ARCHIVED - Transcript, Hearing 25 April 2013
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Volume 3, 25 April 2013
TRANSCRIPTION OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION
Applications for mandatory distribution on cable and satellite distribution systems pursuant to section 9(1)(h) of the Broadcasting Act and applications for the licence renewal of independent conventional, pay and specialty television services
140 Promenade du Portage
25 April 2013
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
Applications for mandatory distribution on cable and satellite distribution systems pursuant to section 9(1)(h) of the Broadcasting Act and applications for the licence renewal of independent conventional, pay and specialty television services
Leigh-Anna GatesLegal Counsel
Pierre-Marc PerreaultHearing Manager
140 Promenade du Portage
25 April 2013
- iv -
TABLE OF CONTENTS
PAGE / PARA
14. Canadian Broadcasting Corporation, on behalf of ARTV inc.736 / 4417
15. Canadian Punjabi Network Inc.763 / 4557
16. 8094039 Canada Corp. (Starlight: The Canadian Movie Channel)791 / 4754
17. Aboriginal Peoples Television Network Incorporated913 / 5514
18. On Purpose TV Inc.966 / 5818
19. ZoomerMedia Limited1013 / 6104
- v -
PAGE / PARA
Undertaking785 / 4711
Undertaking849 / 5093
Undertaking873 / 5260
Undertaking897 / 5421
Undertaking900 / 5438
Undertaking956 / 5733
Undertaking964 / 5800
Undertaking965 / 5803
Undertaking1040 / 6243
Undertaking1044 / 6271
Undertaking1047 / 6296
Undertaking1059 / 6376
--- Upon resuming on Thursday, April 25, 2013 at 0900
4415 LE PRÉSIDENT : Bonjour, tout le monde. Bienvenue.
4416 Comme d'habitude, je vous demanderais de vous identifier et de faire votre présentation, et vous avez 15 minutes pour ce faire. Merci.
4417 MME KIRSHENBLATT : Merci.
4418 Monsieur le Président, Monsieur le Vice-président, mesdames et messieurs les conseillers, bonjour. Mon nom est Bev Kirshenblatt et je suis directrice générale des affaires réglementaires de CBC/Radio-Canada.
4419 Je vous présente les autres membres de notre panel :
4420 - à ma gauche, Marie-Philippe Bouchard, directrice générale, Planification stratégique et services numériques, Services français;
4421 - à sa gauche, Marie Côté, directrice générale, Chaînes spécialisées, Services français;
4422 - ensuite, Jean Mongeau, directeur général, Groupe revenus, Services français; et
4423 - à ma droite, Anne-Marie Migneault, directrice, Affaires réglementaires.
4424 We would like to begin our presentation this morning by highlighting an important distinction about ARTV's application in the context of this hearing.
4425 All the applicants that will appear before you during this phase of the hearing are seeking the same regulatory mechanism, a mandatory distribution order pursuant to section 9(1)(h) of the Broadcasting Act.
4426 As you are aware, however, ARTV's request is different from the other 21 applications. We are asking for what you have termed "must offer." "Must offer" means simply that, if approved, ARTV would be made available to subscribers residing in Anglophone markets, who can then choose whether to subscribe to it.
4427 I will now turn it over to Marie Côté for the rest of our presentation. Thank you.
4428 MME CôTÉ : Merci, Bev.
4429 Bonjour à tous et toutes. Bon matin. Je veux d'abord remercier le Conseil de nous avoir invités à comparaître aujourd'hui devant vous.
4430 Je suis ici pour vous présenter un sujet qui me tient particulièrement à coeur : la mise en oeuvre d'un droit pour tous les Canadiens d'avoir accès à ARTV.
4431 J'aborderai dans cette présentation les sujets suivants :
4432 - le rôle particulier d'ARTV qui justifie pour nous l'accès à la distribution terrestre partout au Canada;
4433 - l'importante diversité des appuis que reçoit notre demande;
4434 - la nature de l'ordonnance que nous demandons; et
4435 - enfin, je parlerai de l'impact de cette ordonnance qui respecte le libre choix des abonnés et qui ne comporte pas d'inconvénients significatifs pour les entreprises de télédistribution.
4436 ARTV est un service consacré aux arts et à la culture canadienne. Sa nature de service précise qu'ARTV doit tenir compte « du caractère unique de la culture québécoise et des besoins et particularités des communautés francophones d'autres régions du Canada ». Dans les faits, la programmation actuelle d'ARTV remplit pleinement cette mission.
4437 ARTV reflète la vitalité de la vie artistique et culturelle des CLOSM par ses émissions produites à l'extérieur du Québec et même dans plusieurs de ses autres productions.
4438 J'attire votre attention sur la grille horaire jointe à nos notes d'allocution. Il s'agit, en fait, de la première page de l'Annexe A de notre demande.
4439 Dans cette grille, 95 pour cent des émissions sont de langue originale française.
4440 Globalement, plus de 70 pour cent de cette grille est composée d'émissions canadiennes dont près du quart sont produites hors Québec. Ce sont les cases colorées en orange que vous voyez; c'est exclusivement produit hors Québec. Et en couleur jaune, c'est des cases d'émissions provenant en partie de l'extérieur du Québec.
4441 Je porte à votre attention, par exemple, mardi à 19 h, il y a « Jardins » et il y a « Xpression Graffiti ». « Jardins » est une production hors Québec; elle est là pour huit semaines. Mais dans notre programmation printemps-été, il y aura par la suite « Xpression Graffiti », qui n'est pas une série hors Québec. Par contre, dans « Xpression Graffiti », on parle des graffiteurs au pays, à Toronto, à Vancouver, mais la production n'est pas nécessairement hors Québec.
4442 Je voulais également vous dire que 84 pour cent des émissions produites hors Québec sont originales, en première diffusion. Je porte à votre attention, par exemple, « Rendez-vous », qui est le vendredi à 20 h 30, qui est produite par la maison de production Léa Pascal à Hawkesbury et qui est donc en heure de grande écoute le vendredi à 20 h. C'est une nouveauté de ce printemps-été. Cette semaine, on était d'ailleurs à Ottawa sous le tunnel du Canal Rideau à faire une oeuvre artistique multimédia.
4443 De fait, de nombreuses interventions en faveur de notre demande soulignent l'importante contribution des émissions d'ARTV au reflet de l'activité artistique francophone à l'extérieur du Québec.
4444 Par exemple, plusieurs soulignent la contribution de l'émission de variétés « Pour un soir seulement », qui est produite à Winnipeg. Malheureusement, le câblodistributeur qui domine ce marché a décidé de ne pas distribuer ARTV. Mon équipe et moi-même avons, encore cette année, reçu des commentaires d'artistes de cette région qui nous disent qu'eux et leur famille ne peuvent pas voir l'émission à laquelle ils ont participé car leur distributeur n'offre pas ARTV.
4445 Je pense à la famille de la chanteuse Sarah Dugas et son frère musicien Christian qui ont participé à cette émission cette année.
4446 Je salue au passage la chanteuse Marie-Josée Clément, qui est aussi enseignante à l'école immersive de St-Pierre-Jolys et qui est également professeur de musique dans plusieurs écoles francophones du Manitoba et qui m'a dit combien il était dommage que ses élèves et leurs parents n'aient pas accès à ARTV et ainsi pouvoir voir les artistes présents au Festival du Voyageur de Saint-Boniface. Vous savez que c'est un important événement culturel au Manitoba.
4447 Ces exemples soulignent l'incohérence qui existe actuellement entre la mission d'ARTV et son accès à la distribution hors Québec. Notre demande vise à assurer que les abonnés qui vivent dans la région de Winnipeg ou dans toute autre CLOSM ailleurs au pays aient au moins le choix de s'abonner ou non à ARTV et puissent conserver ce choix.
4448 Nous avons démontré dans notre demande que l'ordonnance ne produirait pas des revenus supplémentaires significatifs pour ARTV, ce qu'aucun intervenant ne conteste. L'objectif principal de notre demande n'est pas d'améliorer la situation financière d'ARTV mais plutôt d'assurer une concordance entre la mission d'ARTV et son accessibilité hors Québec.
4449 Et je me permets d'ajouter que ce ne sont pas seulement les francophones qui bénéficieront de cette ordonnance mais aussi tous les Canadiens intéressés à l'activité culturelle de langue française. L'appui d'intervenants comme Priscilla McKenna, une citoyenne de l'Ile-du-Prince-Édouard, est un bel exemple de cette appréciation du service unique d'ARTV et nous a particulièrement touchés lorsqu'elle a exprimé l'importance de la chaîne pour le partage de la culture canadienne d'expression française.
4450 Comme vous avez pu le constater, la demande d'ARTV pour obtenir un droit d'accès à la distribution par les EDR terrestres dans les marchés anglophones a reçu de nombreux appuis, et nous en sommes très heureux.
4451 Encore plus important, les intervenants qui nous appuient proviennent de milieux très variés, ce qui offre différentes perspectives, selon les intérêts et le rôle de chacun.
4452 Par exemple, la demande est appuyée par :
4453 - des associations représentant les consommateurs abonnés aux EDR;
4454 - des citoyens vivant en milieu linguistique minoritaire et des producteurs parmi les plus importants de ces communautés, comme François Savoie de Connections Productions à Moncton ou encore Louis Paquin de Productions Rivard à Winnipeg;
4455 - des associations et des parlementaires qui représentent des CLOSMs, par exemple la Société franco-manitobaine et l'Honorable Maria Chaput, Sénatrice;
4456 - le Commissaire aux langues officielles et l'honorable Andrée Champagne, vice-présidente du comité du Sénat sur les Langues officielles;
4457 - des entreprises culturelles, des organismes des milieux artistiques, des institutions d'enseignement comme l'Université de Saint-Boniface; et
4458 - plusieurs créateurs et artistes de nombreuses disciplines comme le cinéma, la musique, le cirque, le théâtre, et caetera.
4459 Nous tenons également à signaler qu'aucun citoyen ne s'est opposé à la demande d'ARTV visant à obtenir un tel droit d'accès.
4460 Ma collègue Bev a bien expliqué au début de notre présentation qu'ARTV ne demande pas une distribution obligatoire au service de base. Nous demandons une ordonnance assurant qu'ARTV fasse partie des services facultatifs offerts par les EDR à leurs abonnés, à leur convenance dans des forfaits en bloc, en bouquet, en package, pick-and-pay, à la carte, standalone, à l'unité, comme les EDR le désirent.
4461 Nous ne demandons pas non plus au Conseil de fixer un tarif de gros. C'est donc simplement un droit d'accès que nous demandons, un droit semblable à celui dont jouissent les services de catégorie A de langue anglaise dans les marchés anglophones.
4462 Considérant que la nature de service d'ARTV, qui est de tenir compte « des besoins et des particularités des communautés francophones » vivant dans les marchés hors Québec anglophones, il serait tout à fait pertinent que le Conseil oblige les EDR terrestres à offrir ARTV partout au pays et pas seulement dans les marchés francophones comme c'est le cas actuellement.
4463 À notre avis, l'ordonnance demandée pour ARTV permettrait au Conseil de répondre aux divers objectifs de la Loi sur la radiodiffusion reliés au reflet de la dualité linguistique et aux services aux communautés en milieu linguistique minoritaire.
4464 Elle permettrait aussi au Conseil de contribuer à « favoriser l'épanouissement des minorités francophones et anglophones du Canada et à appuyer leur développement, ainsi qu'à promouvoir la pleine reconnaissance et l'usage du français et de l'anglais dans la société canadienne », tel que l'encourage à le faire la Loi sur les langues officielles.
4465 Par ailleurs, certains distributeurs affirment que les abonnés des marchés anglophones n'ont qu'à s'abonner à une EDR par satellite s'ils désirent avoir accès à ARTV. Cela nous semble une réponse déraisonnable qui ne tient pas compte de la complexité et des coûts qu'impliquent le choix ou le changement d'une compagnie de télédistribution.
4466 N'oublions pas également qu'à certains endroits, il n'est tout simplement pas possible d'installer un récepteur, une soucoupe d'EDR par satellite. Cette position ne nous apparait pas être dans le meilleur intérêt des consommateurs.
4467 L'ordonnance que nous demandons a le mérite de permettre un libre choix aux abonnés, soit celui de pouvoir ajouter ARTV s'ils désirent obtenir le service et que le prix demandé par l'EDR leur convient. Le désir d'avoir ce choix a été exprimé par de nombreux intervenants et aussi par le regroupement d'organisations représentant des consommateurs.
4468 Cette ordonnance a également le mérite de ne pas imposer un fardeau significatif aux EDR licenciées dans les marchés anglophones. ARTV a déjà des ententes touchant les conditions de distribution avec toutes les principales EDR du pays. Les EDR ont la flexibilité nécessaire pour leur permettre d'assembler et d'offrir les chaînes à leurs abonnés à leur guise.
4469 D'ailleurs, certaines EDR ont écrit que l'ordonnance que nous demandons n'est pas nécessaire car, à l'exception de quelques systèmes, ARTV est déjà distribué par la vaste majorité des EDR terrestres dans les marchés anglophones. Mais loin d'être inutile, l'ordonnance assurerait à tous les abonnés des EDR hors Québec la garantie qu'ils ne perdront pas cet accès au cours des prochaines années.
4470 En conclusion, nous croyons que notre demande offre une belle occasion au Conseil d'avoir un impact direct sur la qualité des services offerts aux communautés francophones en situation minoritaire, notamment parce que l'ordonnance que nous proposons :
4471 - assure une cohérence entre la mission particulière d'ARTV à l'égard des CLOSM et sa disponibilité dans ces communautés; et
4472 - permet aux Canadiens de l'extérieur du Québec d'avoir accès à un service qui reflète de façon exceptionnelle la diversité culturelle canadienne.
4473 De plus, cette ordonnance respecte le libre choix des abonnés et n'aura pas d'impact significatif sur les EDR.
4474 Les principaux bénéficiaires de cette ordonnance seront les francophones vivant en milieu minoritaire qui pourront choisir de s'abonner à ARTV. Ils profiteront alors de la haute qualité de notre programmation culturelle, une vitrine extraordinaire pour les artistes et les créateurs issus de leurs communautés, une vitrine qui les fait rayonner partout au pays.
4475 Nous sommes maintenant prêts à répondre à vos questions.
4476 LE PRÉSIDENT : Merci beaucoup pour cette présentation.
4477 Comme vous le savez, parce que vous avez eu le plaisir au mois de novembre, je crois, de passer deux semaines ici avec nous lors du renouvellement des licences de Radio-Canada/CBC, nous ne considérons pas le renouvellement du service aujourd'hui. Ça, c'est en délibéré, par ailleurs.
4478 Donc, ici, je vais juste focusser sur la question de la distribution.
4479 Donc, à votre avis, vous semblez dire que les critères de l'Avis public 2010-629 ne sont pas appropriés pour encadrer votre demande de distribution obligatoire. J'aimerais vous entendre un peu plus pour justifier cette position-là.
4480 MS KIRSHENBLATT: The Commission set out very clear criteria for those applicants that are seeking mandatory basic carriage pursuant to a 9(1)(h) distribution order and given the exceptional nature we understand why the Commission has set a very high threshold and has set out criteria in which to assess those applications.
4481 ARTV also makes an important contribution to the Canadian broadcasting system and we have addressed that in our application, but given that the request is different, it's not a request to be carried on basic, it's not about the rate, we believe the application ought to be addressed against a different backdrop looking at the unique nature of service of ARTV and the interests of Canadians and particularly Francophones and Francophiles outside Quebec that can't access the service.
4482 MME BOUCHARD : Si vous me permettez, j'ajouterais que par rapport à, par exemple, la demande de 9(1)(h) de RDI que nous avons discutée devant vous, donc, on est familier avec ces critères que vous avez établis.
4483 ARTV répond à, je soumettrais, pratiquement la totalité de ces critères-là, à l'exception peut-être dans le cas de cette demande de la question de la viabilité du service.
4484 Nous ne prétendons pas que l'ordonnance que nous demandons est nécessaire pour assurer la viabilité du service puisque nous avons établi que cette ordonnance-là ne mène pas à des revenus matériellement substantiels dont le service dépend pour maintenir la qualité et la nature de service qu'elle offre.
4485 Pour ce qui est des autres critères en ce qui a trait à la contribution aux objectifs de la Loi et des différents aspects de cette contribution-là, je pense que la présentation de Marie a bien souligné en quoi ARTV répond à ces critères-là.
4486 Également, en ce qui a trait à la demande pour le service, encore une fois, vous le voyez à travers les intervenants. Vous le voyez aussi dans le fait que le service est réclamé en ce qui a trait à sa disponibilité.
4487 Et donc, au niveau de la demande que nous faisons, nous pensons que nous avons atteint le standard de démontrer qu'il y a une demande pour ce service-là, c'est-à-dire que les gens peuvent vouloir le choisir.
4488 Et finalement, en ce qui a trait à sa contribution générale en termes de contenu canadien, dépenses pour des émissions canadiennes, productions originales en français et productions hors Québec, je pense que le dossier parle par lui-même.
4489 Donc, à l'exception de la question de la viabilité, tous les autres critères sont rencontrés.
4490 LE PRÉSIDENT : Bon, tenons ça pour acquis pour une seconde. Advenant... Et donc, vous nous invitez, en somme, d'utiliser un critère un peu différent, étant donné la nature de votre demande.
4491 Cela étant dit, j'ai bien peur que bien d'autres tenteront un jour de cogner à notre porte pour obtenir une distribution avec un statut très semblable.
4492 Donc, à votre avis, c'est quoi le filtre ou les critères qu'on devrait utiliser pour des demandes semblables à la vôtre?
4493 MME BOUCHARD : Notre position est basée sur la nature de service d'ARTV, et ayant regardé la nature de services des autres catégories A -- puis on ne parlera pas des catégories B parce que je pense que là, ça serait aller un peu au-delà des besoins -- mais pour les autres catégories A du marché francophone, je ne crois pas que vous allez trouver une catégorie A qui a dans sa nature de service la mission spécifique de tenir compte des besoins et des particularités des communautés francophones vivant en milieu minoritaire.
4494 Donc, notre position, c'est que c'est la nature de service qui la distingue de tous les autres catégories A.
4495 L'autre service qui a cette notion-là dans son essence même, c'est RDI, mais c'est un autre débat. C'est une catégorie C, puis on a eu cette discussion-là en novembre.
4496 Donc, c'est, je crois, la façon de regarder le dossier dans son écosystème. ARTV se distingue complètement des autres chaînes à la fois par sa nature de service et sa contribution réelle. Ce n'est pas que sa nature de service. Elle est actualisée dans ses conditions de licence et également dans ses réalisations.
4497 LE PRÉSIDENT : Comme vous le savez, dans le Règlement sur les entreprises de distribution, plus particulièrement l'article 18(2)(iii), il y a une règle de distribution qui exige -- puis ça existe depuis plus d'une dizaine d'années -- qui exige un ratio de 1 sur 10 pour assurer justement ce dont vous parlez, la disponibilité de service francophone dans des marchés en situation minoritaire.
4498 Pourquoi que ce mécanisme-là n'est pas suffisant? D'ailleurs, vous nous dites que vous êtes -- il y a des exceptions, je comprends bien -- mais que, généralement, vous êtes assez bien distribué au moment où on se parle.
4499 MME BOUCHARD : Je vous dirais que l'expérience d'ARTV a quand même démontré les limites de cette règle 1 pour 10, entre autres choses parce que depuis l'existence ou la création de cette règle-là, la disponibilité de chaînes francophones a quand même augmenté substantiellement, et notamment, on voit des situations où ce sont des chaînes de catégorie B, et ça ne leur enlève rien en termes de mérite ou autrement, mais les chaînes de catégorie B peuvent aussi se qualifier pour la règle 1 pour 10. Donc, le nombre de chaînes disponibles pour atteindre le fameux quota 1 pour 10 a augmenté.
4500 Et pour toute sorte de raisons aussi -- peut-être mon collègue Jean peut vous entretenir davantage -- ce sont les règles d'assemblage, dans le fond, et les pratiques, devrais-je dire, d'assemblage des EDR qui peuvent priver certaines communautés francophones importantes de l'accès à ARTV.
4501 M. MONGEAU : Clairement, dans les stratégies d'assemblage de certaines EDR, à travers les discussions que nous avons avec eux de façon continue, on constate qu'il y a des choix arbitraires qui sont faits sur la sélection des chaînes qui se retrouvent à l'intérieur des forfaits pré-assemblés, et dans ces contextes-là, ARTV ne réussit pas dans certaines régions, en dépit de la prédominance ou de l'importance des marchés francophones, à réussir à se tailler une place dans ces marchés-là.
4502 Je cite l'exemple de Winnipeg, par exemple, qui est un cas assez exceptionnel, où sur la base du potentiel du marché, il y a une communauté francophone importante, mais on ne réussit pas avec l'EDR, le principal EDR dans le marché à conclure une entente pour la distribution.
