ARCHIVED - Transcript, Hearing 15 April 2011
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Volume 10, 15 April 2011
TRANSCRIPT OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION
To consider the broadcasting applications for the group-based licence renewals for English-language television groups listed in Broadcasting Notice of Consultation CRTC 2010-952, 2010-952-1, 2010-952-2 and 2010-952-3
140 Promenade du Portage
In order to meet the requirements of the Official Languages Act, transcripts of proceedings before the Commission will be bilingual as to their covers, the listing of the CRTC members and staff attending the public hearings, and the Table of Contents.
However, the aforementioned publication is the recorded verbatim transcript and, as such, is taped and transcribed in either of the official languages, depending on the language spoken by the participant at the public hearing.
Canadian Radio-television and Telecommunications Commission
To consider the broadcasting applications for the group-based licence renewals for English-language television groups listed in Broadcasting Notice of Consultation CRTC 2010-952, 2010-952-1, 2010-952-2 and 2010-952-3
Konrad von Finckenstein Chairperson
Leonard Katz Commissioner
Rita Cugini Commissioner
Suzanne Lamarre Commissioner
Peter Menzies Commissioner
Tom Pentefountas Commissioner
Stephen Simpson Commissioner
Jade Roy Secretary
Joshua Dougherty Legal Counsel
Sheehan Carter Hearing Manager
140 Promenade du Portage
April 15, 2011
- iv -
TABLE OF CONTENTS
PAGE / PARA
Corus Entertainment Inc. 1507 / 9074
Shaw Media Inc. 1579 / 9529
- vi -
PAGE / PARA
Undertaking 1541 / 9263
Undertaking 1543 / 9282
Undertaking 1579 / 9521
Undertaking 1631 / 9879
--- Upon resuming on Friday, April 15, 2011 at 0903
9069 THE CHAIRPERSON: Good morning.
9070 Madame la Secrétaire, commençons.
9071 THE SECRETARY: Good morning.
9072 We will now proceed with the presentation by Corus Entertainment Inc.
9073 Please reintroduce yourselves for the record, after which you will have 20 minutes for your presentation. Thank you.
9074 MR. MAAVARA: Good morning, Mr. Chair, Commissioners, Commission staff. My name is Gary Maavara and I am Executive Vice-President and General Counsel of Corus Entertainment.
9075 With me today, on my immediate left is Doug Murphy, our Executive Vice-President and President of Corus Television.
9076 To his left is Karen Phillips, Vice-President, Network Program Operations.
9077 To my right is Sylvie Courtemanche, Vice-President, Government Relations.
9078 And to Sylvie's right is William Knight, Vice-President, Head of Business Development and Planning.
9079 First of all, we would like to thank the interveners who supported Corus' group-licensing application.
9080 We would also wish to note that yesterday Corus provided responses to various undertakings and we also provided additional responses to requests for information made last week by Commission staff. We will be touching base on some of these undertakings and responses in our remarks this morning.
9081 As to the others, we are prepared to discuss these during the question and answer phase.
9082 Last week, Corus indicated that it was prepared to adhere to the principles of the Commission's group-licensing framework. The central issue is establishing the group CPE and PNI spend that will apply to each group, including Corus.
9083 Corus made it very clear that our application was premised on being given the right circumstances so that we may succeed and spend more on Canadian programming. We hope that we were very clear that we intend to meet the principles of the group-based licensing policy.
9084 MR. KNIGHT: Corus provided during the in camera phase of this proceeding financial information that had been requested by the Commission on day one of the hearing.
9085 We have requested a number of COL amendments that will help grow our revenues even with the uncertainties that will arise over the next licence period. It is this growth that will allow us to spend more on Canadian programming.
9086 Without these COL amendments, we cannot commit to our proposed CPE or suggested PNI rate.
9087 Corus believes in Canadian content production. We are the only applicant in this hearing that owns a production company. We produce world-class Canadian animation programming that is sold internationally. So we fully understand the financing of such content, how it is developed, produced, scheduled and marketed.
9088 To achieve the core financial commitments of the policy, we asked for an internal reallocation of the group spend. This would avoid the unintended consequence of having our OTA CPE set at 69.7 percent. The resulting CPE spend would represent an almost threefold increase from the current CPE spend and such an increase would not be sustainable given that we operate three small stations that are affiliated to the CBC.
9089 Meanwhile, our proposal would provide virtually the same level of funding to the system as the Commission's formula in the group-licensing framework. We would be happy to explain during the question phase why this is the case.
9090 To achieve this, our CPE percentage would have to be fixed as follows:
9091 - for our Category A specialty and pay services we would apply a 31 percent CPE requirement;
9092 - for our Category B specialty services we would apply a 16 percent CPE requirement; and
9093 - for our OTA stations, we would apply a 28 percent CPE requirement.
9094 We do wish to note that we project over the next five-year period to spend in excess of $670 million on CPE. This represents a significant increase over our historical CPE spend.
9095 MR. MURPHY: On the matter of PNI spending, you asked -- and I quote -- "that we sharpen our pencils." The Commission is aware that we had originally requested that our PNI spending be set at 5 percent.
9096 Historically, our PNI spending has been 9.2 percent. More importantly, 96.6 percent of our PNI spend was on Canadian drama. So it is obvious that Corus understands the value of and has been a tremendous supporter of such content.
9097 In requesting a 5-percent PNI, we were simply seeking the ability to respond to market demands as they evolve. Previous business cycles have demonstrated that audiences do not always respond to the same types of programming over any given licence period.
9098 That said, we understand the objectives the Commission is seeking to achieve in this licensing proceeding.
9099 In order to increase our PNI commitment, it is critical that we obtain the requested COL amendments. We simply cannot commit to a higher PNI rate without these since we will not have the right circumstances to succeed and grow our revenues and our audiences.
9100 With the understanding that we obtain our COL amendments, we would be prepared to increase our PNI spending commitment to 8 percent. This means that our minimum PNI spend over the licence term would increase from $113 million to over $182 million, an increase of over $69 million.
9101 We trust this demonstrates Corus' willingness to contribute significantly to this type of programming. Given our portfolio of assets, a large majority of the PNI spend will continue to be made on Canadian drama over the next licence term.
9102 MS COURTEMANCHE: Of course, these commitments are premised on all of our OTA, specialty and pay assets being included.
9103 Certain interveners have requested that our pay assets not be included within Corus' group-licensing framework.
9104 Alternatively, one intervener suggested that if our pay assets are included, they should be treated like OTA services and only be allowed a 25-percent spending flexibility.
9105 Corus objects strongly to these requests for the following reasons:
9106 - This would represent a change to the Commission's policy where it is stated that applications from other ownership groups would be considered, including those controlling multiple specialty and pay services and that they be allowed flexibility in the allocation of their services' CPE obligations.
9107 - The Commission's policy for discretionary services' spending flexibility was clearly set at 100 percent; restricting pay services to a 25-percent spending flexibility also represents a change.
9108 - Including our pay services will greatly benefit the Canadian broadcast system since this translates into an incremental spend on Canadian programming of $18.1 million over the next licence term.
9109 - This will allow Corus to utilize Encore Avenue's CPE spend on new and fresh Canadian productions. Limiting this spending flexibility would prevent Corus from investing in new Canadian productions and we just fail to see how this serves the public interest.
9110 - Première Bobine, a leading independent producer of Canadian drama who sources a significant portion of its revenues from pay television, stated unequivocally that, given the threat of new elements in the system such as over-the-top broadcasters, it was essential that Corus have the necessary flexibility to respond to the changing competitive landscape; therefore, its pay assets should be included.
9111 - And it is also important to note that Corus operates four channels that rely upon movies and drama. Two are pay and two are specialty. We are clearly committed in a big way to long form drama.
9112 MR. MAAVARA: Corus is one of Canada's biggest supporters of Canadian drama and feature films. This will not change over the next licence period for the following reasons:
9113 - The first is our track record. Over the last licence term, Movie Central broadcast on average 175 hours of Canadian programs each month, of which 80 percent or 140 hours represented Canadian drama. We acquired or pre-licensed in excess of 1,400 hours of first-run Canadian drama programming from fiscal 2003 to fiscal 2010.
9114 - We understand that a premium television service that is solely supported by subscriber revenues must distinguish itself by the compelling and fresh programming it offers. If we don't, we will very quickly see declines in our subscriber base.
9115 - We proposed to keep an exhibition requirement on Movie Central requiring that no less than 50 percent of all of our Canadian content be devoted to the distribution of Canadian dramatic programs.
9116 - We have also proposed to keep the condition of licence related to affiliated productions. This means that on Movie Central at least 75 percent of its overall Canadian programming must be sourced from independent producers. On average, the vast majority of our overall Canadian programming comes from independent producers.
9117 - The amendment sought to the Movie Central Canadian drama spend was simply reflective of the group-licensing framework, which allows new spending flexibility amongst the media group's television assets subject to a PNI requirement.
9118 - We have increased our PNI commitment to 8 percent, increasing our projected minimum PNI spend over the next licence term from more than $113 million to over $182 million or more than $69 million over the next licence term.
9119 - Historically our PNI spend is 96.6 percent Canadian drama. Canadian drama spending will continue to represent a significant amount of our PNI spending over the next licence term.
9120 We think that Première Bobine got it right when it comes to our pay services. However, we do not agree with their request to make our current licence commitment to air all Canadian feature films appropriate for the service as a condition of licence. We meet this commitment, and no one has alleged otherwise.
9121 MS PHILLIPS: The Commission has requested that Corus provide additional information regarding described video, and more particularly the costs and impact of increasing either the hours of described video and/or increasing the amount of original described video programming.
9122 For Corus the costs are significant. Our average DV cost is approximately $1,400 per hour for scripted and about an additional 10 percent for documentary programs. For unscripted, this amount is about $1,000 to $1,200 per hour.
9123 Accordingly, the potential increases to our described video requirements would represent an increase of between $2.5 million and $5.8 million to our programming costs over the next licence term.
9124 From a scheduling perspective, even the suggested four hours of described video each week, of which 50 percent is programming original to the service, is problematic. This is due to the long turnaround time of the DV process, which can be two to three days for a single one-hour program.
9125 If program delivery is too tight, we would be forced to make last-minute schedule changes or be out of compliance.
9126 Comparatively, we would never want to be in a position where we needed to hold back a described episode in order to ensure that we could make the original requirement in a subsequent week. In essence, in some cases we would be forced to program our networks based simply on what has or has not previously been described.
9127 Corus had requested to amend its described video condition of licence for Encore Avenue to recognize the fact that this service largely offers library titles. Commissioner Lamarre suggested a revision to the standard COL in order to accommodate our concern.
9128 We have reviewed the suggested condition of licence and have determined that it would still not be workable, not on the basis of the original programming requirement but rather on the requirement to make two hours of this content available each and every week.
9129 Corus is prepared to accept this COL for all of its specialty and pay services as long as it is measured over the broadcast year. Yesterday, we provided the Commission with proposed COL wording to this effect.
9130 This would result in the same number of described video hours both in repeat and original to the service being made available. We will simply be better able to manage the scheduling of this content.
9131 Corus believes that a yearly requirement on both hours and original DV would benefit the users of described video, our total audience and the licensee. This represents the most reliable means by which to remain consistent with ensuring that episodes of a series are described and that fresh inventory, as mandated by the Commission, is offered throughout the year, while avoiding micromanaging the licensee's programming schedule.
9132 We also note that given this proceeding is a licensing hearing, we did not budget or anticipate that the Commission's 2009 Accessibility Policy would be changed prior to its actual implementation.
9133 For our over-the-air stations we face another unique circumstance. As we explained yesterday, the Commission's proposed DV COL for these stations will simply not work.
9134 Since our three over-the-air stations are affiliated with the CBC network, Corus does not control a large part of its programming schedule. What we produce is local news, which because of the length of time that is required to describe, would not be possible to DV.
9135 Corus does, however, provide audio description of all of its news programming and has done so since last year. Corus has accepted a COL to this effect for the next licence term.
9136 Accordingly, Corus would need to rely on the CBC network programming for described content in order to meet a DV COL.
9137 Currently, the CBC network does not have DV commitments. Corus contacted the CBC in relation to this matter and they indicated that they are aware of the 2009 Accessibility Policy as it relates to DV. They also expect that a DV requirement will be discussed at their upcoming licence renewal hearing this fall.
9138 In addition, Corus has applied, consistent with Commission policy, that it only provide logs for its local programming schedule. This means that Corus will not be reporting on network programming which we would rely upon to report our DV programming.
9139 Given this unique situation, Corus believes that its three local OTA stations should not be subject to a DV COL. Corus will continue to offer over the next licence term CBC network programming which we assume will meet the Commission's DV requirements.
9140 MS COURTEMANCHE: On closed captioning, Media Access Canada has suggested that it could complete the process of revising standards by September 1st, 2011, and that it had a meeting planned with broadcasters next week.
9141 As Chair of the Canadian Association of Broadcasters, I am the person who was responsible for this file. I am not aware of any broadcaster meetings next week to review the standards.
9142 And for the record, the facilitator hired by the CAB was not fired. The CAB filed its final report with the Commission, as have the user groups, and it is our understanding that the Commission is now considering how to complete the review of the English-language closed captioning standards.
9143 I will just add that the French-language closed captioning standards have been agreed to and they have been filed with the Commission.
9144 During our Phase I appearance, there was a discussion regarding OWN and its compliance with its conditions of licence, in particular its nature of service. As requested, we have filed significant additional information.
9145 Corus continues to believe that OWN's programming schedule is in compliance with its conditions of licence, including its nature of service. However, the broader discussion was within the concept of the continued relevance of the genre exclusivity policy. This is an interesting debate and one which we believe merits further discussion.
9146 MR. MAAVARA: The Commission asked other applicants whether they would be prepared to accept a suspensive condition of licence in relation to the Terms of Trade Agreement recently concluded with the CMPA.
9147 For the record, Corus opposes such a COL for the following reasons:
9148 - Corus will sign the finalized agreement and will work in good faith to implement its terms with the producers.
