Category Archives: Television

More Talk TV – Drawing a Box Around It

So as I’ve said before, this TalkTV consultation is HUGE. My big concern has been that there would be very little air time for programming issues as the Commission and the media focused on pick and pay and simulcast. Mainstream media has certainly gone in that direction already (with the notable exception of Cartt.ca, which has had a series of articles on almost every topic raised in the hearing.).

The Commission is now trying to draw a box around what will be discussed at the hearing by throwing out some proposals and asking for a focused discussion on those proposals. Stakeholders are free to talk about anything they want and in particular to float alternative proposals but this is a starting point.

The Commission has also re-opened the online public discussion forum and asked the public for their thoughts on the proposals now and over the course of the hearing. So instead of yelling at your computer screen at some of the things said at the hearing, you could post to the discussion forum.

Back to the proposals. They are extensive but they do limit the discussion from the 80 different questions in the original Public Notice. There are now 29 issues, though some of them have an Option A and an Option B. I find some more interesting than others, particularly those focused on Canadian programming. Here are a few to listen for in the oral public hearing (and note – @CRTCeng confirmed that the hearing will be available by audio and video feed so we’ll be able to see faces).

Simultaneous substitution: There are two options, either no more simsub or remove simsub from live events such as the Superbowl or Oscars. This is interesting because while a few stakeholders expressed concern over the impact of simsub on programming schedules, few came right out and asked for simsub to be rescinded. There was a general recognition that while it might not be perfect, simsub revenues are hugely important to the health of conventional broadcasters and by extension to their level of expenditure on Canadian programming. Apparently there aren’t even that many complaints about not being able to watch US commercials during the Superbowl. Seriously – if you really want to watch them, they’re almost immediately available online.

Redefining Broadcasting Revenues: The proposal is to include revenue from programs offered online in the base for calculating CPE. Broadcasters would then also be able to count expenditures from programming created for online platforms as part of their CPE. The CRTC sees this as a way to encourage made for digital content but it is also a huge potential first step towards looking at the broadcasting system as a whole and not its regulated and unregulated parts. Given that no proposal included a reference to extending regulation to OTT, this could be the CRTC’s first step towards platform agnostic regulation. Or it could be an attempt to close a loophole as its been widely speculated that since broadcasters have the ability to allocate revenues and expenses between regulated and unregulated platforms they are doing so to their advantage. I expect a lot of ‘oh no, you can’t make us do that’ and ‘oh no, we just can’t identify our revenues/expenses that way’ and of course ‘but we don’t make any money from online platforms and we are incapable of proving that’ and other such arguments heard before.

Programs of National Interest: First there is the positive statement that PNI will be maintained (sad that this had to be said). Then, that children’s programming will be included. There has been a decline in commissioning original children’s programming and this is the CRTC’s response. Expect to see discussion about whether this will be effective or whether there also needs to be CPE sub-quotas for children’s programming (as well as feature films and long form documentaries).   Just because you CAN include children’s programming in your CPE does not mean that you will, particularly if you are a corporate group without any children’s services and have been allowed to walk away from children’s programming on your conventional services (*cough* Shaw *cough* Rogers *cough*).

Programming requirements: An interesting proposal is to eliminate exhibition requirements during the day but maintain them for prime time. This will mean no incentive for Canadian daytime talk shows, particularly on conventional stations that can also simulcast US daytime talk shows or soaps. Do people care? This is one where I’d be interested to see if there are any responses on the online discussion forum. How much do people want their “The Social” and “The Marilyn Dennis Show” or can they live with “The View”. From a policy perspective, it’s saying that the Broadcasting Act can fulfill its goal of providing a diverse range of programming to Canadians through prime time programming alone. I’m not sure that’s what was intended. I’m also not crazy about getting rid of any exhibition requirements while scheduled programming is still important to Canadian audiences. We are not yet in an on demand world.

Another programming requirement proposal is to extend CPE requirements to all licensed services. Currently they are limited to conventional services, Cat As and Cat Bs with subscribers of 1 million or more. CPEs would be set at licence renewal and it is assumed that those Cat Bs with low subscriber bases or niche audiences would have lower obligations than the other services. They would also be part of the corporate group, if they are owned by one of the large companies, and could help to amortize costs. This could mean more money for CPE generated by services that air little Canadian programming because of their conditions of licence. If this extends to independent Cat Bs (and it’s not clear from the wording), I can see them having more of a problem than the Cat Bs in corporate groups.

