Monthly Archives: April 2013

The Benefits Bulge*

It might have been lost in the dropped jaws reaction to Kirstine Stewart’s sudden move from CBC to Twitter Canada, but yesterday Mario Mota released his 2013 Canadian Television Benefits Monitor. The Report, which is available in detail to subscribers and summarized in his press release, tracks each year English-language broadcasters’ reporting on their CRTC-mandated tangible benefits packages. Those are the benefits required to be spent on the Canadian broadcasting system as a condition of approval of an acquisition of Canadian broadcasting assets. The 2013 Report tracks spending for the year ending August 31, 2012. It takes this long for the broadcasters to report to the CRTC, for the CRTC to publicize the reports and for Mario to then review and analyze the reports.

We are currently enjoying substantial benefits spending on Canadian television and we now have the data to demonstrate that. Due to benefits packages primarily from Bell, Shaw and Rogers that were determined in 2011 but finally started to be spent in 2012, benefits spending jumped from $52 million in 2010-11 to $177 million in 2011-12. Not all of that was for onscreen benefits (i.e. television programming) and the Commission did allow for unprecedentedly low allocations for onscreen benefits for Bell-CTV and Shaw-Global. Even so, onscreen benefits spending increased from $44 million in 2010-2011 to $113.5 million in 2011-12. That is an increase of 158%.

Benefits are to be spent roughly equally in each year but broadcasters will not be sustaining this level of spending in each year going forward. This may in fact be a high water mark, perhaps with next year. Some packages expire in 2014, others in 2015 and the final ones in 2019. There will be smaller packages approved for Bell-Astral 2 (most of which will go to French television or radio but some for TMN), and Teletoon and Family Channel transactions are still to be determined. Currently, according to the Report the total to be spent by 2019 on onscreen programming is $355.4 million.

To give some context to these numbers, the 2011-12 budget for CMF English Performance Envelopes was $189 million. So last year’s onscreen benefits spending of $113.5 million was 60% of the full amount that was available from CMF from the performance envelopes. Additionally, benefits are to be incremental to what a broadcaster already has to spend on Canadian programming through their CPE and/or PNI CPE (see Acronym Decoder). That’s the other part of the story that we do not know yet – how much did the broadcasters spend due to the Group Licence Policy before they started spending benefits money. We need to know that before we can really get a sense of how much money is in the system for Canadian programming.

But it’s a lot! We know that much. What happens when it has all been spent? I have said this before and I am not alone – we have an opportunity here to leverage increased spending on Canadian programming to try and create permanent positive change. Last year in an article in Carrt (subscription needed) Mario Mota suggested that we leverage the increased funding in Canadian programming by implementing Non-Simultaneous Substitution (“NSS”). NSS would break English Canadian broadcasters dependence on the US schedule, give Canadian programs stable timeslots thereby increasing audiences and therefore increasing revenues. If NSS was in place, the benefits-funded “Bomb Girls” would not have been pulled off the air for a simulcast of “Survivor” and might have had a chance at a better time slot when it did return. [See Kate Taylor at the Globe and Mail].

There are technical hurdles to NSS and I am not qualified to discuss them. NSS is just one of the ways though that we can try and take advantage of the current ‘bulge’ in Canadian programming. We have audiences watching Canadian drama in higher numbers than they have in years. How do we sustain that appetite for Canadian programming and the willingness of Canadian broadcasters to keep spending money on Canadian programming when they no longer have to. I agree, getting rid of simultaneous substitution so that Canadian broadcasters have to rely on their Canadian programming is another solution. I am just not sure that the Canadian broadcasters could survive a cold turkey withdrawal of their crack cocaine. Then again, who says it would have to be cold turkey?

What else can we do? Perhaps future benefits should be put in endowments like they used to be so that they could have long term sustained investment in Canadian production as the Independent Production Fund, Cogeco Fund and others have been able to do. That is something for the Commission and broadcaster applicants to consider. Perhaps some of the benefits money yet to be approved could go to building audience demand (i.e. promotion, social engagement, sustaining a star system) so that broadcasters risk alienating their audience if they stop funding Canadian programming. [Note – in no way am I advocating a return to entertainment magazine programming, a notorious broadcaster boondoggle that was intended to build a star system but instead allowed Canadian broadcasters to spend money on promoting a lot of US programming with Canadian stars in it instead of spending it on actual Canadian programming.]

