Good afternoon, Mr. Chairman, members of the committee, and committee staff.
My name is André Bureau. I am chairman of the board of Astral Media, and I'm joined today by John Riley, president of Astral Television Networks, and by Pierre Roy, president of les Chaînes Télé Astral.
I would first like to thank the committee for inviting us to be part of this review of the television broadcasting industry, an important economic sector in Canada and a pillar of Canadian identity.
Astral Media is very proud to have become a truly national Canadian media company, operating 18 pay and specialty services, 2 small CBC affiliates, as well as 82 radio stations across the country. What is distinctive about our operation is that we are a fully bilingual company with properties in both the French and English language markets.
Broadcasting is an industry with a finely regulated balance among its different constituents. So far, the committee has heard from over-the-air broadcasters and broadcast distribution undertakings. However, you have not heard from the specialty/pay television sector. We would like to take this opportunity to profile the sector and some of the specific challenges that the current context presents. We hope this will complement the information provided to the committee today.
The specialty/pay sector is the fastest growing part of the Canadian television industry, with revenues of $2.9 billion recorded in fiscal 2008. There are over 180 domestic specialty and pay services now available in Canada. These services currently draw 42% of the overall viewing audience in the French market and 38% in the English market. The sector directly employs close to 5,500 people and pays more than $406 million annually in salaries.
The sector contributes significantly to the creation of Canadian programming. In 2008, the overall specialty/pay sector invested $1.1 billion in Canadian programming. Also, 90% of broadcasters' financing for Canadian filmmaking comes from pay television services.
By way of background, specialty/pay services were introduced as cable developed in Canada and BDUs needed new and exclusive sources of content to offer consumers, and in order to justify charging for their BDU services. Broadcasting policies at the time encouraged the development of a domestic specialty/pay sector, rather than simply importing existing foreign--U.S.--services into Canada.
Fast forward two decades, and what we have now is a strong and steadily growing sector that offers Canadians access to a diversity of content, including many underserved genres that are not widely available on conventional television, such as children and documentary programming. In addition, the specialty/pay sector delivers the largest audience for Canadian programming, with 55% of the total viewing of Canadian programs coming from these services.
Since the advent of Canadian specialty/pay, the portrait of viewing has evolved significantly. Why? Because Canadians appreciate our programming. Our sector has developed in response to the specific programming needs and desires of Canadians. In so doing, we have become a thriving hub of economic activity that is viewed internationally as a unique success. It has enabled Canadian broadcasters to develop profitable businesses employing thousands of Canadians and contributing significantly to the national GDP.
However, while the specialty/pay TV sector is profitable and growing steadily, it is not without its own challenges. During this hearing, some ODA broadcasters have suggested that because specialty services have access to subscription fees, it has granted them an unfair advantage. We would caution the committee against focusing on a singular rule in isolation without looking at the broader matrix of rules that serve to produce a carefully regulated balance between the various sectors. For example, over-the-air broadcasters have access to revenues from both national and local advertising, whereas specialty advertising revenues are only at the national level. Pay services, which constitute over 50% of Astral's television revenues, have only one source of revenue: subscription fees. English language OTA benefits from simultaneous substitution. Specialty and pay do not. OTA do not have specific Canadian programming expenditure obligations, as is the case for specialty and pay. OTA also have the advantage of mandatory carriage on basic cable and DTH. Specialty and pay do not. In fact, specialty and pay do not control how they are sold to consumers. Packaging and retail pricing are decided by BDUs.
What is also important to note is that since 1983, 26 years ago, the vast majority of Astral's specialty services have not had a single increase in wholesale rate, despite numerous increases in the amounts BDUs charge to consumers.
With consolidation in broadcasting and telecommunications, BDUs have also become increasingly integrated with specialty, over-the-air, and VOD programming services. They have also been growing mobile and Internet businesses, the newly emerging platform for content consumption. This presents a particular challenge for specialty pay broadcasters in that BDUs are now, in some cases, also our competition. Furthermore, we are no longer necessarily the focus of their bundle offers, which include Internet, telephony, and television services.
The Quebec market is obviously very different from the English-Canadian market. First, and critically, Quebec is a small market that generates less revenue in absolute terms—revenue that underwrites program creation. But there is no less demand for original programming. In fact, viewership for locally conceived and produced shows is high, and loyal.
Broadcasters' investments in original programming for this market are significant—ours as well as others. In fiscal 2008, Astral's French-language specialty and pay services invested more than $85 million in Canadian content. And, because we work almost exclusively with independent producers, the vast majority of this amount was invested in Quebec's independent production community, increasing the overall impact of our dollars on domestic cultural development.
In Quebec, the BDU relationship is a challenge. Quebecor Media is the dominant BDU, and with its subsidiary, Vidéotron, represents 60% of BDU subscribers in Quebec. Quebecor is also the dominant private OTA broadcaster with TVA, and they operate a considerable number of specialty and VOD services. It is a matter of significant concern to Astral that Quebecor would suggest that if a fee-for-carriage was implemented, it should be left to the discretion of the BDU to decide where they will source the funds to pay the OTA broadcasters, which, for Quebecor, would include its own subsidiary, TVA.
Quebecor has repeatedly indicated that if they were to negotiate a fee-for-carriage, this fee would be deducted from what is paid to specialty services as part of a so-called “recalibration” of the system. They reiterated this position in front of your committee on April 20, 2009.
Economically, it makes no sense to allow BDUs to siphon money from a healthy and growing business into a struggling one.
The Canadian television industry has gradually developed because of a careful balance involving profits, rights and obligations. It may well be that we have reached a point where a rethink is required. However, it has taken 40 years to establish this balance and we should be careful to ensure that any changes that are made do not have unintended consequences.
The committee has received conflicting information regarding the state of over-the-air broadcasting. It is still unclear to us whether the challenges are cyclical or structural. If they are cyclical, short-term solutions may be required. However, if they are structural, a full review of the system is needed, and we believe that the CRTC, with its expertise, tools, and information, remains the best vehicle to conduct such a structural review.
With this in mind, we suggest that among the most helpful measures the committee could recommend to alleviate the immediate pressure on over-the-air broadcasters would be, first, to set a government priority on the settlement of the part II licence fees. It's hundreds of millions of dollars. Second would be to address the looming digital transition. Supporting hybrid solutions that take into account the specific challenge of the small market stations' transition to digital is important. As has been the case in other countries, government should work with the industry to ensure we find constructive solutions to help navigate through this particular financial challenge.
There are other possible immediate regulatory measures that could be taken, such as compensation for distant signals, the local programming improvement fund, and the rights of local stations for carriage in their local markets, all of which are currently being examined by the CRTC in a way that ensures the necessary checks and balances prevail.
Mr. Chairman and members of the committee, thank you for the opportunity to appear before you. We will be happy to answer any questions you might have.
Mr. Chairman, members of the committee, ladies and gentlemen, my name is John Cassaday, and I am the president and chief executive officer of Corus Entertainment. Thank you for the invitation to speak.
Before I begin, I'd like to introduce the team with me today. Michael Harris is the vice-president and general manager of CHEX-TV in Peterborough and CHEX-TV-2, which serves the people of Oshawa, Ontario. Sylvie Courtemanche is our vice-president, government relations. And Gary Maavara is our general counsel.
Corus Entertainment is one of Canada's largest media companies. This includes local broadcasting in both radio and TV. We have 52 radio stations, and we are Canada's leading operator of news or news-talk format stations in both English and French language markets. For example, these stations include CJOY in Guelph and CFPL AM 980 in London, which serve your constituents who live in the Perth--Wellington riding. Over-the-air television stations serve constituents in ridings of two cabinet members, and one member of this heritage committee, Mr. Del Mastro.
Each of our broadcast stations is an important source of local news and community information. We are an important part of the local community, serving audiences, local business, and governments.
In times of local emergency, such as the Manitoba floods this year, or in Peterborough in 2004, we are the most reliable source of timely emergency information. The flu situation is of great concern to us all. Corus has had a pandemic flu strategy in place for some time, and we are currently operating at a preparedness level 5, in step with the WHO status. We are doing so to preserve our ability to carry on business and to keep ourselves in a position to disseminate information to the public in a timely and accurate fashion.
Our stations are also important contributors to local charities such as the United Way, Easter Seals, local hospitals, and countless others through special programming such as telethons, as well as free promotion and coverage of their events.
Our stations are deeply involved with their communities. Our suppertime local news programs attract almost half of the people watching TV in these communities during that time period.
These local TV stations have had partnerships with the CBC for 54 years. We distribute the CBC national news service to our audiences and add a strong element of local news, public affairs, and other community-oriented programming to the national content.
If CBC severed this relationship, our viewers would probably be forced to watch signals delivered from Toronto or Ottawa containing little or no local reflection. We took some comfort from the statement to this committee by Mr. Lacroix last week that the CBC was prepared to maintain an affiliate relationship, although the terms are not yet clear to us. We look forward to discussions with them.
For local small businesses we are a crucial advertising partner. We create and distribute the ads that help them to compete with the large multinationals that also serve their markets. Without this relationship they would face greater hurdles in reaching their customers.
Corus also operates more than a dozen specialty and pay television services. Corus leads in programming to children through such channels as Treehouse, YTV, and Teletoon. We also program to women through the W Network, Viva, and Cosmopolitan Television.
We own Nelvana, which is one of the world's premiere producers of children's animation programming. Corus has invested more than $1 billion in the production of Canadian content programming, and we are proud of the fact that our pay and specialty networks show the best in Canadian drama in volumes not matched in the industry.
Over the past several years we have been exploring new and innovative ways to capitalize on these new technology-driven markets. Our goal is to use a variety of digital platforms to deliver our content directly to viewers, not only in Canada but around the world. Corus provides Canadian content to multi-platform channels, such as KidsCo in Europe, Asia, and Africa; and qubo in the United States, where we are equity investors.