Genre protection: The proposal is to eliminate genre protection and nature of service definitions. If this goes through then the Commission will overturn its recent decision on OLN and you’ll get your Whisker Wars back because services will be able to morph into anything that they want, whenever they want. I find this an odd proposal given that they just came down hard on OLN and before that issued warnings to G4TechTV and OWN and others. There are a number of reasons to advocate for at least enforced nature of service definitions both for diversity of programming (i.e. to avoid all services chasing the same audiences) and clear branding in a pick and pay environment.

Local programming: There were a lot of submissions which identified the need to re-examine the funding mechanisms for local programming and in particular to bring back some form of LPIF. The Commission apparently doesn’t want to go down that road (it is always very reluctant to reverse decisions) so instead they are suggesting that the expense burden on local services should be lightened by removing their obligation to maintain transmitters. Given how many stakeholders advocated a more direct funding regime, it could still be a topic at the hearing.

Finally, the Commission proposes that all of these rules would come into place December 15, 2015.

It’ll be interesting to see if the Commission’s attempt to draw a box around what it wants to talk about will actually limit topics or just add new ones to all the things that stakeholders want to talk about. This could be the last big hearing for some time so everyone wants to get their kick at the can (using a very old analogy, which seems quite wrong in this context). There’s also the fact that some of the decisions about programming and in particular tweaks to the Group Licence Policy have to be made now in order to implement them in the 2016 licence renewal process.

This is going to be a long hearing.

 

 

 

 

 

 

 

 

 

 

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Rogers Licence Renewal

When the Rogers Licence Renewal decision came out last week (July 31, 2014) it didn’t create much fuss. That’s partly because it is the middle of summer and partly because it is a short term licence renewal – many of the issues will be addressed again and perhaps in more depth at the Group Licence Renewal in 2016.

As a reminder, Rogers had an earlier licence renewal because at the time of the Group Licence Policy and the group licence renewals, Rogers was still a group of not yet national conventional stations and a few specialties but had already started buying up what they needed to become a third diversified group (Corus is part of the group licensing framework but with almost no conventionals so is a different beast altogether). Rogers wasn’t a group in 2010 but they are now.

Being an official group (they were sort of a group before in the way that they were licensed but not fully) puts Rogers on the same footing as Bell, Rogers and Corus going into the Group Licence Renewals. That’s important.

There are a lot of picky little details in the licence renewal but I would like to highlight a few things that caught my attention.

There were a lot of concerns about Sportsnet 360 being included in the group. It is not a Category C (news and mainstream sports) service but a Category B so there is no regulatory reason to exclude it. There were concerns expressed at the hearing that Sportsnet 360 combined with CITY broadcasts of NHL games would allow Rogers to spend all of their non-PNI CPE on sports and specifically NHL hockey. The Commission in the decision advised that they shared stakeholders concerns but they didn’t think much could be done to change programming plans during the coming two years so rather than impose regulatory safeguards they would instead require detailed reporting and monitor the situation. So the message is ‘don’t do what we’re all afraid you’re going to do or we will regulate’.

The level of reporting required is also interesting in a wonky way. Rogers has a multiplatform deal for the NHL rights and that means an ability to deliver programming across multiple platforms but also an ability to allocate revenues and expenses across those platforms. There is huge opportunity to game the system here and the Commission knows it. They have asked not only for detailed reporting of NHL revenue and expenses across regulated and unregulated platforms but also details on how the allocation formulas were arrived at.   The reporting requirement is an enforceable condition of licence and not one of those ‘expectations’ that can be ignored.

Rogers had asked for a lot of concessions on their ethnic programming on OMNI which basically would allow them to air a lot less Canadian and ethnic programming on the basis that the business model was broken. You may remember in the public hearing when Commissioner Shoan repeatedly asked intervenors if they watched third language news online because that was Rogers’ argument for asking for a reduction in prime time commitments. The answer was universally no. So Rogers didn’t get most of the concessions requested. Their Canadian exhibition requirements were slightly reduced but only to bring them in line with the exhibition requirements under the Group Licensing Policy. There are a few other reductions but in the interest of harmonizing the requirements across the OMNI stations. They were once individual services and as a result each had different conditions of licence.

