Tag Archives: Television in Canada

New CIPF Regulatory Framework – But What Does It Mean?

Yesterday, August 25, 2016, the CRTC released its new Broadcasting Regulatory Policy (2016-343) – a Policy Framework for Certified Independent Production Funds (“CIPFs”).  There are some minor and major changes to how CIPFs will be managed and the kinds of productions they will be able to fund going forward.

First, the framework sets the rules for how a CIPF has to be set up in order to be certified by the CRTC.  A fund needs to be certified to allow BDUs to allocate some of their mandated contribution to it.  A fund does not need to be certified if it does not need or want those contributions.  For example, while the Independent Production Fund is certified as a CIPF, its funding is based on an endowment so its management is outside of this framework.  However, most of the CIPFs do rely on BDU contributions so will need to abide by the new framework.

There are two types of changes to the framework:  1) new requirements in order to be certified and 2) new permissions which a CIPF may wish to take advantage of.  With that in mind, let’s look at each of the changes in turn.

Requirement: Eliminate Licensed Broadcaster Commitment

Going forward, CIPFs must no longer require a broadcast licence or development commitment from a licensed broadcaster as a condition of funding.  This is to allow greater flexibility in funding by producers as they can access OTT services provided that those services are accessible to Canadians (so yes to Netflix Canada but no to Hulu).  However, tax credits still require a licensed broadcaster so there will not be many productions that will be able to take advantage of this new flexibility at the moment.  It may provide more opportunities for web series, however.  Additionally, CIPF funding is awarded as part of a subjective assessment and each one may decide that in its assessment it will reward a licensed broadcaster commitment with more points as evidence of greater potential audience.  It may be difficult, though not impossible, for a project with a non-traditional broadcaster to be competitive with projects with traditional broadcasters.

Requirement:  Redefining “new media project”

I find this one odd.  “New Media Project” has now been re-categorized as “non-programming digital content” by removing programming content such as webisodes from the definition.  While the Notice of Consultation asked intervenors to consider whether the current definition of “new media project” needed to be updated and many said that it did (mobisode anyone?), the CRTC makes no reference to any intervenor asking for “new media project” to be redefined in that way.

It is more troubling because those who work in interactive digital media (“IDM”) know that most IDM associated with television includes video content either as clips or even within the IDM.  Walls between forms of content are breaking down and this redefinition feels like a belated attempt to put up a wall that the industry does not need or want.  Those in Ontario are currently experiencing a similar challenge with changes to the Ontario Interactive Digital Media Tax Credit draft regulations which attempt to remove streaming sites from eligibility but went too far and remove digital media with any form of video from eligibility.  Standalone web series may still be financed through the change to the broadcaster requirement (and because IPF is outside this framework) but as the new definition (‘innovative projects such as story-driven videogames, interactive or customizable web content, apps and all other similar types of non-programming content’) is very brief it is not clear whether the inclusion of video within ‘non-programming digital content’ will exclude it from eligibility.

Requirement: Maintain cap of 10% on non-programming digital content

CIPFs were limited to spending no more than 10% of their fund on ‘new media projects’ or now ‘non-programming digital content’.  A number of the CIPFs wanted greater flexibility to allocate more or less of their funds to digital media while on the other side the broadcasters wanted to keep the cap to ensure that most of the funds stayed within the licensed system.  The cap is being maintained, though for the more restricted definition of non-programming content.

Permission:  Canadian content certification points

Sigh.  How many times do we have to talk about this?  OK, so the CIPFs can now fund projects with a minimum of 6 CAVCO points.  But will they?  The decision says, without evidence, that the current limit of 8 points ‘excludes many productions that could otherwise be of high quality and qualify as Canadian’.  What exactly isn’t getting funded?   Bueller?

For those of you who were around during the Canada Media Fund review in 2008 (which excludes all of this current Commission), you will recall that when parties argued that CMF needed to lower its point count because lower point count shows would sell better, lots of evidence was presented to show that in fact 10/10 point Canadian programs sell better than 6 point (what we used to call ‘industrial’) programming.  It is hard to get more Canadian these days than “Murdoch Mysteries” and it sells all around the world.  When we used to produce a lot of 6 point productions there was a market internationally for “Andromeda” and “Mutant X” but it has pretty much dried up as international markets focus more on domestic production.  A high quality production that reflects a distinct domestic voice such as “Murdoch Mysteries” or “Motive” but also “Doctor Who” or “The Bridge” or “Wentworth” sells better internationally. It just does.

On a more practical note, how will these 6 point projects get financed?  For one, CMF still requires 8 points. Will the 6 point projects be competitive in the selection process with 8 and 10 point projects with greater sales potential?  A key sentence in the decision is “CIPFs will continue to have the discretion to finance the productions of their choice, based on their expertise and measurements of success”.  So only time will tell as to whether this change will have any real impact.

