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Impact of a $200 Million Cut on CBC's Services

Jan 5, 2009

To: FRIENDS Steering Committee
From: Ian Morrison, Spokesperson

As you know, we have learned through a reliable, confidential source of a secret plan by the Harper Conservatives to cut $200 million from CBC's Parliamentary allocation.

Background

  • $200 million is 18% of CBC's 2008/2009 Parliamentary appropriation, and 12% of CBC's total revenue from all sources.
  • Owing to inflation, the purchasing power of CBC's Parliamentary appropriation has already declined by one-third since the early 1990s. A further $200 million reduction would effectively halve the real value of what Canadians pay for their national public broadcaster compared to fifteen years ago.
  • While previous rounds of budget cuts in recent years have led to modest programming service reductions, they have focused on reducing administration and support services. There is effectively no more room to continue with that type of "belt tightening". Future cuts of the magnitude proposed would have to come almost entirely out of programming services to Canadians.
  • In order to offset reduced public funding, CBC has been forced to earn more and more of its own revenue, the majority of these funds through television advertising. Approximately one-third of CBC's revenue now comes from this earned income, impairing the Corporation's capacity to operate in television as a true public service broadcaster (along the lines of BBC, RTF or NHK).
  • The English and French television networks earn almost half of what they spend. This means that expenses and revenues go hand in hand: a cut to popular programs generates only half the net savings to CBC's bottom line. Audience ratings, and thus commercial revenues, tend to fall proportionately. This process can lead insidiously to a "death spiral" of diminishing returns.

You asked what scenarios might be available to CBC's Board of Directors and senior management in order to deal with such a massive cut to its annual resources. With assistance from knowledgeable sources within and outside the CBC, we have developed the following options.

Amputating limbs

It is not possible for the CBC to absorb a further $200 million annual funding cut without amputational restructuring. Limbs would have to go. This would be so even in good economic times. The recent softening of the advertising market would increase the scope of the required amputations. A $200 million cut would inevitably lead to a dramatically smaller CBC, with a reduced range of services, and significantly diminished impact and value for Canadians.

Faced with a budget cut of this magnitude, CBC's Board of Directors would have to choose among a limited number of radical scenarios, each of them terminating basic programming activities which have for decades been central to CBC's public service mandate under the Broadcasting Act. They would need to amputate limbs from our national public broadcasting services.

Each of the following three scenarios would achieve a net saving in the order of magnitude of $200 million per annum. The fourth option would increase commercial revenues to the point where CBC would become indistinguishable from private sector broadcasters:

Scenario One: Get out of local programming

  • In this scenario, CBC would stop all local programming in both English and French on both Radio and Television.
  • This would mean no more local information morning, noon and drive home shows on Radio; no more supper hour shows on television.
  • Local programming is the lifeblood of Radio services. The most highly-rated shows CBC Radio broadcasts are all local.
  • But the cost of producing programs in up to fifty locations across Canada is much greater than originating programming from Montreal in French and Toronto in English.
  • On Television, local news has already suffered major reductions. But public and Parliamentary pressure has so far prevented its complete elimination.
  • At a time when private broadcasters and newspapers are consolidating as well as downsizing their newsrooms, the CBC's withdrawal from the local scene would represent a loss to many communities of one of their most important forums for coverage and discussion of local political, social and cultural issues, as well as the development and celebration of local talent – a huge reduction in the information infrastructure which binds communities together.
  • Terminating CBC's local presence would also entail the disappearance of vital local and regional voices and perspectives from the CBC's national network programming.
  • In effect, the Canadian Broadcasting Corporation would contract into a Toronto or Montreal Broadcasting Corporation, turning its back on the far-flung, diverse reality of the other 72% of Canada.

Scenario Two: Turn CBC and Radio-Canada into all-news networks

  • A version of this scenario has already been suggested in the past by Harper's Conservatives, and before that by the Canadian Alliance and Reform Parties when their leaders mused about "closing the main channels but keeping Newsworld and RDI".
  • On Television, this would mean the cancellation of all non-news programming: no more dramas such as The Border, no more comedy shows like The Rick Mercer Report, no more provocative talk shows like Tout le monde en parle, no more made-for-TV adaptations of great Canadian novels such as The Englishman's Boy, etc.
  • On Radio, we would see the demise of Radio Two and Espace Musique, as well as CBC's on-line music and entertainment services, and all of the Radio network's contributions to Canadian culture and literature, from Eleanor Wachtel to Canada Reads.
  • A country's stories are told, not only on its newscasts, but also in its fiction, drama and poetry. If these forms of story-telling are not brought to the airwaves, Canadian identity would inevitably wither.
  • The departure of CBC/Radio Canada from the fields of arts, entertainment and culture would also be a huge blow to Canadian creative and performing artists and cultural industries, which rely on the CBC for crucial support and exposure – both income and airtime.
  • In this scenario, CBC would likely give up its major TV Sports franchises, including Hockey Night in Canada – a substantial loss of both revenue and audience.