9149 - These agreements will involve terms of trade plus a myriad of other elements such as adherence to the other terms from funding agencies such as Telefilm, the CMF and other investors.
9150 - These are all commercial matters which the Commission has never overseen. They also involve unregulated third parties.
9151 - As such, there are too many matters outside of the control of Corus as licensee and the Commission as regulator for us to agree to this COL.
9152 In our opening remarks last week, we stated that the "devil is in the details." Much of the discussion over the past two weeks has been just that. We have all struggled with these complex elements of the Commission's group-licensing framework.
9153 This task has not been easy. There is much information on the public record to date and there is more to come.
9154 We believe that Corus' proposals as amended fully meet the expectations of the policy and we look forward during the next licence term to have the right circumstances so that we may succeed and spend more on compelling and exciting Canadian programming.
--- Video presentation
9155 MR. MAAVARA: Mr. Chairman and Commissioners, we wanted to set that up a little bit, but that was a -- we just got back from the Spring Television Market in Cannes and the Nelvana Studio's shows were extremely well received by all our international broadcast buyers.
9156 This is one that was -- the idea came from a book in Kids Can Press. I was going to set that up a bit but we wanted to share a little of the really fresh content that we are making in our studios for you.
9157 THE CHAIRPERSON: Thank you and thank you for the interruption of just talking. It's always good to see something else.
9158 Well, we asked you to sharpen your pencils and you certainly did and I do appreciate that.
9159 By the way, procedurally, do you want an in camera portion or not? Because I noticed what we had discussed in camera, you allowed us to publish it without any extractions.
9160 MS COURTEMANCHE: Well, it would depend on where the discussion went, you know, with respect to the numbers. There are some numbers that are confidential, but if we maintain it at the level that we did last week, we would have no problems with it all being on the record.
9161 THE CHAIRPERSON: You let me know. If we touch on an area that you would rather do in camera, we will do that in camera. Okay?
9162 MS COURTEMANCHE: Okay. Thank you very much.
9163 THE CHAIRPERSON: So if I understand you, it's 8 percent PNI, 31 percent CPE, 28 percent for the OTA, subject to us allowing you the little transfer between specialty and OTA?
9164 And you put several conditions on them. One of them is agreement to all the changes of the COLs that you put forward, include Pay TV and also no suspensive COL regarding terms of trade.
9165 MR. MAAVARA: That's correct.
9166 THE CHAIRPERSON: Now explain to me what some of these things mean. Needless to say, I am very heartened by your numbers and I appreciate the fact that you went to great lengths to go forward and try to put the best offer on the table.
9167 When you say "agree to all COLs," what, for instance, is the COL in -- and you specifically referred to it, Mr. Maavara, to Movie Central. What is the change in the COL on Movie Central that is so essential to you?
9168 MR. MAAVARA: Well, if I could make a preliminary remark.
9169 When we looked at the group-licensing policy framework, we looked at how that affected the legacy conditions of licence that we had across the board.
9170 And we accepted the Commission's premise that the next stage of the licensing process in Canada was going to be about created compelling Canadian content and the key driver of that was going to be the spend.
9171 So we looked at that and we said, what are the conditions that are going to allow us to attract the audiences and drive the revenues so that in fact we are going to be able to make that spend?
9172 And as we have said a couple of times this morning, we are going to be spending significantly more and in particular on the areas of concern that the Commission has been most devoted to over literally the last decade.
9173 So when we looked at each one of our channels, we had a number of legacy conditions, some of which had literally been around for 20 years. So we went through each of those and we said, how can we harmonize all of those and bring it into the context of the digital migration?
9174 With that introduction, I will turn it over to Miss Courtemanche to go through the specifics.
9175 THE CHAIRPERSON: Okay. I understood then. I have no problems with the cleanup of the legacy.
9176 But since you singled out Movie Central, I actually looked at it, and the only change you want is what seems to me like a legacy one, that rather than referring to semesters we refer to the broadcast year?
9177 MS COURTEMANCHE: Yes.
9178 THE CHAIRPERSON: What does that mean for you in terms of money or flexibility? I am just trying to -- as you said several times, the devil's in the details. Explain this detail to me illustratively.
9179 MS PHILLIPS: We are looking to measure it over a year as opposed to a semester just because --
9180 THE CHAIRPERSON: What is a semester, first of all, in terms of broadcasting?
9181 MS PHILLIPS: A semester is -- right now it's measured on the six-month period of September to February and February to August.
9182 THE CHAIRPERSON: Right.
9183 MS PHILLIPS: And the conditions of licence are required to be met on both of those semesters.
9184 We are looking to have it measured over just the broadcast year, similar to our other services. It just allows us better scheduling flexibility. It gives us more opportunity to meet the COLs on a 12-month period than it does on six-month period if we catch something partway through that needs to be adjusted.
9185 THE CHAIRPERSON: Have you gone so far as to measure what the financial impact of this is?
9186 MS PHILLIPS: There is no financial impact to it.
9187 THE CHAIRPERSON: It's just operational flexibility.
9188 MS PHILLIPS: It's just a measurement.
9189 THE CHAIRPERSON: Okay. Then let me turn to the very first one, which is Country Music Television. If I understand it, what you --
9190 MS COURTEMANCHE: Mr. Chair, on Movie Central you said what else was important, and the other element that is important is to keep our 150-percent credit, which --
9191 THE CHAIRPERSON: The advertising, yes.
9192 MS COURTEMANCHE: Yes.
9193 THE CHAIRPERSON: It is evident that that means what are the financial implications. That is why I didn't ask for an explanation.
9194 But let's say on Country Music, for instance, unless I misunderstand it, right now any feature films that you broadcast have to be on a country music artist or a country music artist is cast in a performing role and you want to eliminate that.
9195 By eliminating it, aren't you just creating another outlet for your movies? You told me yourself you have four channels to show movies. Now, you are going to use Country Music as a fifth?
9196 MR. MAAVARA: Well, we are not going to run a lot of movies, but what we are trying to do with CMT generally is to have a mix of programming which fits the brand, a family brand.
9197 It's a particular lifestyle and that would be a mix of music as well as the other elements, including drama, and some of that would be features, but the feature films would be very much in keeping with that family brand.
9198 THE CHAIRPERSON: But you see, here --
9199 MS PHILLIPS: The nature of service, Mr. Chair, says that the licensee shall provide a service which focused on country and country-oriented music.
9200 So we just thought that, you know, you didn't need an additional condition of license with respect to your feature films, it's already caught in your nature of service that it has to be that type of programming. We just thought it was a duplication
9201 THE CHAIRPERSON: Are you on the same page, because I have no problem if you show movies that have something to do with country, but Mr. Maavara just talked about now family, which surely doesn't --
9202 MR. MAAVARA: No, because it's within the nature of service. That was my point.
9203 MS COURTEMANCHE: Yes.
9204 MR. MAAVARA: We are indeed on the same page
9205 MS COURTEMANCHE: We believe that country programming espouses the family values. That's part of country living -- or country values I should say.
9206 MR. MURPHY: Yes. If I could add, we spoke of this last time we collected. What we have been doing is listening to our audiences. We have a strategy to move a lot of the country music, the real heart of the music piece of it to our web-based strategy, to deliver audiences to the web and we have been very successful building audiences around the notion of family values, trust, all those kind of contemporary country feelings.
9207 We would like to have the same sort flexibility on the movies, that the country music protagonist is pretty restrictive from a movie perspective so we are just asking for a little bit of flexibility within that definition.
9208 THE CHAIRPERSON: Presumably I know the answer, but still, have you costed this out? Does this have a financial impact or is this operational flexibility?
9209 MR. MURPHY: It's more the operational flexibility for us.
9210 THE CHAIRPERSON: Okay. Now, you are quite strong on the point that pay should not be excluded. You have heard the movie people saying if you do this, if you include pay then this is another nail in the coffin of Canadian feature films because this is one way in which we have a guaranteed showing of our films, et cetera.
9211 What do you say to their argument, because they were quite persuasive when they were before us.
9212 MR. MAAVARA: Well, I guess we would first of all make the observation that we have had very few actual producers in front of the Commission in the last two weeks and the one major producer, Tom Berry, in fact talked about the support that we have made for features.
9213 We are quite proud of the quality of the features that are being developed by Movie Central and with our colleagues at Astral and with the industry generally and the Commission -- we have had the good fortune to have screenings here in Ottawa of some of -- we are really now starting to make films that have both a high quality and also a high public appeal. We are not moving away from that at all.
9214 I think the concern that the intervenors have had has been based on a false premise and that is -- and we tried to get into this a little bit last week. The premise is that simply we could move all of our costs out of one particular channel into another under the flexibility.
9215 Practically speaking that's impossible and, as we set out this morning, there are a variety of reasons why the Commission has in place a structure that would prevent us from doing that.
9216 First of all, Movie Central and Encore have a Canadian content bucket that we have to fill. There is a cost associated with that. As we have said, a major proportion of that is PNI and drama. So that's the first control, we are not going to be able to move out of that.
9217 The second control is the PNI spend. That again means that we can't move that money out of the pay channels. The third aspect is the independent aspect of PNI. The fourth aspect is the drama condition that we are prepared to accept. The other thing is, as we have said in our speaker's notes, we have four channels that rely on movies for their content, so we are simply not going to walk away from that type of content. It's in fact really at the heart of our pay TV operations.
9218 THE CHAIRPERSON: I understand. All of this would seem to me that it really should be indifferent as to whether the pay was included or excluded.
9219 MR. MAAVARA: Well, we would like it to be included because of planning is comprehensively based on the entire group and at the same time we are not going to move all our money out of one channel or another. We want to be able to make our plans going forward based on the entire spectrum of channels that we have and if we took one part of that out it would just complexify things.
9220 I should add, it would also make life more complicated for the Commission as well, because you would, in effect, be creating another hybrid of the group licensing policy.
9221 MR. MURPHY: I was going to add, Mr. Chairman, that exclusivity is a critical part of the value proposition of pay and so for us, our commitment to long-form feature and scripted drama on Movie Central is critically part of our strategy. We have U.S. studio deals, we have other things, but we know that Canadians like Canadian long-form content, we know they like it on Movie Central, and so our intention is to continue to build our audiences by delivering great Canadian content on the pay services.
9222 MS COURTEMANCHE: It's good for the system, because it brings $18.1 million more dollars towards Canadian production, so we think it's a win-win.
9223 THE CHAIRPERSON: The hybrid that somebody suggested which basically says, yes, you are included but you can only move 25 percent over, the flexibility on it is as restricted as is the moving out of OTA. The net effect is that obviously has an impact on your PNI, I can see that. What would be the impact on that?
9224 MR. MAAVARA: Sorry, of establishing a --
9225 THE CHAIRPERSON: If the Commission adopted the suggestion -- I don't know whoever made it -- that rather than -- it is included, but you don't have 100 percent flexibility but you can only take 25 percent out of the pay and move it into any other category.
9226 MR. MAAVARA: Right. I guess just as a matter of first principle, our view on a lot of these regulatory elements is that we have to start moving away from this simply because as we move -- and our intention is certainly not to stand still. We hope to launch more channels, more multiplexes. We have to keep growing in order to survive.
9227 If we attach more and more elements of regulation it really complexifies our life and that is really the first part of this. It's just the attitudinal approach.
9228 In terms of the 25 percent, with the other elements, the five elements that we described earlier, I think you are probably as a practical matter going to achieve that anyway. We simply --
9229 THE CHAIRPERSON: That's why my question. I appreciate your complexity issue and it's close to micromanagement, which I am very against. I just didn't see that it would necessarily have a financial impact on you.
9230 MR. MAAVARA: We can take a close look at that maybe, Bill, but our sense is it's probably not going to make any great difference. Again, of course we are going to be spending significantly more.
9231 MR. KNIGHT: I would just echo that. I don't know that there would be a financial impact. I agree with Gary that in practicality it probably would limit us to 25 percent just from the other reasons.
9232 THE CHAIRPERSON: Okay. Thank you.
9233 Then, lastly, on terms of trade, I don't quite understand your position. The Terms of Trade Agreement, which I read through very carefully, has its own dispute settlement mechanism and all of that. If we made it a suspensive condition of license the net effect would be zero because you would be -- it would only kick in if and when you basically said we will walk away from it. Then presumably the broadcaster -- or the broadcaster walks away, either way it doesn't make a difference, we are not trying to point fingers here -- then if the other party would come to us and says, "You made a suspension of COLs, I will now step in." If we did that, what we do, does that live up to the terms of the dispute settlement of the agreement?
9234 So it sure as hell, as you suggest, would not get into arbitrating the internal disputes, lots of which involve parties which are not parties subject to our jurisdiction.
9235 Why are you so opposed to this in effect sort of overhanging sword of Damocles so we live up to the agreement and use the dispute settlement provisions of it?
9236 MR. MAAVARA: Well, I think in some ways, Mr. Chairman, you have answered the question.
9237 There are really two ways of looking at this. I don't want to talk for too long, but I will start with the element of keeping the regulatory pristine.
9238 As you, as Commissioners and Commission staff adopt a particular regulatory framework you have to ask yourself the question: How am I going to apply this framework? How am I going to measure it and then how am I going to judge how that application has been adhered to.
9239 I'm going to come back to that, but I'm going to jump over to the other side of the fence, which is years ago I was talking with a friend, colleague and mentor, John Hilton, who actually has sat up on that side of the room and he has also sat on that side of the room, and we were talking about the regulatory process and how the regulator regulates and he said there are times when the regulator doesn't necessarily establish black letter law. He called it the process of regulation by the raised eyebrow. That is where the regulator simply makes it's intentions known and the industry understands and we move forward on that basis.
9240 Mr. Chairman, Members of the Commission, I think what we have here is an example of regulation by the raised eyebrow. I might add in fact for the record, let the record show that you are raising your eyebrow --
9241 MR. MAAVARA: -- and you are demonstrating that process.
9242 There are times when the regulator asks us to do things, they are not necessarily measurable, they are not necessarily something that ends up in Peter Grant's excellent book on regulation, but it's things that we do.
