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Speech
Notes for an address
by Konrad von Finckenstein, Q.C.
Chairman, Canadian Radio-television
and Telecommunications Commission
to the Prime Time conference
of the Canadian Film and Television Production Association
Ottawa, Ontario
February 21, 2008
(CHECK AGAINST DELIVERY)
Thank you very much.
One year ago, at this same Prime Time conference, I made my first public speech as the new Chairman of the CRTC. So I am very glad to be here again. I can report to you that I have survived the first year. And I am looking forward to the next four.
Today, I would like to focus on two subjects.
First, I want to discuss terms of trade agreements, an issue that I know is particularly important to you, and review what we have been doing about it.
Second, I would like to discuss our decision on maintaining a diversity of voices in light of the recent wave of major ownership consolidations in the industry.
I know there is another subject of interest to you, namely the Canadian Television Fund. As you know, we held public hearings on the CTF earlier this month. I have nothing to say on that subject today, except that our decision and recommendations will be released in a timely manner.
Canadian voices
I'd like to start by repeating something I said to you last year: “We're going to have to find ways, in this ever more borderless world, to carve out a special place within the broadcasting system for Canadian voices, points of view and ways of expressing ourselves.”
One year later, I certainly stand by those words. And it's appropriate that I say this before this audience. The CFTPA is a key voice in the broadcasting industry. The work that your members create will occupy much of the special place that we are carving out. Independent producers are one of the major sources of Canadian content.
In particular, you provide a large proportion of what we call “priority programming.”
Importance of independent production
We call it that because of the vital role it plays in showing us the character and diversity of our country. Drama, comedy, documentaries, programs for children and youth. These forms require a lot of creativity and the willingness to take risks.
As independent producers you also play an important role – not only in the industry, but also in our economy and our society. We were pleased to learn from your Association that overall production volume in Canada has increased from the previous year to almost $5 billion, thanks to a record year in domestic television.
And Canadian independent producers have also shown how well they can compete in the international market.
First, on the English side:
In the drama field:
- The Best Years has been sold in 40 countries.
- ReGenesis, in 110.
- Degrassi: The Next Generation, in 121.
- And Intelligence in 143.
In comedy:
- Corner Gas, sold in 28 countries.
- Little Mosque on the Prairie, in 80 territories.
In children's programming:
- Naturally, Sadie, in 90 countries.
- Instant Star, in 110.
- And Life with Derek, sold in 138 countries.
Canadian productions in French have also found export markets:
- François en série has been sold as a format option to eight countries. This includes an American sale for development as a pilot for NBC under the title Serial Frank.
- Minuit, le soir has been bought by two broadcasters in France – Cinécinéma Culte and France 2.
- France 2 bought 26 episodes of Les hauts et les bas de Sophie Paquin for broadcast in peak viewing hours. They have also taken an option on subsequent cycles.
- The documentary series Artisans du rebut global was acquired by France 5 and broadcast in under the title Les Artisans du futur. It was then acquired by TV5 Monde and it has been shown in member countries of La Francophonie. The format has also been sold to the U.K., where it is known as Ecohouse: The Challenge.
The writers' strike in the United States may have opened up new opportunities for Canadian producers. CBS has bought the Canadian series Flashpoint, a police drama set in Toronto with an all-Canadian cast. It is scheduled for prime-time broadcast in the fall. NBC has bought 13 episodes of the drama series The Listener. And ABC Family has bought 13 episodes of the comedy series Sophie, which is the English-language adaptation of Les hauts et les bas de Sophie Paquin.
It is clear that Canadian production companies have the know-how to create television of high quality and popular appeal around the world.
The present state of the market
As you know only too well, the Broadcasting Act specifies that “the programming provided by the Canadian broadcasting system … should include a significant contribution from the Canadian independent production sector.” At the CRTC, we have been following through on this objective with our expectation that the major broadcast groups will obtain at least 75 per cent of their priority programming from Canadian independent producers.
Every year we monitor their fulfilment of this expectation, and I'm happy to report that they are exceeding the 75-per-cent benchmark. However, it is not possible to ensure the health of the independent production industry simply by making sure that its productions get on the air. There are major changes happening in the broadcasting system that make life difficult for everybody involved, including broadcasters and regulators as well as producers.
