Thank you, Madam Chair, for this invitation to discuss the report titled “Harnessing Change: The Future of Programming Distribution in Canada”.
I'll skip the introductions, as the chair already went through them, but I'll just underscore that Sheehan is pronounced “Shawn”.
We are pleased to support the committee's important work on shaping the future of Canada's media industries. At the government's request, the CRTC prepared the Harnessing Change report to evaluate the future of our environment and how it would support a vibrant domestic market for the creation and distribution of audiovisual programming. The report is intended to inform the government's review of communications legislation and the work of the legislative review panel.
It describes the many benefits and opportunities generated by digital technologies. Canadians can now access more content from more places around the world than ever before. Innovative services succeed by catering to this demand. New digital tools make it easier to create high-quality audio and video content and make it available globally. The number of content buyers continues to increase, and data analytics make it possible to learn more than ever before about the relationship between content and audiences.
The report analyzes traditional and digital platforms in terms of the relative level of maturity and long-term sustainability. In the audio market, for instance, radio is mature and is adapting to the shifts in consumer habits. However, new online services such as Spotify are experiencing rapid growth.
The market for video content is also fragmented. Conventional broadcast television is on the decline, while online services and user-uploaded content continue to attract a growing number of subscribers.
Mature distribution models such as cable, satellite and fibre services will face increased competition, but they are making investments in new technology.
As online markets and distribution models for both video and audio continue to change, it will become increasingly difficult to divide them into clear-cut categories.
And while there are numerous opportunities for Canadians, the content they make and enjoy watching risks being lost among all the digital options at their fingertips. Moreover, as we watch less traditional television, there may be impacts on the underlying support systems used to create much of the video content we enjoy today, including news programming.
One of the report's key findings is that video and audio streaming account for two-thirds of all online data traffic on North America's fixed networks and one-third of all data on mobile networks. We expect that these percentages will only continue to grow, as more Canadians have access to faster broadband service and larger mobile wireless data plans.
The preferences of people under the age of 35 give us a sense of what the future holds. This group is three times more likely than older Canadians to watch video online, for instance. And younger people are less likely to subscribe to traditional television services, such as cable and satellite. At the same time, streaming services such as Spotify and Netflix continue to draw greater numbers of subscribers both young and old.
Digital services are clearly on a growth trajectory and will play a more important role in the years ahead. It is important to keep in mind, however, that traditional services are mature businesses. Despite recent declines, they are popular with Canadians, and will continue to evolve and remain viable for the foreseeable future. The main area of concern is for services whose business models are declining. Conventional television, for instance, is facing considerable challenges and may not remain viable due to the erosion of advertising revenues.
These trends have serious implications, not only for Canada's media industry, but on our regulatory and policy framework's ability to meet its objectives. In essence, the current framework was designed for another time—a closed system of traditional broadcast services.
It is not sufficiently adaptable to meet the challenges of an era marked by ready access to streamed content.
As the members of this committee recognize, the CRTC and the report we produced view these through a regulatory lens. Canada's regulatory regime strives to achieve specific policy goals, such as to foster the production and accessibility of Canadian content, including news programming.
Licensing is the principal mechanism used to achieve stated policy goals. Licences for most television service providers, for instance, require the investment of prescribed percentages of revenue in the production of Canadian content.
Given these realities, the report considers four regulatory approaches: the status quo, deregulation, applying existing rules to digital players, and designing and implementing an entirely new approach.
The report concludes that the first three are inadequate in light of the current and emerging challenges. New tools and approaches are required to ensure a vibrant Canadian media production industry—innovative tools and techniques that exploit the opportunities presented by current and emerging technologies.
The process to design a more effective regulatory regime must begin by identifying clear policy goals. The Harnessing report suggests three.
First, we need to foster both the production and promotion of Canadian content, including news programming. Moreover, in a digital age, discoverability is essential to success.
Second, we must recognize that there are social and cultural responsibilities associated with operating in Canada, and all parties should contribute to ensure that Canadians benefit and that all players can compete fairly and effectively—however, in an equitable manner.