Then there is my favourite part. For the third time Rogers tried to expand the interpretation of OLN’s nature of service to allow it to broadcast programs that have nothing to do with outdoor adventure. You may remember the first time when they tried to argue that “Lost” was outdoor adventure and they should be allowed to use OLN to air more US prime time dramas like “Lost” in second run. In the second attempt some of us cut and paste our arguments from the first intervention for the second intervention because so little had changed. This time the argument was that “Baggage Battles”, “Operation Repo” and yes, “Whisker Wars” (really – it’s a show about competitive beard growing – I kid you not), should all be part of a more vaguely interpreted outdoor adventure nature of service.  Not only did the Commission disagree strongly but they gave Rogers till January 31, 2015 to fix their schedule. This short time frame came in the same decision where the Commission said they understand how long it takes to change programming schedules so they didn’t think Rogers would fill its schedule in 2015 with hockey.   Finally, the requirement to report by January 31, 2015 to demonstrate how they have fixed their schedule is an enforceable condition of licence.

This nature of service decision is also interesting because it suggests that at the Talk TV hearing in September, the Commission is not likely to drop nature of service definitions as requested by some broadcaster intervenors.  Arguments have been made that enforced nature of service definitions are essential to diversity of programming and it could be that the Commission is open to this argument.  We will see.

Why am I excited about the enforceable conditions of licence in this decision? In the past these sorts of provisions would be ‘shoulds’ and were often ignored or half-fulfilled.  As a broadly written ‘must’ if the broadcaster fails to perform the required activity they can be called to a show cause hearing to give it the chance to explain why they didn’t do it and why the CRTC should not issue a mandatory order (enforceable by Federal Court) or any number of other harsher penalties such as refusing to reissue a licence. As Rogers is up for renewal in only two years they are not going to want a show cause hearing with licence renewal in question. I am hopeful that we won’t have a ‘History replaces CSI: New York with NCIS’ situation based on how the decision has been worded. We may not have a NMBU reporting situation with the NHL reporting – though I have to admit that I’m less hopeful with that one. Broadcasters do have a long history of fighting detailed reporting requirements.

DHX Approved for Family Channel Purchase

This one is no surprise.  The kids industry was very positive about DHX buying the Family Channel services and becoming an independent (i.e. non-vertically integrated) broadcaster.  DHX clearly knows the kids market.  So this is just a quick blog post about the highlights of the decision.

As usual, there was a slight increase in the purchase price from $170 million to $173.1 million to cover the value of assumed leases.  That will increase the benefits package from $17 million to $17.3 million.  The package was allocated 85% on screen and 15% social benefits as is now expected.  Specifically it goes to:

$8 million for drama and comedy production

up to $5 million for partnerships with public broadcasters and APTN for co-licensing

$1 million for associated digital media

$1.5 million for a Children’s and Family Development Fund for new entrants to the kids sector, regional producers, OLMC’s and French language producers.

$1.6 million to regional opportunities and training in children’s script writing (social benefits)

The package hit all the right notes and was approved.

There were a couple of other issues in the decision that are relevant.  By pulling the Family Channel services out of the Astral group, the group CPE had to be recalculated.  DHX proposed 21% based on the average spend in 2010, 2011 and 2012.  This was not consistent with the formula used for all of the other groups and the CRTC adjusted it to 22% based on 2009, 2010 and 2011.  DHX’s proposal also included 2012, the year that Astral stopped spending money because they were in the process of being bought, which is why the CRTC’s CPE went up even though it includes the 2009 recession.

DHX asked that the requirement to spend 75% of PNI CPE on independent production be reduced to 60% with the ability to fill up to 40% of the program schedule on their own production.  DHX has a substantial catalogue of Canadian children’s programming and that side of the business will continue.  The CMPA was ok with the proposal as long as CPE spent on independent production is to be spent on original independent production and not repeats.  The CRTC agreed.  This is interesting because it is the first time that the CRTC has specified that CPE needs to be spent on original programming.  The Group Licence Policy was supposed to prevent a reliance on repeats because of the sheer volume of spending required.  The independent production community all along thought that the levels for PNI were set too low and now reporting, to the extent that it is usable, suggests that broadcasters are in fact relying on repeats for their PNI CPE and spending their original dollars on incremental benefits spending.  As a result, CMPA is proposing in their Talk TV submission that PNI CPE should be spent on original programming.   The CRTC may be open to this.

Let’s Talk TV – Let’s Talk About It ALL!