- First, broadcasters find that their traditional viewing platforms are in decline because of audience fragmentation. They hope to gather these scattered audiences back in through consolidation of major broadcasting groups. This means that you as independent producers have fewer doors to knock on when you're selling your ideas and your work.
- Second, broadcasters are also trying to acquire rights that cover all the New Media platforms so they can regain and monetize viewership. Your Association has expressed concern that they are seeking blanket licences rather than evaluating the different windows and platforms separately.
- And third, broadcasters say it is difficult to negotiate appropriate payment for these various rights because there is not yet any clear evidence of what their value may be.
You have argued that there is an imbalance in the market that favours the major broadcasters, and enables them to insist on longer licence terms and additional rights without appropriate compensation.
So the Commission understands how difficult and how important these negotiations are for both parties. The writers' strike in the United States was in part a result of conflicts over very similar issues.
Terms of trade
We want to help smooth the way toward agreement. However, let me make this clear: It is not the job of the CRTC to get involved in the contractual arrangements among the various players in the industry. We have no intention of setting rates or arbitrating prices between producers and broadcasters. Our role is to foster an environment within which the parties themselves can resolve the issues between them.
That's why we have welcomed the proposal of the CFTPA that the Commission encourage the development of terms of trade – that is, a framework for meaningful negotiations.
Last May we announced our new policy for over-the-air television. That policy includes this statement:
“The Commission is of the view that terms of trade agreements would provide stability and clarity to all concerned, and encourages the development of such agreements between broadcasters and independent producers. The Commission will expect licensees to provide draft, or signed, terms of trade agreements with independent producers as part of their licence renewal applications. The Commission will examine the role of independent production at the time of licence renewal.”
In August, at our public hearing on the Rogers Media acquisition of CHUM's Citytv stations, we obtained from Rogers their commitment to take a lead role in negotiating terms of trade agreements with independent producers.
The actual decision explicitly states: “The Commission expects the licensee to take a lead role in negotiating terms of trade agreements with independent producers.”
During our hearing on the CanWest/Alliance Atlantis transaction, CFTPA was one of the interveners who pointed out that CanWest had not yet negotiated such an agreement, and urged us to make it a condition of approval that CanWest do so.
Our decision in December included the following:
“[T]he Commission expects CanWest to provide draft, or signed, terms of trade agreements with independent producers as part of the licence renewal process … If at renewal time, this expectation has not been fulfilled, the Commission may choose to arbitrate the negotiations to develop the terms of trade agreements with independent producers.”
So as you can see, your proposals have not gone unheard. Terms of trade agreements are going to become part of the landscape in the Canadian broadcasting industry. They will bring to the negotiation process not only clarity and stability, but also some degree of predictability – a principle which we consider particularly important in such a volatile industry.
Why our emphasis on terms of trade? We feel they are a meaningful addition to the industry and will create an efficient, balanced and productive relationship between producers and broadcasters. This will be good for everybody.
Our recent decisions demonstrate that we are putting pressure on the broadcasters we license to conduct serious and productive negotiations with you. And you, for your part, must be ready to compromise in order to arrive at agreements that are not only in your interest, but good for the broadcasting industry as a whole.
I'm confident that by the time of licence renewal for the major broadcasting groups this issue of terms of trade will have been resolved.
Diversity of voices
I'd now like to say a few words about the new policies on diversity of voices in the broadcasting system that we announced last month.
In 2007 we approved, with some conditions, four major transactions that have increased the consolidation of ownership in the industry.
This urge to merge is an economic fact of life. Given the market forces that operate in broadcasting, some kind of concentration of ownership is inevitable, and we believe that the wave of mergers is not yet at an end.
The CRTC gave careful scrutiny to each of these transactions. We examined their implications for the health of the industry, for the objectives of the Broadcasting Act, and for the interests of all Canadians.
But we also realized that the impact of mega-mergers on the diversity of broadcasting voices was a subject that deserved its own inquiry. So we held hearings in September, and heard from a number of interveners including the CFTPA. The new policies that emerged from this process were announced on January 15.
We examined the issue of diversity of voices within the private element of our broadcasting system from two points of view.
First, we looked at the plurality of voices. By “voices” we mean professional editorial voices in news and information programming. A healthy variety of these voices is essential to a functioning democracy.
