CRTC looks to retool Canadian TV by Grant Robertson and James Bradshaw

Feb 14, 2009

Source: Globe and Mail

Regulator considers new rules that would force networks to spend equal amounts on domestic and foreign production

In a move that would reshape prime time television, the federal broadcast regulator is considering placing a cap on how much the country's biggest TV networks can spend to acquire hit U.S. shows, such as Grey's Anatomy, The Office and House.

The proposal, which came as a shock to network executives yesterday, would require CTV, Global, CITY-TV and others to spend the same amount on Canadian programming as they do on U.S. shows. For every $1 spent on programs from outside the country, a dollar would have to be spent at home creating a domestic show.

The announcement by the Canadian Radio-television and Telecommunications Commission comes just days after new federal data showed the networks spent a record $775-million on foreign programming last year, with most of that content coming from major Hollywood studios.

There are concerns in Ottawa that runaway spending to lock up U.S. shows that do well in the race for ratings is now contributing to network television's financial woes in Canada.

"The commission, at first blush, finds a lot of merit in the idea," the CRTC said in yesterday's announcement, suggesting the proposal could be tested on a trial basis for one year.

However, the networks argue the advertising dollars derived from popular foreign shows, which dominate the ratings each week, help pay for their Canadian productions.The proposal was welcomed by members of the Canadian television production community, who have raised alarms about declines in spending by the Canadian networks to make domestic shows.

"That is certainly the issue that we have been raising - the disparity between what the [main networks] are spending on foreign dramatic programming and Canadian drama," said Maureen Parker, executive director of the Writers Guild of Canada.

Since 2003, CTV and Global have escalated the amount they spend on foreign shows in an effort to steal audiences from each other. Though numbers are not broken out by network, back then the commercial networks spent $541-million on foreign programs, and $536-million on Canadian ones.

Last year, spending on foreign shows hit a record $775-million, compared with $619-million to make domestic programs. The numbers include several commercial networks; CTV, Global, CITY-TV, and French networks such as TVA. Public broadcaster CBC is not included.

The networks refused comment on the CRTC announcement yesterday, saying they need more time to study it.

It is also possible that such a move could spark a trade war with the U.S, one executive said, if American networks complained about government intervention in the TV market.

The changes affect licence renewal hearings being held in April. The major broadcasters have argued that the state of conventional network television is in decline, as audiences migrate to cable and the Internet. Most industry revenue growth now comes from specialty channels, which collect small fees on monthly cable bills. CanWest Global Communications Corp. and CTVglobemedia Inc., parent company of The Globe and Mail, have bought up dozens of specialty channels between them to take advantage of the steady revenue they offer.

The CRTC said yesterday that it will hold licence renewal hearings that combine the big networks with their cable channels starting in 2010, rather than treating them as two separate businesses. The CRTC said it wants to view the broadcasting operations as a whole to determine their profitability, and whether major concessions are needed.

The regulator also decided to issue one-year licence terms for the broadcasters, citing the financial pressure on the big networks, after a steep drop in profits. Licences are usually issued for a seven-year period for the broadcasters, but the one-year term would allow the networks to come back and seek further changes if their situation worsens.

Annual figures showed profits at Canada's major commercial TV networks had fallen more than 90 per cent last year. The industry saw its pretax profits fall to $8.04-million from $112.94-million in 2007.

© Globe and Mail