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Speaking notes for Hubert T. Lacroix, President and CEO, CBC/Radio-Canada, at the Canadian Club of Montreal

May 5, 2014

Source: CBC/Radio-Canada

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Good afternoon, ladies and gentlemen. First, I’d like to thank the Canadian Club for giving me the opportunity to speak to you today. Given the announcements we made this past April 10, you’ve likely surmised that CBC/Radio-Canada is facing a defining moment. I’m very grateful to you for showing an interest in what we do and being here today.

I’d also like to draw your attention to my colleagues who are here with us.

I’ll start by stating an obvious fact: times are tough for the public broadcaster these days. We’ve just announced $130 million in budget cuts, triggering the elimination of the equivalent of 657 full-time positions. All that, and we will only manage to balance our budget for 2014–2015.

Over and above these reductions, we also have $390 million in financial pressures we’ve had to manage since 2009. Since I took up my duties on January 1, 2008, this is the third time I’ve had to announce major cutbacks to our staff. Overall, these reductions have affected the equivalent of 2,107 full-time positions.

Our latest announcement made waves. There have been myriad reactions, from concern, questioning and heartfelt appeal, to anger and accusation.

Most would like to know what we’re going to do to secure the public broadcaster’s future.

On the street, in our inboxes, on social media, in the editorial pages and on the Hill, opinions about CBC/Radio-Canada’s future abound.

Opinions are coming in from everywhere. It’s fast and furious. Conversations about CBC/Radio-Canada are never boring and always passionate; and often, not that easy to follow. But nothing new there: this complex relationship that Canadians have with the public broadcaster has existed forever.

In fact, what the public broadcaster needs more than anything at this point in our history is a nation-wide conversation about public broadcasting, our mandate and funding model, and active participation from Canadians interested in it.

Today, I’m here to tell you why CBC/Radio-Canada matters now more than ever before and why it's time to stand-up and be counted if you care about public broadcasting.

But, as we have this conversation, the biggest danger we face is having a conversation about what we once were, rather than what we need to become.

CBC/Radio-Canada is an activator of culture, not the curator of a museum. Yes, our programs have contributed immensely to our heritage – but now we need to inspire new generations.

We need to make investments – smart investments – in people, technologies and programming that will meet the changing needs of Canadians and of a changing Canada.

To do that costs money. If we can't generate new revenues or our funding model doesn't change, we'll need to take existing dollars away from services we’re currently offering, to pay for those we need to be offering in the future.

Context
Let me first set the scene.

The industry is in flux. Conventional television is undergoing a huge transformation. In this new world, Google, Facebook and newspapers (think LaPresse+) are as much participants in our industry as TVA or CTV.

The advertising market is weak, down approximately 5% overall in the last year.

All signs point toward this not being a slump – it’s a new way of life, particularly as advertising dollars migrate to digital.

In fact, two days before our own budget announcement last month, the president of Rogers Media was before the CRTC, asking for changes to the conditions of licence for OMNI television. Keith Pelley said, “I am very worried about the long-term health of the conventional television sector. Some of the trends and shifts I have witnessed over the last couple of years I would have never imagined possible.”… He added: “It’s shocking how dramatic the industry has changed, and it has happened so fast, so fast. It’s not changing yearly… It almost seems like it’s changing daily.”

Not a week later, Shaw, Global’s parent company, announced its own restructuring, claiming a need to “better position” themselves for the future. They eliminated 400 jobs.

So, within days of each other, two major private broadcasters and the public broadcaster said the same thing.

And, why do we care so much about ad revenues? Let me explain with a few facts.

Our annual budget is now just over $1.5 billion.

Our total public appropriation, including our capital budget, is about $1 billion ($1,034 B); our ad and commercial revenues make up the rest. By themselves, ad revenues represent between $250 and $300M. Lose them or eliminate them, and this means less services to Canadians.

That's our funding model: we receive a public appropriation, a base budget and, to do more, and better deliver on the mandate from the Broadcasting Act which hasn’t changed since 1991 and requires us to offer “a wide range of programming which informs, enlightens and entertains”, we need to raise additional revenue by ourselves. That’s what we have been told by government and by the CRTC. And so we have.

