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37th PARLIAMENT, 1st SESSION

Standing Committee on Canadian Heritage

EVIDENCE

CONTENTS

Thursday, March 21, 2002

0900

The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.))

Mr. Paul Robertson (Chair, Canadian Association of Broadcasters)

Mr. Glenn O'Farrell (President and Chief Executive Officer, Canadian Association of Broadcasters)

0905

0910

0915

The Chair

Mr. Glenn O'Farrell

The Chair

Mr. Glenn O'Farrell

Mr. Philippe Lapointe (Vice-President, Groupe TVA inc.)

0920

Ms. Loren Mawhinney (Vice-President, Canadian Production, Global Television Network)

0925

0930

Ms. Joanne Levy (Executive Director, Craig Broadcast Systems Inc.)

Mr. Glenn O'Farrell

Mr. Alain Gourd (Group Executive Vice-President, Corporate, Bell Globemedia Inc.)

0935

0940

Mr. Glenn O'Farrell

The Chair

0945

Mr. Jim Abbott (Kootenay--Columbia, Canadian Alliance)

Mr. Glenn O'Farrell

Mr. Jim Abbott

Mr. Glenn O'Farrell

Mr. Alain Gourd

0950

The Chair

Ms. Christiane Gagnon (Québec, BQ)

Ms. Loren Mawhinney

0955

Mr. Glenn O'Farrell

The Chair

Mr. John Harvard (Charleswood St. James--Assiniboia, Lib.)

Mr. Glenn O'Farrell

1000

Mr. John Harvard

Mr. Glenn O'Farrell

Mr. John Harvard

Mr. Glenn O'Farrell

Mr. John Harvard

Mr. Glenn O'Farrell

Mr. John Harvard

Mr. Glenn O'Farrell

The Chair

Mr. Dennis Mills (Toronto--Danforth, Lib.)

1005

Mr. Alain Gourd

Mr. Glenn O'Farrell

The Chair

Ms. Wendy Lill (Dartmouth, NDP)

Mr. Glenn O'Farrell

1010

Ms. Wendy Lill

Mr. Glenn O'Farrell

The Chair

Mr. Grant McNally (Dewdney--Alouette, PC/DR)

Mr. Glenn O'Farrell

Mr. Alain Gourd

The Chair

Ms. Sarmite Bulte (Parkdale--High Park, Lib.)

1015

Mr. Alain Gourd

Ms. Sarmite Bulte

Mr. Alain Gourd

Mr. Glenn O'Farrell

1020

The Chair

Mr. Glenn O'Farrell

The Chair

Mr. Glenn O'Farrell

The Chair

Mr. Glenn O'Farrell

The Chair

Mr. Glenn O'Farrell

The Chair

Mr. Glenn O'Farrell

Mrs. Kathleen McNair (Vice-President, Business and Regulatory Affairs, Corus Entertainment Inc.)

1030

Mr. Peter Miller (Vice-President, Planning and Regulatory Affairs, CHUM Television)

1035

Mrs. Kathleen McNair

1040

Mr. Glenn O'Farrell

The Chair

Mr. Jim Abbott

1045

Mr. Glenn O'Farrell

Mr. Jim Abbott

Mr. Glenn O'Farrell

Mr. Peter Miller

Mr. Jim Abbott

The Chair

Ms. Christiane Gagnon

Mr. Glenn O'Farrell

Mr. Peter Miller

Ms. Christiane Gagnon

Mr. Glenn O'Farrell

1050

The Chair

Ms. Sarmite Bulte

Mr. Peter Miller

Ms. Erica Redler (General Counsel and Senior Vice-President, Policy and Legal Affairs, Canadian Association of Broadcasters)

Ms. Sarmite Bulte

Ms. Erica Redler

Ms. Wendy Lill

Mr. Glenn O'Farrell

1055

Mrs. Kathleen McNair

Ms. Wendy Lill

Mrs. Kathleen McNair

Mr. Glenn O'Farrell

Ms. Erica Redler

The Chair

Mr. Grant McNally

1100

Mr. Glenn O'Farrell

Mr. Grant McNally

The Chair

Mr. Grant McNally

The Chair

Mr. Glenn O'Farrell

The Chair

Ms. Betty Hinton (Kamloops, Thompson and Highland Valleys, Canadian Alliance)

Mr. Glenn O'Farrell

The Chair

Mr. Glenn O'Farrell

Mr. Kenneth Goldstein (Executive Vice-President and Chief Strategy Officer, CanWest Global Communications Corp.)

Mr. Richard Cavanaugh (Vice-President, Radio, Canadian Association of Broadcasters)

1105

Mr. Kenneth Goldstein

Mr. Glenn O'Farrell

The Chair

Mr. Jim Abbott

1110

Mr. Glenn O'Farrell

Mr. Jim Abbott

Mr. Glenn O'Farrell

1115

Mr. Kenneth Goldstein

Mr. Jim Abbott

The Chairman

Ms. Christiane Gagnon

Mr. Glenn O'Farrell

Ms. Christiane Gagnon

Mr. Kenneth Goldstein

1120

The Chair

Ms. Wendy Lill

Ms. Sylvie Courtemanche

Ms. Wendy Lill

Ms. Sylvie Courtemanche

Ms. Wendy Lill

Mr. Glenn O'Farrell

The Chair

Mr. Grant McNally

1125

Mr. Kenneth Goldstein

The Chair

Ms. Sarmite Bulte

Mr. Glenn O'Farrell

The Chair

Ms. Christiane Gagnon

1130

Mr. Glenn O'Farrell

Mr. Paul Robertson

Mr. Glenn O'Farrell

Ms. Sylvie Courtemanche

The Chair

Mr. Kenneth Goldstein

The Chair

Mr. Kenneth Goldstein

1135

The Chair

Ms. Betty Hinton

Mr. Kenneth Goldstein

Ms. Betty Hinton

Mr. Kenneth Goldstein

Ms. Betty Hinton

Mr. Kenneth Goldstein

The Chair

Mr. Kenneth Goldstein

The Chair

Mr. Glenn O'Farrell

1140

Mr. Mark Maheu (Vice-President and General Manager, CFRA /KOOL-FM (CHUM Limited))

Mr. J.J. Johnston (General Manager and Vice-President, Programming, Corus Entertainment Inc.)

Mr. Claude Gagné (Representative, Télémédia)

1145

Mr. J.J. Johnston

1150

The Chair

Mr. Glenn O'Farrell

The Chair

Mr. Glenn O'Farrell

The Vice-Chair (Mr. Dennis Mills)

Ms. Betty Hinton

1155

Mr. Glenn O'Farrell

The Vice-Chair (Mr. Dennis Mills)

Mr. J.J. Johnston

The Vice-Chair (Mr. Dennis Mills)

Ms. Christiane Gagnon

1200

Mr. Claude Gagné

Ms. Christiane Gagnon

Mr. Claude Gagné

The Vice-Chair (Mr. Dennis Mills)

Mr. Rodger Cuzner (Bras d'Or--Cape Breton, Lib.)

1205

Mr. J.J. Johnston

Mr. Rodger Cuzner

Mr. J.J. Johnston

Ms. Sylvie Courtemanche

The Vice-Chair (Mr. Dennis Mills)

Ms. Sarmite Bulte

Mr. J.J. Johnston

1210

The Vice-Chair (Mr. Dennis Mills)

Mr. Glenn O'Farrell

Ms. Sarmite Bulte

The Vice-Chair (Mr. Dennis Mills)

Ms. Wendy Lill

The Vice-Chair (Mr. Dennis Mills)

Mr. Glenn O'Farrell

The Vice-Chair (Mr. Dennis Mills)

1215

Mr. Grant McNally

Mr. Glenn O'Farrell

Ms. Erica Redler

Mr. Grant McNally

Mr. Glenn O'Farrell

The Chair

Mr. Glenn O'Farrell

1220

Ms. Sarah Crawford (Vice-President, Public Affairs, CHUM Television)

1225

Ms. Glenda Spenrath (Vice-President, Finance, Mid West Television Ltd.)

Mr. Marc Simard (Chairman of the Board, Télé Inter-Rives Ltée (CKRT-TV))

1230

The Chair

Mr. Paul Larche (President and General Manager, KICX 104 FM)

1235

Mr. Glenn O'Farrell

The Chair

Mr. Glenn O'Farrell

The Chair

Mr. Glenn O'Farrell

The Chair

Mr. Jim Abbott

1240

Mr. Glenn O'Farrell

Mr. Paul Robertson

Mr. Marc Simard

The Chair

Ms. Christiane Gagnon

Mr. Marc Simard

Ms. Christiane Gagnon

1245

Mr. Marc Simard

Mr. Glenn O'Farrell

The Chair

Mr. John Harvard

Mr. Glenn O'Farrell

1250

Mr. John Harvard

Mr. Glenn O'Farrell

Mr. John Harvard

The Chair

Mr. Claude Duplain (Portneuf, Lib.)

Mr. Marc Simard

The Chair

Ms. Sylvie Courtemanche

1255

Mr. Claude Duplain

The Chair

Ms. Wendy Lill

Mr. Glenn O'Farrell

Mr. Paul Larche

Ms. Sarah Crawford

1300

Voices

Mr. Marc Simard

The Chair

Mr. Grant McNally

The Chair

Mr. Glenn O'Farrell

The Chair

CANADA

Standing Committee on Canadian Heritage

NUMBER 046

1st SESSION

37th PARLIAMENT

EVIDENCE

Thursday, March 21, 2002

[Recorded by Electronic Apparatus]

¿ (0900)

[English]

The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): I would like to call the meeting to order.

Today the Standing Committee on Canadian Heritage is meeting to continue our study on the state of the Canadian broadcasting system.

Appearing before us today is the Canadian Association of Broadcasters. The CAB has asked us to set up their presentation in a way that it will be in five different segments where they will have a brief introduction of each segment, about five minutes each time. They will start with an introduction for ten minutes, then they will introduce each segment for five minutes, which will leave twenty minutes for questioning after each introduction of the particular segment.

At the end of the meeting, there will be a wrap-up briefly by Mr. O'Farrell, the president and CEO of the CAB, and Mr. Paul Robertson, following which there will still be time for general questions by the members.

So I will now call on Mr. Robertson, Mr. O'Farrell, and Madam Courtemanche to start the proceedings and give us the introduction to their presentation.

Mr. Paul Robertson is the CAB chair. Mr. Glenn O'Farrell is the CEO of the Canadian Association of Broadcasters. Ms. Sylvie Courtemanche is a member of the board.

Mr. Robertson, the floor is yours.

Mr. Paul Robertson (Chair, Canadian Association of Broadcasters): Good morning, Mr. Chair and members of the committee. Thank you for this morning's opportunity to appear before you. We appreciate it.

I am president of television for Corus Entertainment, but I also serve the broadcast industry as chair of the board of directors of the Canadian Association of Broadcasters. The CAB represents 600 member stations, equalling 85% of Canada's private radio, conventional television, specialty TV, and premium and pay television from coast to coast.

Although we face many challenges, private broadcasting in Canada is a tremendous success story. Faced with the significant penetration of foreign services and proximity to the U.S. entertainment machine, Canada's private broadcasters have delivered. They've delivered an unprecedented diversity of voices and choices and unparalleled cultural investment. In fact, upward of a billion dollars annually is spent on Canadian programming by private broadcasters. They've delivered a star-making machine that brings Canadian artists to national and international stardom, and an economic engine that creates over 40,000 direct and indirect knowledge-based jobs in Canada.

Unlike most corporate sectors, our members have two bottom lines: our commitment to our viewers and listeners in the communities we serve, and the financial viability that allows us to perform that public commitment. Our future viability is critical not only to our shareholders, but of course to our country.

When it comes to entertainment and information, we are the choice of Canadians. In English radio we have an 89% audience share. In French radio we have a 92% audience share. In English TV, the private sector commands 61% audience share; and a 76% share in French TV.

In times of celebration or in times of tragedy, Canadians turn to private broadcasters. We've been connecting Canadians for over 75 years. Originally, the CBC alone was the centrepiece of the Canadian broadcasting system. With government encouragement, private broadcasting has grown significantly to be a critical platform for Canada's creative expression.

The Broadcasting Act may speak of a space for public broadcasting, but it relies on a strong, profitable private sector whose success can be harnessed to help achieve public objectives. Today and increasingly tomorrow, the system we have built together will depend on the private sector's ability to be successful. It's a shared goal. The more we draw Canadians to Canadian expression, the more we all succeed together.

This morning it's our hope to outline some future critical pillars of success for private broadcasting, to highlight some of the pressing challenges that impede our success, and to provide the members of this committee with some focused recommendations that we hope will help your proceedings.

It is now my pleasure to introduce our new president and CEO of the Canadian Association of Broadcasters, Mr. Glenn O'Farrell.

Mr. Glenn O'Farrell (President and Chief Executive Officer, Canadian Association of Broadcasters): Thank you very much, Paul.

And thank you, Mr. Chair and members of the committee, for allowing Canada's private broadcasters to present you with an overview of our industry today.

We have with us an impressive array of broadcasters. Their bios are in your packages. We will be introducing them to you throughout the morning.

¿ (0905)

[Translation]

I would also like to introduce Sylvie Courtemanche, who is the Executive Vice-President of Policy and Regulatory Affairs at the Canadian Association of Broadcasters, our real specialist. She is here to answer your questions and to provide her assistance.

Since we submitted our brief ahead of time, we do not intend to spend our time today repeating all the points we make in our brief. Rather, we thought it would be useful for you to hear from specialists, leaders from across the country, and to discuss with them some of the practical problems we will have to deal with in the future.

As Paul Robertson mentioned, our industry is seeking to achieve two main results. The men and women who are here today represent much more than a commercial interest, they have become the leaders of this industry because of the strong relationship they have established with the communities they serve. They are passionate about our country challenging stories.

[English]

Why is this so important to us? Mr. Chair and committee members, we are fiercely proud of the contribution we make as the primary platform for the Canadian creative voice. A country's cultural identity finds expression through its creative voice. You know that and we know that. Try to imagine a country as great and as grand as Canada were it deprived of such a voice.

Private broadcasters have created opportunities for over 75 years for some of the best and brightest talent this country has to offer. Today there are thousands of young Canadians in universities and colleges across this country studying film, radio and television, drama, and the written word. Some will undoubtedly transform this country and how we see ourselves. Our responsibility as private broadcasters is, we feel, to ensure they have a place for that expression.

We must keep pace in the global entertainment and information business. This will require support from public policy-makers to ensure that together in Canada we can build robust media companies ready for all the challenges that lie ahead in this century. We are ready. We need our public policy partners to be ready too. And partnership is critical, critical to success.

J.K. Rowling wrote a fabulous book, Harry Potter, but it was the partnerships around the book that made it such a mega success. This is an example of a blockbuster film with top actors, the highest of production values, and millions of dollars in promotion: TV, radio, newspapers, bus shelter ads, cereal boxes, fast-food soft drink cups, school notebooks, Halloween costumes--you call it. This is what gave Harry Potter legs.

Canada, through its progressive feature film policy, has begun to see the importance of these partnerships. A fine example of that is Men with Brooms, which was released this month. The promotion of that film on TV and radio and in newspapers, the book version now on sale in Canadian bookstores, the soundtrack now available in retail outlets, and the film's box office receipts are proof that partnerships are working. We need more of this.

Today we want to have an open discussion on some of the business and policy realities we face on a going-forward basis. We are hoping to begin by examining three pillars of success.

The first pillar is a robust and profitable private broadcasting sector. A broadcast licence in a given market in this country was once a very valuable piece of property, as it meant access to a controlled marketplace. However, what we may have seen as a truth even a few decades ago is no longer the case as we face a new world. That new world has increased fragmentation, where a marketplace is flooded with more and more foreign and indigenous services than ever before. The new world has new technologies that defy a 40-year-old regulatory model. The new world is one of massive consolidation among key advertising customers. Broadcasting is experiencing a serious structural shift. As business people and as public policy makers, we need to work together to develop a response that will ensure success.

The second pillar is a strong and complementary public broadcaster. In a country this large and diverse there's no doubt there is an important need for a focused public broadcaster that will reach a broad spectrum of Canadians from coast to coast to coast. The public and private sectors must, in our view, be complementary, not competing. This already exists in radio, where a strong CBC radio service complements private radio. You can be in Halifax, Edmonton, or Chicoutimi, but when you tune in to CBC Radio, you know what you're listening to. They have a distinct programming voice, and we compliment those responsible for that.

The third pillar is the development of popular Canadian programming. In this 500-channel universe, Canadian content distinguishes us. Canada's private broadcasters invest over $1 billion annually in Canadian content.

¿ (0910)

This is why private radio has invested tens of millions of dollars in Canadian talent development to showcase the next Céline Dion, the next Shania Twain, or the next Barenaked Ladies.

In a cross-platform world, there is no business in simply renting programming and throwing the switch to a transmitter. The modern reality of private broadcasting in Canada is one that has built an integrated approach to information and entertainment.

So where do we begin? Well, it's striking, but we still face what we would call self-defeating pieces of public policy that impede success rather than favour success. An example of that is how the CRTC collects fees. The commission regulates both broadcasting and telecom. The licence fees for telecom are assessed on a cost-recovery basis, while broadcasting licence fees annually run almost $90 million over the CRTC costs. We believe this is a prejudicial tax that takes resources away from content.

The second example is when outdated advertising laws, like the 50-year-old restrictions on pharmaceutical advertising in the Food and Drugs Act, keep upwards of $400 million annually out of the Canadian media industry. We estimate that approximately $240 million of that would be to television. Those are resources that we are not channelling to the production and promotion of Canadian programming.

When policy fails to address black market satellite piracy and other technologies that threaten our cultural sovereignty, we need to address that as well. When copyright tariffs pile up, including a technology transfer tax forcing radio stations to pay for the simple task of transferring music from CDs to their hard drives, we are stunting innovation. That could potentially cost radio $14 million annually.

The last example I'd like to raise is what we call regulatory paralysis. It is counterproductive when government agencies like the Competition Bureau try to overstep their jurisdiction when the CRTC clearly has jurisdiction over broadcasting. It is evident that we have work to do. We believe our success is your success. Let's work to ensure that policy and industry are turned to channelling maximum resources toward content for Canadian viewers and listeners.

Given the pressures, your review today and your work are important and timely. Our industry was built in an environment where we have had to compete with the best programming the world has to offer.

[Translation]

We are ready to take on this challenge. To this end, the brief we submitted to the committee sets out five major initiatives to ensure a sustainable future for private broadcasting: first, develop a financing strategy for Canadian programming; second, rationalize the copyright system; third, establish policies on digital broadcasting that will guarantee the future of Canadian broadcasting; fourth, develop a strategy for radio that will ensure that we have many Canadians stars; fifth, adopt a strategy that is a local reflection of our communities.

¿ (0915)

[English]

Mr. Chair and committee members, we have a lot of ground to cover with you this morning. We appreciate your giving us the time to do so.

We want this morning to be more of a dialogue than a presentation, so we will try to keep our comments brief and to the point, leaving as much time as possible after each presentation for discussion and debate. Given the time constraints, we are going to try to be disciplined and contain our discussion to the main themes, hopefully leaving enough time at the end for a dialogue on general issues you may wish to raise.

Without further ado, Mr. Chair, I would like to bring forward our first panel of experts, who will address the challenges facing the program financing of Canadian television.

The Chair: Thank you, Mr. O'Farrell. You were kind enough to realize that politicians sometimes don't start on time, so you had planned your scenario to start at 9:15. Well, we fooled you. We started on time, so we have more time now for questioning.

We'll go ahead with initiative number one.

Mr. Glenn O'Farrell: We will try to use that time very judiciously, Mr. Chair.

The Chair: Thank you.

Mr. Glenn O'Farrell: Mr. Chair, for this first segment of discussion I have the pleasure to introduce to you and committee members four leaders in Canadian programming.

First we have Joanne Levy of the A-Channel Production Fund. Next to Joanne is Alain Gourd of Bell Globemedia. I've already introduced Sylvie Courtemanche of the CAB, and you've met Paul Robertson, of course, who is also the chair of the CAB. Next to Paul is Loren Mawhinney of the Global Television Network and next to Loren is Philippe Lapointe of Groupe TVA.