Scenario Three: Get out of news programming

  • This is, in effect, the ‘flip-side' of the previous scenario.
  • It is also the model for PBS – though not for any other national public broadcasters in democratic countries around the world – all of which have strong news divisions at their core.
  • Under this option, there would be no more The National, Le Téléjournal, World Report, The Current, As It Happens, Sunday Edition, The Fifth Estate – none of the excellent news and current affairs shows that have come to represent CBC and Radio-Canada at their best.
  • CBC News is Canada's most trusted news brand, and the country's largest broadcast news operation, with more bureaus and correspondents across Canada and around the world than any other news service. Without CBC News, Canadians would lose their most valued source of coverage and analysis of local, regional, national and international events and issues.
  • Without the News Divisions, CBC and Radio-Canada would become hollow shells, mere commissioners, packagers and schedulers of programs produced by others, shunted from the centre to the sidelines of Canadian public life.
  • More important: the level of informed citizenship and public discourse in the country would be deeply compromised.

Scenario Four: Fully commercialize all aspects of CBC/Radio-Canada

  • This scenario would advance a disturbing tendency to emphasize audience share and popularity at the expense of quality and distinctiveness in CBC/Radio-Canada programming – as well as the parallel focus on generating an ever-greater proportion of the Corporation's budget from commercial revenue.
  • This trend is already deeply entrenched in the Television networks – particularly English Television, where CBC is often described by senior executives as a "company". Were this to continue, we should expect further reductions in Canadian content in favour of more US shows, such as Jeopardy!, Wheel of Fortune and the Martha Stewart Show. The network's reliance on high-cost, high-revenue professional sports properties would also intensify.
  • Programming and scheduling decisions made solely on the basis of audience and revenue potential would eliminate from the television schedules many of the most valued types of programming – documentaries, for instance, such as the hugely popular and influential bilingual series A People's History of Canada which, while expensive to produce, leave a lasting impact and legacy.
  • Apart from public policy concerns, there are several practical risks to this scenario, especially given the current shaky state of the television advertising market. As well, given the very different operating environments in the English and French language markets, this strategy could be difficult to apply equitably to both networks.
  • On Radio, as well, we have already seen evidence of an appetite for higher ratings and more "desirable" demographics driving programming choices – witness the recent attempts to make over Espace Musique and Radio Two.
  • The logical next step – fuelled by a financial crisis – would be to sell ads on CBC and Radio-Canada Radio services. This would reverse a long-standing policy, and destroy one of the most distinctive and highly prized features of CBC Radio – its non-commercial status.
  • A CBC so clearly dependent on commercial revenue would soon cease to be recognizable as a public service broadcaster – distinct from private broadcasters.
  • The question might then be asked: "Why are public funds allocated to CBC/Radio-Canada, since their services are virtually indistinguishable from other stations that pay their own way with commercial revenues?"
  • Who might want to raise this question for public discussion?

Each scenario would achieve a $200 million cut

Attached is an order-of-magnitude analysis of the financial implications of each of the above scenarios, indicating how each would address a $200 million shortfall:

Four $200 Million Cut Scenarios

Scenario One: Get out of local programming
    Estimated Net Annual Savings
Eliminate local programming, in English and French, on Radio and Television:
   English Radio
  $80M
   English TV   $40M
   French Radio   $40M
   French TV   $20M
Close CBC.ca and Radio-Canada.ca   $20M
TOTAL   $200M

 

Scenario Two: Turn CBC and Radio-Canada into all-news networks
    Estimated Net Annual Savings
Eliminate all non-News programming (Drama, Sports, etc.) from the English and French Television Networks. In effect, close the “main” TV Networks, and retain continuous information channels only (à la Newsworld and Réseau d’Information):
   English TV:    
   Cost of Main Network $500M  
   Lost Ad Revenue ($200M)  
   Cost of expanded News Division ($200M)  
    $100M
   French TV:    
   Cost of Main Network $300M  
   Lost Ad Revenue ($80M)  
   Cost of expanded News Division ($135M)  
    $85M
Close “second” Radio Networks, in English and French, plus associated cultural programming on Radio 1 and Première Chaine:
   Radio 2 $15M  
   Espace Musique $10M  
Expand News programming on CBC.ca and Radio-Canada.ca ($10M)
TOTAL   $200M

 

Scenario Three: Get out of news programming
    Estimated Net Annual Savings
Eliminate Network News & Current Affairs programming from all four services. Close Newsworld and RDI (no net saving):
   English Radio:    
   Close Network News & Current Affairs $20M  
    $20M
   English Television:    
   Close Network News & Current Affairs $150M  
   Lost Ad Revenue ($50M)  
    $100M
   French Radio:    
   Close Network News & Current Affairs $15M  
    $15M
   French Television:    
   Close Network News & Current Affairs $100M  
   Lost Ad Revenue ($35M)  
    $65M
TOTAL   $200M

 

Scenario Four: Fully commercialize all aspects of CBC/Radio-Canada
    Estimated Net Annual Savings
Fully commercialize all aspects of CBC/Radio-Canada
   English Radio
  $70M
   English TV   $60M
   French Radio   $25M
   French TV   $35M
   CBC.ca and Radio-Canada.ca   $10M
TOTAL (additional revenue raised to offset government cut)   $200M

Notes:

  • Savings shown are order-of-magnitude estimates only.
  • Allowance has been made for replacement programming at minimal cost.
  • Proportionate reductions in administration and overhead costs are included.
  • No provision has been made for one-time costs or savings – e.g. capital costs, revenues from sale of property, etc.

For additional information: