'CLEAR, SIGNIFICANT AND UNEQUIVOCAL'
Where have all the benefits gone?

An intervention submitted by the CCA 23 March 2001
for the CRTCpublic hearing regarding renewal of conventional
television licences controlled by BCE and Global

EXECUTIVE SUMMARY

The Canadian Conference of the Arts (CCA) is a non-governmental, not-for-profit arts service organization representing cultural workers, cultural industry organizations as well as individual Canadians interested in the arts. The CCA welcomes the opportunity provided by the CRTC’s April 17th’ public hearing to share its views regarding the licence renewal applications filed by CTV and Global with respect to the individual conventional television undertakings they control.

The CCA notes that in 1999 the CRTC issued a new policy for Canadian television. It described this sector as a success and concluded that “…conventional television will remain the cornerstone of essential support for the Canadian independent production sector and the core of the Canadian television broadcasting system.”

The Commission's’ new policy maintained existing Canadian content levels, extended the time during which priority Canadian programs are to be exhibited, and broadened the definition of ‘priority programs’ so as to include every Canadian program but news and sports, dropped specific expenditure requirements for large MSOs, and encouraged private broadcasters to continue to provide local programming to the communities they serve.

Under the Broadcasting Act individual broadcasters face no specific legislative requirements about local programming, independent production or entertainment programming. It is up to the CRTC to decide how the private, public and community elements that make up the broadcasting system provide such programming, and what individual programming undertakings should be doing. The licence renewal proceeding involving CTV and Global for which this intervention has been prepared is the first opportunity for the CRTC to make such decisions using its new policy.

As part of its own preparations for this hearing the CCA commissioned independent research about consolidation in Canada's private television sector and its impact on issues of interest to the CCA, and also reviewed the current and historical public examination files of the conventional television stations now controlled by CTV or Global. In this process we learned that the CRTC routinely destroys all public examination files after fifteen years. This now means that private broadcasters ownership, programming plans and financial commitments from 1968 to the early 1980s are no longer available for public review. We therefore make the following recommendation to the CRTC.

Recommendation 1: Retain current and historical public examination files for their historical value.

We have also found that the public record in this proceeding has made it virtually impossible for members of the public to comment in an informed fashion about the central issues in this hearing – and in many other proceedings of this nature – because the information central to these discussions is available to only two of the three groups involved: the CRTC itself, and the licensees or applicants appearing before it. This does not encourage effective public participation, but curtails it.

The Act calls for Canadian programming to predominate – yet the Commission did not release any historical spending information about non-Canadian content. Without this information, how do we know the manner in which Canadian programming expenditures have been made, compared to non-Canadian programming expenditures? Although the CRTC did release information about these licensees’ total revenues, the data were aggregated for all licensees controlled by CTV or Global, to meet concerns related to confidentiality, and covered the last four years -- though a standard licence term lasts seven.

Federal access to information legislation requires applicants for confidentiality to substantiate – not simply declare – the competitive harm that will take place if historical confidential information is released. Does evidence exist to support the claim that releasing historical data up to the latest two years of a licence term directly and substantively harms licensees? If such evidence is unavailable for individual stations, the CCA believes the public interest in understanding the manner in which Canada's broadcast licensees meet Canada's broadcasting policy (as defined in section 3 of the Act) can only be met by publishing annual financial data (including profitability and non-Canadian programming statistics) for individual licensees, for all but the most recent two years of licence terms, at the time licensees seek to apply for the renewal of their licences.

Recommendation 2: Publish historical financial performance statistics, by station, when considering applications for renewal or acquisition, up to the last two years of the current licence.

We note that this hearing involves an exceptionally large number of individual conventional television station licence renewal applications. Yet with respect to the fundamental issue of Canadian content exhibition no central record of statistics maintained by the CRTC about television stations’ performance was available. Finding a complete record of this fundamental aspect of Canadian broadcasting policy – resulting in the three-page table in Appendix 1-- required a search of almost two hundred public examination files. Bearing in mind the Commission’s current policy of destroying all public examination files after fifteen years, Canadian content performance statistics now in the licensees’ public files for these years will also disappear from public view. We believe that there is a simple solution to this concern.

Recommendation 3: Publish historical Canadian content performance and weekly hours of original programming or news, by station (both through the Commission’s internet site and in paper form).