In 2000 alone, private broadcasters spent, as I mentioned earlier, almost $1 billion on Canadian programming. As stated earlier, it's our competitive advantage. That's how we feel about it. It's what distinguishes us, and perhaps our greatest collective challenge is to find a way, within a population base of only 31 million Canadians, to make high-end programming that will compete for viewers against the U.S. entertainment machine. While we easily compete with the best in genres like news and sports, we are still struggling to make drama and other genres a more profitable enterprise.

To be clear, this is largely an issue in English-language Canada. The market dynamic is very different in French-language Canada. In French-language Canada, we find significant success in drawing audiences and creating a strong star system. However, in essence, the English-language marketplace hopes to mirror and achieve the same level of success.

The cycle of success is really quite simple. I'd like to walk you through you it very briefly. Popular programming with solid promotion attracts more viewers. More viewers creates commercial success at home. Commercial success at home opens the doors to commercial success in other markets. International programming success creates stronger producers with stronger returns. Stronger returns on programming create increased incentives to invest in programming, and finally, increased investment creates more popular programming.

Perhaps we could lead off this presentation with some good news. Therefore, I'd like to ask Philippe Lapointe from Groupe TVA to share with you some of the success that French-language broadcasters have been able to achieve, and then perhaps Joanne Levy from the A-Channel Production Fund and Loren Mawhinney of Global could explain some of the economic challenges they face in the quest to develop successful Canadian programming.

Philippe, s'il-vous-plaît.

[Translation]

Mr. Philippe Lapointe (Vice-President, Groupe TVA inc.): Good morning, ladies and gentlemen.

I would like to start by telling you a little story. Last Sunday the TVA network in Quebec broadcast the MetroStar Gala which is the highlight of the television year, where the public votes for its favorite stars. Two million French Canadian television viewers watched the MetroStar Gala, which represents a 65% market share.

The people at CBS were very pleased with a 34% market share for the program 9/11, so, the fact that 65% of Quebeckers chose to watch a single program because it was about the Quebec star system and what it has become, is absolutely extraordinary. People are extremely proud of this success. However, there are a number of reasons for this success.

When we look at the 30 most-watched programs on television in French-speaking Canada, we find that 28 of them were developed, manufactured and produced by people who live here for people who live here. This is a significant success that we may take somewhat for granted. People think that it stands to reason.

However, when we look at the past, and if we have any memory at all, we remember that in 1980-1985, French-speaking Canadians were watching mainly American programs: Mannix, Hawaii Five-0, Dallas and Dynasty. For this presentation, I had prepared a list of the top 30 programs, the 30 most-watched programs. The most watched program in 1980-1985 was The Little House on the Prairie in its French version. Today, there are virtually no American programs on the French-language networks in Canada. People now watch programs made here.

There are all sorts of reasons for this success, of which we are so proud. First, there was the will to make successful, popular programs that appeal to people. There is a way of doing television programming that is close to people, programs that talk about the stories that are very close to the people who live here. This accounts for the success of the television programs produced here.

There are also other important structural reasons that account for this success. Among the top 10 programs this year, 8 would not have been possible without the participation of the Canadian Television Fund. The system in place for financing Canadian television is the cornerstone. Eight of the top ten programs were financed with assistance from the Canadian Television Fund through its two programs, the EIP and the LFP. This is an essential ingredient of our success.

Unfortunately, our success is also fragile. I work for the TVA network, and I had the privilege of directing programming on this network for three and a half years. We obtained market shares that are equally good since we have been doing programming that is closer to the people who live here. The programs are better. Despite the market fragmentation, our market shares are higher than they were 10 years ago.

However, the market shares of advertising revenues are not the same. There has been a striking drop in the volume of advertising. I will not be discussing that, rather I will let my colleagues tell you about it later. Thus, our success is rather fragile.

I would like to conclude by emphasizing two key points: the importance of maintaining the financing and of increasing it so that we can make high-quality Canadian productions. We manage to make very high-quality programs at a much lower cost. The salary of one of the stars of Cheers would pay for a whole series in Canada. Consequently, we are not at the same level, but we do need resources to do the type of high-quality television programming required to attract viewers. The Canadian Television Fund has an essential role to play in this effort, as do advertising revenues.

I will now turn the floor over to my colleagues.

¿ (0920)

[English]

Ms. Loren Mawhinney (Vice-President, Canadian Production, Global Television Network): Good morning.

The matrix of financing of Canadian programs has changed as our broadcasting system has changed. In the last five years we have experienced the launch of five more conventional channels and went from 20 speciality services serving Canadians to 60. Dozens of new diginets have launched this fall and their input is just starting to be felt.

However, Canadians are not watching more television. As a result, the audience is simply becoming more fragmented; thus, so are the advertising dollars. It's becoming harder to afford high-cost programs as audiences are shrinking.

Broadcasters try to anticipate trends. For instance, in recent years formats from Europe, particularly in the reality genre, have generated current trends in North America. Big Brother was a Dutch phenomenon before it was made in the U.S. , and Global's Pop Stars was inspired by a successful series in Australia. We launched another new series this month called No Boundaries. This series was a huge hit in Scandinavia and we hope to achieve equal success in Canada.

We're always working to attract more audiences to our network with new formats. In the same way that Survivor was the number one performer in Canada for an American program, Pop Stars was the number one rated English-Canadian entertainment program last season. And we hope that season two will do the same.

These programs are not drama, but they are very much Canadian and are extremely popular with viewers.

The other point, following on Philippe's comments, is that they do not take money from the Canadian Television Fund, so we are able to make them independently of those funding structures.

The following are some suggestions that may make the creation of other genres of Canadian programs more successful and, I hope, can be put on the table for future discussions during the proposed financing task force that my colleagues have mentioned.

Canadian drama is the most expensive genre to produce. And while it occasionally generates good audience numbers, because it is so expensive to commission, it usually loses money for the broadcaster. Therefore, incentives are needed to make commissioning these programs more attractive.

A Canadian drama that achieves 10 out of 10 points qualifies as 150% content. This means it counts as an hour and a half of Canadian content. And 10 out of 10 points refers mainly to the citizenship of the individuals involved in creating and producing a production, as well as the location setting.

In the old regime, the 150% bonus was an incentive for broadcasters to commission this type of product. In our case, for example, an hour of Traders counted as an hour and a half of Canadian content. Thus, we could buy another half hour of American content we could simulcast. Therefore, the incremental revenue that we could generate from the American program could be used as rationale for spending more on the Canadian program.

Under the new group licensing regime, where large broadcasters must telecast eight hours of priority programming per week, the bonus for Blue Murder--again to use one of our own shows--only counts against the eight hours of priority programming. It does not count against the obligation to run 50% Canadian in prime time. Therefore, the bonus becomes moot and we lose the economic argument to spend more money on a Canadian program.

I would suggest that the bonusing mechanism be allowed to count against the 50% Canadian in prime time and therefore maintain its importance, which would thus stimulate more indigenous production activity.

Another way to increase audiences to Canadian programs is to have them look more like the expensive programs our neighbours create. For example, the production budget for the last season of Traders, all 13 episodes, cost less than the production budget for the hour-long pilot of West Wing, made during the same year. The entire season of Traders cost $12 million while the one-hour pilot cost approximately $14 million.

Now, West Wing is a very expensive program and the pilot is always more expensive than a regular episode. A less expensive example would be CSI, which costs about $3 million Canadian. A typical Canadian drama budget is about $1 million an episode.

Canadian audiences are sophisticated and are accustomed to seeing the best the U.S. has to offer. On our budgets, even our best producer cannot match the special effects, large casts, and multiple locations of a typical American production.

Perhaps the CTF could consider a mechanism where certain flagship shows on each large station group could receive more money to approximate the quality of a typical U.S. production hour.

¿ (0925)

The third thing is, the CTF needs to be confirmed as a permanent fund. Broadcasters do not want to risk spending hundreds of thousands of dollars promoting a program that may be cancelled because of a lack of funds or for reasons beyond our control. To encourage the commissioning of expensive drama series we need to know that the funding will be there in the event we elect a commission or renew a program.

Finally, we think that the CTF needs to become less parochial. The citizenship of the producer needs to be the primary qualification, especially in the documentary genre. As an example, we are currently looking at a proposal from a documentary producer about this strange--at least to us--phenomenon of North American women who are becoming Muslims subsequent to September 11. We think that's a really interesting story, but it won't be fundable because it will require so much foreign location work.

Canadians want to experience the world and see the world and changing trends through a Canadian perspective. This perspective can be just as valuable as focusing on our own country.

Thank you very much, and I'll be pleased to answer any questions after our presentation.

¿ (0930)

Ms. Joanne Levy (Executive Director, Craig Broadcast Systems Inc.): Good morning. I represent Craig Broadcast Systems. I believe you had an opportunity to meet the president of our company, Drew Craig, during your deliberations in Winnipeg on March 1.

My regional broadcaster has a desire matched by commitment and significant achievement to provide viewers with quality Canadian long-form drama and documentaries. Our locations in Alberta and Manitoba reach only 20% of English Canadian viewers. However, in the last four years we have licensed 15 completed movies such as The War Bride, which received seven Genie nominations and won two awards just this last January. We've also licensed the Gemini award-winning documentary Hitman Hart: Wrestling with Shadows.

We provide an important alternative for filmmakers, especially those in our home provinces, to tell their stories, perfect their craft, and reach an audience. We provide diversity to both viewers and the entire Canadian cultural system. Productions we license are seen across the country in movie theatres, on pay TV, and in fact on the services of other Canadian broadcasters, both conventional and specialty.

We have a condition of licence to spend $14 million in Alberta on Canadian priority programming. The fact that we're halfway there is a testament to the entrepreneurial skills of independent producers in Alberta and their interprovincial and in some cases international co-production partners. Only about half of our projects received funding from the licensing program of the Canadian Television Fund, and only one movie has received Telefilm equity.

Now, we have never expected that all of our programs would be supported. Indeed, we're proud to do distinctly Canadian programming without the incentive of the fund. The War Bride, which I mentioned earlier, is a $7 million Canada-U.K. co-production that was made without that support. Quite frankly, that's my beacon of hope, since on Monday I found out that all three of the movie projects we had sent into the fund have been turned down.

Last year the drama envelope was undersubscribed. This year it was oversubscribed. What was considered the maximum licence fee from a broadcaster has become the minimum, and it bears no relationship to the budget of a project or its cultural objectives.

On one of my projects the licence fee was high enough, but someone decided it wasn't Canadian enough. On another project with half the budget and therefore a lower licence fee total, the fact that it was to be the first feature from an aboriginal writer with an aboriginal protagonist gave it no extra points.

The Canadian Television Fund has indeed become an essential cornerstone. It has become one of the most successful programs in encouraging the production of high-quality Canadian programming. Just as it can be a tremendous asset to Canadian culture, it can be a vital asset to our building a production industry in our region. This will require that it become a stable, reliable, and long-term fund that can reward more than those with the deepest pockets, including those who use their parliamentary appropriation to leverage the fund.

I look forward to your questions.

Mr. Glenn O'Farrell: Thank you, Joanne.

Mr. Chair, we're going to try to speed along in this presentation so we don't get bogged down, but the subject of the funding of Canadian programming is complex and multi-layered. We're going to try to bring this to the nexus of it.

I'd like to ask Alain Gourd to walk you through some of the other factors in the paradigm.

[Translation]

Mr. Alain Gourd (Group Executive Vice-President, Corporate, Bell Globemedia Inc.) : Thanks a lot, Glenn.

First, I would like to focus on the economic aspects of broadcasting because these economic aspects have changed significantly.

The first change had to do with the source of revenue of the Canadian Television System. This revenue model, which was based on advertising at the time, has now been changed into a model based on subscriptions. At the moment, more than half of the overall revenue of the canadian broadcasting system comes from subscriptions, and advertising now accounts for only one third of the overall revenue. This situation is exacerbated further by fragmentation; that is more Canadian channels are fighting over a single source of consolidated advertising.

If the trend continues, if we do not allow conventional, general television to have access to subscription revenue, we will be jeopardizing the future of the entire economic model for general television in French and in English, which is one of the main expressions of our culture.

The economic situation is aggravated by a second change that everyone mentions, but which is correct: new technology such as the personal VCR, which enables people to eliminate the ads.

A third change, and one of the most fundamental, is the gradual collapse of the cross financing of English-language Canadian programs through the broadcasting of American programs. Loren mentioned West Wing, which we broadcast. If we compare West Wing, for example, to Cold Squad, which is one of our Canadian programs, both cost us about the same amount at the end of the day namely, between $200,00 and $250,000 Canadian. However, in terms of production value, a program such as Cold Squad gives us a production value of close to $1 million, while the total investment in a production of West Wing, which varies with each episode, may be from $3 million to $5 million. The result is that in terms of tempo, stars, the quality of the music, the number of exterior shots compared to interior shots, West Wind, has a significantly higher rating constantly over one million viewers while an excellent Canadian program will have fewer than one million viewers. Ultimately, the advertising revenue from West Wing will be higher, of course, than the advertising revenues from Cold Squad.

We could give you other examples, but to be concise, let us just say that this phenomenon changes our economic situation significantly. Consequently, the practice of simply renting American programs to subsidize Canadian programs that are not cost effective is not a solid, long-term strategy for the future, particularly given that the American networks often belong to Hollywood studios and, to an increasing extent, are able to reach Canadian television viewers directly. There is an ever-growing number of remote American stations. There is an ever-growing number of specialty American stations distributed by cable or direct-to-home television and, in our view, this trend cannot be halted.

As regards the Internet, there will gradually be a massive dissemination of videos. Will the technology be ready next year or in five years? We do not know, but we do know that it will happen. They will reformat the contents to make them more attractive for the Internet, as was done for music, for example. So it is coming, and the combination of distribution through the television system and through the Internet will mean that the Americans will start wondering why they would sell their hit shows to a Canadian network rather than distributing them directly through their remote stations, their specialty services and the Internet, because these individuals, such as AOL Time Warner, control everything. So, from this point of view, it is definitely not a long-term solution to be permanently dependent on American programs.

Should we throw in the towel? Of course there is no question of the system doing that. There are three components on which we should focus: creativity, which my colleagues have mentioned and I will not repeat their remarks; attitude, which I would like to cover at the end, and yes, funding, which, after all, is the sinews of war.

¿ (0935)

My second main point concerns the rate of funding. As we mentioned, the government's rate of funding has remained the same since 1998, whereas with the new Canadian services, the number of hours of Canadian programming produced is increasing exponentially.

Although we could get into a debate today about the need for more government funding in this area, I would simply like to put forward the following facts for you to think about. The main point is that for every dollar the federal government puts in the Canadian Television Fund, close to $5 are produced by private investment.

The Canadian Television Fund should be the star of government programs. It has no equal when it comes to raising money from the private sector. In addition, it creates some 16,000 direct and indirect knowledge-based jobs, many of which are held by young Canadians. So, the model must change.

Thus, given the disappearing advertising market and the reduction in the absolute rate of funding from government, we must review, as Glen and others have mentioned, the funding of Canadian programming production. In addition, the review could focus on an overall assessment of all sources of government funding—Téléfilm, the Canadian Television Fund, and tax credits—in order to develop an overall approach, an all-in-one hybrid.

We should also look at the commercial restrictions that have been in place for a long time, which prevent broadcasters from participating fully in the production and distribution of Canadian programming, in light of the fact that we have made a significant first step in this direction. The Department of Canadian Heritage has supported some changes to the guidelines of the Canadian Television Fund which would enable distribution undertakings affiliated with broadcasters to participate in the Canadian Television Fund project.

Another important dimension, since Loren mentioned the international component, is to review our international treaties with respect to co-productions to further promote co-productions, that is the export of our products, by having partners abroad. We must also review other investment incentives in the areas of development and promotion.

In conclusion, the availability of Canadian content in the future will depend on creativity, a funding strategy for Canadian programming that is geared to the market, and does not merely provide for subsidization of Canadian content by the government and by American programming.

This is where the question of attitude, the question of the philosophy of this system comes into play. It must be said: Canadian content must become a viable business capable of attracting investors. Mr. Stursberg, the Director of Téléfilm mentioned the importance of having Canadian champions as regards both viewers and commercial aspects. Frankly, I would like to support that myself.

If I may, given that our company, Bell Globemedia, operates both in English Canada and French Canada, I would like to conclude by saying that in the English-language television market, what we are seeking is a commercial success with programs close to the American level, but with a social-cultural impact of the type achieved in French-speaking Canada as Mr. Lapointe mentioned as well.

Thank you.

¿ (0940)

[English]

Mr. Glenn O'Farrell: I'd just like to close this section by saying our recommendation is simple. We are asking that the committee call on the Minister of Canadian Heritage and the Minister of Finance to strike a joint working group on the future of television program financing in Canada. We believe this is essential, and we call on you to make that recommendation so that we can find a long-term programming strategy for the financing of Canadian programming.

We suggest we find a way to commit to long-term, stable CTF funding at the current levels, and we suggest it would be appropriate for the Department of Finance to streamline and simplify the tax credit system so it can be harmonized with provincial tax credit schemes. We believe an examination of the emerging economic issue of declining advertising dollars to find a subscription revenue stream for conventional television would also be appropriate.

Finally, we believe the CRTC part II licence fees, representing approximately $90 million over and above the cost of recovery, should not continue to be a charge on broadcasters.

We believe the antiquated advertising restrictions, for example in the Food and Drugs Act, that prohibit direct-to-consumer advertising would allow $240 million to go to Canadian programming. And finally, we think that broadcasters should have access to all future broadcast-related activities that would generate revenues, such as interactivity in the digital world.

We would love to deal with any and all of your questions as well as we can, and we turn it over to you and thank you for your indulgence in this first section.

The Chair: Because of time, maybe we could confine this segment to just one question from each member.

¿ (0945)

Mr. Jim Abbott (Kootenay--Columbia, Canadian Alliance): Thank you for your thorough and thoughtful presentation.

I think before I, or I'm sure most people on this committee, would be prepared to make any such recommendation of talking to the heritage minister or the finance minister about the future of TV program financing, I really need a bit of enlightenment, from perhaps you, Mr. O'Farrell.

We've taken a look at charts that have clearly shown that in prime time viewing on the main channels, primarily CTV and Global, there is a complete vacuum of Canadian content between 7 p.m. and 11 p.m., Monday through Friday, and yet in your presentation this morning you said that you saw the private broadcasters being the primary platform for exposure of Canadian content.

I would like to understand how you could make the statement that you're the primary platform for Canadian content when there is a virtual vacuum of Canadian content in prime time during the week.

Mr. Glenn O'Farrell: Hopefully I can clear that up for you, Mr. Abbott.

I don't know which charts you're looking at, but clearly, I think, first and foremost, if you're referring to Global and CTV, both of those broadcasters recently were before the CRTC--post the commission developing its new television policy--and both broadcasters, including TVA in the French-language market, were given very stringent obligations in terms of prime-time exhibition of Canadian programming. The commission created a new category of programming that is called priority programming, and that involves the genres of drama, music and variety, entertainment, documentaries, and regionally produced programs.

So both CTV and Global are required to air eight hours per week of priority programming in prime time of those types of programs; otherwise, they're out of compliance. I can certify they are meeting those obligations on a week-by-week basis. I'm not sure what charts you're looking at.

In terms of the overall broadcast day, Mr. Abbott, I think what we have to look at is that Canadians don't watch television only in prime time. Canadians watch television all day long in varying degrees, and what we've found is that in terms of the English TV sector, the private sector commands a 61% audience share. The audience share in French TV is 76%.

In other words, Canadians are watching to the tune of 61% over the entire broadcast day on English-language private television, and 76% French-language private television. That includes the conventional networks. It includes the specialty networks. And we think this is a much more relevant universe to be looking at--all television choices.

Mr. Jim Abbott: At the risk of entering into a debate with you, I would suggest your advertising rates at 4 o'clock on Tuesday afternoon would be somewhat different from 9 o'clock on Tuesday night. So with the greatest respect, it doesn't really tell the story when you suggest we have to look outside of prime time. The hours between 7 p.m. and 11 p.m., Monday to Friday, are the prime viewing hours, and that is when we have a virtual vacuum of Canadian content. Yet the broadcasters say you're a primary platform. Those things don't match up.

Mr. Glenn O'Farrell: Let me try one more time, and then maybe I'll ask Mr. Alain Gourd to add a few comments.

Again, with due respect to the charts you have before you, the information we have is the information required by conditions of licence. They are very clear, and require eight hours per week, in prime time, of both those broadcasters, to air Canadian priority programming. I can certify for you that they are in compliance...not to suggest that they are probably exceeding that requirement from time to time.

