Tag Archives: Canadian Radio-television and Telecommunications Commission

More Talk TV – Drawing a Box Around It

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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expressed concern over the impact of simsub on programming schedules, few came right out and asked for simsub to be rescinded.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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Let’s Talk TV – Let’s Talk About It ALL!

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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.

 

CRTC’s Tangible Benefits Policy Review

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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.

 

CRTC’s Corus Decisions – A Few Lumps of Coal In With The Presents

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C’mon – I had to go with a holiday themed subject line on the last real working day before the holiday break.

Yes, the CRTC decided that it was in the public interest to allow Corus to buy the Teletoon services and Historia and Séries+.  The interesting stuff (for a CRTC watcher like myself) is in the detail.  A lot of detail.  Don’t worry, I do have holiday baking to do so I’m only going to touch on what are for me the most interesting points.

A lot of people were watching the Historia and Séries+ part of the hearing to see whether the CRTC would agree that benefits would only be payable on the half that Corus was buying from Bell and not on the half that they were buying from Shaw.  There has been a lot of confusion on whether Shaw and Corus are related or not (even at Shaw and Corus).  There have been long rumoured plans for Shaw to take over Corus fully but a requirement to pay benefits would make that a costly reorganization.  Well, it looks like they can go ahead.  In both the Historia and Séries+ decision and the Teletoon services decision, the CRTC made a clear statement on how they see Shaw and Corus.  Are they one or two?  Depends.

For the purposes of determining effective control, Shaw and Corus are considered part of the same ownership group as they are both controlled by JR Shaw.  But when applying the group-based licensing policy, Shaw and Corus are two designated licence renewal groups. [para 14 in Teletoon and 18 in Historia and Séries+].  So – no benefits are triggered by the acquisition of the Shaw ownership of Historia and Séries+ and none will be triggered when Shaw buys Corus.  I’m not sure that I agree but the clear statement is helpful.

The decision clears up what has been a very odd situation with Terms of Trade and Teletoon.  While Teletoon’s owners Bell and Astral had both signed a Terms of Trade agreement with the CMPA, Teletoon said that it was not a signatory so took the position that the Terms of Trade didn’t apply.  Well, it does now and it is a condition of licence for all Corus properties.  The CRTC took it further and requires Corus to enter into a Terms of Trade agreement with the AQPM (the French producers in Quebec) within one year and to start negotiations with APFC (the French producers outside Quebec).

The benefits payable under both decisions have been increased.  For Teletoon they were increased from $24.9 million to $26.02 million to reflect leases and cash on hand.  For Historia and Séries+ the increase was from $13.86 million to $14.48 million to reflect cash on hand.  The one thing we can always count on is that the valuation will go up because the CRTC found one or more ways that the purchaser tried to reduce the benefits payable.

Most of the benefits proposed have been accepted.  What interesting is the additional requirements.  The self-administered benefits cannot be spent on production just for Corus properties (generally the benefit of self-administering benefits).  ‘Benefits should be used to create and acquire the best possible Canadian programming to be made available on whatever services Canadians choose.  As such, the benefits resulting from this transaction should be made available to a wide range of producers for broadcast on a variety of services so that they do not exclusively benefit the Teletoon services’.  [para 73.  The same line is in the Historia and Séries+ decision at para 72.]  Corus might as well give the money to the CMF or other independent funds if it can’t be run out of their commissioning department.  Combine this with the proposed benefits policy that has 80% of benefits going to independent funds and we have a clear signal of the impending death of the self-administered benefits fund.

Corus had proposed that 75% of production benefits would go to independent production.  This was of concern for many as Corus owns Nelvana and that 25% would therefore go to its own productions.  The CRTC agreed and Nelvana was cut out of benefits.  They will go 100% to independent production.   Yup, that’s definitely a piece of coal.

In the Bell-Astral decision we had what I believe was the first allocation of a portion of benefits to OLMCs.  Keeping in mind that the Chair of the CRTC and the Vice-Chair of Broadcasting both grew up in OLMC communities, it is not that surprising that there is a renewed interest in supporting OLMC communities.  [and I will add OLMC to the Acronym Decoder].  Both decisions require 10% of the programming benefits to go to OLMCs, consistent with the Bell-Astral decision.