4503 LE PRÉSIDENT : C'est quoi les points d'achoppement?
4504 M. MONGEAU : Les points d'achoppement ne sont pas... Je vous dirais que c'est plus l'EDR qui pourrait vous répondre à cette question-là, mais je peux vous dire que dans tous les cas, il n'y a pas de... ce n'est pas un critère de coût, la dimension coût n'entre pas dans l'échange, et ce n'est très certainement pas sur la base de notre offre puisque cette même EDR nous distribue dans d'autres marchés ailleurs dans le pays, par exemple, Vancouver, où nous sommes présents.
4505 Mais clairement, on ne réussit pas, et dans les discussions, il n'y a pas une volonté démontrée de nous inclure dans les forfaits qui sont déployés dans ce marché-là.
4506 LE PRÉSIDENT : Certains diront que la règle du 1 pour 10 tente d'avoir un équilibre, d'une part, entre assurer un certain résultat pour l'offre francophone en situation minoritaire, d'une part, mais aussi une certaine place pour les forces du marché, et donc, vraiment d'être guidée par la demande des abonnés.
4507 Donc, j'aimerais mieux comprendre pourquoi la règle de 1 sur 10, avec cette philosophie-là, ne peut pas atteindre vos objectifs.
4508 MS KIRSHENBLATT: I think that in the case of ARTV it faces a unique paradox because, as we talked earlier, it has this nature of service that it needs to reflect or it must reflect the needs and circumstances of French-language communities outside of Quebec, but there is no corresponding requirement that cable companies must make the service available.
4509 Now, there is the 1 to 10 rule, but in the case of ARTV it isn't sufficient because a terrestrial undertaking would still be meeting its regulatory obligations but it can drop a service such as ARTV or not carry it at all and still be doing what it needs to be doing in regard to its regulatory obligations.
4510 The last part of your question was what about market pressure, can Francophones exercise enough market pressure outside of Quebec to get a service carried, and I think we addressed it in our reply. I think it's paragraph 11 of our reply.
4511 You know, we highlighted that it is difficult and nearly impossible for a minority to exercise pressure in making decisions. It's a small group that's spread out.
4512 LE PRÉSIDENT : Oui, je vous en prie, Madame Migneault.
4513 MME MIGNEAULT : Si je peux me permettre, aussi, la règle du 1 pour 10 favorise de moins en moins les catégories A. C'est que déjà, elle permet de distribuer les catégories B, puis en plus, avec les nouvelles règles comme celles de l'article 19 du Règlement sur la distribution des services non liés et indépendants qui ne s'applique qu'aux catégories B, alors, maintenant, les EDR ont même encore plus d'intérêt à distribuer un B plutôt qu'un A, parce que le fait de distribuer un B va les aider aussi à remplir ce quota de l'article 19 pour les services non liés et indépendants.
4514 LE PRÉSIDENT : Donc, en présumant qu'on accorde votre demande, comment voyez-vous la relation entre une ordonnance pour distribution de l'offre, là, le "Must Offer" avec la règle de un pour dix, parce que certains diront que si vous avez cette ordonnance-là vous prenez la place d'un service un sur dix?
4515 MS KIRSHENBLATT: We don't believe that BDUs would need to add additional services and to maintain, you know, in order that our TV would continue to count in the 1 to 10, in meeting the 1 to 10 Rule.
4516 THE PRESIDENT: So, you would agree with me that it bumps off somebody else who might want to fit in that 1 to 10 Rule?
4517 MS KIRSHENBLATT: No, because that is simply a minimum. BDUs are free to determine their packages and tailor --
4518 THE PRESIDENT: I didn't fall off the track yesterday. Do you really think BDUs will act in that way?
4519 MS KIRSHENBLATT: I think that in the case -- the only companies that could answer that would be those terrestrial BDUs that aren't currently carrying the service. They would be in a best position to tell the Commission what their plans are in the event that this -- you know, the impact of the distribution order in those particular systems.
4520 MME CôTÉ : Si vous me permettez, monsieur le président.
4521 LE PRÉSIDENT : Oui, je vous en prie.
4522 MME CôTÉ : Par rapport à la nature de service, j'insiste un peu, mais sur la programmation qu'on fait, quand je vous parlais tout à l'heure de rendez-vous de jardin, deux productions qui sont faites à Hawkesbury, là aussi à Hawkesbury c'est... les détails, souvent ils vont vous dire, on a des problèmes d'interconnexion, de capacité, mais ça fait des années que c'est ça.
4523 Puis c'est quand même pour moi un peu un paradoxe de dire qu'on a deux séries qui sont produites par une productrice d'Hawkesbury et que sa communauté, qui n'est pas très nombreuse, on a raison, ils sont 5 000 ou 6 000, je crois, dans la ville même de Hawkesbury, qui n'arrivent pas à avoir accès à des productions qui sont produites qui sont sensées les refléter. C'est un peu...
4524 Puis c'est là que... peut-être que, comme on dit, on les laisse libre que ça ne soit pas dans un "package". Parfois je me pose la question aussi, c'est une programmation culturelle. On a la seule chaîne à être 100 pour cent culturelle au pays, anglais et français, là, on est la seule.
4525 Est-ce que peut-être c'est parfois plus difficile pour eux d'être en package? C'est pour ça qu'on dit que ça nous fait rien que ce soit un stand alone, à l'unité, mais c'est un peu mon...
4526 LE PRÉSIDENT : Est-ce que ça vous ferait de quoi si c'était un tarif de 0,00 cent?
4527 MME BOUCHARD : Sur la question du tarif, vous savez... d'abord, première chose...
4528 LE PRÉSIDENT : Est-ce que j'ai bien... je ne veux pas vous interrompre là.
4529 MME BOUCHARD : Oh! Excusez-moi.
4530 LE PRÉSIDENT : Mais j'ai bien compris votre argumentaire, c'était que ce n'est pas pour un motif financier. Donc, si ce n'est pas pour un motif financier, ça pourrait être facilement 0,00 cent?
4531 MME BOUCHARD : C'est-à-dire que ARTV est déjà distribuée et disponible dans le marché, dans les marchés hors Québec à un tarif qui est négocié avec les EDRs qui, à l'origine de sa licence, était à un tarif de 0,25 $ par abonné sur le service numérique.
4532 Alors, que resterait-il de ces revenus-là si l'ordonnance que vous émettiez était pour distribution gratuite? Là, il y aurait une perte de revenu pour ARTV.
4533 Je vous ai dit tout à l'heure que l'ordonnance que nous recherchions n'allait pas être matériellement substantielle en terme d'augmentation de ses revenus, mais très sincèrement je ne crois pas que RDI, que ARTV excusez-moi -- c'est le multi tâches qui m'assaille-- je ne crois pas qu'ARTV peut se priver des revenus qu'elle reçoit à l'heure actuelle et, donc, conséquemment, je ne vois pas non plus comment on peut dire que la chaîne devrait être offerte gratuitement.
4534 C'est vraiment comme nier la nature de service d'ARTV qui fournit et investit des sommes quand même importantes hors Québec.
4535 Alors, il y a un corollaire aussi en terme d'affaire qui n'est pas juste le corollaire en terme de service.
4536 On est conscient que ce marché-là est beaucoup moins important en terme de revenu, mais pour ce qu'il est, il est essentiel à l'équilibre financier de ARTV.
4537 LE PRÉSIDENT : Dois-je comprendre que dans vos ententes avec les EDRs, vos ententes d'affiliation à l'heure actuelle, vous avez des clauses de ce qu'on dit de MFN, most favourite nation, qui vous empêcheraient de réduire les tarifs pour certaines communautés?
4538 M. MONGEAU : Non, ce n'est pas le cas, mais ce que nous avons très clairement, ce sont des ententes qui nous permettent de distribuer déjà à tout près de 60 000 abonnés à travers le pays, à l'extérieur des communautés francophones du Québec. Ces 60 000 abonnés se traduisent par des revenus d'un peu plus de 350000,00 $ par année.
4539 Alors, évidemment, toute régression pour passer du tarif de 0,25 $ à zéro se traduirait par une perte sèche nette, déjà, là, de cet ordre-là.
4540 MME BOUCHARD : Et si je peux ajouter, évidemment ARTV est déjà disponible sur les EDRs par satellite, alors est-ce qu'on créerait deux classes et, clairement, il y a un tarif associé à ça? Donc, je verrais difficilement qu'on puisse avoir une distribution hors Québec qui serait à zéro sous en mode terrestre et tarifée en mode satellite. Ce serait un peu étrange.
4541 MME CôTÉ : Puis, moi, j'aimerais rajouter qu'on vit des redevances d'abonnements. 97 pour cent de nos abonnés sont au Québec, les redevances viennent de là. Or, vous me demandez, le Conseil demande de s'engager de manière significative dans des productions hors Québec. La somme qu'on investit est deux fois, trois fois, quatre fois, dépendant des années, la somme de revenu qu'on obtient de hors Québec, alors il y a aussi de ce côté-là.
4542 LE PRÉSIDENT : Avec l'ordonnance que... vous avez parlé de 60 000 abonnés à l'heure actuelle et 350 000,00 $ de revenu à l'heure actuelle, si on octroyait votre demande, combien de francophones et de francophiles supplémentaires pourraient bénéficier de votre service?
4543 M. MONGEAU : Nos évaluations, évidemment, varient en fonction des marchés, mais l'hypothèse de départ qui est une hypothèse je dirais fort agressive et optimiste, positionne le nombre à environ une cinquantaine de mille, donc, une cinquantaine de mille nouveaux abonnés.
4544 LE PRÉSIDENT : Nouveaux, qui ne sont pas inclus dans les 60 000.
4545 M. MONGEAU : Qui ne sont pas inclus dans les 60 000 actuels, oui.
4546 LE PRÉSIDENT : Et en terme concret, l'impact sur les chlosmes M, les chlosmes, pardon. Moi aussi, il y a plusieurs audiences, là.
4547 MME CôTÉ : Vous parlez d'impact de quelle façon par rapport à la programmation?
4548 LE PRÉSIDENT : Non. Qu'est-ce que ça veut dire pour les... parce qu'on entend souvent que les communautés ne se sentent pas reflétées dans le système de radiodiffusion.
4549 MME CôTÉ : Moi, quand j'entends ça, ça me fait toujours quelque chose parce que je pense qu'on travaille très fort. Si je vous remontre les couleurs ici, jaunes et oranges, là, ce n'est pas rien. Ce qu'on fait, on le fait quotidiennement.
4550 On a presque tous les jours de la programmation qui reflète la vitalité et le dynamisme culturel hors Québec. Je veux dire qu'on les côtoie à toutes les semaines. Vendredi, j'étais encore au Cabaret du Miland à avoir les ABBS que j'ai découverts à l'émission « Pour un soir seulement » cette année.
4551 Ça me fait toujours un peu quelque chose puis je me dis que c'est peut-être aussi parce que ce n'est pas... ils n'ont pas accès autant qu'ils pourraient l'être.
4552 LE PRÉSIDENT : Et ma dernière question, elle est plus technique, là, c'est que ce n'était pas clair au dossier pour quelle durée que vous demandiez la distribution?
4553 MME BOUCHARD : Bien, je crois qu'on pourrait demander cette ordonnance-là pour la durée de la licence que vous considérez à l'heure actuelle.
4554 LE PRÉSIDENT : D'accord. Merci. Alors, ce sont mes questions puis je pense que c'est les questions du panel. Merci bien, mesdames et messieurs, pour votre présentation.
4555 We will go now to the next application, which is the Canadian Punjabi Network. That's the applicants to approach the table. Thank you.
4556 THE PRESIDENT: So, welcome to the hearing. I would ask you to, for the purpose of the transcripts to identify yourselves and to make your presentation. You will have 15 minutes to do so. Please go ahead.
4557 MR. DHILLON: Good morning,
4558 Mr. Chairman, Vice Chairman, Commissioners, ladies and gentlemen of the Commission and the staff.
4559 I am Tarsem Dhillon, CEO of Canadian Punjabi Network. Let me introduce our team along with me today.
4560 On my left is David Keeble who is responsible for Research and Regulatory Issues for CPN. Sitting beside him is Sherali Thaver, a long time producer in South Asian broadcasting. He opened his first production studio in 1983 at Steven Street in Toronto.
4561 Beside him is Prabhjot Dhillon, she will be working in a day to day management as a co-producer as a Women's programming.
4562 On my right is Meena Chopra who will be working in the areas of Media Advertising and Management. Beside her, our Chief Marketing Officer, Bhupinder Virdi. He has over 20 years experience in Marketing and Advertising.
4563 Sitting in the second row is our Technical Consultant, David Ahmadi.
4564 Now we will begin with our presentation.
4565 Today we will be looking at three main questions:
4566 Is there a need and a demand for CPN on digital basic?
4567 Does CPN make good business sense?
4568 What makes CPN an "exceptional" service as required by the 9(1)(h) call for applications?
4569 The first question is the need for CPN.
4570 My introduction to television began when I was only 12 years old. My dad bought a video camera and a VCR back in 1980 as he used to make wedding films on the weekend.
4571 I made my first commercial for my dad at the age of 13.
4572 I became a producer in 1987 and made the first-ever 30-minute Punjabi program on Citytv every Sunday at 11:00 a.m.
4573 It is my experience in programming that brought me to the realization, five years ago, that there was a great unmet need in the Canadian Punjabi community. They needed television programming that reflects their experience as Canadians and that helps them understand Canada.
4574 This need was not being met by existing channels. I realized that Canada and the Punjabi community, needed a channel that could help integrate and develop this community in every way. That was the beginning of the Canadian Punjabi Network and that is why we are here in front of you today.
4575 When you opened this hearing, Mr. Chairman, you said:
"... sometimes competition alone cannot ensure the achievement of all of the objectives of the Act, so that all Canadians can identify with and be reflected in their broadcasting system."
4576 That is the problem. A large community of Canadians are not reflected in their broadcasting system, but a solution is possible. It is a solution that can be sustained by that community from its own resources: A Canadian Punjabi Network.
4577 CPN calculates that, from the Statistics Canada Census and Immigration data, there are currently about 575,000 Punjabi speakers in Canada. Most important to remember is that this population is not distributed evenly. That is what CPN is asking the commission to recognize, that where the Punjabi-speaking population is locally substantial, it should be treated as such and given the services appropriate to Canada's third most spoken language.
4578 Within the Punjabi-speaking community we conducted a survey to determine demand for a service like CPN. We learned that the level of demand is very high. Seventy-six percent of those surveyed said they would be "very interested" in receiving CPN if it was offered on digital basic, even if there was a price attached, though, as you know, we are not asking for any subscriber fee.
4579 Second, does CPN make good business sense?
4581 MS CHOPRA: CPN submits that its supporting interventions from the Canadian Punjabi community show that its vision of a Canadian Punjabi channel is shared widely across the country.
4582 Since our application became public, CPN marketing teams in Toronto, Vancouver, Winnipeg and Calgary approached potential advertisers. Many reacted strongly to the vision of a channel to knit the community together, economically as well as socially.
4583 The network's presence on digital basic cable without a subscriber fee is the key, as it will extend the reach of their message. Some of these business people indicated their willingness to buy time on CPN if it was licensed. Today we are pleased to tell you that we can go beyond that.
4584 MR. VIRDI: Many businesses have already signed commitments to a year-long advertising buy, commitments that will become binding if CPN is licensed as a basic service. The advertising contracts that are already signed total an annual revenue for CPN of $875,000.
4585 In our business plan, we projected a first year local revenue of $672,000. We are already ahead of that projection by 30 percent.
4587 MR. DHILLON: Lastly, what makes CPN exceptional? We can start with the numbers:
4588 70 percent Canadian content, 80 percent in prime time;
4589 A CPE commitment of 50 percent;
4590 PNI, million dollars over the license term;
4591 A unique commitment to closed captioning, including development of the world's first Punjabi-language closed captioning system;
4592 Reflection of aboriginal realities,
4593 And both French and English-language lessons for Punjabi speakers.
4594 I think it is safe to say this is exceptional. There has never been a third-language application with this level of commitment to Canada.
4595 But it is more than numbers. The numbers are simply the result of our vision of a Punjabi-language service that is truly rooted in Canada, a service whose mission is to help the Canadian Punjabi community understand itself and understand Canada.
4596 CPN will knit the community together with its weekly documentaries, daily women's programming, daily youth programming, daily news, daily educational programs, and weekly sports such as Kabaddi;
4597 CPN will connect viewers on television via the internet with program's like U-TV;
4598 CPN will become the 4-1-1 of the Punjabi community.
4599 It is not that we are opposed to those who provide television programs from India, with only a small amount of Canadian content. People like those services, but that is not our vision. That is not what CPN wants to do. Punjabi Canadians are well served with entertainment and information about India, but they are underserved when it comes to reflection of their own country, Canada.
4600 Let us show you the kind of programming we are talking about with our video presentation.
4601 By the way, CPN's programming will be in Punjabi, but for your convenience today we have made this video in English with Punjabi subtitles.
4602 Video, please.
--- Video presentation
4603 MR. DHILLON: This business model we are introducing today is new for third language television. The markets in which we are asking for carriage, using DTH and cable, have enough population and business to make CPN a success story.
4604 We will accept conditions of license for 70 percent daytime and 80 percent evening Canadian content and CPE of 50 percent of our last year's total revenue.
4605 Approval of our application will ensure that the Punjabi community across Canada will have an even stronger voice and programming from Canadians for Canadians. Less of Manmohan Singh, more of Steven Harper.
4606 In closing Mr. Chairman, Commissioners, we would like to leave you with three thoughts:
4607 First, the Canadian programming we are proposing, nobody else is producing. That's our vision. That's what we want to do.
4608 Second, our application is very fair. We are not raising the fee for basic cable package for the general Canadian. This is a service for a community and it will be supported by the economics of that community.
4609 And finally, our success lies in how well do we know our community. We know it well and we will succeed.
4610 Thank you and we now look forward to your questions.
4611 THE CHAIRPERSON: Thank you very much for your presentation.
4612 The Vice-Chair will be asking you some questions to start off. Thank you.
4613 COMMISSIONER PENTEFOUNTAS: Good morning. Thank you for an interesting presentation.
4614 MR. DHILLON: Thank you.
4615 COMMISSIONER PENTEFOUNTAS: I think, one, you talk about it being an exceptional service. There are other Punjabi television stations that are already airing in Canada, are there not?
4616 MR. DHILLON: Yes.
4617 COMMISSIONER PENTEFOUNTAS: Are you distributed? Are you airing any -- are you part of a channel presently?
4618 MR. DHILLON: No.
4619 COMMISSIONER PENTEFOUNTAS: No.
4620 MR. DHILLON: We are not launched as yet.
4621 COMMISSIONER PENTEFOUNTAS: So you have no experience as broadcasters?
4622 MR. DHILLON: We have experience in broadcasting, but we are not a running channel as yet.
4623 COMMISSIONER PENTEFOUNTAS: Okay.
4624 MR. DHILLON: We have been in the broadcasting industry for over -- I myself being 25 years, Sherali Thaver over 35 years.
4625 COMMISSIONER PENTEFOUNTAS: Okay. When you first realized that there was a need five years ago, did you think about simply asking for a licence to broadcast Canadian Punjabi Network?
4626 MR. DHILLON: I did not go to the BDUs directly because the community -- and we are in the broadcasting business, I know a lot of applicants personally who have come and has a Category B licence --
4627 COMMISSIONER PENTEFOUNTAS: Yes...?
4628 MR. DHILLON: -- and they went to the BDUs, but they were turned down. I can talk about a few of them right now, and they have maybe broadcasting experience, more than I have. So I didn't think that we would have a chance.
4629 COMMISSIONER PENTEFOUNTAS: So why aren't they here today asking for a 9(1)(h) status?
4630 MR. DHILLON: They would be better to answer. Maybe they didn't, you know -- I couldn't answer that for them.
4631 COMMISSIONER PENTEFOUNTAS: Okay.
4632 MR. DHILLON: We are here and --
4633 COMMISSIONER PENTEFOUNTAS; Okay. But there are other channels, there are numerous channels that offer services in Punjabi to the Punjabi community across Canada.
4634 MR. DHILLON: There are, but their Canadian content is very low.
4635 COMMISSIONER PENTEFOUNTAS: It's low.
4636 MR. DHILLON: They basically bring programming from India and whatever the small Canadian content they are presenting -- and I don't want to be talking bad about anybody in front of you over here, but I can give you some samples that all seven networks -- specifically I can speak about four networks -- they are until the ATN umbrella --
4637 COMMISSIONER PENTEFOUNTAS: Yes...?
4638 MR. DHILLON: -- they are taking a feed from the Temple from 6:00 p.m. to 8:00 and putting it on different networks. It is one feed going to four networks, one starting maybe at 4:30 p.m., one at 5:00 p.m., so that's their Canadian content. They have no documentaries, they have no -- the schedule that we are proposing to you, they have none of that.
4639 COMMISSIONER PENTEFOUNTAS: But they do have Canadian content, they do talk about what's happening in the community, they do talk about what's happening in Canada, be it Memorial Day or Canada Day.
