Remarks by: Ian Morrison, Spokesperson, FRIENDS of Canadian
Mr. Chair and members of the Committee, thanks for the
invitation to appear today in the early days of your examination of "the
challenges faced by the Canadian Broadcasting Corporation in relation to the
changing environment of broadcasting and communications".
I was originally invited to focus on the broadcasting
environment, but last week I was told that I could include some comments on the
CBC, so I will touch on both - as a stimulus to our conversation today.
The basic challenges facing Canadian policy makers and
broadcasters in 2014 are similar to those described by the Aird Commission in
1929. Here are five:
Providing Canadian content in sufficient
quantity and quality to compete for audience attention with the flood of
production from elsewhere, principally the United States.
that content universally accessible
to all Canadians who want it - in a six time-zone country with more geography
than population, with two official languages.
that both the production and distribution of Canadian content are economically viable and sustainable - in
the absence of a profitable business model.
the system to both celebrate and share the rich diversity of this country's regions
and peoples - as opposed to some monolithic centrist vision.
the independence of the system from
undue influence or control by special interests of any kind - either political
The late Graham Spry framed this challenge well when
addressing a parliamentary committee in 1932: "The choice before the committee
is clear. It is a choice between commercial interests and the people's interest.
It is a choice between the state and the United States".
Here is a graphic2
demonstrating the continuity of challenge in the second decade of the 21st
Sheltered from US competition by language, French-speaking
Canadians enjoy a preponderance of Canadian and Québécois content, while
English-speaking Canadians, view 77% foreign, mostly American
programming - constituting an outlier in comparison with other western
Notwithstanding its shortcomings, our television system is
admired and respected worldwide. Because of time-shifted and out-of-market
viewing options, and the wide range of over-the-air and specialty channels, the
average Canadian viewer has greater viewing choice that the average American.
Nonetheless, our system faces real threats.
Much of our success results from delicate checks and
balances that have been put in place by the CRTC to ensure availability of
Canadian programming. A pick-and-pay (or unbundled) system referenced in last
October's Throne Speech could unravel decades of hard work to ensure the
availability of a wide variety of programming which is predominantly and
Another challenge is the changing pattern of advertising
spending, where online spending has risen ten-fold in the past decade -
propelled by a new-found capacity to monetize human activity - outpacing
newspapers and conventional television. It is soon expected to exceed all TV ad
And unregulated services such as Netflix, YouTube, Hulu and
Google TV, among others are creating unprecedented fragmentation of Canadian
tuning. As recently as the autumn of 2012, the CRTC insisted that such
platforms continue to be complementary to the regulated broadcasting system.4
One policy option would be to offer priority carriage for Canadian services on
Similarly, Canadian radio stations are now competing not
only with satellite radio, but also with streaming channels from all over the
world. Thus far, they have held up their share of ad revenues. But a recently published
commercial radio environmental scan concludes that radio ad revenues "can be
expected to start to decline over the next five to seven years... by as much as 15%.5
Another challenge to the sustainability of our broadcasting
system is the immense profitability of the large communication companies for both
their broadcast and non-broadcast services. Last year, their profits before
interest and taxes (PBIT) exceeded, for the first time, the revenues of
Canada's conventional broadcasters. In 2012, for example, Cogeco, Rogers, Shaw
and Videotron and some smaller distributors' combined operating margin was 44%.6
Compare this to a 6% margin for the conventional television industry.
Why is this a problem? Because more than $2 billion in
subscribers' money passed through the distributors' hands into those of their
shareholders without contributing to the creation and broadcast of Canadian
stories. This market domination absent price regulation means that consumers
take it in their pocketbooks. We note that the current government, though
speaking out in support of the interests of wireless consumers, has remained
silent on the interests of cable and satellite consumers.
As a seguë towards your CBC study, I offer a few comments on
Rogers' recent acquisition of NHL rights from 2014 to 2026. This is very good
news for the National Hockey League and its hard-working players. Starting next
September, Rogers will pay upwards of $400 million annually for the NHL's
multi-platform rights. In a period of low inflation, $400 million constitutes a
500% increase in rights payments since 2007. Split amongst 30 teams, 77% of
that money - more than $300 million per annum - will remain in the United States.
By September, Canadians will be paying more than Americans for the NHL's audio
and video images.