Corus is also Canada's largest publisher of books for children.
The result of all this is that today our productions and books are available in more than 160 countries worldwide in more than 40 languages.
In this context, we appear before the committee today as a company that plays a variety of roles in the Canadian economy. Corus is a distinctive Canadian company. We are a broadcaster here and around the world, but we are also a major producer of content in a variety of forms.
The key purpose of this heritage committee hearing is local broadcasting. But local broadcasting is no longer alone. Television and media markets have become enormously complex. The companies like Corus that operate local TV have other operations that try to succeed in these markets. In this context, Corus believes that the key question should be: what can government policy do so that the Canadian television industry has the strength and flexibility to stay relevant to Canadian viewers, subscribers, and advertisers as we enter the digital age?
We come before you today with some proposed solutions and hope we can be helpful in this process. Corus is confident about its future. Television is not broken, but we believe it is time for a strategic policy direction from the government to the regulatory agencies such as the CRTC and the Copyright Board of Canada. In our recent appearances before these agencies and departments, we have argued for an approach to policy and regulation based on what we characterize as the Corus Big Six. We list them one at a time, followed by some specific policy recommendations.
First of all, we recommend that the government embrace the merits of fostering a Canadian-owned but globally competitive industry. It must be explicitly recognized that we compete in the world market even at the local broadcasting level. Of course, this has always been the case for traditional broadcasting. Our policies are built upon the realities of our small market beside a huge market. Digital media are now enlarging the challenge. Our adjacent market is now the whole world, even in small communities such as Peterborough or Timmins. Government and regulatory bodies must align their domestic policies and rules so that we can have a Canadian-owned system that's globally competitive. We can no longer shelter our domestic market. The barriers that we have built to protect Canadian media can become a confining trap if we are not mindful of this change.
Second, we encourage you to increase the probability of success of the Canadian media industry by encouraging the creation of larger and stronger enterprises. Corus is a significant player in the Canadian market, but on a global scale we are very small. Google spent roughly U.S. $1.5 billion on research and development in 2007. This amount is greater than the revenue last year of the entire Canadian radio industry. So we must all recognize that the scale problem is worse in the digital realm than it has been in traditional broadcasting. This makes it very challenging to fully participate in the new media world. Corus must invest in digital broadcasting, which means towers and digital origination equipment. But to participate in digital markets, we must also address the critical issue of the management of these digital rights. We need to make a huge investment in technology to track and protect our rights, and we need to train our employees to use this technology.
Third, we need to develop a Canadian industrial strategy for the production of Canadian content. As has been the case in other industries, we need to look at the business from a strategic perspective. Strategic thinking means making decisions about what the priorities are for the system. For example, we need to consider a policy priority that supports the creation of high-quality Canadian content from all Canadian producers, including producers that are affiliated with Canadian broadcasters.
Fourth, we should recognize that private media enterprise success is what will lead to a stronger cultural system in Canada, not the current system of progressive fees, conditions, and tariffs.
Fifth, we need to allow Canadians to experiment. Recognition of this principle is essential in the digital media world. By their very nature, digital media initiatives are risky, business plans are uncertain, and ultimate success is very much a matter of trial and error. In this type of dynamic environment, we must be able to experiment. Regulation of our digital media activities, no matter how well intentioned, can only hinder our participation in these new markets.
Sixth, we should recognize that our small market requires that government continue to support its industry through research, development, and implementation of intellectual property. In the context of this strategic perspective, we have a number of specific tactical recommendations or solutions that we would like to leave you with today.
First of all, our investment in digital rights management technologies and their implementation should be eligible for Canadian programming expense credit.
Second, our capital investments in towers and other digital broadcasting technologies should be eligible for accelerated capital cost tax treatment as well as government funding.
Third, the committee should recommend the elimination of artificial quotas requiring broadcasters to acquire large percentages of their programming from independent producers. At the very least, Canada's media companies should not face barriers to creating and distributing the high-quality Canadian content that is contemplated by the Broadcasting Act. We can create a viable production industry, and the beneficiaries will be Canadian viewers, writers, performers, and the economy.
Fourth, we recommend the abolition and reimbursement of the CRTC part II fees, which would be a positive step that would benefit local broadcasters and the rest of the system.
Fifth, we recommend the relaxation of the prohibition on advertising of pharmaceuticals. Canadians already see a plethora of these messages on foreign services. Permitting this in Canada would not only establish another revenue stream, estimated at $400 million, but would also make these messages subject to Canadian law and Canadian industry standards.
Sixth, we recommend a temporary, one- to three-year advertising tax credit of 10% on all Canadian media advertising. This would serve to stimulate the economy as a whole and be a huge help to local broadcasters.
Seventh, we encourage the CBC to maintain their local affiliation agreements. This will ensure that the CBC stays close to its constituencies of local Canadian taxpayers.
Eighth, the sale of local television advertising should remain with private broadcasters. The proposal to allow carriers to sell local Canadian advertising on foreign channels would have a huge impact on local broadcasting, both in television and in radio.
Ninth, the committee is aware of the dedication of local stations to community and charitable efforts across Canada. Broadcasters should be able to deduct airtime donations as a charitable expense under the Income Tax Act.
These are some of the things that this committee could recommend that would help to keep Canadian broadcasters competitive and relevant.
On the subject of fee-for-carriage, any change will require a fulsome analysis and discussion of all of the elements of the system, as my colleague, Mr. Bureau, has said. Negotiation of a fee regime should be made in that context. It's not something that should be imposed in a vacuum.
In closing, we should note and congratulate the Minister of Canadian Heritage for the commitment to the Canada Media Fund. This funding, and the manner in which the fund is changing, ensures that we can continue to tell Canadian stories in the new digital environment.
Mr. Chairman and members of the heritage committee, these are our submissions. We look forward to your questions.
Good afternoon, Mr. Chair.
Honourable members of the committee, my name is Michel Roy and I am the Chairman of the Board of Telefilm Canada. Joining me here today is Wayne Clarkson, Executive Director of Telefilm Canada.
First, let me thank the committee for the opportunity to appear before you to share our views with respect to your study on the evolution of the future of television.
This is an important process that you have embarked on. The viability of local television largely contributes to the stability and health of the entire broadcasting system to the benefit of all industry stakeholders and communities across the country.
As an investor on behalf of the Canadian government in independently produced Canadian content creation, Telefilm Canada has a vested interest in the maintenance of a healthy broadcast system. Telefilm Canada's role, as you know, is to foster the creation of Canadian content regardless of platform. As the administrator of cultural development programs worth approximately $400 million annually, Telefilm is the privileged financial instrument of the government to encourage and provide support to private sector producers, distributors, writers, directors and other creative talent of the Canadian audiovisual industry. Telefilm manages the Canada Feature Film Fund, the Canada New Media Fund and the Canadian Television Fund. We manage the New Media Fund through an agreement with Canadian Heritage, and we also have an agreement with the Canadian Television Fund to manage that fund on behalf of the board of the CTF. As you know, it has been announced that those two funds would eventually be amalgamated into a single one as of next April, and the new fund would be called the Canada Media Fund. The scope of our responsibilities demands exemplary governance, and I have made it my personal mission, during the first year of my tenure as chairman of the board of Telefilm Canada, to strengthen and stabilize the corporation's governance. We now have a solid and seasoned board of directors that ensures the public and private funds we administer are managed with optimal efficiency and effectiveness.
Just a few weeks ago, Mr. Clarkson and I, along with the members of the board, met with the industry in Montreal and across the country via live webcast, and we renewed our commitment to working with all our partners to continue to bring high-quality Canadian content to audiences on the platforms of their choosing.
In our view, the elements that have contributed thus far to a thriving audiovisual industry and the creation of award-winning works, stem from fruitful partnerships among talented Canadians, independent producers, broadcasters and government funding agencies. These partnerships help Canadian content producers secure the necessary financing to produce the works that audiences appreciate. As you know, the financing of Canadian content continues to be one of the greatest challenges faced by the industry. Now, broadcasters are essential among the many players contributing to the financing of Canadian content.
Television affords more working opportunities for talented creators and provides related sectors such as feature films with a highly skilled creative workforce. Producers, writers and directors successfully navigate the porous border between film and television all the time. Over the course of their careers, popular stars like Paul Gross, Patrick Huard and Sarah Polley have appeared on both big and small screens, accumulating star value with different audiences.
Numerous screenwriters and directors cut their teeth in television. Nitro's writer Benoît Guichard got his start in music videos. Before making Borderline, Lyne Charlebois directed numerous TV shows, including the hit series Nos étés.
Canadian television, including conventional television like CBC/Radio-Canada, pay television and video on demand, has been a key platform to support our domestic film industry, largely as a result of regulated Canadian content requirements.
There is no doubt that there are challenges facing conventional television. The evolution of audiovisual technologies has profoundly changed how Canadians communicate, express themselves, and interact with various media. One observer described the changes taking place as “everything is coming out of its containers”.
The business case for conventional television has changed significantly through the expansion of viewing choices, and this fragmentation of viewing is causing ongoing erosion in advertising revenue and profitability of broadcasters. The central challenge now is that new business models are required to move those containers around.
Ironically, while this is a time of great upheaval in Canadian television, it is also a time of great opportunity for Canadian content producers, as evidenced by the popularity of Canadian drama such as Flashpoint, co-produced by Anne-Marie Latraverse and Bill Mustos with the U.S. More recently, long-time film producer Roger Frappier of Maxfilms, together with Karine Martin of MediaBiz, concluded a 12-show deal with German producer Eva for the production of action-thriller telepics.
To ensure that we have the capacity going forward to produce high-quality Canadian programming that Canadians want to watch, Canadian producers need access to international financing. One of the highest priorities of the board of Telefilm Canada now is precisely to help Canadian producers attract greater international financing and assure the continued growth of the Canadian audiovisual sector.