4640 MR. DHILLON: No, no. On Canada Day I can specifically tell you there was no programming on these 24-hour networks.
4641 In fact, we didn't present it to you in the application, on Remembrance Day, zero. There is absolutely no programming. The only programming they have is the feed that's coming from the Temple and that's it. Everything else is coming from India. They are basically just adding commercials to that and airing it.
4642 COMMISSIONER PENTEFOUNTAS: But you haven't tried approaching -- first of all, you don't have a licence, you haven't applied for a licence and, second, you haven't tried approaching the BDUs once you have acquired that licence, so you can't speak from personal experience in terms of getting carriage.
4643 MR. DHILLON: Not my personal experiences, but there are applicants, I can mention Mr. Bhupinder Bola, which the Commission has licensed him last year for a Markham radio station. I believe he has over 15 licences and he has more, better experience than me in broadcasting and speaking to the BDUs he was turned down. He still doesn't have a licence. He is still not on the air.
4644 MR. KEEBLE: If I may, Mr. Vice-Chair?
4645 COMMISSIONER PENTEFOUNTAS: Yes, certainly.
4646 MR. KEEBLE: When you look at the record -- and as the Chair just remarked, none of us fell off the truck yesterday -- there hasn't been a Canadian Punjabi channel actually carried, given a carriage commitment since 2006 and yet there have been many who have received Category B licences, some of them with significant Canadian content. You have interventions from several of them on the record of this proceeding talking about their dealings with the BDUs.
4647 Second, it was clear from the beginning that the vision of this channel was to be accessible to the community, not up there in a tier which is the best you would ever have gotten -- sorry, not a tier, old language, in a discretionary package, which is the best one might ever have hoped for from a BDU.
4648 If you are charging $25 a month for the package, which is the price, you are not going to reach the whole community.
4649 So fundamental to the whole essence of this proposal, the vision of this proposal, was that it be generally accessible and that meant basic carriage.
4650 So second part on which you haven't fallen off the truck, what independent channel has received basic carriage from the BDU?
4651 Third, you heard just a few days ago from the gentleman from the National Resources Network who has had the experience of going to see a BDU -- I believe he described it as physical abuse, perhaps metaphorically -- $500,000 is the price for basic carriage, from one BDU.
4652 So at that point you say to yourself, "This is not going to happen voluntarily", it can only happen as a result -- as the Chairman said in his opening remarks, sometimes the free market doesn't do it for you, sometimes you need some intervention in that market if you actually want to serve the goals of the Broadcasting Act and that's why the 9(1)(h) order is required.
4653 COMMISSIONER PENTEFOUNTAS: If we were to allow Punjabi Network to be on digital basis, how many more -- you know, Canada being a country of immigrants, as we often say, how many more communities should we put on basic digital besides the Punjabi community?
4654 MR. DHILLON: That's a good question. I believe their commitment has to approach what we are proposing and they have to surpass the Category A's, which would be the Italian network and the Chinese network. So if they have already a Category A licence, then I don't think they will be on basic -- you know, they cannot apply for basic.
4655 And if there was a Category A licence given to a Punjabi panel 10 years ago, we wouldn't be here. And the population has to meet as well.
4656 MR. KEEBLE: On that population question, Mr. Vice-Chair, our supplementary brief contains an appendix which analyzes the populations of various language groups across the country. I'm not speaking here about ethnic groups, but people who speak a certain language. It's clear that there are perhaps three or four languages that might hope to meet a threshold test such as the one that we are proposing, but then, as Mr. Dhillon says, you have to go beyond that, you have to establish that there is no service there and the ethnic Category A's basically do cover off those languages.
4657 So you would have to --
4658 COMMISSIONER PENTEFOUNTAS: Punjabi included?
4659 MR. KEEBLE: Well, the ethnic category is not in Punjabi, that's the Hindi service.
4660 COMMISSIONER PENTEFOUNTAS: Hindi, yes.
4661 MR. KEEBLE: Punjabi, as you know, because it is not regarded as competitive with that service, can be an exempt service or a Category B without any competitive issues.
4662 But the others -- you know, to launch in one of those other languages there would be that issue because the ethnic Category A's are there and because they do have higher programming commitments, not as high as what is being proposed here, but nonetheless higher. And with CPE expenditures that are gain not as high, but somewhat significant.
4663 So if one was to work to try to get a proposal like this in another language, there would be a number barriers to overcome to actually meet this kind of test that you have put down for a 9(1)(h) service or for basic carriage.
4664 COMMISSIONER PENTEFOUNTAS: There would be quite a few other third language services that we would have to include on the 9(1)(h), under must offer.
4665 MR. KEEBLE: I thought that was the opposite of what I was just saying.
4666 I'm sorry, I must be misunderstanding your question.
4667 COMMISSIONER PENTEFOUNTAS: How do you arrive at your 5,000 number?
4668 MR. KEEBLE: Again, that is part of the analysis, and we did a number of different tests in that analysis to show how different thresholds would work.
4669 Basically, it is a kind of practical consideration. Number one, you have to have a threshold at which it is possible to reach a substantial part of that Punjabi-speaking population or there is no point to it.
4670 So, if you make it too high, you don't reach the population, and you can't pursue the vision of the community-oriented service.
4671 If you make it too low, you are putting terrestrial BDUs in a curious situation, where they are allocating their own resources to a community that isn't substantial enough to be worth that resource.
4672 The Broadcasting Act is quite sensitive to when resources are available to the purpose, right? I believe that is the language. So we were trying to strike a balance between those two questions: What is reasonable to ask a BDU to provide, and what can allow a service to actually reach its community.
4673 COMMISSIONER PENTEFOUNTAS: And in terms of the radius within which you have to find that 5,000 population?
4674 MR. KEEBLE: That comes down to the practicality of the test, and that is when you turn to StatsCan and the Census and see how they do Census division, Census subdivision, Census metropolitan areas, and so on.
4675 The way that the test is worded, I think it would cover the markets that have to be covered and would exclude the ones that don't have to be covered.
4676 One of the problems with the 10 percent test that you apply to ethnic Category A's, for example, is that there are some very small populations that meet that test. Three hundred people may be 10 percent of a community that is only 3,000 people.
4677 So, by going to not a percentage based, but a quantity based, we hoped that we managed to find the right balance between the resources that are being allocated to this purpose and actually being able to pull the channel off.
4678 COMMISSIONER PENTEFOUNTAS: What happens when you fall below the 5,000 threshold?
4679 MR. KEEBLE: At that point, CPN would negotiate with the BDUs to see if they were interested in carriage. They would not be subject to the Mandatory Distribution Order at that point.
4680 COMMISSIONER PENTEFOUNTAS: And would there be distinctive programming for each of these 5,000-person communities?
4681 MR. KEEBLE: Well, it is a national service, it draws its programming from those communities across Canada.
4682 I am not sure -- when you say distinctive programming, that does not mean a separate service for each community, no.
4683 But there would be programming on the national service that would be drawn from as many communities as possible.
4684 COMMISSIONER PENTEFOUNTAS: When you talk about a 4-1-1 service for the Punjabi community, how do you justify that within the Act and within your desire to have a "Must Offer" sort of status?
4685 MR. KEEBLE: I think that 4-1-1 was used as a kind of metaphor. You may be using it in a telecom context.
4686 I think what Mr. Dhillon was saying was simply that this is a service that provides basic information to the Punjabi community.
4687 COMMISSIONER PENTEFOUNTAS: I understand it metaphorically, and I am speaking metaphorically. Is that the purpose of this hearing, to provide a 4-1-1 service for the Punjabi community?
4688 MR. DHILLON: I am not quite understanding.
4689 COMMISSIONER PENTEFOUNTAS: That's fine.
4690 MR. KEEBLE: I don't think that I would take the metaphor that far.
4691 COMMISSIONER PENTEFOUNTAS: That's fine.
4692 MR. KEEBLE: What the service is providing is pretty clear in the conditions of licence that the service is prepared to commit to: 70 percent CanCon, 80 percent prime time, 50 percent CPE, and the various other things that were listed there.
4693 4-1-1 is simply a way of bundling that together and saying that it becomes a central place in which the community meets and informs itself about what is happening around the country.
4694 COMMISSIONER PENTEFOUNTAS: Have you thought about the impact that this service may have on existing services that are established toward serving the Punjabi community?
4695 MR. DHILLON: We believe that there will be very minimal impact, and the reason is because, right now, because of their content, they are not reaching the Punjabi community for advertising. All seven channels, even though they are on the West Coast, as well, and Calgary and Winnipeg, are mainly targeting the GTA market, which we are not.
4696 That is the difference, and when we went into those markets we found a number of businesses that want to promote their business on television. But these channels are not, they are only looking to the GTA market.
4697 Ninety percent of the revenue that they are generating comes from the GTA.
4698 COMMISSIONER PENTEFOUNTAS: Given that you have this distinct service, which is different from the services that are already available -- again, I come back to my original point -- you didn't think about applying for a licence and pitching that to the BCUs, given that you are so special that the community is behind you?
4699 That never crossed the organization's mind?
4700 MR. DHILLON: It did, and I will give you an example. Jaswinder Khosa, he applied for a licence in 2004 --
4701 COMMISSIONER PENTEFOUNTAS: I understand all of the other examples of all of the other people who are more experienced broadcasters than yourselves who have tried and have not succeeded. But given that your service is so different, so distinct, so exceptional --
4702 MR. DHILLON: But if somebody else is not given a chance by a BDU, why would they accept us?
4703 COMMISSIONER PENTEFOUNTAS: Okay. You mentioned firm commitments for $879,000, or something to that effect.
4704 MR. DHILLON: Yes.
4705 COMMISSIONER PENTEFOUNTAS: Those are written commitments?
4706 MR. DHILLON: Yes.
4707 COMMISSIONER PENTEFOUNTAS: Are they on the public record?
4708 MR. VIRDI: No, they are not on the public record, because we don't have the licence as yet.
4709 Once we are approved -- they are just projected figures. They have signed on the dotted line that, if you get CPN going, we are there with you.
4710 COMMISSIONER PENTEFOUNTAS: Would you be in a position to deposit that documentation, if need be?
4711 MR. VIRDI: Oh, yes.
4712 MR. KEEBLE: If that could be done on a confidential basis, Mr. Vice-Chair, because it is commercially sensitive information.
4713 COMMISSIONER PENTEFOUNTAS: Certainly, if need be.
4714 THE CHAIRPERSON: First of all, it would be for May 2nd, and you can ask for confidentiality and we will consider that.
4715 MR. KEEBLE: I am simply suggesting, Mr. Chair, that it would be not fair to the advertisers to put everything on the public record at this point.
4716 But we can discuss that offline, if you like.
4717 THE CHAIRPERSON: Well, then you will have a position to put forward as to why it should be confidential.
4718 MR. KEEBLE: Yes, exactly.
4719 THE CHAIRPERSON: But we haven't ruled on confidentiality yet.
4720 MR. KEEBLE: Indeed, not.
4721 COMMISSIONER PENTEFOUNTAS: Your revenue projections are not that high. Do you think you have sufficient funds to produce the quantity and the quality of programming that you have proposed?
4722 MR. DHILLON: Yes, we do. Nowadays television is not produced the way it used to be produced. It is very inexpensive. The equipment that runs the whole system is very inexpensive, and we will be building a very efficient studio, so that we can have this production in-house, we can start production, and we can make it very efficient.
4723 It is very much achievable.
4724 COMMISSIONER PENTEFOUNTAS: Do you want to add something?
4725 MR. KEEBLE: Not on that one, no.
4726 COMMISSIONER PENTEFOUNTAS: Not on that one, okay. Thanks.
4727 C'est tout ce que j'ai comme questions, Monsieur le Président. Je ne sais pas s'il y a quelqu'un d'autre qui voudrait rajouter.
4728 THE CHAIRPERSON: Did you have anything to add?
4729 MR. DHILLON: Yes. We are going to produce ---
4730 COMMISSIONER PENTEFOUNTAS: I knew you had something to add.
4731 MR. DHILLON: It is the volume that will count. When we are producing so much in an efficient studio, the projections that we have placed in our business plan are very much achievable.
4732 MR. KEEBLE: I think that volume is very much the point here. If you are producing two hours a week, it is going to cost you a lot more per hour than if you are producing the kind of volume that CPN is looking at.
4733 Secondly, the studio will be built with that in mind. It will be a purpose-built studio, designed precisely to achieve a high volume, with a reasonably small number of employees.
4734 And given that several people have commented on the kind of equipment that is currently available -- you don't need three camera people in a studio anymore. You don't need to send a make-up person and an audio person.
4735 I mean, this is all very old-school thinking.
4736 Some broadcasters are still living with a legacy plan that they must use that way, but this is being built, from this point on, from the point of licensing, and can use all of the most efficient technologies and produce in high volume.
4737 That is what makes this kind of programming possible.
4738 MR. DHILLON: And I would like to add that in the programming we have proposed there is a program that is called "You TV", where, once we are launched, we will tell the viewer to have a webcam -- everybody has one at home -- and they can send their messages. On a daily basis we will have one person downloading them and then putting them on different programs.
4739 The current networks, even the Category A licence networks -- nobody else is doing that in the Punjabi community, or even, in fact, in the South Asian broadcasting system.
4740 COMMISSIONER PENTEFOUNTAS: Like a Punjabi YouTube network that you are working on.
4741 COMMISSIONER PENTEFOUNTAS: Finally, your own study shows that members of the community are willing to pay for this service. You didn't think about asking for a rate?
4742 MR. DHILLON: A rate under 9(1)(h), like a per-subscriber fee?
4743 COMMISSIONER PENTEFOUNTAS: Yes.
4744 MR. DHILLON: No, we did not ask for a rate, and the reason is because the market -- the business is so much that it can sustain itself from the market.
4745 Even in the beginning we didn't think it was a good idea to ask for a rate.
4746 The other thing is, we have a community of 500,000, why should we put a burden on 32 million Canadians if we ask for even a few cents?
4747 That is not -- I don't believe that is the right thing to do, and if the community can achieve its goals from its own resources, there is no point in asking for a fee.
4748 COMMISSIONER PENTEFOUNTAS: Thank you very much.
4749 THE CHAIRPERSON: Thank you very much. Those are our questions.
4750 As I said to others with respect to the number of questions, you should not draw any conclusions one way or the other. We are really here to complete the record in this oral phase of the hearing.
4751 Thank you very much.
4752 I understand that there is a large cast of characters for the next application, so for logistical reasons let's take a 15-minute break, and we will be back around 10:30 a.m. for the next application.
--- Upon recessing at 1011
--- Upon resuming at 1029
4753 THE CHAIRPERSON: Welcome to our hearing. If you wish, you can introduce your considerable panel, although I see that you are all identified and that might help. I leave that in your hands, but once you have made that decision, please go ahead and make your presentation, and you will have 15 minutes to do so.
4754 MR. BOLEN: Good morning, Mr. Chairman and Members of the Commission. My name is Norm Bolen, and if the licence is granted, I will be the president and CEO of Starlight: The Canadian Movie Channel.
4755 Before we begin our presentation, I would like to introduce our panel. We have quite a few to introduce because our group includes many of Canada's most distinguished filmmakers. You don't often see them in the same place at the same time, and today they have come together in a common cause.
4756 In the first row, on my far left, is Paul Gross. Paul Gross is English Canada's most popular homegrown star. He co-produced and starred in the hit television series "Due South". He wrote, directed and starred in the comedy "Men with Brooms" and the historical drama "Passchendaele", both of which were major Canadian box office hits.
4757 Next to Paul is Deepa Mehta. She is an Academy Award-nominated writer and director of "Water", the final chapter of her "Fire", "Earth" and "Water" trilogy. Her most recent film, "Midnight's Children" --
4758 THE CHAIRPERSON: Mr. Bolen, if you are going to give a bio of everyone, that cuts into your time. Just names, please.
4759 MR. BOLEN: Thank you, Mr. Chairman, we will do that.
4760 THE CHAIRPERSON: We have to be fair to everyone.
4761 MR. BOLEN: Would you like me to just give names?
4762 THE CHAIRPERSON: Yes. It's your choice, but it cuts into your time.
4763 MR. BOLEN: Deepa Mehta is next to Paul. To Deepa's left is Denys Arcand. Next to Denys is Denise Robert.
4764 On my immediate left is Robert Lantos. On my right is Grant Buchanan, our legal counsel from McCarthy Tétrault.
4765 Next to Grant is David Cronenberg. Next to David is Patricia Rozema.
4766 Finally, in the front row, we have Lyse Lafontaine.
4767 Now I will introduce our second row.
4768 At the end, on my far left, is Rick Anderson. Next to him is Paul Gratton. Next to Paul is David Kassie. Next to David is Penny McDonald. Next to Penny is Victor Loewy. Next to Victor is Guy Maddin.
4769 And then we have Mark Musselman and Hussain Amarshi. The final person in the second row is Ian Capstick.
4770 That is our panel.
4771 Mr. Chairman and Commissioners, we believe that Starlight: The Canadian Movie Channel fits perfectly with the objectives of the Commission's 9(1)(h) framework.
4772 Robert Lantos will begin.
4773 MR. LANTOS: Good morning, Mr. Chairman and Commissioners. Some twenty years ago I presented an application to the CRTC for a new specialty service to be called "Showcase". I proposed that the new network broadcast 100 percent Canadian drama in the heart of prime time.
4774 In any other country which has a production industry, the concept of reserving prime time for domestic drama is taken for granted. Yet, in Canada there was widespread resistance to our application from within the BDU industry. They said two things: There isn't enough Canadian drama to program such a service, and no one will watch it.
4775 They were wrong. The Commission granted the licence, and "Showcase" turned out to be among the most popular television services in Canada. Canadian theatrical films were a key component of its schedule.
4776 Under its current owners, "Showcase" has essentially eliminated Canadian feature films from its programming, as have other broadcast services.
4777 In fact, Canadian theatrical films are the virtual orphans of our broadcasting system. Even the premium pay services, including the ones which have the word "Movie" in their name, combined, devote less than 6 percent of their schedules to Canadian feature films.
4778 And because of the high cost to consumers, 75 percent or so of Canadians do not subscribe to pay television in the first place.
4779 We have come to you today to redress this imbalance, but we are not here to propose a service that is simply 100 percent Canadian in the heart of prime. We are here to propose a service that is 100 percent Canadian 100 percent of the time.
4780 The service will be entirely devoted to Canadian movies, with feature films presented without commercial interruption. These movies are part of our national legacy. Most Canadians have been denied any affordable access to them.
4781 MR. KASSIE: One of the criticisms that we sometimes hear is that Canadian films are inferior and that Canadians don't want to watch Canadian films. This is the big lie.
4782 The reality is that when Canadians actually have the chance to see Canadian films, they do like them a great deal.
4783 When people go to theatres, they watch movies they hear about, with stars they know about, and these are primarily from Hollywood. About 95 percent of marketing expenditures are for Hollywood films.
4784 Because of limitations in their marketing budgets, Canadian movies in English Canada generally are distributed with relatively little advertising and limited theatrical exhibition. Accordingly, there is little knowledge or awareness of them.
4785 But none of this speaks to quality or audience appreciation or enjoyment. It speaks to the size of the budget.
4786 While there is no way that Canada is going to outspend Hollywood on promotion, we can certainly provide access on an affordable basis, and that is the essence of the rationale for Starlight.
4787 Canadians want to see Canadian movies on television, and the licensing of Starlight would be a great equalizer.
4788 MS ROZEMA: In the colour brochure that you have in front of you, on page 8, the first thing you will notice is that the entire schedule, 24/7, is Canadian.
4789 In the first year we will run more than 700 films. Over time, that number will grow, as our library expands.
4790 The Starlight schedule will be carefully organized and curated, which is important. On Wednesday evening you may see films from Quebec subtitled in English.
4791 On Tuesday evening you may see feature documentaries.
4792 On Friday you may see films devoted to a particular genre or a particular filmmaker. And on each evening, you will have a half-hour program introducing the films and the filmmakers to Canadian viewers.
4793 This will be a one-of-a-kind channel, celebrating Canadian filmmaking, and bringing these films to Canadians who have never seen them and may not even be aware of their existence.
4794 MR. ARCAND: Mr. President, I am honoured to be part of the group backing Starlight.
4795 Feature films form an important part of Canada's cultural legacy and nowhere more so than in Quebec, where they are widely released in theatres to popular acclaim. Recent examples include, "Monsieur Lazhar" , "Incendies", "Bon Cop, Bad Cop", "De père en flic", "Starbuck", "La Grande Séduction", and "Maurice Richard".
4796 But Quebec films are rarely shown in theatres in English Canada and these films are almost never seen on English television.
4797 That such an important part of our cultural legacy is effectively unknown in English Canada to me is a tragedy.
4798 MS LAFONTAINE: We have heard it said that French and English Canada exist as "Two Solitudes". Sadly, this is also true of our film industry. It is time we addressed this problem. Starlight is an inspired solution.
4799 One of the reasons why Quebec films have wide support in their home province is the star system. This is something that is missing in English Canada. You can only develop stars through wide exposure to mass audiences. So the Starlight service will represent an important step in supporting a star system in the rest of Canada.