And, with no increase to our permanent base budget, beyond partial inflation funding, since 1973, we have been able to build services for Canadians that today amount to 88 radio stations and 27 television stations; three all-digital services; two specialty television news services (ICI RDI and CBC News Network); three other specialty television services; and 11 other services, including music channels. And we deliver our services in two official languages, across six time zones.

And, as I’ve said time and again, despite our repeated requests regarding this, we’ve performed all our financial gymnastics with no access to a line of credit to manage our working capital, and parliamentary appropriations renewed every 12 months, with no predictability, about 6 weeks before the beginning of our fiscal year.

But as efficient as we are, the fact remains that our costs are presently still higher than our revenues.

And with a growing need for us to invest in fundamentally transforming the public broadcaster so we can focus firmly on the future, it’s become clear to us that our funding model now lacks the flexibility we need in the current environment.

Let’s have a look at what’s happening elsewhere.

Almost all public broadcasters rely on some mix of public and commercial revenues. We are not alone.

The revered BBC is ad free in the UK, but everyone who owns a colour television in that country pays a licence fee of about $270 Canadian dollars for it, every year.

And, their new director-general said a couple of weeks ago that he wants to extend the annual fee because Brits are now watching BBC programs and content on home computers, mobile phones and tablet services. As a result, they avoid paying the fee. Lord Hall is thus saying that the rise of online viewing means that the fee needs to be “modernized.”

These fees currently add up to 3.6 billion pounds or, presently, over 6.5 billion Canadian dollars; $97 per capita. And, over and above that $6.5B, the BBC actually does generate commercial revenue through a robust global offer, BBC Worldwide, which then declares a yearly dividend to the Mother Corp to add to the licence fee funding.

The Australian public broadcaster is about 98% ad free. It too gets about $1.1 billion from the government. Per capita, it works out to $53.

In a nutshell, when we look at the 18 major Western countries, Canada ranks 16th (3rd from the bottom) in terms of per-capita public funding, just ahead of New Zealand and the United States.

As of this year, each of us pays just $29 per year for the combined services of CBC/Radio-Canada. The worldwide average is $82.

And, it’s not that Canada doesn’t invest in culture. Between 1991 and 2011, spending on culture was up by 66% in other areas. In addition, in the same period, indirect benefits to private broadcasters – yes, privates get their share of direct and indirect public subsidies and benefits as well as tax credits, about a billion dollars a year – grew between 60 and 70%.

CBC/Radio-Canada’s public funding during the same 20 years? Down almost 40%, adjusted for inflation.

Those are simply the facts.

And, this is what it means: if you want the BBC, it will cost you the equivalent of $97 per Britton. If you want the New Zealand broadcaster, which doesn't have radio and whose television schedule is almost entirely commercially motivated, it will cost you the equivalent of $21 per Kiwi.

Last Thursday, in Ottawa, in front of a House Committee, that's basically what I said: the level of service and the extent to which we can fulfill our mandate is, obviously, directly linked to our level of funding. We have an extremely wide mandate that hasn't been amended since 1991, numerous regulatory obligations, and our funding is skinny. This can't continue. We can't keep making spectacular cuts to the public broadcaster every second year to balance its yearly budgets.

If we all believe in public broadcasting, then we need to support it, adjust its mandate to reflect the complexities of the current media environment, and to give it the resources it needs to fulfill that mandate.

On one of our national radio programs, The Sunday Edition, a couple of weeks ago, I heard a former BBC executive say: “Keeping a kernel of public service broadcasting, but depriving it of weight and energy by endlessly hacking away at its funding… is in some senses worse than abolishing it, because it allows politicians and you, the public, and an entire society to believe in the illusion of a civic space without actually having the substance of one”.

I agree with that statement.

Is there a magic number? No. Again it's all about the level of service that, as a civil society, we want and expect from the public broadcaster.

In 2003, the Standing Committee on Canadian Heritage published the “Lincoln Report”. It called for “increased and stable multi-year funding.” That was over 10 years ago.

Then, in 2008, the same committee went as far as to call for a core funding increase of “at least $40 per capita.” The Conservative minority on that committee called for “stable, multi-year funding for CBC/Radio-Canada, indexed to the cost of living.”

Under our current funding formula and at $29 per year per Canadian, we are confronted with finding, within ourselves, the resources necessary to transition into the future. And that means taking money away from current programs and services in order to invest in the future.

