CHPC Committee Report

As noted at the outset, the world economic downturn and long-term structural changes have resulted in what has been described as a crisis for conventional and local television broadcasters. In his first appearance before the Committee, Mr. von Finckenstein said: “... conventional television now finds itself under a great deal of financial pressure, which the industry claims is threatening the viability of local programming.” He went on to say, “... television stations serving a population of less than one million are having a hard time maintaining the quality and quantity of their local programming.”[21] He also noted that the success of Canadian pay and specialty channels had resulted in the fragmentation of conventional television audiences, a phenomenon that has been exacerbated by the Internet.

The Committee heard, however, different interpretations about the extent and the causes of the financial pressure. Conventional broadcasters who appeared before the Committee said the conventional television business model is broken. These included Quebecor Media Inc., CTVglobemedia, Canwest Media Inc., CHCH, CBC/Radio-Canada, Remstar — TQS, the Canadian Association of Broadcasters (CAB), the Jim Pattison Broadcast Group, and the Newfoundland Broadcasting Company, as well as the Société des auteurs de radio, télévision et cinéma.

For them, there are long-term, structural problems in the industry, which have been accelerated by the economic crisis. These include audience fragmentation that has resulted from the increasing numbers of specialty channels, declining advertising revenues, and the challenges posed by new media. To quote Pierre Dion, president and chief executive officer of Groupe TVA (part of Quebecor Media Inc.), the structural problems mean that:

[O]ur costs are increasing and that our revenues are decreasing through fragmentation. There are many different ways for advertisers to sell their products. So then, revenues are declining, costs are increasing and earnings across the country, even in major urban centres, are declining. The same trends are emerging everywhere, whether it be for national or local advertising revenues.[22]

For CBC/Radio-Canada, which relies to a large extent on parliamentary appropriations, the problem of declining television advertising poses particular problems, as explained by Mr. Lacroix:

Without the financial flexibility available to other commercial broadcasters ... CBC/Radio-Canada has no access to capital markets or to commercial borrowing to manage its cashflows. In an economic downturn, that means we cannot use a simple line of credit to lessen the impact of the decline in revenue and smartly manage ourselves out of a slowdown. That means that for every dollar of revenue lost, the corporation must immediately cut a dollar somewhere in order to balance its budget in the same fiscal year.[23]

On the other hand, a number of witnesses told the Committee the problems of conventional television are temporary and cyclical in nature. These groups included BDUs such as Rogers Communications Inc. and Shaw Communications Inc. and groups such as the Documentary Organization of Canada, the Canadian Film and Television Production Association (CFTPA), the Directors Guild of Canada, the Association des producteurs de films et de télévision du Québec (APFTQ), the Writers Guild of Canada, the Alliance of Canadian Cinema, Television and Radio Artists, and the Alliance québécoise des techniciens de l’image et du son.

For example, Phil Lind, vice-chairman of Rogers Communications, told the Committee: “The system is not broken. TV is a cyclical business. It's gone through some rough patches before and recovered to earn billions of dollars for its owners. History tends to repeat itself. With the greatest respect, our advice to this committee is simple: give history time to repeat itself.”[24]

Some of those who said the problems of conventional television are temporary argued that conventional broadcasters brought some of the problems on themselves. For instance, Peter Bissonnette, president of Shaw Communications said: “Broadcasters make business decisions to spend more than $700 million annually on American programming. In one case, they amassed a $4 billion debt from the purchase of non-Canadian television stations and publishing properties.”[25] Brian Anthony, national executive director and chief executive officer of the Directors Guild of Canada, made similar points, saying, “Despite declining ad revenues, the broadcasters have continued in their determined drive to outspend each other and bid up the cost of foreign programming in the process. That, coupled with other factors such as debt load and dubious business decisions, is their problem — a problem of their own making.”[26]