4800 MR. CRONENBERG: I would like to talk a bit about television and its relationship to film.
4801 I'm a filmmaker. I work on feature films that call for your undivided attention without commercial interruption. These are expensive, thoughtful, creative works and they are designed to be shown in theatres on a big screen.
4802 But I would be the first to acknowledge that films also need television to survive. Box office revenue rarely covers the cost of films. And as shown in a recent Canadian Heritage study, most people watch films on television, not in theatres. In Europe, this is widely recognized. Broadcasters in Europe are required by their regulators to invest in and broadcast domestic films in order to provide the wide audience access they deserve.
4803 But this is not true in Canada. For their own reasons, Canadian broadcasters have chosen to focus their drama spending on episodic series, often to the exclusion of feature films. So we have a real problem.
4804 Of all fiction programming, Canadian feature films have the highest cost, are the most difficult to finance and are the riskiest to produce. But they also represent the high watermark in Canadian creative and cultural expression. There is no place, however, where Canadians can get consistent and affordable access to our feature films on television. That is why Starlight is so important.
4805 MR. ANDERSON: Mr. Chairman, I am here on behalf of Anderson Insight who designed and supervised the consumer research for Starlight.
4806 Working with Vision Critical, we conducted an online survey of a representative sample of 1,007 English-speaking Canadians who subscribe to digital television.
4807 More than 90 percent of respondents said they would support the CRTC licensing a service like Starlight. When informed that the service would be on digital basic cable at a retail cost of 3 cents a day, fully 70 percent of the respondents continued to support the licensing of the channel.
4808 Something I found striking in the survey is that many respondents noted the opportunities Starlight would provide for young Canadian filmmakers. Yes, respondents loved the idea of a 24-hour Canadian film channel, particularly without commercial interruption. But they also strongly agreed the channel would help young Canadians and create economic benefits for Canada.
4809 MR. AMARSHI: Mr. Chairman, some have argued that video on demand or the Internet is the way to go for film distribution. But as a film distributor with experience in this area let me tell you that VOD is not the answer. Video on demand only works for films you've heard about. If you don't know what you're looking for you're never going to find it.
4810 And VOD costs $4.00 or more a title.
4811 In terms of affordability, the wholesale fee for a year's subscription to Starlight, with 700 different films, would be less than the price of two VOD movies.
4812 And in terms of access, when surveyed, over 75 percent of Canadians tell us that they are unlikely to use VOD. So television continues to be far and away the key platform.
4813 MS ROBERT: More than providing exposure to Canadian films and building an audience, Starlight would help cultivate and nurture Canadian talent.
4814 A central feature of the new channel will be the Starlight Feature Film Fund. This Fund will provide full financing for eight to 12 Canadian feature films a year. This is an historic first for Canada and it comes at a time where the financing of films is becoming more and more difficult.
4815 It will give filmmakers the certainty and freedom to focus on making their films rather than spending their energy cobbling together scarce financing.
4816 Starlight will also license some films that are already partially financed and will negotiate with the CMPA on appropriate Terms of Trade for those films.
4817 ME MEHTA: To me, one of the most exciting aspects of the fund is that it will seek out newly emerging filmmakers.
4818 It is important to note that we have all agreed that none of us, the shareholders, will be eligible to apply to Starlight for financing. But we will sit on an advisory panel to ensure that the fund benefits from our collective experience. I will be honoured to serve on that panel.
4819 MR. GROSS: Three years ago, the Commission set forth very specific criteria to determine whether a service could qualify for a 9(1)(h) order. Those criteria are tough and they're demanding. The Commission set a very high bar. We firmly believe that Starlight completely meets the criteria.
4820 By having a schedule that is 100 percent Canadian and by devoting at least 70 percent of its revenue to Canadian programming, Starlight will make an extraordinary contribution to Canadian artistic and cultural expression.
4821 Canadians want more access to Canadian films. Starlight is the ideal vehicle to provide that access.
4822 Most Canadians are simply unaware of the depth and quality of Canadian feature films. That will no longer be the case if the Commission provides Starlight with broad national distribution.
4823 Starlight represents an extraordinary opportunity for Canada and for Canadians. And it's all about Canadian consumers who finally can get the films they want at a price they can afford.
4824 Now, before we conclude, we have a short video to show you about Starlight.
--- Video presentation
4825 MR. BOLEN: (Off microphone)
4826 THE CHAIRPERSON: Your mike, please. Mr. Bolen, you're used to this. You should be able to --
4827 MR. BOLEN: You never get used to it completely.
4828 MR. BOLEN: We are grateful for this opportunity to present our application to you and we welcome your questions.
4829 Thank you.
4830 THE CHAIRPERSON: All right. Thank you very much for that presentation.
4831 I didn't want to seem harsh but we are an administrative tribunal and we have to be fair to everyone.
4832 MR. BOLEN: We understand.
4833 THE CHAIRPERSON: Okay.
4834 And Commissioner Simpson will start off the questions.
4835 COMMISSIONER SIMPSON: Good morning. This is a big crowd.
4836 I would like to just preface this series of questions by saying that in the course of the questions we are about to ask, I'd like to try and establish that we're not questioning the contributions -- the cultural or quality of craft of the film industry. We accept that as a given.
4837 What we're trying to understand is what the impact will be as you move a genre of the entertainment business into another genre with the plan you have.
4838 So you know, I'm going to try and keep my questions to the economic issues, to the genre issues, to relegate it to the issue of television, not equality or the importance of film. If you feel that I have wandered off of that and you feel it's necessary to defend the industry, fill your boots. But I really don't think it's something we have to get into.
4839 Is that fair? Okay, great.
4840 My first question is what is this initiative? What problem is it trying to solve?
4841 MR. BOLEN: Well, I would just start by saying the real problem it is trying to solve is a lack of presence of feature film in the Canadian broadcasting system. It's a form of cultural expression which it counts as programming the national interest but it's vastly underrepresented in the broadcasting system.
4842 We have presented a lot of stats about that, but I'd like Mr. Lantos to talk further about that.
4843 COMMISSIONER SIMPSON: M'hmm.
4844 MR. LANTOS: Theatrical films, as I said in my earlier presentation, have become the orphans of the Canadian broadcasting system. There is no parallel for that anywhere in the world where films are made. For reasons of their own, Canadian -- the BDUs, the broadcasters have chosen to program their services without feature films.
4845 The only places where feature films actually appear are the pay television networks which 75 percent of Canadians do not subscribe to and even within the pay television networks the tendency is much more towards television series and made-for-TV movies than theatrical feature films.
4846 Yet, feature films are the -- they are the emissaries of a nation. They are the emissaries to our own population and to the rest of the world.
4847 When Denys Arcand's Barbarian Invasion wins the Academy Award, when Atom Egoyan's The Sweet Hereafter wins the Grand Prix in Cannes that is something that all Canadians take pride in and it becomes a moment. It becomes like -- it's akin to one of our athletes winning the gold medal of the Olympic Games. It is the highest achievement of mass culture and it is the -- one of the most popular art forms, if not the most popular art forms in the world.
4848 The Canadian broadcasting system simply makes no room for it. The private sector and public sector alike, less so today than many years ago although feature films were never a consistent part of the diet of any Canadian broadcaster as Citytv which used to be, for example, a friend of Canadian feature films and no longer is under its new ownership. It doesn't have any.
4849 You can go to the main networks, CTV, Global. You will never see a Canadian film, ever.
4850 You can go to the specialties and you see fewer and fewer Canadian films. As I said in my presentation, Showtime when -- I'm sorry, Showcase, wrong country -- when I was the Chairman of Alliance which owned Showcase and when we first launched the network it had a steady menu of Canadian films. It no longer does. You can go anywhere else on the dial. On all the specialties you will find the same thing.
4851 So we are not here to complain. We are not here to lobby. The lobbying has been done by all the Canadian organizations that represent feature films for the last decade to 10, 20 years with very little effect.
4852 What we are here to say is this. Broadcasters have made it crystal clear and the BDUs have made it crystal clear that Canadian feature films are not desirable from their point of view. That is their business. They are extremely desirable from our point of view.
4853 In fact, that is the only thing we do. That is the only thing we wish to do, is to devote a network to that format which is currently absent and which consumers have virtually no access to unless you're willing to go on a determined search and pay a lot of money for them, Canadian films 24/7.
4854 COMMISSIONER SIMPSON: I'll direct my question to Mr. Bolen and you can stickhandle as to who should reply.
4855 MR. BOLEN: Thank you, Commissioner.
4856 COMMISSIONER SIMPSON: In your orals this morning you said that the essence of the service, and you just confirmed it, is to provide access to Canadian content and Canadian films on an affordable basis.
4857 I go back to the written submission which said that if you were to have a lower than proposed wholesale rate it would compromise the services' objective of investing 70 percent of revenues in feature films, Canadian feature films. So if you were to put a ranking on access or exhibition versus funding, which would be first in terms of your company's objective?
4858 MR. BOLEN: Well, that's a tough question to answer because our application requires access and funding because any channel that is broadcast to a wide audience requires its own original programming.
4859 And the funding we require is funding to have our own original programming so that every few weeks, every month we'll have new Canadian feature films on our channel that are exclusive to us, just like any other channel. That's a very, very important part of the business plan for this channel.
4860 COMMISSIONER SIMPSON: But when we asked you to run some numbers and look at different scenarios, 45 cents, 35, 25 when you reached a threshold of 25, as an example, you essentially responded that it would defeat the purpose of the service because there wouldn't be the money to fund new productions.
4861 But if you were -- if the intention of the service was, at least on an equal footing, 50 percent of its objective is access, why wouldn't a 25 or a 20 cent subscription fee allow you to at least exhibit if not create new content?
4862 MR. BOLEN: Well, I will just say we did model those various models, Commissioner Simpson. At 25 cents the channel really isn't viable at all.
4863 But there were other rates where there was a possibility of the channel still operating. But every penny that was taken from the wholesale fee led to a reduction in Canadian content and the kind of original first-run programming the 9(1)(h) category requires.
4864 So you know, we are mindful of the consumer and we looked at different points of financing. We looked at higher points of financing as well.
4865 We tried to find the sweet spot where we can deliver the kind of content that audiences expect and need in order to be attracted to a channel while, at the same time, keeping the price reasonable to consumers, particularly relative to other sources of Canadian feature film which are very expensive in the system.
4866 I don't know if anyone would like to add to that.
4867 COMMISSIONER SIMPSON: This is always the not fun part. You know, in funding feature films you want to get past that and get to shooting. I understand, but the numbers are where we live.
4868 Mr. Lantos, if I may, I'll just tack onto Mr. Bolen's testimony.
4869 Where I'm going with this is, in looking at the numbers that you provided, if you were to receive 9(1)(h) carriage complete with a subscription fee of 25 cents, you'd still have an average PBIT over seven years of 14, almost 15 percent. So it's not that it isn't viable.
4870 MR. LANTOS: If I may, our mission with Starlight is twofold. It's to, on the one hand, to bring the entire legacy of English and French-
4871 Canadian films to every Canadian home, to create easy and inexpensive access for all Canadians to their own films and their own stories. That's one, one part of the mission.
4872 The other part of the mission is to create original programming so that we are able to bring fresh films with the appeal of them not being available anywhere else any other way. Films that will be part of our -- a very significant part of Starlight's budget has to do with marketing of the movies, films that will be heavily marked, unlike many Canadian films, so that by the time they get on Starlight they will have been heard of.
4873 Now, we could run a service with a lower subscription rate but we would not be able to accomplish both of these objectives.
4874 Frankly, when we started discussing Starlight quite some time ago, we ran models of all kinds of numbers and a lot of them were considerably higher than 45 cents. We were very pleased with the results because, as we said, wow, the amount of money this will generate for new Canadian films at, say, a dollar a month would essentially triple the number of Canadian films being made today. It will be a godsend to the Canadian feature film industry.
4875 And then we said, "But consumers are probably not going to be happy paying for it. So let's find a sweet spot. Let's find a balance. Let's find a price point where -- which is not prohibitive which is in the context, as I'll let Denise address it -- was 45 cents by me today but which is certainly within the reach of everybody, within the reach of the high school students who, as you'll probably -- you'll hear from Reel Canada in a few days -- for the most part have never been exposed to a Canadian film. But when it's brought to them, to their classroom, they overwhelmingly want more and they -- it's within their reach as well, whereas as, say, a VOD at four or five dollars a film is not.
4876 So we looked for a sweet spot and that's where we arrived at 45 cents which allows us to do both, accomplish both our objectives including a steady stream of original feature films heavily marketed.
4878 MS ROBERT: Yes.
4879 One of the things that is very important in Europe, as you probably know, the investment of broadcasters go beyond 50 percent. A few years ago the Canadian broadcasters would go up to 8 percent and in the past couple of years have gone down below the 2 percent mark.
4880 This is a great first for the cultural industry to have a broadcaster committing so much money into the development and nurturing of young filmmakers.
4881 I'm the mother of a 17-year old daughter and her whole generation is overexposed to American products, American films, American programming. And I'm very concerned for her future and the future generation of viewers.
4882 I think that the fact that this feature film fund will concentrate on young emerging filmmakers who will tell their stories, our Canadian stories and make Canadian films that will speak to this new generation of viewers, will increase their appreciation of what we do in Canada and our Canadian films and on a long term basis.
4883 The consumers, they are tomorrow's consumers, and they'll certainly be far more influenced in buying Canadian because they will appreciate it. They will love it because it will be part of their daily living of being able to open the television and see 24/7 a wonderful Canadian film.
4884 Do you want to add?
4885 MR. BUCHANAN: I would like to add a point about the number that you advanced, Commissioner.
4886 What did you suggest the --
4887 COMMISSIONER SIMPSON: I will tell you what I was looking at, Mr. Buchanan, I was looking at is a projection at $.25 under an approval before the investment fund. In other words, I was looking at the PBIT margin before spend in investment and I was looking at 25 percent PBIT in the first year, 10 percent in year six. That's what I was looking at.
4888 In other words -- this is provided by staff so perhaps we can do an undertaking to clarify that afterwards, because I have been wrong before about numbers.
4889 MR. BUCHANAN: Well, no. No, I wasn't suggesting that. I was trying to find --
4890 COMMISSIONER SIMPSON: Oh, my wife suggests that all the time.
4891 MR. BUCHANAN: I'm trying to find that number and I can't, but we do --
4892 COMMISSIONER SIMPSON: My interpretation of this table is that at a 25 percent subscription fee if there was to be no investment in new product you would have a positive PBIT.
4893 So we will get staff to advise me on that.
4894 MR. BUCHANAN: I can comment, because you did ask us in deficiencies to run a model --
4895 COMMISSIONER SIMPSON: Yes.
4896 MR. BUCHANAN: -- at $.25 and that is on the record and that is what we have available to us --
4897 COMMISSIONER SIMPSON: Okay.
4898 MR. BUCHANAN: But PBIT is an interesting construct because it avoids the fact that there's bank loans and, you know, $5 million in bank loans. Like there are an awful lot of things that you have to ignore --
4899 COMMISSIONER SIMPSON: Right.
4900 MR. BUCHANAN: -- to get to your PBIT number that wouldn't be realistic, but I think the summary from the $.25 rate was the fund effectively gets dropped down to one film a year. I think that's what you heard people saying.
4901 COMMISSIONER SIMPSON: That could well be.
4902 Why I was going along this line of questioning, ladies and gentlemen, is because I'm trying to again devine a less-than-perfect world into if we can't have one which of the two is more needed, funding or exhibition.
4903 You know, when I look at the numbers that are provided to me I see -- and this is from CMPA, your old alma mater -- Mr. Bolen, that about $381 million was spent in theatrical spends. I don't know if that is totally Canadian content or that was co-productions or runaways, but I see the disparity in a theatrical spend versus the overall in terms of what goes to television and the like. But we will get into that later.
4904 I'm trying to just devine whether we have a funding issue or we have an exhibition issue.
4905 MR. BOLEN: I would like to just speak briefly as a former broadcaster.
4906 Any broadcaster operating channel or a group of channels is mindful of the balance that's needed between exhibition of library programming and exhibition of original new programming.
4907 We were very mindful of the 9(1)(h) requirements when we put this application together. One of the elements that's required under 9(1)(h) in order to get mandatory carriage is a significant contribution to original first-run programming. We did try to balance the amount of original first-run programming to make the cost affordable to consumers, but at the same time delivering something that's going to engage them.
4908 You need as a programmer to have your own slate of ongoing content. If we just became a rerun channel, yes, we would still be distributing the library of Canadian films historically, but we would not be creating new films that are our very own and that are exclusive to our service and are important for driving audience and driving interest in the channel.
4909 COMMISSIONER SIMPSON: Okay.
4910 MR. LANTOS: If I may add to this?
4911 COMMISSIONER SIMPSON: Please.
4912 MR. LANTOS: To answer your question directly, if the license fee is considerably lower than $.45, we could certainly fulfil the mission of bringing all Canadian films to all Canadians, films that have already been made. The cost of acquiring on a non-exclusive basis Canadian films from various libraries, some of them two years old and some of them 20 years old, we could accomplish that we could have, as we have promised in our application, some 700 films per year, which would be refreshed each year. This we could do.
4913 But original making a film, even on the low-budget -- on the lower budget side of things as we sort of have projected between $2 and $4 million per movie in addition to some films that are financed by others which we would acquire the first television license to -- is a whole other -- economically is a whole other world.
4914 So we have reserved some $6-$6.5 million a year for the licensing of films. And yes, we could technical run a channel on that, but we would have very scarce original programming.
4915 And in order to get on our feet and be someday -- if you choose to license us on a mandatory basis, when that is up, to no longer require mandatory license, in order to be competitive in the marketplace and despite the fact that we will not be BDU-owned, which is certainly a major disadvantage in our country, but in order to be competitive in the marketplace we will need original programming and we will over the course of seven years accumulate a considerable amount of programming will be exclusive to Starlight and we will be in a position to offer a great deal more of it to subscribers than if we don't have any.
4916 MS ROZEMA: Mr. Commissioner, if I may interject, I would be very sad to see the funding aspect of this proposal erased or really reduced, because I fear there is a serious talent drain happening in our country right now. We are losing a lot of extremely talented young possible filmmakers to America and to other professions because it just isn't easy. It was far easier when I started out. I took it into my head to become a filmmaker, it took me two months with the Ontario Film Development Corporation to come up with some cash and make a movie. It was relevant, it was a reaction to the moment, it was easy.
4917 This isn't about me, it isn't about us, we don't benefit from this, but I go to schools and I don't know what to tell kids, I don't know what to -- I see many fabulous stories, it's still an exciting, you know, sexy field for young people, but they don't have a place to go. This would sort of massively increase the Canadian -- fresh, contemporary Canadian youthful content that could be out in front of viewers.
4918 COMMISSIONER SIMPSON: Mr. Bolen, going back to the statistics from 2010-2011 at CMPA, could you help me understand out of that $381 million -- I apologize if I'm throwing a number at you, but I think you were there and may be familiar with this number.
4919 But in the $381 million in theatrical film action in Canada in that period of 2010-'11, what percentage of that money was totally domestic 100 percent Canadian? All of it? Some of it? What percentage?
4920 Do you know off the top of your head?
4921 MR. BOLEN: I don't have an analysis of that number for you right now.
4922 COMMISSIONER SIMPSON: Okay.
4923 MR. BOLEN: I could try to do something for you.
4924 Does anyone have a comment on that?
4925 MR. LANTOS: Well, I don`t have exact numbers but we can approximate.
4926 Telefilm Canada's annual budget is under $100 million, a considerable portion of which is spent on various programs that do not have to do with feature film production. Feature film production in both languages combined comes to $60 million. That's their share of investment.
4927 On the average Telefilm Canada tends to be a financier. According to their own statistics, they tend to finance about one-third or 32 percent or so of the cost of most condemned films. So if you multiply their $60 million by three, you are about $180 million of genuine Canadian production, which does not include service productions or productions that are simply made in Canada, actual Canadian films.
4928 So probably -- and I'm basing this on Telefilm's numbers, I think the number is closer to $200 million a year, French and English combined.
4929 COMMISSIONER SIMPSON: Okay. Thank you for that, because I was poring over all the stats and when I got into British Film Institute or the Australia statistics, they broke out what they called inward investment from domestic investment and it made it a lot easier.
4930 So that helps a tremendous amount. Thank you.
4931 Just not to put a fine point on the issue of $.45, but you know, a healthy skeptic, the BDU's, are not going to pass this through without some mark-up and in a worst-case scenario $.45 could potentially, from the statistics I have seen, could go as high as $.90 to the consumer and it would put somewhere between 2 and 2.5 percent on top of the basic bill.
4932 Have you thought about that and do you have any opinions as to what that does to the consumer?
4933 MR. BOLEN: Well, for the research that we did where consumers more than 70 percent showed that they would support this channel at $.03 a day, which is $.90 a month, we did mark up the wholesale feet by 100 percent because that is the way the market has been working. We didn't want to be seen as being unrealistic.
4934 At the same time, I think it's fair to say that the BDU's could offer this service for a much lower retail rate if they chose to do so. Their marginal costs, including profit, on delivering this channel to consumers as much lower than $.45. Absolutely, we know that.