Well, it’s ambitious. I’ll say that for the Let’s Talk TV consultation. It can even said to be HUGE!

To recap, yesterday the CRTC released both the Notice of Consultation on the third stage in the Talk TV consultations (the first stage being the online discussion board and the second stage being the Choicebook) and as well released its response to the government’s s. 15 order to report on the feasibility of pick and pay. These two releases need to be read together.

First, to reiterate, the s.15 request  was for the CRTC to provide the government with a report on the impact of any pick and pay measures for pay and specialty services and how any such measures would still ensure that the majority of services received were Canadian and that BDUs continue to give priority to Canadian services. The report is only the next stage of the process and not the final stage. The CRTC’s proposal for pick and pay options will be discussed as part of the Talk TV consultation and after receiving evidence from various stakeholders (deadline June 25, 2014) and discussing it at the hearing (starting September 8, 2014), the CRTC will then make a decision.  It could easily be a decision to not implement any pick and pay because of the expectation of harm to the system (I doubt that but it’s possible).  What it will not be is a decision to implement full pick and pay because of the social policy goals of the Broadcasting Act.   I’m saying this because the gap between public perception and the reality of the process annoys me.

So, what is the CRTC’s proposal? The CRTC proposes that BDUs offer:

–       A small, all-Canadian basic service that includes only the local Canadian conventional stations, the mandatory carriage services, the provincial edunets and in some cases community channels and provincial legislatures services.

–       Promote the availability of the small Canadian basic

–       Allow pick and pay on pay and specialty services

–       Allow consumers to create their own packages for pay and specialty services

This proposal gives Canadians the option to stick with their packages or if they really really don’t want all of those channels go to a skinny basic and pay for individual pay and specialty services. The hearing will review specific issues with this proposal such as the impact on more niche specialty services, the impact on BDUs and the impact on program producers from such a proposal. It will be interesting to see how the consumer groups respond. I hope they all try and conduct some studies or economic modeling to put some evidence behind their responses but practically there are limits to what evidence can be provided. We just don’t know how consumers will behave if offered this proposal. How many would reduce their packages and buy just a few services, especially if those services by necessity have to be more expensive when sold on their own? I like tv and a choice of services so I’m not likely to do it. I know sports fans who might. How many are in each camp – does anyone have a clue?

This topic on its own could fill a hearing with each sector of the industry weighing in because of the potential impact of any pick and pay system. It isn’t the only topic. On the assumption that you have not read the Public Notice I’ll skim over the issues.

–       Increased access to non-Canadian services

–       Remove Simultaneous Substitution completely (which allows broadcasters to replace the US ads on the US programs they buy with Canadian ads they have sold – I honestly did not think removing it would ever be discussed in my lifetime) or replace it with Non-Simultaneous Substitution (which allows them to replace the ads whenever the Canadian broadcaster airs the US program)

–       The importance, or not, of local programming

–       How will programs be delivered in the future and do we need to change the funding model for support of Canadian programming to keep up?

–       Does the CRTC need to continue to require exhibition of Canadian programs or is funding enough? Should there be regulation of promotion?

–       Support of underserved audiences such as OLMCs, Aboriginal audiences, third language communities and persons with disabilities.

–       Is support for independent programming and distribution services required (i.e. VI Code).

–       Enhanced measurement of audiences using set-top boxes and the privacy issues that are triggered by that discussion.

–       Maintain, or not, the Genre Exclusivity Policy (i.e. should History be allowed to morph into Discovery and Showcase to morph into Space)

–       Simplified licensing of services

–       Better communication of changes to consumers by services and BDUs

–       Improved parental controls

–       Competition within the BDU market

–       Dispute resolution between BDUs and subscribers

Each one of these topics could be a hearing on its own. They do relate to each other and impact each other so I understand why they are bundled together but this is going to be a difficult hearing for most stakeholders. I’ve participated in these ‘all you can eat buffet’ style hearings and they are hard. You just don’t have the time or resources to address every issue so you pick your top issues and hope that other stakeholders address the ones that you can’t get to. Reading all of the other submissions alone is time-consuming but necessary. The Commission did remind smaller groups that they can apply to the Broadcasting Participation Fund for financial assistance (and I remind you as well) but it is still going to be a costly year for stakeholders.

On the upside – I’m definitely looking forward to some interesting discussions during the September hearing.

 

Is Primetime Still Important – You Betcha!