On your comment about the advertising rates in prime time versus non-prime time, you're absolutely right. But it's not to dismiss the importance of non-prime time, in terms of viewing, or audience, or revenue, frankly.

Alain.

Mr. Alain Gourd: We are broadcasting eight hours of priority programming per week. It's a condition of licence that it has to be done, and it is done by us and Global.

On program positioning, I'm a generalist, so I guess I'm allowed to speculate on that. Program positioning is an art, because you are supposed to position your programs while having in mind not only your Canadian competitors but also what is on the U.S. networks, which are massively in Canada. You don't want to position your high-cost Canadian program against something like West Wing or ER, where it would have no chance.

So each network develops its own strategy. In our case, we have a tendency to position our Canadian programs in prime time during the weekend. There are some exceptions. During the week we'll show The Associates, for example.

As well, what you don't see on the regular schedule are programs like movies of the week, which draw big audiences. You position those maybe once a month or once every three weeks. For example, recently we showed Tagged: The Jonathan Wamback Story, which drew close to 1.5 million subscribers. It was during the week on violence against teenagers.

If you had taken a look at the schedule the week before, you would have seen a U.S. program, but last week for two hours we showed that movie for television. It drew a big audience and allowed us to meet our eight hours of priority programming commitment.

¿ (0950)

[Translation]

The Chair: Ms. Gagnon.

Ms. Christiane Gagnon (Québec, BQ): Earlier, Ms. Loren Mawhinney, you spoke about the Canadian Television Fund, and said that it should be more generous so that we could have more competitive, higher quality programs to compete with American productions. That leads me to think that if, for example, we try to imitate the Americans too much, we will lose our more distinctive program. After all, we are trying to achieve Canadian programming that is closer to Canadians, not Americans.

Last week, a journalist wrote an article about the new director of Téléfilm Canada, in which he seemed to say that we might even try to get Hollywood stars to do productions that look more like American productions. However, at the same time, I look at what is going on on the French-language side, and that is not the type of television we want, we want a different type of programming. That is what makes our French-language television programs, particularly those from Quebec, so popular.

If that is what you are after, do you not think that the Canadian Television Fund may look for more American-type scripts, and perhaps avoid productions that are more specific to us, bolder and speak to us more?

[English]

Ms. Loren Mawhinney: I wasn't speaking specifically of the tone or the subject matter. I was referring mainly to the budgeted amounts. In other words, you can still have absolutely Canadian stories reflecting our own justice system so that our police people look like our own cops and our lawyers look like our own legal system. The problem in English Canada is that people don't watch television in order to.... It's not that it's medicine that's good for them; they want to be entertained, and they want to be relaxed at the end of the day. And if they're used to seeing budgets that are richer than what Canadian programs generally are made for, they tend to go to that.

Just this week on Judging Amy, which is a terrific American show...and it's written by an ex-alumnus of Traders. All of our writers are as good as any writers in the U.S. It's the problem with the production values that's an issue in English Canada. Our show Blue Murder is about a police force set in Toronto. We had an episode where a SWAT team has to come in and break down the doors and find this bad guy. In our typical budget, a SWAT team consists of two guys. What SWAT team has two guys? In NYPD Blue you're going to have 13 guys beating down the door.

So that's what I'm talking about. Your suspension of disbelief is always wrested away, because it looks like the bar is a slow night, or there's nobody else in the office, if they're set in an office. Look at Cold Squad; it was set in the basement and in the first season there were no other cops around. They were talking to each other for the entire hour.

That's the problem. It's the production budgets.

¿ (0955)

Mr. Glenn O'Farrell: Madam Gagnon, perhaps I can add a comment for a moment just to give you a sense of the order of magnitude.

I think what we're saying is two things. Number one, we realize that we have to produce distinctive Canadian programming, because that will distinguish us in the broader context. So to the extent that we can find the resources and more resources, and a certainty of resources and funding, that's a good thing. We need to have that, which is why we're recommending that the CTF be renewed on a multi-year basis so that there's certainty and predictability.

But just as an order of magnitude, if you look at all revenue to media, all forms of media in Canada--television, books, sound recordings, radio, outdoor advertising--the total amount of revenues to all media in Canada for the year 2000 was just under $18 billion. AOL Time Warner has that revenue in one quarter. That's the kind of magnitude we're playing with here. That's the order of magnitude of the disparity, and it speaks to production budgets. So we have to recognize that our ability is one where we should be looking at quality over quantity and emphasizing this so that we attract audiences and make successes out of it.

I come back to the Men with Brooms example. Men with Brooms was a smart production. It was probably not all that expensive at the end of the day, by way of comparison to American film, but lots of partnerships made it into a larger success than it would have been otherwise. Those are the kind of strategies we want to look at for the future.

The Chair: Mr. Harvard.

Mr. John Harvard (Charleswood St. James--Assiniboia, Lib.): Thank you, Mr. Chairman.

Thank you for your presentations. I think it was Mr. O'Farrell who said that he wanted the service of private broadcasters to be complementary to the CBC's. I couldn't agree more. I happen to also believe in the dual broadcast system. I've worked in both, and I think we do have a good system from that point of view.

But I do worry, though, Mr. O'Farrell, and this is a question I have for you, that this complementarity that you refer to can suffer from, or cave in under the pressure, the competition for public funds, and you've already mentioned that you'd like to see an increase in public funds.

So we have CTF, we have Telefilm, we have the National Film Board, and we have the private broadcasters looking for funds and public support, as does the CBC look for funds. So my question would be twofold. You've already indicated that you want an increase. How much of an increase would you like to see from public sources? And two, perhaps even more important, would you be prepared to support protecting the share of those public funds for the CBC?

I ask that because I'm worried; there is a lot of you guys, and you're very influential. You're very powerful, especially around here in Ottawa. I'm just worried that you would gang up on the CBC. I can see, as you make your case for more and more public funds for Canadian programming, that this will put enormous pressure on the source of funds for the CBC. I can see a day where the CBC's share will just shrink and shrink.

Those are my two questions.

Mr. Glenn O'Farrell: Thank you very much, Mr. Harvard. I will do my best to answer both as best I can.

First of all, I think we have to recognize that the broadcasting system as we know it today is no longer a system where you have a public sector and a private sector that are equal or comparable. Government has encouraged--and rightfully so--private sector broadcasting to grow and grow in such a way that we have the numerous services that exist today. Last September, 48 new private digital specialty networks were launched. The CBC didn't launch any, and we don't think that's a bad thing. We think the CBC does a good job in its four television networks in English and French.

On the question of pressure on public funding, as the private sector grows and continues to offer more and more services and more choice to Canadian consumers, and is required by conditions of licence and by regulation to purchase and exhibit Canadian programming, yes, there will be additional pressures from the private sector to seek more and more funds.

On your question as to how much more we want, our recommendation is simple in that respect. We think current levels of CTF funding should be maintained on a multi-year basis for the time being. That's as a transitional measure. Meanwhile, what we have to do is find new, 21st century public policy measures to continue to sustain the development of Canadian programming.

Ultimately we want Canadian programming to become a profit centre and therefore be weaned off public funding. We don't think that's something that will happen overnight and we don't think that's something that will happen without your partnership. We think there has to be a very strong partnership between the public policy-makers and broadcasters to make that happen. We think there's enough ingenuity in this country to make it happen over time, if we put our heads to it.

That said, the CBC will continue to have access to parliamentary appropriation and to other public funds as well.

À (1000)

Mr. John Harvard: Would you be prepared to support the CBC in protecting its rightful share, whatever that rightful share might be?

Mr. Glenn O'Farrell: We think the CBC is doing a good job, Mr. Harvard. For instance, we think Canada: A People's History was a fabulous Canadian program. Frankly, it was a program that the public sector would do but the private sector in all likelihood would not do, certainly not in that manner. We think that was proper use of public funding.

Mr. John Harvard: May I just pick up on what Mr. Abbott started with? I don't want to get into any kind of an argument over statistics or figures. I'll be brief.

Mr. O'Farrell, CAB has made a statement before the committee that says it is the Canadian private broadcasting industry that is the predominant source of Canadian programming in the broadcast system. And yet when I look at the figures, they indicate that when it comes to prime time...and to me, that's what important.

You talk about a 24-hour schedule. Well, I think what is important is the prime time viewing share, because that's when most people are available to see programming. And according to the statistics on private broadcasting, only 13% of programming is Canadian, and on the CBC between 7 p.m. and 11 p.m., it's 95%.

Perhaps it's apples and oranges, but to me what's important is, where is the Canadian programming showing up? To me, it's in prime time on the CBC and not on private broadcasters.

Mr. Glenn O'Farrell: As a matter of regulation, Canadian private broadcasters are required to air 50% Canadian content between 6 p.m. and midnight. The chart you have has to be erroneous, because that is a condition of the licences that private broadcasters hold. That's every week; that's not one week a month.

Mr. John Harvard: I'm talking about 7 to 11.

Mr. Glenn O'Farrell: Well, that's 50% within prime time.

Mr. John Harvard: Between 6 and 7 it's generally news.

Mr. Glenn O'Farrell: Correct. As we stated earlier and as Mr. Gourd pointed out, in prime time, 7 to 11, there is a requirement to air Canadian priority programming to the tune of eight hours a week. Both CTV and Global have that. That specifically excludes news.

We'd love to provide this committee with proper charts that reflect the actual programming that airs on private broadcasters as a sample, because that's erroneous, unfortunately.

The Chair: I suggest the researchers could certainly delve into this and get the proper statistics, with your help and the help of others.

Mr. Mills.

Mr. Dennis Mills (Toronto--Danforth, Lib.): Thank you very much, Mr. Chairman.

Witnesses, I celebrate this tremendous emphasis you all have on ingenuity this morning. This is something I think we as a community and as a country , have to rebuild in this country, more and more creativity and ingenuity in our thought process.

On the $14 million-a-year technology transfer tax, I personally am going to campaign vigorously that it gets straightened out. I think it's an awful, discriminatory situation, especially for smaller radio operators in this country.

The second thing is the $90 million overage, the excess money at CRTC. I think it's something else we have to look at.

I want to go to Mr. Gourd. He put an emphasis on the need for the model to change, and I agree.

As an organization, have you ever done modelling? In other words, using the CAB collective ingenuity, could you create a model that would say “Here is what it should be and here are the numbers”? Have you ever done any economic modelling?

In your remarks, you referred to the number of jobs that would be created if we developed a Canadian content partnership. Rather than wait for a joint task force between the departments of heritage and finance, I think it would be very useful if you could use your resources to develop an economic model, on the theme you discussed in your presentation, that could be presented to us. When we develop the recommendations that we ultimately will table in Parliament, it could be an appendix to our report as one example of an economic model with the numbers and ramifications.

À (1005)

Mr. Alain Gourd: I will turn to Glenn, because I believe it is something the industry association should do.

Personally, I think it's quite a good idea. We're saying the Canadian Television Fund should be secured at its current level. We need more money to have winners in terms of Canadian programs. During the week, we could pit them against ER and West Wing because they would have the draw.

How do we get the money? We could get it from the excess broadcast fees, pharmaceutical advertising, and other sources. I see it as a valid suggestion for the continuing proceedings of this committee.

Having expressed a personal opinion, I now should turn to the president of the CAB.

Mr. Glenn O'Farrell: Thank you, Alain.

I agree; we weren't trying to pass the buck by saying we call on this committee to recommend that the Minister of Finance and the Minister of Canadian Heritage lead a task force absent of us. We very much would want to participate in it.

If it were more useful from your point of view that we lead the charge to present our recommendations in the form of a model outlining various new financing alternatives that involve public policy measures, we would be happy to do so. Because it clearly comes down to ultimately a matter of fiscal measures and Canadian heritage policy, we felt it would be helpful to do it in a framework that had the ministers involved. If there's a better way of doing it, Mr. Mills, we certainly would be prepared to look at it and very much engage in it.

The Chair: Ms. Lill.

Ms. Wendy Lill (Dartmouth, NDP): Thank you.

I hear loud and clear from all of the presenters that you would like to see the Canadian Television Fund maintained at its present level. You also feel there's a need for an increase in money to increase your production budget.

I've noted you're recommending the government rebate to the CAB's members $71 million in licence fees. I think, Glenn O'Farrell, you mentioned it's even higher. I think you mentioned something like $90 million. You'd like to use it to increase spending in Canadian programming.

Would you support a recommendation that the government allocate the money, the $71 million, to the CTF or Telefilm, so those who want to do more Canadian programming could apply for it? Would you recommend it?

Mr. Glenn O'Farrell: Thank you, Ms. Lill.

If I may, I'd like to look a both of the items we have before you, because I think it will bring clarity if we look at the two--the notion of pharmaceutical drug advertising revenue and the part II fees--together. I think it makes more sense. Those are two ways we believe we can improve our performance in Canadian programming.

On the $240 million that we estimate would flow to television through pharmaceutical drug advertising, with a made-in-Canada solution, one that is sensitive to the various concerns.... Because, Ms. Lill, many broadcasters have a condition of licence that requires them to spend as a function of their revenue, any new revenue that they would garner from the sale of advertising to pharmaceutical advertisers would convert into expenditure requirements. Many of the broadcasters across the system have a requirement to spend, say, 35% of their revenue. So any increase of their revenue is only going to increase their spending as a matter of condition of licence. That's number one.

Two, on the licence fee issue, that is not a revenue item but an expenditure item. Obviously that would fall directly to the bottom line of every broadcaster who would no longer have that expenditure to incur. That would free up those resources.

Certain broadcasters may choose to put that into local programming. Others may choose to put it into regional programming. Others may choose to put it into priority programming.

The problem is with the fund is that it has limitations on the use of the funds for program types; and secondly, in fact it's producers who access the CTF, and not broadcasters.

À (1010)

Ms. Wendy Lill: I just want clarity on this, though. We'll say there's $71 million that CAB wants back; your members are saying you would like that money back into your pockets instead of the regulator's pocket. Keeping in mind your commitment to Canadian content and quality production, what I'm asking is this: Would you recommend that the money be rolled into the CTF, to increase that body of money for Canadian content?

Mr. Glenn O'Farrell: No, we would prefer that broadcasters be allowed to elect on their own terms where that programming money should be spent and not have it turned over to the third-person body of the CTF.

Just as a point of clarification, the total amount of part II fees includes the fees paid by cable companies, because cable companies also pay that excess amount. The net amount that would end up in program undertakings' pockets would be approximately $35 million, because the rest would go to cable.

The Chair: Mr. McNally.

Mr. Grant McNally (Dewdney--Alouette, PC/DR): Thanks, Mr. Chair.

I have two questions for you.

You mentioned weaning off public funds. How do you square that with the call for long-term stable funding, with an eventual weaning off of public funds? I understand where you're at now and where you want to get to. Could you outline that for us?

Secondly, maybe stepping back a little bit from the specific recommendations, do you think it would be wise to maybe consider heritage and industry coming together, if that might be a way organizationally, from our perspective, to handle some of these bureaucratic quagmires that happen with regulations in one department and another, and the funding difficulties that were mentioned by others?

Those would be my two questions for you.

Mr. Glenn O'Farrell: I think I'm going to ask Mr. Gourd to answer the second question, because he's much more qualified than I am, in light of his past experiences in government.

But on the first question, what we are suggesting is that, for the Canadian broadcasting system to continue to be successful with a long-term view, we ultimately have to make Canadian programming commercially successful, therefore profitable, and not a cost centre.

Currently, Canadian news and sports makes money. Other categories generally do not. For the foreseeable future, we don't see that changing unless we change our attitude and unless we change things.

So our first recommendation is that we set up permanent transitional mechanisms but that we start working on the longer-term plan, which ultimately is to make Canadian programming a success commercially across all platforms.

Alain, would you have any thoughts on the second part of the question?

Mr. Alain Gourd: I was one of the last deputy ministers of the Department of Communication, therefore it's dangerous to say that the past is always better than the present and even the future. I wouldn't wish to address structures directly, and I wouldn't wish to address whether or not parks should be with high tech. But if I focus on cultural industries, I have to know that what the Competition Bureau, as Glenn mentioned, is trying to do in broadcasting certainly has an impact on the role of the CRTC.

Another example is intellectual property and copyright, within the Department of Industry, which certainly have an impact on the ongoing activities of the broadcast system.

So whether it's this structure or that structure, in terms of substance, I think it's absolutely imperative that there be absolute coordination and clarification relative to the role of these entities, which are, as we speak, in two separate departments.

The Chair: Okay, briefly, Ms. Bulte, just very briefly.

Ms. Sarmite Bulte (Parkdale--High Park, Lib.): Thank you very much.

Mr. Gourd, you spoke about the Jonathan Wamback story, which is a wonderful story produced by an independent Canadian producer at Tapestry Films. I think it's wonderful that private broadcasters are asking usually independent producers to broadcast their shows. Thank you to Bell for that.

Let me ask you about your model of financing. It was brought up by my colleague. Specialty channels seem to be doing well. Can you apply the way they're being financed to conventional broadcasting? Have you looked at conventional broadcasters getting some of the subscriptions? You talk about that having been a hindrance to the financing model. And what about foreign investment? What about foreign ownership of private broadcasters? You haven't brought that up at all. Do you see it as an option?

À (1015)

Mr. Alain Gourd: I'll give three quick answers rapidly; maybe my colleague would like to add.

Specialty services have, I believe, an advantage in terms of their internal financial structure, because they rely on both advertising, as we know, and subscription revenues. However, that said, that was the analog world. The digital world is something different, because the base, of course, is much smaller. I would say all of the private broadcasters who have launched new digital services are cross-subsidizing these services in a significant fashion as the digital base continues to grow, particularly with the digitization of cable. So my first comment is that what was true for analog specialty services is quite different for digital services.

The second comment is relative to broadcasters having access to subscription revenues. There are discussions as we speak between broadcasters and some distributors that might lead to some additional contribution from distributors. Maybe I could leave that on the back burner pending these discussions. But I feel distributors should indeed contribute to mitigate the impact of the distribution of foreign, distant stations on the Canadian conventional broadcaster.

In terms of the economic structure of conventional broadcasting, I feel that even though there might be a different contribution from distributors, advertising for the foreseeable future will continue to be by far the main source of revenues. Therefore, as the advertising coming from U.S. blockbusters has a tendency to go down, the obvious thing is to bring up the advertising revenues on the Canadian programs by having creativity, by having a winner's attitude, and by having better financing--as Glenn mentioned, better financing not by increasing again and again, necessarily, the Canadian Television Fund, but by trying to tap new sources of revenue that would be reinvested in content.

Ms. Sarmite Bulte: And foreign ownership?

Mr. Alain Gourd: I feel personally--and I believe this view is shared by our colleagues--that most of the members of the CAB, including our organization, would favour continued Canadian control and operation of Canadian programming services, whether speciality or conventional television. As well, in terms of Canadian programs, I feel the rule that says Canadian programs should be controlled by Canadians is a wise one.

Mr. Glenn O'Farrell: As an association, I can tell you that the views of the membership are well represented by what Alain has just told you. Our members have a variety of approaches to the topic of foreign ownership, as you know, and that's due largely to their corporate strategies, their structures' international development strategies and so on.

At this point in time there is consensus on majority Canadian control with views on foreign ownership levels ranging from the status quo to an unrestricted 49% of ownership tied to a reciprocal liberalization of similar rules in other countries.

What's interesting is that as a result of consolidation and vertical integration, there are ownership groups that include such media assets as newspapers and telecom distribution companies, and therefore there are various statutes that apply to those companies well beyond the Broadcasting Act. For instance, in the case of newspapers it's the Income Tax Act, section 19, I believe.

So a wholesome discussion would have to be in a forum, we think, that would allow all of those statutes to be properly addressed as a result of the way the companies have consolidated and the vertical integration that exists with our members today.

À (1020)

The Chair: Mr. O'Farrell, we are running behind time. If you want to carry on with the four other segments that are left.... I'm just saying this from your own point of view.

Mr. Glenn O'Farrell:Yes.

The Chair: Mr. Abbott wanted to ask another question about Canadian content, and this is where maybe it would fit in best. May I suggest--and I'm simply offering this to you--that you do each segment one after another, perhaps, leaving the rest of the time for overall questions.

Mr. Glenn O'Farrell: If that would be preferable from the committee's perspective, we certainly can accommodate that.

The Chair: Perhaps that's the best way to do it.