Canada's broadcasting legislation requires the broadcast regulator to ensure that, through the efforts of its public, private and community elements, the goals of our country’s broadcasting policy are met. The CCA notes that of the public elements in Canada’s broadcasting system the Canadian Broadcasting Corporation (CBC), is by far the largest, operating conventional radio and television stations and networks across the nation, along with three specialty services. Appropriations voted by Parliament make up the majority of the CBC’s operating revenues. Between 1994 and 1999 the CBC’s Parliamentary appropriations fell by 20.4%.
Over the same period, the level of Canadian content on the CBC’s English-language television network increased from 65% to 74%, and on its French-language television network, from 75% to 78%.

In January 2000 the CRTC renewed the CBC’s radio, television and specialty service licences. Notwithstanding either the real (constant dollar) decrease in its revenues or its success in increasing the amount of Canadian programming it provides to Canadians, the Commission sought more Canadian, local and regional programming from the Corporation and supported the CBC’s commitments with respect to its use of independent productions.

We note that over the same period, between 1994 and 1999, conventional, private television broadcasters’ revenues rose by almost a quarter, while profits before interest and taxes (PBIT) increased by two thirds.
We believe that all elements of the system should meet their mandate under Canada's broadcasting legislation, especially when their financial performance and capability are increasing.

Recommendation 4: Treat all elements of the system more equitably with respect to programming expectations and resource availability.

Industry consolidation – whose synergies and benefits will be central to the issues to be raised at the CRTC’s April hearing – now stands at its highest levels in Canadian broadcasting history. Between 1994 and 1999 the proportion of private television stations controlled by Canada's five largest television broadcasters increased 13% (from 55.4% of private stations in 1994, to 62.7% in 1999). By August 2000, Canada’s 5 largest television owners controlled almost two thirds (62.7%) of the country’s private television system and the two largest owners – BCE and Global -- controlled half (48%) of the country’s private television stations.
As consolidation has increased, diversity in ownership has fallen by half: in 1970 forty-one people or companies controlled the country’s private television stations; by August 2000, twenty people or companies did so. Altogether 14 people or companies now control almost all of Canada's private television stations.
The CRTC has not granted every application received related to industry consolidation, but in the decisions in which such applications were allowed, the Commission has cited the need to ensure that “clear, significant and unequivocal” benefits result for the Canadian broadcasting system as a whole, Canadian programming and Canadian viewers.

These benefits have frequently been linked to the efficiencies and synergies to be gained from consolidation. Since the early 1980s, moreover, the CRTC has not only streamlined its regulation of private television but made its policies more flexible so as to meet broadcasters’ needs and encourage more and better Canadian programming.

ver the last seven years, while industry consolidation has continued, administrative expenses in private television have fallen relative to total expenses, by about a fifth (-19.9%), from 17.3%% in 1994 to 13.9% in 2000. The number of people employed by Canada's private television stations decreased 9%.
Over the same period, revenues increased almost 15%, while profits grew three times as much (43.9%)
Yet despite increased revenues and profits and almost three decades of regulatory flexibility, proponents’ claims that industry consolidation would generate “clear, significant and unequivocal benefits” for Canada's broadcasting system have not been met.

Canadian content exhibition levels have declined
Over the last seven years levels of Canadian content carried by thirty-seven private television stations unaffiliated with the CBC and controlled by CTV or Global declined slightly over the broadcast day and evening broadcast period.

Canadian content expenditure levels have declined relative to total revenues
In 2000, Canada's private, conventional broadcasters spent less of their income on Canadian programming than they did seven years ago.

According to their renewal applications, stations controlled by CTV and Global also plan to reduce the proportion of their income that they spend on Canadian programming. In 1991, CFTO-TV and CJOH-TV planned to spend 28% and 36% of their income on Canadian programming; in 2002, their plans have decreased to 25% and 26%, respectively. The decrease is particularly noticeable for CIII-TV: in 1991 it planned to spend 21% of its income on Canadian programming; in 2002 it plans to spend 12.6% of its total revenues on Canadian programming.

The proportion of income allocated to Canadian programming has been decreasing for some time. If CFTO-TV, CJOH-TV, CIII-TV and CKND-TV had not increased their spending plans for Canadian content, but simply maintained their 1991 spending levels (as a proportion of total income), just over $50 million more would have been spent on Canadian programming by these four stations. If these levels had been maintained to 2008, the four stations alone would have spent almost $300 million more on Canadian programming.
Between 1994 and 2000 expenditures on Canadian programming increased slightly, but declined when measured in constant dollars.