The Canadian broadcasting system and its use of various audiovisual technologies must remain relevant in a global digital environment. Previous innovations in new technologies provoked fundamental changes in the way content was consumed. The shift today, occurring as a result of the exploitation of digital platforms, will be even more profound.
In this regard, in creating the Canada Media Fund, Minister Moore made the decision that it should support the production of Canadian content for all platforms, including interactive digital media. There is no doubt that traditional media and new media form a continuum; supporting both means adapting to the new environment.
Telefilm is hopeful that this dialogue, which the committee has initiated through this review, will not lose sight of the importance of maintaining strong Canadian content in the audiovisual industry. A healthy environment will ensure that talented young Canadians can continue to find work and production opportunities in their respective communities. Time and time again, we are reminded that compelling stories that originate from diverse communities make the most memorable entertainment.
In summary, Mr. Chairman, we understand that television broadcasting creates revenues for a certain number of players, each of which plays a role within the system and each of which wants to receive its fair share of these revenues. Regardless of that situation, and because of the huge cultural impact that television has on the Canadian population, Telefilm believes that everything must be undertaken to maintain a substantial share of Canadian content within the Canadian broadcasting system.
Thank you for your attention. We would now be happy to answer your questions.
Thank you, Pierre-Louis.
We are on page 3.
Our broadcasting system offers hundreds of choices, the majority of which are Canadian. It is clearly the preferred option for Canadians. Today, we have more choice per capita than people in the United States, the United Kingdom, France or Australia. Despite fragmentation, Canadian channels obtain 70% of television ratings in Canada. When it comes to French-language services, ratings are at over 95%.
Last year, private television spent $385 million on locally-produced programming. These impressive figures went into delivering services to communities throughout the country. Over the last 10 years, conventional private television spent over $90 million for a host of activities related to Canadian programming, skills development and other initiatives, as a result of tangible benefits resulting from property transactions. A further $51 million was spent on closed captioning and video description.
Finally, in 2007, private broadcasters disbursed $314 million for the benefit of the communities they service, through donations, volunteer hours and public service announcements. That is probably the most visible aspect of our work to you and your constituents: radiothon or fund-raising dinners and activities. Private broadcasters build relationships with their communities by providing substantial and irreplaceable support.
I'll move on to page 6.
The focus of these hearings has been local television. For private conventional television, the local advertising market has been flat for many years. Private conventional television has relied increasingly on national advertising to drive its business model. Increases in national advertising revenues make it possible for private conventional television stations to increase their spending on Canadian programming, including local programming.
Is this just another business cycle? Advertising, the source of virtually all private television revenues, has shifted considerably away from conventional television over the past 15 years. This slow erosion of ad share will not be recovered in the next business cycle, nor is Canada exceptional in this regard. The erosion of ad share for conventional TV is even more acute in the U.S.
Where are the ad dollars going? As the ad market has become more fragmented over time, the dollars are flowing to specialty television and the Internet.
I'll turn to page 8 to focus on local advertising. You'll recall that local television ad revenues have been flat for the past 15 years. In terms of share of advertising, local television is capturing less of the local ad market than ever. Other media and new advertising vehicles, such as the Internet, are capturing a greater share of local ad dollars. This does not look like a business cycle blip.
Moreover, the costs of other kinds of Canadian programming supported by public policy and regulation are increasing faster than conventional television revenues. For example, over the past five years, English language drama costs have increased an average of 11% per year, while conventional television revenues have increased less than 1%. Similarly, French language variety and performing arts production costs have increased an average of 15% annually. With production costs outpacing revenues, private conventional television faces one more pressure.
The 21 largest private television stations, which made modest profits of 4.8% in 2008, buttressed the losses of 78 smaller stations, which collectively had a minus 13% profit margin last year. Larger companies, which own both large and small stations, argue that they cannot continue to cross-subsidize stations that are losing money. Smaller companies, many of which also operate smaller stations, are in a precarious position.
Fragmentation of audiences, declining ad share, higher programming costs: these are some of the elements of the structural transformation in local television. The transition to digital and its attendant cost of up to $327 million for the private sector simply makes the transformation even more challenging in the next 12 months.
Pierre-Louis, would you continue?
We have five recommendations for this committee. First, provide local programming support. The local programming improvement fund's, or LPIF's, structure and amount is still being discussed at the CRTC. Some parties have recommended an increase to the amount, in recognition of the decline in revenues and unsustainable business model for local over-the-air television. Based on the current CRTC proposal--1% of BDUs' revenues--the LPIF would not alone solve the pressures on local television. It would contribute needed funds, particularly for stations serving less than one million population, to bolster local programming, particularly news. Therefore, the CAB endorses a fund that will assist these stations.
The second recommendation deals with signal carriage. Private broadcasters need all local signals carried by VTH and compensation for these signals when carried outside of their local market. Broadcasters, large and small, see this as a pillar of the policy framework. Broadcasters and MPs have asked that all local television stations be broadcast in their local market. The government and the CRTC should require the carriage fix for all local stations, such as in Medicine Hat, Rouyn, or Rivière-du-Loup.
The second issue relates to the monetary harm caused to local stations by the distribution of distant signals. CAB estimates that the economic impact of the distribution of Canadian distant signals through the OTA sector was $70 million in lost advertising revenue for the year 2005-06 alone, of which BDUs compensated broadcasters $10 million to offset the loss--clearly not an acceptable level. Therefore, broadcasters have asked for the right to exercise control over the carriage of their signals out of market.
The third recommendation deals with DTV transition. The committee is aware of the government-mandated August 31, 2011, transition date to convert analog to digital television signals. Broadcasters are requesting industry collaboration to implement a hybrid model. A hybrid approach would significantly lower the cost of conversion. The request to fund the digital transmitter conversion for broadcasters would be appropriate, given the government-mandated conversion. Depending on the model chosen, financial support will be quantified. Equally important, the consumer information campaign required to inform viewers of the change should be led and supported by government.
The fourth recommendation deals with part II licence fees. Broadcasters, distributors, and the CRTC have all recommended the elimination of the part II licence fee regime. On an annual basis, this $100 million fee, which broadcasters challenge as an illegal tax, takes away from broadcasters' bottom line, while the fees are directed to the Consolidated Revenue Fund with no connection back to the broadcasting system. This committee should recommend the immediate end of the part II regime.
Finally, a recalibration of the CBC/Radio-Canada funding. CBC members fully support CBC/Radio-Canada as a key component of the Canadian broadcasting system. It is critical to ensure a clear mandate and funding structure for CBC/Radio-Canada. Our members believe the time is right to examine a change to CBC/Radio-Canada's undue reliance on commercial advertising and government appropriations. This quasi-commercial approach puts the public broadcaster in direct competition with the private sector, as programming decisions are driven by the need to maximize viewing audiences in order to generate advertising revenues. Changing the corporation's ability to access commercial advertising would obviously need to be offset by increased parliamentary appropriations.
Mr. Chairman, members of the committee, overall, private broadcasters are of the view that we must take action, in the area of policy and regulations to address the challenges faced by local television.
In closing, the CAB has taken no position on the issue of distribution rates or fee-for-carriage. Member companies within the organization or the association have addressed this issue individually with you. We would be pleased to answer any questions you may have.
Mr. Chairman, members of the committee, we are here before you today to remind you that the Broadcasting Act provides that the Canadian system comprises three elements: public, private and community. We are representatives of the community element.
The television stations we represent are non-profit organizations established by the members of their communities. They are media players that offer local news in their own way, commensurate with the meagre financial resources available to them. The independent CTVs or community television stations are part of the range of news voices and they need better financial support.
CTVs welcome many volunteers whom they train in technical aspects of production, hosting, and whom they involve as members of their board. Community television is a medium available to all, accessible and close to the people. This medium plays a crucial role in local economic, social and cultural development.
The total budget of an independent community television station varies considerably, ranging, according to our latest figures, between $30,000 and $400,000. The CTVs' main funding sources are the following, but not necessarily in this order: self-funding activities, member recruitment campaigns, Quebec government advertising, the Quebec government community media operation support program, local sponsorships and cable company contributions. We will return to this last source below.
As you are no doubt aware, the community television experience has not all been positive. Far from it! Following the first revision of the Broadcasting Distribution Regulations in 1998, Canadian companies lost access to their community channel, which had become a competitive advantage for the cable companies that now had to compete with newcomers, such as satellite distribution undertakings. Citizens' right to their own television was called into question.
In 2000 and 2001, in response to pressure by the CTVs, the federation and a number of other stakeholders, the CRTC launched a revision of the Community Channel Policy. The result was the publication of the Policy Framework for Community-Based Media, on October 10, 2002, under Broadcasting Public Notice CRTC 2002-61. In this new policy, the CRTC finally acknowledged the contribution of independent CTVs to the Canadian broadcasting system and formally included them in the new Policy Framework for Community-Based Media as undertakings promoting community access to community programming. Quebec independent community television stations could consider this recognition as an unprecedented historic gain.
Apart from the recognition of independent CTVs, the policy framework put in place guidelines for the operation of community channels that were maintained by cable companies. However, this recognition has not forced cable companies to fund the independent CTVs for the local and access programming they produce. And yet if a cable operator decides to maintain a community channel, under section 29 of the Broadcasting Distribution Regulations, it may deduct all or part of the percentage of its gross revenue that must go to Canadian programming to fund community programming. However, a number of cable operators prefer to retain the money for their own production teams and little or nothing goes to the independent CTVs.
We note that, since there is no funding obligation, these contributions are uneven from one cable operator to the next, from one CTV to another, and many receive absolutely nothing. An appropriate way must be found to fund local, independent community television stations. We believe that the solution lies in the creation of a dedicated local community and access programming fund.
My colleague Mr. Gérald Gauthier, of the Fédération des télévisions communautaires autonomes du Québec, will continue.