Mr. Glenn O'Farrell: We're happy to proceed that way if that's your wish.

The Chair: Is that okay with you?

Mr. Glenn O'Farrell: Yes.

With your permission, then, we will move right into the second section. We'll make our presentation and then we'll move into the third, fourth, and fifth sections, and then go to whatever questions the committee may have. We may have to draw on various members to help us.

The Chair: Before we continue, let's just suspend for two minutes.

À (1022)

À (1025)

The Chair: Order.

I understand, Mr. O'Farrell, that on second thought you would prefer to leave the segments separate. That is quite okay with us.

Mr. Glenn O'Farrell: On balance, yes. We've consulted our members, and we would prefer to do that. But we will move very quickly.

The Chair: That's fine so long as on each side, if we want to get through these segments and hear what you have to say, we are disciplined. If I feel the answers or the questions are too long, you'll appreciate it, because we won't get through it otherwise.

Mr. Glenn O'Farrell: We'll appreciate it.

The Chair: All right. Go ahead, Mr. Farrell.

Mr. Glenn O'Farrell: Mr. Chair, I'd like to begin by introducing the members of our panel: Kathleen McNair of Corus; Paul Robertson, our chair, who you've met; Erica Redler of the CAB; and Peter Miller of CHUM.

While we understand that the complex issue of copyright was beyond the committee's original scope, it is arguably the other half of the equation and an increasingly important part of our success. We'd like to spend a little time on this topic.

Broadcasting is about the creation and use of copyright material. Pictures, scripts, and music are all the raw materials used by broadcasters to produce their programming for Canadians. The government must recognize the public policy implications of copyright policy and the link between copyright and other facets of broadcasting policy.

The reality is this: Canadian broadcasters compete in the North American economy; 80% of Canadians live within range of a U.S. broadcast signal; and Canadian broadcasters must compete with U.S. signals for audience. Effective competition requires that Canadian broadcasters not be disproportionately burdened by copyright obligations.

Kathleen.

Mrs. Kathleen McNair (Vice-President, Business and Regulatory Affairs, Corus Entertainment Inc.): The copyright burden on Canadian broadcasters is significantly heavier than that on our U.S. counterparts. Let me start with an interesting comparison. Based on the proposed reproduction tariff filed with the Copyright Board, which will be heard this spring, this is a snapshot of what we face in private radio. Take two radio stations, each with annual revenues of $10 million, one based in Seattle and the other in Victoria. Annual copyright expenses in Seattle: $280,000. In Victoria the minimum is $480,000, and if the Copyright Board allows the proposed reproduction tariff in full, our Victoria station could see an increase to almost $600,000 annually, almost three times that of its U.S. counterpart.

How did we get to this point? Simple; we have more tariffs and our tariffs are higher. Canadian radio stations have to make three separate rights payments for their analog operations, whereas U.S. stations pay only one. Performing rates for U.S. radio stations are set at 2.8% of revenues, while for Canadian radio stations the combined costs of rights for radio could be in the neighbourhood of 6%. For television the performing right rate in the U.S. is approximately 0.86%. In Canada it's 1.8%, with the collective SOCAN seeking to raise it to 2.1%.

And here's the great irony: Bruce Springsteen makes more money when his song is played in Canada than if his song is played on a U.S. radio station. At the end of the day Canadian broadcasters bear a significantly higher copyright burden than their U.S. counterparts, with whom we compete for audience.

Peter.

À (1030)

Mr. Peter Miller (Vice-President, Planning and Regulatory Affairs, CHUM Television): Thanks, Kathleen.

Mr. Chair and members of the committee, it's a pleasure to see you again and to talk about this thoroughly exciting topic of copyright. I say that partly in jest. But as Glenn says, while this is an arcane area of what we deal with, it's a very important one.

The number of rights broadcasters must pay for in copyright is unfortunately increasing. Moreover, each right has its own separate regulatory and administrative regime. Let's go back to the example of the two radio stations Kathleen mentioned. Our friend in Seattle has one set of logs. Those are the things he maintains to show what is broadcast on his radio station. And he's got only one cheque to cut and to hand over to the U.S. society representing artists--the collective society that represents artists.

Our friend in Victoria, however, has three sets of records to keep and three different societies to hand over money to. In addition, he has three sets of hearings in Ottawa dealing with litigation costs and each of those different tariffs. It's hard enough for a larger operation such as CHUM to manage, but imagine what it means for a smaller radio broadcaster.

How did we get to this point?

Until 1998, conventional analog radio stations paid a single rate, the so-called public performance rate. That's the fee that's paid to SOCAN. But in 1998 a new tariff for neighbouring rights was introduced and it added a copyright burden of about $6 million annually to radio. For the year 2000 and thereafter, new tariffs--here's the third right--have been filed for something called reproduction, what you, Mr. Mills, mentioned earlier as the “transfer format tax”. That, as you indicated, would be new payments of $16 million.

Let me just try to explain how silly this is, and what this reproduction right or the transfer format tax is. And let me talk about the radio context and the TV context.

In radio what it means, as Mr. O'Farrell referred to at the beginning of our presentation today, is that while record companies freely give us CDs to encourage us to play those CDs and their artists, they now want us to pay if we're taking the CDs and loading them on our hard drives, which is what we now use to run our stations efficiently. We're not doing anything other than taking it--and remember, we're taking something they give us for free--and putting it into a computer.

For the television example, I'll give you the example of music videos. We at CHUM, and operators such as Corus who run music video channels, get and pay for the music videos. We pay an organization called AVLA a fairly high amount of money--on the order of 5% to 10% of our revenues--for the privilege of running those music videos. But now we've got people saying to us, “You can use those music videos, but the moment you reproduce them, put them on your hard drive....” They even say the very act of broadcasting itself is a new reproduction, a new right we have to pay more money for.

This is what we're talking about--and I like the term “transfer format tax”--when we say this is unreasonable and needs to be stopped. When you take into consideration all these tariffs and all these proceedings, private radio in 2002 could pay in the order of $56 million annually. That's more than double our U.S. counterparts and in fact compares almost identically to the full after-tax profit of private radio in Canada, which at the height of the boom of radio was only $62 million.

Even more significant may be this issue of the streaming of broadcast signals, which we've talked about, and yet further rights for other forms of Internet programming.

À (1035)

We strongly believe the government needs to intervene. We are well past the stage where we are simply providing fair support to artists for the use of their work. Some limits surely must be put on this endless proliferation of new rights. A more holistic and integrated approach should be pursued to replace the current fragmented one. This is not only an issue of the total rights cost but also one of the administrative and transaction costs associated with all these separate tariffs.

The litigious rights system we have, where creators and users fight major tariff battles, destroys the relationship between industries that have to work together. Broadcasters have worked hard with the music industry to establish funds, such as the Radio Starmaker Fund, only to find that the music industry is still pursing us for significant new copyright royalties.

With all due respect to my fellow lawyers in this room, we have in a sense created a system that has become so litigious that it benefits lawyers more than artists or broadcasters. What's worse, we have a situation where in a sense the right hand doesn't know what the left hand is doing. Copyright Board Canada, which sets copyright tariffs, operates on the basis of national treatment. It must treat Canadians and foreigners the same way. It makes these decisions on copyright tariffs to the tune of tens of millions of dollars a year.

Then on the other hand we have the CRTC, who, I would submit, has the very mandate to promote Canadian culture, Canadian programming, and Canadian artists. It does so much more effectively than a copyright board ever could, also establishing CanCon requirements, benefits, expenditures, and so on. So you have tens of millions of dollars on that side as well, yet there's no attempt to reconcile the two. At a certain point you're biting the hand that feeds you. When it becomes economically unfeasible for broadcasters to play music, which has become the case at many AM stations, we move to talk formats. We're actually providing less room for Canadian artists as a result.

I've talked a lot about radio, but the same kinds of concerns apply to television. My recommendation to you is that government start to figure out a way to recognize the total contribution broadcasters make to creators, both monetary and otherwise, in Canadian content, in support, and in promotion. This goes far beyond the royalties paid for licences to copyright owners and must be more fully recognized.

Kathleen.

Mrs. Kathleen McNair: Thank you, Peter.

Some aspects of copyright law threaten the ongoing success of the Canadian broadcasting industry. In December 1999 an Internet-based company in Toronto, iCraveTV, launched a service that retransmitted off-air television signals on the Internet. This was done without the consent of either the broadcasters, who own the signals, or the producers, who own the programming. The CAB formed and led a coalition of broadcasters and producers to urge that the Copyright Act be amended to prohibit any unauthorized retransmission of our television signals. Very simply, if Internet companies package TV signals with banner advertising and make them freely available over the Internet as iCraveTV did, the value of the programming and advertising time offered by broadcasters is diminished. This jeopardizes the basic value chain of the Canadian broadcasting system.

In the grand scheme of things, why is this such a pressing issue? Because it's a case of trying to fight wrongful use of Internet technology with antiquated legislation. This is like trying to fight the Hydra from Greek mythology. You may be able to beat back iCraveTV, then JumpTV, and the newest version, iCraveTV.biz, but without clarity the next wannabe service is just around the corner.

We could spend a lot of time on this issue, but the facts are simple: it was never Parliament's intent for section 31 of the Copyright Act to allow for Internet retransmission. The rest of the developed world, the U.S., the EU, Australia, New Zealand, etc., have dealt with this issue explicitly in legislation or through regulation. Canada is facing international scrutiny as a piracy haven, risking the entire value chain of Canadian over-the-air broadcasting. Last December, recognizing the seriousness of the problem, the Minister of Canadian Heritage introduced Bill C-48. We hope it will provide a framework for solving the Internet retransmission problem, but we will have to look at the government's proposed supporting regulations to see if the regulations have the necessary teeth.

While we expect you will be called upon to review Bill C-48 in the coming weeks and the CAB will make a more substantive appearance on that specific issue, we urge members of the committee to ensure that the review is not done in isolation from the draft regulations. Otherwise, the exercise, while well intentioned, may not bring us any closer to solving this pressing issue.

Thank you.

À (1040)

Mr. Glenn O'Farrell: Thank you, Kathleen.

In summary, Mr. Chair, we have four recommendations in the area of copyright. First, we urge this committee to call on the Minister of Canadian Heritage to use the legislative review provisions in section 92 of the Copyright Act to call for a review of the overall copyright burden, considering the rate disparities with the U.S.; secondly, recognize reasonable exceptions to copyright licensing, including revisiting Parliament's intent for the “reproduction right”; third, defend appropriate exemptions for small market broadcasters against neighbouring rights in the upcoming Copyright Act review; and lastly, recognize that new rights cannot create new burdens, and tariffs need to be rationalized and consolidated.

Thank you very much.

The Chair: Could the members agree to have one question each, if we want to hear the other presentations?

Mr. Abbott.

Mr. Jim Abbott: I'd like to state for the record, again, that the Canadian Alliance is in favour of repealing the provision of the “reproduction tax”, as I call it, because it was never intended. I was involved with Bill C-32. It was never intended to be a tax. It's found money for the creators.

My question, though, goes to Bill C-48. Let's take a look at technology, because certainly the CAB members are not Luddites relative to technology. We're talking about a medium being able to transmit the signal. Cable and satellilte take off-air signals. They're involved in all sorts of regulations, including compulsory licence fees and so on and so forth.

Let's presume that Bill C-48 would see that anyone who is going to be rebroadcasting off-air signals was involved in the same regulatory regime, no matter what the technology. We can't imagine what the new technologies will be in the future. They would be involved in compulsory licence fees. The Internet, in particular, would be involved in containing the signal within Canada. We might talk about the time shift, but we're already up against the DTH time shift in any event. There's an absolute parallel there.

If we had regulations that would speak to access by broadband, certainly today's technology modem capability would not permit a dial-up user to get anywhere near the kind of quality they want to get.

Is it what the CAB is after? It seems to me, if we're putting Internet, satellite, cable, and whatever else comes in the future into the same regulatory box, we would have solved the problem. Have we solved it?

À (1045)

Mr. Glenn O'Farrell: Very quickly, Mr. Abbott, we would respond that any form of distribution that amounts to technology-enabled theft is wrong. Property rights have to be protected. The problem with iCrave, JumpTV, or any other iteration is the ubiquitous nature of distribution and non-regulatory nature of the activity.

Mr. Jim Abbott: Why isn't it regulatory? I don't understand the point.

I've stipulated that, in this instance, the Internet company would be involved with the same regulations relative to the compulsory licence fee. They would be performing fundamentally the same service of taking off-air signals, as the current rebroadcasters do. They would be constrained to broadcasting the signal in Canada, as the satellite companies are.

If they were complying with exactly the same rules of the current rebroadcasters of your signals, what is the problem?

Mr. Glenn O'Farrell: Others may want to comment on this. Frankly, from what we understand of the activity proposed, it would not fall into the regulated box you've described.

Peter, do you want to say something?

Mr. Peter Miller: Thanks, Mr. Abbott.

Yes, I think it's the issue. What we have seen with iCrave and its predecessors is that they want the privilege of taking our signals and paying a very nominal fee, without the concurrent obligations that cable, satellite, and others have. So if, to add to your list, they would follow priority carriage and simultaneous substitution requirements, and would contribute to the CTF, and if they would have exactly the same burden as other distributors at the end of the day, then we would be okay with it. But that's not what we've seen. In a sense, they want to take the little loophole and get all the benefits out of it without contributing back in the way other distributors do.

If they did contribute back--and again, to be clear, it has to be the full contribution that the commission, the CRTC, requires of distributors--then I believe we would be comfortable with it.

Mr. Jim Abbott: Thank you.

[Translation]

The Chair: Ms. Gagnon.

Ms. Christiane Gagnon: You referred to some figures—the fees you have to pay for certain rights—which have increased over the years.

You said that the CRTC sets certain limits, but you did not speak about them. I would like to know a little more about this so as to better understand the copyright situation.

Mr. Glenn O'Farrell: To put it in a nutshell, Ms. Gagnon, we are referring to the fact that the CRTC imposes obligations on established broadcasters, and that decisions pertaining to them are made without taking into account additional copyright costs. That is what we mean when we say the right hand does not know what the left hand is doing, and vice-versa. These collective obligations are beginning to crush us—on one hand, we have the costs imposed by the CRTC, and on the other hand, the costs imposed as a result of the additional tariffs implemented in 1998.

Mr. Peter Miller: If I might add something, ... [Editor's Note: Inaudible]. I myself have taken part in many hearings before the Copyright Board, and they are clearly unaware of what is going on at the CRTC. So the fact that we get all these contributions for Canadian artists and programming, is of no use to the Copyright Board. That's the problem.

Ms. Christiane Gagnon: You have made some recommendations. For example, you have recommended a study of the copyright differences with the US. It seems that there is less pressure on broadcasters. Have you looked at that? Do you have any studies to show us? If you are asking us to look out for these differences, do you have any earlier studies to show us?

Mr. Glenn O'Farrell: We are not recommending a system like the US system. We recognize that Canada is a different and distinct country, with its own values and culture. However, in a context where public policy is based on productivity and competition, on the efficiency of companies and operations, I do think there is some merit in looking at what the US is doing. When we realize that copyright costs here are three times higher than in the US, as in the Victoria/Seattle example we gave you, we do have to ask if this is really the direction we want to go in. But we do not recommend that Canada's system simply be a clone of the US system.

À (1050)

[English]

The Chair: Ms. Bulte.

Ms. Sarmite Bulte: Thank you, Mr. Chair.

My question is on copyright, with respect to the technology transfer copyright tax, and Mr. Miller was speaking about the enormous costs to the smaller radio stations.

In one of your recommendations you talk about defending appropriate exemptions to small-market broadcasters. Can you give specific examples of what type of exemptions you have in mind, and have you discussed your concerns with the holders of copyright? Have you talked to the creators? What discussions have you had with the creator groups, not just SOCAN but the other collectives? What is the status of those discussions, if any?

Mr. Peter Miller: I have two comments. First, in terms of exemptions for small-market radio, the most important exemptions are the ones already built into the naming rights regime. Again, others may recall those better than I, but they are very significant exemptions for smaller-market stations. For all broadcasters, however, the issue of the reproduction tax or transfer of medium tax has to be addressed. We think it's fundamental.

In terms of discussions, I'll pass to Erica. We do have discussions, but you have to understand...and I think it was Mr. Abbott who used the term “found money”. It's very hard for them to resist the notion of found money. If they can get it, obviously they're going to get it.

Ms. Erica Redler (General Counsel and Senior Vice-President, Policy and Legal Affairs, Canadian Association of Broadcasters): The small markets discount that appeared for the first time in the neighbouring rights tariff is very important to the industry. There is no formalization of a similar discount in respect of other types of copyright payments, such as the payments to SOCAN or to the new collectives, CMRA and SODRAC. We think that kind of discounting is very important to the industry, and we would like to see it incorporated into other types of payments. That's the point we were making there.

Ms. Sarmite Bulte: But have you spoken to CMRA? Have you spoken to SOCAN?

Ms. Erica Redler: We are in the process of conducting a hearing before the Copyright Board starting next month. We are asking for a similar type of consideration in reference to the reproduction right. However, because it's not built into the legislation, it's not guaranteed that we will get it in the same way we did for neighbouring rights. In that case, the legislation directed the Copyright Board to take that into consideration and to provide a small-market discount. That is not in the legislation for other rights, so we are at the mercy of negotiating or at the mercy of the Copyright Board in fact doing that for us.

Ms. Sarmite Bulte: Thank you.

Ms. Wendy Lill: I'd like to ask you about your problems with the neighbouring rights copyright situation. I find it interesting that producers everywhere, whether they're publishers or theatres--I'm also hearing this now from you--are always locked in negotiations about royalties, about what chunk of the money is going to go to the creator. It's irritating to me that I hear the name Bruce Springsteen thrown up. I think it's a red herring. We're suddenly locked into thinking, “Oh my gosh, they're making so much money, and the poor little radio stations are in fact subsidizing Bruce Springsteen.”

I'd like to know what your basis is for saying this neighbouring rights percentage is too high, other than the fact that you think it's too high. Obviously it was agreed upon based on an enormous amount of consultation between artist groups, copyright collectives, civil servants, and radio stations. There has been a lot of consultation on this. What is it that now makes you think it's simply too much?

Mr. Glenn O'Farrell: I'd maybe just offer one comment and then I'll throw it to Erica or Kathleen if they want to comment.

We certainly didn't want to irritate you by raising the Bruce Springsteen example, but it does illustrate that a foreign, non-Canadian artist finds more royalties in play in Canada than in their home country. That's just the point we wish to make, without dwelling on it. It's a fact that I think needs to be mentioned in the context of this discussion.

Kathleen or Erica.

À (1055)

Mrs. Kathleen McNair: With respect to the level of royalties, one of the issues for us is when the collectives file their royalties. They have the right to do it for one year, two years, three years, so we're constantly going back before the board and discussing the appropriate level of the tariffs. I think we have a full consultation before the board on that, but one of the difficulties facing radio broadcasters right now is the new rights that keep appearing. The reproduction right is a good example of that.

Last week we found out that with private copying, storage on hard drives is going to attract $21 a gigabyte, I think, which will affect private radio broadcasters again. With the additional tariffs constantly being filed, they're trying to make the pie a lot bigger.

Ms. Wendy Lill: So you have no problem with neighbouring rights and copyrights to Canadian creators that you are paying now. You're not having any problem with that. You have some problem with the fact that you're paying too much to American musicians and you have a lot of problems with the reproductive right thing. Is it fair to say that?

Mrs. Kathleen McNair: Well, it's always a debate about what is the appropriate level of the tariff. The radio industry recognizes that we pay SOCAN for the performing right and there's a neighbouring right that's been enacted.

Mr. Glenn O'Farrell: I'm sure Erica will want to add to this. What we're suggesting is that we have to rationalize and we have to balance our approach. We can't incrementally keep adding rights without keeping an eye on the bigger picture, which is the value of the work. To use the analogy of the pie, the pie doesn't get bigger just because you want to slice it more often. At some point in time the value will have to be reassessed in the context of where we're at rather than incrementally.

Ms. Erica Redler: Just to go back to your question about the level of royalties that we pay to Canadian artists, from a copyright perspective one cannot separate it. These collectives represent whatever group--performers, composers, authors--from all around the world. The reality is that if we in Canada are trying to provide money to our talent, our own Canadian talent, copyright is not a particularly efficient tool, because a greater portion of the money does in fact flow outside of Canada to artists in the United States and Europe. I don't have figures at hand, and it varies for different rights, but for example, on the performing rights, more money goes out of Canada than stays in Canada. So this is a very important factor in terms of considering whether copyright is in fact a good way to support our domestic artistic industries.