Second, we looked at diversity of programming. This can mean several things, such as the expression of Canadian voices amidst foreign ones, the availability of different genres and formats, or the airing of content made by a variety of producers, including independent producers. In particular, Canadians should have access to a diversity of national, regional and local content.
In order to maintain a plurality of editorial voices, the Commission established a new policy restricting cross-media ownership. As a general rule, we will not approve applications for a change in the effective control of broadcasting undertakings that would result in the ownership or control, by one person, of a local radio station, a local television station and a local newspaper serving the same market.
We regard the Globe and Mail and the National Post as national, not local newspapers. So we are not aware of any market in Canada where a single person or entity now controls all three media.
This new restriction will ensure that Canadians continue to benefit from a range of perspectives in their local news coverage. It is a simple, clear-cut rule.
On the other hand, to protect diversity of programming, we have taken a more analytical approach. We feel that our present system has provided a great diversity of programming to Canadians. However, too much ownership concentration in the future may put that diversity in peril.
We have therefore placed limits on the share of the Canadian TV audience – including discretionary and over-the-air services – that one person can reach through acquisitions.
- As a general rule, the Commission will not approve transactions that would result in the control by one person of more than 45 per cent of the total Canadian television audience share in a given language.
- We will carefully examine transactions that would result in the control by one person of between 35 per cent and 45 per cent of that audience share.
- And barring other policy concerns, we will approve expeditiously transactions that would result in the control by one person of less than 35 per cent of that audience share.
Let me stress that broadcasters are free to increase their audience above the 45 per cent threshold by offering more attractive programming. These restrictions apply only to audience shares achieved by acquisition.
I have been asked how we arrived at these percentages. We looked at the thresholds developed by the Competition Bureau for measuring competition in banking services. For example, the Bureau considers that a 45 per cent share indicates that a single player is approaching economic control of a market. We believe that those thresholds are also appropriate for assessing control over the diversity of programming.
We will also protect diversity of programming by restricting common ownership of broadcasting distribution undertakings, or BDUs. The Commission, as a general rule, will not approve applications for a change in the effective control of BDUs in a market that would result in one person being in a position to effectively control the delivery of programming services in that market.
Given that Canadian consumers are obtaining their broadcasting primarily by way of an intermediary broadcasting distribution undertaking, access to delivery of programming would be seriously jeopardized if there was only one BDU in a given market.
So we now have straightforward standards for dealing with all future applications to consolidate ownership. We recognize that there may be differences of opinion on some issues – such as the measurement of audience shares. I expect that the finer details will be worked out in future decisions involving specific cases.
The establishment of these standards means that applicants will know how to structure their deals in a way that complies with our rules. Those who want to do something different will have to show very good reasons why they should be allowed to do so.
Disclosure of financial data
I would now like to turn to the question of disclosure of financial data.
The increasingly consolidated broadcasting groups have accumulated a good deal of market power. The CRTC has put forward the idea that it would be in the public interest to disclose the aggregated financial data of the radio and conventional television broadcasting undertakings owned by those groups.
We received preliminary responses at the diversity of voices hearing. There was no clear consensus on this subject. Therefore, last month we issued a call for comments on our proposal.
Our aim is to obtain sufficient financial disclosure to provide greater transparency for all interested parties, including producers like you, while respecting the need for protecting the confidentiality of sensitive commercial data. Whatever the final disposition of this matter, we see it as complementing your initiatives regarding terms of trade and our goal of encouraging an efficient, balanced and productive relationship between producers and broadcasters.
Conclusion
Today I have spoken mostly about issues of traditional media: terms of trade and diversity of voices. But there is an elephant in the room called New Media. We all know about it, we are challenged by it, and we need to find answers to these challenges.
As you know, the Commission is presently undertaking a major study of New Media, which we expect to publish in May. We also expect to hold hearings in the fall or winter. I expect that by this time next year, this topic will dominate our discussions. I am sure that with your customary creative and innovative attitude, you will be a major contributor to that debate.
But the topic of New Media is for another day. Today, I'd like to congratulate the members of CFTPA for their achievements as independent producers, and the Association for its vigorous work on their behalf.
Thank you very much for your attention.
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Date Modified: 2008-02-21
