Applications by the CBC to renew broadcasting licences for radio, television, and specialty television as per Broadcasting Notice of Consultation CRTC 2011-379-2 and your letter to the CBC dated 18 May 2012

Jul 12, 2012

Mr. John Traversy
Secretary General
Ottawa, ON
K1A 0N2

Dear Mr. Traversy: 

By the time the CBC renewal hearing takes place in November, 2012 and the subsequent decision is issued, the period of time that will have elapsed between CBC licence renewals will be approximately thirteen years, nearly twice as long as intended under the Commission's regulatory procedures and practices.

Given the importance of the CBC's role in the overall Canadian broadcasting system, and in the lives of Canadians, and given also the fact that the CRTC's public hearing process is one of the few opportunities for broad public input into, and transparent public scrutiny of, the CBC's mandate, track record and commitments, this hearing is critical to the future of our national public broadcaster and its service to Canadians.

In our letter of April 12th, Friends urged the Commission not to treat the Corporation's proposals to introduce commercials onto Radio Two and Espace Musique on an expedited basis, but rather to consider them in the context of the renewal hearings.  We were pleased that the Commission adopted this approach.

We are writing now to address another critical procedural and substantive issue connected with this important renewal process.

In its recent decision to further postpone the renewals, the Commission cited as the reason the Corporation's financial uncertainty in advance of the then-pending federal budget, and said that "it would be inappropriate to set a hearing date for the renewal of the CBC's licences until the CBC has had an opportunity to establish its future operating budget."

Under the government's Deficit Reduction Action Plan announced in the budget tabled in Parliament on in March, the reductions to the CBC's Parliamentary appropriation, when fully phased in over the next three years, will amount to $115 million annually.  According to information filed by the Corporation with the Commission, this represents a 10% reduction in the Corporation's total appropriations and a 6% reduction in total revenues.  This is undoubtedly a serious blow to an already chronically underfunded organization.

As we look ahead to the November hearings, the CBC is facing yet another financial threat of potentially equal or even greater magnitude, when one of its greatest strengths could become a significant weakness.

Hockey Night in Canada, perhaps the most iconic program on CBC English Television, first aired in 1952.  HNIC is much more than a program; it is a shared experience that brings together the entire spectrum of CBC's vast audience.   Its importance to the CBC can hardly be overstated, in terms of either its connection to millions of average Canadians or its advertising revenue outcomes.

The current broadcast rights contract between the CBC's English Television network and the National Hockey League will expire in 2014 - within approximately the first year of the CBC's new licence term.  Recently, senior representatives of at least two other major Canadian broadcasting organizations with deep pockets and ample shelf space have been quite clear and open about their intention to bid aggressively to win this contract away from the CBC.

We understand that hockey represents a significant percentage of total commercial revenues for CBC English Television; the actual numbers, of course, are confidential to the CBC.  Nevertheless, the scenario described above inevitably casts a further shadow of significant financial uncertainty over the CBC's immediate future - quite possibly of a similar order of magnitude to the recent federal budget reductions.

While there is currently insufficient information in the public domain to accurately quantify that threat, it seems clear that the potential impact of the loss of NHL rights on the CBC's audiences, revenues, overall business model and ability to discharge its mandate could constitute nothing less than a "game changer".

In these circumstances, Friends recommends that the Commission carefully examine the importance of hockey rights to the overall CBC English Television commercial revenue model, and put on the public record all possible facts and figures which facilitate transparent understanding of this situation without, of course, unduly compromising the CBC's competitive position. 

This should include all relevant data, including the direct and indirect audience and revenue "lift" hockey gives to the rest of the schedule, during both the regular and playoff seasons.  Various alternative scenarios for replacement programming, and its projected audiences, revenues, and rights and production costs as compared to hockey, should also be part of the picture.

Moreover, we recommend that the Corporation be asked to describe its contingency plans to discharge its mandate and live up to its commitments, in the absence of NHL hockey.  Failing this, we are at a loss to imagine how the Commission can renew the CBC's licences for a seven year term, without any idea of what might happen to those commitments within a mere twelve or eighteen months. Doing so would be akin to issuing a blank cheque.

In addition, given the centrality of hockey-related revenue to CBC English Television's overall commercial activities, it would be important for the Commission and the public to know the net value (minus the cost of sales and related promotion, distribution and administration expenses) of the network's remaining advertising activity, in order to be able to reassess the relative business and public policy cases for and against the continued presence of advertising on CBC Television, in the absence of hockey.

Friends respectfully urges the Commission to request the Corporation to file the additional information described above on an expedited basis.

Yours sincerely,

Ian Morrison

cc: Canadian Broadcasting Corporation

Related Documents:

Aug 2, 2012 — Letter: Broadcasting Notice of Consultation 2011-379-2
Response from the CRTC to FRIENDS' recommendation that the commission examine the importance of hockey rights to the overall CBC English Television commercial revenue model.

Jul 16, 2012 - Letter: Applications by CBC/Radio-Canada to renew broadcasting licences for radio, television, specialty television, and Friends of Canadian Broadcasting Letter of July 12, 2012

CBC responds to FRIENDS' recommendation that the CRTC carefully examine the importance of hockey rights to the overall CBC English Television commercial revenue model.

Apr 12, 2012 — Policy Brief: Re: Advertising on CBC Radio 2 & Espace Musique
FRIENDS encourages the CRTC to reject a CBC proposal to place ads on Radio 2 & Espace Musique and instead proceed with the long-delayed review of the overall licensing of the Corporation's networks and services.