Ms. Wendy Lill: Because you--

The Chair: Ms. Lill, you'll get a chance later. Sorry.

Mr. McNally.

Mr. Grant McNally: Thank you, Mr. Chair.

I want to follow up on this new levy; I'm calling it the “stealth tax”, because that's exactly what it is. You're telling us about the impact of levies and tariffs and how that hurts you, and I personally agree with what you're saying.

That's going beyond the realm of just affecting industry. It's now affecting consumers. With this new tariff on blank tapes and CDs, DVDs, memory sticks, the gigabytes in the MP3 hard drives, again that's going to impact you as well. To me, it just seems ludicrous that we're going down this road of increased tariffs.

I understand the concept, to get dollars to those who hold the copyright, but this is a little bit like hitting the toothpaste out of the tube with a sledgehammer. It's going to affect a whole pile of people who don't use these products for pirating.

A few do, and unfortunately all citizens, all consumers of those products in the country, are going to have to pay the price for the few who abuse it--not too unlike Mr. Miller's argument with the rebroadcasters over the Internet, because they don't have to play by the rules. You have to play by the rules. As consumers, there are some who aren't playing by the rules, and those who are playing by the rules have to subsidize those who are not.

This is more of a comment than an actual question. It seems that you're being quite nice in this regard, but I think you should be lowering the boom, saying, look, we need a new paradigm here, because this one is not working. Let's get beyond what isn't working and get to one that actually solves the problem we're looking to address--to continue to support those who produce these products in our industry. And if it's broken, let's fix it and get on with it.

Á (1100)

Mr. Glenn O'Farrell: Could I comment, not in response as much as in addition?

Mr. Grant McNally: Sure.

Mr. Glenn O'Farrell: I think what we've asked for in our recommendation, to use your language, is not quite “lowering the boom”, but we think there is a serious issue here. We would very much like this committee to call on the Minister of Canadian Heritage to use the legislative power under section 92 to have a review that would look at--I won't go through all the recommendations again--all of those issues. We think it's high time that we bring balance and harmony to a situation that has evolved into one that we don't think was initially intended. As Mr. Abbott was saying earlier, certainly in Bill C-32 that was not the intent for reproduction and this transfer issue.

So we're hoping that you will take these recommendations to heart and include them in your report.

Mr. Grant McNally: No, there's an opening here; no question's being asked.

The Chair: Sorry....

Mr. Grant McNally: All right. Just checking, Mr. Chair.

Voices: Oh, oh!

The Chair: You ended on a good note, Mr. McNally. You told the CAB they were very nice, so I'm sure we'll want to close this segment on that happy note.

We'll move on to the third initiative.

Mr. Glenn O'Farrell: Thank you, Mr. Chair. Being new to the job, I'll take any compliment from whichever source it comes.

The Chair: Excuse me, Mr. O'Farrell. Ms. Hinton wants to make a brief comment. As she's a very nice person, I will allow her the chance.

Ms. Betty Hinton (Kamloops, Thompson and Highland Valleys, Canadian Alliance): He's a very nice chairman.

This is always interesting to me. Some of the subjects you raised today I'd like to speak to you about privately later--I realize there's a shortage of time here--but I do want to comment on a remark made by Mr. Miller.

I happen to agree with you completely in this circumstance. Sometimes there are laws or decisions made that do benefit the legal community more than those they are supposed to be trying to help. Today's comments were very enlightening for me. I don't envy you the position you have, trying to make something work with these kinds of rules and regulations.

Mr. Glenn O'Farrell: Thank you. Peter is a member of the bar, so he does it at some peril.

Voices: Oh, oh!

The Chair: We'll now move on to digital transition, Mr. O'Farrell.

Mr. Glenn O'Farrell: Thank you, Mr. Chair. We'll get right into this third initiative, creating business opportunities for Canadian programming in a digital environment.

Let me first introduce the two panellists who have joined us here. You will recall Ken Goldstein, who I believe you met with when CanWest Global met with the committee in Winnipeg. And you already heard about digital radio from the DRRI presentation, so we invited Richard Cavanaugh, our vice-president of radio at the CAB, to join this panel as well.

Ken.

Mr. Kenneth Goldstein (Executive Vice-President and Chief Strategy Officer, CanWest Global Communications Corp.): The digital transition is much more than a spectrum-swapping exercise. We tend to focus on the technology and its costs. Of course, both of those issues are important, but we should not lose sight of the broader issue.

At a time of massive technology change, the potential exists for all of the value chain relationships within the industry to change also. So we also have to concern ourselves with how the changing technology will affect our ability as an industry to continue to support the kinds of programs we want to see broadcast.

Mr. Richard Cavanaugh (Vice-President, Radio, Canadian Association of Broadcasters): There are daunting challenges ahead in moving both radio and television through the digital transition. Making and paying for this transition is a highly risky business, since it will require massive investments with no proven model.

As the committee members are aware, digital radio is a reality in Canada, having been launched in a number of markets and reaching now some 10 million Canadians after a decade of research and development, but we need to go further.

On the radio side it's estimated that it will cost over $40 million to build three strategic digital radio corridors in British Columbia, Alberta, and through Ontario and Quebec, and millions more to bring digital radio to all Canadians. This would represent one of the most significant investments in the history of Canadian radio.

Beyond the actual building of the infrastructure for digital radio there are a number of other challenges ahead. We need accessible and affordable receivers for consumers and we need to alert consumers to the benefits of digital radio through aggressive marketing and promotion. Radio must go digital to remain competitive and to deliver the promise of new and enhanced services.

All broadcasters will need to operate in both the digital and the analog environment, with the respective costs associated with each environment, for many years to come. This means a doubling of operations costs.

The success of digital transition will also depend on consumer acceptance and the affordability of the equipment, much like colour television, VCRs, or FM radio.

Ken.

Á (1105)

Mr. Kenneth Goldstein: Moving to digital will require a very significant investment. For conventional television the cost of building digital transmitters has been estimated to be up to $390 million. The issuing of over 300 new digital specialty licences in June of 2000, and the launch of over 40 new digital specialty channels this last September, provide an unparalleled base for interactive services.

But in the interactive environment the issue of the ownership of content will be critical, as will the ownership of revenues generated by interactive initiatives. There will be many stakeholders in the system competing for these new revenues. This means that broadcasters will need assured access to their fair and equitable share of these new revenue sources if they are to continue to serve as the primary providers of high-quality Canadian content.

Barriers that could limit broadcaster access to these new revenue sources must be avoided.

Mr. Glenn O'Farrell: Mr. Chair, we have a number of recommendations as they relate to this section.

First, that you recommend that the Minister of Canadian Heritage direct the CRTC to create a policy framework that ensures broadcasters have access to new revenue sources in a new digital environment.

Second, that the Minister of Canadian Heritage direct the CRTC to create a policy framework for digital television that guarantees the extension of existing successful policy measures for Canadian programming to a digital environment. What we're referring to here is that measures such as priority carriage, simultaneous substitution, and access rules be carried over from the analog to the digital environment so that the same benefits continue to exist.

Third, that the Minister of Canadian Heritage and the Minister of Industry ensure the development of industry standards in relation to all components of the digital broadcasting system.

Fourth, that the Minister of Canadian Heritage direct the CRTC to recognize capital expenditures related to the digital transition as tangible benefit initiatives in transfer of ownership applications.

And fifth, that the Minister of Canadian Heritage direct the CRTC to include expenditures on interactive programming enhancements when calculating minimum Canadian content expenditure limits.

I think this set of recommendations illustrates how we feel that the government has to play a leadership role in the partnership that we are proposing between the private broadcasting sector and government to lead us into the challenges of the 21st century, and in this case as they apply to the digital environment.

Thank you.

The Chair: Thank you very much, Mr. O'Farrell.

We'll now turn to questions, beginning with Mr. Abbott.

Mr. Jim Abbott: My question is going to be primarily about the whole issue of new revenue sources. I might say, in a bit of a parenthesis here, that the discussion earlier about more access to pharmaceutical drugs and foods and so on makes me question whether Canadians would really be prepared for more pharmaceutical drug advertising considering the template they have of the Viagra ad as it presently appears on television.

You mentioned the cost of $390 million to build digital transmitters for conventional television. I have two questions, separate from each other. First, what would the cost be to the Canadian viewer? In other words, you're concerned about your cost as broadcasters to build the digital transmitters for television; have you given any thought to the cost to the ordinary Canadian citizens for having to just trash the analog television receiver they presently have to be able to get to your signal?

Secondly, I'm really confused, from your presentation, about the issue of new revenue services. When I go back to the brief you presented to the committee, government funding accounts for 8.5% of your industry's total revenue. I think this puts your industry, really, at the top of any industry in Canada, save farmers perhaps. You get $100 million or more from the Canadian Television Fund, you have access to Telefilm, you are looking for reduced licence fees, and you're looking for additional tax incentives to lower Canadian program production costs. Now you're saying you want to have some way for consumers, presumably Canadians, to invest in digital transition.

I guess my question is, where is all this coming from? I mean, surely private industry isn't looking for more Canadian government help than they are already receiving in order to make this digital transition--or are you?

Á (1110)

Mr. Glenn O'Farrell: The short answer is we want to make Canadian programming commercially successful. To get to that place in time requires a transitional strategy that involves, in our view, simply maintaining the CTF levels at their current amounts but on a multi-year basis.

The transition to digital--and I'll ask Ken to speak to this--is like any new technology. There will be a take-up that will largely be driven by the fact that Canadians will have access to digital television service, for example, coming to them from across the border. It's a reality that we have to face as an industry. Were it not for our geographic proximity, we may not be looking at transition to digital in the same way. But we have to be cognizant of the fact that the digital signals that will cross the border from American sources will find viewers in Canadian homes, and they will go out and buy those sets simply because of the advantages of the new technology in large part, but the take-up will be there.

How long will it ultimately take for the transition from analog to digital to be made? Your guess is as good as ours. The forecasts are all over the map and they really will depend on a variety of issues that we have no influence over, including price of appliances.

Mr. Jim Abbott: Perhaps Mr. Goldstein would answer this. Is the CAB looking for some form of tax relief or government subsidy? In other words, are they looking to reach into the Canadian taxpayer's pocket? And if so, is that comparable with the United States?

Mr. O'Farrell has said you want to match the United States. Would the United States broadcasters be looking for the same kind of help that I understand you might be looking for?

Perhaps I misunderstood your presentation, so you can clarify it for me.

Mr. Glenn O'Farrell: To be perfectly clear, we are not suggesting that Canadian taxpayers subsidize our transition to digital technologies in radio or television. Let's make that perfectly clear.

What we are suggesting is that the transition should occur in an orderly, regulated manner. For instance, in television there currently are public policy measures that don't cost the taxpayer or the consolidated revenue fund any money but that support Canadian programming services: for instance, priority carriage; for instance, access; for instance, simultaneous substitution. We're suggesting that as we move from analog to digital, those measures that worked so well in the analog world should be carried over into the digital world. That is not at any cost to taxpayers.

What we're saying, moreover, is that the digital transition is a fact of life we have to deal with that is not necessarily one we would have come to in the same way were it not for our geographic proximity to the U.S. We don't want to match the U.S. as much as we want to maintain our relevance and sustain our industry and continue to grow it in the face of what undoubtedly will be fragmentation from not another analog signal but a digital signal. And that's a new kind of challenge that's on our horizon.

Ken.

Á (1115)

Mr. Kenneth Goldstein: In the preamble to your question you referred to our brief, and noted that the television industry gets 8.5% of its revenue, or did in the year 2000, from the government. I think it should be made clear that's from Exhibit 4, on page 14, of Appendix A of the brief. And that refers to the entire television industry. The 8.5% is in fact the government grant to the CBC. It isn't money that goes in government grants to private broadcasters. I think as a matter of clarity that should be stated.

The point about additional revenue streams and why this is much more than just “I'm going to change from getting this station on channel 2 to getting it on channel 227B” or something--which in fact will all be computer code--is that the new revenue streams are associated with the digital signal itself. Instead of being able to send just a television signal with some sound--and there's something in the television signal now, called the vertical blanking interval, where we put closed captioning, for example, for the hearing impaired--that will change now to a stream of computer data that will contain one or more pictures; that will contain perhaps different sound tracks you can access; that will contain opportunities, for example, as the program runs, for you to use your remote control to open a little window on the screen and get more information about something that's going on in that program; that will contain the opportunity for an advertiser to buy an advertisement that the consumer will then be able to click to get more information about the product, or even buy the product.

Our concern as broadcasters is that the whole signal has to be passed through to the consumer. We believe it would be incredibly short-sighted and unreasonable to say, “Okay broadcasters, go spend $390 million. Let us, the government, harvest that spectrum once you've made this transition and then use it for other purposes.” All of that is fine, but we don't want to then turn around and find that our friends in the cable companies and the satellite companies are saying to us, “You know what? We're just going to carry the picture, the one picture. All that other stuff where you think you can earn the extra money? Sorry.” That's the real nub of the issue.

Mr. Jim Abbott: Thank you.

[Translation]

The Chairman: Ms. Gagnon.

Ms. Christiane Gagnon: You say that the response to digital services will depend on audience response, but audience response is also influenced by cost. You are talking about affordable transmitters and receivers. But what do you consider a price that the consumer can afford? We get the impression that access to more services is becoming increasingly expensive for the consumer. Even those able to pay the cost are finding that access to all programming and services provided by distributors and broadcasters is costing more and more.

Mr. Glenn O'Farrell: Ms. Gagnon, I'll give you my personal response and tell you an anecdote.

I recently went to Future Shop and took a look at all the digital equipment on sale. My impression was that there were no major differences—at least in price—between digital and analogue equipment.

Ms. Christiane Gagnon: Nowadays, we get the feeling that anything we buy will become obsolete before too long. We also get the feeling that consumers keep paying to get the latest gadget and the latest technology. In the end, the pressure is on the consumer.

Response depends on cost as well. If consumers keep being forced to buy additional equipment, they might be more hesitant to buy the services offered by broadcasters.

[English]

Mr. Kenneth Goldstein: I agree with you completely. The consumer is the key in all of this. The consumer is the key, and in terms of being able to respond or wanting to respond, in terms of the price of the equipment falling to affordable levels, there are a number of things that go into this. We often say in this business it's a chicken and an egg issue. Will somebody buy the new device, and therefore there'll be enough people to make the transmission justifiable; will somebody put out the transmission so enough people will be interested in buying the device?

There is a history of consumer electronics falling in price. The fact is, if you adjust for inflation, you can buy a computer or a colour television set or a VCR today all for less money than a radio cost in 1936. But these things take time. The VCR took about 15 years until it was more or less ubiquitous.

I want to add one other point, though, that's very important on the chicken and egg question. We talked earlier about copyright. The people who produce the programs are very nervous about releasing programming in digital formats unless the copyright issues can properly be solved, because aside from all of the technological stuff--and I'll leave that to the very competent broadcast engineers we have in this country--the one significant difference between digital and analog is that in digital every copy is the same quality as the original. Unless we have our Copyright Act together, the products simply won't get released into digital to promote the consumer to buy the equipment, because the people who make the product will be afraid that the day after they broadcast, it's going to be e-mailed around the world.

Á (1120)

The Chair: Ms. Lill.

Ms. Wendy Lill: I'd like to ask you for clarification on your last point. You are suggesting we direct the CRTC to include expenditures on interactive programming enhancements when calculating minimum Canadian content expenditure limits. I really have no idea what that means and I'd like to understand it in plain language. I think it has something to do with cutting Canadian content limits. Maybe you can tell me that's not the case, but let me hear it from your mouth.

Ms. Sylvie Courtemanche: Just to clarify, there are a great number of broadcasters subject to what we call Canadian programming and expenditure requirements, which means that according to the level of revenues they receive in a given year, a certain percentage has to be dedicated to Canadian programming. The commission limits what kinds of expenses it considers to be Canadian programming expenses. Right now, if we were to enhance our programming in order to make sure it had various interactive functions, that wouldn't necessarily be recognized as a Canadian programming expenditure. We think it would be very favourable to promoting innovation in the system to have it duly recognized as a Canadian programming expenditure.

Ms. Wendy Lill: You're not saying you would want to cut the number of hours of Canadian content?

Ms. Sylvie Courtemanche: No; it's purely on the expenditure side. We're just looking at broadening the definition to make it clear. The commission regulates both the quantity of Canadian content that makes it to the screens--we call those the exhibition requirements--and in many cases it also has a second component we call the expenditure requirement.

Ms. Wendy Lill: You're actually hoping you could get a bit of a break on the amount of money you're spending on Canadian content because this is going to cost more, the actual--

Mr. Glenn O'Farrell: Maybe I could add a comment, Ms. Lill.

What we're saying is that we think that credit should be given to the expenditures that are made to Canadian programming where enhancements of an interactive variety have been made to the Canadian program. It's simply a matter of saying, take credit where credit is due.

The Chair: Thank you, Ms. Lill.

Mr. McNally.

Mr. Grant McNally: Thanks, Mr. Chair.

Maybe I'll start off where I ended the last time. Madame Gagnon actually sparked my thoughts on this with respect to going down and getting the new gadgets. If you go and get the new MP3 player, which is going to cost $600, with another $400 for the new tax, it's going to cost $1,000. Not a lot of people are going to buy that product, and that's not because of the cost of the new product itself. It's the huge tax that's going on the product that's going to stop people from buying it. Anyway, it's a little pet project of mine right now.

Getting back to the issue at hand here, I was intrigued by what you had to say, Mr. Goldstein, about every digital copy being the same in quality and the hesitance to then broadcast by digital means because of that high quality. They've laid out some fairly broad.... We should look at this regulatory policy or this framework, but in a practical sense, how do we get to that?

The technology is emerging, and it's going to continue to emerge. Copyright is an important issue, I don't deny that. From your perspective, anybody on the panel, how do we frame that in a way that's going to address that particular issue and others that are going to happen--ones we can't even anticipate now because the technology is going to continue--in order to be able to address that? I'm not sure there's an easy answer there. Maybe we should be looking at the big picture more.

Á (1125)

Mr. Kenneth Goldstein: This is a debate that is going on in virtually every developed country right now. The debate in the United States is, interestingly enough, between Hollywood and the manufacturers of computers. The desire is to embed technology in the digital program transmissions that will cause degradation on copying. That's what's being attempted.

As I speak, there is a 17-year-old in a garage working to defeat it, and that's the nature of the business. But this is something that's going to take us some time, and really, all of us are going to have to work together on this. This isn't an either-or; we have to get this right.

The Chair: Ms. Bulte.

Ms. Sarmite Bulte: I noticed that four of your recommendations are directed to the CRTC, where the minister should direct the CRTC to do something. Well, I understand the latter two with regard to recognizing certain expenditures the CRTC has perhaps been seized with doing, but is it really the role of the CRTC? Are they truly the people best placed to create policy frameworks?

I always go back to this, and our study has looked at what the role of the CRTC is. The CRTC is supposed to supervise and regulate the policy, not affect or create policy. In my opinion, in the last few years the CRTC has come very close to that slippery slope of becoming a policy maker as opposed to doing the regulatory. Is it really the CRTC's place to develop this policy framework you've suggested? Should it not be put somewhere else? That's a concern.

What is the status of your consultations with the Department of Industry right now? I'd be interested to know with respect to the standards you asked for here.

Mr. Glenn O'Farrell: As to the first part of your question, the act does state that the CRTC does develop policy, but we're suggesting among other things that the minister use her prerogative to direct the type of policy that is appropriate for this digital transition.

As to the relevance of the CRTC, your concern is in part our concern. We turn to the CRTC for regulation and supervision, but we turn to the minister for ultimate policy change and broad policy directions, particularly a vision for the future--if I can use those words.

As to our discussions with industry, the association has a very constructive relationship with both Industry Canada and Canadian Heritage, where the officials are very receptive to our concerns. We have a very open dialogue on a variety of issues on a continuing basis.

Just having started this job, I learned, frankly much to my surprise, that there is a fabulous relationship between the association and the various officials, and there are a lot of past experiences there of working together. Coming into this role, I was pleased to see that there really is a sense of partnership between our organization and the officials of both those departments.