That’s exactly the choice we laid out in our budget announcement last month. And we all saw the reactions we got from Canadians.

Funding options for the public broadcaster are available to policy makers. But that’s for Canadians to decide, not us. We can't have a conversation with ourselves, and this isn’t only about us. It’s about the services Canadians want and expect from their media ecosystem (the conventional broadcasters, the specialty channels, the over-the-top participants, the independent producers, the cable companies and satellite providers, the internet service providers, and the public broadcaster), the funding available to all participants of the system, and the rules and obligations that go with that funding, all to deliver an appropriate service.

Until that happens, CBC/Radio-Canada has to find ways of adapting to market fluctuations and shifts in the landscape without resorting to mass layoffs as we announced last month. But this also means a very different public broadcaster.

The Stakes
And the stakes have never been higher.

When CBC/Radio-Canada was first created, it was to ensure Canada had a place on its own airwaves. Without it, we risked being inundated with American programming and having our identity forged by foreign commercial interests rather than our own experiences.

We needed a voice. We needed to preserve our languages and our cultures. We needed a lens of our own through which to view and understand our country.

Today, as the media environment becomes increasingly global, fragmented and almost infinite; as our own industry is controlled by fewer, larger empires and as Canadians have more demands on their time than ever before, there is an unprecedented hunger and need for a space to call our own.

A public broadcaster does not exist just to step in where the market fails or does not wish to offer services. On the contrary, research shows that there is a strong correlation, in each country, between the quality of the public broadcaster’s channels and the commercial channels. And, the more diverse the public broadcasters’ schedule, the more diverse the commercial broadcasters’ schedule.

Hence, it's not a race to the bottom but, actually, a race to the top.

This concept of a national identity is also important. We take great pride in our cities, towns and landscapes being featured in Hollywood films. Too often our media experience feels foreign to us. As a result we celebrate little pieces of Canada on our screens, big and small.

Yet, despite these glimmers, rare are the opportunities for us to see ourselves on screen.

So, I am proud of the role that CBC/Radio-Canada plays in showcasing Canada to Canadians. 19-2, 30 Vies, Unité 9, Heartland, Republic of Doyle: these television shows are instantly relatable because they are set in our own backyard. We recognize ourselves in the landscapes, cityscapes and hallways. We’re seeing a piece of ourselves on-screen. And that’s a tremendously powerful thing.

As we look at an increasingly fragmented and global media environment, Canadians, more than ever, need a place that is theirs. We need a space in which to grow, in which to thrive, in which to find ourselves.

This space must belong to all of us. It must be a public space.

Again, let me give you some perspective.

Right now, around the world, we have about 23 foreign correspondents beaming uniquely Canadian perspectives back from places like Ukraine, Syria, Washington and the BRIC countries. CTV has 6 and TVA has 1.

If CBC/Radio-Canada were to disappear tomorrow, Canada would instantly lose most of its eyes and ears around the world.

Last summer, we all felt shockwaves ring out from the explosion in Lac Mégantic. The first video footage of that rail disaster travelled around the globe, and it was shot on Radio-Canada cameras. We were the first, because geographically we have the presence, and our commitment to the regions is second to none.

That presence in markets like the Eastern Townships is one way we serve Canadians. We contribute to local economies. We contribute to culture and the quality of life of the people we serve, and we also organize and take part in charity and community activities.

Last year during our holiday season fundraising drive, we collected over $16.4 million across the country.

A strong public broadcaster is also the cornerstone of any healthy democracy’s public discourse, and raises the level of citizen engagement and awareness of what’s happening in their country.

It was our journalists, specifically those who work on the program Enquête, who exposed corrupt management of public contracts in the construction industry. Were it not for us, there would be no Charbonneau Commission. But Enquête, only one of many, represents so much more than the Charbonneau Commission. It also brought us a compelling report on football concussions, and another (together with the fifth estate) on the exploitation of workers in the textile and garment industries of Bangladesh. That’s why, despite the budget reductions affecting Radio-Canada, the Enquête team still has 29 full-time staff members, and is central to our mandate.

If not for the public broadcaster, who would serve language minority communities and ensure that people are aware of them, right across Canada?