4935 We also know that they have other means to defer any retail mark-up. For instance, the LPIF is being phased out, that money could be applied towards new services on basic without any increase in wholesale fees to the consumer.
4936 I know the Commission doesn't regulate those fees, but I think it could send a message that in the case of these 9(1)(h) services that you do choose to license, if you choose to license any, that it's a special situation, you are dealing with extraordinary Canadian contribution and perhaps the BDU's would participate in that contribution.
4937 COMMISSIONER SIMPSON: Last question on this particular line.
4938 In your research that you just referred to, the question methodology was focused toward what and is there a want for Canadian content and is there a desire and ability to pay up to $.03 for that?
4939 But 9(1)(h) is tricky because a lot of the determination as to what qualifies for 9(1)(h) through the Act is just more determinative upon need.
4940 Would you like to comment on whether your research, you know, fully dealt with the need issue?
4941 MR. BOLEN: Well, I would like to have Paul say something on that. We have been discussing that within our group and it's something that we are very mindful of. So I would like Paul to add a comment.
4942 COMMISSIONER SIMPSON: Thanks.
4943 MR. GROSS: Mr. Commissioner, it is something we have been discussing quite a bit and how we go about defining the word "need". I think it's a little -- it's something that's very difficult to quantify, particularly if you go and ask people "Do you need to see such and such"? They may not know that until you actually offer it to them.
4944 To a great extent I think we are really talking about access where the need would present itself or prove itself or manifest itself. And I think all of us have anecdotal evidence that that need exists quite profoundly inside and across Canada.
4945 Our colleagues in this venture from Quebec have proven that over and over again in the Quebec model of how they took their films out -- I mean if you look back 20 years ago there wasn't an enormous amount of demonstrated need to see Quebec film, but they took the films out into the regions and made it go into all of the smaller communities and that need expressed itself to the point that today they have built a really formidable Star system.
4946 In my own experience of working with Robert on "Men With Brooms", we took -- at least tried to do a modified version of the Quebec experiment and applied across the country and took "Men With Brooms" into very small communities, which ordinarily wouldn't necessarily be on the exhibition trail of distribution, and the need expressed in smaller communities like Brooks, like Blind River, like Corner Brook was extraordinary and actually eye-opening I think to most of the people involved in the distribution of the film.
4947 On a more personal note, I can say that need expresses itself in a cultural importance apart from just the numerical importance in odd ways. I'm going to do be doing a film that's set in Afghanistan and I was in Afghanistan on a couple of occasions and every soldier I ran into had seen Passchendaele. Passchendaele had played over there in a Quonset hut across from Tim Horton's. And they would stop me and say, "Thank you for the film", or "I enjoyed it", or "I hated it" or what -- but every soldier had seen it.
4948 General Andrew Leslie is now retired, but at the time was the Commander of the Army, said that the film was extremely important to the troops because it gave everybody -- it gave them -- not only could they see, but they could feel the long line of their own history, that their history working in ISAF dates back to the formation of the Canadian Expeditionary Force in 1914.
4949 I think this kind of need has so many different levels. I think the numerical need proves itself over and over again when we have access.
4950 My feeling, as always -- I'm a populist and I have always felt that we need to get our -- the material we make into every household in Canada. This cannot be done anywhere in the world simply through theatrical distribution, you have to do it through television platforms.
4951 And in large part I think what we are saying is we don't have that -- there is no avenue inside the current broadcasting landscape. It's clear that most of the BDUs do not want to be involved in this for reasons that make a great deal of sense to them, and to some extent to me personally, I get their business model, what we are saying, it's, "Okay, we understand you don't want to do it, let us do it", and the need will prove itself.
4952 MR. BOLEN: Mr. Commissioner, if you --
4953 MR. ARCAND: Again, just on the same line, I made a number of films over the years, these films are shown every year in major European countries -- I know because I receive royalties for which I am very grateful -- but still why would Englishmen, French, Italians, Spaniards have this need for my films, whereas they are not shown in Canada. That's a bit strange. Our assumption is that there is this need, it just to be brought to the people.
4954 MR. BOLEN: Commissioner Simpson, if you would indulge me, and Mr. Chairman, if you would indulge us, I think this is a central point in your determination of whether a service is going to qualify for 9(1)(h) and I think we would like to address it in a couple of more ways.
4955 I would like to call on Rick Anderson in a minute, but first this is something I was actually talking to Deepa Mehta about last night and I was profoundly touched by what she had to say and I think her comments on need would be helpful to the Commission in terms of making a decision about the need for this service.
4956 MS MEHTA: As an immigrant to Canada, and I have been here for more than 30 years now, but I have always said that Indian inspires my stories, Canada gives me the freedom to express them. There is something uniquely wonderful about Canada that it gives that license to a filmmaker, and a filmmaker of colour.
4957 The first film that I did was called "Sam and Me" and I remember going to a funding body and they said, "The script is great, but it's about coloured people and you are a woman." And I didn't get the money.
4958 But the point is, today it's different. If a younger filmmaker now of colour or -- because the point is in 30 years, you know, every fourth Canadian is going to be non-Caucasian and how are they going to -- what are they going to find? How are they going to see themselves reflected in our films?
4959 We really need that. We need -- I mean, Canada is about inclusion, it's about that freedom and we have to have films that reflect that. I mean I know immigrants will not go to a movie hall -- because Hussain and myself have worked on this -- to see a film. When I talk to them, whether it's in schools or whether it's in the Peel Health Centre or different areas and I say, "Why won't you go"? they said, "No, it will go and buy it on DVD", because they will watch it at home.
4960 What Starlight will do is actually make that piracy impossible, because it will be there.
4961 MR. BOLEN: I would just like Rick to make a final comment on the research and then we could take another question. Thank you.
4962 MR. ANDERSON: Thank you.
4963 We asked the question ourselves three different ways in our research.
4964 First we provided respondents with a written description of the service we are proposing and asked them if they would like to see this launched. Eighty-four percent said yes.
4965 We then provided them with a video, not dissimilar to the one that you have seen today, but an earlier version, and 93 percent said that they would support the licensing of the service.
4966 And then we asked them the tougher question: If it cost you $.03 a day using the marked up retail figure that Mr. Bolen was referring to, 70 percent still said they would support the service, which of course is a pretty high number and, in our opinion, meets the test of widespread acceptability of the service as enunciated in 9(1)(h).
4967 I would also draw your attention to some data that was published by Canadian Heritage last fall in which it was reported that 9 in 10 -- this was not done by ourselves -- respondents agree it is important that Canadians have access to Canadian films -- 90 percent; and 73 percent of respondents said that Canadian broadcasters should show more Canadian films on television.
4968 Lastly I would make two points. First of all, that people are not shy when given the opportunity in research to say that they don't want to support something or that they don't want to buy something. We see that in lots of consumer research, that people shy away and say, no, great idea, but no thanks, I don't want to pay for it."
4969 That's not what we see here. We see 70 percent saying even at $.03 cents a day or at $.03 a day I would support the licensing of this service.
4970 Lastly we see lots of evidence beyond consumer research actual behaviour where consumers are spending more and more of their share of wallet on the acquisition of content of various sorts. It's never been higher.
4971 So that people are, you know, from their own perspective judging that this is something they need. Content, whether it's broadcast content, cable content, DVD purchases and rentals, theatrical exhibition or other kinds of content, people are spending a great deal of their consumer disposable income on this because they judge that need it.
4972 Thank you.
4973 COMMISSIONER SIMPSON: Great. Thank you.
4974 Let's get over to exhibition for a while. I have sort of beat the numbers thing to death, although I probably will circle back on a few items later.
4975 I can't help but wonder, you must have contemplated that opening up your own -- not orphanage but adoption agency let's call it -- to have Canadian films adopted by more Canadians, you are going to in essence be competing with your own product on other channels.
4976 Canadian feature films, I would have to believe, enjoy some exhibition on other channels, including the fact that all releases have to be available on VOD. So is there some kind of a regression analysis that you have done? Are you robbing Peter to pay Paul by giving broadcasters the option to exhibit fewer Canadian feature films because you are providing a necessary service?
4977 MR. BOLEN: Robert will speak to that, if you don't mind, Commissioner Simpson.
4978 MR. LANTOS: Commissioner Simpson, the reason why we are all here today, this was not an idea borne overnight. This was many years in the making and when the Commission called for 9(1)(h) applications, then that gave us an opportunity to gel thoughts that we have had for a long time. Those thoughts come from the extraordinarily frustrating and really unparalleled situation that -- it's not so much that we face as filmmakers because those who are here on this panel today are all successful at their craft and so it's really the -- what I find particularly difficult to swallow, and Denise Robert mentioned it earlier, is that Canadians are deprived of easy, inexpensive, thematically curated access to our product. It's not because it's out product, but because it's -- and of the 3,500 feature films that have been made in Canada over the last 50 years, we only made a very few of them here at this table. It's about an entire national legacy.
4979 Now, you mentioned that the films -- that we may be robbing Peter to feed Paul, but first of all, Starlight is going to acquire older films strictly on a non-exclusive basis so anybody else who wants to license them and play them, the more the merrier.
4980 What we are going to offer is a curated service where each evening films will be introduced by their filmmakers, including 30 and 40-year-old films. Films will be brought up to date, it will be thematically presented, and with a few exceptions, to answer your question, Canadian films are in fact not available in Canadian broadcasting.
4981 You know, if you travel around the world and you are in a place like France or Italy or Germany or other place and you turn on the television set in prime time, you are likely to stumble onto a domestic feature film several nights a week. You will never stumble onto a Canadian film on a conventional over-the-air Canadian network ever. You will not find one, ever, on Global or on CTV, and the CBC has cut way back on their Canadian films, down to very few a year, especially in prime time, when people are actually watching television.
4982 If we felt that Canadians had adequate access to Canadian films, we wouldn't be here. We all have day jobs, and we are doing this because we all strongly feel -- and the evidence is available. The statistics are totally available.
4983 The only place that you can consistently find Canadian films -- and, as I said earlier, in declining numbers -- are the premium pay television services, which most Canadians don't get, and certainly not young Canadians, which is our particular focus.
4984 MR. BOLEN: I would just add a couple of numbers to that, to illustrate it, because I don't really think that the other broadcasters are trying to use feature film in a competitive way as part of their core offering at all.
4985 And they can, if they wish, because we are not exclusive in terms of most of our content.
4986 Between 2004 and 2011, the premium services, TMN, Movie Central and Super Channel, reduced their Canadian feature film exhibition from 13 percent of their schedules to 5.2 percent of their schedules.
4987 We have put this on the record. It is in our reply to interventions.
4988 And specialty services between 2004 and 2011 reduced their feature films as a portion of their schedules from 3.3 percent to 1.7 percent.
4989 So there is not much out there. It is not something that they are going to be concerned about competing with, they have decided to abandon it for their own good reasons.
4990 I was a broadcaster, and I understand this trend. There is nothing malicious in it. It's a fact of life that if you are a commercial broadcaster, it is much easier to market, promote and advertise long-running dramatic series than it is to promote feature films which are one-offs.
4991 We are going to embrace one-offs, and we are going to create a schedule that thematically embraces one-offs and organizes them in a way that makes them accessible, and then we are going to market and promote them, and advertise them in a significant way, in order to build an audience.
4992 We don't think that takes away from any other service in Canada.
4993 COMMISSIONER SIMPSON: This is a question that I have to ask, but we have mandated that in VOD, which, I believe, is available to everyone, unlike having to have a movie channel subscription. We mandated that all Canadian theatrical releases have to be available on VOD.
4994 I understand your value proposition of $8 to $10 a year. It's a heck of a lot better than $5 a download when it comes to buying movies, because you get the whole gamut of Canadian films, if you were to join a 9(1)(h).
4995 But on the basis of VOD now, how are Canadian films doing, understanding that there is an economic barrier.
4996 MR. BOLEN: Well, we happen to have an expert in the room on that, and that is Hussain Amarshi, who is a film distributor, who puts a significant focus on Canadian film.
4997 MR. AMARSHI: Commissioner Simpson, we distribute films in Canada, and we distribute several Canadian films, and VOD is a window that we use. We go through all of the broadcast VOD services, as well as iTunes.
4998 Our experience is, with the exception of one or two films, that most films get lost in the VOD jungle. There are a lot of VOD availabilities, and every week there are new titles going in.
4999 On a week like last week, or two weeks ago, "Django Unchained" comes on. If you have a Canadian film that is coming out that week -- the way the VOD service works is that every week they feature the new films that come out. That is your window.
5000 The second week, generally, the number of rentals drops 50 percent to 80 percent.
5001 If you happen to be coming out on the week that you have "Django Unchained" or some other big Hollywood film, there is no chance that you will get noticed. That is the constant reality.
5002 The second part is that, again, as we mentioned before, Canadian films have that intrinsic problem that we do not have the kind of marketing power, the marketing muscle, that establishes those films at the theatrical stage.
5003 Now, we do for some, but not for most of our films.
5004 So, when you have a situation like that, when people don't know the film -- if it just shows up on the screen, with a little box, chances are they will not recognize that film.
5005 That is something that is just the nature of that service.
5006 Now, what we are proposing is something different. We are talking about highlighting our films by thematically positioning them, so that there is a certain context that will give it a bit of a leg up.
5007 At the end of the day, yes, it's great that they are mandated to take all of the Canadian films, but it doesn't change the problem that we are dealing with.
5008 COMMISSIONER SIMPSON: That gets back to Mr. Lantos' point, that this would be a curated channel, that it would manage its assets much differently. I understand that.
5009 And I also understand that the spend ratio in the U.S. is anywhere from $2 to $3 in promotion to every $1 that goes into the camera.
5010 So I understand that. It is a problem, and hopefully that will be corrected.
5011 MR. BUCHANAN: Mr. Commissioner, could I add to that, please, on the VOD question?
5012 COMMISSIONER SIMPSON: Yes, absolutely.
5013 MR. BUCHANAN: Your indication appeared to suggest that they all must be on there, but the night that we got the interventions, we compared the schedule that you have in front of you, at page 8 of the brochure -- there are 80-some-odd titles there, including half a dozen curation things. There are 78 feature films on there. A lot of them you may recognize. There were 6 on the Rogers VOD service that night.
5014 So I don't know where all of them are, if they are supposed to be on there. Perhaps they are on the ones that are affiliated with the movie services, as opposed to the Rogers VOD service.
5015 Those are the ones, of course, where you have to be a subscriber. You have to be one of whatever percent it is of Canadians who subscribe to those movie networks in order to get access to it. I don't know, but they didn't appear to be there.
5016 And in the reply document that we tendered, the evidence is that 75 percent or more of Canadians don't use VOD anyway.
5017 So, (a), they don't seem to be there, and even if they are, people aren't using it. But, you know, if they do, it's 4 or 5 bucks each.
5018 Those 6 that we talked about, the cheapest was $3.99, but there were others at $5.99.
5019 The service that we are talking about here gives you a whole year's inventory for less than that.
5020 It is not a consumer-friendly way to consume Canadian feature films, let's put it that way.
5021 COMMISSIONER SIMPSON: That was very instructive.
5022 MR. LANTOS: At the expense of testing your patience, I would like to say more about VOD.
5023 COMMISSIONER SIMPSON: Please do.
5024 MR. LANTOS: The whole VOD business is a hit-driven business. It is based on the thesis that people will have heard of -- they are films that people have heard of, but did not see in movie theatres. They are going to seek them out because they have been so heavily marketed that they know them and they are looking for them.
5025 This does not apply to the overwhelming majority of Canadian films.
5026 Let me correct that. This does not apply to the overwhelming majority of independent films made outside of the six Hollywood studios. Studio movies have, today, an average marketing budget of around $70 million each. So their marketing budgets are designed to drive their product through all of the windows.
5027 So, for those who don't see them in movie theatres -- and only a minority of audiences see films in movie theatres -- they will recognize the title when it appears on video, or DVD, on VOD, and various other formats, and seek it out.
5028 This does not work anywhere near the same way for films that do not enjoy a $70 million marketing budget. People don't actually seek them out.
5029 And VOD is based on -- it is destination programming. It works mostly for films that people are looking for.
5030 We are proposing something entirely different.
5031 I also may say, not to dispute your numbers, but there are over 3,000 Canadian feature films made, and I have not seen any Canadian VOD service that remotely approximates that number, offering that number of films.
5032 Although it pleases me to note that I heard recently, in the last couple of weeks, that one of our major cable companies in the VOD business has suddenly licensed several hundred Canadian films, which is more than they had ever licensed, cumulatively, over the preceding decade.
5033 And if, perhaps, this application has something to do with that, that's a good thing.
5034 But VOD is never going to play the role that we are proposing to play.
5035 COMMISSIONER SIMPSON: Yet we are hearing from consumer groups and industry experts that pick-and-pay is where the market wants to go. So it is interesting in whether there is not just a price barrier, but a technological barrier, or a marketing barrier with VOD that has to be conquered.
5036 But I take your testimony to heart, and we will have a good look at the accuracy of our understanding with respect to exhibition on VOD of Canadian films.
5037 This is a programming question that probably is in your wheelhouse, Mr. Bolen.
5038 In your submission, you indicated that no less than 60 percent of your evening programming is going to be in the apocryphal 7(d) category, which is theatrical. What is the other 40 percent going to consist of?
5039 MR. BOLEN: I am going to put that question to Paul Gratton, who put our schedule together. He will do a much better job than I will.
5040 COMMISSIONER SIMPSON: Great. Thanks.
5041 MR. GRATTON: In the sample schedule that we presented to you, there is at least a half-hour contextualizing, a bit of original programming every night, which would introduce the theme for the evening. So that wouldn't fall under 7(d).
5042 We also have one evening dedicated to theatrical documentaries, and that would not be coded as 7(d).
5043 I think that accounts for most of the difference.
5044 COMMISSIONER SIMPSON: So a lot of it would be background or industry inside focus.
5045 MR. GRATTON: Everything, especially in prime time, would be about promoting, encouraging film literacy, and presenting an appreciation for the evening's programming.
5046 Technically, some categories, such as theatrical documentaries, would not be 7(d), and these programs that are about contextualization would not count as 7(d). But the entire programming would be about theatrical Canadian movies.
5047 COMMISSIONER SIMPSON: Would these productions be originated by your network, or would they be coming from other providers?
5048 MR. BOLEN: They could be originated by us, in terms of being in-house production, they could be done by independent producers, and they could be done by partners.
5049 For instance, we have discussed with the Toronto International Film Festival the possibility of collaborating with them in producing some of this programming, because it could mesh with some of the things they are doing.
5050 We are open-minded about how to do that. The important thing is that this context will help to build a star system, will help to build an appreciation and a better understanding of Canadian film, and will profile the creative people in the industry and what they are trying to do.
5051 It is not an insider industry show, it is for the general public. It is about film appreciation.
5052 And, again, if you are running, for instance, a thematic evening, you would have an interview or a series of interviews prior to that thematic evening, where you would talk about the context for the schedule.
5053 COMMISSIONER SIMPSON: Yes, I understand that.
5054 Just for clarity's sake, the fund that you propose, if you get the full meal deal from the Commission, the funding for these programs would not come out of your Starlight fund?
5055 It would come out of general operating revenues?
5056 MR. BOLEN: They are part of our CPE, but they are a separate programming line in our budget. They are not part of the fund.
5057 COMMISSIONER SIMPSON: Great. I just wanted to be clear on that.
5058 I am just chewing through my list here, so I apologize, I will take a second. I am just making sure that I don't get slapped on the head at lunchtime for missing something.
5059 MR. BOLEN: I didn't know that the Chairman was that tough.
5060 COMMISSIONER SIMPSON: Oh, yeah.
5061 He's kind on consumers, hard on Commissioners.
5062 MR. BOLEN: I have never seen him that tough.
5063 COMMISSIONER SIMPSON: Anecdotally, or in a greater context, can you tell me what kind of conversations you have been having with BDUs so far?
5064 Because, as Mr. Lantos indicated, this has been an idea that has been long in coming, and I am sure that you have walked this across the hall to the BDUs, and I am curious as to what kind of response you got.
5065 MR. LANTOS: You will not be surprised by the answer.
5066 I could spend a long time relaying some of the conversations, but it really boils down to a very simple analogy.
5067 Approaching the BDUs for a service that is seeking as wide a carriage as their own services on the basic digital tier is really no different than, as my friend David Cronenberg put it last night, asking the wolf to guard the sheep. It is simply not going to happen.
5068 There are only two ways, that we know of, of being on the most widely distributed tier, which is the tier that accomplishes the mission we are on, which is to bring Canadian films to every Canadian. One way is to be owned by a BDU, which we are not, and have no intention of being.
5069 The other way is to be mandatory.
5070 In the 9(1)(h) licence, you have a powerful tool to accomplish what, really, we all do in various ways with our lives, which is to bring Canadian content to Canadians, which is really the foundation, the raison d'être of our whole broadcast system.