9243 Getting back to the pristine side, this is an example of that. We have an agreement that we have hashed out. We are going to finalize that. We have a meeting on Monday actually, we are going to finalize that and file it hopefully by the end of the week next week, but then we take that framework and we are going to have to overlay that with each producer as they come in and we are going to have to match that.
9244 There was quite a bit of discussion earlier in the week about the relationship of the various CRTC policies with the Canadian Media Fund policies, Telefilm, we have the provincial funding agencies, we are going to have to mesh all that together. Hugely complex.
9245 So on the one hand we kind of agree with you that a suspense of COL doesn't really have much impact, but from a pristine regulatory standpoint as general counsel I just can't sit here and say I'm prepared to accept on behalf of this company a condition of license which will be extremely difficult to define and almost all of the elements will be impossible for us to control except on a good-faith basis.
9246 THE CHAIRPERSON: Thank you. That was an honest response, I do appreciate that. I am delighted that you guys managed to do a terms of trade agreement and I expect both sides will adhere to it and so this would never -- so we are really talking only about the worst-case scenario which hopefully will never arise. But there are operational complexities, as you have pointed out.
9247 Okay. Len, you have some questions?
9248 COMMISSIONER KATZ: Thank you, Mr. Chairman.
9249 Good morning. Both today in your opening remarks and last week you kept referring to three OTA stations that you provide service to through an affiliate agreement with CBC, yet your application spoke to five licences. I understand that two of them are rebroads, but there are obligations there as well will regard to local programming.
9250 Can you just expand as to what exactly you are seeking and clarify that as part of your license renewal process you will be providing -- I think it's seven hours of local programming in those rebroad markets as well?
9251 MS COURTEMANCHE: Sorry, we provide original local programming in only three markets and two of those rebroads just pass through the local programming from another market. So there are only three markets where there is original programming.
9252 COMMISSIONER KATZ: Do you not provide --
9253 MS COURTEMANCHE: We don't get LPIF for five stations, we get LPIF for three stations, just to be clear, so that's why we only have local programming.
9254 COMMISSIONER KATZ: So you do not provide --
9255 MS COURTEMANCHE: I don't get LPIF for five stations, I only get LPIF for three stations. I get LPIF for my Oshawa station, Kingston and Peterborough.
9256 COMMISSIONER KATZ: Okay. So you have just confirmed you do not provide 7 hours of local programming in those two rebroads?
9257 MS COURTEMANCHE: That's right. It's just passed through from another market, but it's not original to that rebroad. That's right.
9258 COMMISSIONER KATZ: Okay.
9259 We talked last week about tangible benefits reporting for those two acquisition in 2008-2009, you said you are well on track, everything is hunky-dory.
9260 Can you file the required and obligatory annual reports with us?
9261 MS COURTEMANCHE: I believe it has already been filed, but we would be happy to refile it.
9262 COMMISSIONER KATZ: Okay.
9263 MS COURTEMANCHE: If for some reason it hasn't reached the Commission, we would be happy to do that.
9264 COMMISSIONER KATZ: Okay.
9265 Those are my only questions, Mr. Chairman.
9266 THE CHAIRPERSON: Okay. Tom...?
9267 COMMISSIONER PENTEFOUNTAS: No questions, thank you, Mr. Chairman.
9268 THE CHAIRPERSON: Steve...?
9269 COMMISSIONER SIMPSON: Thank you very much.
9270 Good morning. More reading for the airplane, thank you very much.
9271 COMMISSIONER SIMPSON: I have a couple of questions, very brief, just clarification questions.
9272 At the beginning of your presentation you had mentioned -- these are really PNI questions but I would like to ask them because they might not get touched on.
9273 In your presentation you had said that with respect to PNI you are spending 96 percent on drama. Of the remaining 4 percent, would that cause me to correctly assume that the rest would be documentary out of that 100 percent?
9274 MR. KNIGHT: We also do awards shows, too, on CMT Awards and others, so it's probably more awards shows than documentaries.
9275 COMMISSIONER SIMPSON: Okay. It's great. It's a huge percentage on drama.
9276 From putting your programming hats on, are docs not working from the standpoint of being able to achieve audience?:
9277 MR. MURPHY: Documentaries have a place in any network. For us, given our suite of services, we have found that drama obviously is the most highly sought after by our audiences, and then of course the award shows given the CMT relationship, but I wouldn't say that there wouldn't be documentaries in the future we might look to produce. It would need to be kind of a fit to the brand of the network in question.
9278 COMMISSIONER SIMPSON: Okay.
9279 Following on to the drama question of earlier, when you were making reference to Movie Central you stated that you are tracking about 175 hours per month of drama production, how much of that is acquired versus original production?
9280 MR. KNIGHT: I'm sorry, acquired versus...?
9281 COMMISSIONER SIMPSON: How much is foreign versus Canadian of that percentage?
9282 MS COURTEMANCHE: We would have to get back to you on that for a specific percentage.
9283 COMMISSIONER SIMPSON: Okay.
9284 Lastly, on the accessibility issue, I had asked this question of Bell the other day, when you did your financial projections with respect to costs over the license term of DV, had you taken or contemplated the impact of more U.S. based programming coming to you after 2012 that would be described because of the policies that are kicking in in 2012 in the United States.
9285 If you have not taken that into consideration would you consider filing an undertaking as to what your savings might be on that budget?
9286 MS PHILLIPS: Our costs were calculated based on us describing as opposed to getting content in that was described.
9287 Having spoken to our programmer on the women's group this week actually, she had indicated that a lot of the information that we do -- a lot of the programs that we do get in from the States don't have described video.
9288 Typically if you do get something there is an increase in the license fee of the product itself, so the cost would still remain. They might not be as high, but I wouldn't have the exact figures as of yet because it hasn't really hit.
9289 COMMISSIONER SIMPSON: Okay.
9290 MS COURTEMANCHE: The problem that we would have, Commissioner Simpson, is we just don't know how much is going to come in the pipeline so it's kind of -- you know, it's hard to provide you with an estimate if we don't know how much content is coming in the pipeline.
9291 So we wouldn't be able to actually give you an accurate assessment until 2012 when we see the actual -- you know, when this all pans out and we know how much is coming down the pipeline, then it would be easier to cost out. We would really be guessing at this point.
9292 Not that I don't want to do another undertaking, but I just thought that I would put that on the record.
9293 COMMISSIONER SIMPSON: Thank you very much. That's it.
9294 MR. MURPHY: Commissioner Simpson, if I could just return to the prior question --
9295 COMMISSIONER SIMPSON: Yes. Yes.
9296 MR. MURPHY: -- just for the sake of accuracy and clarity, of the 175 Canadian programs, that 100 percent of hours, they are all Canadian. Those are all Canadian drama programs.
9297 COMMISSIONER SIMPSON: Terrific. Thank you.
9298 MR. MURPHY: Thank you.
9299 COMMISSIONER SIMPSON: Thank you very much.
9300 COMMISSIONER MENZIES: You say 31 percent Cat A, 16 percent Cat B, 28 percent OTA, what percentage does that give overall on your revenues?
9301 MR. KNIGHT: For the first year we stuck to the 30 percent, but because -- so once you fix your numbers obviously, depending on what the different services would do, your overall number would change, go up and down depending on what services grow faster or slower. But we stuck to the initial Commission's policy of the 30 percent in fixing the OTA and that's where we get the first sort of analysis where we show the OTA comes to 69.7 and then by reallocating it into our specialty channels we still get to the same overall dollar amount of $670, but just having to switch up the amount between OTA and specialty.
9302 COMMISSIONER MENZIES: So it's the 30 percent --
9303 MS COURTEMANCHE: Well, it's not 30 percent. We have to be clear. No, sorry, it's not 30 percent.
9304 MR. KNIGHT: Yes.
9305 MS COURTEMANCHE: What happens is that we did the calculation using your 30 percent model and it came out to $670 million, so with our reallocation you still get your $670 million, so you get the same amount in absolute dollar terms.
9306 COMMISSIONER MENZIES: I get all that.
9307 MR. KNIGHT: Yes.
9308 MS COURTEMANCHE: That's what we demonstrate --
9309 COMMISSIONER MENZIES: That's where you have done there, is what you have done is taken things like DUSK and moved them from 4 percent to 16 percent --
9310 MS COURTEMANCHE: Right.
9311 MR. KNIGHT: Correct.
9312 MS COURTEMANCHE: Correct.
9313 COMMISSIONER MENZIES: -- and that sort of stuff.
9314 So why do you need to fix the OTA as a percentage in terms of --
9315 MR. KNIGHT: That's the way the Commission policy is set out.
9316 MS COURTEMANCHE: Yes. The way the formula works is you have to set a fixed CPE for your conventional. It's just the way the formula works.
9317 COMMISSIONER MENZIES: Does that interfere or not with the flexibility you are seeking?
9318 MR. KNIGHT: No, because the 28 percent OTA we set, which is close to historical for OTA --
9319 COMMISSIONER MENZIES: Right.
9320 MR. KNIGHT: -- so we still have that 25 percent flexibility if necessary.
9321 MS COURTEMANCHE: Yes. So at 28 percent it reflects our historical spend, so it's fine.
9322 COMMISSIONER MENZIES: And the flexibility that you have worked out in terms of taking, like it said, outlets like DUSK and moving them from 4 percent to 16 percent and that sort of stuff, that's --
9323 MR. KNIGHT: Yes. So on the specialty and pay, because we have 100 percent flexibility, we can -- you know, the amount of 16 percent on DUSK for example, even though our historical is at 4, in the future it may not end up being at 4 or it may not end up at 16 but because you have that flexibility we can move it.
9324 COMMISSIONER MENZIES: Okay. Given the nature of those services, on your PNI offer of 8 percent, it sounds to me like that is perfectly compatible with what you have to do anyway in terms of that, so I'm just wondering how necessary it is.
9325 MR. KNIGHT: How...?
9326 COMMISSIONER MENZIES: How necessary it is to nail in an 8 percent PNI when that is what -- as you say on page 8 of your oral remarks, that's what you do anyway.
9327 MR. KNIGHT: Agreed. Yes, right. So we agree. We historically have done, as we said, 9.2 percent.
9328 COMMISSIONER MENZIES: Yes. So there is no real incentive or burden there, it's kind of this is what we do and that seems like a fair average.
9329 MS COURTEMANCHE: We would like to explain to you, Commissioner Menzies -- I will ask Bill to do that -- how we got to the 8 percent, just so you understand we didn't pick this number out of a --
9330 MR. KNIGHT: Right.
9331 MS COURTEMANCHE: -- shot a dart. There is actually a logic behind it and I will let Bill explain how we got there.
9332 COMMISSIONER MENZIES: Sure.
9333 MR. KNIGHT: We actually looked at the actual hard dollar amount, so we looked at what we historically had spent in hard dollars and then looked over the new license term, because obviously PNI is based on part of your revenue, so of course as revenues are increasing over the next term we are projecting it to increase over the next term. So when you look at the hard dollar amount actually our proposal of 8 percent is actually over a 12 percent increase in actual dollars over the next license term.
9334 So that's how we looked at it. We kind of looked at a dollar amount and then backed into the percentage after we had --
9335 COMMISSIONER MENZIES: Right.
9336 MS COURTEMANCHE: As you have correctly pointed out, Commissioner Menzies, this is a minimum.
9337 MR. KNIGHT: Yes.
9338 MS COURTEMANCHE: This is just a minimum. We have a terrific track record, we will likely do more, but we do understand that there are compelling and competitive changes that are going to happen over the next license term, so we just thought that, you know, the absolute minimum should reflect what you did historically and 8 percent does. Actually, it is more than what we did, it's 12 percent more, so we thought that was a good place to create a floor, which is what the 8 percent does.
9339 COMMISSIONER MENZIES: Right. So are you comfortable if the absolute minimum reflects what you do historically, are you comfortable if that applies to other companies being licensed through this process or would we hear back that we want everybody to -- if we are going to do 8 percent PNI we want everybody to do 8 percent?
9340 MR. MAAVARA: Corus is simply not in a position to give you really any advice as to other companies.
9341 COMMISSIONER MENZIES: It's kind of the no complaining clause.
9342 MR. MAAVARA: Pardon?
9343 COMMISSIONER MENZIES: I'm kind of talking about the no complaining clause.
9344 MR. MAAVARA: Well, fair enough. The time honoured phase in this room is a level playing field. We have really come here with our comprehensive plan for what we think we need to do to be competitive in a digital migration environment and it is our plan. We really can't comment as to whether it would be appropriate for the other companies that are being you.
9345 COMMISSIONER MENZIES: Okay. That's fine. I just wanted to clarify that.
9346 In terms of your OTAs, is that your plan right through the future, is to retain the affiliation with CBC?
9347 MR. MAAVARA: Yes. We are delighted to say that we have reached an agreement with the CBC to extend our affiliation agreement with them. We are delighted for a whole bunch of reasons, not the least of which is that these stations are the only television stations in their markets, they have a huge history, we are really proud of the news and public affairs that we do there, and we are really looking forward to helping the CBC move it's operation into the future as well and providing whatever support we can for that with our three small stations.
9348 In our view, we have three small stations but they are huge and we are delighted to be working with them.
9349 COMMISSIONER MENZIES: Okay. If you add, as you said you hoped to, more channels in the years ahead, would you see them just merging into this 30 percent in terms of that? Obviously additional shuffling could take place between various specialities, but --
9350 MS COURTEMANCHE: Well, it would be simple with ours because we have proposed that for all our Cat A services you apply 31 percent, so if we would acquire a Cat A then you would just, you know, put it in at 31 percent and if we launched a Cat B and it got more than 1 million subscribers then it would have a 16 percent CPE. So it would just be very easy to apply and merge within our model and of course the PNI would remain at the same rate.
9351 COMMISSIONER MENZIES: Yes. The question is on genre in terms of that.
9352 What is more important to you, the flexibility to be able to adapt the natures of service applications or the protection of the genre in terms of that, CMT, if it moves to movies with I guess at least one cowboy and one horse?
