Tag Archives: s.9(1)(h)

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

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.

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Does Canadian TV need an overhaul? Maybe. Probably.

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

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

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

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

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

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

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

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