CBC Television used to make a substantial profit on its Hockey Night in Canada franchise. In
2007 it unwisely bid up its NHL rights payment by about 100%, believing,
erroneously, as it turned out, that CTV/TSN would also be bidding.7
Shortly thereafter, a major worldwide recession suppressed TV ad rates, causing
CBC to lose money on its investment. Our research indicates that CBC was able
to get back into the black on its NHL investment by 20118
and that it offered approximately $200 million per annum in its unsuccessful
bid for the 2014+ rights.
Further, we understand that the NHL 'recommended' to Rogers
the current arrangement Rogers has made with CBC to essentially 'rent' CBC
Television's English network for upwards of 350 hours of prime time for the
four NHL seasons beginning September 2014 and ending in June 2018. Under this deal,
Rogers will have the right to sell ads on CBC Television during NHL hockey
broadcasts. Media speculation has it that this arrangement will come to an end
in 2018. We are skeptical, for two reasons.
We believe that Rogers has over-paid for the NHL rights, and
going forward its shareholders will insist that it do its very best to monetize
this asset. And CBC Television's Canada-wide reach is an unsurpassed opportunity
to sell ads to national advertisers. Second, CBC Television has acquired a very
high level of skill in telling hockey's story to Canadians, including high
production values, which hockey fans have come to expect.
CBC Television has avoided a doomsday scenario for the time
being: losing NHL hockey for 350 prime-time hours each year, and having to
replace that programming at its expense. FRIENDS believes this four-year period
offers CBC Television an excellent opportunity to do what SRC Television did
twelve years ago - to wean itself from excessive dependence on professional
The loss of NHL rights will reduce CBC Television's ad
revenues by more than $120 million, half its total ad revenue. As its sales
costs will not fall proportionately, the net benefit of its remaining
advertising will decline to a level where it could contemplate, for the first
time, going non-commercial.
We are greatly concerned by the failure of CBC's CEO and senior
management to engage in advance contingency planning for the possible loss of
NHL rights. The writing was on the wall. CBC's testimony before the CRTC at
last year's licence renewal hearings suggests that its head was in the sand on
this matter. It appears to remain there today. In its recent corporate plans9
CBC's leadership has advocated ever more dependence upon self-generated,
principally ad revenues. The recent failure of its NHL strategy as well as its
recent venture into advertising on Radio 2 and Espace musique10
suggest the need to consider the option of a non-commercial future.
Albert Einstein defined 'insanity' as "doing the same thing
over and over again and expecting a different result". We recommend that the
Committee explore the possibility that this applies to the CBC. And removing
subsidized competition with the private sector can offer a win-win benefit.
No less an authority than the Prime Minister has advanced
this view, when he told the Canadian Association of Broadcasters that CBC's "English-language
television has tended to become more commercial, more in direct competition
with private television and more driven to use American programming to attract
advertising dollars - an approach which does not appear to be successful. We
(ie. the government) believe that CBC English-language television should
become, and will have to become, more distinctive if it is to remain viable and
fulfil its role as a unique public broadcaster."11
FRIENDS agrees with the Prime Minister!
Finally, I want to flag two issues we
believe merit your priority attention during this study.
One is to focus on strengthening CBC's
'local' presence in communities across the land. Canadian Media Research Inc.
has established that 'local news' is Canadians' top priority for television.
The Broadcasting Act charges CBC with
reflecting "Canada and its regions to national and regional audiences, while
serving the special needs of those regions".12
We believe that greater attention should be devoted to the local and regional
dimension of CBC's statutory responsibilities.
The second is to address the independence
of CBC's governance, in keeping with the necessary arm's-length relationship
between a public broadcaster and a government in a democratic country. The sage
advice of the 2003 Lincoln Report has yet to be enacted: "in the interests of fuller
accountability and arm's-length from government, nominations to the CBC Board
should be made by a number of sources, and the CBC President should be hired by
and be responsible to the Board".13
I look forward to our conversation this morning, and also to
a future opportunity to comment once you have heard from the CBC.
- 30 -
For Information: Jim Thompson
1 FRIENDS is an independent watchdog for Canadian
programming on radio, television and online, supported by approximately 200,000
Canadian families, and is not affiliated with any broadcaster or political
FRIENDS submits final comments to the CRTC on several subjects: CBC Television - Balanced Schedule, Programs of National Interest, and Regional Production; CBC Radio 2 and Espace musique - Commercial Messages; and CBC Television - NHL Hockey.