5071 We are bringing to you a proven, mass-embraced vehicle, Canadian feature films, which is the flag-bearer of popular culture, and which certainly has tremendous entertainment value, as well as cultural, historical and educational value. And we are bringing this to you as a way to accomplish the mandate, the mission, of the whole 9(1)(h) section of the Act.
5072 It is not going to be accomplished any other way, based on my discussions with BDUs, not only now, about Starlight, but historically. I had similar discussions with them in the days of "Showcase", and in the days of the History Channel.
5073 But back then, at least, they were not in the programming business. Today they operate pretty much -- you don't need me to say it here -- they own most of the services in the country, and they see those that they do not own as competitive with their beachfront real estate, which they would prefer to keep for themselves.
5074 So, to attain the kind of wide distribution that we are seeking without a mandatory licence, based on conversations that I have had, is essentially impossible.
5075 COMMISSIONER SIMPSON: I could be naïve, but I would think, from past examples where we have mandated something, that the BDUs would love to increase their average revenues on basic, and add a 50 percent markup or a 100 percent markup to your service, and blame us, and increase their average revenues.
5076 I would think that they would be lined up to buy you lunch.
5077 MR. LANTOS: I would think so, too. I agree with you.
5078 If I were running one of the BDUs, as I said to the CEO of one of the BDUs, I would embrace this service, especially in a world in which they are worried about cord cutting and cord shaving, and all of those various buzzwords that they are so happy to use.
5079 I would say that it is an opportunity to reach people, particularly young people -- who may otherwise engage in cord cutting -- if you offer them something that they currently do not have.
5080 And we are not talking about some esoteric kind of programming that most people have expressed no interest in, we are talking about an extraordinarily popular programming format, theatrically released feature films.
5081 So I would have thought -- I agree with you -- that it would be something they would embrace as a way of increasing their reach and providing their consumers with something they don't currently have.
5082 However, it seems that -- how to put this diplomatically -- direct self-interest rules.
5083 MR. BUCHANAN: Mr. Commissioner, I have one other thought for you, and it is directly related to your point about a 45-cent service attracting a 45-cent markup.
5084 When we analyzed -- and it was in the late 1990s -- what the value of a channel was to a cable operator, they rolled in all the costs and came out with the number of 16.2 cents per sub a month.
5085 That was and, as far as I know, that remains the official cost. If you are an exempt service buying your way onto cable, that is what you can expect to pay the BDU for access.
5086 I am completely with you. Why wouldn't you take 45 cents as a markup if the cost is 16.2 cents?
5087 I don't understand.
5088 COMMISSIONER SIMPSON: That is, again, a great answer, Mr. Buchanan. It is a figure that I have been searching for, and I appreciate you giving it up.
5089 On the subject of BDUs -- and this is a housekeeping question -- is it your wont to have exempt BDUs included in this distribution, exempt BDUs being 2,000 to 20,000 households?
5090 Is that a make-or-break?
5091 MR. BUCHANAN: No. I can't even remember if it was factored in. That's under the 20,000 --
5092 COMMISSIONER SIMPSON: Yes.
5093 MR. BUCHANAN: We could come back to you in reply with a better answer to that. I don't remember if we ever considered that or not.
5094 THE CHAIRPERSON: Not in reply; May 2nd.
5095 MR. BUCHANAN: I'm sorry, May 2nd?
5096 THE CHAIRPERSON: For undertakings, please.
5097 MR. BUCHANAN: Yes, that's fine.
5098 COMMISSIONER SIMPSON: Thanks.
5099 We have to get back to the fund sooner or later. You say that you will take a majority equity position in each feature film that is produced by the fund, and I have a couple of questions on that.
5100 First off, what would you do with the revenues created by these products? Would they be ploughed back into the fund, or would they be ploughed back into general revenue?
5101 MR. BOLEN: Similar to Movie Central and other services, it is our intention to take any return on these investments and include it in our revenue for the purposes of the 70 percent CanCon spend.
5102 COMMISSIONER SIMPSON: In the course of producing these projects, would it be your intent to also seek other existing funds to top up the requirement for any particular project?
5103 MR. BOLEN: For the fund itself, we intend to provide full financing, net of federal tax credits from the producer, which would be their equity.
5104 And Robert could explain why we are doing that, and where the need is for that.
5105 COMMISSIONER SIMPSON: Yes, thanks.
5106 MR. LANTOS: In Canada there has never been an opportunity for young filmmakers, with the exception of a short period of time in Toronto, or in Ontario, via the Ontario Film Development Corporation, which essentially did this.
5107 To provide full financing for a project, particularly to emerging filmmakers, producers tend to spend a great deal of their time running around, trying to patch together their financing, and focusing more on that than on the quality of their films.
5108 The idea behind fully financing projects is to remove that obstacle, to permit the filmmakers to focus on making their films.
5109 And the second reason for it, frankly, is because we want to deliver a consistent stream of original programming to our audiences, and the only way to guarantee that we will be able to do that is to fully finance a certain number of films, so that we know they are actually going to be made.
5110 We will also license films, but films which we license, where our financial contribution is a relatively modest portion of the budget, we don't know if they will be made or when they will be made.
5111 So this accomplishes two things. It opens the doors to those who have difficulty financing films, which tends to be those who are emerging, and it guarantees us a steady supply of product.
5112 Do you want to add to that?
5113 MS ROBERT: Yes, just a little thing. The amount of funds available for young, emerging filmmakers is extremely limited. I think the type of budget that they need to do a film is around $1 million or $1.5 million, which is very, very little.
5114 Scripts will determine how much a film costs.
5115 So the fact that young filmmakers are limited in the kind of films they can do with the present financing system is in a way -- it's censured. Il est censuré. Excusez-moi. Excuse me. C'est quoi en anglais censuré? En tout cas, ça.
5116 I apologize.
5117 LE PRÉSIDENT : Vous n'avez qu'à le dire en français, puis...
5118 MME ROBERT : Ça apporte une certaine censure. It brings a little -- it limits them in their ability to tell their stories.
5119 The fact of having the ability to have a budget of up to $4 million, and also be accompanied by experienced filmmakers, people like Deepa, or David Cronenberg, or Patricia Rozema, or Denys Arcand, and so on, is a tremendous opportunity for these young filmmakers.
5120 Also, just the question about video-on-demand, it is one here, one there, and so on.
5121 The success of films in Quebec has been built mainly because we also have a critical mass of films. Over the years we have created more and more films, so the consumer can keep going back. In the theatre, all of a sudden there is another Quebec film, another Quebec film. So they have choices.
5122 When you have a choice once every six months or once every year a Canadian film, your habit of seeing Canadian films is greatly reduced. So these are two elements I wanted to bring up.
5123 MR. CRONENBERG: I'd like if I may jump in.
5124 By happenstance, my son Brandon is a template for what we're talking about. He just made his first feature film. Its budget was $3.2 million. That's the kind of budget that Telefilm is no longer interested in. They don't see that as part of their mandate and I think they've restricted themselves to budgets of $5 million or more.
5125 But because Neve Fishman had an envelope at Telefilm of $3.2 he was able to fully finance Brandon's film and so it got made very efficiently and it's been shown at film festivals around the world.
5126 He's travelled with that film and has become, ipso facto, an emerging filmmaker who has a presence now and has established a track record, is also being distributed theatrically all over the world.
5127 So in a way that's the template for what we're talking about.
5128 COMMISSIONER SIMPSON: Now that I've got you, Mr. Cronenberg, this is a sidebar, but is Telefilm also limiting its development money to films over $5 million or are they still doing development funding for smaller companies?
5129 MR. CRONENBERG: I believe they would be. I'm not 100 percent sure.
5130 MS ROBERT: Development funds is related to just somebody writing a script. You know, when the script is not written yet, you don't know how much it's going to cost. Is there a war in your film? If there is a war, then it's going to cost a few millions. If it's two characters in one room, you know, you can then do a smaller-budget film.
5131 COMMISSIONER SIMPSON: Okay. Thank you for that.
5132 MR. AMARSHI: I'd like to add one more thing. I mean one of the inspirations for this particular fund is Channel 4. You may remember 20-25 years ago Channel 4 started in the U.K. and one of their main things was to produce local films.
5133 And the films that they ended up producing were "Four Weddings and a Funeral," "Trainspotting," "Sammy and Rosie Get Laid," "My Beautiful Laundrette." I mean these were films by very young filmmakers at the time. Danny Boyle was one of them, Stephen Frears was another one, and they ended up becoming sensations themselves but also the films were phenomenal successes.
5134 But they were driven by the same kind of philosophy of nurturing and supporting and fully financing those films from Channel 4, a television channel.
5135 COMMISSIONER SIMPSON: M'hmm.
5136 MR. AMARSHI: Thank you.
5137 COMMISSIONER SIMPSON: Thank you.
5138 Moving back to programming for a second, it's my understanding that your nature of service is to subtitle your products. Would that just be your new productions or would it be all exhibitions on your channel?
5139 MR. BOLEN: We intend to subtitle all of the films in languages other than English, subtitle them in English. That is our intention, yes.
5140 COMMISSIONER SIMPSON: Okay. So French films would be --
5141 MR. BOLEN: Subtitled in English.
5142 COMMISSIONER SIMPSON: -- subtitled in English?
5143 But English films would not be subtitled?
5144 MR. BOLEN: No, because we're applying for an English service or licence.
5145 COMMISSIONER SIMPSON: Okay. Just clarifying.
5146 Back to the money. I'm sorry I'm bouncing all over the place.
5147 In the corporate structure you have a roll-off of 1 percent where anyone who has a holding of greater than 1 percent is not allowed to participate in the fund if I've got this correctly, but there are several shareholders who own exactly 1 percent.
5148 Is there any need for us to put some caveats into a decision that would stipulate that no shareholders could benefit from the fund?
5149 MR. LANTOS: I think you've misread or we have misexpressed our intention. The shareholders who have 1 percent or more are excluded.
5150 COMMISSIONER SIMPSON: Okay.
5151 MR. LANTOS: So, in fact, every shareholder is excluded from producing films with Starlight's funds.
5152 COMMISSIONER SIMPSON: You're quite right, my mea culpa.
5153 MR. BOLEN: We would accept a condition of licence on that if there are concerns about self-dealing.
5154 COMMISSIONER SIMPSON: Okay.
5155 Given that --
5156 MR. MUSSELMAN: Sorry, if I may just respond to that.
5157 COMMISSIONER SIMPSON: Yes. Yes.
5158 MR. MUSSELMAN: We did have that initial restriction in our application to address what we thought were concerns regarding self-dealing, but subsequently we've clarified that to the extent that that itself does not meet the concerns of the Commission that we would be willing to go further and recognize that none of the shareholders of Starlight would have access to financing from the Starlight Fund.
5159 COMMISSIONER SIMPSON: Okay.
5160 On that theme, for the sake of the public and other vested interests that are watching or listening to this hearing, would you give me your response to this statement: that because 9(1)(h) is a mandated service it is going to then impose a cost onto the public and that cost, for very altruistic reasons, is going to go to the production of new Canadian content which you own.
5161 Would you tell me your interpretation of why the public doesn't have a vested interest in the equity of that production? Because they have, in effect, by other means other than taxation paid for it.
5162 MR. BOLEN: We're just having a little trouble fully understanding the question.
5163 COMMISSIONER SIMPSON: They don't have a choice to purchase the service. It's not an option, it would be mandated. Therefore, if the intent of the structure of Starlight is to fund new Canadian productions which Starlight would then own and have the rights to and be able to derive profits from, are there any issues of conflict or self-dealing that the public and the Commission should be concerned about?
5164 MR. LANTOS: I think we -- now, I understand the question.
5165 In a sense, the public would own the films because the films will be shown exclusively on Starlight. So they will have permanent access to them. But 70 percent of the returns on these films will be reinvested into Canadian programming which goes right back to the public.
5166 Starlight will -- we need to define ownership. The copyright of each film would be 100 percent owned by its producer. The revenues generated by the film will be shared between Starlight and the producer, and that's on a formula, I believe, we are on record with and that we have proposed.
5167 And it has something -- the producer will have a participation from the first dollar simply because he's produced the film. He will get 50 percent of all profits, in addition to which, if he chooses to invest the tax credits, which are automatic in Canada, provincial and federal, then he will receive a pro rata share of each dollar that flows based on his investment of tax credits, which he can also choose to keep.
5168 But in terms of ownership of distribution rights, those will not be owned by Starlight. The only rights Starlight will retain are the exclusive Canadian television rights after VoD, after theatrical, after DVD.
5169 All other rights, in other words, Canadian theatrical, DVD, VoD and worldwide rights, will be in the hands of the producer, who will then arrange for distribution for each film in conjunction with a lot of expertise that's at this table. We have the two most knowledgeable film distributors in Canada as shareholders.
5170 So help will be certainly provided and guidance and we will retain the right to approve the financial terms of each deal, but in terms of the distribution of the films we will not have ownership of those rights. They will be handled by the producer, who will choose his distributor.
5171 COMMISSIONER SIMPSON: My last two questions and then I will turn it back to the Chair.
5172 The first question is to do with the service not being granted 9(1)(h).
5173 In looking at your denial scenario, it looks pretty dire. You're into triple negative PBIT numbers and I can't reflect that even as bad as they are they're still optimistic compared to what I've seen in terms of percentage of box office on theatrical releases.
5174 I think CBC did a feature news package on theatrical releases in Canada, and Canadian films were enjoying somewhere -- I think this was mid-2000s -- somewhere around 4 to 6 percent of theatrical box office, and your non-9(1)(h) figures are considerably more optimistic than that but still not viable.
5175 So my question is this. Have you considered over-the-top? Have you considered a Canadian Netflix, and if not, why not, and if so, what did it look like?
5176 MR. BOLEN: Well, we haven't considered an over-the-top Netflix and we do not believe that we would be able to reach the widest possible audience with that kind of service. I think that that's part of the problem.
5177 We don't see online as being the solution to this problem and I'm actually going to turn to Ian Capstick because we have talked about this because we anticipated one of the questions, well, why isn't this just all done online, why do we need a broadcast service.
5178 Apart from, you know, speaking to the fact that most people want to watch their content on television and most of them are getting it over cable and satellite or over the air and that is the preferred method, there are obstacles when it comes to Netflix and people's accessibility to that content and the financing of it.
5179 MR. CAPSTICK: Thank you.
5180 I think that central to the digital strategy for Starlight is ensuring that the new content that's created by the fund starts to drive and create a conversation about Canadian stories and those -- the digital strategy that we've created places the creation of digital first content, not dissimilar to what you currently find on a DVD and an extras package for instance being released in advance of the actual theatrical release and then eventual broadcast release of the film. That's creating excitement around it.
5181 Part of the problem with just a straight up OTT service is that you can't do that in a sense. It's not a second-screen experience, if you will, for your consumer, and that's again what Starlight's digital strategy is predicated on, is the trend towards consumers pulling out their iPads, their iPhones, BlackBerrys and having interaction with the content that's on the screen.
5182 With an OTT service, again, that second-screen experience in fact is almost negated. We only know right now about 8 percent of consumers even have the technical capacity to be able to take OTT onto their TV as well. Most of them are utilizing it from additional mobile technologies or their computers.
5183 So economically as well it's just simply not viable. We need the number of subs to be able to get the level of promotion for the Canadian Star system that we've been talking about today.
5184 COMMISSIONER SIMPSON: It's also back to awareness of the content, you know, the star-making machinery that somebody once sung.
5185 My last question and then I'll turn it back.
5186 Oh, sorry, Mr. Buchanan. More wisdom.
5187 MR. BUCHANAN: We were listening to the Internet discussion and thinking each time the Commission has explored the Internet in the context of the broadcasting system you've determined that it's complementary and not competitive.
5188 And we saw it very much the same way, that the Heritage study, our own research, show that 90 percent, 89 percent of Canadians want it on TV. Sure, they can have a second screen experience the way you're talking about, or a third or a fourth nowadays, but to do that alone, especially with feature films, of course, it's a bandwidth hog and we may not have heard the end of that movie, you know, it's not the main way to deliver Canadian feature films. It's an adjunct, a very valuable one that we had every intention of exploring, but not a standalone.
5189 MR. LANTOS: May I add one more thing, Commissioner Simpson?
5190 You could ask that question of any programming service, why aren't you just over-the-top? And why, for example, would there be four sports channels, say, if I wish to subscribe to cable that I would have to -- I have no choice but to buy whether I'm interested in four sports channels or not? Why couldn't three of them be over-the-top?
5191 I think though that's a valid question to ask. But we are all here in this room because we have a regulated system. And why is it regulated? Because of the need and the desire to have a Canadian voice and to protect that voice.
5192 To say why couldn't we just put our service over-the-top like Netflix, specifically, a service that's 100 percent dedicated to Canadian films and which is going to invest 70 percent of its revenue one way or another in Canadian films, to then go on an unregulated medium in head-on competition with Netflix, which now has annual revenues of $3 billion and is fully financing large-budget television series that are $100 million each and spending tremendous amounts of money marketing, to say unlike all the other services which enjoy the protection of a regulated system, why don't you go unregulated and take those guys head-on, except they will be showing television series and movies from all over the world, you get to show only Canadian films, that doesn't seem to me like the wisest use of the regulated system.
5193 COMMISSIONER SIMPSON: Now, the ballot question.
5194 I heard someone say there's about 3,000 Canadian feature films in the can right now and from the CMPA I'm seeing that we're putting out another 60 to 80 feature films a year.
5195 From an inventory standpoint, from year one through year seven, how do you not exhaust your supply of films?
5196 MR. BOLEN: I'm going to have Paul Gratton speak to that because that's something that he and I have put a lot of thought into.
5197 MR. GRATTON: Obviously, in the first year you need to fill up 24 hours -- sorry, I can't see you through the crack.
5198 Obviously, in the first year you have to fill up 24 hours a day and so you're front-end loaded in terms of acquisitions. You acquire the titles though for a period that extends beyond one year and so the titles from the first year remain available in the second year, et cetera, et cetera.
5199 Over time you start to diminish somewhat the amount of titles that you have to buy in the first year, and so you spread it out. Meanwhile, new titles are coming online and you continue to add that to the --
5200 You know, I have a fair amount of experience with movie-driven services and essentially you create a theme around your new movie of the day and that's kind of how you would do it on an ongoing basis. By year three you have a tremendous inventory of titles that have been picked up from the first two years that are still there and are still in rotation.
5201 So, you know, we're extremely confident that we can utilize this complete inventory over a long period of time while replenishing it both with our original programs which would probably come online in our third year of operation after development production and theatrical exhibition.
5202 COMMISSIONER SIMPSON: Thank you very much.
5203 Those are my questions, Mr. Chair.
5204 THE CHAIRPERSON: Thank you.
5205 Monsieur le Vice-président.
5206 COMMISSIONER PENTEFOUNTAS: Thank you.
5207 At the end of the day, you're not-for-profit, Mr. Bolen, is that correct? So any profits that may be derived from the films that you would produce would go back into creating films? Did I understand that correctly in reading your document a few months back?
5208 MR. BOLEN: Yes. Any return on our investment in film would be part of our revenue for the purposes of calculating our 70 percent CanCon expenditure.
5209 COMMISSIONER PENTEFOUNTAS: Okay. And is there going to be an online component to Starlight?
5210 MR. BOLEN: Yes. We intend to take advantage of all the latest opportunities such as, for instance, Rogers' Everywhere TV. We intend to be part of that ecosystem for authenticated subscribers.
5211 We also intend to offer a free video-on-demand service for authenticated subscribers. We intend to be on mobile, intend to be on all platforms and make the content available to our subscribers in any way that they want to consume it and put significant effort into making sure that happens.
5212 COMMISSIONER PENTEFOUNTAS: But given that your subscribers are basically, you know, 12 million Canadian subscribers, everyone would have access to it under the authenticated process?
5213 MR. BOLEN: I don't think our penetration would be that high. There would be --
5214 COMMISSIONER PENTEFOUNTAS: Whatever the penetration might be.
5215 MR. BOLEN: Anyone who is getting basic English would have access to us online.
--- Off-record discussion
5217 MR. BOLEN: Yes, basic English, anyone who has basic English. We're only applying for an English service licence.
5218 COMMISSIONER PENTEFOUNTAS: Okay.
5219 MR. BOLEN: So anyone who is not a subscriber would not have access to our content and it would not be appropriate for us to make that content available in other ways because that would mean that we are really undercutting the BDUs in that situation.
5220 You know, the revenues are coming through the BDU, the revenues are coming to us. We want to encourage people to subscribe to basic, to get basic cable so that they can get our service. So we wouldn't want to just offer all that content in some other way, free or on a pay-per-view basis, outside of the system.
5221 COMMISSIONER PENTEFOUNTAS: Would that exclude all of Quebec, Mr. Buchanan?
5222 MR. BUCHANAN: No. No. It includes the folks on Shaw Direct and Bell ExpressVu who subscribe to an English-language package or a bilingual package.
5223 COMMISSIONER PENTEFOUNTAS: Okay. Including Videotron customers, Cogeco customers? If they're on an English package, they would have access to Starlight?