There are two funds that still need to be finalized in both decisions, the Script and Concept Development Fund and the Export Fund.  Stakeholders had objected to the Export Fund as not being an onscreen benefit (Corus had been very vague in its application and at times described it both as a fund to promote programs internationally and as a way to help producers find international financing) but to ensure that it will be an onscreen benefit the CRTC has required that any funds will result in the production of new programs and that those programs are broadcast on a Canadian service.  Effectively it is a ‘foreign presale’ fund rather than an after market distribution fund.  Corus has until January 30, 2014 to file an agreement with either Telefilm or CMF for these two funds.  If Corus can’t come to an agreement with either Telefilm or CMF then the funds will go to the self-administered (but not for Corus’ benefit) funds.

The filter that benefits must be of a benefit to the entire broadcasting system has also been applied to the offscreen or social benefits.  Frequently in the past there have been tenuous connections between the recipients of social benefits and the broadcasting system (I remember an allocation to the Girl Guides of Canada that didn’t make much sense).  The CRTC is being very clear that Corus will have to report on how the funds were used to the benefit of the broadcasting system and hinted that a proper use would be script development, pitching events, professional development and the opportunities to meet OLMCs.  One social benefit, the Corus Inner City Childhood Obesity Research Initiative, was denied for not being clearly of benefit to the broadcasting system (and being very vaguely described in general).

There were a few changes to the licence terms of the Teletoon services that will be of interest.  Corus requested a CPE for Teletoon of 31% but the CRTC set it at 34% with an allocation of 9% specifically to French language programming to allay concerns that collapsing Teletoon into the Corus group could swamp French programming.  Teletoon’s PNI is set at 26% and Teletoon Retro’s at 4%.  That effectively increases Corus’ group PNI from 9% to 12%.  This is all good news so hopefully when the benefits expire Corus will still be spending healthy money on Canadian programming.

The CMPA had requested a condition of licence that Teletoon air 90 hours of Canadian programming as well as the expenditure requirement.  The CRTC did not approve it on the basis that they are leaning towards regulation that focuses on creation rather than exhibition in order to keep pace with changing audience behaviour and provide broadcasters with greater flexibility.  This was also a theme in the Group Licensing Policy, though that policy did not completely get rid of exhibition requirements.  What I find interesting though is that the Commission also denied Corus’ request to remove the requirement to air one hour of Canadian programming during prime time on Teletoon Retro.  That was on the basis that the Commission didn’t want Teletoon Retro to have a completely foreign prime time broadcast.  So exhibition requirements are still sometimes necessary.

There is more nitty gritty in the decisions but my holiday baking calls.  Happy holidays to you all!  Hopefully you can take a proper break and I will see you in the new year.

What’s the Significance of a S. 15 Study?

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You may have missed this in the Rob Ford scandal of the day, but today the Government announced that it was calling on the CRTC to report on ‘television channel choice’ under s. 15 of the Broadcasting Act.  Specifically Minister of Heritage Shelly Glover said:

“our Government believes Canadian families should be able to choose the combination of television channels they want . . . This decision is an important step in defending Canadian consumers, who want choice and flexibility in their television services.  Our request will ensure that the CRTC develops a more complete roadmap to unbundle TV channels.”

You may be scratching your head on this.  Yes, the CRTC did just launch its Talk TV consultation and among the many questions being asked are:  “If you subscribe to cable TV or satellite TV, how satisfied are you with the way your channels are packaged?”.  Why does the government need to do this and what is the significance of a s. 15 report?

First, the CRTC decides on its own what it is going to study and what public hearings it will hold.  The one exception is if, under s. 15 of the Broadcasting Act, the Governor in Council asks the CRTC to hold a hearing or make a report on any matter under the CRTC’s jurisidiction.  So the significance of the s.15 request is that the CRTC must now report on that narrow issue to the government rather than its usually reporting which is just to the public.  But is that all?

We have to ask ourselves why the government would ask for a report on one question when it is going to get a report (we all will) on the many questions which are part of the Talk TV consultation. This appears to me to be a political response to a very complex issue that the CRTC is trying to look at in its entirety.  It speaks to voters without having to actually implement any changes.

The government has done this before.   I’m sure that you remember the very public fight that went on between the broadcasters and cable companies over Fee For Carriage (which then morphed into Value for Signal).  September 16, 2009 the government requested under s. 15 a report on the implications of a value for signal regime.  The issue had come up time and time again during public hearings and most recently under the April 2009 hearing on the renewal of licences for the private conventional stations (i.e. Global, CTV etc.).  As part of the licence renewal decision, the Commission decided that it would hold a hearing in the Fall of 2009 on, among other things, a value for signal regime.  That hearing was pre-empted by the s. 15 notice which effectively hived off the issue from the other outstanding issues and resulted in its own public consultation.

