FCB Undertaking #1, November 23 re: Forecast of Potential CBC/SRC Radio Advertising Revenues

Nov 27, 2012

Memo to: Ms. Jade Roy, Supervisor, Public Hearings, CRTC
From: Ian Morrison, Spokesperson, Friends of Canadian Broadcasting

During the question period following the presentation by Friends of Canadian Broadcasting on November 23rd, the Commission asked me to file the analysis underlying our statements regarding projected revenues should the Commission approve the Corporation's proposal to introduce commercials on Radio Two and Espace Musique.

That analysis, commissioned by Friends from Canadian Media Research Inc., accompanies this email (CMRI.AdRevenues.nov27.pdf).  By way of summary and introduction, we wish to bring the following points to the Commission's attention:

1.    As set forth in paragraph 19 of this CMRI report, at a conservative estimated sales rate of 60% of the average English private station, Radio Two would earn $29.3M in ad revenue by 2015, compared to $22.9M as projected by CBC - a difference of almost 30%.

2.    The same paragraph shows that, at a similar estimated sales rate of just 60% of the average French private station, Espace Musique would earn $11.1M in ad revenue by 2015, compared to the Corporation's projection of $1.7M - a difference of some 550%.

3.    This suggests that the detrimental impact of the CBC's proposals on private station revenues would be considerably greater than the Corporation has projected. 

4.    It is also important to underline that the CBC's own research, conducted by Strategic Inc. and filed with the CRTC during the present hearing at the Commission's request, confirms, on p. 8, that "almost one out of two" regular Radio Two listeners "will tune much less if commercials are aired."

5.    This constitutes a devastating critique of the CBC's proposals from an audience service perspective, and suggests that the CBC would be forced to further modify the formats of these networks in order to maintain their popularity, commercial appeal and revenue-generating potential - thus leading them even further astray from a public service orientation.

6.    We note that in most Western democracies, national public broadcasters operate non-commercial radio services focusing on world classical culture, including, for example: the United States, the United Kingdom, Australia, Germany, the Netherlands, Portugal, Italy and Hungary.

7.    Finally, it should be noted that the CMRI analysis includes, at Friends' request, parallel projections of the potential revenue, should CBC apply to place ads on Radio One and La Première Chaîne.  By Year Three, using the same conservative assumptions, these networks could generate $142.7M and $36.4M respectively.

8.    We express a strong concern that, given the CBC's current and anticipated financial challenges, and notwithstanding its protestations to the contrary, the Corporation will find it difficult or impossible to resist for very long the temptation to take advantage of this much more significant source of income, if the Commission opens the door by permitting ads on other CBC radio services.

Ian Morrison

cc:             regulatoryaffairs@cbc.ca