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CRTC Should Force Broadcasters To "Compete Just Like Any Other Sector"

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Tuesday April 23, 2013
Last month, Jean-Pierre Blais, the chair of the Canadian Radio-television and Telecommunications Commission, delivered a much-discussed speech at the Canadian Media Production Association's annual conference. The CMPA is Canada's leading organization for the production of Canadian film and television programming and Blais' message was intended to both congratulate and challenge the industry.

On the congratulatory side, Blais noted the Canadian film and television production had a record year in 2012, growing by over $500 million over the prior year, by far the highest total and fastest growth in over a decade. Canadian television production led the way, increasing 21.3 per cent in 2011/12, for a ten-year high of just under $2.6 billion. Most of the increase was due to English-language programming, with fiction production growing by over 41 per cent.

Blais' challenge came in several forms, but my weekly technology law column (Toronto Star version, homepage version) notes the comment that attracted the most attention was his remark that "under my watch, you will not see a protectionist. I'm a promotionist." Most observers took the comment to mean that the CRTC will not focus on mechanisms such as Canadian content requirements and foreign restrictions as a means to advance Canadian culture.  Rather, with billions being spent on the creation of Canadian programming, it is better to concentrate on marketing and promotion of those works.

Yet there was a second comment that garnered less attention, but that may ultimately prove more important. After encouraging the industry to become more innovative and entrepreneurial, Blais warned "you will need to compete, just like any other sector."

That may sound unremarkable, but to an industry that has often focused on creating rather than competing, it represents a potential sea change.  

For example, most of the funding for the record amount of Canadian English-language television programming came from taxpayers and broadcasters, not the original producers of the content. According to Profile 2012, an annual report on the state of the industry, only ten per cent came from private funding such as production companies and private investors. Canadian distributors covered 18 per cent of the total costs, with foreign distributors kicking in an additional nine per cent.  

That still represents less than half of the total financing costs for Canadian English-language television programming. Federal and provincial tax credits provided the largest chunk of funding, covering 29 per cent of the cost, while broadcaster licence fees constituted another 25 per cent. The Canada Media Fund, which is jointly funded by the taxpayers and cable and satellite providers, covered the remaining ten per cent.

The notion of competing in the market should take centre stage this week as the CRTC conducts its hearing on whether Canadians who subscribe to cable and satellite television packages should be required to pay for channels such as Sun News Network and Starlight, a proposed all-Canadian movie channel. The regulatory process has been likened to winning the lottery, since channels selected for mandatory carriage are guaranteed millions in revenue regardless of whether Canadians watch or even want the channel.

The best approach would be to scrap the mandatory carriage rules altogether.  Instead, the Commission could require cable and satellite companies to offer all licensed channels to their customers. That would enable consumers to decide what they want to pay for and assuage broadcaster concerns that some distributors may withhold access to their programming altogether. 

That shift in approach would represent a significant change in Canadian broadcast policy, effectively establishing a framework that requires the industry to compete for subscribers. As CRTC Chair Blais would say, just like any other sector. 

Comments (3)add comment

Crockett said:

...
An à la carte model in Canada? But that would be a world precedent progressive step for consumers ... one can only dream.
April 23, 2013

doug said:

I wish...
I wish by being an anti-protectionist, we could now legally subscribe to Dish Network or DirecTv. Of course, there's not a chance in heck of that ever happening.
April 23, 2013

Brad said:

Don't confuse "Broadcasters" and "Independant Producers"
Just for the purpose of clarity, any tax credit is also a *producer* investment, since those are instruments (whether you agree with them or not) which are payable to individual production companies and they have to interm finance to be part of production funding, because broadcasters demand it.

Combined with the fact that individual producers are also generally responsible for finding and financing pre-sales and you have a funding model where actual broadcasters are only paying 25% of a productions cost in license fees.

They can get away with use using their access to the CMF as leverage - which is silly because it's a condition of carriage that they contribute to the CMF not some act of cultural largesse on the part of any broadcaster. But even with the CMF you're looking at "average" license fees in the range of 25-35% of a production budget.

Show me another industry where an extremely limited numbers of buyers of of a product ensure that the *seller* of said product has to sell their goods at a 50-65% *below* the cost of creation!?

This leads to a system where any potential profit from a content production is sold off in advance at a discount just to produce the show, so there is absolutely no chance for profit participation in successes, and thus absolutely no incentive for significant private investment.

And even then the BDU's have started grumbling that with todays advertising market they need to lower license fees, and need additional EST and VOD rights from producers to be competitive.

You basically have a system now where independant producers are scraping every nickle they can (including, in some cases the entirety of their own fees) just to get shows made, with no potential for upside, while the Broadcasters claim the system is unsustainable for them.
April 24, 2013

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