The Canada Media Fund (CMF) has asked me to write the occasional blog post of television issues and my first one was released today. I just want to give a little more context to why I thought it was a necessary topic – space and tone were limited there (I had to sound more pro and less convo as I do here).

If you were listening to the Rogers licence renewal hearing last week you would have heard a reminder as to why a discussion about the continued importance of prime time is important. Or if you read Andrew Coyne today, you would get another reminder. Everyone seems to think that prime time is out the door or has one foot in the doorway. The stats say otherwise.

In the Rogers licence renewal hearing, Rogers argued that they did not need to broadcast ethnic news in prime time because their audience is going digital and can pick up all their news online. They would rather air reruns of US programming in that time slot and make more money. In a unscientific but illustrative poll, Commissioner Raj Shoan asked many of the intervenors if they or their stakeholders watched Omni and particularly the ethnic news online. Very few admitted to watching online and in fact most were adamant that they and their stakeholders wanted to watch their news on broadcast and in the evening. This was what they were used to. I’m sure that this was no surprise to Rogers. Though BBM data is notoriously difficult when it comes to capturing ethnic audiences (not large enough sample sizes) they must know from feedback from their audience that the broadcast schedule is important to them. Rogers still tried to make the argument that we are in an on demand world as a way of trying to reduce regulation and increase revenues. It sounded to me like the CRTC wasn’t buying it but we’ll see.

Today’s piece by Andrew Coyne puts the on demand world a little further out at ‘a few years, maybe two’ as part of his argument that we no longer need the CBC, CanCon, the CRTC and the Broadcasting Act. His argument ignores the facts, such as those quoted in my CMF blog post, which demonstrate that tv viewing is not actually dropping. The growth of on demand, currently at least, means that we are watching more video entertainment in total given the opportunities of digital platforms. So yes, for the foreseeable future we do still need the CBC, CanCon, the CRTC and the Broadcasting Act.  And regulation that ensures that there is the choice of Canadian programming in primetime when most Canadians are watching.

Content is Missing from Digital Canada 150

First, let’s have a quick refresher course on our long wait for a National Digital Strategy. In the summer of 2010, then Minister of Industry Tony Clement launched a public consultation (together with the Ministers of Heritage and Human Resources) on what should be included in a National Digital Strategy though the government called it a Digital Economy Strategy and put a clear emphasis on infrastructure and economy.  [Note – I would link to the consultation but as of writing all those public documents are offline. I will update when I can.]. We were promised a strategy document in the fall, then spring of 2011 and then pretty much annually we’d be told that it would be coming ‘soon’. There were those of us who thought there would never be a National Digital Strategy.

Why do we need one? Other countries such as Australia, the UK, the European Union, and even the US, have created National Digital Strategies to set a plan and measurable goals. What are we going to do to move into the future, make sure that every citizen has the tools that they need, has the protections and can fully enjoy the benefits of the new digital world? How will Canada make sure that it is competitive internationally? How are we going to measure our progress? Where will we put our emphasis – economy, skills training, infrastructure, privacy, content?

Today the government released Digital Canada 150. It’s an odd document. It has five pillars: Connecting Canadians, Protecting Canadians, Economic Opportunities, Open Government and Canadian Content. [Note that Skills Training or anything else to do with the Department of Human Resources, one of the sponsors of the original consultation, is absent.] In each pillar it sets out a few items that are forward thinking and celebrates the government’s past achievements. I think we were hoping for a more forward thinking document. I was. As with a lot of the government’s activities these days, it seems to have been written with an eye on the next election. How else do you explain unbundling of TV channels as a Digital Canada topic? It’s a nice sound bite aimed at getting votes when the reality is that providing Canadians with more choice while still living up to the goals of the Broadcasting Act is a very complex exercise and is unlikely to result in both more choice and less cost for consumers.

There is a goal to extend broadband coverage to 98% of the population by providing $305 million to extend 5mbps to rural areas. This is a reasonable target speed (though some jurisdictions have set faster speeds as their goal) but is only about coverage. Universal broadband as a concept is about coverage and affordable access. Citizenship in today’s digital world means that every Canadian should have affordable access to broadband. This goal does nothing to achieve that. But the rural voters probably will love it.