It therefore seems clear to many that the establishment of a dedicated local community and access programming fund would help solve the underfunding problems experienced by the groups that produce this programming. That is also the federation's view. Furthermore, if such a fund included an infrastructure funding component, there would undoubtedly be increased interest by various local organizations in obtaining a community-based television programming undertaking licence, be it low power or digital.
The CRTC recently announced the establishment of a Local Programming Improvement Fund (LPIF). We were surprised and stunned that the CRTC put the fund in place in the context of the Diversity of Voices hearing, which must first serve private local broadcasters. We view that fund as the very essence of what we have been seeking for more than eight years, but which will now serve others.
Even though the CRTC indicated that it will consider whether it is appropriate to open the LPIF up to community producers, we can now state that it will be unable to adequately meet the needs of private broadcasters. Sixty million dollars is the amount we considered necessary for independent community production in Canada. How can $60 million be enough to meet the financial needs of both private broadcasters and community producers? Even if the LPIF received twice the planned funding, its structure would nevertheless result in endless quarrels between private broadcasters and community producers. It will be impossible to square the circle if the second fund is not established.
Since 2002, community television stations have been allowed to air sponsorship messages with an animated visual presentation with the maximum of 15 seconds. However, this type of advertising may not show the goods and prices. This restrictive principle deprives the independent CTVs of substantial revenue from local merchants who would like to advertise on television at an affordable cost. No conventional advertising is permitted. That is why the federation is asking the CRTC for a softening of rules to permit 12 minutes of conventional, commercial and local advertising.
The independent CTVs need new income sources to enhance the amount and quality of local and access programming. However, they also need new funding sources to keep up with technological developments that force us to adjust to the transition to digital and high definition.
The federation is in favour of funding through conventional advertising because, as a result of the independent CTVs' non-profit structure, the resulting revenues would be entirely allocated to access programming and to the technological upgrades necessary for digital production.
The community channel, as an immediate tool of community and information, should be able to promote local development and help reduce the amount of lost business. To do this, we would like you to recommend that the CRTC review subsection 27(1) of the regulations, which restricts the type of advertising messages that can be distributed on the community channel.
The CRTC has also observed that the various bodies it has put in place over the past three years or so have brought reaction from community television craftspeople across the country, particularly those in Quebec. Authorities have, concerning the diversity of voices, the Canadian Television Fund and the broadcasting distribution regulatory review, raised fears in the community television environment even further. That is why the oversight agency has announced that there will be a specific review of community broadcasting in the fall of 2009.
That review should spearhead a consolidation of the community element as recognized in the Broadcasting Act. We should not wind up with a weaker community broadcasting sector at the end of this exercise. The Standing Committee on Canadian Heritage must take an active part in the debate by sending a clear message to Canadian citizens that it will defend the maintenance and consolidation of a strong community broadcasting system.
Mr. Chairman, members of the committee, I want to start by thanking you for your kind invitation to come and share with you our ideas and concerns about the future of television in Canada and the consequences of our future decisions for our fellow citizens.
Because our time is limited, I do not intend to get into all the topics that are of concern to us. I will however be happy to answer any of your questions to the best of my knowledge.
Like my colleagues, today I would like to draw to your attention television networks that are often overlooked in our debates on the future of the major systems, but which play an essential role in ensuring program diversity both for young people and for local communities. I am speaking of the educational networks.
Created by the provinces and financed entirely or very largely by them, educational networks are explicitly referred to in the Broadcasting Act as an integral component of the broadcasting system. There are five educational networks, which form the Association for Tele-Education in Canada, or ATEC: Knowledge in BC, SCN in Saskatchewan, Tele-Quebec in Quebec, and TVO and TFO in Ontario.
In all discussions held here, they are paid little or no attention. They are public networks, but they are outside CBC/Radio-Canada, the national public broadcaster. They are governed by federal legislation and obtain their licences from the CRTC, but their mandates are provincial. They are among the off-air networks, but they do not belong to any of the major integrated groups that dominate the industry. They have specific, targeted mandates, and are distributed either over the airwaves or on cable, but they are not specialty channels and thus do not have access to the economies of scale or the fees that the latter enjoy. They are aimed primarily at audiences in their own regions and often are not distributed outside their own province. But they are not considered local, either because they do not carry local news programming or because their coverage area has more than 1 million inhabitants.
And yet educational networks, it is important to emphasize, contribute more to diversity than so-called local television, because their entire programming, and not just news bulletins, is aimed at a regionally-defined population. They are with the exception of CBC/Radio-Canada the only networks that offer children and parents free access to a wide range of programs for children, without violence and tailored to promote their development and mental growth. They are also the only networks whose mandate is to reflect their regions. To the extent their resources allow, they strive to carry out this mandate by focusing on the production and broadcasting of documentaries, series and public affairs programs that reflect their regions and make the residents of their province known to one another.
The situation may seem different for Tele-Quebec, because French-language networks are in fact aimed primarily at a Quebec public. However, the Tele-Quebec Act explicitly calls on it to reflect the regional realities and the diversity of Quebec society. We are involved in the regions through the production of a public affairs program promoting cultural activities in different areas, the production and broadcast of documentary, drama and variety series, and the presence of regional personalities. We have 9 regional offices, and are involved in more than 250 partnerships with local organizations. Our association with Canal Savoir brings to the screen a considerable amount of programming from institutions of higher learning and cultural and educational organizations in the regions.
What are the key issues for educational television channels? Like the broadcasters that have appeared before you, educational networks must maintain an adequate level of resources to carry out their mandates and expand access to their products on new platforms, given the increasing importance of the new technologies for its public and particularly for young people, who make up a large proportion of their clientele. Unlike other types of networks, they cannot rely on auxiliary sources of revenue, and the provincial governments on which they depend have been seriously hurt by the economic crisis. It is thus vital that the educational networks not be excluded from any program that may be set up to assist the industry. It must be borne in mind that there is more to television in Canada than CBC/Radio-Canada on the public side and private networks on the other. Neither performs the same role as the educational networks.
It is also important that the unique features of educational networks be taken into account when new rules are formulated for funding allocation by the new Canada Media Fund, as it is now called.
The emphasis placed on market share takes into account neither the mandate nor the coverage areas of educational networks, some of which do not even have real audience-share measures. Educational television targets particular publics, is distributed mainly on the territory of one province, and does not necessarily seek commercial success. It is for these very reasons that it makes an invaluable contribution to the diversity of television in Canada, and is appreciated by a steadily growing number of Canadians.
This is why the educational networks have the following priorities: that the Minister of Canadian Heritage require—because he is in a position to do so—that the board of the Canada Media Fund recognize the special character of educational television networks and take this into account in its policies; that a protected envelope be set aside for the production of programming for children, who are a non-commercial clientele and a priority for all Canadians; that the definition and criteria for the production of documentaries be clarified; that the mechanisms for protecting and enhancing regional production be maintained; lastly, as desired by the whole industry, that the proposed changes be introduced gradually so that there can be a smooth transition for both producers and broadcasters.
One final issue for the future of educational networks is distribution. With the shift to digital, the restricted obligations on satellite distributors, and the possibility of a hybrid strategy for a shift to digital in more remote regions, it is becoming increasingly crucial to ensure: that it be mandatory to distribute educational television networks on all platforms available in their province of origin; that educational networks be able to obtain distribution throughout the country if they so wish, based on negotiated terms and conditions; that the French-language educational networks be made accessible throughout the country, given the limited supply of French-language products for the country's francophone minority communities; that Canadian networks' HD television signals be given priority distribution by satellite throughout the country. It is wrong that our HD signals cannot be carried by satellite because of a lack of capacity, while distributors give preference to American channels.
Mr. Chair, members of the committee, thank you for giving me this opportunity to remind you of the existence and contribution of the educational television networks to the diversity of Canadian television programming and the well-being of our fellow citizens.
I would be happy to answer your questions.
Numbers also tell a story regarding our performance and impact. Cogeco's community television channel, TVCogeco, serves both Ontario and Quebec. We operate 36 local television channels, serving communities from Windsor to Cornwall, from North Bay to Niagara, from Trois-Rivières to Gaspé, and from Baie-Comeau to Sherbrooke.
We partner with close to 700 core community volunteers in the creation of our local programming. These enthusiastic and civic-minded individuals range in age from 15 to 73 and provide their time and talents as community producers, crew members, editors, and on-air hosts. Many develop their skills through our training programs, and they contributed an amazing 60,000 volunteer hours in the creation of local content in the past year.
Last fiscal year we created 12,130 hours of original 100% local Canadian content, including public affairs, sports, arts and culture, community events, and local news and information, and in Ontario alone, 43,721 no-cost public announcements were posted by local groups and organizations on our channel and website to inform their communities about local events and activities.
Viewers like what they see. Our annual surveys indicate that 490,814 viewers are tuning in to TVCogeco. That's an average of 44% of the total households served. Our 2008 Environics customer satisfaction study reveals that an overall average of 90% of respondents believe we provide a valuable service to the community, and 88% perceive the channel as providing an overall quality product. In comparison, a recent Polaris study on the CBC shows that 40% of their respondents watch CBC on a weekly basis.
Our viewers are most likely to watch our local community news, event coverage, and politics and current affairs programming, including municipal councils, and the demand for hometown hockey appears almost universal.
Our newsmagazine shows are very popular. For example, the number one show in Quebec is Autrement Vu featuring local activities, resources, personalities, and issues twice a week. In Ontario we have a similar format called The Source. As an example, one of the recent segments in our Burlington-Oakville area alerted viewers about a door-to-door energy scam operating in their neighbourhood and subsequently informed them on how to get off the grid. Our larger systems update their Source magazines daily.
We're always open to innovation, since changes are constant and we know we need to reinvent ourselves, so when challenges appear, we develop a new model. In our last presentation, we illustrated our flexibility through the transition of our North Bay system to hard news coverage, presented each weekday in addition to traditional community content. We launched the daily half-hour news program when the local broadcast affiliate made the decision to cut back on their local news coverage. Our 2008 viewer survey indicates that 92% rated the channel as providing a valuable service. We will also upload North Bay news highlights onto our website in the coming year.