Did the outcome change because it was a s.15 report and not a regular hearing?  I don’t think so.  There was more of a public consultation than had probably been planned. From the perspective of an industry stakeholder we had the same submission process and public hearing.  The broadcasters and BDUs had the same fight in the media and in the hearing room that they would have otherwise.  There was no legislative response from the government.  And the whole issue became moot when Shaw bought Global and Bell bought CTV.   However, there might have been a political win from the government being seen as a champion of the consumer who was being caught between the broadcasters and the BDUs but little practical impact.

In this case, the CRTC could decide to hold a separate consultation on unbundling or just report specifically on the topic from the existing hearings.  They were given the deadline of April 30 to deliver the report to the government so it is expected that they will prepare it as they are preparing the report on the public consultation. The s. 15 request adds a political layer to the consultation and but it may not have any practical impact beyond the extra workload on CRTC staff.

Update:  Cartt.ca (subscription) has a link the the actual s.15 order as well as a description of the relevant parts of the order and its relevance.

What’s all this about data?

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Warning – this is a wonky post.

In last week’s Corus CRTC hearing there was one recurring line of questioning that I thought deserved its own blog post because I suspect that most of you are not aware of its full significance and might need some context.

Commissioner Raj Shoan asked each of the English creator groups (ACTRA, CMPA, WGC and DGC) if they could identify any impact that the new Group Licensing Policy (frequently referred to as GLP and now an entry in my Acronym Decoder) had had on their sector.   Jay Thomson of CMPA and Peter Murphy of the DGC responded that the creators do not have access to the spending data to assess how spending on a group basis and through PNI compares with the previous regulatory framework.  (CMPA para 1615, DGC para 2033-2035).

In the Reply phase of the hearing Gary Maavara responded that the creators had enough information from the CRTC Pay and Specialty Financial Summaries to determine what impact GLP was having on the pay and specialty sector.  (para 2386)

In my opinion, this is wrong.

Back in the summer of 2012, I was a part of the creators’ group that went to the CRTC and asked for detailed reporting that reflected the new GLP framework (Disclaimer – because of that involvement I do feel some ownership of this issue, still).  Existing reporting provides stakeholders with OTA aggregated reports on spending by program category, pay and specialty aggregated reports on spending by program category, individual pay and specialty service revenue and total program spending reports, aggregated conventional spending by corporate group and by program category and benefits spending by corporate group.

Seems like a lot of reports, right?  Yes, but there are no reports by the entire group and corporate groups are now able to allocate their CPEs across the group, with certain conditions.  There are also no PNI reports (by group or service or licence category) and the regulatory framework allows groups to allocate their PNI CPE across a group, with certain conditions.

Why are these reports necessary?  The GLP was put in place to provide broadcasters with flexibility in their programming and expense allocation across their corporate group without letting them decrease their Canadian programming obligations and specifically protecting more expensive Programs of National Interest.  After many years it had been proven, through extensive data, that the previous priority programming policy framework had allowed broadcasters to meet their obligations through low cost programming, resulting in a significant drop in spending on Canadian drama and documentaries.  The creative community hopes that GLP works and reverses the trend in spending but wants to see the data to ensure that it works.   If it isn’t working – well it’s better to learn that earlier and try to deal with any problems promptly rather than have the system fail Canadian programming for 11 years (that’s not an exaggeration sadly).   If it is working – well I’d love a good news story!

I understand from the creator’s group that while the CRTC is working on the question of reporting, no decisions have been made and the requested reports from the first year of the GLP (2011-12) are not available.  It is a tricky issue dealing with what legally can be provided, what the CRTC’s obligations are and pushback everyone knows will come from the broadcasters.   I’m not sure why Commissioner Shoan asked the question that he did, unless it was to see if the creative groups had other ways of measuring impact.  Production is up.  CMPA’s Profile says that (2012 had a 21.3% increase over 2011), there are more Canadian shows in the Top 30 than in previous years, there are production crews all over Toronto streets (and other cities but I live in an area of Toronto where crews love to shoot so let me tell you – I’ve noticed an increase!).  The real issue is whether the increase in production is because of benefits (and will drop when they expire) or because of the GLP or some combination.  There are other questions like whether PNI is being appropriately allocated amongst drama, documentaries and award shows or all being spent on the more expensive drama shows.  None of these questions can be answered with the existing reports.