Permission:  Eligibility of Co-Ventures and Co-Productions

While the discussion in the decision is about treaty co-productions and co-ventures, the actual decision is only about co-ventures, this current Commission’s pet project.  This is probably because treaty co-productions are not actually ineligible for CIPF funding, though the CIPFs have rules to ensure that only majority Canadian co-productions benefit from Canadian funding.  Co-ventures have not been eligible.  Few productions use co-ventures (a system that allows Canadian producers to partner with non-treaty producers, i.e. from the U.S.) because they are too hard to finance. As well, the control that is then given over to the U.S. partner is not that attractive.  The Canadian partner must have 50% of creative control and profits but realistically co-ventures are U.S.-driven projects.

Time will tell whether CIPFs will actually allocate more funds to co-ventures or whether this is flexibility they really did not want or need.

Permission: Script and Concept Development

Previously, the requirement for a broadcast licence prevented CIPFs from funding early stage development except through non-BDU funds (i.e. endowments).  The removal of the requirement for a broadcast licence automatically frees up CIPFs to allocate more funds to early stage development, or even slate development, if they so wish.

Permission:  Promotion Funding

CIPFs have not been able to specifically fund promotion, an increasingly important part of any production in the crowded marketplace.  However, the CIPFs have limited funds and many stakeholders are concerned about money being reallocated from production to promotion.  It is therefore up to each CIPF as to whether it wants to reallocate any of its limited resources specifically to promotion.

Requirement:  Measurement of Audience Success

CIPFs each make subjective assessments of projects and decide to fund the ones that meet their criteria, including the greatest potential for success.  CIPFs were concerned that any formalization of that process would impede the subjective analysis but also attempt to standardize what are inherently non-standard funds which cover many different niches of programming and audience.  The CIPFs are likely relieved that the decision is instead to require the CIPFs to report on the audience success criteria used rather than to change them in any way.

Requirement:  Accessibility

CIPFs will now have to ensure that all programming that they fund is closed captioned and includes described video.  They are not required to fund it but to disclose it.  While broadcasters require closed captioning and described video, by requiring CIPFs to ensure that a project has it before it is funded, the theory is that this rule will ensure that productions are developed with accessibility guidelines in place rather than dealt with after the fact in post-production.  This will have little effect on CIPFs except as a check box on their application form but may have a positive effect on production planning for accessibility.

Requirement:  Reflection of OLMCs

There are no requirements currently to reflect in any way Official Language Minority Communities (OLMCs).  The new framework will require that one person on the selection committee for a CIPF will be responsible for ensuring that OLMCs are properly reflected in decision making.  Annual reports will now have to track OLMC projects.  There is no quota system so it is not clear how the Commission will define ‘properly reflect’ and what penalty there might be.  Many CIPFs already fund OLMC projects on a regular basis so this may only be an added reporting requirement.

Requirement:  Governance

The Notice of Consultation hinted at possible major changes to the governance of the CIPFs, which worried many intervenors who could not see any problems that needed to be fixed.  However, with vertical integration there were some concerns about how the Boards of the CIPFs were constituted in order to ensure that they remain independent of their contributors.  Two thirds of Board members must now be independent, rather than previously no more than one-third could be members representing BDUs.  The definition of independent excludes employees, officers, directors etc. of a contributor or its affiliates.  For example, an employee of CTV would be independent of Bell under the old rules but not under the new rules.

Additional wording was also added to the conflict of interest language to require that decisions are made ‘absent of actual or perceived conflicts of interest’ but without setting any specific criteria to abide by.

Requirement:  Reporting

While most CIPFs publish annual reports there was no requirement to do so nor any criteria for those reports.  This is now standardized with few additional criteria beyond what most CIPFs already report on.  They will also have to submit audited financial statements.  The Commission understands that this could be an administrative burden for smaller funds which might not be able to cover the cost of an audit, particularly with the cap of 5% on administration costs.  These smaller funds can apply for an exemption from the audit if they can prove it would be unduly burdensome.

 

This revised policy framework will go into effect September 1, 2016 however it will take time for the funds to review and implement the changes into their guidelines, and have those changes approved by their boards.  There are no transition rules so it is not clear how quickly the CIPFs will have to change those parts of their guidelines that must change, before the Commission declares them offside of the new policy framework.  The only real penalty is being de-certified so hopefully the Commission will give the CIPFs at least one fiscal year to implement all the necessary guideline changes and possibly even board changes.

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The Benefits Bulge*

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

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

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

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

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

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

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

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

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

Canadian Media Policy – Is There Any Fun Left?

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

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

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

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

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