I am sure that there are other things that we could do to leverage this ‘golden opportunity’ if we put our minds to it. We need to learn from the last golden age – the mid-90s. We had so many great programs that Canadians loved to watch: “Street Legal”, “Due South”, “Da Vinci’s Inquest”, “Road to Avonlea” to name just a few. Those shows trained screenwriters, directors, actors and producers and developed a talent pool. When the money dried up with the 1999 TV Policy, which got rid of an expenditure requirement for broadcasters, a lot of the talent went south and did not return. That is what we are risking if we do not have a plan in place for post-2019. We are right now growing our talent pool but will they have careers here in a few years.

*And for the record, I was thinking more of a cow in the middle of a snake kind of bulge, nothing Jon Hamm-ish.

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New Broadcasting Participation Fund

Last Spring, as part of the CRTC’s approval of the Bell-CTV transaction in 2011, the CRTC approved Bell’s proposal to create a Canadian Broadcasting Participation Fund. The goal of the Fund is to help public interest and consumer groups participate more often and more effectively in CRTC broadcasting proceedings. The Fund will reimburse internal and external costs of lawyers, expert witnesses and consultants necessary to draft submissions and attend at hearings. There is a grid for approved costs for the lawyers, expert witnesses and consultants but also for reimbursement of travel, accommodation and meals.

The guidelines are modeled on the guidelines that support reimbursement of costs in telecommunications proceedings. Unfortunately those guidelines are drafted in a way that assumes that the reader has also read the various decisions that support the process of reimbursing costs of participation in telecommunications proceedings. So they’re not that clear. For example, an Applicant is defined as someone who applies. The goal is to support nonprofit public interest and consumer groups and individuals (though the forms are drafted as applicants are only groups and not individuals). I did confirm with the Fund that individuals could apply. Public interest is not defined but there is the suggestion that it includes ‘advocacy and service groups’. The Fund confirmed that two of the key determining factors in eligibility are that the applicant’s intervention is relevant to the proceeding and that they are non-commercial (i.e. no broadcasters).

Bell allocated $3 million of their mandatory benefits to the Fund. They have also proposed allocating another $2 million to the Fund from the upcoming Bell-Astral2 acquisition, so if approved the total Fund will be $5 million. The Fund was  launched last Friday and it is now accepting applications for reimbursement. As the Fund was initially approved March 26, 2012, it will reimburse costs from participation as of that date.

Participation in broadcasting proceedings can be expensive. A submission can be more effective when at least reviewed if not drafted by someone with experience with the rules and regulations of the CRTC, including the details of the Broadcasting Act. Hearings are fairly formal proceedings where commissioners will challenge intervenors on their position to better understand them and get information on the record. There are a number of organizations that have to pick and choose which proceedings they will participate in because they just can’t afford to weigh in on all the ones that affect them or their membership. Few individuals and small organizations attend, particularly if they are located outside Ottawa. It is hoped that this Fund can address those concerns and help the CRTC hear from more than the usual suspects.

[Yes, this post could possibly sound self-serving but honestly, I’m interested in sharing widely the availability of this Fund because I think it will increase the quality of discussion even if intervenors were to use it just to cover travel costs. My heart goes out to those passionate individuals and small groups who find the issues important enough to spend their own money to attend. I’d like to see more of them, more of the Marjorie’s, and I would like them to be able to get some help.]

Does Canadian TV need an overhaul? Maybe. Probably.

Yesterday, Scott Stinson questioned whether we needed the CRTC in his column in the National Post.  I dismissed it as the usual ‘free market’ knee jerk ‘I hate the CRTC, I want my Superbowl ads’ kind of article.  So I was surprised that people within the creative industries were positively circulating it.  That set me off on a twitter rant.  I am calmer now so will aggregate my thoughts into a post.

Stinson’s article seems to have been prompted by two things.  The first, jokes from the WGC Screenwriting Awards, I won’t address as I was, not surprisingly, not there.  The second catalyst was the current mandatory carriage hearings, which Stinson suggested was a ‘lot like deciding who would get access to the horse and buggy even as Henry Ford was unveiling the Model T’.   He’s not wrong there but his thesis I have a problem with:  ‘why do we have the CRTC, exactly?  And just what do we get out of this wacky regulated system?’.  That’s where my rant started.