Hopefully the issue will be resolved soon.  In the meantime, the existing reports only tell half the story.

Corus Acquisition of Teletoon, Historia and Séries+

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The Corus hearing for these transactions, and the licence renewal of the services, was November 5-6, 2013.  There wasn’t a lot of traffic on social media so it looks like few people were paying attention (I did the buik of the tweeting when I wasn’t restarting my computer and downloading plugins – the CRTC doesn’t like Macs and I’d lost the plugins that worked when I updated to Mavericks – argh!), but there were a few issues raised that are worthy of mention.

As a reminder, Corus is buying these services because the Commission told Bell Media that they needed to divest of them in order to prevent dominance in the marketplace.  English creator stakeholders (CMPA, DGC, WGC, On Screen Manitoba) expressed concern that the resulting company will dominate the children’s market because Corus already has YTV and Treehouse.  Conflicting stats were submitted to show Corus dominated the children’s market (CMPA’s stats as also used by DGC and WGC) or did not (Corus’ stats).  Methodology wasn’t clear – was CMPA talking about percentage of programming or audience?  If audience, is it a percentage of all viewing by children or just of viewing on children’s services.  Corus kept saying that they had not included children’s viewing of Netflix.  While Netflix Kids is definitely competition it is exempt from the regulated system so clearly does not apply.  But what is the right measurement?  I hope that the CRTC addresses this in their decision as it can come up again when dealing with market dominance in a genre.

Fear of market dominance also led some stakeholders to recommend safeguards against programming being spread across all Corus stations to the detriment of each service.  The Commission pointed out that there were nature of service definitions that should prevent that as well as existing overlap limits between YTV and Treehouse but stakeholders looked for more.  In its reply phase Corus agreed to a limit of 10% overlap between Teletoon and YTV, the two services with the greatest potential of overlap given their respective natures of service.

An allocation of the benefits package to an Export Initiative was quite controversial.  It got a lot of air time at the hearing because both Corus and the CRTC seemed genuinely puzzled that the creative community in both languages was not interested in the program.  On the surface the objection was that as described (funding things like attendance at markets in order to solicit foreign sales) the program would not directly fund new production.  Stakeholders were repeatedly asked how they would amend the program so that it would be an onscreen benefit but they refused to respond.  They wanted the money allocated to production (or in the case of the WGC – development) instead.  Discussion got a little heated between the Chair and Michael Hennessy of the CMPA on this topic.  Hennessy kept saying that promotion was a broadcaster’s job and benefits should go to production so that there is something to promote.  That’s a fine argument except right now there are a lot of benefits monies in the system so it’s a bit harder to argue need (let’s revisit this in 2017 when benefits have been spent and BDU contributions to the CMF have plummeted due to OTT).  It also fails to take into account that the producer (and often the talent) share responsibility with the broadcaster to promote the show.  This isn’t service work where you just produce it and walk away.  Remember that Blais has said that under his watch the Commission would not be protectionist but ‘promotionist’ so this kind of a program that would promote Canadian programs outside the country and leverage foreign financing for domestic production is the sort of thing that he is looking to do.

Commissioner Raj Shoan asked Corus if they would consider tweaking the Export  fund so that it would finance presales or subsequent season sales to directly link to production (and be more clearly an onscreen benefit) and Corus was fine with that.  We’ll see where this one goes.

Part of the transaction involves Corus buying Shaw’s half of Historia and Séries+ along with Astral’s half.  Corus does not want to pay benefits on the Shaw half because they are related companies and Corus says no control is being transferred.  There was a fair bit of discussion of this as this transaction could be nothing more than a litmus test to see if the argument flies before Shaw purchases Corus and consolidates operations.  It prompted a reference to St. Augustine from JP Blais and I have to say that’s the first time I’ve heard such a reference at the CRTC and definitely the first time that I’ve ever heard Shaw-Corus compared to the Holy Trinity.  It’s a tricky issue indeed though as Shaw and Corus want to be treated as the same company for some purposes but not for others.  I’m looking forward to the decision on this one.

After Corus submitted their application for these transactions, and before the hearing, the CRTC released its proposal for a new benefits policy for comment.  It is open for comment till December 5, 2013.  Part of the proposed new benefits policy is that 80% of benefits would be allocated to third party funds (80% to CMF and 20% to the independent funds).  While the proposed benefits do not comply with this proposal they do not have to as there is no policy yet.  The Commission clearly telegraphed its interest in going down that route though so Corus advised that if the Export Initiative does not comply as an onscreen benefit, rather than wrap it in with self-administered programming benefits, it would transfer them to Telefilm or CMF and it would be up to one of those parties to figure out how to arrange a program that supported export and was still an onscreen benefit.