The Chair: Madame Gagnon has been very good with her time. She has asked me for a very tiny question.

It'll have to be very tiny, Madame Gagnon.

[Translation]

Ms. Christiane Gagnon: Thank you. That is very kind of you, Mr. Chairman.

You have often stated that the amounts you are required to pay in transfer fees from one format to another are excessive. You have also said that copyright costs were not competitive in relation to US costs. If those costs did not have to be paid, what would you do with that money? Where would you invest it? What sort of choices would you make? Would you make it cheaper for consumers to buy transmitters? Would you use the money for personal benefit, or would you invest it in something that could be shared with the public? How generous would you be?

Á (1130)

[English]

Mr. Glenn O'Farrell: Paul.

Mr. Paul Robertson: Canadian broadcasters are in a world market for funds. What happens is the current profitability of television and radio in Canada is much less than it is in the United States--for example, take a country like Australia. To be effective over the long term, Canadian broadcasters are going to have to become stronger in terms of their ability to get access to capital to make the appropriate investments to be able to invest in Canadian content appropriately, and create their own programs and their own content that can help them be effective on a world stage, certainly on the North American stage.

The initiatives we've been talking about here that have to do with streamlining the process or reducing the costs really all go to this notion that as a company with shareholders we need to return a decent level of financial return and we have to be competitive with the large multinational companies that we compete with, not just here in Canada but of course south of the border. This is really the essence of why we're looking for ways to streamline some of these tariffs and some of these approaches that we don't think are effective in the system and don't help us compete on a broader scale, which we really feel we need to do in the future.

[Translation]

Mr. Glenn O'Farrell: Ms. Gagnon, I will add something to Paul's comments, if I may.

If we look at all the tangible benefits contributed over the past four years by private broadcasters as a result of property transfers within the industry, we come up with $554 million. That is an indication of our contribution to the Canadian broadcasting system, above and beyond our licensing obligations or others.. The vast majority of this money has been invested in Canadian programming. These are investments made by TV-station buyers, and do not include tangible benefits from radio-related transactions.

Ms. Sylvie Courtemanche: As for radio, the tangible benefits contributed to the system over the next eight to ten years amount to some $100 million.

[English]

The Chair: Before we close your segment, Mr. Goldstein, perhaps you would give me further precision. When you talk about $390 million to build digital transmitters, is that for private enterprise broadcasters or is it the whole system, including CBC?

Mr. Kenneth Goldstein: It's for everyone.

The Chair: Have you made a study to show what would result if you introduced digital broadcasting across the total system? Admittedly, it produces competition from digital sources in the United States, as Mr. O'Farrell has pointed out, but at the same time, does it also not increase revenues from a broader audience, a broader access, better copying and so forth? Have you made any studies to show whether the investment produces increased revenues from that particular investment?

Mr. Kenneth Goldstein: As far as we can tell, for the immediately foreseeable future the investment will produce no increased revenues. You will get a zero-sum game, initially. If I were watching Blue Murder in analog, I'll now watch Blue Murder in digital, but it's still one person watching one hour of television. So we will basically have traded one form of transmission for another.

Over the longer term, we are hopeful that we can use the digital technology to develop the alternative revenue streams dealing with e-commerce and these other things I've talked about. That then of course is very dependent on us being able to pass the entire signal through the gatekeepers without having to pay a toll at the gate.

Á (1135)

The Chair: Thank you.

Ms. Hinton, very briefly.

Ms. Betty Hinton: In digital capability the signal is compressed, so you can get far more channels in much less space than you take for one channel right now. That has to be a cost saving.

Mr. Kenneth Goldstein: We have the option, once this rolls out.... I tread lightly into the technology area, but basically the way the digital system works in what is called a six-megahertz channel, which is the current allocation for an analog channel, is that we would be able to transmit one high-definition signal, or four or five standard definition signals.

In terms of this reducing costs, it does and it doesn't. On the one hand, you can say, yes, you can get those signals there. On the other hand, you have to pay rights for the programs to put in those signals. For all this to be fully realized, you have to make sure those gatekeepers will pass through all five of those signals at the time you're transmitting them.

Ms. Betty Hinton: You have to pay for rights now, though, whether it's compressed in digital or whether it remains in analog. So there are cost factors involved in both. It has to save you money when it's compressed into digital.

Mr. Kenneth Goldstein: If we broadcast Blue Murder today, we pay for the rights to broadcast Blue Murder. If we put on four other channels with four other programs simultaneously, we have to pay for those other four programs. They aren't covered in what we paid for Blue Murder.

Ms. Betty Hinton: So from your end it doesn't save money, but from the end where they're putting it out there, it does.

Mr. Kenneth Goldstein: There is some efficiency in transmission. I don't want to spend all day, but you could spend a whole lot of time discussing the degree to which competition law will allow broadcasters to share some of these facilities, for example. It's a whole other issue.

The Chair: Let's leave it there. If by any chance, Mr. Goldstein, you work on projections and figures in that area, it would be really interesting for us. We don't want to pirate your secrets, but whatever you can make available would be appreciated.

Mr. Kenneth Goldstein: Shortly after launch, Mr. Chairman.

The Chair: But before launch, surely you'll know where you're going.

We'll move on to initiative number four, Mr. O'Farrell, Canadian music strategy.

Mr. Glenn O'Farrell: Thank you, Mr. Chair. I'd ask my colleagues to join me for this segment. The good news for the committee members is that this is the second-last one, but there are two other very important areas we do want to cover with you.

Joining me here today are Claude Gagné from Télémédia, Mark Maheu from CHUM, and J.J. Johnston from Corus.

When you think about radio, Mr. Chair, a number of things instantly come to mind. You think of the morning man or morning person you wake up to, what today's weather is likely to be, the latest news, or whether the Montreal Canadiens won last night's game. There's all this, plus of course the music and the programming mix.

With us here today are three of Canada's most innovative and passionate radio industry experts, who I've just introduced to you. They're here to tell you their stories about what it takes to make radio music work in this country.

Without question, private radio is the primary promotional vehicle for Canadian music. Canadian private radio has made an enormous impact on the careers of many Canadian stars while contributing $27 million annually through various music industry initiatives. These include the Radio Starmaker Fund, Factor, and Musique action, all of which support the production, marketing, and promotion of Canadian talent.

The Minister of Canadian Heritage and her officials have demonstrated their commitment to the continued development of popular Canadian music through the Canada Music Fund but also, interestingly, through the Investment Canada Act. They have taken direct foreign investments from Vivendi Universal and AOL Timer Warner, which together have pledged over $500 million over the next five years to a variety of industrial and educational programs around film, sound recording, television, and new media.

We applaud that. These are significant benefits, which strategically bundled with public and private money make a considerable difference in the cultural products we produce. It's our intention to work closely with the officials of Canadian Heritage to find ways of bringing those moneys strategically into the marketplace so they yield maximum benefits.

As a result, we have some tremendous English and French music stars in this country, and for many music formats on radio there is an excellent supply of Canadian music selections.

Now I'll turn the microphone over to the marvellous voices of radio.

Go, Mark.

Á (1140)

Mr. Mark Maheu (Vice-President and General Manager, CFRA /KOOL-FM (CHUM Limited)): Good morning, and thank you.

Canada does have some very major successes like Céline Dion, Eric Lapointe, the Barenaked Ladies, and Shania Twain, and rising stars like Nellie Furtado, Kevin Parent, and Sum 41. However, in key music formats such as adult contemporary and classic rock, there is still too little music to choose from, and there are too few major stars to maintain a steady and fresh flow of Canadian content for radio, where 35% is the Canadian content threshold for most popular music formats.

Some radio formats face content problems when major recording stars take a break from producing music. In addition, these artists can burn out too quickly when back in rotation. Some recent examples of that would include artists like Amanda Marshall and the Tragically Hip.

This also has an impact on sales of Canadian music. Even after 30 years of Canadian content regulations, sales are generally flat, in the 10% to 12% range of the national total. It's closer to 12% when a major star like Céline Dion has a current record out but falls under 10% when she takes a break from recording. The point is that we need some fresh approaches in order to continue building a robust Canadian music industry that will be able to attract Canadian listeners and consumers. Much of what we have done in regulation, marketing, and promotion has given rise to success, but we can do more to bring even greater success to both Canadian radio and Canadian music.

Mr. J.J. Johnston (General Manager and Vice-President, Programming, Corus Entertainment Inc.): The problem of maintaining sufficient content for radio can be resolved at least in part if we do two things. Let's start giving more airplay to new artists, and let's start counting music performed by Canadians as Canadian content.

First, we should look seriously at developing an initiative for getting new Canadian artists on radio. One approach is, for the playing of new Canadian music within the first year of release, to give a bonus worth 1.5 selections toward Canadian content levels. Second, the existing definition of what counts as Canadian content is outdated. There's the MAPL System, standing for music, artists, production, and lyrics, and as it stands you need to have two points to qualify as a Canadian selection. This has resulted in numerous cases where content performed by Canadians is not counted among Canadian selections. For instance, recordings performed by Canadians such as Céline Dion, Neil Young, and Ronnie Hawkins have not counted as Canadian content in the past.

Alternately, recordings performed by non-Canadians such as Rod Stewart and Aerosmith have been counted as CanCon. To broaden available Canadian recordings in a number of radio music formats, we need to increase the point allocation for artists from one to two points, thereby allowing recordings performed by Canadian artists to count as Canadian content, which is a proven method in the feature film sector and which is also currently used by CAVCO.

[Translation]

Mr. Claude Gagné (Representative, Télémédia): Before talking to you about the future, I would like to look back and tell you something about the specific nature and challenges of French-language broadcasting in Canada.

Almost 30 years ago, FM radio regulations came into force to provide a regulatory framework for emerging FM radio. French-language music stations were required to broadcast 65% of music in French, and ensure 30% Canadian content. That percentage recently increased to 35%.

At the time, though this was not very long ago, a radio broadcaster could fill half of his French-language programming requirement with music from Europe and elsewhere. That was the golden age of French music, with stars like Bécaud, Aznavour, Fugain, Brel, Mouskouri, Dassin, Iglesias and many others. At the same time, Quebec music was booming, with groups and music emerging like Beau Dommage, Harmonium, Charlebois, and many others, which gave Quebec a flourishing and dynamic music industry in the unique North American environment.

Over time, but particularly in the past ten years, this has changed. France produces much much less music than it did before, and French rap, though popular in Europe, finds few takers on this side of the Atlantic. It's probably a question of musical culture—it simply doesn't connect here.

In order to counter the drop in high-quality musical sources, radio broadcasters had to find solutions themselves. The result was a Quebec star system that has its own stars, honours and institutions. Canadians and Quebeckers, to whom local stars are very important, were instrumental in helping the system take hold. Many research tools used by broadcasters confirm this view: Canadians like Canadian artists. That is where the strength of the Canadian broadcasting system lies. Broadcasters were the first to understand the need to give emerging artists an opportunity to ensure the industry's succession by promoting shows, festivals and CDs, giving away tickets on the airwaves, establishing intimate, exclusive-unplugged concerts, and implementing a vast range of other initiatives to give emerging artists the tools they needed to expand, produce, sell and innovate.

Broadcasters are proud to play this role and see their artists succeed. We are extremely proud to see our panoply of stars garnering success in France. They include Garou, Lynda Lemay, Isabelle Boulay, Natasha St-Pier and, before them, Céline Dion and Roch Voisine. It is the Quebec star system and private broadcasters that have made it possible for these artists to go from being unknowns to superstars in such a short time.

But the system is fragile. It is dynamic but also risky, with hazards of over-exposure and over-dependence. That's what happens when an artist takes a sabbatical for several years, or stops making music. But unfortunately, French-language and Canadian content requirements do not take into account drops in production, or less generalist waves of musical creativity. When a station fills its 65% French-language requirement with primarily Quebec material, Canadian content can reach 50%, exacerbating the over-exposure problem. Although adult audiences may like familiar, well-known tunes, younger audiences want new music. When listeners hear the same tunes over and over again and get nothing new, they may tune in less or drop the station all together. That is not in anyone's best interest.

That is why this is such a good time to review what has worked in the past for Canadian artists and what could work better. It is also an excellent time to examine initiatives that could inspire and encourage broadcasters to do more, or to do things differently. In addition, if we want broadcasters and artists to prosper and evolve together, then the success of one group cannot be at the expense of the other.

The future success of radio will depend on how far and how well the industry can migrate towards a number of platforms, like digital radio, the Internet, wireless systems and satellite services. Given the current copyright system, the migration might lead to new copyright obligations. The prohibitive cost of many copyright systems targeting many platforms could prevent radio from continuing to showcase Canadian music and Canadian artists.

Á (1145)

[English]

Mr. J.J. Johnston: Consolidation in the radio industry has benefited both the broadcasting system and the music industry. The multiple licence ownership policy, or MLO, is working. Consolidation has worked to increase diversity of voice as new formats such as jazz, urban, and dance music have been introduced into markets across Canada. There is more choice.

You also see situations like the market in Toronto, for instance, where stations like Q107 and Edge 102, which were both creeping into each other's territory and actually shrinking the rock pie of listenership in the marketplace, now are niche stations. Q107 is now a classic rock station, a station that's back and serving the needs and the expectations of that 25 to 54 audience. Edge 102 is committed to breaking new rock, as it has been for many years. It is also a distinct choice from Q107.

You see the same thing with CFOX and CFMI in Vancouver. In Montreal, CHOM-FM, the station everyone has grown up with, is back. Montreal was a rock town without a rock station. It's now back. An urban station in Toronto, the FLOW, is doing very well and is a voice to a community that waited patiently for a long time to have their own distinct outlet.

Who would have thought we would have jazz stations in Canada? I think it's fantastic. We have one in Hamilton, we have one coming soon to Calgary, and we have one in Toronto. This is a showcase for a genre of Canadian talent that has never had the public exposure and sales opportunities that these formats provide.

Other formats, such as top 40, really only achieved maximum impact in the country in the last couple of years. It wasn't until consolidation happened that top 40 showed up on the airwaves in Toronto.

In each case, consolidation has many other opportunities for Canadian talent development. For instance, in promotions, it enables using the weight of more than one station to promote and execute significant events of exposure. Many genres of music that were only being played in limited rotations on stations are now being exposed full time on targeted radio stations. Radio sells records, and new targeted stations bring exposure and sales opportunities never before seen by these artists.

Meanwhile, the successes of consolidation are threatened by a lack of clarity regarding jurisdiction over the transfer of broadcasting assets between the CRTC and the Competition Bureau. The Competition Bureau continues to examine radio broadcaster transactions and their impact on local markets, while the CRTC has sole jurisdiction under the Broadcasting Act. Concurrent jurisdiction would put broadcasters in a position of double jeopardy and cause regulatory uncertainty.

One thing I forget to mention about consolidation is that it's given rise to substantial contributions to the Radio Starmaker Fund/Fonds Radio Star and to Factor MusicAction Canada, approaching $50 million so far.

Á (1150)

The Chair: Thanks, J.J.

Mr. O'Farrell, will you excuse me for a few minutes? I have to go and speak in the House. I will ask the vice-chair, Mr. Mills, to replace me.

Mr. Glenn O'Farrell: Certainly. Thank you.

The Chair: Thanks for your indulgence.

Go ahead, Mr. O'Farrell.

Mr. Glenn O'Farrell: Canada's private broadcasters are the biggest talent promoters for our rising Canadian stars. In order for Canadian music to be successful, Canadian private broadcasting, Canadian private radio, must also be successful.

Therefore we have three recommendations. First, we call on the Minister of Canadian Heritage to direct the CRTC to examine regulatory incentives to stimulate the supply of music and the development of stars in two ways. The first, as we've said earlier, is by crediting the airplay of new Canadian artists, for both English language and French vocal music, at 1.5 selections toward the 35% CanCon requirement, when radio plays the new selection within 12 months of its release. Second is modernizing the rules for what counts as Canadian by allowing a two-point credit when a song's performer is Canadian.

Our second recommendation is to call on the Minister of Canadian Heritage and the Minister of Industry to recognize reasonable exceptions to copyright licensing rights, using the reproduction right as an example.

Third is to call on both ministers to confirm that the CRTC is the final adjudicator in matters relating to the transfer of broadcasting assets.

Those are our three recommendations. We are open to you questions.

Thank you.

The Vice-Chair (Mr. Dennis Mills): Thank you very much, Mr. O'Farrell.

Ms. Hinton.

Ms. Betty Hinton: I'll begin by telling you I like your recommendations. I'd also like to give you a better opportunity to go back a little bit to some of the other parts we talked about today and tell me how you're going to overcome this problem you have. You're going to be charged $21 a gigabyte, as we were told earlier, and you have all of these other obstacles in your way, in doing what you want to do.

Obviously you're not going to be able to promote Canadian talent if it's not in your best interest to be playing records and paying fees you can avoid by having the talk format. I would just like to give you an opportunity to elaborate on how you think we might be able to help you here.

Á (1155)

Mr. Glenn O'Farrell: Thank you. We appreciate your help and your interest.

From the copyright perspective, clearly we'll advocate very strongly. We urge you to also join our efforts in ensuring the kind of review required is conducted ASAP, so we look at the issue of where we stand, in terms of all of these tariffs, as soon as possible in the most useful light, to bring some rationalization to the copyright regime generally, as it applies to radio, and also to television.

Secondly, we thank you for your applause in terms of our recommendations. Frankly, I was in the television sector for the past 15 years, so I'm not as conversant yet on all radio issues, but I'm learning. I was introduced to the Canadian Radio Music Awards a few weekends ago. I was thoroughly impressed with the incredible job--and I say this quite sincerely--private radio has done for Canadian music and Canadian artists.

If you have the opportunity to attend Canadian Music Week, I suggest you do so, because your eyes will be opened to the fabulous job.... When you think of how media, particularly radio in this case, can support Canadian talent, there are just incredible examples of that in abundance at that event, and I invite you to attend.

We think more can be done. We think we can play a larger role, if we are given the incentive to do so. For instance, the 1.5 credit to the 35% CanCon would be a direct way to create an incentive for broadcasters to build the momentum of a young artist who releases a record, provided, of course, it's played within the 12 months, so the radio industry gets in, gets behind that artist, and promotes them immediately. I think that's just a small example, yet it would yield huge benefits and great careers.

Maybe J.J. or Mark would like to add to this discussion, in response to your question. And we thank you for allowing us to back up a bit.

The Vice-Chair (Mr. Dennis Mills): Excuse me, but could we tighten up the answers a little bit? We're really running out of time here.

Mr. J.J. Johnston: Being one of the actual founders of the Canadian Radio Music Awards, I have to say, that is quite an event, an event that is recognized all the way around, including by the music industry. It's all about breaking new young talent.

We're in a situation where, when it comes to our Canadian content, there has been some discussion in the past that perhaps there is enough quantity, but in fact, with commercial radio stations, the quantity gets whittled down significantly when you get to the commercial material. So what happens is, music being cyclical, we find ourselves sometimes, in certain formats, not being able to have enough material to meet our mandates, therefore we go back to recurrent music and to catalogue music. It has a harmful effect on some of our partners in the music industry--artists like Tom Cochrane, who is having a bit of a difficult time right now. His music has been overexposed. Amanda Marshall's music has been overexposed. With these incentives, you will see more and new Canadian music on the radio stations, and you'll see some new careers blossoming.

[Translation]

The Vice-Chair (Mr. Dennis Mills): Ms. Gagnon.

Ms. Christiane Gagnon: You spoke of the Quebec star system; you paid tribute to our star system. I think that it has gained recognition. People like it, listen to it, watch it. You mentioned the risk of overexposure, but there is also an overexposure of American production and no one seems tired of watching it or listening to it. How come we get tired of our production, in Quebec as well as in Canada, more quickly? I am a bit skeptical about this fatigue to overexposure. We are very happy to see our own artists, but we still listen to old American tunes. Thus, I wonder whether we should get tired more quickly than those who listen to American productions in Quebec.

Â (1200)

Mr. Claude Gagné: This is because a broadcasting week, comprising 65% francophone material, has a smaller base for broadcasting. Of course, when we look at the anglophone material, there is a much wider base to choose from, and it has existed much longer. Thus, we can repeat American pieces less frequently, except, of course, what is on the hit parade. Whatever is on the hit parade, be it in French or English, gets about the same exposure.