9353 MR. MAAVARA: The genre discussion is a fascinating one because it really revolves around three call it broad themes, one being diversity of service types, the second being the carriage rights that are associated with a particular genre and the third being, as you noted, the barrier to entry of people coming into the genre.
9354 Corus has had over the last five years a really hard experience with genre, genres and encroachment.
9355 For example, we are not here on behalf of TLN, but we had the RAI situation with TLN and we have had the licensing of 24 channels that compete directly with TLN and our response to that was had to get better.
9356 What we are trying to do with the channels and the conditions that we are seeking is to say we understand the Commission's dilemma, the Commission has to ensure diversity and we have a diverse array of channels, but we understand that we are going to have to compete and the way we are going to compete is to launch new channels.
9357 To the extent that the genre protection policy is used to prevent us, or anybody else, from launching news, then it's probably time to take a close look at that.
9358 With respect to the carriage aspect, the rules are changing on September 1st, so for all intents and purposes, we are all becoming discretionary, and the challenge for us is to ensure that the subscribers really, really, really want to keep our channels.
9359 We know from our historical performance that whenever we move from an analog position into a digital or discretionary position, we lose subscribers. It's not unusual. If you have a choice, as a consumer, you don't necessarily take everything.
9360 But we also feel that we have powerful brands that will cause consumers to want to take us.
9361 As far as the carriage issues are concerned, that's all changing. As far as the diversity issues are concerned, that is also changing, and we would hope that, at the same time as perhaps some genres need to have some walls built up around them, there may be other ways to do that.
9362 But, for Corus, we need to grow. We need to keep adding channels, and we need to keep building the ones that we have.
9363 MS COURTEMANCHE: The short answer is, it's more important to get our COL changes and to maintain genre protection.
9364 COMMISSIONER MENZIES: Thank you. Those are my questions.
9365 THE CHAIRPERSON: Suzanne...
9366 COMMISSIONER LAMARRE: Thank you, Mr. Chair.
9367 My first question is, your Affiliation Agreement that you just concluded with the CBC, when does it expire, if you may say so.
9368 MR. MURPHY: It's a five-year term, which, I believe, will commence in September.
9369 COMMISSIONER LAMARRE: So 2016.
9370 MS COURTEMANCHE: It's the same period as the licence term.
9371 COMMISSIONER LAMARRE: The same as the licence --
9372 MS COURTEMANCHE: Identique, identique.
9373 COMMISSIONER LAMARRE: Madam Courtemanche is reading my mind. That's scary.
9374 COMMISSIONER LAMARRE: On the issue of described video, I just want to make sure that I understand what you are saying here. You are basically saying in your presentation this morning that you understand the standard COL for accessibility of four hours per week, half of it having had to be original service. But considering the nature of your services, you would like that four hours a week and two hours a week original to be averaged over the year.
9375 That's correct?
9376 MS COURTEMANCHE: Yes, because we spoke with Commission Staff, and they explained to us the meaning that the Commission gives to original to the service. It was not the meaning that we thought, which is the first time to the system.
9377 So once we understood that, we said: Oh, okay, we can do that. But then we got into the problem with respect to scheduling, which we explained this morning, and we are happy to get into further details, if you like.
9378 Then we said: Okay, we can do it, as long as it is measured over the broadcast year.
9379 And I would note for the record that we are not the only broadcaster who has made that point, that it needs to be measured over the broadcast year.
9380 COMMISSIONER LAMARRE: When you say that you are willing to accept it for all of your services, you are not suggesting to average it out over all of the services.
9381 MS COURTEMANCHE: No.
9382 COMMISSIONER LAMARRE: No. Okay, thank you. I just wanted to have that clear for the record.
9383 Finally, if we were to agree that you could average it out over the year, would you find it terribly difficult if we added a condition that it must be reasonably distributed over the year?
9384 MS PHILLIPS: We would accept that. I think, by its very nature, we would have to ensure that it is, because of the time that it takes to describe video. The only way we could do it would be to reasonably spread it out over the year.
9385 COMMISSIONER LAMARRE: Okay. I get your point about the CBC programming, and the fact that you are going to wait to see their Condition of Licence, but in the meantime, what you do produce, which is mostly news, you are very conscious of the requirement to offer and provide good audio description for what is onscreen.
9386 MS COURTEMANCHE: We have done that since last year, and we do it consistently. Thank you.
9387 COMMISSIONER LAMARRE: Now, going back to Conditions of Licence and Nature of Service, if I may, you have already had part of the discussion with the Chairman, but let me try to beat a horse which I think is still alive.
9388 This morning you said: Look, we are willing to accept a minimum of 8 percent PNI in our CPE spending, given, though, that we get the flexibility that we requested in the change of Condition of Licence.
9389 Specifically, about CMT, when we had this discussion last week, I questioned you about the fact that you wanted to delete the conditions on feature films that would have to either feature a music artist or be about country -- a country music artist or be about country music itself as the main subject.
9390 Looking back at the transcript, Madam Courtemanche, you said at one point that you thought -- and I am quoting from the transcript: "We thought because the Condition of Licence says that all programming has to be focused on country and country-oriented music, we thought that caught it. Now, if you feel that at the end of the day we need that additional Condition of Licence with respect to feature films specifically, we could understand that, but we just thought that it was caught in the original 1(a)."
9391 With your proposal this morning, does it mean that you are still dead on, that you are back to your original position that this Condition of Licence has to go, so that you get 8 percent PNI imposed, or is it still a hill that you are not willing to die on?
9392 MS COURTEMANCHE: I will tell you right now that it's not the hill we are willing to die on. If the Commission feels that that should be retained, we would be prepared to accept that.
9393 I honestly think that, at the end of the day --
9394 COMMISSIONER LAMARRE: It's not necessary, but --
9395 MS COURTEMANCHE: It's not necessary, and I think that the whole issue, as Gary explained earlier, is that we were trying to streamline our services and remove some of the legacy COLs that we thought were either duplicative or not necessary.
9396 But, at the end of the day, that's not our hill to die on.
9397 COMMISSIONER LAMARRE: So if it makes some intervenors feel better that it stays, you are willing to leave it there.
9398 MS COURTEMANCHE: Yes.
9399 MR. MURPHY: Yes. I would just say that it is, from a programming point of view, given what audiences are telling us, country music -- or country music as a protagonist -- it's a very narrow window to find features around. So it is restrictive.
9400 But, at the end of the day, if it's important for the Commission to address the concerns of others, we will relax.
9401 COMMISSIONER LAMARRE: Okay. Now, getting back to Treehouse, you are requesting that we eliminate the COL that requires 80 percent of the drama programs aired between 9:00 p.m. to 6:00 a.m. to be copyrighted at least ten years before they are aired.
9402 How is that helping you?
9403 MS PHILLIPS: That Condition of Licence in the original licensing of Treehouse was because we had intended at that time that we would be broadcasting not only to pre-schoolers, but in the evening hours we would broadcast to families, as well, as an audience. We have never gone there. Treehouse is a 100 percent pre-school network. So, because of that, we just feel that the Condition of Licence is not required.
9404 COMMISSIONER LAMARRE: What are you airing between 9:00 p.m. and 6:00 a.m.?
9405 MS PHILLIPS: Pre-school programming. It's all pre-school.
9406 MS COURTEMANCHE: It's 100 percent pre-school.
9407 We had originally thought, when the service was first launched --
9408 Some of these things -- you have to remember that when the applicant came, at the time, they had a concept of how the service would be deployed, and at that time there was a concept that part of the schedule would be targeted toward families. That just never occurred.
9409 This is really just a clean-up COL, meaning that we don't do that. We are 100 percent pre-school and that's what we are going to continue. So we just didn't see the point in keeping it. It's a legacy COL that we didn't think was needed any more.
9410 MS PHILLIPS: I was just going to say that that COL was based upon the theory in the licensing that we might be running regular sitcoms, et cetera, in prime time to target the family, as opposed to real pre-school programming like Max and Ruby and Backyardigans, et cetera.
9411 COMMISSIONER LAMARRE: I can't help being puzzled, though. Between 9:00 p.m. and 6:00 a.m. -- well, when my children were that age, they were sleeping. But I guess not everybody sleeps the same hours.
9412 MS PHILLIPS: We have one feed, as well, so we are also serving western Canada.
9413 COMMISSIONER LAMARRE: Oh, that too. Okay.
9414 MS PHILLIPS: And we recognize that there are lots of little two-year-olds who sometimes get up at 3 o'clock in the morning.
9415 MS COURTEMANCHE: They have toothaches, or whatever, and they want to watch TV.
9416 MR. MAAVARA: It is also targeted at grandparents who have their grandchildren.
9417 COMMISSIONER LAMARRE: And they want to sound interesting when their grandchildren come over.
9418 Also, the question that you only have one feed, it makes sense that you get flexibility in that schedule. Okay, that clears that up.
9419 Now, overall, when we look at the requirements you are making for changes in your Conditions of Licence, it is obvious that you will be getting more flexibility, and there are two concerns that arise from that, and I will touch on the first one, because somehow they are almost contradictory, when I look at them.
9420 One of them is the concern that you may be trying to move toward programming that would allow you to, basically, show more and more feature films and movies, over all of your services, so that you would get more windows to show the same thing over and over again.
9421 How can you address that concern? How can you reassure us and intervenors and other stakeholders that this is not going to happen?
9422 MR. MURPHY: The strategic reply to that question would be that we are obviously paying very careful attention to what our audiences want, by each service, and the positioning of each service.
9423 We have demonstrated in the past that -- you know, we have spent our CPE on scripted drama, unscripted drama, long-form animation -- you know, MOW features.
9424 And those spend levels have been based on our strategies to build and drive audience.
9425 So it's going to continue to be our approach that we are going to spend the money on what our audiences are saying they want to see on the screen. That doesn't mean that we are going to move to a complete long-form network. We are going to continue to focus on all aspects of the programming spectrum.
9426 MR. MAAVARA: One of the interesting aspects of these hearings is that sometimes we compartmentalize ourselves when we talk about a particular subject. One of the strange paradoxes of this is that, on the one hand, we have just had a discussion about how we have to do more Canadian films, and now we are in a discussion about why do you want to do Canadian films.
9427 As Karen noted earlier, this is a legacy -- some of these are legacy channels that were around when there were only -- basically, analog cable was 24 channels, or maybe it was 40 channels, and you tried to do a variety of different things in that one box.
9428 We are all about having, as Doug said, the flexibility to do things. We are meeting the new CRTC policy, which allows you to have a smattering of different things. We are just trying to align to that.
9429 That doesn't mean that we are moving into a movie service, per se. It still has to match the brand. Whatever channel we are running, the film that we are showing, or the drama that we are showing, or the reality show that we are showing, or the documentary that we are showing, has to match that brand. Otherwise, the viewers get confused, and when they get confused they say goodbye.
9430 COMMISSIONER LAMARRE: You are actually taking me where I wanted to go. There is another concern that has been raised, which is that by including the pay services, most of which are movies, it will be detrimental, in a way, to the financing of those movies.
9431 Would you like to address that concern?
9432 MR. MAAVARA: Actually, it is precisely the opposite.
9433 I must confess that people have said that we were confused about including pay in our model. We are not confused about our model, we are confused about why people would say: Why do you want to have pay inside your model?
9434 Our company is built on three target markets. Our pay channels are all about people who want to watch drama, and then we have our two other areas, which are about women and families and kids, and that's what we drive our business off.
9435 Feature films are huge for us, and the only evidence on the record before the Commission in this proceeding has really been -- you have only had, I think, two actual producers who have been here. There have been a number of trade associations, but...
9436 The confusion that we have is that a trade association comes in and somehow says, "Why should we have pay in this process," when in fact we are sitting here saying, "We are going to make more content that, in fact, includes the people that you represent."
9437 So there is a bit of a disconnect there. Our intention is to continue to make great -- and to finance -- and we are a huge part of the financing of these films -- the best Canadian drama series and films possible. That is our commitment.
9438 CONSEILLÈRE LAMARRE: Merci.
9439 THE CHAIRPERSON: Tom...
9440 CONSEILLER PENTEFOUNTAS : Merci à vous, Madame Lamarre.
9441 Ce n'est pas dans ma nature de lancer des fleurs, mais je dois dire que vous avez beaucoup travaillé au cours de la semaine passée.
9442 THE CHAIRPERSON: You have to --
9443 COMMISSIONER PENTEFOUNTAS: Oh, I'm sorry. I said that it's not in my nature to throw flowers out -- I don't know if that translates well, but I have to admit that you did work hard over the last week.
9444 That being said, at the heart of this new Group Licensing Program is PNI. We were looking at traditional spends. We are offering greater flexibility. You are asking for changes to certain COLs. And, we are trying to guarantee traditional spends and, if possible, increase those spends on PNI.
9445 Your traditional spend is 9.2, and you come before us a week later at 8 percent.
9446 MR. KNIGHT: Again, I would look at the actual dollars spent rather than against our revenue.
9447 On an actual dollar basis, as I said, it's over a 12 percent increase in actual dollars versus what we have historically spent.
9448 I appreciate that the actual percentage --
9449 COMMISSIONER PENTEFOUNTAS: I understand that you are getting flexibility. You are getting changes in Conditions of Licence. You also want to not exclude your movie channels from the calculation, and you are still coming below traditional spend on PNI.
9450 MR. MURPHY: Mr. Commissioner, that is a floor. So we may well spend more.
9451 In the spirit of sharpening our pencil, which I think was your expression last week --
9452 COMMISSIONER PENTEFOUNTAS: It might have been.
9453 MR. MURPHY: I like the flower one, too, by the way.
9454 COMMISSIONER PENTEFOUNTAS: I don't think it translates well, though.
9455 MR. MURPHY: -- we have come forward with this. Historically, as you note, we have spent more. We very likely may spend more in the future, but we feel that an 8 percent PNI is a great starting ground, and in the spirit of flexibility and fairness amongst all of us before you these last couple of weeks, we think that it's a good outcome from everybody.