Furthermore, and third, we need to create a nimble and innovative regime that can be readily adaptable to change.
The last of these goals is particularly important over the long term. Just as those who designed Canada's current regime could not have imagined today's digitized world, we cannot foresee all of the changes that will arrive in the future. We must have flexible tools to adapt to new realities.
The report concludes by describing a series of potential policy options—new mechanisms that could help achieve the stated goals. To be effective, the new policy requires legislative support, including the regulatory authorities needed to ensure compliance. This could include the authority to impose administrative monetary penalties in instances of non-compliance.
Ultimately, to ensure that the broadcasting industry continues to thrive, Canada must have a regulatory regime that encourages innovation and delivers the content that Canadians want.
While the panel conducts its review, the CRTC continues to look forward and fulfill its mandate for the benefit of Canadians. Our current activities are focused on assisting the broadcasting system to adapt to the digital environment and develop new approaches and tools. These activities include a review of the policy for indigenous broadcasting to ensure that indigenous communities have access to content that reflects them as well as the tools to produce it.
As a radio transforms itself in the digital environment, the CRTC will also review its commercial radio policy with the intention of developing renewed approaches that will more effectively support artists and content development, including news and information. Work is also underway to implement a digital monitoring system for radio and update the policy on Canadian programming expenditures in light of digital media. These are essential steps in improving the ways we monitor and understand how the digital environment is evolving so as to regulate as effectively as possible in the future.
In addition, we will soon initiate the process to renew the radio and television licenses of the CBC and Radio-Canada. This will enable us to examine ways it can move forward in the digital environment while continuing to fulfil its mandate to Canadians.
We'll do our best to answer your questions. Thank you.
Conventional television stations are those that produce local and national content and news. So this is a major problem.
I will continue with the subjects that were just brought up.
Often, if you ask those in the org charts of large groups, you are told that everything is going well and that they are making lots of money. When they talk to the shareholders who want to sell their shares, that's clearly what they do. When they go to the government, they say that it's frightening, that money is no longer being made, and that things are disgusting.
It’s not Bell any more, it’s Bell Media that tells us that it is having difficulty paying the salary of Ben Mulroney, the host of the show Your Morning. So we have to take it all with a grain of salt.
Just now, however, you told Mr. Boissonnault that 17% of the public gets the audiovisual content of their choice online. Am I missing something? With young people—millennials under 40, 35 years of age—that number has to be much higher. You are probably not using recent figures.
I would like to jump to the conclusion of your report right away. I feel that it is a very lucid report and that the whole television production sector was happy to see that you fully understood everyone’s arguments. Heaven knows that television has a fundamental role in our society, particularly in Quebec, where so much has been invested in it. From Point de mire—a show that René Lévesque hosted—through the Janette veut savoir series to the current show called Fugueuse, all kinds of shows have been vehicles for the evolution of Quebec society.
Take Fugueuse as an example. The show dealt with the problem of juvenile prostitution, which is a harsh reality in Canada, in Quebec and in Longueuil, particularly at the Longueuil metro station. Let me tell you about it. That harsh reality was depicted in a work of fiction that caught everyone’s attention. Actors in the show were featured in an article in the Star System magazine and became known to the public. The series was also discussed on a program that brought together a social worker and the producer or writer of the series. It was nominated for a Gémeaux award. Young people got out of prostitution because the series allowed that reality to be talked about.
This is a long way from the toxic consumption—that’s an exaggeration; let’s just say the consumption—that does very little on a societal level, like the Netflix series 13 Reasons Why. That show was dropped on us and I binge-watched it in a hurry because I was afraid that my children might see it before me. I was right to be afraid because, according to figures from the United States, there was a 27% increase in suicide rates after the first episodes. That is huge. You are the defenders, the guardians, of the system we have in place, I feel.
One of the conclusions of your report is to “replace prescriptive licensing with comprehensive and binding service agreements that include traditional and new players”. So you are talking about a hybrid system. Do you have enough wiggle room to change things? What do you need?
The culture sector is asking the Yale commission to propose interim measures as a matter of urgency. What do you need to do something similar?