Local news coverage, however, costs well above our regulated allocations. As noted before, we could do more if we had access to our own local resources for that purpose.
The value of our community involvement is also reflected through our commitment to fundraising efforts. Many key charitable organizations and agencies rely on our promotional partnerships in order to continue their valuable and essential support roles. TVCogeco has helped our service groups, agencies, and institutions to raise close to $4 million in the past year through telethons, TV auctions, and other joint fundraising activities and promotions.
As much as the on-air product is important, there is another key service that local television provides. We are a training ground for the television industry. Our dedicated employees work hard to teach volunteers the art of television through practical experience with technology, helping students to gain a broad working experience that is not available anywhere else. In some cases, colleges turn down applicants to their broadcasting course because of a lack of experience. Students with a good academic standing and experience in local television tend to fare much better.
Successful volunteers have gone on to complete their post-secondary training and have found employment in the broadcast television industry across the country, while others have returned to their roots, preferring to stay in the type of media that introduced them to their love of television. In fact, with the Peterborough TVCogeco channel as a model, all employees are former volunteers, some of whom have returned to our industry after graduation, either immediately or after a taste of broadcast.
Our unique structure and flexibility enables us to cover aspects that are of importance to our community in a greater depth than most local broadcasters are able to provide. For instance, most regional broadcast stations are not able to provide the same full local coverage of municipal elections as we do. During federal elections, many regional broadcast entities have quick inserts as part of their national coverage, provided by their parent networks.
We cover most ridings in their entirety, with interviews and analyses from our studios or mobile facilities. In the most recent municipal election in Peterborough, TVCogeco was the first to declare winners in each race. We are a credible media entity, so much so that candidates, local political junkies, and high-profile citizens visit the studio during election coverage to watch, to take part, or simply to be where the most up-to-date information can be found.
TVCogeco and our colleagues in other cable companies have also stepped in to pick up events that are not covered by broadcast but that still hold considerable interest to our viewers. We are adept at utilizing multiple transmission formats to provide our viewers live coverage of sporting events that are of specific interest to them. Events such as provincial curling championships draw a very vocal and active audience. Our cooperative efforts to provide sports fans live coverage of their home teams playing away games is hugely appreciated.
TVCogeco Peterborough is also an active partner with other media entities within the municipality. Politically Speaking is a program involving three media partners: two from print and one from radio. Additionally, the local broadcaster regularly uses footage produced by us in its news, and we've even co-produced coverage of the local Christmas parade with CHEX-TV.
We believe that our local television is an important part of the television landscape in Canada, providing a very valuable asset to the communities we serve.
I'll try to be specific and very clear. Please don't think of me as rude if I interrupt you at any point to go on to someone else.
I'll leave you with a question on how you summed up your presentation. I'm not trying to put you in a corner here, but here's my situation with what you just described.
You provide a community event--the community aspect that is the third pillar of the Broadcast Act--but do you emphasize more of the community aspect by way of telethons, raising money, and community coverage, or are you filling a void left over from the regional broadcaster that has vacated town? You put a lot of emphasis on election coverage, news, and that sort of thing, but is that truly where your emphasis will be over the next little while, as we try to piece our way through policy and talk about revenue?
On the community aspect, they gave us some really good and intelligent examples of what they do as a community broadcaster. Can you provide me with an example of what you're doing right now in community television? I think both groups have incredibly valid points. It's a pillar that's overlooked as part of the Broadcast Act.
You seem to have a huge problem with revenue, but in addition to that you have a mandate from the province. Now we're getting into a digital transition, and it seems to me you're going to face an incredibly difficult time, as an educational network, getting that message out. There are a lot of people out there receiving that analog signal, and it's going to be lost in this. Your programming to the nation--not just your specific example--is going to be lost.
To the CAB, you're in a bit of a pickle because it's nasty on fee-for-carriage. We've seen it here time and time again, and the CRTC is dealing with it. It's kind of like passing over the Rubicon to the next business model of television. Essentially we're looking at a new revenue model here as one of the most important things. With the proliferation of technology, the old regimes are slowly dying, and the old regimes were set up for revenue.
Now you're talking about all your stakeholders in the LPIF and the types of models where funding is given by the government, with certain stipulations in certain markets. There are all kinds of regulations tied to this. You like it and you have a percentage in it, but is what's being talked about enough? Do you think it should go further, as opposed to issues of regulation? In other words, especially to the guys who were up earlier, should it be a free-for-all? Should there be no such thing as basic cable, and should we let them do as they wish? Should the fee-for-carriage proponents make their own deals with the BDUs? You say here you want mandatory carriage. Is that correct?
Before you answer that, I apologize because I have to get this all out in five minutes.
I want you to also comment on the digital transition. It's a huge issue right now in the United States. President Obama has made it one of the five issues that has to be done now, and we have to be done by 2013. Are we ready? To be ready, what do you require of government?
Thank you for this opportunity to be here. I am Jean LaRose, the Chief Executive Officer of APTN.
This year marks APTN's 10th anniversary. Ten years ago, it was difficult to believe that a national aboriginal network could offer 10 hours per day of live Olympic programming across Canada, in high definition, in English, French and up to 8 aboriginal languages. Now, for Vancouver 2010, it is a reality.
Getting ready for the Olympics is a welcome challenge. We are training sports announcers in aboriginal languages—finding new ways to express sporting events in our own languages.
We are training technicians, building sets, and performing behind-the-camera work. We are working in partnership with other host broadcasters to bring Canadians complete coverage of the games. In these games we will reflect all of Canada in a way that has never been done before.
You are hearing a great deal in your committee meetings about how parts of the broadcasting system are broken, but I can tell you that APTN is a success story.
APTN is a national network. We strive to reflect all aboriginal communities—first nations, Inuit, and Métis—and we act as a bridge between aboriginal peoples and the broader Canadian population. We deliver three separate regional feeds directed to the west, the east, and the north of the country, as well as a high-definition feed.
I have distributed to the committee an information package about APTN and our programming.
In 10 years, we have achieved a lot. APTN shows that, thanks to the Broadcasting Act and to the CRTC, the Canadian broadcasting system is strong and contributing to Canada's well-being.
Let me move on to some of the specific themes this committee is examining.
APTN doesn't provide local programming, at least not in the sense discussed at these hearings. But in many cases, our programming has regional and local roots and reflects a particular region or aboriginal group from that region.
Our northern service is the most differentiated of our regional feeds. We currently schedule 40.5 hours each week of distinctive northern programming on this feed. Usually this programming is in Inuktitut or other aboriginal languages spoken in northern communities. This is a different way of looking at local programming. Programming that reflects Nunavut and Nunavik is local, from our point of view, even though the communities it serves are spread out over a region that represents a large percentage of Canada's land mass.
APTN licenses this programming from our general revenues. These revenues come from the subscription fees earned from broadcast distribution undertakings in southern Canada and from advertising. The northern broadcasting societies receive additional funding for this programming from the Government of Canada through the northern aboriginal broadcasting program. Funding for the societies through that program has not changed for many years. As a result, the societies have not been able to stay current with technology and increased production costs.
We are working with the societies to develop their technical and production capacities, which will result in new programming, aimed at the youth population of the region as well as the rest of the young aboriginal peoples in Canada.
We are using other mechanisms to generate production revenues for those programs. In addition to northern local programming, APTN regularly broadcasts programming that reflects other particular aboriginal communities throughout Canada on a regular basis. All of our programming now comes from aboriginal producers or aboriginal-owned or controlled production companies.
In the past, APTN has expressed concern about the disruptive impact the fee-for-carriage proposal could have on the broadcasting system. Our concern has been based on two main factors.
First, a fee for carriage could increase materially the cost of the basic level of service. The basic level of service already costs many subscribers more than $300 per year. Affordability is therefore an issue. You should be under no illusion: the BDUs will aggressively market this fee as a tax on consumers.
Second, we are concerned about the impact on the Canadian broadcasting system as a whole if access to the system is made more expensive for Canadians, especially at this time, when the entire system is facing competition from the unregulated new media sector. Increasing the cost of access could turn Canadians off Canadian broadcasting just when their enthusiastic participation is most needed.
If policy makers elect to follow the fee-for-carriage route direct attention should be paid to the question of the affordability of the basic level of service—and how to make the new fee a "win-win" for consumers. APTN has proposed, in the past, a "Made in Canada" basic service package, smaller and mandated by the CRTC to ensure that Canadian programming remains affordable and available to all Canadians.
This approach, coupled with more consumer selection of digital channels—rather than the "all-you-can-eat" packaging approach that is now so popular, and expensive—could be one way forward.
APTN is ahead of the industry in phasing out our analog technology. Four years ago we concluded that it would not make economic sense to continue to maintain and upgrade our network of terrestrial transmitters across the North.
At the same time, we know that APTN has a history of over-the-air service in the north and an important role to play in the preservation of aboriginal languages. The delivery of APTN to all northern residents will be continued. With the assistance of the Department of Canadian Heritage, we developed an innovative approach. We entered into agreements with a satellite DTH service, Bell ExpressVu, and with local cable operators and cable communities to make sure that all residents now served by analog transmitters will still be able to receive APTN's northern service without any charge through their satellite or cable distributor. We are rolling out this program in smaller communities across the north. Through this program, APTN North will be made available to northern residents as a free service. No resident is required to obtain any additional level of service from a distributor to continue to receive APTN. I don't know whether a comparable program would work in southern regions for southern broadcasters, but the program is working for us.
The Government of Canada has played a direct role in supporting aboriginal broadcasting for a long time.
The Northern Aboriginal Broadcasting Program supports the northern broadcasting societies. As I stated earlier, funding for this initiative has been static for the last 15 years or so. The northern distribution program has funded infrastructure costs to deliver APTN North across the North—this is the program that has allowed APTN to begin the transition from our analog over-the-air network.