9456 THE CHAIRPERSON: The problem with that is, our experience is that all minimums become maximums.
9457 MR. KNIGHT: I think that the nature of our services is such that it won't end up being that way.
9458 COMMISSIONER PENTEFOUNTAS: It lends itself to spending.
9459 MR. KINIGHT: Right, it lends itself to spending, absolutely.
9460 But what we are trying to do is make sure that we are able to take advantage of that flexibility, if necessary, that you are offering to us.
9461 MR. MAAVARA: I think an important point to make on this is that we are only part of the actual production process, and our dollar commitment is higher than has been the case in the past, but no one should be confused -- and we certainly agree with the CMPA and the producers who have been here -- the financing of Canadian content in these genres is extremely difficult.
9462 We have just had a great week -- and we showed you that Scaredy Squirrel -- we had a great week at MIP. We don't know how their producers did, but the challenge that we are going to have is: How do we make that combination of the CMF, of Telefilm, of the various tax credits, both on a federal and provincial basis, and other markets, and our colleagues in this room? How do we make all of that work in order to increase the amount of content that is available?
9463 Our licence fees and the equities that we put in -- what we are saying is, we are putting in more.
9464 That doesn't necessarily mean that there is going to be more, because the producers, as they will tell you, are still going to have to go out and find the rest of that package, and we are prepared to help them do that. Why? Purely self-interest. We want to put good product on the air.
9465 But the Commission has to understand that we are not the only driver in that, and what we are saying is: We are going to spend more.
9466 We hope that helps.
9467 MR. MURPHY: And the flexibility that we are asking for will help us to have the right circumstances to meet the needs of our audiences, grow our revenues, and then spend more again.
9468 So it does help to have a favourable sort of circle of life, if you will, in terms of making great shows for our audiences and spending more in years to come.
9469 Forgive the Lion King analogy.
9470 COMMISSIONER PENTEFOUNTAS: I will leave it at that. Thanks.
9471 THE CHAIRPERSON: The brick that you left with us this morning -- and most of it is the Oprah Winfrey Network and a detailed description of it.
9472 Now, the Nature of Service is extremely broad, I must say, and I see that you have taken full advantage of it, and why shouldn't you. As it says: The licensee shall provide a national English-language specialty television service which provides formal and informal educational programming and learning opportunities that generally focus on adult education, and the educational programs will come from a full spectrum of basic, credit-based, skills related and life-enhancing programs, many of which will be undertaken in cooperation with colleges, universities and training schools.
9473 On that basis, just while one of my colleagues was questioning you, I had a look at some of your program schedules, and there are cooking shows and there is physical training -- exercise shows and how to be sexy and -- "Go to the bedroom with Dr. So-and-so" and God knows what else.
9474 All of this you can probably squeeze in here. But you then also come to something called VIVA Cinema, and basically what you are doing is showing movies, such as Annie Hall, Steel Magnolias, Imaginary Heroes, Hanging Up, Thelma and Louise, Little Women, and you, presumably, have a professor speaking at some -- giving a two-minute interstitial at the beginning, saying how this movie illustrates a conflict between A and B, or whatever, and that's why you can show it.
9475 Isn't this really going beyond the pale? I mean, this is no longer education, these are movies, and you just put a little frame around them in order to sell them as educational.
9476 MR. MAAVARA: I think, Mr. Chairman, that the Oprah Winfrey Network is different from VIVA, in that there will be less of that.
9477 But in terms of education and what is formal and what is informal, I would submit that the world is changing dramatically in that regard.
9478 I will remind you of some of the things that are happening in the formal education aspect.
9479 You and I, in fact, were in a room in Stratford, the Peter Mansbridge Room, a couple of years ago, with Mike Lazaridis and Tom Jenkins, and we were talking about the Stratford Institute, and the brilliant idea that they had with respect to that.
9480 What is the Stratford Institute? The high-tech companies of Kitchener-Waterloo realized that they had at the University of Waterloo the largest Mathematics Department in the world, and they had probably the leading edge high-tech thinkers in the world, and they said to themselves: How are we going to move forward? How are we going to stay competitive?
9481 They said: We need to form an institute where the mathematicians and scientists can study with the artists and storytellers.
9482 The Stratford Institute -- and the goal is to establish six of these institutions across Canada, where you are going to have hard science and drama being discussed in a classroom setting.
9483 I think that the Oprah Winfrey Network is an illustration of that.
9484 The second thing -- and I will use a personal example. My daughter is studying hydrogeology. She wants to become an expert in water.
9485 Last year she was tutoring first-year chemistry students, and they were having a hard time with the problems. She developed a system of -- basically a memorization system of doing chemical formulas using Harry Potter as a guide.
9486 The president of the university saw that and invited her, and she went to a world conference in New Orleans and presented "Teaching Chemistry using Harry Potter".
9487 With any luck she won't get sued by J.K. Rowling for copyright infringement.
9488 My point is that universities are starting to look at that now.
9489 I was at Sheridan last week, and they are looking at new ways of moving what used to be very formal information to a more entertaining context. The reason is because there is so much stuff to learn now that you have to put it into that context.
9490 So Oprah Winfrey is about that, and, no, we are not doing some of the stuff that you referred to on VIVA. There is a formal element to that, but there also is a very important informal element.
9491 THE CHAIRPERSON: I don't dispute with you that education is moving. Like everything else, you know, the digital revolution affects it and changes its nature, and our traditional way of looking at education is in transition, there is no question about that.
9492 As I say, your Nature of Service is already very wide. Basically, any lifestyle programming with some ingenuity, you can squeeze under it, and you have done that.
9493 I am not taking issue with that, but I was just pointing to -- there is a series of programs that you call VIVA Cinema and, as I said, I think that you just --
9494 We will see, but I can only look at what you have here on paper. We will see how you actually present it, but showing Steel Magnolias and having it somehow referenced to a course given at some university and having some professor comment doesn't change the nature of the beast, you are truly showing a movie.
9495 MS COURTEMANCHE: We are not showing that Cinema --
9496 I think we are down to one movie?
9497 MS PHILLIPS: Yes, we have one movie a week on the network.
9498 MS COURTEMANCHE: But, Mr. Chair, I take your comments very seriously, and I gave it a lot of thought over the last week, and we have come up with some -- if the Commission wanted us to go there, we have come up with some proposed changes.
9499 If you wanted us to table them, we would be happy to. If you don't, that's okay, too.
9500 THE CHAIRPERSON: No, listen, I just saw this this morning and I haven't gone through -- obviously, the proof is in the pudding.
9501 All I am saying is, VIVA -- actually, I like the programs, so I am speaking against my -- the existing VIVA --
9502 MS COURTEMANCHE: We lost a viewer with OWN?
9503 THE CHAIRPERSON: No, the existing VIVA -- I always wondered, "What on earth has this got to do with learning?" and I see that you picked some of that up.
9504 We will, obviously, look very carefully at the Oprah Winfrey Network, but it also begs the question, which we asked you earlier: Do you really need Category A and mandatory carriage for this? Isn't this something that sells itself?
9505 I mean, Oprah Winfrey is probably the most famous name in television right now, and you showing it is a great coup for you.
9506 Do you need mandatory carriage for that?
9507 MR. MAAVARA: That's a really important question. One of the things that we considered when we were looking at the new Category A and Category B -- one of the preliminary questions that we reviewed -- and we discussed this with CRTC Staff -- was: What do we come in with?
9508 One of the concerns that we had was that if we moved Category A into a B mode, we could be in a circumstance where we would run into the genre protection policy and, in fact, could be denied a licence.
9509 That is where the genre protection policy is being used as a barrier, and our view with respect to that is, if someone else comes in with another formal education application, then, go ahead, license them. We don't want to see ourselves as a barrier.
9510 THE CHAIRPERSON: I can put that in? We can, in effect, write a Condition of Licence for the Oprah Winfrey Network that it is not to be used, in fact, as a shield -- or however we are going to word it -- to prevent other educational services from entering this field?
9511 MR. MAAVARA: Absolutely. As a matter of public policy, we should be fostering more of these.
9512 THE CHAIRPERSON: Okay. Thank you very much. I think those are all of our questions.
9513 Counsel, do you have any undertakings that you want to read?
9514 MS DIONNE: There are no undertakings, but I do have one question that I would like to clarify for the record.
9515 Regarding Treehouse, would you accept that your Nature of Service COL be extended up to the 6:00 a.m. period?
9516 THE CHAIRPERSON: Could you repeat that, please?
9517 MS DIONNE: Would you agree that your current Nature of Service for Treehouse includes the period from 9:00 p.m. to 6:00 a.m.?
9518 If not, could you provide a Nature of Service definition for that period only?
9519 MS COURTEMANCHE: Because it is measured over an 18-hour broadcast day, I just want to make sure --
9520 Could we come back in reply and answer then, because we need to sort it out, and I don't think we should do it here.
9521 MS DIONNE: Yes, you can take it as an undertaking.
9522 THE CHAIRPERSON: Okay. Address that point specifically in an undertaking.
9523 Thank you very much.
9524 We will take a 10-minute break.
--- Upon recessing at 1029
--- Upon resuming at 1042
9525 THE CHAIRPERSON: Commençons.
9526 THE SECRETARY: Thank you.
9527 We will now proceed with the presentation by Shaw Media Inc. Please reintroduce yourselves for the record, after which you will have 20 minutes for your reply.
9528 Thank you.
9529 Thank you.
9530 MR. ROBERTSON: Good morning, Chairman, Vice-Chairs, Commissioners and Commission staff. We'll begin by introducing our panel for today.
9531 My name is Paul Robertson, Group Vice-President, Broadcasting and President of Shaw Media.
9532 With me today starting at your far left is Barb Williams down at the end here. Barb is Senior Vice-President of Content.
9533 Next to Barb on my right here is Charlotte Bell, Vice-President, Regulatory and Government Affairs.
9534 Seated beside me here is Jean Brazeau, Senior Vice-President of Regulatory Affairs for Shaw Communications.
9535 And next to Jean is Michael French, Vice-President, Finance.
9536 And then, finally, on Michael's left, Jean Medline, Senior Director, Regulatory Affairs.
9537 And that's the team.
9538 So we would like to begin today by recognizing the more than 160 intervenors who filed letters in support of our licence renewal application. These positive comments come from a wide range of organizations, sectors and regions across the country and validate the important contributions we make both locally and towards the system as a whole.
9539 We have received letters from a variety of independent producers, advertising agencies, community and diversity groups, associations and festivals.
9540 In addition, numerous local and provincial politicians, charities and other not-for-profit organizations also came forward.
9541 We wish to thank each of them for participating in this process and we also extend special thanks to those who appeared before you on Wednesday to support our application.
9542 Commissioners, this has been a long hearing and you will be happy to know that we will keep our remarks short and not make it any longer. By and large, the positions of the other parties have been throoughly addressed in our detailed written response from February 25th.
9543 We encourage you to resist repeated attempts to turn back the clock and reinstate micro-regulations that no longer serve a purpose in the new digital media world.
9544 Most importantly, we believe that a return to outdated regulatory tools would be inconsistent with the Commission's new vision for the future.
9545 Your stated intentions for the new policy were quite clear. First, to ensure continued support for the creation of Canadian programming and, second, not to impose at this time additional obligations on the groups beyond their recent historical expenditures.
9546 And despite this clear direction and intent, many have suggested layering on new obligations that were deliberately excluded from this new flexible policy approach. We have heard a laundry list of possible add-ons such as primetime drama, obligations for conventional networks, new quota for feature films, children's programming, regional production documentatries and on and on.
9547 We have supported the intent of the Commission's new policy because flexibility is fundamental to the future of our industry.
9548 We have proposed very limited licence amendments for our specialty services and we have agreed to a group spending obligation with signficiant contributions to independent producers and programming of national interests.
9549 But as we discussed at length last week, new competitive forces are already upon us. Just last year you introduced a new flexible regulatory framework for our licence renewals and that was meant to help us navigate through increasingly challenging times.
9550 And we are already seeing new unregulated entrants such as Netflix aggressively entered the marketplace and competing for our programming, our subscribers and our advertising dollars. No one had heard of Netflix when we filed this renewal application, yet they have grown into a household name in less than seven months. We know this is only the tip of the iceberg.
9551 We have demonstrated that Canadian programming overall continues to lose money. If new, unregulated entrants can simply bypass the regulated system and take the programming that helps to subsidize our Canadian content then of course we risk destabilizing the regulatory bargain.
9552 We have put forward significant proposals to support the provision of quality news programming as well as PNI and other entertainment programming over the next licence term.
9553 We encourage you to stay the course and be true to the letter and spirit of your policy.
9554 We appreciate the opportunity to discuss our views in this reply phase and at this time we would be happy to answer any questions you may have.
9555 We have also filed with the Commission staff responses to each one of the undertakings we agreed to provide you in the reply phase.
9556 Just on that note, we would like to make one correction prior to our question and answer session. I would ask Charlotte just to correct the record.
9557 MS BELL: Thank you, Paul.
9558 Just one quick correction: In our Undertaking No. 4, which was commitments with respect to the allocation of a percentage of our group CPE to non-PNI independent productions, in our response we have stated no less than 35 percent of all Canadian programs broadcast by the licensee, that first sentence. It was meant to read:
"No less than 35 percent of all spending on Canadian programs."
9559 So I apologize. I didn't want to leave you with the impression that it was exhibition. It's spending.
9560 Thank you.
9561 THE CHAIRPERSON: Thank you. I thought after your appearance last week and our long discussion you would come back with revised numbers. I gather you are not -- on CPE, PNI and CPE for OTA.
9562 Where do you stand on all of those?
9563 MR. ROBERTSON: Well, I think we said in our remarks with respect to the CPE that while our numbers had come to 29, in our view, that we supported the CRTC's efforts to get to a kind of a 30 standard and we were amenable to stepping up for that.
9564 THE CHAIRPERSON: Right.
9565 MR. ROBERTSON: On the PNI front, we have gone back and made just a slight change in our historical which actually increased the percentage a touch. So give or take historically, we are at 6.