There have been quite a few non-productive years. This is my own opinion, but I do not know whether Beau Dommage would have been broadcast as much during the past 25 years if it had produced more. This does not mean that we would not have broadcast the group, but Beau Dommage and artists of the same calibre have benefited from increased exposure during their less productive times.

It goes without saying that we value our artists, but at a given point, as the hit parade rotates, a piece can remain on the hit parade for 25 weeks. This means a lot of broadcasting, at the rate of 20 times a week. Besides, we can decrease broadcasting of anglophone pieces over a lesser number of weeks because there is more material coming through. Thus, this is above all an issue of exposure and opportunities.

Ms. Christiane Gagnon: Do you think that interactive radio, that engages consumers to a greater extent, would have a beneficial effect, more audience loyalty to programming which might be repetitive, but... Let us look at La Fureur in Quebec. Apparently, when they looked at La Fureur, where the audience participates, the sales go up. I think that La Fureur could be broadcast by others than Radio-Canada, but I think that we should perhaps take a more positive look at interactive radio.

Mr. Claude Gagné: To fill a whole week, we certainly have to resort to the past because we cannot merely rely on new pieces, and this contributes, as it were, to support artists who are less heard on the radio. Nostalgia is currently fashionable, and La Fureur is an example of this. The album Le Lait, that sold, I think, 350,000 copies, with French hits from the 1960s, is another example. At this time, there is a definite current of nostalgia that is profitable for many artists. Perhaps, as we all get older, we tend to turn to the past for comfort, in any case, it is finding an echo somewhere.

[English]

The Vice-Chair (Mr. Dennis Mills): Mr. Cuzner.

Mr. Rodger Cuzner (Bras d'Or--Cape Breton, Lib.): For the benefit of the panel, I represent a riding, Bras d'Or--Cape Breton, and we've certainly made a considerable contribution to the mosaic of Canadian music. Nathalie McMaster, Ashley MacIsaac, the Rankins, Rita MacNeil, and Matt Minglewood are all constituents of mine.

Mr. Johnston spoke of consolidation and I have a concern about it. We really have lost an opportunity in our community. We had two privately owned, independent stations that were gobbled up, bought out, through consolidation. We're just not seeing our local music played any longer. If it were not for the CBC station giving our local artists an opportunity to play their music, we'd be really locked out. The Canadian content is there, but I don't know if people are rushing out to buy Parachute Club or Luba right now. We want to continue to make that contribution. We have some fabulous young artists, but they just aren't being given the opportunity.

I tell you, I think the Cape Breton artists can take credit for some successes we've had nationally, like rekindling the Celtic music--the Leahys have come on and all these artists. I think a lot of it is because the privately owned independents were giving our local artists an opportunity.

I like the two recommendations; do you think the recommendations are the keys that will unlock that door to give our local artists the opportunity? You see, with the consolidation, it seems that they're the only game in town now, those privates. The programming is coming out of Halifax and the pleas from our community and from our artists are falling on deaf ears. Do you think that these recommendations will do the trick? Will they open the door for our local artists?

Â (1205)

Mr. J.J. Johnston: First of all, I have a great deal of respect for all of those artists. I've spent some time down east and have been involved somewhat in the Cape Breton music industry as more of an observer.

I don't know the specifics of the stations you are talking about and whether we're talking about commercial artists versus non-commercial artists or up-and-coming artists. I'm not sure what you're thinking of.

Mr. Rodger Cuzner: Bruce Guthro more than Bruce Springsteen.

A voice: Hear, hear.

Mr. J.J. Johnston: All Bruce all the time.

Bruce Guthro is a fantastic artist. And I would say with this incentive, absolutely, you will be seeing these artists getting more airplay. That's probably a good example of where you will see it.

Ms. Sylvie Courtemanche: I would add that it's not only through those two incentives. As we noted here earlier, $50 million will be going over the next eight to ten years, and that $50 million is earmarked solely for the promotion and marketing of up-and-coming stars for whom there is a buzz coming around, and we want to launch. I want you to know that among the beneficiaries of the last two rounds we've had many Cape Bretoners. We've had Bruce Guthro, who has received significant amounts, and Jimmy Rankin and many others are receiving significant radio dollars in order to promote and really launch their careers so they get that kind of exposure, everybody wants to listen to them, they get their albums sold, and all of that good stuff.

The Vice-Chair (Mr. Dennis Mills): We really must remind members that we're running against the clock and we're behind. In fairness to the next set of witnesses, we should have tight questions and tight answers.

Ms. Sarmite Bulte: Thank you very much.

First of all, I have had the privilege of being at the Canadian Radio Music Awards, and I think they're wonderful. It was actually at those awards two years ago that the CAB launched its Radio Starmaker Fund, and I commend the CAB on that.

That said, I'm not as enthusiastic about your recommendations as Mrs. Hinton is. I'm going to need a little bit more convincing.

Mr. Johnston, I'm not convinced that the MAPL system is a bad system. It's clear, it's articulate, we understand where the artist is coming from and where the music is coming from.

You used the example of Céline Dion a lot, so I will too. Look at Céline Dion. Céline Dion is living in Admiral's Cove, Florida, is producing music that's been composed by somebody who lives in Admiral's Cove, Florida, with lyrics by someone from Admiral's Cove, Florida, and it's produced there. I have a problem with that being Canadian and getting the benefit of the two-point system. Please help me there.

Are we not, by giving people like Céline Dion, two points there--because she's in Florida--actually protecting her and precluding the artists who Mr. Cuzner was just talking about? I have a little bit of a problem with that.

Secondly, Mr. Johnston, again, I don't mean to pick on you, but you raised this issue--and maybe I misinterpreted this--but why should your industry be exempt from the Competition Act?

Mr. J.J. Johnston: If I may, I'll answer the first question, and perhaps Mr. O'Farrell can take the second question.

The fact is, both before and after the increase to 35%, sales were in the 10% to 12% range. As I've said, commercial supply is what we deal with. We deal with a cyclical business. There are certain times when in the alternative format there is very little to play; there are certain times where the AC format has some problems. Remember, there are certain times of the year when all these releases come out, and then there are fallow times you deal with.

When you sit back and you look at that 10% to 12%, I think it's very important, particularly when we're in one of those drought times, if Céline Dion comes out with a new record and that record does not qualify. That would help a lot. When Céline Dion or Sarah McLachlan does not count...when they're off the road and they're not releasing records, you see that sales number go down below 10%.

Â (1210)

The Vice-Chair (Mr. Dennis Mills): Mr. O'Farrell.

Mr. Glenn O'Farrell: On the Competition Bureau, we believe regulatory certainty is a necessity for an industry. The commission reviews transfers of applications in a very full and comprehensive manner, oftentimes if not all the time conducting a public hearing and allowing interveners to present their views on the benefits--or the lack thereof--associated with the transaction. They have a specialized expertise in broadcasting, and they have a specialized expertise in all the areas broadcasters are regulated and supervised under the act, particularly as it relates to the goals of the act. Therefore, we believe they are the appropriate body.

Furthermore, the Broadcasting Act itself says the CRTC's decisions are final with two appeals: an appeal to the federal cabinet and an appeal to the Federal Court. Nowhere do we find an appeal to the Competition Bureau or any other agency.

What we would like to see is a smarter partnership between both agencies rather than two agencies of government going at each other and fighting over jurisdiction. We don't think the resources of government should be squandered that way. We think the resources of government would serve the public interest much better if they were cooperating and collaborating towards a common purpose.

On the subject of Céline Dion, I would just like to add one comment. Madam Bulte, in our view there are so few; we'd like to see so many more huge international Canadian success stories. We shouldn't be pulling the rug out from under any of them. I think whether they're living elsewhere...oftentimes we've seen writers and performers go off, live abroad, and come back. They remain Canadians in their hearts, and they remain Canadian in the hearts of Canadian fans. I think we have to celebrate that.

Ms. Sarmite Bulte: Mr. Chairman, I need to reply to that.

It doesn't preclude you from continuing to put Céline Dion on the air at any time. The way you're speaking right now suggests that you don't play her. We should, but I think the solution is to find ways to foster those new artists by giving stars additional points.

The Vice-Chair (Mr. Dennis Mills): We'll have a very short question from Ms. Lill, and then we'll be moving to the next sector.

Ms. Wendy Lill: I too am more interested in Bruce Guthro than Bruce Springsteen. That's a wonderful place to start.

I'm concerned about your recommendation to credit “the airplay of new Canadian artists, for both English-language and French vocal music, at 1.5 selections toward 35 % CanCon”. We know when the CRTC made the 35% threshold in 1998 your president said that it was excessive, unfounded, and, most importantly, not what listeners wanted.

Given this background--and it's not too long ago, only four years--it doesn't ring quite as clearly to me that you're trying to promote Canadian content. If that recommendation was adopted, we could in fact see that the music format radio stations would be able to water down Canadian content to 23% by playing only new Canadian music and artists.

What's stopping you right now from showcasing new artists? I don't see why you need any kind of change in the content regulations for you to do exactly what you say you care about doing.

To repeat what Mr. Cuzner said, we're seeing, in the very hotbed of creative Canadian content in this country, a languishing, not as much support from local radio stations as there used to be. If that's not the canary in the mine, what is?

Why do you need to change your Canadian content requirements? The bottom line seems to be that you're trying to lower them.

The Vice-Chair (Mr. Dennis Mills): Mr. O'Farrell.

Mr. Glenn O'Farrell: We respect and understand your view, but we don't share it. We believe the 1.5 credit would make a major difference in providing an incentive to broadcasters to play more young talent.

Why don't they do it now? Perhaps because there isn't any affirmative action to support it. We've watched the 150% credit on certain types of programs work very, very well in the television system, to the benefit of audiences, producers, and broadcasters. We think the same thing would apply here as it relates to young Canadian artists.

The Vice-Chair (Mr. Dennis Mills): Thank you very much.

As a final note, this is something I've been lobbying for around here for 14 years. I would go up to two points if all of the anglophone stations in Canada would play Canadian francophone artists on a rotation, so that all of a sudden if we could expose....

You know, you mentioned that exposure on radio sells records. If we played francophone artists--you mentioned Parent, Richard Séguin--right across Canada, I think Canadians would be shocked initially, but after a little while it would have a profound and very positive effect.

The next series of witnesses.....

Mr. McNally, can you wait until the next round?

Mr. Grant McNally: No.

The Vice-Chair (Mr. Dennis Mills): Okay, go ahead.

Â (1215)

Mr. Grant McNally: I've waited patiently. I want my turn, Mr. Chair, thank you.

First of all, I want to point out what's going on--and perhaps you're aware of it--with CBC Radio 3's initiative to get new artists out there. Maybe this could be done as an add-on, not to take away from what you're doing, but this could be a way to showcase new Canadian artists as well. An approach such as this would be proactive.

The second-last bullet on page 37 says:

Call on the Ministers of Canadian Heritage and Industry to recognize reasonable exceptions to copyright licensing rights--using the Reproduction right as an example....

Could you elaborate on exactly what you mean here, in a nutshell?

Mr. Glenn O'Farrell: I'm going to ask Erica to join us. What we're saying essentially is that the reproduction right that we discussed earlier should be repealed. And I think we've kind of beat that one--

Mr. Grant McNally: So you're talking about the copying to the other media.

Mr. Glenn O'Farrell: Erica, did you want add to this response?

Ms. Erica Redler: Yes.

Essentially this goes to the point about our being confronted with copyright fees as we try to develop the music industry. These act as disincentives to the things we propose to do that we think are good for our business and for the music industry.

This goes back to the point we made in our panel about the disconnect between the copyright system and the regulatory system, which overlap, but there is no coordination of the regulations they set out.

Mr. Grant McNally: All right. Thanks.

Here's another lull that I'm not taking advantage of--just note that.

Mr. Glenn O'Farrell: With your permission, Mr. Chair, we're prepared to move into our last segment.

The Chair: Mr. O'Farrell, members have indicated to me that although we finish at 1 o'clock, we have a business meeting. So maybe we could condense that last segment so that we have time for questions, because I think members have quite a few questions they want to ask.

Mr. Glenn O'Farrell: Thank you. We will do our best.

Mr. Chair, I'd like to introduce the panel members who are with us today.

We have Sarah Crawford from CHUM in Toronto; Marc Simard from Rivière-du-Loup, who represents Télé Inter-Rives Ltée; Glenda Spenrath from Lloydminster, from Mid West Television; and Paul Larche from Midland, Ontario, from KICX.

The broadcasting industry serves as a lifeline that connects Canadians from coast to coast to coast, and in the same way that railways unified the country using metal tracks, broadcasters are the virtual trains that bring together Canadians through a complex communications network.

We are the voice of Canadians. We are the voice of the local community. Our local voice is the foundation of not only our industry but also our country. This could not be truer in light of what happened on September 11. On that day we awoke to a new world. Our democracy--the foundation of our society--was being attacked. Under this threat, Canadians from all walks of life rose to the occasion to defend the core values of our society. From the citizens of Gander, Newfoundland, who opened their homes, their wallets, and their hearts to the thousands of stranded American and foreign travellers, to the thousands of Canadians who generously donated everything from food, clothing, and medical assistance to the millions of dollars raised through countless efforts of fundraising, Canadians stood up once again and showed the world our strength, our compassion, and our generosity as a nation. And standing right alongside were Canadian broadcasters, who immediately responded by devoting all their resources to help Americans and Canadians cope with the situation, and contributing locally and nationally to assist in raising funds for 9/11 victims.

On that infamous day Canadians were reminded of our place in the world. We were reminded of the importance of leadership, which has unfortunately been demeaned and trivialized of late. Cynicism, once fashionable, has been replaced in our view with a renewed commitment to public service.

Canada's private broadcasters recognize the importance of public service and carry it out every single day in communities across this vast country. They do so quietly and without fanfare. Canadians know the extraordinary role played in their communities by the local private radio and television stations, and it is time, I believe, that you take the time to pay attention and take note as well.

I would like to invite my colleagues to tell their stories, and I'll start with Sarah Crawford.

Sarah.

Â (1220)

Ms. Sarah Crawford (Vice-President, Public Affairs, CHUM Television): Thank you, Glenn.

Not only in times of tragedy but also in times of celebration, Canada's private broadcasters are the choice of Canadians. Across the country every day, private broadcasters express their commitment to their local communities in a variety of ways. First is with news, of course, but in addition, private broadcasters are there to support local events, promote arts and cultural groups, and celebrate our film and television industry, by providing relevant programming that reflects the diversity and richness of the communities they serve.

I work for CHUM Television, a company that's perhaps well known for our specialty channels, such as Bravo. We also operate eight intensely local television stations. Some are in smaller communities such as Wingham, Ontario, and London, and others are in larger urban centres, such as Toronto and Vancouver.

I know some of you visited us at our headquarters in Toronto. Our colleague, Prem Gill, in Vancouver was pleased to present to you when you visited there.

Our local stations are built on the following areas of commitment. First is to provide relevant local programming. Each station creates and broadcasts an extraordinary amount of unique and local original programming each week. In fact, the aggregate for eight stations is over 180 hours a week.

Second is cultural diversity, with fair and accurate reflection and inclusion. It's most relevant to talk about this point today as we celebrate, not only in Canada but internationally, the United Nations International Day for the Elimination of Racial Discrimination. In fact our company pioneered that concept in local television when Citytv set out to become the first station to most directly and truly reflect and celebrate Toronto's culturally and racially diverse population, when it launched in 1972.

Third is Canadian film and talent development, and fourth is our emphasis on public service, including the community-based support for media literacy.

I offer you a very few brief examples of our service to our communities. Our newest station, The New VI, in Victoria recently held an open call for submissions of original writings. The station set out to develop B.C.-based stories that focus on urban contemporary multicultural themes. Station staff were recently overwhelmed when the deadline was this week and they had received over 400 submissions. They look forward to mentoring new filmmakers and works for that community.

Also in Victoria, the station invited community stakeholders to participate, along with national stakeholders, in a live dialogue about the state of cultural diversity and reflection in the media. The colloquium was televised live on a variety of CHUM stations, both local and specialty, but we also made it available free of charge, and it was carried by the Aboriginal Peoples Television Network, Vision TV, and CPAC.

In London, our local station, the new PL, together with CHUM Television, announced a very exciting partnership with the London public library for what is a North American first--a media literacy centre based in the new downtown library. The centre will provide local resources to parents, students, and teachers to better understand, think critically, and study the media, all supported by local teacher training.

Finally, in Toronto, Citytv continues its second year as founding media sponsor to the ReelWorld Film Festival, which celebrates the work of Canadian black filmmakers. We continue as the founding media sponsor of the Canadian perspectives segment of the Toronto International Film Festival.

In each of our communities the station message is clear: everybody is welcome, and everyone belongs.

Glenda.

Â (1225)

Ms. Glenda Spenrath (Vice-President, Finance, Mid West Television Ltd.): Broadcasting means connecting with Canadians. The very essence of our business is the provision of local broadcasting services. To be relevant and successful, private broadcasters must address the needs and interests of their local viewers and listeners. We've been connecting with Canadians for 75 years. Whether it was providing essential information during the 1998 ice storm, helping raise millions of dollars for local charities, or giving people the latest crop report, local private broadcasting has been an indispensable link in communities large and small in every part of this country.

Our community is rich in local programming opportunities, so I would like to give you a quick glimpse of local broadcasting that happens in rural Alberta.

We are situated in the heart of western Canada and our bread and butter is the agricultural and oil industries. As a sunflower follows the sun, so too do we follow the agricultural industry by providing programming on matters of local interest such as our local drought conditions, weather advisories, livestock and commodities pricing, local livestock breeders' forums, and our educational features--our programs Focus on Farming and Window on Agriculture.

The oil industry is also another significant economic driver for Lloydminster. We provide daily local service to this sector on matters such as oil-price information and local drilling and exploration activities.

In our coverage area we have 10 first nations aboriginal communities. We provide extensive programming on aboriginal activities that are of interest at the local band level, such as the native youth conference that was held in the Cold Lake first nations community. All aspects of youth and adult sporting events, including our rodeos, which are of particular interest, are covered.

And this is but half of our responsibility in serving the Lloydminster market. Our off-air responsibilities number many.

As the largest corporate sponsor of the new Lloydminster Performing Arts Theatre, which is celebrating its opening gala today as I sit here with you, we used our stations as a public service vehicle to promote the two-year fundraising campaign for this project. Fifty local volunteers, including myself as treasurer and three of our other staff members, raised $1.8 million. This is the equivalent--to put this into perspective for you--of the citizens of Ottawa banding together and raising $27 million.

Another local organization that we support is the Lloydminster Region Health Foundation. In November, the foundation held a fundraising gala, with Jann Arden as our guest, to raise money for the purchase of a mammogram unit for the Lloydminster Hospital. You see, up until now, if a Lloydminster resident needed a mammogram, she would have had to travel a six-hour round trip to Edmonton for a 20-minute medical procedure. We promoted this event on our stations as a community service because in a small community, when you want something done, you have to stand up and do it. You can't wait for the next guy, because there just aren't enough next guys to go around.

So you see, being a local broadcaster is both rewarding and challenging. Our most daunting tasks now lay before us. We must hold on to our local identity amidst the intense fragmentation and the other issues that have accompanied satellite delivery and find a way to continue to reach out and touch our community.

[Translation]

Mr. Marc Simard (Chairman of the Board, Télé Inter-Rives Ltée (CKRT-TV)): Mr. Chairman, our television stations are in eastern Quebec and Gaspé. We operate four television stations in a small market, and I must say that my family has been in the broadcasting business for nearly half a century. Let me tell you that I have a bit of a problem because I have four children who would all like to carry on in this field that they love so much.

As you know, private broadcasters in Canada not only provide news, but also information that is essential for the community they serve, and this, in my opinion, is a very important public service.

For instance, Mr. Chairman, our small stations spent nearly $10 million over the past five years to improve on-screen services, encoded captioning, descriptive video, training initiatives, scholarships for students and to foster Canadian talent, but also to help in the field of education, health, fund-raising activities, museums, shows or exhibitions by local and national artists, theatre plays, festivals, promotion of literary works and various community activities.

Our local television stations broadcast free-of-charge public interest messages regarding a whole set of social programs like drunken driving, racism, substance abuse and violence.

For instance, private broadcasters have donated more than $4 million of air time to broadcast public interest messages produced by announcers in charge of publicity for children.