Back to content though. What does the Digital Canada 150 promise us as tools to give Canadians ‘easy access to Canadian content that will allow us to celebrate our history, arts and culture’ (Digital Canada 150 pg. 21)? Two Heritage Minutes per year every year until 2017. The Canada Book Fund and the Canada Music Fund will become permanent funds. There will be continued support of the Virtual Museum, the Memory Project (veterans stories), digitization by Library and Archives Canada and the NFB. Nice, but we asked for a lot more fundamental changes to be able to provide Canadians with access to Canadian content in the digital age and beyond.

What is missing? Canada Media Fund, Canada Book Fund, Canada Music Fund and more have all had digital content or distribution tacked on to their existing mandates, generally with no increase to their funding. Consumers are no longer accessing or engaging with content through silos. For example, magazines and books are read on iPads with hyperlinks to video. There needs to be a comprehensive overhaul of the funding mechanisms for Canadian content to ensure that they meet the social policy goals of the Department of Canadian Heritage and are structured appropriately.

The government did make the Canada Media Fund permanent and that was a great thing. But it did not increase the CMF’s funding when it extended its mandate to digital media. As Canadians shift to digital platforms and cut or reduce their cable packages, the CMF’s revenue from the BDUs is starting to shrink. Additional revenue sources need to be found if Canadians are going to continue to have access to the excellent Canadian programming choices that they have now. This could be additional funding from the government or a contribution from the ISPs or the OTT services, both of which are benefitting from the consumer shift to digital platforms.

The Broadcasting Act and the Telecommunications Act should be merged into a Communications Act. New technologies and distribution models have frequently left the CRTC unsure as to which Act applies or whether either does, leaving it to the Courts to determine. Vertically integrated companies like Shaw, Rogers, and Bell are governed by both Acts at different times. These companies are able to shift revenues to divisions, such as the ISP divisions, with no or less regulation. A Communications Act would ensure that the Canadian broadcasting and telecommunications system was, where necessary, Canadian-owned and regardless of platform made the appropriate contribution to the production and exhibition of Canadian programming on that system.

The CBC has always had a mandate to provide information and entertainment to all Canadian across the country in both languages. Digital platforms make it easier for it to meet that mandate but at the same time repeated budget cuts have made it harder for the CBC to fulfill that mandate. There should be a review of the CBC’s mandate in light of the opportunities of digital platforms and a clear provision of sufficient funds so that the CBC can meet that mandate.

Another ask was for more support for original digital media through labour-based tax credits. Extending the film and video tax credit to web series and creating an interactive media tax credit would help develop a labour market of skilled talent in these newer digital content areas.

The government reformed the Copyright Act recently but it is up for review as of 2017. At that time, the Copyright Act should be amended to ensure that creators and owners are appropriately compensated when their works are exploited on digital platforms. The last amendment did not appropriately address that issue.

Skills training is a subject that was completely left out of Digital Canada 150, which is odd considering that it was a prominent aspect of the consultation. The content sector has called for improvements in training both at university and for mid-career training so that creators can take full advantage of innovations in digital content creation and distribution. There are gaps in the labour market that need to be filled if the sector is going to be internationally competitive.

Despite a full pillar titled Canadian Content, there isn’t much in Digital Canada 150 for the film, television and interactive digital media sectors.

 

CRTC’s Tangible Benefits Policy Review

The CRTC is currently in the midst of a review of its Tangible Benefits Policy.  This is the policy that requires purchasers of television and/or radio assets to pay a percentage of the purchase price to programs that will benefit the entire broadcasting system.  This policy was initially put in place because while there is a competitive bid process to acquire a licence in the first place, there is no such competitive process when purchasing the assets of an existing licensee.  The CRTC decided to institute the Tangible Benefits Policy to help to ensure that the prospective purchaser was the best possible purchaser (i.e. had the assets to pay the benefits package as well as the purchase price) and that the entire broadcasting system would benefit from the transaction and not just the shareholders of each entity.

Over the years tangible benefits have been assessed on a case-by-case basis but in accordance with policies and precedents that have been established.  At times this worked well and proposed benefits would fit roughly within the established practice and stakeholders would focus on the value of the transaction or aspects of the proposed programs that they wanted tweaked.  However, once the BDUs started buying the broadcasters they got aggressive with the benefits packages and we started seeing self-serving proposals and ones that had nothing to do with the policies or sometimes even the broadcasting system (see Shaw-Global and Bell-CTV (2010)).  This took up a lot of Commission staff time and stakeholder time as part of the public hearing process.   From my perspective the worst development was when purchasers started coming up with new proposals during the hearing and trying to negotiate their benefits packages at that time.  Stakeholders had to scramble to get enough of an understanding of new proposals to be able to comment on them in their presentations or reply interventions.