9566 We are still recommending a level of 5 percent which we thought is appropriate to provide and a sensible level of flexibility. We would be happy to discuss that with you.
9567 THE CHAIRPERSON: But through the regulations, what is the percentage of OTA for you?
9568 MR. ROBERTSON: Of what?
9569 THE CHAIRPERSON: CPE for OTA.
9570 MR. FRENCH: The CPE we are still going on the floating methodology so not the fixed methodology for --
9571 THE CHAIRPERSON: For either one just give --
9572 MR. FRENCH: Yes. It's about 21.7 percent.
9573 THE CHAIRPERSON: Then we did spend a long time discussing the 5 percent PNI last week and I pointed out to you your historical average which we have here somewhere.
9574 By the way, sorry, I should have asked you that first. Do you want -- are we going to have discussions in camera or not?
9575 MR. ROBERTSON: Only if it comes to a point we feel it's necessary. We would be happy to do it here if we can make it through.
9576 THE CHAIRPERSON: Yes.
9577 But your PNI what you are offering is 5 percent. Historically, as you yourself mentioned, it's 6.3 depending what period you take, obviously.
9578 But regardless, the whole idea of this whole exercise was of course to see to which extent on which we can ramp this amount up over the licence term. My colleague, Tom Pentefountas, used the expression "sharpen your pencil" et cetera and I, as the group just before you, Corus, your cousins, did sharpen their pencil. And I expect you to do the same.
9579 MR. ROBERTSON: Well, we felt that of the two numbers of the 30 and the PNI number that one would consider the 30 number to be really the key and because we had stepped up and suggested we could go to 30 from what we felt our historical, which was 29, we felt that we had made a major commitment there. You know that would add give or take $50 million incremental over the licence period.
9580 So in terms of pencil sharpening, we thought we had a pretty pointy end on our pencil on that front.
9581 On PNI what we are concerned about with respect to flexibility is we don't want put ourselves in a situation where we are picking projects to go into the PNI that are substandard to make a quota.
9582 As we have gone back and looked at our numbers and said, yes, on a kind of apples to apples basis we think our historical PNI is in the 6 percent rang. And you know that's fair.
9583 But we thought, knowing that if you set a level of 5 percent PNI we are still going to spend the 30 percent on programming and there is a lot of worthy projects outside of the PNI that we are really proud of. We just didn't want to be in a situation where we reduce some flexibility and caused any reduction in the quality on the PNI programs that we have and add to that --
9584 THE CHAIRPERSON: Why would it cost reduction in quality if you spend more money? I don't --
9585 MR. ROBERTSON: You will remember that we raised last time, in addition to the 5 percent PNI, we have got $123 million in benefits on additional PNI spending still to be discharged due to previous benefits.
9586 So if you add the 5 percent to the 123 and you are out there looking for worthy projects and you have got some -- you know some are great and then if you get into the list of just okay projects trying to make that quota then well, "Gee, wish we could have spent on that on non-PNI because we have got a lot of worthy projects there".
9587 So again, it goes to the matter of flexibility and you know relates to the benefit commitment in addition to the PNI.
9588 THE CHAIRPERSON: You heard the part of the industry appearing before you and saying that there is an untapped source of supply and talent and so on and there is you know the fact that you are unlikely to ever run out of either projects or talents to produce Canadian talent.
9589 MR. ROBERTSON: Barb can answer.
9590 MS WILLIAMS: There is no doubt that there is always something else to do. We have never ever come to a point where, you know, the barrel is absolutely empty and dry.
9591 But we are always on a sliding scale of best to not so best and that's the point that I think Paul is trying to make.
9592 THE CHAIRPERSON: M'hmm.
9593 MS WILLIAMS: There are a number of incentives that encourage us actually to make that 5 percent a floor that encourage all of us as broadcasters to do more in the PNI category.
9594 One of those incentives is that, frankly, that's the only kind of programming that gets real significant funding. So if you are interested in, you know, accessing the CMF and accessing all those great dollars that are out there to support Canadian content, you have to be in the PNI world. When you step outside it and decide you want to risk your dollars on a big reality show or something in primetime on Global, you end up almost always 100 percent financing that.
9595 Those dollars become much, much more expensive. It's much riskier to put your dollars into those shows. And so you are actually encouraged wherever possible to do PNI shows that you think are smart or make sense.
9596 You are also encouraged, frankly, because the one and only place where you really can maybe make it all work is on a primetime drama and Global that's in simulcast with a U.S. network and the opportunity to do that is a real carrot in front of us because that's the magic; that's the win.
9597 And so we work really, really hard to find those projects that just might grab the attention of a U.S. network and give us that simulcast because that's the -- you know, that's the golden goose. That's whatever you want to call it.
9598 So there is many, many encouraging -- encouragements to send us down that PNI path.
9599 But to Paul's point, what we don't want to find ourselves in -- and frankly, it has happened occasionally on the benefits side -- you are scrambling in August to throw some money at something to be able to get Charlotte off my back because she is going to go report something August 31st and you had better show you have spent it.
9600 We have nothing we really want to spend it on. We still have projects maybe in development that just aren't there yet. But they are these hard rules around you have got to have spent it by August 31 and we start throwing development money at stuff for the heck of it.
9601 That's the wrong way to build great Canadian content. We think 5 percent and the amount of hard dollars that 5 percent represents absolutely makes sure that, you know, to all of us that important idea of the underserved categories and making sure they are not abandoned, it absolutely lives up to that expectation and that goal, that ambition.
9602 But I'm not quite sure what the value is of pushing that too much higher. You take money away from other stuff. You know, you heard some arguments I know from producers earlier this week about a PNI and its definition and why isn't Canadian Idol just as important to the nation.
9603 We are trying to make all those balances. 5 percent preserves that baseline that we all really believe in and beyond that we think flexibility is the key.
9604 THE CHAIRPERSON: On that very point that you raised there, would it make sense to widen the PNI program? As you know, the award show is sort of open-ended. You know, you made mention that you can't apply.
9605 Now, you could presumably say Canadian Idol is in effect an award show. It exhibits Canadian talent. At the end of it the last winner, you know, gets the prize because he or she will be a star. So therefore we could qualify shows of that type under it and thereby increase the pool of available screen time to exhibit Canadian talent.
9606 MS WILLIAMS: Now you are thinking like a broadcaster. Sure --
9607 THE CHAIRPERSON: You have that effect.
9608 MS WILLIAMS: The definition becomes all important, absolutely, and we have already seen the impact of that by taking the 2(b) and dividing out reality and taking away from a bunch of the content that used to be considered priority and now no longer will be considered PNI and that grinds down the number against true PNI if you will.
9609 I mean absolutely, if the PNI definition is opened up then more of that 30 percent will fall into the bucket. But I guess that's one of the points is that we are going to spend 30 percent regardless and now we are just talking about how it's divided up.
9610 We can carve -- we can make almost any definition to make it say that it should be 5, 6, 7, 8 absolutely. I just think we have to remind ourselves of what the point is and what we are trying to accomplish with this.
9611 THE CHAIRPERSON: Frankly, I expected you to come back with something on a graduated scale, saying it's a five year licence and you started at five but you wind up at X over five years or something like that.
9612 MS WILLIAMS: To what end though? Like do we think that ultimately that there is some magic to 10 percent on dramas? Like that absolute number will grow over the five years, for sure.
9613 I mean if our business is successful then you know that's what a percentage CPE does. So we will invest more and more in there. And to the extent that we can continue to be successful with the things that work for us we will do them regardless of the number.
9614 I guess I'm just not quite sure I'm grasping what the end goal is of a bigger and bigger number on PNI.
9615 THE CHAIRPERSON: Well, the end goal is presumably because PNI more than anything else reflects Canadian culture and Canadian talent.
9616 MS WILLIAMS: And I have to suggest that there are many, many shows that don't fall in the PNI category that equally reflect Canadian culture and Canadian talent whether we are talking Canadian Idol or whether we are talking lifestyle shows that are very specific to Canadian lifestyle and Canadian culture and we don't always want to see the lifestyle of the U.S. reflected either.
9617 So I think that a large commitment to Canadian content is really, really important. I think dividing it up within it becomes much more subjective. A baseline to ensure that some of those tougher shows are done I absolutely agree.
9618 But, you know, the size of that bucket I think becomes harder to be sure of.
9619 THE CHAIRPERSON: Okay. The problem with arguing with you is you are always so logical.
9620 THE CHAIRPERSON: But I do also see -- I mean you have heard the other intervenors before us, especially on this point. The creative community by and large all feel that both you and Bell should step up to 10 percent, which clearly would make a major impact on you, et cetera.
9621 But some sort of improvement, some sort of staggering or graduation, et cetera, you know, I think would not be inappropriate. You have until the end of this submission to rethink this point.
9622 Let me switch gears here. Regional production I talked to you. I talked to Bell. I talked to everybody. And I heard as I expected to see from all of them, et cetera, the same thing that if you are out of Toronto you are forgotten and you have to push yourself onto your radar screen. You have to either come to Toronto, go to conferences or invite people to come out, et cetera.
9623 And I don't want to micromanage you or tell you how to run your business. You know it best, et cetera. But I made it quite clear I was looking towards some commitment what you are doing for regional and not just the usual good undertaking and description of what you have done in the past but actually some sort of serious commitment of what you are doing.
9624 I haven't heard anything on that point.
9625 MS BELL: Have you seen our Undertaking No. 2?
9626 THE CHAIRPERSON: I have only seen what you just read out to me, sorry.
9627 MS BELL: I'm sorry. No, we filed our undertakings last night with the Commission.
9628 THE CHAIRPERSON: Then walk me through them, please.
9629 MS BELL: I'm sorry.
9630 THE CHAIRPERSON: And for the record to the people online too.
9631 MS BELL: All right. So we filed with the Commission an undertaking, a proposed commitment regarding better interaction with regional producers.
9632 THE CHAIRPERSON: Yes.
9633 MS BELL: So what we have committed to is that:
"Shaw Media programming executives commit to attend and actively participate in at minimum five production-related festivals, conferences and/or visits to the regions per year in order to develop and/or maintain working relationships with producers who are located in the various regions."
9634 THE CHAIRPERSON: Well, thank you.
9635 MS BELL: I apologize. We filed this last night and we assumed that you have reviewed it.
9636 THE CHAIRPERSON: I have not seen anything.
9637 MS BELL: All right.
9638 THE CHAIRPERSON: So maybe you should walk me through all your undertakings or the ones that are relevant so they are general information not only for the Commissioners here but for the people who are listening online.
9639 MS BELL: All right.
9640 THE CHAIRPERSON: I mean the ones that are -- that are relevant like the one you just read.
9641 MS BELL: So that would be for independent production.
9642 THE CHAIRPERSON: Yes.
9643 MS BELL: In terms of commitments with respect to the allocation of a percentage of our group CPE to non-PNI independent productions we had discussed this last week.
9644 THE CHAIRPERSON: Yes.
9645 MS BELL: So what we were willing to commit to was that:
"No less than 35 percent of spending on all Canadian programs broadcast by the licensee other than programs of national interest, news, current affairs and sports shall be produced by non-related production companies.
For the purpose of this condition a non-related production company is defined as one in which the licensee or any of its shareholders owns or controls directly or indirectly less than 30 percent of the equity."
9646 That's a definition that you are already familiar with.
9647 We have provided a narrative description for Showcase in light of your request and I can just move straight to that.
9648 So the proposed -- that's Undertaking No. 5, if you are following with what we filed:
"Showcase shall offer a national English-language specialty programming undertaking focused on drama. The licence is defined by the following parameters:
A minimum of 95 percent of all programming broadcast by Showcase shall be drawn from the following categories as set out in broadcasting regulatory policy CRTC 2010-808 as amended from time to time: Category 7 drama and comedy; Category 12 interstitials; Category 13, public service announcements; Category 14 infomercials, promotional and corporate videos and Category 15 filler programming.
Over the broadcast year the licensee shall devote not less than 100 percent of the broadcast period between 7 p.m. and 10 p.m. to the distribution of Canadian programs.
And, finally, 80 percent of the programming broadcast by Showcase shall have been produced outside of the United States."
9649 THE CHAIRPERSON: Can I just ask you -- excuse my ignorance, but the last one.
9650 MS BELL: M'hmm.
9651 THE CHAIRPERSON: Is that something we imposed or you put forward or something like that? It strikes me as strange. If it's non-Canadian what difference if it comes from Italy or whether it comes from the U.S.?
9652 MS BELL: It was actually part of the licence and we have asked to amend it.
9653 THE CHAIRPESON: Yes.
9654 MS BELL: And so this takes into account the amendment that we had proposed.
9655 COMMISSIONER SIMPSON: Yeah. It used to be 90, isn't that correct -- not 80?
9656 MS BELL: That's correct, yes, yes. So that would take into account our amendment.
9657 THE CHAIRPERSON: It doesn't get to the nature of my question.
9658 MS BELL: Who cares where it comes from?
9659 THE CHAIRPERSON: Yeah.
9660 MS BELL: That's our point also.
9661 THE CHAIRPERSON: Thank you.
9662 MS BELL: Because it doesn't impact the Canadian content in any way.
9663 THE CHAIRPERSON: Yes. This is why I am -- we are talking all about flexibility so I mean if you --
9664 MS BELL: That's correct.
9665 THE CHAIRPERSON: -- want to go for Italian, I mean go right ahead.
9666 MS BELL: That's right. I mean when this was imposed in '94 there were not a lot of services that provided any foreign programming that didn't come from the U.S. There are tonnes of them now. So it doesn't really serve a purpose, yeah.
9667 THE CHAIRPERSON: Okay.
9668 MS BELL: Chairman, I don't think you want me to read through --
9669 THE CHAIRPERSON: No, I just said I rely on your judgment which ones are relevant.
9670 MS BELL: Exactly. Yeah, we went through the logs. There were a couple of issues which we have made up the difference. So I won't go into detail but --
9671 COMMISSIONER SIMPSON: Ms Bell, may I just ask --
9672 MS BELL: Sorry.
9673 COMMISSIONER SIMPSON: -- these issues were all to do with logging, categorization of logging and so the "C" numbers. This hasn't been permanently fixed?