There were other issues but these are my favourite.  There is one other point to mention though.  In his opening speech, Blais reminded everyone of the Commission’s Talk TV public consultation and specifically encouraged content creators to participate.  Many of us think of public consultations as something that our non-industry friends and neighbours participate in but Blais is specifically asking us industry types to get involved too so that the CRTC has “access to the broadest diversity of views possible”.  [which can be read as ‘we don’t want to hear from just the trolls’ – reading the online forum can be painful!] So go to the online forum, join a Flash! Conference, send in your views.  Start by checking out my previous blog post.  If you are member of an organization, ask if they will be running a Flash! Conference.  [The Academy of Canadian CInema and Television is running one November 21, 2013].  This is your chance.

Update:  The CRTC’s twitter account has informed me that the stream for their next hearing will be Mac-friendly.  Yay!!!

The CRTC Wants You To Talk About TV

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Today the CRTC released its public consultation on the state of the Canadian broadcasting system.  I assume that most of my readers are involved in the Canadian broadcasting industry and are not members of the general public (I’m not sure about you readers from Russia or the former SSR of Georgia).  So you may be asking yourself “should I get involved in this stage or wait for the industry consultation next spring?”*  You might want to get involved now.  If you are part of a member-based organization then I definitely think that you should get your members involved now.  We’re all part of the public, right?

The CRTC has set up a lot of different ways to get involved.  Find the official invitation here.  You can call, email or fax your thoughts.  There is a discussion forum, similar to past public consultations such as the ones on the wireless code or the CBC.  And new for CRTC public consultations is the encouragement to hold “Flash!” Conferences.  I don’t know the logic behind “Flash!” – flash mob?  It has nothing to do with the software.  The CRTC wants Canadians to gather, talk about the issues, and send the CRTC a report.  Interesting.  There’s a toolkit to facilitate the “Flash!” Conferences and the CRTC has limited funds to subsidize the cost of running them for smaller organizations (apply by November 13, 2014).  There doesn’t seem to be a push to get Canadians to use social media other than the request to use the hashtag #TalkTV (Note:  I may cave but at the moment I’m not using #TalkTV because it is already an active hashtag for people to talk about Canadian and US talk shows.  I’ll stick to #CRTC and #CdnTV for now.)  Update:  The FAQ suggests that there will be Twitter chats and a Reddit AMA.  Should be interesting.

What are the topics?  In most of the material there are only three general topics mentioned.

Programming:  What do you think about what’s on television?

Technology:  What do you think about how you receive television programming?

Viewer toolkit:  Do you have enough information to make informed choices and seek solutions if you’re not satisfied?

Those are pretty vague and general topics but if you dig into the Notice of Invitation you’ll find more detail on the questions and context for them.  I’ve put them all together in one place for ease of use (for you and for me).

Programming

1. What television programs are most important to you (children’s programming, comedy, documentaries, drama, feature films, news, sports, reality TV, variety, other)? Why?

2. Do you know which of the television programs you watch are Canadian? If so, how do you know which programs are Canadian? Would it be important for you to know which programs are Canadian? Why?

3. What programs do you consider to be local television programming—programs about your city, your province, other? How important is local news to you? Why? How important is community access programming and “community TV” to you? Why?

4. Do you think the programming on television is fully reflective of Canada’s cultural, ethnic, linguistic, geographic and demographic diversity? If not, what’s missing? How important is reflection to you? Why?

5. What do you think programming will look like in the next 5 to 10 years? Why? Would you be satisfied with that situation? Why?

Technology

1. How do you prefer to watch television—on a traditional television set, online, on a smart phone, etc.? Why? How do you usually watch television programs—live, on-demand, recorded on a PVR, other? Why?

2. If you subscribe to cable TV or satellite TV, how satisfied are you with the way your channels are packaged?

3. What type of television service do you subscribe to—cable TV, satellite TV, Internet Protocol TV (IPTV) or other?  Do you intend to stay with your type of television subscription in the next few years or switch to something else? What would make you stay? What would make you switch?

4. How do you think we will receive and watch television in Canada in the next 5 to 10 years? Why? Would you be satisfied with that situation? Why?