This program is being phased out along with our analog infrastructure, as of March 2010. There are, and have been, no similar programs for aboriginal peoples in the south. APTN does not receive direct funding from the government to support our operations or our national mandate. We do obtain licence fee and equity funding through the Canada Media Fund, which supports independent production, generally, and is not focused on "local" programming, as such.
At this point, it is difficult to say whether the recently announced changes to the Canada Media Fund will hurt or further aboriginal programming, and regionally focused programming in particular. A great deal will depend on the details. For now, let me just say that one of the stated goals of the fund is to reward programs that, to quote from the Department of Canadian Heritage's backgrounder, “...have achieved and demonstrated the most potential to achieve success, in terms of audience and return on investment”.
I just want to point out that the audience in Iqaluit is not the same as the audience in the greater Toronto area. The potential return from these audiences is obviously not comparable. It is a real question for us whether smaller audiences in Iqaluit, Thompson, or even Regina and Winnipeg, for example, will be given the same kind of weight as an audience in Toronto when funding decisions are made.
We are also concerned about the focus on hit programs, which may not lead to the kind of innovation and risk-taking in programming that is required. What may be a hit for an aboriginal audience may not be with any other demographic in Canada. Will that make it any less of a hit?
With respect to the CRTC's new local programming improvement fund, APTN will not be eligible for the fund. LPIF funds are not likely to find their way to support local aboriginal programming. I'm not criticizing the LPIF fund; I'm just pointing out that it was not intended to support local aboriginal programming, and it won't.
I thank the committee for this time. I hope I stuck to my 10 minutes. I would welcome any questions later.
Mr. Chairman, members of the committee, and staff, my name is Chuck Allard, and I am the chairman and CEO of Allarco Entertainment. With me today is Malcolm Knox, Super Channel’s president and CEO, and Richard Paradis, our business and government affairs representative.
The three of us have each been involved in the television and/or pay television industry for over 30 years. We'd like to extend our thanks to the committee for allowing us to attend this meeting and provide our views and observations on how Canada’s television industry is evolving in the face of tremendous economic and regulatory challenges under the edict of an aging Broadcasting Act that dates back to 1991.
Today we wish to address the main issue your committee is currently looking at, and also to share with you some insights on how difficult it can be these days to launch, as we have just recently experienced, a new English language national pay television service, Super Channel, within the confines of existing regulations and industry consolidation, particularly in the area of broadcast distribution.
We have all witnessed Canada’s television industry go through dramatic changes over the last 30 years, from a universe with 10 channels to one with over 200 channels, where we first saw significant fragmentation, and then in the last 10 years, significant consolidation and concentration. Conventional television broadcasters, who are at the source of our broadcasting system, now find themselves in serious financial difficulty for a number of reasons, including the tremendous growth of specialty television services that are eating up not only audience shares but also advertising revenues. In addition, such conventional broadcasters now have to compete for advertising budgets with the Internet, which has seen its share of advertising revenues increase significantly over the last couple of years.
We believe your committee should recommend the introduction of a reasonable subscriber fee for Canadian conventional broadcasters to ensure the regulatory system is equitable for all television broadcasters, whether they are specialty services or conventional services. We also believe the cost of such a subscriber fee should be fully assumed by the broadcast distribution undertakings that have had the nerve to come before you and strongly object to such a fee and suggest it would just be passed on to the consumer.
It is our strong conviction that BDUs have amply benefited financially for a number of decades from the sale of their basic service package, which has included conventional television services since the beginning and for which the BDU pays nothing to use. Such a subscriber fee should be directed by conventional broadcasters towards the production of Canadian content and local programming over and above their existing Canadian content commitments. In no circumstances should it be used to subsidize the increasing cost of acquiring American programming in a bidding war.
With regard to the BDU positioning, we found it quite instructive when the representatives of Rogers and Shaw came back before you two weeks ago. My relationship with BDUs goes back some time, and I can tell you, as a prior senior officer of the western pay television service licence, we strenuously objected approximately 15 years ago to the granting of pay-per-view and subsequently VOD licences to BDUs, especially terrestrial BDUs, because of the obvious conflicts we could envisage that would arise from the BDUs competing with existing broadcasters, giving them an undue preference and advantage over other independent programming services.
Unfortunately, our objections were denied at that time, and the rest is just history, with BDUs, or the company controlling the BDUs, now owning and controlling broadcasting entities that often benefit from in-house, priority carriage, additional marketing opportunities and other tangible advantages. All of this notwithstanding, there are supposed to be “Chinese walls” to give the illusion that conflicts do not arise and that BDUs are being fair with everyone.
On February 12, 2009, we sent to the chairman of your committee and some members a copy of a letter to the heritage minister requesting much needed changes to the Broadcasting Act to provide a stronger regulatory regime. Why do we need such changes? Because we are a living example of how present regulations are outdated and have allowed BDUs over time to wield excessive power over our broadcasting system.
The broadcast distribution sector reaches over 90% of Canadian households. At the same time, six BDUs—Rogers, Shaw, Bell TV, Star Choice, Vidéotron, and Cogeco—control access to over 91% of cable and DTH subscribers. In essence, this small number of BDUs has the power of life or death over news services such as ours, not to mention existing services. For many years now, some of the larger BDUs have on a regular basis shown contempt for our regulatory system, even though it is the same regulatory regime that has allowed them to grow into such profitable entities.
We are before this committee today to bear witness, first, to the pure contempt of the two largest terrestrial BDUs, Rogers and Shaw, which have in our case shown damaging disregard for the CRTC's conditions of licence and expectations, and, second, to the intentional injury this has caused a fledgling pay entrant into the Canadian broadcasting system.
The terms of our licence, which was granted on May 18, 2006, clearly stipulate that Super Channel would be offered distribution comparable with that of the regional incumbent's pay television services. The commission went on to state that without such conditions it would be unreasonable to expect the new Allarco service to meet its business plan, including its commitments with respect to expenditures and exhibition of Canadian programming. Since our launch in November 2007, Allarco has suffered unfair treatment from both Rogers and Shaw, which control over 40% of cable and DTH subscribers in Canada.
Since our letter to the minister of February 12, 2009, we've had to initiate an undue preference claim against one of these major terrestrial BDUs for failure to honour the terms and expectations of our licence from the CRTC. To determine how our service was being sold by the two largest BDUs, we conducted independent phone research on how the customer service representatives at both Rogers and Shaw were dealing with our service offering during January, February, and March 2009. The results were shocking, even though we were spending hundreds of thousands of dollars in advertising with Rogers and Shaw on U.S. ad avails, radio spots, and direct-mail pieces.
For Rogers, out of 320 recorded calls made to CSRs at their call centres, 97% of the calls were directed only to the regional pay TV service, TMN. When the caller asked if there were other movie services available, Rogers VOD was mentioned 24% of the time and Super Channel only 10% of the time. For the most part, our service was negatively portrayed and misrepresented by the CSRs, conferring an undue advantage on their own VOD service and the regional paid TV service, TMN. Where is the fairness principle applied here?
In the case of Shaw, the results were also shocking.
To give you an indication of the negative effects such undue preference has had on our business plan, which preference has cost us tens of millions of dollars, another major satellite provider, which launched us in November, reached and exceeded 7.5% penetration of their English language digital base, and a small provincial telco has recently reached 11% penetration. In contrast, Rogers is sitting at one-third of 1%.
In our letter to the minister we strongly support the request by the chair of the CRTC to immediately secure administrative monetary penalties under the Broadcasting Act. It is my understanding that the chair of the commission discussed this question with you in an earlier session in May 2008.
We also propose the introduction of civil remedies for those licensees that have been injured, including actual damages and future damages, because of the wilful misconduct of the BDUs. In the United States and in Great Britain, the FCC and Ofcom have wide powers to impose fines on corporations that do not comply with the letter, intent, or expectations of regulations and/or licence conditions. This is not the case with our own CRTC. Your committee and Parliament have to introduce much needed changes to the Broadcasting Act to provide the CRTC with more teeth in dealing with major broadcasting distribution groups that have been extremely vertically integrated and who refuse to abide by existing regulations and licence conditions.
We fully understand that your committee is presently concerned with the survival of local stations and local news within our broadcasting system. However, we encourage the committee to look beyond the immediate problem, because it is only the tip of an oncoming iceberg.
The recent consolidation of ownership in the Canadian broadcasting and distribution sectors has handed the power of life or death of our broadcasting system not to legislators but to a few private enterprise titans: Rogers, Shaw, and Quebecor. All of these major BDUs have amply benefited from past regulations that favoured their development in the interest of having a strong Canadian broadcasting system. This privileged situation has favoured the growth of their companies into what they are today and is a direct result of the contribution of independent, conventional specialty and pay television services, which are now being shunned by the BDUs in favour of their growing businesses, such as local telephone, publishing, Internet, and wireless services.
This was confirmed to us when we met with the chief executive officers of Rogers on February 12, 2009, who told us that their main businesses were phone, Internet, cellular, and broadcast services, in that order. In other words, broadcasting has fallen back to the bottom of priorities. May we remind the committee of key words spoken by a number of prominent Canadians in the past: “It's all about content”. We sincerely believe that we are at a crossroads in terms of where our broadcasting system is going. It is up to you and your fellow parliamentarians to ensure that Canadian content can continue to be developed and, more importantly, get past the BDU gatekeepers to reach Canadians.
Proposed changes to the Broadcasting Act should, one, give the CRTC the power to fine BDUs that do not respect conditions of licence or commission regulations and to award compensation to broadcasters that have suffered financial losses because of BDU misbehaviour; two, give CRTC the power to issue a clear directive to a BDU to remedy non-compliance immediately with regard to any matter that abrogates or denigrates the spirit and/or intent of the Broadcasting Act; three, clearly establish the responsibilities of each component of the broadcasting system, with a special emphasis on a key role BDUs must play in giving priority and promotion to Canadian programming services; offering other services such as Internet, local phone, or wireless services should in no way be done in a business fashion that is detrimental to Canadian broadcasting programming services; and four, ensure that programming services have the right of access to their subscribers through the BDUs to promote and market their service, in addition to providing a possibility of two-way communication with such subscribers.