If not for the public broadcaster, who would secure a place for the North in our collective consciousness, and who would make sure that Aboriginal languages remain an integral part of our heritage?

Do we, as a culture and as a country, need more than the few hours per week of Canadian programming currently offered by CTV and Global in prime time?

If there were no ICI TOU.TV, would Francophones in Quebec and in the rest of Canada be well served by Netflix?

If not Radio-Canada, who else would air news and current affairs programming in prime time, at par with made-in-Canada dramas and sitcoms, and Canadian entertainment and variety shows?

So here is the challenge to which we are now confronted: defining our future with our current funding.

Strategy
To get there, we started with some basic questions:

What are the sociodemographic changes ahead? According to Stats Canada, within 20 years, at least one person in four living in Canada will be foreign-born. How do we serve their needs?

Cable and satellite are still dominant, but their penetration has plateaued and has even started to decline. Everyone is talking about cord-cutting. We think consumers will continue to subscribe to TV, but tomorrow’s subscription won’t look much like today’s; it will be non-linear, multi-screen, pick-and-pay and with even more content choices.
Over-the-air TV is only used by about 5% of the population – < 2-3% by 2020 – but remains a big part of our infrastructure with the attendant costs.

Household penetration for mobile, smartphones and broadband in the home is closing in on 90%. Canadians own more screens than ever before. Can we invest in new modes of distribution while continuing to serve the traditional ones? At what point do we stop providing over-the-air distribution of our television services?

Over the last decade, we’ve reduced our real estate portfolio by 1 million square feet. Can we reduce it further and pour those dollars into content and services? Or will we then lose our connection to the local communities in which we’re invested?

News and local television are also at a crossroads. Local television is especially under threat following the elimination by the CRTC of the Local Programming Improvement Fund (LPIF). In many cases, there simply isn’t an economic model to support it. For that reason, we don't think the privates will stay, except maybe in the most populated cities in the country. Should we exit now or be the last broadcaster offering local news? Can we fulfill our mandate in the regions differently?

And though TV is still a primary medium for news in Canada, we can see digital/mobile surpassing it by 2020. How can we best inform Canadians who will be using their mobile devices?

What is the balance to strike between traditional newscasts and online short-form content?

We know that listening to music on radio is in decline, particularly as younger Canadians move online. And we know that the online music environment is hyper-competitive. However, currently, over 70 % of listening in Canada takes place over the air. When should we change our approach?
We’re not alone with these questions. But we are unique.

We are unique because the services we provide go far beyond filling market failures. We exist to join Canadians together and share their stories. We exist for a purpose beyond making money and satisfying our shareholders – we exist to create a national consciousness.

And, while the pieces of the puzzle continue to move around, we must prepare the next generation of CBCers. I’d like to tell you Elodie’s story. She’s 23 or 24, she’s got a big smile, she’s energetic and bursting with ideas, she’s engaged and convinced of our Corporation’s mission, and she’s been with us for 3 years. A member of the SCFP union, most recently she was on the team involved in our signature community events. I saw her everywhere: with the kids at our open house; outside during our Olympic week; on hand for our live audience programs. She was someone we hoped to build on. Elodie lost her job on April 10th. Losing our young people like that immediately puts our future in jeopardy, and our transformation becomes that much harder for us to carry out.

In early summer, we will share the results of our internal reflections, and embark on a course for 2020. But we know we can’t do it alone.

Starting today, we are launching a call for input into our future. We will leverage our social media platforms and online tools, to let Canadians have even more of a say in the future of their public broadcaster.

Let’s start right here. Take out your smart phones and go to cbc.radio-canada.ca/future (English) or cbc.radio-canada.ca/futur (French). Tell us what you think. Tell us what you need from us; tell us what you want from us; but always, always, with an eye to the future.

While all of this is happening, I have to keep my emotions in check, respect and safeguard the one billion dollars given to us by Canadian tax payers, and engage Canadians in fact-based conversations about us, while balancing our budgets.

Today, my goal was to trigger a national conversation about the media industry in Canada and our place in this environment, to convince you of our importance, and the urgency of your participation. This ecosystem is in full transformation. The public broadcaster must have the tools necessary, so that society can fully benefit from what we have to offer.

I hope that I did that today.

Cheers!

Merci. Thank you.

© CBC/Radio-Canada