Last week’s CRTC decision to ban simultaneous substitution from the Super Bowl broadcast starting in 2017 has generated mounting criticism in recent days. While analysts initially noted that the lost revenue for Bell Media would not be material (a prediction borne out by a quarterly conference call where the decision was not raised by anyone), anger over the decision has continued to grow. Nothing compares with Kevin O’Leary, a Bell Media commentator, ranting against the decision on Bell-owned BNN as he repeatedly calls the CRTC “insane” and laments lost foreign investment into a sector that still has Canadian ownership requirements. However, with Bell seeking private meetings with CRTC Commissioners to discuss the decision and more serious critiques from CMPA’s Michael Hennessy and Cartt.ca’s Greg O’Brien, the decision has clearly left many unhappy.
If the critics are right, the CRTC decision is the “beginning of the end of the system”, erodes the value of rights, and will lead to job losses and less Canadian content. It is undoubtedly true that changes are coming to the Canadian broadcasting system, but this simsub decision is at best a small part of the reason. The post raises six points in response to the decision and the critics.
First, this decision should not come as a surprise. The CRTC telegraphed the outcome months ago when it released a working document for discussion in advance of the TalkTV hearings. The document identified two options on simultaneous substitution: total elimination or removal for live event programming such as the Super Bowl. Broadcasters and creator groups argued against the complete removal of simultaneous substitution and the Commission went with a slimmed down version of its second option.
Second, the suggestions that the removal of simultaneous substitution eradicates rights or eliminates the ability of a Canadian broadcaster to air their own commercials is at odds with the experience of most other major sporting events. The Stanley Cup finals, the World Series, the Olympics, and World Cup are just some of the major events where Canadians have a choice between a Canadian and U.S. feed. Canadians often opt for the Canadian version, perhaps because they like the commentators or the Canadian-oriented coverage. No one suggests that the Canadian availability of the Stanley Cup finals on NBC or the World Series on Fox (Sportsnet uses the international feed) eradicates rights or eliminates the ability for a Canadian broadcaster to successfully air the same event.
With the elimination of simultaneous substitution, Canadians will have a choice between the U.S. feed and a Canadian feed. If the two are identical, many may opt for the U.S. feed to experience the commercials. If Bell Media uses the opportunity to compete with local content (there were two Canadian players in this week’s Super Bowl and at least two former CFL players), many may prefer the Canadian feed (provide different commentators during the years that CBS broadcasts the game with Phil Simms and many will make the switch).
Third, it is surprising to see advocates of the Canadian broadcast system argue that YouTube provides a viable substitute for those seeking access to the missing U.S. content. The commercials are available online, but as the CRTC rightly notes, their inclusion in the broadcast is often part of the experience. This is more than just a minor inconvenience. For some, it is part of the experience that is missed in Canada (more than half of U.S. viewers watch commercials as much as the game). For example, the PSA on domestic abuse broadcast in the U.S. during this year’s Super Bowl offered an important education opportunity that was absent in Canada.
Fourth, this is not the beginning of the end of simultaneous substitution. The beginning of the end of simultaneous substitution started years ago. The growth of specialty channels, which now represent a far bigger slice of the broadcasting revenue pie than conventional channels, heralded the decreasing importance of simultaneous substitution with fewer programs substituted and subscription revenue surpassing conventional television advertising revenue. Moreover, consumers gaining increasingly control over what they watch and when they watch it contribute to its declining importance. Recording television shows or watching them on demand eliminates the simultaneous substitution issue. Watching streamed version of the shows directly from broadcasters or through services like Netflix does the same.
I argued for the elimination of simultaneous substitution in this December 2013 piece, noting that the policy trades additional revenue for loss of control over the Canadian programming schedule and turns the Canadian system into a country-wide U.S. affiliate with hundreds of millions of dollars spent on the rights to non-Canadian programming. The CRTC recognized that eliminating simultaneous substitution altogether would still create a shock to the system. Limiting the elimination to the Super Bowl may be incoherent policy (ie. why just the Super Bowl), but it has the practical benefit of starting to move the industry off the addiction to U.S. programming and toward competition rather than regulatory protection.
Fifth, the arguments over lost jobs or less content point to the need for changes to the financing of Canadian programming, not retention of problematic policies. For broadcasters, there are clearly potential short term losses, however, revenues in the television broadcast system are over $6 billion. The CRTC estimates the value of simultaneous substitution at $250 million. That is not an insignificant hit, but the cost of U.S. programming may decline as a result (being worth less to Canadian broadcasters) and broadcasters will be encouraged to compete more effectively with original content.
From the creator perspective, the success of broadcasters and broadcast distributors is still viewed as the prime source of funds for Canadian content creation. This leads creator groups to argue against almost anything that might lead to declining broadcaster revenue, regardless of the wider implications. Moreover, it means that success is often measured by obtaining funding, rather than other potential metrics such as viewers or foreign distribution. As an industry beholden to regulations, it is unsurprising that many fear change.
Yet imposing old regulations on new, innovative services will not stop the broader societal and technological shifts in viewing habits. It is up to the industry to shift away from reliance on regulatory support. Further, the reality is that taxpayers – not broadcasters and broadcast distributors – still represent the largest source of financing in Canada. The CMPA’s annual report states that financing of television production came from the following sources:
- Private broadcaster licence fees – 20%
- Public broadcaster licence fees – 11%
- Federal tax credits – 10%
- Provincial tax credits – 18%
- Canadian distributor – 11%
- Foreign – 8%
- Canada Media Fund – 13%
- Other public – 1%
- Other private – 8%
The public portion of this: public broadcaster licence fees (11%), federal and provincial tax credits (28%), Canada Media Fund (6.5% federal contribution), and other public (1%). The total is 46.5%, slightly more than the Canadian private contribution (45.5%).
Looking ahead, the private broadcaster portion may well decline. Arguments to shift the burden to Internet providers or companies like Netflix are non-starters. If eliminating simultaneous substitution from the Super Bowl leads to greater attention to competing in the global market, that is an outcome that should be welcomed, not rejected.
Sixth, the CRTC is doing exactly what it said it would: “placing Canadians at the centre of the communication system.” The criticism over the decision boils down to broadcasters and creator groups arguing that Canadians should not be able to see what they want during the broadcast because doing so hurts their bottom lines. That is not placing Canadians at the centre of the broadcast system, which the CRTC has tried to do with its decision on Super Bowl broadcasts.