Viewer Toolkit

1. How satisfied are you that your television service provider supplies the information you need to understand your service options, including packaging and pricing?

2. Are you experiencing barriers that prevent you from changing your television packages or switching to another television distributor? If so, what are those barriers?

3. How satisfied are you that your television service provider supplies the information you need to make informed choices about programming that you may consider inappropriate for you or your family?

4. Do you have a visual or hearing impairment? If so, how satisfied are you with the tools available to enable you to share in our television culture?

5. Do you know where you can voice your concerns over television content, your television services and bills?

6. How do you think we will make informed content choices as program viewers and consumers in Canada in the next 5 to 10 years? Why? Would you be satisfied with that situation? Why?

I think these are really great questions.  All of us would like to know what the general public thinks of these questions.  For too long at public hearings all sides of the industry have tried to speak for the general public and what they want from our broadcasting system.  I just wonder how the CRTC is going to get people motivated to get involved.  There isn’t any hot button issue like there is whenever you deal with the CBC or want Canadians to talk about their cell phone bills.  This is big picture thinking that most Canadians, I think, would rather someone else do for them.  I suspect that organizations with agendas will be the easiest to motivate.  We know how important this is so perhaps we should start with our own people.  Gather and have a “Flash!” Conference in the next two months so that a report on the conference can be filed by January 10, 2014.  [Shameless Self-promotion – you can hire me to help you do that.]  I assume that anything gathered will be useful as well in the industry consultation.   Spread the word about the consultation.  The more ‘general public’ who hear about this and get involved the better for the industry.

*As part of this invitation to the public, the CRTC released its updated schedule on the industry consultation on the state of the Canadian broadcasting system.  There will be a call for submissions Spring 2014 and a public hearing September 2014.  Expect that one to be a doozy!

A Hodge Podge of CRTC Decisions (Independent Licence Renewals)

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Or is it a mish mash?  I’m not sure of the technical term here but last Friday afternoon when most of the world was either sitting on a patio or packing up the car for the last summer long weekend, the CRTC released a whole pile of renewal decisions.  Several of them are of interest.

As you will remember, when the s.9(1)(h) hearing was posted, the call for comments included a number of non-appearing licence renewal applications for independent (i.e. not part of the large groups like Bell, Shaw, Rogers and Corus) broadcasters.  They were to some extent lost in the hubbub over the mandatory carriage applications but a few stalwart stakeholders weighed in.  I outlined a few issues that interested me in an earlier post.

I won’t go through all of the decisions but I do want to mention a few themes that came to mind as I read them.  The first is that almost all of the broadcasters asked for reduced CanCon expenditure and/or exhibition requirements.  This is partly because they can no longer include the CMF top up as part of their expenditure requirement.  As the top up was part of broadcasters’ calculations when they proposed their CPEs in their licence applications, the Commission has decided that it is fair to allow them to make new proposals at a lower level.  Most of them had reductions approved but not necessarily the full extent that they asked for.  ‘Why’ is interesting.

There seems to be a real attempt by the Commission to rationalize the various Cat A (and a few Cat B) licences so that there is some consistency of conditions of licence.  Services were licensed at different times, with different competitive environments and natures of service so to some extent they should have differing terms but the conditions of licence have morphed into a crazy quilt where the rationale is not always evident.  Where it doesn’t make sense to have different terms, the Commission has gone for consistency.  So, while OUTtv asked for a reduction in their CPE from 49% to 35%, they were granted 40%.  ONE asked for a reduction from 41% to 30% and they were granted 40%.  Blue Ant’s Cat A’s were granted 40% CPEs as well.  Most Cat A’s have a CPE of 40% so there’s the reason for the pattern.

Superchannel also asked for a reduction in CPE from 32% to 27% and they were granted 30% because Superchannel is a pay service and the more established TMN and Movie Central have 31% CPE and Family Channel (equally established but for some reason lower) has a CPE of 30%.  The Commission made that decision on the basis of consistency and did not accept Superchannel’s arguments that it has been having a hard time getting started and needs the break.  Here’s the interesting part.  Superchannel has had a hard time getting started and did have to complain to the Commission because they couldn’t get carriage or even if they did have an agreement, the BDUs weren’t letting their consumers know that Superchannel existed.  But the Commission based its decision on a) Superchannel made commitments to win their licence in a competitive bid so shouldn’t be allowed to make less of a commitment now that they  have the licence and b) they were in serious and regular non-compliance at the time that they asked for the break.  Superchannel also asked for a break in their regional outreach and script development commitments ($1 million annually for regional and $2 million annually for script development) and the Commission gave it to them but on the condition that they also pay the unspent commitment of $6 million, which averages out to a total of $2.5 million per year instead of the $3 million they were supposed to spend.   [Note – if you’re a screenwriter you might want to go knock on Superchannel’s door as they have to spend $1.5 million in script development annually.]