So the Commission is now reviewing the policy to try to streamline it so that there are very clear guidelines for how to prepare the Tangible Benefits packages.  You might be asking yourself why now when there are no big benefits packages in our future.  My response to that is – says who?  I have heard many times over the years the statement that there are no more possible acquisitions because the media consolidation process has been completed, yet acquisitions keep happening.  For example, Bell has acquired CTV twice and each time had to pay benefits.  You just never know what the future will hold. 

The Commission issued its call for comments on a proposed revised policy on October 21, 2013 and the first submissions were filed January 13, 2014.  There is a right of reply and those will be filed by January 28, 2014.  We can then expect a decision from the Commission some time in the early spring.  Note that the Call for Comments also included comments on a revised valuation policy but that gets into accounting and valuation policies that would be better left to accounting professionals to comment on.  I’m also focused here on television rather than the radio benefits policy, which is similar in concept but slightly different in the detail.

Generally the CRTC is proposing that rather than the bulk of tangible benefits being self-administered by broadcasters for their own programming, 80% would go to the CMF and the Certified Independent Production Funds (“CIPFs”) with the other 20% being discretionary (i.e. social benefits but could also go to independent production or digital media production).  The breakdown between CMF and CIPFs would be the traditional breakdown of BDU revenues between those agencies, namely 80% to CMF and 20% to CIPFs. 

The initial submissions are somewhat predictable.  All the private broadcasters are against the benefits policy to begin with.  They ignore the fundamental reason for it (lack of a competitive licensing process at that stage) and call it a ‘tax on purchasers’ (Corus) or no longer needed because there is plenty of other production financing (Rogers).  If the Commission must continue the policy then they would like to keep the current case-by-case approach since that allows the most flexibility.   For them.  [Note that the CBC is in favour of the revised Tangible Benefits Policy as it would mean that they, or their producers, would get access to funds that they do not generally have access to.]

On the other hand, the content creators who have been major beneficiaries of the Tangible Benefits policy generally support the CRTC’s proposed new policy but would like to see a variety of tweaks to the proposal.   For example, DOC would like to see a portion of the benefits go to a non-broadcast fund.  The CMF and CIPFs all require a broadcast trigger, which is generally fine except that DOC is finding that broadcasters increasingly do not want to air documentaries.  As an organization they are exploring other avenues to get to documentary-loving audiences and this proposal furthers that goal.  

Most of the content creators would like to see the split 85% on screen and 15% discretionary, consistent with past practice (though DGC would like to see it 83.33% on screen and 17.67% discretionary).  CMPA points out that the increased split will make up for the fact that as a third party fund, the CMF and CIPFs will have administrative costs that will need to be deducted (though strangely the WGC doesn’t think they should be able to deduct admin fees because the additional administration would be minimal – I don’t think they’ve been on either side of a production financing application).    

One of the arguments that a few stakeholders made to support money going to the CMF is the trend that we’ve started to see towards lower BDU revenues and therefore a drop in their contributions to the CMF.  Future benefits are seen as a way to make up for the expected growth in revenue shortfall.

There is some concern that the CMF’s funding criteria under its Contribution Agreement is much more limited than Tangible Benefits have been over the years.  The CMPA called for benefits money being spent by CMF and CIPFs consistent with the Tangible Benefits Policy rather than the Contribution Agreement or other existing criteria.  That would mean, for example, that the language split would be in accordance with the language split of the assets being acquired rather than the 2/3-1/3 of the CMF.  It would also mean that some of the categories of programming that have had access to benefits (eg. feature films and local news) but are not supported by CMF and the CIPFs, would somehow still have access.

It’ll be interesting to see the replies on January 28, 2014, if there are any.  I’m not sure that there’s really much more to say.  Many of the points of the content creators can be worked out in a more defined policy – and many of them are quite valid points in my opinion.  I don’t see the Commission agreeing with the broadcasters that the Tangible Benefits Policy should be thrown out the window or that the Commission continue with the case-by-case approach.  It was just too much work for everyone involved (well – except maybe the purchasers who seemed to be coming up with vague proposals the day they submitted their applications). The recent Corus decisions seem to have signaled that self-administered benefits have had their day.