5224 MR. BUCHANAN: I would have to look. I can't remember when we did the financials if we included a number for them or not. I can't remember. Either we heavily discounted it or we ignored it altogether.
5225 COMMISSIONER PENTEFOUNTAS: Okay.
5226 MR. BUCHANAN: Again, I'll look at that in the -- we'll be coming back on May 2nd with the exact question.
5227 COMMISSIONER PENTEFOUNTAS: We will take a look at that as well actually.
5228 MR. BUCHANAN: Yes.
5229 COMMISSIONER PENTEFOUNTAS: Mr. Bolen, at the end of the day, equally, 25 cents for your library service but if you want to replenish stocks you need the 45-cent-per-sub revenue?
5230 MR. BOLEN: We believe a 45-cent subscription wholesale rate gives us the balance to finance and commission the appropriate amount of original content required to make our channel as attractive as we want it to be and to continue to engage our audiences. So that is our plan and we think it's a balance.
5231 COMMISSIONER PENTEFOUNTAS: Mr. Anderson, when I look at your polling data, there's 1,007 English-speaking Canadians. Would Quebeckers be involved in that poll?
5232 MR. ANDERSON: Yes, they would, Mr. Vice-Chair. The reason that we limited the research to English-speaking Canadians is because that's the nature of the licence that's being applied for. But yes, it would include English-speaking Canadians right across the country, including in Quebec.
5233 COMMISSIONER PENTEFOUNTAS: Including Quebec. Great.
5234 Il y a-tu une partie de l'enveloppe qui sera dédiée à des films, à des longs métrages de langue française? Has that been taken into consideration, Madame Robert, Monsieur Arcand, Madame Lafontaine? Is there a portion of the 8 to 12 films or the budgets that go into that that is going to be dedicated to French-language films?
5235 MME LAFONTAINE : Monsieur le Vice-président, non, pas... 50 pour cent de l'enveloppe va être dédié à des gens qui sont des régions, que ça soit en anglais ou en français.
5236 CONSEILLER PENTEFOUNTAS : Bien, ça veut dire qu'il n'y aura pas...
5237 MME LAFONTAINE : C'est-à-dire extérieur à Toronto et Montréal, par exemple.
5238 CONSEILLER PENTEFOUNTAS : Ça, c'est un budget ou une enveloppe dédiée aux régions?
5239 MME LAFONTAINE : Oui.
5240 CONSEILLER PENTEFOUNTAS : Mais à l'autre langue officielle du pays, non?
5241 M. LANTOS : Si je peux ajouter à ça?
5242 CONSEILLER PENTEFOUNTAS : Oui, Monsieur Lantos.
5243 M. LANTOS : Il n'y a pas une enveloppe, mais il y a une ouverture pour financer des films en langue française. Étant donné que notre service est un service anglophone, les films tournés en français vont être sous-titrés et ne seront jamais la majorité de la programmation. Ce sera une minorité, mais l'ouverture est là. Mais il n'y a pas de chiffre précis.
5244 CONSEILLER PENTEFOUNTAS : Je comprends la volonté, mais la volonté... va m'acheter un café au lait sur les Champs-Élysées.
5245 Mais il n'y a pas de fonds ou de pourcentage dédié sur une base annuelle ou autre envers des longs métrages de langue française?
5246 M. LANTOS : Non, il n'y a pas...
5247 CONSEILLER PENTEFOUNTAS : ...bonne volonté.
5248 MR. BUCHANAN: Mr. Vice-President, I have your answer.
5249 COMMISSIONER PENTEFOUNTAS: Go ahead.
5250 MR. BUCHANAN: So we don't have to wait till May 2nd.
5251 One hundred percent of Videotron subscribers were excluded; 50 percent of Cogeco subscribers were excluded.
5252 COMMISSIONER PENTEFOUNTAS: Why would you exclude 100 percent of Videotron customers? That's a huge English clientele base.
5253 MR. BUCHANAN: Well, we did what we did. We assumed that we would be a "must carry" on -- we didn't drill down in the various Videotron systems to figure out which ones were English and which ones were French. Is that --
5254 COMMISSIONER PENTEFOUNTAS: Okay.
5255 MR. BUCHANAN: With Cogeco we assumed that half --
5256 THE CHAIRPERSON: Mr. Buchanan, I think you're talking about how you did your business projection --
5257 MR. BUCHANAN: Yes.
5258 THE CHAIRPERSON: -- and I think the Vice-Chair was asking you about what would the distribution order say, which are two different things.
5259 COMMISSIONER PENTEFOUNTAS: Yes.
5260 MR. BUCHANAN: They are. In that case we will come back on May 2nd with the distribution order question.
5261 COMMISSIONER PENTEFOUNTAS: Okay.
5262 MR. BUCHANAN: Thank you.
5263 COMMISSIONER PENTEFOUNTAS: And perhaps do a little data mining on the numbers because Videotron has a huge -- a very substantial area of Montreal and Quebec that is largely Anglophone or has a propensity to sign onto the Anglo service even if they're Francophones because they like the service. Maybe take that into consideration come May 2nd.
5264 MR. BUCHANAN: We will do so. Thank you.
5265 COMMISSIONER PENTEFOUNTAS: Great.
5266 MME ROBERT : Monsieur le Vice-président...
5267 CONSEILLER PENTEFOUNTAS : Oui, Madame Robert.
5268 MME ROBERT : ...juste une petite chose?
5269 Votre point sur les films de langue française est tout à fait très juste. Au Québec, il y a une belle relève. Il y a aussi des jeunes anglophones qui ont besoin de faire leurs films.
5270 CONSEILLER PENTEFOUNTAS : Oui.
5271 MME ROBERT : Et pour nous, qui appuyons Starlight, c'est très important que les jeunes cinéastes de langue française ne soient pas exclus, qu'ils fassent partie, parce que, comme on dit, il y a deux solitudes au Canada. C'est très important et je pense à travers le cinéma qu'on pourra réduire ça, qu'il n'y aura plus de solitudes au Canada et qu'on pourra comprendre autant les histoires qu'on raconte au Québec qu'à travers le reste du pays.
5272 CONSEILLER PENTEFOUNTAS : En tout cas, je ne trippe pas sur l'expression « deux solitudes, » mais c'est un lieu de départ.
5273 MME ROBERT : J'ai emprunté... Oui.
5274 CONSEILLER PENTEFOUNTAS : En espérant qu'on n'est plus là, mais...
5275 MME ROBERT : Il n'y en a pas...
5276 CONSEILLER PENTEFOUNTAS : O.K.
5277 MME ROBERT : Pour nous, il n'y en a pas de solitudes.
5278 CONSEILLER PENTEFOUNTAS : Non. Je suis d'accord avec vous.
5279 The self-dealing issue and the 1 percent, I think it was made clear by the question from Commissioner Simpson, it will be 1 percent or 0.5 percent. You will not be involved in the envelope going to those 8 to 12 films a year.
5280 Some shareholders may have interests in production companies. They may be a minority interest. Have you sort of thought about how that will all play out?
5281 I say that with the following sort of arrière-pensée, the sort of thought in the back of my head in that you risk exposing yourselves to all kinds of criticism if any of the shareholders by any association to various production companies and other relationships find themselves having access to these funds and sort of self-dealing and self-interests.
5282 MR. ARMSTRONG: We are very clear on this and we want to do everything we can to assure you that there will be no opportunity for any self-dealing of any kind.
5283 Robert may want to elaborate on that but this is something that's key to our philosophy for this channel.
5284 MR. LANTOS: Well, the only thing I'll add to that is the only exception I could foresee to this will be, for example, Paul Gross is -- among other things he is an actor. He may well find himself in a film produced by someone who is at arms length with this channel but who has financing from Starlight. So in that context that can and is likely to happen at some point.
5285 But we have safeguards in place. It is not our intention to use Starlight's funds to finance the movies we make.
5286 Many of us here are filmmakers and that's what we do. We are in a relatively more fortunate situation than those who are earlier on in their careers, in that we have more access to the worldwide distribution than they do and more access to financing. This specifically was not designed to finance the films we make. On the contrary.
5287 So we have whatever safeguards we could think of in place, but if you wish to add to those you're welcome to. It is not our intention.
5288 COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Lantos.
5289 The publicity revenues is quite low. I think here 250 in Year 1 and that gets ratcheted up to about 600,000 in Year 7, Mr. Bolen.
5290 Do you want to explain how the advertising will be sold? It seemed a little low, those figures.
5291 MR. GRATTON: Yes, Mr. Vice-Chair.
5292 Advertising is not a primary component of our business plan because most of our content will be offered without commercial interruption. We're different than other channels that put 14 minutes an hour or 12 minutes an hour into their programming, including movies and cut them up.
5293 We don't think that makes for a very compelling viewing experience and it would not add to the appreciation of these films. And we are cinephiles. We are film buffs. We believe that people should see the films without commercial interruption.
5294 Having said that, there would be a small amount of advertising in between films, nothing even coming close to approaching the volume on other services. There would be some opportunities for sponsorship. We have put in a very modest number for that. As I say, our main revenue source will be subscriber revenue.
5295 Does that answer your question?
5296 COMMISSIONER PENTEFOUNTAS: Yeah, it does. And just to add to that, given the fact that theatrical releases are so tough for films, especially English films in Canada, will there be some time set aside to promote upcoming theatrical or other release of Canadian films on Starlight?
5297 MR. BOLEN: Well, I think we would have perfect opportunities to do that. We intend to, for instance, do programming in our association.
5298 We have a whole wide range. We've identified some of them in our documents, a wide range of organizations across the country that are engaged in promoting Canadian film. Promotion is a big part of what we are going to be about.
5299 This is kind of a virtuous circle where we start promoting internally. You know, we use the technique that broadcasters use all the time. You show one program. Within that program or at the end of it, you program another program that's similar to the same audience. You try to build this momentum by promoting within and promoting forward-looking content.
5300 So I think that would be a key part of what we do. We intend to create a whirlwind of excitement and enthusiasm about Canadian film using every possible mechanism that we can as programmers, as marketers and advertisers and publicity people.
5301 COMMISSIONER PENTEFOUNTAS: Appreciate your enthusiasm.
5302 MR. RENAUD: May I just add another point on the question of advertising?
5303 We tested as well -- the broad testing I mentioned earlier -- a dozen different attributes of the service with consumers to find out which ones they ranked as the most important.
5304 Number one on the list was 78 percent of Canadians said they value the idea that the service would be presented, that the films would be presented commercial-free. So not only do they value the service itself, they particularly value the idea that the films would be shown without commercial interruption.
5305 COMMISSIONER PENTEFOUNTAS: And would spending time between films promoting other films hurt the viewer's experience?
5306 MR. RENAUD: No, it would not.
5307 COMMISSIONER PENTEFOUNTAS: Is that document anywhere near, research, or it's just --
5308 MR. RENAUD: No, we -- sorry, I should tell you.
5309 COMMISSIONER PENTEFOUNTAS: If it's not, it's not.
5310 MR. RENAUD: It's a good question. We did not test that.
5311 COMMISSIONER PENTEFOUNTAS: Okay.
5312 MR. RENAUD: We did ask if they value -- the commercial -- the film being shown commercial-free.
5313 MR. BUCHNANAN: As a former programmer of 13 channels, I would assure you that if promotional materials are properly produced and properly presented, they are of great interest to viewers. But they have to be done well and they have to be integrated with the content of the channel in order to make them effective.
5314 COMMISSIONER PENTEFOUNTAS: I appreciate it.
5315 I feel the whip coming, so just the last question.
5316 MR. BUCHNANAN: Not the slap on the head. It's the whip! You're revealing new insights into your chairman that I've never seen before, honestly, and we have worked together a lot in the past.
5317 COMMISSIONER PENTEFOUNTAS: Not that there is anything wrong with that if you're into that, but that's another time and another place for that particular discussion.
5318 MR. BUCHNANAN: There is a movie script in here, I think.
5319 COMMISSIONER PENTEFOUNTAS: You've got an admin fee of somewhere between 5.2 in Year 1 and 5.9 in Year 7. Are you comfortable with that?
5320 A good chunk of that would go to awards personnel. Have you thought about how many people would be employed by Starlight?
5321 MR. BOLEN: Well, we haven't put together a totally detailed operational plan but we have used our experience to come up with numbers that we think are realistic. We benchmarked what other services are doing that are comparable to Starlight and our cost structure comes in somewhere in the middle.
5322 But if you'd like to drill down on that, Mark could provide you with some details.
5323 COMMISSIONER PENTEFOUNTAS: If he could that'd be great, because the more money that goes to admin the less money will go towards creating film.
5324 MR. BOLEN: Well, keeping in mind that 70 percent of our revenue is going into Canadian content and 73 percent of that CanCon investment is going into original first run programming. So that's going to happen, no matter what.
5325 COMMISSIONER PENTEFOUNTAS: I still want to drill down some numbers.
5326 MS ROZEMA: Well, I can concentrate if you'd like.
5327 We have budgeted a million dollars for annual management fees which represent the cost and our best estimate as to the cost of actually administering the feature film fund.
5328 There are some costs that Starlight will have which are, quite frankly, on par with any other broadcaster that is operating. What makes Starlight unique is that in addition to broadcasting and financing, broadcasting operations, we're also providing for full financing of feature films through a selective process.
5329 COMMISSIONER PENTEFOUNTAS: I understand that. Do you have personnel numbers in terms of how many people will be hired by Starlight?
5330 MR. MUSSELMAN: No, we haven't actually got to the point in time where we've set that out.
5331 COMMISSIONER PENTEFOUNTAS: Okay, great. Thanks so much.
5332 Merci, Monsieur le Président.
5333 THE CHAIRPERSON: Madam Poirier.
5334 COMMISSIONER POIRIER: Yes, I have two questions.
5335 My first one is I'm trying to understand the rationale behind your request considering that Telefilm is investing almost $200 million, you said, in Canadian film productions or $180 million. That's right, no?
5336 MS ROBERT: It's $60 million. They have a yearly budget.
5337 COMMISSIONER POIRIER: Okay.
5338 MS ROBERT: Of $100 million, but actually going into feature film it's about $60 million.
5339 COMMISSIONER POIRIER: $60, okay.
5340 MS ROBERT: That goes into distribution, marketing and production.
5341 COMMISSIONER POIRIER: Okay. And this is public money, isn't it?
5342 MS ROBERT: This is public money.
5343 COMMISSIONER POIRIER: Okay.
5344 So why would Canadians have to pay a second time to see Canadian films because they are already investing in Telefilm and then they would have to pay, let's say, $12 per month to see -- well, I'm saying $12 because 45 cents becomes a dollar almost when it comes time for Canadians -- $12 per year, I'm sorry, okay, per year, okay, to see the film.
5345 So why would they have to pay a second time to see the production?
5346 MR. ARCAND: If I may, the irony is that, yes, it's the public who pays for the film, but the public doesn't get to see the film. So that's why. That's why we're here.
5347 The thing is the films get produced by the films that are produced by Telefilm and they are doing a great job, except that films worldwide are mostly seen on television finally. And our television system for various reasons doesn't provide this service. So that's why we are here.
5348 COMMISSIONER POIRIER: And what happens to your project if we deny it?
5349 MR. BOLEN: It doesn't exist and we lose a historic opportunity to do something exceptional in terms of providing Canadian content to Canadian consumers in a way they want to see it on television.
5350 MS ROBERT: I truly believe, again, as a parent it would be a sad time because this is a great opportunity to address a problem of future generations of viewers. They are so consumed by American products they don't -- no longer or very little identify themselves to our culture and our values.
5351 This is a terrific opportunity to not only give the ability to young filmmakers to tell their stories that will talk to their generation, this new generation, it will create -- and I really firmly believe in that -- future viewers that will appreciate what Canada is all about, what our stories are all about.
5352 We saw that a bit in Quebec when we went around the regions and brought the films to the regions where before it was not accessible. As a result of that it created a star system that Quebecers are proud of.
5353 There is a tremendous amount of talent across this country. They are terrific filmmakers. You have some here around the table. And what they create should be accessible to all in the small regions alike and Toronto and Montreal and wherever.
5354 So I personally as a parent would feel it's very sad that we did not take this great opportunity because, as has been said, broadcasters are now -- it's less than 5 percent of the amount of films being broadcast in Canada.
5355 MR. LANTOS: Can I add to this, Madam Poirier?
5356 COMMISSIONER POIRER: Yeah.
5357 MR. LANTOS: You know, in the film business, television is the great equalizer.
5358 Theatrical exhibition of feature films whether they are Canadian or from elsewhere, based on all of the revenues that we know of and statistics, accounts for at best 20 percent of a film's revenue, at best; often less. That means that 20 percent or fewer of the people seeing the films see them at the movie theatres.
5359 The overwhelming majority of films -- of audiences see films on television. So you're absolutely right. Canadians by Telefilm Canada are contributing to the financing of Canadian films. But they don't get to see them on their own television networks.
5360 They can if they wish to, spend $12 and go to a movie theatre and park their car and go see a film if they happen to live in Toronto, Montreal, Ottawa or Vancouver, with greater difficulty if they lie anywhere else because rarely do Canadian films go anywhere else.
5361 But what they don't get to do is to watch it on television. If they did we would not be here.
5362 So all over the world today, the way films are made outside of the United States and even in the United States they are subsidized, but certainly in Europe, in Australia, in Canada films are subsidized by the public purse one way or another. It's the only way they can actually survive against the Hollywood onslaught. That's why there are films made.
5363 Everywhere else where films are subsidized -- you pick your country because it applies to everywhere else, every other country -- the films are broadly available in primetime on the most widely distributed networks, often because of regulations. It's not the case here.
5364 So we are proposing to remedy this and bring to those very Canadians who are contributing to the financing of Canadian films, a way for them to actually see those films.
5365 COMMISSIONER POIRIER: And just to complete my last question because of what you just said, Mr. Lantos, and Madam Robert, I was wondering, Mr. Buchanan, could you clarify in your final document where you wanted distributed in Quebec?
5366 Because if it's so important it should be distributed everywhere and it should be seen by Quebecers too, okay, because the French film will be presented in French with translation on the bottom so it can reflect themselves. So I don't really understand the answer you gave to Mr. Pentefountas saying it wasn't distributed everywhere in Quebec, if I understood well.
5367 MR. BUCHANAN: The answer simply related to how we had done our financial model. We had picked up -- we had tracked from memory an English-language distribution order which reflected the same kind of distribution. You weren't going to put it on a mandatory basis into a Francophone community if it was an English-language mandatory order.
5368 So I will do as you suggest and address that.
5369 But I do have a further response, and it speaks to what Commissioner Simpson and I were also talking about earlier, which is what happens if you don't do this. You've heard the cultural -- kind of a -- if I can call it that, a cultural answer.
5370 The financial answer might be different. If what you're thinking is, well, 45 cents becomes 90 cents, if you do a 100 percent BDU market or markup, and Commissioner Simpson and I were talking about the costs that had been previously attributed to a channel being more like 16 cents, why wouldn't someone embrace the opportunity to get 45 cents instead of 16 cents?
5371 What about all 90 cents? What about if the BDU raises the price by 90 cents and you don't have Starlight?
5372 What have you achieved for the Canadian broadcasting system if the price goes up? There is no impediment to it going up by 90 cents, and don't we know, all of us who receive regular bill stuffers, how that works? You may find yourself in that situation where the bill goes up anyway and there's nothing to stop it from happening.
5373 MR. BOLEN: Also, Madam Commissioner, if you wouldn't mind, I'd just like to make one quick comment about your previous question.
5374 There are other forms of Canadian content in the broadcasting system that receive subsidies from taxpayers, quite a few through the CMF and through tax credits and other mechanisms. The difference between feature film and those programs is that they have shelf space and we don't. They are being seen but ours aren't for reasons that have nothing to do with the quality of the programming or the need or demand for the programming.
5375 This is sort of a -- it requires a kind of -- put a mandatory carriage on basic as a form of regulation because what we have is a form of market failure. And the markets failed not because of a demand problems but because of a supply problem.
5376 We believe that by addressing the supply problem and making this content readily available in an exciting way and adding to the inventory, going forward, that we will address the supply problem and the demand that's there will grow and show itself in a myriad of ways.
5377 So that's where we think the role of the Commission is so important, where there is a failure in the marketplace for perfectly good commercial reasons on the part of other players in the system have different interests. Our interest is to address that demand and address that market failure.
5378 THE CHAIRPERSON: So I have some questions as well.
5379 The Vision Critical studies, if I understand correctly, asked on a 3 cents per day basis, right? And I know you guys are masters of illusion, right? That's your business. We are in the business of evidence. Nobody pays on a daily basis.
5380 Did you actually ask a question based on a monthly fee and, if not, why not?
5381 MR. ARNISH: We did not ask that question. We presented it as 3 cents a day.
5382 THE CHAIRPERSON: Okay. And why did you not ask that question in a monthly basis?
5383 MR. ARNISH: Well, you're asking me to go beyond the evidence that I've got and had, but I would expect that one of the ways --
5384 THE CHAIRPERSON: But, surely, you're an expert on how one surveys.
5385 MR. ARNISH: Well, I'm not a master of illusion.
5386 THE CHAIRPERSON: Your clients might have been.
5387 MR. ARNISH: I would assume that one good way to market the service if it's licensed, would be to describe it to consumers that way. And of course, as we have been discussing earlier, the 3 cents takes into account 100 percent retail markup.