9674 MS BELL: This will never be fixed. This will happen over and over again. If I am understanding your question correctly, there will always -- "C" numbers will always arrive after we have aired the program. There will always be back and forth with the Commission on the logging of categories.
9675 We sort that stuff out as we go along. Unfortunately it's just technology that doesn't allow us to be more precise, although we are pretty close.
9676 COMMISSIONER SIMPSON: Yeah, it's just that it seems you know that because of its recurring nature and because of the amount of manpower that's being employed to -- in retrospect, I'm just wondering if there isn't a way we could solve this because, you know, it's turning a tremendous amount of time on both our sides.
9677 MS BELL: You know I am going to say something to you, Commissioner Simpson.
9678 I started working at the Commission in 1987 and we were having problems with the logging system back then. So 25 years ago almost and there are still -- we have never figured out a way to make it perfect.
9679 But, you know, we continue to work with staff and fax stuff, came and visited our facilities and we are constantly working with them to try to find the perfect way of doing this to make sure it's more accurate.
9680 So apologies for that.
9681 COMMISSIONER SIMPSON: No, thank you.
9682 MS BELL: All right.
9683 As I move along on the undertakings I guess you asked us to provide the estimate of how much it cost to describe one hour of programming. It costs approximately $1,500 an hour.
9684 We have provided a breakdown of what it would cost to increase the amount of described video each year. I'm not sure if you want me to walk through --
9685 THE CHAIRPERSON: No, I think the only other one from a quick -- genre is No. 12.
9686 MS BELL: No. 12.
9687 THE CHAIRPERSON: We ask you are there other categories where you would have given -- I don't know if you were here for your cousins. We were talking about the -- and they said, "We don't need genre protection" there, you know, et cetera.
9688 You don't have anybody in that category, I gather, here?
9689 MS BELL: No, we actually don't have anything to propose to you at this point.
9690 And I guess, as you heard and we discussed with you last week, we feel that genre protection should be maintained throughout the next licence term.
9691 But we certainly appreciate the fact that it's something that the Commission will have to take a look at, and we expect that that would be done in a policy review at some point over the next few years.
9692 THE CHAIRPERSON: Okay. And then one of the questions that I assume you -- I have had a long discussion with both Bell and with Corus on the whole issue of terms of trade and the question of whether it's sort of expensive and a COL would make sense or not and whether there is similarity.
9693 What is your position on that?
9694 MS BELL: I guess, not to repeat everything that's already been said, but we would agree with the other parties that we don't feel that it's necessary or desirable. I mean even yourself, Chairman, you have asked us to go away and do this and we have done it.
9695 THE CHAIRPERSON: Yes.
9696 MS BELL: Just like the other groups have told you, we are prepared to sign the final agreement in the next -- probably the next week. And we have all come to the table in good faith.
9697 There is absolutely no reason for anyone to believe that we are not going to live up to that agreement as we live up to other agreements. There is a mechanism in place to deal with any disagreements and we just don't feel that it's something that requires additional regulatory oversight for all of the other reasons that you have already heard from the other groups that have come before you.
9698 THE CHAIRPERSON: But I thought you in particular and I the last time, talked about how would one word such a condition of licence and I asked you and said go ahead. Or I'm mixing you up with somebody else.
9699 MS BELL: I think you may be, but I wouldn't blame you if you did after the last two weeks.
9700 THE CHAIRPERSON: Anyway, your position is you can't write a COL that would be meaningful is your bottom line.
9701 MS BELL: That's correct.
9702 THE CHAIRPERSON: Okay.
9703 MS BELL: We don't need it.
9704 THE CHAIRPERSON: Then let me turn you over to my colleague, Len, for CPE and PNI.
9705 COMMISSIONER KATZ: Thank you.
9706 You filed this morning Appendix 1, I guess, to answer question 13 or 14. That reflects as I understand it, the revised definition which removes the reality programming or whatever?
9707 MS BELL: That's correct, yes.
9708 COMMISSIONER KATZ: Okay. I guess some of the data is confidential.
9709 MS BELL: We can speak to the percentages but not the actual dollar amounts. So if you feel that we need to that in camera we can do that.
9710 COMMISSIONER KATZ: Let me start with percentages and see if we can get through it.
9711 It reflects the fact that Category 2(b) docs has gone up from 2009 1.6 percent of the total to 3.1 percent of the total, while drama, Category 7, has gone down from 4.3 percent to 2.5 percent. Obviously, there was a strategic decision made somewhere to do this or this is the fallout of natural decision making?
9712 MS WILLIAMS: Yeah, I would love to say that there was some master plan. But I think, quite honestly, there has been a lot of emphasis on trying to get the documentary part of our business to work better and a lot of emphasis on history in this last couple of years to really address what we think should be a service that should be highly supportive of successful documentaries.
9713 I think we have really focused our drama efforts very recently actually in this last year and a half and that you don't necessarily -- you will see in these next coming years as we have ramped up much more aggressively on the drama side.
9714 But you are balancing every year what projects are offered to you in addition to what projects you might look to find.
9715 So you know that is one of the great aspects of the flexibility of the policy, is it just keeps allowing us to keep redefining what it is we need and balancing that against what is out there to be found.
9716 COMMISSIONER KATZ: But pure drama has gone down to 2.5 percent of your total expenditures.
9717 Do you see it continuing to go down?
9718 MS WILLIAMS: No. We have actually had some great success this year with a couple of our new dramas that you may be familiar with on Showcase, in particular Lost Girl and Haven, Endgame which just launched a few weeks ago and yet another brand new Canadian drama, King, which is starting this week.
9719 So we are actually having more success with the drama on Showcase than we have had in a long, long time. So we would expect to continue to grow those dramas.
9720 Then, as we mentioned again last week, not only has Rookie Blue proven to be a huge success for us but we are launching another Canadian drama this summer with ABC again, The Hot Zone.
9721 And if that one is as successful as Rookie Blue we will have two going forward with simulcast opportunities.
9722 So we are working hard at finding opportunities for drama.
9723 COMMISSIONER KATZ: Yeah, I mean, as you are well aware, policy last year talked about 5 percent plus for drama and whatever else comes out of docs. We then got some information on the docs as well.
9724 But recognizing the data you have filed in front of us, it sort of begs the question what would it take to get you back to even 5 percent just for the drama component?
9725 MS WILLIAMS: Yeah, I'm not doing the math fast enough in my head to help you there, but I guess what I look at is a slate of scripted shows that is the biggest slate we have ever, ever had.
9726 Now, part of that, honestly -- and I know we keep coming back to the same points -- is supported by the huge amount of benefit spending that is out there, which is almost all going to drama.
9727 So we have the biggest drama slate of any of the groups at the moment, I know that, bigger than the CBC's. So I guess we feel we are in the drama game big time.
9728 I can appreciate why you are asking the question, looking at the numbers, but I am not at all feeling as a group that we are looking to avoid doing drama. Quite the opposite, we are working hard to find stuff that works.
9729 COMMISSIONER KATZ: And the award shows, are they lumped into anywhere here or are they not in here at all?
9730 MS WILLIAMS: Yes. All the award shows that we did last year, and we did do some that are important to us, the Aboriginal Awards we did, the Geminis, but those were done out of benefits money, so they are not reflected here.
9731 COMMISSIONER KATZ: Okay. So in light of this data here, what is your proposal with regard to PNI? Is it still the 5 percent?
9732 MR. ROBERTSON: Yes, that is right.
9733 COMMISSIONER KATZ: And that is inclusive of all the components in there, inclusive of documentaries, award shows and drama?
9734 MR. ROBERTSON: That is correct.
9735 COMMISSIONER KATZ: Notwithstanding the fact that the numbers in front of me here are much higher, 10.2 in 2008, 5.9 in 2009, 5.5 in 2010 and 5.6 in 2011?
9736 MR. ROBERTSON: Well, you know, those are clearly the numbers. There was an aberration in the 2008 number on the acquisition of Alliance Atlantis by Canwest, which created kind of a one-time write-down. So that is reflected in the numbers in 2008.
9737 So the run rate there is, you know, arguably in the 5.5 to 6 range. So we set out a number of 5 and felt that that was appropriate given we had kind of stepped up from the 29 to the 30 to be helpful in terms of your sense of where you need to get to on the policy.
9738 COMMISSIONER KATZ: Okay.
9739 Mr. Chairman, the rest of the pages that I wanted to ask about are wiped out.
9740 THE CHAIRPERSON: Okay.
9741 On this last point, just so I understand, you are really telling me that the PNI, if you look industry-wide, is actually vastly understated because you have to add to it your spending that you are doing with benefits money in those categories?
9742 MR. ROBERTSON: That is correct, Chairman. I know that it's in a lot of regards thought to be a totally separate issue, but in our real world it's all part of our drama.
9743 THE CHAIRPERSON: Yes.
9744 MS BELL: There is also another consideration, and Barb can maybe speak more to it.
9745 There are so many places where you can put that type of programming too. If you are injecting over $100 million in PNI over the next five years through benefits, plus an additional 5 percent, there are a lot of our licences that have restrictions in terms of categories. There are other types of programming that lend themselves well to those particular licences.
9746 So again, in order to provide the best service to our viewers, I think it becomes problematic if you ramp up that number too high and we are doing too much of one thing. I know that may not be what the producers want to hear but that is the reality that Barb and her team have to deal with.
9747 THE CHAIRPERSON: The logic also then with this case -- not for this term of licence but the next term of licence when you no longer have the benefit monies, let's say 7 or 8 percent would be logical because it would be what you have historically spent if you look at it from a real-world point of view of what you are spending on those types of programming, regardless of the source of money.
9748 MR. ROBERTSON: I understand the logic of what you said. That makes a lot of sense and I think, you know, we will look at all -- five years is a long time -- we will look at all the factors at the time and balance it out.
9749 THE CHAIRPERSON: On our knowledge base of today, God knows what it is going to be.
9750 MR. ROBERTSON: We are going to have to agree with you on that one.
9751 THE CHAIRPERSON: Okay. Thank you.
9753 COMMISSIONER MENZIES: I just really only have one question.
9754 It might be just me, and I don't want to diminish your gesture, but I don't really care how many conferences you go to. What I do care about is that when you take a -- I am just trying to think what would that be -- it could be AMPIA, Banff. I think we know the ones, right?
9755 But what is important, I think, in terms of that regional production thing is that whatever it is we do, whether we agree with it or not, that we say we are going to do that we do, and I just wanted to ask if you had had a chance to see the Nordicity report produced by the -- that was presented to us by the AMPIA people the other day.
9756 There is a reference in there to the Canwest Alberta Fund that says -- and I just want to give you the opportunity to address it and debate it or clarify it one way or another:
"Of the $10.5 million allocated to the Canwest Alberta Fund, the IPF reports that $3 million was spent over broadcast years 2008 and 2009. After this point the Fund was terminated with $7.5 million left unspent." (As read)
9757 Now if that is the case, that probably means a lot more to those guys than whether or not you go to Banff, right?
9758 So can you clarify that for us? I mean all I have is their side of the story --
9759 MS BELL: Sure.
9760 COMMISSIONER MENZIES: -- so I just want to get the other side and find out how that is going --
9761 MS BELL: Absolutely.
9762 COMMISSIONER MENZIES: -- or how well that relationship is going if that is how they feel about it.
9763 MS BELL: I think there's a couple of things.
9764 Let me start -- we will break this up and then Barb can get into the relationship -- but let me start with the Fund.
9765 The Fund was not a benefit -- it's not part of a benefit package. The $10.5 million -- and I'm not even sure, perhaps Commissioner Cugini was a Commissioner at the time when we received approval for this -- was tied to the approval of transmitters in Calgary and Edmonton that were tied to our Red Deer licence.
9766 We shut down that station and that was a condition of licence. It was a commitment that we made in exchange for adding a transmitter in each of the markets of Calgary and Edmonton, but they were tied specifically to that licence. They no longer exist. It's gone, all of it.
9767 And it was not a benefit package in terms of what we are used to or what we traditionally know as a benefit package that is tied to a transaction.
9768 It was really a commitment to say over the next seven years we will spend this money because we will have access to that additional -- those two additional markets through those two transmitters.
9769 We shut down that station. It no longer exists. The transmitters are gone. We filed a letter with the Commission in December of 2008 advising that in fact we would cease putting money into the Fund as a result of that because it's a condition of a licence that no longer exists. In fact we returned the licence to the Commission.
9770 So that is really what happened to that Fund. Hopefully, that clarifies that portion of it. And then Barb, I guess, could explain in more detail the relationship we have with Alberta producers.
9771 MS WILLIAMS: Yes. I mean there was a real respect for the work that had been started by that Fund. We actually put that in the hands of the IPF of Andra Sheffer's organization, so it was run independently.
9772 And part of the way that Fund was organized meant that anything it was invested in was returned. If there was a return on any of those investments, there was a commitment to plough that back into future programs.
9773 So we have kept up that piece of it. So any of the monies that are coming back in, there still is a person out there running that Fund under Andra's guidance and we are making sure that that money gets invested back in.
9774 Clearly, the principal stopped with the end of the licence, as Charlotte has outlined, but we have made sure we have continued to live up to our commitment to keep reinvesting anything that comes back because of the original investment.
9775 COMMISSIONER MENZIES: Okay. Just to help me, so the entire Fund was tied to the rebroadcasting of Red Deer, right?
9776 MS BELL: That is correct, yes.
9777 COMMISSIONER MENZIES: Has $7.5 million out of $10 million disappeared because of Red Deer, which was the smallest -- well, I guess other than Lethbridge, would have been the second smallest of your entities in Alberta. That just seems odd.