This completes our oral presentation, and we look forward to responding to any questions you may have.
Thank you, Mr. Chairman.
Good afternoon, Mr. Chair and members of the committee.
My name is Mr. Rick Arnish, and I am president of the Jim Pattison Broadcast Group, from our head office in Kamloops, British Columbia.
I've been in this wonderful business for over 40 years, and our owner, Mr. Pattison, has been in the broadcasting business some 44 years. Our broadcast group consists of three conventional television stations, all small market stations, located in Medicine Hat, Alberta, Prince George, B.C., and Kamloops. Our western-based group also consists of 29 FM radio stations, all located in small markets, except for Vancouver and Canada's two most western provinces.
Speaking of television, CFJC TV in Kamloops was one of this country's first small market stations. It signed on the air April 8, 1957, with its 100-watt transmitter, bringing the 16,000 citizens their very own television station.
Community and being a local broadcaster is what we're all about. We continue being the leaders in the area of news, information, and public service, as well as being the conduit for the diversity of voices in our marketplaces for our viewers and listeners.
I appreciate the opportunity to address the members of the Standing Committee on Canadian Heritage at a time when the conventional television industry is at a crossroads in terms of whether it will survive in the 21st century.
You heard in my opening remarks that we have only three small market television stations, and you may be asking yourselves why the Pattison Broadcast Group has not increased the number of TV stations in proportion to that of our radio growth over the past 12 years in particular. The truth of the matter is that we've had a number of opportunities to acquire other television properties but have chosen not to because of my long-term concern about the future of conventional television in our country.
I'm on record as far back as 2005, when I stated this on CAB panels and through media interviews, as saying that I wasn't sure there would be true small market television stations in existence by 2015. Times were fairly good just four short years ago, and I could see some of my broadcasting colleagues rolling their eyes at what I was saying. Now, because of competitive pressures and economic challenges, they and many others are also questioning the future existence of this conventional model that has been around for over 50 years. The system as we know it today is broken.
Mr. Chair and committee members, during these proceedings I've heard some presenters state that the current financial pressure on local broadcasting is cyclical, that the advertising business we rely on will come back in spades and everything will be peaches and cream. Let me assure you that I do not share that view.
In rural Canada, the true small market conventional television station is under tremendous financial and competitive pressure. It all started a number of years ago, as far back as 1997, when the advertising market for medium and small market conventional stations shifted substantially towards the specialty services offered by the BDUs. From day one, the specialty channels not only received subscription fees, they had the ability to increase the amount of hourly advertising they could sell and air. Where did most of this national advertising revenue come from? The answer is that it came from small market stations like ours.
Another concern I have is the fact that many of them have taken on a more conventional television program schedule than a true specialty service, which again impacts the true small market conventional stations. The systemic problem is that there's just not enough revenue to go around even in a strong economy, let alone a weak one.
If it weren't for the direct-to-home small market local programming funding that Canada's 19 independent small market conventional stations have access to, I believe that a number, if not all, of these stations would not exist today. I thank the CRTC for this fund, as it has been a lifeline for our stations in Kamloops, which collectively produce 47 hours weekly of award-winning local programming.
Regarding fee-for-carriage, although we would not turn down any moneys we would be eligible for, that is really a large broadcaster issue. The big companies would benefit to the tune of millions of dollars versus thousands of dollars for our stations. The true small market independent stations have stated categorically that we would not give up the small market local programming fund in exchange for fee-for-carriage. That would be an economic disaster for all the stations.
The newly created CRTC BDU local programming improvement fund is another initiative that will certainly assist the long-term future of our three stations, as long as it's not tied to an incremental amount of local news, information, and community reflection. This new fund would go a long way in ensuring that CFJC TV in Kamloops maintains its 18.5 hours per week of true local programming as well as over 14.5 hours each week on CKPG-TV in Prince George and 14 hours weekly on CHAT TV in Medicine Hat.
Funding would also be used to facilitate the capital expenditures to move toward a virtual digital transmission platform for our stations, as the demand is growing for this type of delivery, even in our small markets.
You've also asked how the federal government could address the situation of local broadcasting, so please let me respond in a very respectful manner to the Broadcasting Act and current CRTC regulations. Regarding the true independent local small market conventional television stations across the country, if there ever were a time to deregulate, the time is now.
One way to help rebuild the audiences and revenues of Canada's small markets is to have no regulation except a minimum requirement of local reflection of, say, perhaps seven hours per week. Other than that, on all small market stations in populations of under 300,000, there should be no regulatory obligations at all, including the current Canadian content rules, where 50% of our programming must be Canadian in prime time, as well as 60% throughout the broadcast week. This would allow small markets to compete with all distant regional Canadian and American signals, along with foreign services and specialty and pay-per-view, which have severely impacted the tuning and revenues of our stations.
Today we truly have the 500-channel universe, Mr. Chair, and this is a matter of survival, committee members. The small market cable companies are currently exempt from regulation, with more changes perhaps coming for even larger cable systems, so why not a major breakthrough for small market conventional television?
Many years ago there was a hue and cry because the CRTC deregulated FM radio in this country, and many naysayers said it would hurt the radio industry. Well, we all know that the radio industry flourished and will continue to do so now and way beyond the 21st century. I'm bullish on Canadian radio.
So I say it's small market Canadian conventional television's turn, and this is something that has to happen now, not six months from now or a year from now, because if it doesn't, many of us will not be in business. Have no fear that deregulating the small markets would endanger local Canadian programming and reflection, because all these small stations will continue to reflect their markets in the best way they know how, and that is through many hours weekly of local news, information, and entertainment programming. Of course, we would expect that the current rules regarding priority carriage and simultaneous substitution would continue for our stations in the markets where we're licensed as the local station.
Another area where the government could assist us and other small market stations is to change the Broadcasting Act to ensure that all satellite BDU distributors, like their cable counterparts, have to carry all conventional small market Canadian television services. In every small market across this country, 30% to 40% of the viewing is to DTH, and if the local signal is not carried, it has a significant impact on viewership and revenues. They have the capacity and will have even more capacity in the near future. It's time to correct the DTH model.
Another area where the government could also assist the conventional industry is the elimination of the part II licence fees that we all pay, which go into general revenue. This is an additional cost, which, if eliminated, would add to the opportunities you have before you to save small town television stations. All we need are the tools to do the job right, and we won't let you down, nor the Canadian citizens we serve. We are the true eyes and ears of the cities and towns we are part of.
In conclusion, the loss of local broadcasting and local reflection built around diversity of voices in our country would be catastrophic. Canadians want, need, and desire to see themselves and their local communities reflected on their television stations. I believe the conventional industry as a whole does an excellent job. If it weren't for stations like ours in Kamloops, Prince George, and Medicine Hat, along with our other colleagues in the small markets, who would cover the daily activities in the marketplace? I'm talking about the weather, school closures, flood and fire coverage, tornadoes, community happenings, sports, entertainment, businesses talking to our viewers, their potential clients, along with the charitable support for hundreds of worthwhile causes. We truly reflect what is going on in the cities and towns we are so proudly licensed to serve.
Members of the standing committee, you have an opportunity to make history by implementing the necessary changes to ensure the survival and sustainability of true small market conventional television in Canada.
Thank you for this opportunity to appear before you this evening. I would be happy to answer any questions you may have.
The business model for conventional television is broken. Mr. Fecan of CTVglobemedia and Mr. Vinner of Canwest painted that broad picture for you when they appeared, and we agree with their views.
As our time is short, I will try to limit our submission to NTV’s experience and viewpoints.
This crisis has been in the making for years. Specialty channels, the CBC, cable, and satellite BDUs all have multiple monthly sustainable revenue streams. A private broadcaster has only one source of revenue--advertising--and that revenue is linked directly to audience viewing.
Today, we would like to point out a few of the root causes that have been in play for many years. They are: over-regulation, audience fragmentation, lack of fee-for-carriage, and, as a subsidized public broadcaster, we also wish to bring forward our views on the use of cultural development funds, fee-for-carriage, the LPIF, digital transition, and the role of the federal government.
On over-regulation, the regulator has over-licensed, causing fragmentation through a proliferation of specialty channels and foreign signals, with only token compensation for the damage these signals cause to the revenues of conventional stations. Today, we believe there is far too much regulation. It’s time to reform and relax the broadcasting regulations.
One prime example of over-regulation relates to Canadian content requirements. Once the CRTC set Canadian content quotas on private broadcasters’ broadcast days, and later expanded these to priority programming in prime time, the private conventional broadcaster’s balance was upset. The sale of advertising is our one and only source of revenue and it is directly linked to program ratings. Good ratings equal high yield; bad ratings equal low or no yield.
Broadcasters will all tell you, and they have told the CRTC, that airing most Canadian entertainment programs does not provide the audience levels necessary to provide the revenue needed to sustain their operations. When asked, Canadians say they want Canadian programming, but the ratings tell us otherwise.
Another example specific to NTV is the length of our broadcast day and evening broadcast periods. For decades, the CRTC granted NTV an extension to its broadcast day for up to 1.5 hours for news. This was due to our unique time zone when compared with eastern standard time. However, at NTV’s last licence renewal, the CRTC decided this extension was no longer acceptable and forced a change. The result: a shorter than normal broadcast period and a longer than normal evening period, meaning that NTV lost one hour each day of it simulcast opportunities, while causing it to air 3.5 hours a week more Canadian content in the evening period than any other station in Canada.
In NTV’s view, the CRTC should immediately do the following.
It should reduce Canadian content quotas to more reasonable and less restrictive levels.
