the quantity of local news?

[Scott Hutton]

We regulate the broadcasting system, including those who provide local news.

Traditionally in the past, we regulated the number of hours. You mentioned hours and I won't repeat them. The amounts are here.

You mentioned quality. Quality is very difficult to measure. We've just been through eight days of hearings, and those subjects did come up, and Canadians from across the nation expressed those concerns to us. We've asked questions about the definition of local news, for example. Traditionally, we've simply looked at local programming. We've asked ourselves whether we should be more specific towards local news.

What are elements of quality in local news? It's hard for me sitting here in a meeting room, or traditionally in Gatineau, to determine what is of quality for your local environment.

We've asked questions. Should we look at a physical presence? Should we look at reporters on the ground? Should we look at decision-making with regard to what appears on air from the local environment? Those are questions we're certainly asking. We are also wondering whether or not we should intervene in those areas.

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

I welcome that.

The only other question I have is about how digitally in this country nobody is making money off websites. I know this has been a big issue because everything's free. God bless the Winnipeg Free Press for trying another firewall, because they have not worked.

Where are we going with that? When I see the quality of broadcasting and writing in this country...the problem is I can't get this reporter out for three days or a week to do a great investigative story because I'm filling digital now, and digital has to be fed 24/7, every hour, every minute of the day. I can see the reporting has gone down, because I can't afford to have my reporter go for a week and do a great investigative story. Because of digital now, I have to have that guy on there 24/7.

[Scott Hutton]

The CRTC and our chairman through his speech certainly indicated we share those concerns with respect to the importance of investigative journalism.

We're in a great period of transition at the CRTC and the media business. One of the constants in our business is that there is always a change and evolution.

We found there are a number of Canadians who do want to be fed 24 hours a day. We can't fight Canadians. This is what they want and they're looking for that. At the same time, the erosion is occurring, not so with the time that's spent viewing traditional television, but certainly with the revenues. Our colleagues previously...I won't get into too much from their presentation, but yes, the advertising dollars are being spread across a number of platforms.

What we're trying to do is encourage broadcasters to be on all platforms. You create that programming for today and you use the resources that you have today, but you have to spread them across and reach out to Canadians because Canadians are expecting that programming to be available on all platforms.

Money is difficult in that environment. We've all heard the expression “digital dimes and analog dollars“. They're losing analog dollars. They may find people on digital, but it's digital dimes they're picking up.

Sorry, Madam Fry.

[The Chair, Liberal, Hedy Fry]

Mr. Hutton, thank you. That's all right. I'm sorry, but that's my job to put you on this kind of short timeline.

Mr. Nantel, for five minutes.

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

Thank you, Madam Chair.

Thank you, gentlemen, for joining us today.

Clearly, we are talking about a changing marketplace, and the issue that stands out most is the financial one. As my colleague pointed out, providing regional coverage costs money, and getting that money depends on advertising revenues. We all watch Lisa Laflamme on CTV's nightly newscast, but that program is losing the most money for the network because of the astronomical production costs and dwindling advertising revenue.

Conventional television companies are in financial trouble because of the eroding advertising market, which is moving, more and more, to the Internet. That doesn't fall within your domain, however. We can all sit here and scratch our heads at the elephant in the room. On that point, there was clearly a huge misunderstanding when Netflix and Google representatives testified during the CRTC's recent hearings on the subject, as part of the Let's Talk TV process.

Where do things stand in terms of the numbers, which are essential in order to understand the situation? Our entire industry is based on numbers and market analyses. We don't have those figures; nor are we likely to get them. Where do you stand on that huge problem? We can dance around it, but it's there.

[Scott Hutton]

We have excellent data on the companies we regulate, specifically. Over the years, we've undertaken various exercises in an effort to collect specific data. We had some trouble as time went on. We are all familiar with the three companies you mentioned, but they each have entirely different business models. All of them reach, interact with, and sell to their customers in very different ways.

More and more, we don't try to obtain data directly from companies; instead, we try to take a step back and leverage various tools that are available to more or less everyone. We subscribe to tracking services that give us an idea of where revenues are heading. These services question Canadians about their habits. Numerous surveys are available and we buy that data. We found it more effective to go that route than to ask companies for data directly.