But that leads me to another theme.  When you are asking the Commission for a break, it helps if you have been following the rules over the last licence term.  Blue Ant asked for a number of concessions including being treated as a modified group under the group-based policy so they can allocate their CPE across the group.  They do not technically qualify because they have no conventional services but the Commission decided to agree because a) it is important to diversity in the system to have strong independent broadcasters and b) Blue Ant had demonstrated its commitment to Canadian programming through its historical CPE.

Now Blue Ant didn’t get everything that they asked for so there is a limit on what you can get just by being a good broadcaster.  I think that it was a little cheeky of them to ask that their inhouse production be treated as independent in order to qualify under independent production requirements, particularly using the argument that the independent production sector is small now due to consolidation.  Blue Ant’s services are lifestyle, reality and documentary services for the most part and there is no shortage of small producers working in those genres.  The Commission correctly denied the request in order to help those small producers continue to find sources for their programming.

Another item of interest across a number of decisions is the refusal to require that the independent broadcasters adhere to Terms of Trade.  The rationale is that Terms of Trade are necessary to balance the uneven bargaining positions between large broadcasters and small producers but with these independent broadcasters there is no such imbalance and the producers do not need help in their negotiations.  I wonder if the really small producers who work with these independent services feel the same way.

There was a lot more there of course so if you’re interested in the individual independent services, then check out the specific decisions.

CRTC S.9(1)(h) Hearing (Mandatory Carriage) Decision

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For background, last March I wrote a post that explained what mandatory carriage means and talked about the applications that I was most interested in.  The hearing took place the week of April 23, 2013 and the decision was released today.  13 of the 22 applications for mandatory carriage were denied as the CRTC reiterated that mandatory carriage was reserved for services that ‘make exceptional contributions to meeting the objectives of the (Broadcasting) Act’.  See Fagstein’s blog for a good chart form summary.

Most of the mainstream media and social media focus has been on the Sun TV application for mandatory carriage (which was denied) – see Simon Houpt and Steve Ladurantaye of the Globe and Mail for excellent coverage of the topic) but I have always been much more interested in the other applications which had the potential to impact the Canadian content part of the broadcasting sector – APTN, VisionTV, Starlight.  There were also several licence renewal applications of interest, particularly Superchannel and Blue Ant, but those have not been released.  There was however, one aspect of the Sun TV decision that I think is worth noting (in addition to the upcoming policy hearing on Canadian news services which will address the bigger picture of whether all Canadian news services need regulatory assistance).  The Commission noted that not only did Sun TV not demonstrate how its service would make an ‘exceptional’ contribution to the objectives of the Act – it never referenced the Act in its application.  #duh (sorry – couldn’t resist).  Further, the service didn’t make ‘exceptional’ expenditure and exhibition commitments to Canadian programming beyond what other Canadian news services, which do not have mandatory carriage, make.

But enough about Sun TV.  APTN received a renewal of their mandatory distribution order on the basis that its service was consistent with the objectives of the Act, it was important that the service be widely available across the country and that APTN is ‘exceptional in its contribution to Canadian expression and reflects attitudes, opinions, ideas, values and artistic creativity that would not otherwise be seen on television’.  As well, should the BDUs only carry the service where concentrations of aboriginal populations warranted it, then many who were spread out around the country would not have access.  This is a good description of the bar required for a service to be entitled to mandatory distribution – exceptional contribution to the objectives of the Act, and anticipation that the market would not provide the service consistently across the country.

However, APTN also asked for an increase in their subscriber rate from $0.25 per sub to $0.40.  It requested the increase to keep up with inflation, improve programming and make more programming available on multiple platforms.  The Commission accepted that an increase was warranted but given that an increase in the subscriber rate will mean an increase in the cost of the basic package, decided that a $0.06 increase would be a good balance between APTN’s need and the consumer’s reluctance to pay more for basic cable.