It should make Canadian content programs accountable, using a ratings-based scale that credits a station’s Canadian content quota up to 200% on a prorated basis. We have this mechanism for advertising. Why not utilize it for programming? NTV spends millions of dollars to produce the province’s number one rated television program, the NTV Evening News Hour, yet it receives the same Canadian content credit as a rerun of Inspector Gadget.
The CRTC should provide a standard and reasonable base quota for local Canadian content and a positive Canadian content quota incentive of 150% for stations that over-perform regarding the production of local programming.
It should lift restrictions on certain advertising, in particular pharmaceutical drugs, opening up rich new national advertising opportunities.
It should eliminate part II licence fees, with no retroactive payment requirements.
It should freeze applications for any new services well beyond the return of stability. With 170 new stations licensed, the market is saturated.
Audience fragmentation. The activities of BDUs cause fragmentation to the local broadcaster’s audiences through the introduction of many signals, including U.S. networks and stations airing programming that we have purchased the rights to air in our market. We believe this is the only country in the world where cross-border signal theft or piracy is legitimized. Canadian networks do not air on American BDUs.
Further, it is unacceptable for a BDU to simply take an over-the-air broadcaster’s signal, sell that signal to their subscribers, and pay nothing to the originator of the signal. We believe the purpose of broadcasting in the Canadian Broadcasting Act was to provide a signal to the end-user or the public and not an intermediate entity that benefits financially from the use of the signal and pays nothing for it. That's just another form of signal piracy. I might add that when the shoe is on the other foot, cable and satellite BDUs are quite vocal over the piracy of their signals and cross-border signals.
Earlier in these proceedings, Ms. Bell of Canwest pointed out that during the 1971 hearings on cable TV, the CRTC suggested that people should pay for what they use to operate their business. It makes sense to us. In 1975, the CRTC granted MTV a cable subscriber fee of 25¢ per household and then quickly revoked it without a hearing. Since then, we have repeatedly asked the commission for local cable subscriber fees or fee-for-carriage. We believe that fee-for-carriage is a fair and equitable way to compensate broadcasters for the damage BDUs cause local audiences. Local signals are important to local subscribers, and they already believe they are paying for them.
In a study by the DTV Working Group, recently submitted to the CRTC, of 840 persons who receive only conventional television over the air, surveyed in five centres across Canada, 78% say they would pay a $10-per-month subscriber fee for local signals. This indicates that our signals are important to the public and that they are willing to pay for them. There has been controversy over traditional rates to broadcasters, should a fee-for-carriage regime be introduced. These are our suggestions.
Fee-for-carriage and distant signals are linked and should be an industry-to-industry matter. They are considered damaging to each broadcaster's local market. Nevertheless, they are of great value to the public, who time-shift and benefit from the diversity of voices, a crucial element of our democracy, from each corner of the country. Distant signals are also key components of every BDU's service offering. But from what we've seen and read so far, at the end of the day, the CRTC mediation process or government intervention may be required to solve this matter.
If sufficient subscriber fees flowed to each broadcaster for service provided by BDUs in its market, it would help to offset the damage caused by distant signals. Further, it appears from information recently available on the public record that cable and satellite BDUs are quite healthy, with substantial profit margins. They have had substantial rate increases over the past five to six years and are permitted to sell advertising in our markets, further eroding our only source of revenue. They pay us nothing for the use of our signal. If fee-for-carriage was applied at the local level, we see no case for these BDUs to pass further increases on to the public. In our view, BDUs were given a free ride in order to establish their infrastructure, and it's time they paid for what they take and use.
We believe unfair competition exists from a subsidized CBC operating in our market, with no relationship between their revenues, operating expenses, or capital costs. The CBC, with its very deep pockets, is able to undercut our advertising rates and purchase popular U.S. programming such as Wheel of Fortune and Jeopardy, programs that NTV until last year aired for 25 years and made popular in its market. Now these programs are used by CBC to gain ratings against us. If CBC were 100% subsidized and not competing with the private sector for advertising share, it would provide increased local and national advertising opportunities to the private broadcaster. A subsidized entity should not be permitted to compete with private industry.
CBC's mandate under the Broadcasting Act should therefore be changed to 100% Canadian content, with no advertising. A 100% content on CBC would allow relief to the private sector from the onerous Canadian content regulatory quotas placed on it by the CRTC. Selling advertising has caused CBC to travel down a road that in their view requires them to spend huge amounts on U.S. programming and expensive first-run movies, driving the cost of U.S. programming even higher as bidding among Canadian broadcasters for national rights includes a CBC that uses taxpayer dollars.
CBC recently reported that 60% of their expenses are in salaries. That indicates to us that they're either overstaffed or overpaid. Locally, we estimate they outstaff us three to one, yet produce only 5 hours to our 13.5 hours each week.
Further, there are expenses related to the selling of advertising. CBC maintains sales managers and salaried sales staff, whereas the private sector usually operates on commission sales. They must maintain billing, traffic, and credit departments, commercial production facilities, and staff. At the end of the day, it may well be discovered that the activity related directly and indirectly to selling advertising by CBC costs more than they actually gross. We believe this is especially true in the Newfoundland market.
On cultural development funds, in our view, CBC and the independent sector should explore more avant-garde Canadian productions, while the private sector should concentrate on productions that are economically viable and are quality productions where the focus is to create mass appeal Canadian content programming for exhibition by the private sector. In our view, this is best managed by the private sector, which understands what works. There has to be an accountable commercial element attached to the creation of Canadian programming.
The Broadcasting Act creates an expectation that Canadian programming should be exhibited on television, and although most Canadians suggest that we should have Canadian programming, the program ratings show time and time again that few are actually watching it. Most Canadian programs yield very poor results when compared to foreign programming. It should be obvious from this that Canadians are not satisfied with the quality of most Canadian programming. However, the private sector must realize a return on each hour of its broadcast day. To do this requires high ratings or, more simply put, programs that people will watch.
The local programming improvement fund is a means to help over-the-air small market broadcasters maintain local programming. We know this fund is $60 million, and we have heard that there are 72 stations that would likely qualify for the fund. We know that the formula suggested is based on each station’s past expenses related to local programming. If we divide the fund by the number of stations, we find there is $833,000 per station. Some say that CBC should qualify where they operate stations in markets of fewer than one million viewers.
We maintain that if CBC has access to this fund, based on their subsidized economies of scale, the lion’s share of that fund will flow to them. If this happens, their increased resources will cause competition to escalate for news-related advertising dollars. Should CBC’s ratings increase as a result, it will mean reductions and layoffs in the private sector, negating the fund’s benefit to private broadcasters. So instead of helping, this fund will just become another source of revenue for CBC, maintaining an imbalanced duplication of services that we believe was not meant to be the focus of the fund. We maintain that CBC should have no access to this fund if it is to provide any benefit to local broadcasting.
Further, money realized from the fund by the private sector should go exclusively towards the gathering and production of category 1 news.
In our view, digital transition is not about the quality or HDTV. It's—
My name is Stanley James, and I'm the chair of the Northern Native Broadcasting, Yukon, board of directors. With me is Sophie Green, who is the general manager. I'd like to extend the appreciation of Northern Native Broadcasting, Yukon, to the chair and members of the standing committee for the invitation to appear before you to share our thoughts on the evolution of the television industry in Canada and its impact on local communities.
Northern Native Broadcasting, Yukon, is funded through the aboriginal peoples program directorate of Canadian Heritage. The funding we receive through this initiative has remained almost unchanged since its creation. In the 1980s we saw a decrease in funding.
The agreement of just a little over a million dollars each year, if we are successful with our application, requires us to produce and distribute radio and television programming, with the Yukon First Nation audience's needs determining our mandate. Static funding can only be translated as a decrease, as the cost of living and the cost of business escalate consistently each year. The changes to industry standards, particularly in high definition and digital radio, have an immediate impact on us. We have had to lay off personnel and close down our analog television production unit, putting seven people out of work.
Although advertising has augmented the funding from Canadian Heritage, in the current economic downturn, advertising revenues have dropped faster for us than they have for others throughout the industry. Business does not view the aboriginal audience in remote northern communities as a good investment for their diminishing advertising dollars.
New media, changing viewing habits, audience fragmentation, and convergence are having their effects on us. We have not had the necessary funding to meet the needs of a fast-growing youth population who do not view the world as our ancestors did. We need to be able to produce programming that interests the youth of today, delivering the programming in the media of today. As a communications network, we need to continue to play a critical role in keeping the language, culture, and customs of the aboriginal people alive and in use.
We believe the federal government must continue to assist local aboriginal broadcasters and to assist in meeting the cost of digital transmission. We said the same in June 2003 to the House Standing Committee on Canadian Heritage, when they conducted hearings on the second century of Canadian broadcasting. The role of the cultural development fund to ensure the survival of local broadcasting should be strengthened and have the involvement of local broadcasting in the terms of reference. Oftentimes, non-profit societies such as Northern Native Broadcasting, Yukon, find themselves ineligible because of their status as a non-profit entity, as required by contribution agreements. For Northern Native Broadcasting, Yukon, fee-for-carriage does not apply as we are not television broadcasters but television producers. That means also that the CRTC local improvement fund will not be applicable in our specific situation.
The loss of local broadcasting or local production of content for the aboriginal community could be severe. In the Yukon, where two aboriginal language groups split into eight dialects, the ability to hear our language in as many mediums as possible is of great benefit. It is only a decade ago that the indigenous language of the Yukon began to be written down. Our population is a fraction of the entire population of the Yukon--approximately 6,000 of first nations ancestry, out of the Yukon population of approximately 30,000 people. The role of local aboriginal broadcasting in the Yukon is critical to maintain the diversity of the voices in the territory and the aboriginal population in Canada.
In closing, let me say how much we appreciate this opportunity to be here before the standing committee to talk about the evolution of the television industry in Canada and its impact on local communities. Both Sophie and I will try to provide answers to any questions you may have.