What do we get?  A Canadian broadcasting system.  That means Canadian-owned broadcasters who have a regulated commitment to fund and air Canadian programming.  Stinson says that because of the subsidies, we have a system ‘where anyone who wants to make a series in Canada has to ensure first that it will qualify for subsidies’.  Well, if we didn’t have the subsidies how exactly would Canadian television producers make a series?  We are a small market dominated by the U.S. media industry, which dominates most of the world.  We do not have a large enough population or economy for the private sector to finance television.  Without the CRTC protecting Canadian ownership of the broadcasters we would only have U.S.-owned broadcasters.  Why would they license Canadian television rather than amortize their costs and broadcast the same schedule that they air in the U.S. ?  They wouldn’t.

Stinson makes reference to recently cancelled “Less Than Kind” and “Bomb Girls” as examples of failure.  “Less Than Kind” only exists because of CRTC-mandated benefits.  It ran for 39 episodes despite the death of its lead actor.  A pay broadcaster picked it up after the primary broadcaster, Rogers, decided to no longer support it.  To me, this is a success story.  “Bomb Girls” did so exceptionally well in 6 episodes that Shaw decided to license a second season for 18 episodes.  CRTC-mandated benefits made it possible.  After substantial audiences in the first season, for some reason Shaw decided to broadcast the second season at the same time as “Murdoch Mysteries” on CBC.  I believe that was the major reason why “Bomb Girls” didn’t enjoy the same level of audience in the second season – competition from another, similarly themed, Canadian drama series that was already several episodes into its season.  Not a US drama series but a Canadian drama series.  “Murdoch Mysteries” was also dropped by Rogers (which frankly is trying to find itself as a Canadian broadcaster), picked up by the CBC and has been enjoying over 1.2 million viewers each week.  Another success story (and don’t even get me started about “Flashpoint”, “Orphan Black”, “Motive” and quite a few other success stories).

Television production spiked in 2012 from $2.12 billion in 2011 to $2.57 billion in 2012 according to the CMPA 2012 Profile Report.  We do not yet know whether the spike was completely due to the large amount of benefits that are now flowing into the system or in some way also due to the Group Licence Policy and CPE and PNI CPE (see the Acronym Decoder).  Next week, Mario Mota of Boon Dog will release his annual “Canadian Television Benefits Monitor” but in a tweet he teased that “2011-2012 TV benefits spending about the same as previous 4 yrs combined”.  There is more money in the system and more Canadian television is being produced, because of regulation (i.e. the CRTC), than in years.

Yes, the hearing for s. 9(1)(h) mandatory carriage licences does seem anachronistic (as Michael Macmillan of Blue Ant said today).    Which is probably why the CRTC is being so tough on applicants and their requests for mandatory carriage and, for incumbents, rate increases. CPAC was questioned on its need for maintained mandatory carriage since it is recognized as essential to Canadians and owned by the 6 biggest BDUs.  APTN was asked when it would be able to stand on its own feet without mandatory carriage and strongly urged to figure out how to do just that.  Every new applicant was challenged to justify how it was ‘exceptional’ enough to qualify for mandatory carriage.  Canadians do not want their cable bills to increase and I believe that Blue Ant was right today when it said that increased cable bills could lead to increase cord cutting or cord shaving which would be detrimental to the existing broadcasting system.   (Yes, cable bills have been going up for years without subscriber loss but there are reasonable alternatives now.)  But does that mean that the CRTC should not have this hearing and that somehow having the hearing justifies its dismantling?   No.

Does the Canadian broadcasting system need improvement?  I think we can all agree to that, including the CRTC.  Without the CRTC how do we do that?  Do we advocate scrapping the Broadcasting Act and the CRTC with it and let the free market dictate what gets made and who airs it?  I seriously do not think that any of us want the broadcasting system that we’d end up with then, it as it would likely be nothing but retransmission of US signals.  Or perhaps we should work within the CRTC framework to improve the system.  Canadian broadcasters are holding on tightly to the old models that have worked so well for them but their days are numbered unless they adapt.  The unregulated system is growing and we risk being lost in that world.  The current lack of Canadian programming on Netflix is a harbinger of what is to come.   The current high level of Canadian television production risks being a lost golden age unless we spend the time now to figure out how to ensure that regardless of platform we still have high quality Canadian television production and Canadians know that it’s out there.

That’s what we have to do.  End of rant.

CMF Performance Envelopes – What Do the Numbers Mean?