The services provided by our local television stations are not exclusively limited to news. For instance, our stations support many non-profit institutions and organizations in the social, cultural, economic and other fields by offering messages free-of-charge and by collaborating in charitable campaigns or broadcasts that highlight the specific culture of their environment by meeting the promotional and information needs specific to the smallest communities which could never make themselves heard otherwise.

For example, in our region, nearly 600 different organizations benefit each year from the free-of-charge services provided by our stations.

Mr. Chairman, without dwelling on this subject, I would like to give you some examples of the services we provide to the community.

This happened in January. You know that on the banks of the St. Lawrence River, in January, when the north wind blows, the weather is not very warm. Thus, on a January Sunday afternoon, I was driving around with my wife and I decided to take a trip to the back country. As we arrived in a small town we saw a gathering of cars. I said to my wife that this was probably an accident and we went to see what was going on. As we got closer, we realized that this was not the case. Many people had gathered in the neighbouring field; some kind of activity was going on. Suddenly, I saw a banner in the distance with the letters identifying both our stations. So I thought that this was an activity we had sponsored. And so we came closer. Of course, the banner was tied to a tree, because when we broadcast messages free-of-charge, we ask the people to identify our station at the venue of the event. And when I saw that the banner had been hung up and was floating in the wind, together with my wife, we came closer to meet the people.

When they introduced the event's organizer, they told me that I could not imagine how thankful they were. They thought that they would expect 300 to 400 persons at their event, but now they had a problem: they were running out of lemonade, hot-dogs and fries because a crowd of 2,000 people had turned up.

I was told that on the previous night, during the Montreal Canadians hockey game, our Radio-Canada station had broadcast their message free-of-charge, as well as before the TVA network news, during peak listening time. They had never expected such a large turn out and they were very happy. So the people shook hands with us, practically embraced us in their arms to thank us.

Mr. Chairman, this is an example of what regularly happens on our small markets. I could also mentioned the hundreds of thousands of dollars we donated to hospitals to try and raise enough funds to buy new equipment.

Â (1230)

I could also tell you about the significant amounts of money we gave, for example, to cultural centres that showcase artists and cannot afford to advertise on television. So over the last five years, we provided close to one quarter of a million dollars in free advertising.

I therefore think that regional television programming is not just about news. Obviously, we try to broadcast very good news programs every evening for our markets. In addition, more than one-third of our staff in a little station such as ours is assigned to news services. A significant part of the service we provide is to ensure that we can help the people in our region.

Thank you.

The Chair: Thank you, Mr. Simard. Thank you for this good message from the beautiful Gaspé Peninsula.

Mr. Larche.

[English]

Mr. Paul Larche (President and General Manager, KICX 104 FM): Merci.

Like all the things that Marc just talked about, and much more than that, we all have to do it within an economic reality that we face. Overall consolidation in retail and other key sectors has been devastating, especially to small, local advertising markets, making truly independent local broadcasting a difficult business.

As mentioned earlier, a broadcasting licence, which once was considered a licence to print money, is far from that in many small communities, including mine. Many have watched local advertising dollars swept away.

Despite these challenges, we are proud of our local roots and the connections to our communities. We believe we deliver an important public service, and we are hoping that public policy-makers will help us find creative solutions to meet the economic challenges we face. We're not looking for a government handout. We are, however, interested in exploring regulatory relief to reflect local programming as priority programming, much like the CRTC has deemed drama and other programming genres as priority programming.

Â (1235)

Mr. Glenn O'Farrell: Mr. Chairman, we'll end with four recommendations: first, to direct the CRTC to implement carriage requirements on Canadian distribution systems in both the analog and digital environments that support the broadcaster's public service role; second, to ensure the primary role of local service through full protection of program rights; third, to recognize broadcasters' social contributions to local communities as Canadian programming initiatives; and fourth, to direct the CRTC to consider creating a priority programming special credit for non-news local programming.

We're open to your questions, sir. Thank you.

The Chair: Mr. O'Farrell, from what I understand, you're going to have a conclusion later.

Mr. Glenn O'Farrell: We would be happy to do that right now to expedite the process.

The Chair: Then we could go on to questions. I think that would be better, because there is very little time left.

Mr. Glenn O'Farrell: Very briefly, Mr. Chair and committee members, we truly appreciate the opportunity to be here with you today, and we thank you very sincerely for the time you have spent giving your attention to our issues. Any questions you may have we will do our best to answer.

The Chair: Mr. O'Farrell, you realize that you have managed to keep the attention of ten members of a committee for four hours. That's quite a feat, because members have all kinds of other jobs. Some have two or three committees to go to, and some, like Mr. Harvard and I, have a debate in the House. Your presentation was certainly worth our attention. Thank you.

I will open the meeting to final questions.

Mr. Abbott.

Mr. Jim Abbott: I'd like to particularly recognize Mr. Simard and Ms. Spenrath, because this is exactly the point that should be delivered by local broadcasters. Unfortunately, the picture you have presented, which is absolutely accurate, without a doubt, in your own situation, is not accurate across Canada.

With respect to the third point--to recognize broadcasters' social contributions to local communities--I would like to suggest that we should also recognize, in some instances, the lack of social contribution to communities, to the point of actually making the licence for such a frequency available to someone who will be reflective of a local community. The knife has to cut in both directions.

Briefly, I'd like to read two things. This one is from a person in Revelstoke:

Twice, it has been my personal experience to be involved in takeovers of smaller broadcasting companies by larger, absentee corporations which promised better, slicker and flashier programming which ultimately resulted in shorter newscasts less local content, fewer public service announcements and a more repetitive music universe.

He is referring to the takeover of broadcasting by Telemedia Radio West Inc. and Copper Island Broadcasting Ltd. for Salmon Arm, Revelstoke, and Golden.

As you have seen...the trend leans heavily toward the voracious acquisition of smaller radio stations by broadcast behemoths who reduce local service in the name of economies of scale....

The second one is from another gentlemen from Golden:

As a former broadcaster the removal of local broadcasting from Golden is a great disservice to local residents. In 1984 the people of Golden were excited to get a local broadcaster instead of listening to a repeater.

As the appointed program manager in 1984 I was handed the task of filling out forms for the CRTC explaining how we were going to provide news, sports and local event coverage in order to be granted the studio licence.

Well, that's gone. In your opening statement, you acknowledged that private radio has access to a controlled marketplace, and truly it does. But when the broadcasters, in this specific instance and in other instances all across Canada, have walked away from commitments made as little as 18 years ago, as in this case, would you agree that Revelstoke, Golden, and Invermere residents should be able to reclaim their frequency so someone will come in and do the job of giving access to the local community and its people? Right now, it is simply not happening.

Â (1240)

Mr. Glenn O'Farrell: Mr. Abbott, we feel very strongly that private broadcasters, in both radio and television, overwhelmingly do a fabulous job for their communities, their regions, their provinces, and the country as a whole. We think the contributions that have been made over the years go well beyond the call of duty, because for all of the work done by private broadcasters in their communities, very little recognition is generally given. That may not always be the case, I recognize that, and I respect your right to see things differently.

That said, radio has evolved. A few years ago, radio was not a good industry sector to be part of, because it was having very difficult times. The CRTC, in its wisdom, and we commend it, adopted a radio policy that allowed for multiple licence ownership. It was clear that atrophy was taking over in the sector as a whole, and something had to be done. Public policy stepped in, in a smart way, and introduced multiple licence ownership. We now have a much brighter picture--not a perfect picture, but a much brighter one, with more contributions being made to communities and to Canadian music and Canadian radio, music stars.

That said, the flip side of consolidation is that over the course of the last few years, 29 new radio licences have been issued by the CRTC, 27 of which have gone to new players. So, yes, indeed, the system is alive and well. There are new players coming in and new licences being granted, and from a consumer perspective there is more choice now than ever before. I think this is a testament to the success of Canadian broadcasting.

Mr. Paul Robertson: To reinforce Glenn's point with some key numbers, with the increase of Canadian content from 30% to 35% recently; the $22 million spent a year in support of Canadian talent; the $50 million being put towards the system in Canadian development through the ownership transfer transactions; and the other $37 million in copyright fees, it would be really hard to say that local radio isn't doing its part.

[Translation]

Mr. Marc Simard: Allow me to add something. I appreciate your comments very much. Of course, I will be speaking more from the point of view of television, even though your reference earlier was perhaps more about radio. However, I appreciate it very much, because you seem to acknowledge the role that small television stations can play in Canada.

I acknowledge that there are fewer and fewer small private broadcasters like myself and the others around me. It may be unfortunate that there has been so much consolidation in the country. However, there were reasons for that. A great many specialty channels became available, and general television like ours obviously faced very strong competition.

I would like to ask for one thing, and this may be a role that the CRTC could play. Since I have spent many years in broadcasting and hope to spend many more, I think that the CRTC has always played an outstanding role and that it still has a very important role to play. I think that the CRTC should always insist that small private broadcasters serving small communities remain in Canada, regardless of whether these small regional television stations belong to the Canadian Broadcasting Corporation, to private broadcasters, to the major networks or to small owners, as is our case.

Thank you.

The Chair: Go ahead, Ms. Gagnon.

Ms. Christiane Gagnon: Thank you, Mr. Chairman.

We talk a lot about local production and broadcasting, but I think local production is viewed differently depending on one's point of view. How would you define local production? Is it local broadcasting? Very often, the national networks will produce a program in regions with their production team. What does the term "local production" implies for you, so that we have a better idea of what you are doing?

Mr. Marc Simard: One thing is certain, Ms. Gagnon. In the regions, whether the stations are owned by small shareholders, as in our case, or whether they belong to the major networks, the important thing is that there be some local production. I think that is essential.

Obviously, with all the competition in today's world, and given the way in which conventional television is structured, it is true that we cannot produce many one-hour programs, because the networks do not leave us much room.

So, in the small regional stations, since we are small, we have tried to develop something. In a day of television programming, since we are in small markets, there are many places where we cannot show advertising, because we do not sell enough of it. As a result, the small television stations in Canada have developed many one- or two-minute productions that they broadcast throughout the day and throughout the week. This is how we can help our people.

You asked me a question about the definition of local production. I think that local production must come from the region itself and must be produced in the region, by the local broadcaster.

Ms. Christiane Gagnon: Thank you.

What is your opinion about increasing the 33% level of foreign ownership? What impact would this proposal have if it were accepted?

Â (1245)

Mr. Marc Simard: I will ask Glenn to answer this question.

Mr. Glenn O'Farrell: Thank you, Ms. Gagnon.

Foreign ownership is a subject of interest shared by our members at the moment. Our interest is that Canadians must maintain control of their programming companies. As we mentioned earlier, given that the consolidation we are talking about is to create companies involved in cable distribution or daily newspapers, we need to consider not only the Broadcasting Act with respect to foreign ownership, but also many other pieces of legislation such as the Income Tax Act and the Telecommunications Act.

However, at this stage, there is a consensus among the majority of our members to the effect that Canadian control of operating undertakings must be maintained.

[English]

The Chair: We have ten minutes to go and there are four more questioners, so please just keep it concise.

Mr. Harvard, Monsieur Duplain, Ms. Lill, Mr. McNally, and then we'll close.

Mr. John Harvard: I would say to Ms. Spenrath and Mr. Simard that I certainly recognize the good work your industry does in promoting the well-being of your community. I have no doubt about that. Sarah, I recognize the kind of local programming your company has done.

I have a concern relative to what's called local and regional programming on television in prime time. The key or operative words are “in prime time”. Local and regional programming on television in prime time, in my opinion, is an endangered species, if it's not already extinct. I'm wondering whether it can ever be revived. I'd like to hear you on that.

My understanding of the CAB's position is that you don't want the CBC to do any of this. In fact, I think you'd like to see the CBC get out of local and regional programming. I can't see the specialty channels doing it. That's not their mandate. They're more interested in national stuff. In your industry, do the private broadcasters, telecasters, have any kind of a business plan to revive local and regional programming on television in prime time, or is that period of the day just written off forever?

Mr. Glenn O'Farrell: Thank you, Mr. Harvard.

It was only a few years ago that the CRTC conducted a full review of its television policy. Frankly, the subject of local programming was very present in that discussion and debate. At the end of the day, the commission established for prime time a requirement that revolved around this notion of priority programming. Priority programming encompasses various categories of programming, but not local. That was the determination made by the CRTC at that time.

As you may have noticed, we suggested in our fourth recommendation that the CRTC include in priority programming, in that broader concept, the concept of non-news local programming, precisely for the reasons you are referring to. That is because the policy that was established by the commission a few years ago did not include “local” under its definition of priority programming. We're suggesting that because broadcasters will do news, maybe the commission should consider extending and broadening the definition of priority programming to include non-news local programming. That's our fourth recommendation.

Â (1250)

Mr. John Harvard: Which comes first, your plan or the credit you're asking from them? It would seem to me that you should lay out the plan, and then perhaps the CRTC can respond or recognize that with some kind of a credit.

Mr. Glenn O'Farrell: There was great debate at the time, during the TV policy review. There was all kinds of advocacy around the issue. They made a determination, and we have to play by the rules that are set by the commission. We're suggesting that those rules be amended to allow for this and we will happily play by those rules, because we're suggesting them.

Mr. John Harvard: Thank you.

[Translation]

The Chair: Mr. Duplain.

Mr. Claude Duplain (Portneuf, Lib.): I would like to congratulate you on your presentation. It was most interesting. It is not always easy for us to understand properly all the aspects of broadcasting.

I would like to ask you a direct question. I would like you to explain to me the difference between local and community programming. We have also heard the requests of the community sector. Perhaps this applies to you more, Mr. Simard, because you are a smaller broadcaster and community stations are smaller as well. I would like to know what distinction should be made between local and community programming. According to what we heard from the community sector representative, who spoke about their demands to the CRTC, local production is not clearly defined by the CRTC either.

Mr. Marc Simard: My first answer is that the money we spend to produce local programs in our area... For a moment, let us exclude the newscast and all the community supports, where we produce one- and two-minute information pieces to promote all our regional activities.

In a small market such as ours, in my stations, we produce approximately 50 half-hour programs a year. I must tell you that this is a huge amount of production for a small station such as ours.

These programs have a much higher budget than that of a community station. In addition, over half of the 50 programs we produced last year were broadcast during prime time.

Let me give you an example. Last summer, we produced a series of programs called La vie en vacances, which talked about all sorts of activities going in our region and involving francophones in New Brunswick. Our two stations serve all the francophones in New Brunswick. The longest program lasted one hour. At the end of the summer, we asked all our television viewers which of the programs we broadcast during prime time in the summer they would like to see again. The people voted and unanimously asked to see again the special one-hour program on New Brunswick.

I think that a conventional television station such as ours could certainly devote more resources to producing a prime time program and keep an audience.

The proof is that in the ratings, some of our locally produced programs got better scores than many network programs, including those of Radio-Canada, TVA and TQS.

The Chair: Mr. Simard, you have a lot to say.

Mr. Marc Simard:I am sorry.

The Chair:Unfortunately, the clock is ticking.

Mr. Marc Simard:You are right, Mr. Chairman.

Ms. Sylvie Courtemanche: I would just like to point out, Mr. Duplain, that the community channel is the result of a requirement that was placed on cable operators 30 years ago because, at that time, the CRTC was granting distribution franchises in certain markets

The main goal of the community channel is to give the community access to the Canadian broadcasting system without having to obtain a licence. People can go to the community channel if there are topics that interest them, whether it is city council meetings or something else. The public has access to the Canadian broadcasting system.

Basically, there are no commercial objectives like in the case of a local broadcaster.

Â (1255)

Mr. Claude Duplain: We know that, but I mean...

The Chair: I think we have to stop there.

[English]

Ms. Lill, Mr. MacKay and then we'll close. It's almost time.

Ms. Wendy Lill: Thank you.

I appreciate in your submission your commitment to nation-building through a local reflection strategy. It's certainly something we are committed to, in this committee.

But across this country we are hearing that local reflection, local culture, is not being nurtured. We're hearing that the CBC's commitment to local programming has been cut, and people are crying out for more of that. In small communities, we're hearing that their local radio newsrooms have been dismantled, and the norm in most markets is the choice between corporate radio chains, based on a music genre that's being piped in from Toronto or Montreal. Where's the local reflection there?

On the TV side, some of your members are doing good programming, but it seems only when there are large lucrative markets--not in northern Ontario, Sudbury, Thunder Bay, Mabou, Sydney, or Yarmouth. How can we not see this local nation-building strategy ring anything but hollow if large parts of the country are not benefiting from it and are simply not seeing it?

Mr. Glenn O'Farrell: Thank you, Ms. Lill.

I'm going to ask Paul Larche to speak to this from a radio perspective in a small market.

First, I would comment on the following. I think we have to realize that there is a parameter called the art of the possible that has to be factored into any discussion that relates to local service and local programming. We have introduced, by way of the public policy of this radio broadcasting and television broadcasting system, a system where choice is embraced in a manner that is almost unprecedented. Canadians have access to choice in the way of programming services in every part of the country now, well beyond whatever would have been anticipated five or ten years ago.

It's absolutely phenomenal when you think that a person living in any remote community can buy access, by way of a subscription, to a direct-to-home satellite provider and receive as many channels as they possibly could want. That comes as a net benefit to consumer choice. In certain markets that comes at an expense to local programming, because it fragments the viewing audience, and therefore the audience that would otherwise be available to watch the programming isn't watching it because they have so many other choices.

I raise that as a matter of the art of the possible. Paul can speak to it from a radio perspective in his market.

Mr. Paul Larche: Thank you.

It's interesting, we've heard a couple of comments such as the comment earlier about Tele-Media out west cutting back services, but my story is a little different. I worked for Tele-Media for 17 years and five years ago they gave me an opportunity to buy one of their radio stations. So this was going the other way.

The radio station that I bought had a staff of six, in Midland, Ontario, and had half its programming piped in from another market. At that station now we have a full-time staff of 16; we went from a newsroom of one person to four people; we do 100% of our programming, 24 hours a day, from our radio station; and in the last year we finally made a bit of a profit.

So I'd like to add to some of the points that have been made that it's not always going just one way; it's also going the other way. And I think that the CRTC recognizes and the CAB recognizes that there is a place for independent broadcasters, despite our small size, and we do contribute and we do have success stories, as you've heard from this panel today.

Ms. Sarah Crawford: If I can comment for five seconds, I can't let this go unsaid: CHUM is a mid-sized broadcaster with an absolutely passionate commitment to developing local television, and we are chomping at the bit to do more local television.

I would expand on that if I had time, but I don't, so thanks.

· (1300)

Voices: Oh, oh!

[Translation]

Mr. Marc Simard: Same here, Mr. Lincoln.

[English]

The Chair: Ms. Crawford, we'll bear it in mind when we get complaints from different parts of Canada that they are losing their local stations; I'll ask them to contact Ms. Crawford, and Monsieur Simard--and, oh yes, Mr. Larche.

Last question and certainly not least, Mr. McNally.

Mr. Grant McNally: Thanks, Mr. Chair. I'll be brief. And I don't really have a question, only a comment.

First of all, I want to thank all of you for your presentations and all the good work you are doing. It is noticed in all communities across the country. Even big broadcasters like CKNW in Vancouver have a huge impact in the lower mainland through what they're doing, not just on the air but also through their involvement in the community, raising money through the Orphans' Fund.

At every highly visible event we get the participation of a smaller broadcaster, called Radio Max, which broadcasts in my community but is not located there but in the Fraser Valley. Although they don't physically have a plant there, they are in my riding because their signal goes there, and they contribute immensely to the community at many different events.

By way of comment, then, I want to thank you for what you're doing. Sure we can always improve, but let's also acknowledge the positive things you're doing.

The Chair: Mr. Robertson, Mr. O'Farrell, and all your colleagues sitting at the table and beyond, on behalf of the committee we would like to thank you very much for what has been a long morning, but I think a profitable morning, for us certainly and I'm sure for you. You've brought us very clear recommendations and that really helps us in our work. Your brief and your presentation today have put out recommendations that are certainly very clear in their intent and in their importance. We are going to pay a lot of attention to what you had to say and what you have written. We appreciate very much your presence here today. Thank you very much for coming.

If I may, we have a short business meeting that must take place in camera, according to our rules. I would ask the audience to leave as soon as you can do it.

Mr. Glenn O'Farrell: To correct the record, Mr. Lincoln, we will provide the committee with accurate schedules reflecting Canadian programming in prime time on private broadcasters.

Thank you very much.

The Chair: Thank you. We'll be in touch.

This meeting is adjourned to the call of the chair.