9778 Okay. I mean there is not much I can do about it. I just wanted to raise it on their behalf and just note it as a point that, you know, if I was the guy who had been expecting $7.5 million and I didn't get it, I would be not feeling as positive about the relationship as others might be. Even if it was no one presence, it was obviously a difficult time for the company and --
9779 MS BELL: We certainly agonized over the closing of that station, as you certainly appreciate, I am sure. Yes.
9780 COMMISSIONER MENZIES: Yes. It had a lot of encumbrances.
9781 Okay, that is just what I wanted to check on. Thank you.
9782 THE CHAIRPERSON: Suzanne?
9783 COMMISSIONER LAMARRE: I don't have any questions, thank you.
9784 THE CHAIRPERSON: I'm sorry. Steve Simpson.
9785 COMMISSIONER SIMPSON: Yes, thank you very much.
9786 LE PRÉSIDENT : Je m'excuse.
9787 COMMISSIONER SIMPSON: A couple of questions.
9788 I want to go back to the "cover over" agreement just one more time for old times sake. You have asked for an amendment of the "cover over" agreement to sort of broaden the language to include any other privately owned conventional stations being included in this agreement.
9789 I would like to ask you one more time what the reason is for broadening the terminology, because this agreement, from what I have been persuaded by the broadcasters who are at the other end of this agreement, is very vital to their viability in the interior markets and I am trying to get a sense of what the body language is here.
9790 MS BELL: I am going to ask Jon Medline to answer that because he actually had the discussion with the broadcasters who are affected by this. Jon.
9791 MR. MEDLINE: Yes. So after we filed our application, we had two separate discussions with both the Pattison Group and Astral Media -- who own the four affected stations here -- frankly, in response to their intervention, to develop language that would make everybody happy, which eventually happened. That is the language that you see that we have proposed here.
9792 As we mentioned, I think, in our last appearance, this is a very old deal -- this goes back to 1970 or 1971 -- vital to the interior of B.C. stations. There is no question about that. We never argued that.
9793 But over time the language in that -- you know, there's so many different ownership groups -- we had to fix it up for ownership groups, let alone other things. So instead of using the old language, we just changed it to reflect all the stations in the interior of B.C. instead of listing them. This was really a housekeeping thing.
9794 What we did do though at the end, after those discussions, was to say, if there are any problems on the ground, if there are any interpretive issues, we will then agree to meet and discuss these, instead of something festering over years, which I guess had been happening a little bit out there. So this is actually kind of a positive development, I think.
9795 COMMISSIONER SIMPSON: Again, it's not my intention, as you have heard many Commissioners say, to get into the middle of a commercial agreement, which is purely what this is, but I just want to go on record that the broadcasters affected by it were pretty happy with it before.
9796 So if this is something on your side of the fence that you feel is necessary because of your restructuring and -- I shouldn't say restructuring, but now ownership of the network, I just wanted to understand what your intent was.
9797 MR. MEDLINE: Yes, and I think they are more happy now, to be frank. They like the old language and they said that in the intervention, but I think they like the new language better because it incorporates what is happening on the ground.
9798 COMMISSIONER SIMPSON: Okay. I think that's pretty much it. I think the Chair covered most of the questions concerning nature of service in his questions.
9799 THE CHAIRPERSON: Tom?
9800 COMMISSIONER PENTEFOUNTAS: Rita has questions.
9801 THE CHAIRPERSON: Sorry. Rita?
9802 COMMISSIONER CUGINI: Just one question.
9803 I heard you loud and clear on genre protection and I heard obviously your group loudly and clearly last week on genre protection, but I really do only have on question.
9804 What in your mind will be the cumulative effect if we grant every single change to conditions of licence and nature of service amendments asked for by all the groups in these proceedings?
9805 MR. ROBERTSON: I think it's a very good question because there were in total a lot of changes requested and so I appreciate that the Commission needs to deal with the volume and the substance of each one of them.
9806 In our case we came forward with three -- some would say four -- changes that were meant to be just the most -- you know, not concerning and most helpful changes, and we kind of thought we were going at that the right way.
9807 So I guess we would encourage you to approve all of ours and --
9808 COMMISSIONER CUGINI: Shocker!
9809 MR. ROBERTSON: But I think overall you need to -- to be fair, you need to look at each one of them on their merits, unfortunately, even though there's a lot of them, and try to decide which ones make sense and which ones don't for the future.
9810 But in general -- as you say, you have heard us loud and clear -- not to get repetitive, but we think this is part of the kind of normal evolution of the broadcasting, and if we didn't do these kinds of things we would have a pretty woeful system in total.
9811 COMMISSIONER CUGINI: No, and I mean everybody recognizes that. Your arguments are not dissimilar to what has been put forward by everyone else.
9812 But the point is that in totality, should we approve all of these changes, would you have a concern with what that does to the principle of genre protection?
9813 MR. ROBERTSON: Well, again, I think that there has --
9814 COMMISSIONER CUGINI: See, you get this question because you are the last group.
9815 MR. ROBERTSON: No, no, well there has to be an adjudication of the requests. I mean if you are saying, should we just take what is being asked for, holus bolus, and say, what the heck, genre protection is kind of fizzling out a little bit over time, so we will just accept all the changes? No, we wouldn't agree with that.
9816 We think that you need to adjudicate on each one and do your best to say what is appropriate and inappropriate at the end of the day. Yes, we would be concerned if every request that came forward to you was accepted as a matter of policy.
9817 COMMISSIONER CUGINI: Okay. Thank you very much.
9818 COMMISSIONER PENTEFOUNTAS: Good morning. Thank you, Mr. Chairman.
9819 So supposing we grant all your changes and we deny everyone else's changes -- we offer you flexibility to move your Canadian spending around, your PNI around, we take exposure for all intents and purposes off the table. Yet, you still come to us with a PNI which is less than your traditional spend. If we exclude 2008, you are still at 5.7 percent.
9820 The idea was to get to the heart of CPE, which is PNI, and to try and increase that and you are coming below your traditional spend.
9821 Your cousins this morning -- and you were in the room -- came to us at 8 percent. Why are you coming to us for 5? We gave you everything, the house, the barn, the kitchen sink, the whole thing, and you are coming with less than what you were offering beforehand. Explain that to us, please.
9822 MR. ROBERTSON: Vice-Chairman, we came to you as well with a lot of different elements.
9823 We came with an overall spending requirement which goes over top of conventional as well as specialty, which is new. So we know that conventional in that regard will have strict spending requirements.
9824 We came to you with a completed Terms of Trade Agreement, which was the wish of the Commission, and we wholeheartedly did everything we could to throw ourselves into that to show leadership and make it work.
9825 And we came to you saying, gee, we think our historical spending on CPE is 29, but you know what, we see where you are headed and we want to be one of the good guys, we will support you and say we will go to 30 even though it added $50 million over the term to our overall spending.
9826 And then at the end of the day we say on PNI, we want to do more PNI, but if we set a level that is too high, then we are concerned that we will be forced to do PNI programming that won't be as high quality as we are going to feel excited about.
9827 And this is not -- as the Chairman pointed out, this is an issue that is made more complex by the overlay of the $123 million in benefit spending on top of that.
9828 COMMISSIONER PENTEFOUNTAS: You know, the $123 million in benefit spending, it is not Canadian content's -- Canadian content shouldn't be punished theoretically, and I understand practically it may be problematic, for the fact that people are merging and acquiring.
9829 You didn't attach a condition to that transaction that will give you $132 million, but we are going to keep our PNI -- we are going to consider that in our spending on PNI. That wasn't part of the deal.
9830 Am I correct so far?
9831 MR. ROBERTSON: Two separate transactions, certainly.
9832 COMMISSIONER PENTEFOUNTAS: Exactly. Perfect.
9833 Terms of trade also had nothing to do with the renewal of your licence. We agree on that?
9834 MR. ROBERTSON: Well, we were under pretty clear suggestions that if we didn't --
9835 MR. ROBERTSON: -- that the Chairman would have been disappointed had we not come forward with some resolution on the file, and it created a lot of, shall I say, positive energy towards getting this far.
9836 COMMISSIONER PENTEFOUNTAS: Still two separate issues.
9837 MR. ROBERTSON: Oh, I don't know. Well, I mean to the extent that it was going to be a topic of high interest at our licence renewal hearing, it made it very much a part of our renewal process.
9838 COMMISSIONER PENTEFOUNTAS: I think you will also agree with me that -- and I was listening to Madam Williams -- I was going to call you Barb, but I better not.
9839 I was listening to Madam Williams and, you know, looking for this Holy Grail, and I don't know if we discussed in camera or not, but that simulcast, you wouldn't be looking for that simulcast if there wasn't pressure that was brought to bear to fill those PNI requirements.
9840 I think we had a discussion last week. It's a lot easier to buy American and make money on that.
9841 MS WILLIAMS: Yes, I think what is key there is that the simulcast of a show in prime time with an American network is what drives our business.
9842 COMMISSIONER PENTEFOUNTAS: M'hmm.
9843 MS WILLIAMS: If that show can be Canadian, then we are on such moral high ground that we are so excited and we are in financial territory that starts to make sense.
9844 So I think if PNI was zero, we wouldn't stop chasing Canadian content simulcast.
9845 "Rookie Blue" is a massive hit for us. It's fantastic. We will do -- and there is something interesting about that actually.
9846 Both "Rookie Blue" and "Flashpoint," I think, have achieved a certain amount of success now with the simulcast -- "Flashpoint" had a couple of runs at it -- to the point where even if the American network drops out at that point, the Canadian series has at that point got enough momentum and enough invasion into the --
9847 COMMISSIONER PENTEFOUNTAS: Exposure.
9848 MS WILLIAMS: -- exactly, that it can be successful on its own. And that -- I mean there you really have got the Holy Grail, right?
9849 COMMISSIONER PENTEFOUNTAS: So we can make money on Canadian drama? We had a discussion last week, and I can't remember if it was in camera or not, and if it was I'm sorry, but --
9850 MS WILLIAMS: We believe you can if it's simulcast. And in the 25 or 30 years of my experience in this business, I think there has been -- we were trying to count them -- seven maybe.
9851 COMMISSIONER PENTEFOUNTAS: I find it hard to believe you have been in this business 30 years, but --
9852 MS WILLIAMS: Thank you.
9853 COMMISSIONER PENTEFOUNTAS: -- unless you started when you were three.
9854 But this is an incentive to find those projects.
9855 MS WILLIAMS: My point would be that the incentive to find the simulcast Canadian is there as a business opportunity. The incentive to do some of the others, yes, you have to guide us a little bit with that, as does the CMF, as do other tools.
9856 COMMISSIONER PENTEFOUNTAS: Okay.
9857 How can your cousins come in at 8 percent and you insist on 5?
9858 Your cousins, I am quoting the Chair.
9859 MR. ROBERTSON: We don't know what family members they are exactly, but we won't enter into that.
9860 And really, it's hard for us --
9861 COMMISSIONER PENTEFOUNTAS: I don't know if it's the mother-in-law. I don't know what the story is, but --
9862 MR. ROBERTSON: We didn't analyze, you know, their historical data to that extent. We came here to talk about our stuff. We really can't say. We know they have a different historical mix, but they are going to know what their business is about better than us.
9863 MS BELL: They have a different asset mix also. They have three small conventional stations and they have pay television. I mean it's a very -- it's a different asset mix. I don't know that we can compare -- I don't think it's a fair comparison to look at the two.
9864 In fact, they weren't -- you will recall that Corus was not part of group licensing when the Commission issued its policy. So it has come forward with its own proposal.
9865 COMMISSIONER PENTEFOUNTAS: Okay.
9866 Well, Mr. Robertson, you used to be interested and you are no longer interested in your cousins. That's okay. Stay focused.
9867 MR. BRAZEAU: You can't go any further than that.
9868 COMMISSIONER PENTEFOUNTAS: Forget the past. Look at the future.
9869 MR. ROBERTSON: Time moves on quickly, it seems.
9870 COMMISSIONER PENTEFOUNTAS: Thank you.
9871 THE CHAIRPERSON: Okay, I think that concludes the official part. Let's take a five-minute break and we will go in camera then, okay.
9872 Thank you.
9873 MR. ROBERTSON: Okay. Thank you.
--- Upon recessing at 1139, to resume in camera at 1145
--- Upon resuming at 1206
9874 THE CHAIRPERSON: Okay, we are back on the record.
9875 The one question that I forgot to ask you previously is on terms of trade.
9876 Could we not just make a simple COL saying, in your case: Shaw will adhere to a terms of trade agreement with the CPE throughout its license term, i.e. for the next five years. You have one, the agreement covers that period. I think that would address everybody's concern.
9877 You may want to answer that in your reply, but I think something like that seems to be innocuous, yet it fulfils the very purpose underlying the seriousness that we and everybody else attaches to the terms of agreement and the role it hopefully will play in your relationship with your producers.
9878 MS BELL: We will certainly take that under advisement and we will respond to that in reply.
9879 Thank you.
9880 THE CHAIRPERSON: Thank you.
9881 Are there any undertakings, counsel?
9882 MS DIONNE: No, Mr. Chairman.
9883 THE CHAIRPERSON: Thank you.
9884 Madam la Secrétaire, over to you.
9885 THE SECRETARY: So this concludes Phase III for items 1 to 4 on the Agenda.
9886 For the record, the applicants have until 20 April 2011 to respond to questions raised in the final phase of the oral proceeding.
9887 In addition, the Commission will accept final written submissions from intervenors in this proceeding or before 29 April 2011 and the applicants may file a final reply by 6 May 2011.
9888 For the record, there is one non-appearing application on the Agenda of this public hearing. Interventions were received for this application, the Panel will consider these interventions along with the application and a decision will be rendered at a later date.
9889 This completes the Agenda of this public hearing.
9890 THE CHAIRPERSON: Okay, thank you.
9891 Let me take this opportunity to thank staff for having done a phenomenal job with probably the most complicated proceeding we have, certainly the one with the most documents. You have done a great job briefing us and hopefully we will make a decision that reflects your excellent work.
9892 I want to thank the translators for doing a very good job in keeping everybody up to date, and the transcribers and all participants.
9893 I think notwithstanding it's complicated nature it has been a very useful and fruitful hearing and hopefully it allows us to shape the policy of these groups for the next five years.
9894 Thank you all.
--- Whereupon the hearing concluded at 1209
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