Today the CMF released its performance envelopes for each broadcaster for 2013-14.  That means that we all now know how much each broadcaster’s production and development envelopes are at the CMF.  As envelopes are based on a nightmarishly complex set of calculations based on ‘factor weights’ (more on that in a second), they can fluctuate, sometimes wildly, from year to year.  If you are a creator or producer it is important to know the size, and possible change, of a broadcaster’s envelope before you start pitching them or trying to get a greenlight.  And if their envelope went down this year, a look at their factor weight performance might help you find a way to pitch your show as a way to improve performance next year.  More on that in a second too.

First let’s talk about the overall pool.  As I mentioned earlier, BDU revenue growth is slowing and it has an impact on the CMF.  They are projecting a decline in BDU contributions next year and have cut operating costs by 6% and the total Performance Envelope by 4.6%.  So almost all of the broadcasters have been cut by at least a little bit.  Some years there have been very significant swings due to a particularly successful audience year, regional production or above-threshold investment or the opposite but there aren’t any such major swings this year.

Envelopes are calculated using Factor Weights, which reward the broadcaster for meeting certain goals and given them a greater share of the money.  It is a very complicated process as the calculations are also broken down by genre:  drama, children’s, documentary and variety and performing arts.  The factors are 1) Audience Success (Total Hours Tuned), 2) Audience Success (Original First Run), 3) Historic Performance, 4) Regional and 5) Digital Media Investment.  The factor weights have differing impacts on each broadcaster depending on their programming priorities, history, language and makeup of their corporate group.

The results for production are here.  CBC has a slightly smaller envelope at $58 million (-$4mill).  Bell Media is slightly larger at $32.5 million (+$759K).  Their huge uptick in production due to benefits spending (and the larger audience from all that original production) will likely have a greater impact next year.  Shaw is down a little at $27 million (-$2mill).  Corus is also down a little at $21.9 million (-$1.8mill).  Rogers has the single largest increase to $9.7 million (+$3.8mill).  While their level of production has stayed the same (replacing Murdoch Mysteries with Seed and Package Deal) the increase comes partly from the two new shows being regional. APTN loses the most at $4.05million (-$4.778), in large part due to a drop in regional production and digital investment.

It’s also worth noting that there are a few new entrants:  Afroglobal Network, Ethnic Channels Group, New Tang Dynasty and The Weather Network.  Changes last year to the guidelines means that they (along with a few other smaller specialty services) have minimum envelopes which are actually large enough to allow them to commission shows or partner with a larger broadcaster to commission shows (and grow their envelope).

So what do you do with this knowledge if you are a creator or producer?  The first priority is always matching the project to the broadcaster who is looking for that kind of material. But you can add elements to your pitch if you think that your project could help your target broadcaster with their Factor Weights, particularly regional or digital media investment.  If the broadcaster you’re pitching says that they have less money this year then check the list and confirm it.  Almost everyone will be tightening their belt a little bit this year – except those with benefits to spend (i.e. Bell, Shaw and Rogers).  If you are pitching a smaller broadcaster then think of ways that they might be able to partner with another broadcaster so that your project can help them grow their envelope.  Showing an understanding of their challenges might help you get through their door.

[Thank you to Suzanne Keppler, Manager, Program Reporting at the CMF and fellow wonk, for assistance with some of this data.  She is the Performance Envelope Queen.]

Canadian Media Policy – Is There Any Fun Left?

Recently one of my wonks said over cocktails that all the big tv policy issues had been dealt with and now there was nothing to do but get the work done.  I’ve been thinking about this and I have to disagree.  After years of fighting a decline in Canadian television programming and particularly Canadian drama there is now the Group Licence policy, expenditure requirements and Programs of National Interest (PNI).  Once Bell-Astral is done, it is unlikely that there will be any more large acquisitions.  Or so they say (I’ve heard that one before).  There is a lot of benefits money in the system, there are PNI expenditure requirements and the BDU contributions to the CMF are still going strong.  So what is there to worry about?  Promotion?  No – I’m not going there.