Meanwhile, spending on non-Canadian programming increased by 70% in current dollars and over 50% in constant dollars.

Both CTV and Global plan to spend more on non-Canadian than Canadian programming, beginning with the first year of a new licence term ($146 vs. $139 million in the case of CTV, and $223 vs. $132 in the case of Global).

Over the last seven years private television broadcasters’ total spending on Canadian drama increased by almost a quarter in current dollars, and by more than 14% in constant dollars. Spending on non-Canadian drama, however, increased by over 70% in current dollars, and almost 60% in constant dollars.
Finally, the gap between spending on Canadian and non-Canadian drama grew: in 1994, private conventional television broadcasters spent 3.7 times more on non-Canadian drama than on Canadian drama; in 1999, they spent 4.8 times more on non-Canadian drama than on Canadian drama (28% increase).

Local programming
Private broadcaster’s spending on local programming declined between 1994 and 1999, in both current and constant dollars, and in some cases, the amount of original local news either decreased from previous years (CFTO-TV) or, after an increase, declined to previous levels (CKND-TV)

Independent production expenditures have increased
Private broadcasters’ spending on independent production increased between 1994 and 1999, both in current and constant dollars. Private television broadcasters, however, spent more than four times as much of their revenues on non-Canadian programming and the gap between the two grew (3.9 times more on non-Canadian programming than independent production in 1994; 4.4 times more in 2000).

Script and concept development levels have decreased
Spending on local programming has gone down, in both current and constant dollars. In brief, between 1994 and 2000, and as industry consolidation increased, profits earned by Canada's private television broadcasters before interest and taxes increased by 44% in real, constant dollars. Their administrative costs fell as a proportion of their total expenses, and total staffing levels in the industry decreased by 9%. Nevertheless,

• the level of Canadian content carried by the stations now controlled by CTV and CanWest Global declined slightly over the broadcast day and evening broadcast period
• spending on Canadian content, measured in constant dollars, declined while spending on non-Canadian programming increased
• both CTV and Global now plan to spend more on non-Canadian programming than on Canadian programming
• Spending on non-Canadian drama was 3.7 times greater than spending on Canadian drama in 1994, and 4.9 times greater in 2000; in the last seven years spending on Canadian drama (in constant dollars) increased 25%, while spending on non-Canadian drama increased by 60%.
• Spending on local programming declined in both current and constant dollars, as did spending on development (either as script and concept funding or within telecast programming)
  

Moreover, while private broadcasters’ revenues and profits have increased, incomes in Canada's cultural sector remain low, and in the case of actors, have fallen in constant dollar terms. Where have all the “clear, significant and unequivocal” benefits gone?

We believe that the private elements in Canada's broadcasting system can be as creative and resourceful as the CBC with respect to the goals laid out for Canada’s broadcasting system.
We therefore urge the Commission to adopt the following:

Recommendation 5: Define the CRTC-regulated holdings of BCE and CanWest Global to be networks for the purposes of the Act and set expectations of these new networks which are commensurate with their size.

Recommendation 6: Set spending and exhibition levels with respect to Canadian content to match previous levels set for existing television networks and to increase over these levels by 2008.

Recommendation 7: Conduct and publish quantitative research to assess diversity and access within private broadcasting and hold a public hearing to assess its results and implications for future industry consolidation.

Recommendation 8: Measure and monitor the benefits anticipated from streamlining, flexibility and regulatory relaxation to ensure that Canada's broadcasting system and all its components – broadcasters, creators, staff, producers and, most importantly, Canadians -- benefit to the same degree.

Recommendation 9: Grant full, seven-year licence terms if and only if Canadian content – both during the day and evening broadcast period – has been maintained (i.e., a 0% reduction in the percentage of Canadian content exhibited) or increased over the licence term.

Recommendation 10: Raise Canadian content regulatory requirements for private conventional television broadcasters, by increasing the level of Canadian content during the current evening broadcast period from 50% to 60% over the next two years.

Recommendation 11: Ensure that the quality and level of local programming improves over the coming licence term by disallowing local sales time income for private broadcasters who reduce their service while their profitability increases.

We look forward to the opportunity to discuss these issues and recommendations further with the CRTC at its April hearing.


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