The Commission used the same balance language when it agreed to an increase for CPAC.  The $0.01 increase ‘represents a good balance between the impact on the price of the basic service for Canadian consumers and the ability of CPAC to improve its programming’.  This is the consumer filter that we have been told will be applied to all decisions clearly at work.

There were two proposed youth-focused services that applied for mandatory distribution – Fusion and Dolobox.  It was interesting that both had significant user-generated content and online components and both were denied at least in part on the basis that there were enough existing alternatives in the online world that the Commission did not see a need to issue mandatory distribution and broadcasting licences.  I heard both presentations and I could not understand why they were at the CRTC as it seemed like a backwards looking business model for forward-looking services.

Speaking of which, then there’s Starlight.  While I strongly support the idea of finding a way to make it easier for Canadians to find and watch Canadian feature films, I was part of the camp who thought that Starlight for all of its good intentions, was not the solution because of its reliance on mandatory carriage in its business model (See also Denis McGrath’s Facebook post on the subject –- sometimes a former blogger has a relapse).  As you can see from those services that received or maintained mandatory carriage, the Commission looked very closely at whether a service was exceptional enough to warrant increasing the cost of basic.

The Commission did not feel that the proposed service was exceptional enough because Canadian VOD and pay services are required to licence all Canadian services that are available so Canadian films are not unavailable.  [Now, as Mario Mota pointed out in a tweet, pay is about $20/month on top of basic, which is not very accessible to Canadians so there is a flaw in that argument.]  Starlight would to some extent duplicate the offering on pay and VOD so would not provide additional diversity to the system.  I would agree except to the extent that Starlight was planning to reach into the back catalogue to films not currently or rarely available (some rightly so of course).

Part of Starlight’s strategy was to show general support for the service and it conducted a survey to demonstrate a high level of interest.  Unfortunately that strategy seems to have backfired as the Commission felt that the high level of interest demonstrated that Starlight could be successful as a discretionary service.   However, Starlight applied for mandatory distribution because it not only wanted to be sure that it was available in every home but also it needed the revenue to fund its original feature film financing plan.  This plan could not be financed without a mandatory distribution order.  The Commission felt that Starlight had not demonstrated that the existing funding for feature films was insufficient.  I think that another way of putting that is ‘don’t force consumers to solve the problem of insufficient feature film financing’.

Over the years Vision has applied for mandatory carriage several times on the basis that its multifaith programming and its focus on its 55+ audience offers needed diversity in the broadcasting system.  Vision expressed concern that as an independent service it runs the risk of vertically integrated companies moving it from a basic package to a discretionary package in order to make room for their own services.  A move like that would draw fewer subscribers and therefore reduce Vision’s revenue.  The Commission accepted the arguments of BDUs that the BDUs would not want to risk the wrath of Vision’s audience if they moved Vision out of basic (and warned the BDUs that the Commission would need to see good reasons if they ever did so).  Vision also has recourse to the Commission should the BDUs treat Vision unfairly.  The Commission also pointed out that Vision is no longer the only other faith programming service so there is no extraordinary need for Vision’s particular service.  Or in other words – it’s all good so there’s no need to regulate.

One of the few new mandatory orders granted is worth mentioning.  It went to The Legislative Assemblies of Nunavut and the Northwest Territories for a geographically limited broadcast of recorded and live coverage of proceedings in their Assemblies in aboriginal languages, English and French.  The service clearly supports the objectives of the Act, there was a demonstrated demand and a demonstrated market failure.  Bell ExpressVu stated no plans to carry the service and Shaw agreed to but without any time commitment.  And possibly most importantly, the service did not ask for a subscriber fee.

The general feeling about this hearing was that the Commission would not grant many or possibly any new mandatory orders but would maintain the existing ones in order to keep a lid on the cost of basic cable and this is pretty much what they have done.  The decisions were clear so if any service seeks to apply for a mandatory order in the future they will definitely know what issues to address in their application.  There will be an increase to the basic cable rate but it should not be significant (Fagstein came up with wholesale increases of $0.31 per subscriber per month in English and $0.63 in French, which Mario suggests may be used by the BDUs to justify $1 increases in your bill).

In many ways those of us who watched the hearing felt that it was a throw back to an earlier era when broadcast television was the only way that you could reach an audience.  That is so not the case any more.  Now the question is whether the rejected applicants, and those contemplating new services in the future, turn to digital platforms to reach audiences and whether the CRTC needs to be there to ensure that the objectives of the Broadcasting Act aren’t being undercut by these new platforms.  Yeah, I went there.