We have a really big challenge that few seem to be considering.  We should be thinking now about how to fix the system that is going to be broken in a few years.  The Bell-CTV and Shaw-Global big pots of benefits monies will be spent by 2017.  By that point, BDU subscriber erosion will likely be very real as more and more cut the cord, buy their iTunes series subscriptions, watch Netflix or catch up the next day on broadcaster digital players.  [Update:  Yes, I did notice that the CRTC released 2012 financial results for BDUs right after I first posted this, and that demonstrates that erosion hasn’t happened yet as subscribers have grown by 2% for cable, though dropped by 1.8% for satellite.  But revenue growth is slowing, most likely due to subscribers cord shaving, ie paying for fewer services though staying in the system.  CMF contributions have grown but that growth has slowed down as well – and note that contributions to Canadian programming are just CMF, LPIF, independent funds and other BDU mandated contributions, not benefits or CPE as they are reported at the broadcaster level.  I stand by my worries for the future.]  BDU contributions to CMF will go down and this government is unlikely to make up the difference.  So how are we going to finance Canadian television?

I can hear the voices saying ‘why do we need to’ and that is an exhausting argument to deal with but I’ll say this quickly.  Canadians want Canadian television.  Look at the audience numbers for “Murdoch Mysteries”, “Motive”, “Cracked” and “Bomb Girls” just to mention a few on the air right now.  I do not believe that Canadians watch those shows just because they are Canadian but because they are good tv that tells stories that Canadians want to watch and reflect values that Canadians share.  So it is important as a society that we continue to be able to offer Canadians the choice to watch quality Canadian television.

How are we going to fund it?  I have not yet heard a viable proposal for how we are going to continue to offer Canadians choice in 2018.  The ISP levy is the cleanest but since the case was lost at the Supreme Court of Canada it will most likely require legislative change.  There is so much resistance to the idea though, particularly from the BDUs who are also ISPs, that an ISP levy is not likely to be an easy solution.  At Prime Time, the Chair of the CRTC told producers to look outside Canada for financing and explore co-ventures.  The problem with relying on foreign financing is that the resulting programs are overly influenced by the creative interests of that foreign financing and we end up with “Sue Thomas F.B. Eye” rather than “Flashpoint”.

It worries me that I’m not hearing conversations about how to solve the problem.  I am reading about the imminent death of Can Con regulation so those on the other side are gleefully anticipating the future.  For those who understand that the system has to change but there still needs to be a system, there aren’t any round table discussions, working groups, calls for papers or one-day symposiums so that we can try to figure this out.  Everyone seems to be taking a breather after a very hectic five or six year period and I get that.  However, if we’re not careful we are going to wake up in a few years with a broken system and no way to fix it.  No amount of promotion is going to help if there are no Canadian shows available to watch – on any platform.

CBC New Season

Just a quick post to offer some thoughts on the 2013-2014 season announced by CBC today. We’ve been wondering how the CBC would manage their budget cuts and keep quality Canadian programming on the air and we can now see a couple of the strategies. First, renewals are a lot cheaper than a new show so the old favourites like Rick Mercer and Heartland have been renewed but also the new (to CBC and half the country) Murdoch Mysteries and Cracked. Second, it’s cheaper to order more episodes of a series than to order a new series so Murdoch Mysteries and Republic of Doyle both have 18 episode orders.

Is any of this a bad idea? CBC is having a good year and audiences are loving the prime time line up. So give them more of what they like. Sounds good. The risk, and it’s a real one, is that shows will come to a natural end, fickle audiences will drift away, and CBC may not have new, developed shows in the wings ready to be green lit. My fingers are crossed that that’s not the case.

In the meantime, as a lover of all things to do with Canadian TV and Canadian politics, I’m really looking forward to the Best Laid Plans miniseries next year.

TV, Eh? Podcast Guest

I interrupt the regular policy wonk discussion to do a little shameless self-promotion.  This week I was a guest of TV, Eh?’s weekly podcast where Diane Wild and Anthony Marco discuss the week’s news in Canadian television.  Last week they had talked about co-productions and Diane had mentioned my blog post about it.  So this week I was invited to expand on it a bit and explain how co-productions work.  It ended up being a very far ranging discussion including vertical integration, enforcement of licence conditions, mandatory carriage and even co-ventures.  And some of the ways that you can conjugate the word ‘wonk’.

If you don’t know TV, Eh? and you care about Canadian television – well, you should.  Diane aggregates all the press out there about Canadian television and now adds her own interviews and articles and the podcast with Anthony Marco.  It is a great resource for people who work in Canadian TV.  She does it for fun.  So if you see Diane – buy her a drink – you owe her.    Listen to the podcast and you’ll get an idea of what she likes to drink.  You could also donate to the cause through the site.

I’m not just saying this because Diane said such lovely things about me.  I mean it!