5388 But that would be a sensible way to advertise the value of the service to consumers, and we tested it on that basis.
5389 THE CHAIRPERSON: You will understand that we are not in them marketing business. We are in the business of regulatory issues and evidence.
5390 MR. ARNISH: Correct. The math is the same, though, 3 cents a day, 90 cents a month, $10.80 a year.
5391 THE CHAIRPERSON: But when we test affordability in our proceeding we don't ask marketing questions. We ask affordability questions. Perhaps we'll leave it at that.
5392 I've been involved in Canadian film policy for a number of years and I've heard it often said that the problem is not the number of Canadian films being made but connecting those audiences to the films. So I was wondering, and you talked earlier with the Vice-Chair about your promotion budget vis-à-vis promoting your service.
5393 But I was wondering how much of your business case goes to promoting Canadian films outside of your service. Because I realize -- and Mr. Lantos you explained that and it's unfortunate that a lot of people don't see this art form how it was meant to be seen; that is, in a darkened theatre.
5394 But why instead of choosing to make more films and creating more supply of Canadian films, weren't you thinking, well, perhaps this is the final opportunity to actually help the promotion of connecting Canadians more broadly rather than on TV?
5395 MR. LANTOS: Our strategy, if licensed, is that within the budget of every film financed by Starlight there be a substantive amount of money reserved for the marketing of the film in Canada. The approximate number that we have been thinking of internally is about 10 percent of the budget. In some cases it could be considerably higher.
5396 What we -- we have two distributors with us who could add to this, but it is our opinion that to give a film full access to the theatrical marketplace would cost about, anywhere between $400,000 and $500,000 per film. If the film is deemed to be of wide popular value then more money would be spent and then it would play in more theatres.
5397 But it is our intention for the first time because no film, no Canadian film is financed with a marketing budget built into the financing. In the case of Starlight the films that we fund would -- that would be a condition of our funding that the marketing budget is built into each film.
5398 In addition to which, we have reserved -- forgive me. The numbers are not at my fingertips. They may be at yours and my colleagues -- X dollars per year for the overall marketing of our channel and all of its films.
5399 Do you have that number?
5400 It's in our submission.
5401 THE CHAIRPERSON: Yes, the problem is sales, advertising and promotion all put together that's in the 4.4 to 4.6 range. But it's not clear to me what portion of that is promoting the channel as opposed to promoting Canadian films.
5402 MR. LANTOSS: I mean, our view is when we will be promoting -- our channel, remember this, only has one stream of programming. Canadian films, nothing else.
5403 So when we promote the channel we will promote Canadian films. It's all we offer. That's the number of 4.8 a year, in addition to the amount built into the budget of each film.
5404 THE CHAIRPERSON: Right.
5405 Now, let me get back to the point which is more about promotion of Canadian films more broadly, including in theatre -- theatrical distribution. You said that in your structure you would require in your production structure at least 10 percent of the funding.
5406 Tell me how you would calculate that. 10 percent of what? 10 percent of the production budget on top of the production budget or as part of?
5407 MR. LANTOSS: It would be part of it. Let's say a film -- Starlight contributes $4 million towards the financing of film which in turn triggers approximately an additional million dollars of tax credits. So that makes it a $5 million film if the producer chooses to invest the tax credits.
5408 So that would -- a marketing budget will be part of the budget of the film.
5409 MS ROBERT: May I, Mr. Chair?
5410 THE CHAIRPERSON: Yes.
5411 MS ROBERT: When you do the marketing of a film, Starlight would not be the distributor of the film. In the component of how this film being made is going to be distributed, the first part of distributing a film is showing it in movie theatres. So there is a tremendous amount of campaign promotion being done when we shoot the film, we invite journalists, and so on, on the set, and they talk about it in newspapers and the social medias, and so on, and then -- you know, ads in the papers, and so on, and then video-on-demand, and so on. So there's publicity all around.
5412 But one of the problems we are right now as filmmakers going through is the amount of promotion of our films on the broadcast system, because the broadcast system does reach a tremendous amount of audiences.
5413 So if you know that further down the line Starlight is being shown in a small community in Regina and they know that this film is coming, it's certainly going to be wonderful because it's going to tie in that when the film comes out in movie theatres, Cineplex Odeon on might say, "We want to show it in our theatre because those people in that small community heard about it. They want to see it." Because this will create the demand also.
5414 So the promotion is not just what starlight is going to require for the producers and filmmakers to invest in promotion, but this will be in addition to what we already have to do with the distributor.
5415 THE CHAIRPERSON: I understand, but I heard Mr. Lantos say as part of the funding requirement there would be a requirement from the funds perspective to spend a certain amount of the available funding from the Starlight fund into promotion and I was trying to get a finger on that to know exactly how you would do that and whether we could convert that into a condition of license.
5416 MR. LOEWY: Mr. Chairman, if I might say, between Hussain Amarshi and myself we have released probably the majority of Canadian films in the last 20 years or so and we will be available to advise distributors as to how market those films and we are confident that we are going to do a good job.
5417 THE CHAIRPERSON: I'm sure you're very confident, but as regulators we tend to look to conditions of license.
5418 MR. BOLEN: Mr. Lantos would like to add to that. We just wanted to have a brief conference, because this wasn't a question that we considered, but we just did.
5419 MR. LANTOS: We would accept that as a condition of license, yes.
5420 THE CHAIRPERSON: Thank you.
5421 And I would suggest that you might, as an undertaking for May 2nd, provide how exactly it would be articulated and the percentage or -- I'm not quite sure exactly how you intended to do it in your Starlight.
5422 MR. LANTOS: May I say we would enthusiastically accept that as a condition of license because that's what we're all about. As to the exact formula, that's a bit of a challenge because we have not focused on it.
5423 THE CHAIRPERSON: Well, you have a few days to focus on it now.
5424 Now, I understand fully that the films, the 8 to 12 per year you produce. would not seek Telefilm funding, but they would seek tax credit both federally and provincially.
5425 Is that correct?
5426 MR. BOLEN: Well, we have decided we would require the federal tax credit and that would be an equity investment on the part of the producer and count towards equity, but we would allow the producers to keep their provincial tax credit in keeping with the original intention of provincial tax credits was to help those producers capitalize their businesses. You know, it's unusual step.
5427 And then most broadcasters require -- not always, but most require that most of the time that independent producers put all of their tax credits into the financing of a program and that has had a detrimental effect on the independent production community because they have -- they are greatly undercapitalized.
5428 So we are saying we will provide all the financing net of federal tax credit, the provincial tax credit could be kept for the purpose for which it was originally intended.
5429 If the producer wishes to invest the provincial tax credit, they are welcome to do so without restraint and get an equity -- pro rata equity credit for that contribution, it's up to them.
5430 This is been a long-standing issue in the independent production community and broadcasters are starting to be more flexible in that regard with independent producers.
5431 THE CHAIRPERSON: Right. My question is somewhat different and thank you for that answer.
5432 MR. BOLEN: I'm sorry, I may not have understood it.
5433 THE CHAIRPERSON: Well, I didn't ask a question, I just wanted to make sure that I understood as a basis what you were doing with tax credits.
5434 Now, tax credits, unlike grants and contribution, aren't as transparent to Canadian taxpayers as tax credits, because it's forgone revenue, right. There is a value, there is less revenue government goes and gets through a tax credit if otherwise it wasn't there, so I was wondering if you would be able to tell me -- and you might want to do this by May 2nd -- how much additional pressure would these additional 8 to 12 films put on the public purse?
5435 MR. BOLEN: We could do that calculation for you.
5436 THE CHAIRPERSON: Yes.
5437 MR. BOLEN: It's a little hard to determine exactly because it's part of the overall mix of programming. In any given year programming goes up, programming goes down and the drain on the tax credit cost to government is not a fixed cost.
5438 But we will look at that and try to do a thorough analysis and give you an answer.
5439 THE CHAIRPERSON: Well, we know what the percentage would be generally and so you would know as well how much budget there would be based on your financing. It's pretty much a straight line I think.
5440 MR. BOLEN: Okay. Well, we will take a really close look at that and see what we can come up with.
5441 THE CHAIRPERSON: Good.
5442 MR. LANTOS: We can do that --
5443 MR. MUSSELMAN: May I add to this?
5444 I'm sorry, go ahead Robert. Mark is right behind.
5445 MR. LANTOS: I just want to add one thing.
5446 It's important to put tax credits into context. These are vehicles created by most of our provinces and the federal government to attract more film and television production. They don't only apply to Canadian films, tax credits are applied to foreign films. So all the American television series and American movies that shoot in Canada also get tax credits.
5447 Government, for its reasons, based on its own evaluation, has decided that's an economic advantage to Canadians and in fact all of the studies bear that out. For every dollar of tax credit there is more than one dollar generated of revenue.
5448 So that's the basis on which tax credits exist and they are not specific to Canadian productions, a lot of Hollywood movies shoot here for that reason.
5449 THE CHAIRPERSON: Well, it's very good to put that on the record.
5450 You do know I used to run the CAVCO program in another life.
5451 MR. LANTOS: I do know that.
5452 THE CHAIRPERSON: Okay, good.
5453 MR. LANTOS: And so I know I'm speaking to the converted, but maybe not everybody on the panel has.
5454 MR. MUSSELMAN: Mr. Chairman, we are very well aware of your past life and perhaps we might properly address your question not only in terms of additional filings, not only by recognizing the additional, as you put it, drain on the public purse, but also recognizing the increased economic benefit that's generated as a result of the additional production that that would support.
5455 Is that fair?
5456 THE CHAIRPERSON: Fair enough, yes, but still for May 2nd.
5457 MR. MUSSELMAN: Yes. Understood.
5458 THE CHAIRPERSON: And do give priority to the actual question I asked, which I think is the first one I want an answer to.
5459 I'm a bit struck by the fact that you are proposing to do an all-Canadian service. You know, for history of the Canadian broadcasting system there has been a cross -- less so on the French market, certainly in the English market -- of using the popularity of foreign content as a way to lift Canadian viewership. It has occurred on conventional television, it has occurred in various launches of specialty services over time, and I'm sure -- I know Mr. Gratton is a great film buff and I take it he is still going for his world record of films seen, but I'm sure he doesn't limit himself to just Canadian films.
5460 Explain to me why you think putting Canadian films in the ghetto actually is the best strategy?
5461 MR. LANTOS: Well, I was hoping you would ask this.
5462 I have read some of the interventions that have been filed against Starlight so I expected this would come up and hoping that it would, because it cuts right to the core of who we are and why we are here and what the problem is.
5463 One of the interventions against Starlight specifically says that the proper way -- that the best way to show Canadian films is sandwiched in between Hollywood blockbusters. Those might not be the exact words, certainly it's the exact meaning -- and that, to use the words you just used, that Canadian films shown on their own will ghettoize the films and do them a disservice.
5464 Well, Mr. Chairman, I doubt very much that's your line of thinking, but I think it's an important question to put out there given the interventions that have been filed. They are a testament to a kind of colonized mentality that I hope we have long ago left behind, the notion that a Canadian film, in order to attract an audience, needs to hide somewhere, somehow beyond -- behind "The Incredible Hulk" or "Mission Impossible" and then, just as that movie is over, spring on the unsuspecting Canadian consumer before he can change channels is not one we subscribe to.
5465 On the contrary, we make extraordinary films, in English and in French, they are applauded by audiences who get to see them, they win Academy Awards, the win Golden Globes, they win prizes at the Cannes Film Festival, they are the envy of many film industries.
5466 More Canadian films have had Oscar nominations in the past dozen years than any film from anywhere except the United States and the United Kingdom. We don't need to hide behind "The Incredible Hulk", we don't need to hide behind anyone, our films speak for themselves and they are entitled to their own platform.
5467 THE CHAIRPERSON: Now, I understand that after the theatrical windows and other preliminary windows before we get to the TV windows, you would be taking exclusive right to the television window for the 8 to 12 films you would be financing.
5468 Is that correct?
5469 MR. MUSSELMAN: That's correct.
5470 THE CHAIRPERSON: Is that time-limited?
5471 MR. MUSSELMAN: We will need to ensure that our -- what we're trying to do in ensuring that Starlight has access on an exclusive basis to these films that we are fully financing is, as Mr. Bolen referred to earlier, developing a proprietary, an attractive proprietary library of feature films that are only available on Starlight and will therefore drive viewership.
5472 So while there may be situations where after broadcast on Starlight Mr. Bolen and his programmers and his staff may determine to enter into a license with another Canadian broadcaster to provide for the exhibition on another network, that could be.
5473 But certainly our intention is to have these films premiere on television, on Starlight and have exclusive period on Starlight.
5474 And I would also mention that to the extent that films that are financed by the Starlight Fund are exhibited on other networks, those revenues will be flowing into the benefit of the producer as well.
5475 THE CHAIRPERSON: But if they are great Canadian films, why not make them as broadly available as possible on the television platform?
5476 MR. LANTOS: Well, if you choose to provide us with a 9(1)(h) license they will be available in every Canadian home. That's as broad I think as you can get.
5477 THE CHAIRPERSON: On the television platform.
5478 MR. LANTOS: On the television, but they will certainly be available in movie theatres before they go on television. They will be available on VOD, they will be available on digital download, they will go through the normal windows prior to any film getting to television.
5479 However, we will reserve the exclusive television rights simply because we will be in every home if we have a mandatory license and we will be able to build over time a library of films that are only available on Starlight, which is essential for the service to ultimately not be mandatory. It is a strategy that is pursued today by, among others, since their name has been raised here today, that's Netflix's strategy, it is HBO's strategy, it is the strategy of all of those who are in the business of fully financing product.
5480 Those broadcasters who are in the business of simply licensing a product and pay maybe 10 or 20 percent of its cost, they in turn require a limited period of license.
5481 But those who are in the business of proprietary owner, of fully financing, in most cases actually tend to own the worldwide rights to the product, which we will not aspire to, but as far as the Canadian television rights are concerned we believe that's fair trade. We fully finance, we control the Canadian television rights.
5482 As Mark Musselman has just said, if for any reason it makes economic sense at some point to sublicense a film to another broadcaster, those revenues will go into the pool and they will be subject to the 70 percent reinvestment.
5483 THE CHAIRPERSON: Just quickly, I would like to go back to the self-serving argument.
5484 On your presentation of your potential schedule there is obviously a great deal of inventory, some of which many of you here have helped create. and perhaps either contractually or by equity still own a share in, and I take it -- maybe I'm wrong -- that your budgets for acquisition of the inventory will involve some remuneration to whoever is the rights holders to these properties.
5485 Is that correct?
5486 MR. LANTOS: I could answer. I mean I think Hussain may want to add to this.
5487 But the fact of the matter is that the amount of money that we contemplate spending on licensing non-exclusively an individual film from the library is quite modest, as you can see. The numbers are there, so I'm not going to repeat them.
5488 But most of these films, with a few exceptions, are owned by distributors and there is one distributor who is a shareholder -- and we can speak to how we will deal with potential conflicts of interest in the case of Hussain Amarshi -- he's the only one. There may be some people around this table who may own the rights to a couple of their older films, I myself don't. Every single one of my films is distributed by others and they will eventually return to me, I'm not sure if I will still be alive, but as we speak here --
5489 THE CHAIRPERSON: It takes a while to into net, doesn't it?
5490 MR. LANTOS: As we speak here today I don't own the rights to any film that I have made, they are all owned by distributors so they will be -- Starlight will have to license them from those distributors.
5491 THE CHAIRPERSON: But I am correct, though, there is a potential for a net payment to some of you, even through ownership sharing of some sort even if it comes through the distributor? Even though if you don't own it you could still have a revenue share?
5492 MR. CRONENBERG: I can say that I have made about 20 feature films and they only film that I have ever seen residuals from was "The Fly", which was an American production basically in terms of financing anyway. So I will not see one cent from any of these, I can speak for myself.
5493 THE CHAIRPERSON: Okay.
5494 MR. BOLEN: I could just add from a programming point of view.
5495 It would be a terrible lost opportunity to Canadian viewers if we were to exclude films done by the people in this room because there was a slight chance that a trickle of residual revenue at the end of the train might come in.
5496 THE CHAIRPERSON: Sorry, that wasn't my suggestion.
5497 MR. BOLEN: No, I know, but it's just the benefit to individual shareholders from the licensing of library films by Starlight is virtually vapour, and I'm not exaggerating there. There's almost nothing in it for the filmmakers themselves. And other filmmakers as well who have sold their rights to distributors, they will get very little return, these films have been sold long ago.
5498 THE CHAIRPERSON: My last question, and I know it has been a while asking questions here, but I think it's important.
5499 You know, when new distribution platforms have occurred through the 20th century, and I think the advent of television, the film and television -- sorry, the feature film business said: Okay, here is a great new forward-looking platform, let's get our content on there. Then there were other technical advances when addressability, greater capacity on distribution networks occurred and that allowed VOD and all kinds of other platforms, again, the film business was looking towards those future looking platforms.
5500 Some might look at this application as rather than looking at the forward platforms and seeing what might be down the road in five years of focusing too much on the past, and I heard your conversation earlier about Netflix, whether it's Netflix or something else, there are great creative minds here. What would you answer if somebody was saying that, you know, this looks like back to the future in terms of -- rather than looking at where Canadians will be?
5501 MR. CRONENBERG: I would like to say one thing.
5502 I think in the early days of television, rather than movie studios saying here's a great platform we could jump on, they were horrified by the advent of television and thought that it would destroy the film industry to the extent that they actually did not allow a television set to be shown in any of their movies that were made at the time and also of course that induced the development of widescreen cinema and stereophonic sound because they wanted to provide something that television couldn't provide. So just to put that into perspective.
5503 It's not an instant -- there's always a fear and a reaction and a misunderstanding. Only later did Hollywood realize that television would actually save the studios as an additional source of revenue.
5504 THE CHAIRPERSON: In fact that's the point of my question, perhaps the future long-term thinking should be thinking differently than putting it on basic television.
5505 MR. ARCAND: Yes. But then again, each time there is a new art form or a new communication form people tend to be afraid. For instance, you know, when movies came in people thought that maybe it would be the end of theatre. It was not, theatre today is as alive as it was in the previous centuries. And then we thought that television would kill the movie industry. No, it did not. The movie industry is flourishing and so is television.
5506 So the new platforms, the ones that you envision in the future, will probably be something else. Film will still be there and then we will add other things to it that will come in other forms.
5507 MR. BOLEN: We will embrace every opportunity we have going forward as these opportunities emerge to distribute these films in new ways if those opportunities are available and financially viable, but television is still the dominant medium of our time, it is the way most people want to consume audio-visual content and are consuming audio-visual content of the kind that we are supporting here, drama for instance, documentary, and so on. This is the main way that they are being consumed.
5508 THE CHAIRPERSON: Thank you. That's very clear.
5509 And thank you for your patience, I know it has been a long number of questions, but those are all our questions right now and so we are adjourned until -- let's go until 2:15.
5510 Thank you very much.
5511 MR. BOLDEN: Thank you very much, Commissioners.
--- Upon recessing at 1257
--- Upon resuming at 1414
5512 LE PRÉSIDENT : Donc, à l'ordre.
5513 So welcome to the afternoon session and I ask the APTN panel to identify themselves and then make their presentation. I believe you have 15 minutes for that. Please go ahead.
5514 MR. LaROSE: (Aboriginal language spoken / Langue autochtone parlée).
5515 Merci beaucoup pour l'occasion d'être ici aujourd'hui.
5516 Good afternoon, Mr. Chairman, Monsieur le Vice-président, Commissioners, Madame la Commissaire. Mon nom est Jean LaRose. I am the Chief Executive Officer of APTN.
5517 Let me introduce our panel.
5518 Starting with the back row, to my left, we have:
5519 - John Stott, HR Director;
5520 - Karyn Pugliese, Director of News and Current Affairs;
5521 - Wilf Blonde, past CFO and current Financial Advisor;
5522 - Lea Todd, Scheduling Director;
5523 - Vera Houle, Community Relations Director;
5524 - Joel Fortune, our Legal Counsel; and
5525 - Wayne McKenzie, Director of Operations.
5526 On the front row, starting to my left:
5527 - Aimée Powell, Director of Advertising and Sales;
5528 - Lisa Squire, Marketing Director;
5529 - Sky Bridges, Chief Operating Officer;
5530 - Darcy Smith, Chief Financial Officer.
5531 And beside me, to my right, we have:
5532 - Monika Ille, Programming Director; and
5533 - Mr. Dan Vandal, Chair of APTN's Board.
5534 Permettez-moi seulement de signaler en commençant que tous les membres de l'équipe de direction et du conseil d'administration d'APTN sont Autochtones, sauf un. C'est ce qui nous rend unique au pays. Ce groupe prouve que la licence accordée à APTN a créé des débouchés pour les Autochtones dans les domaines de la télédiffusion et des médias numériques.
5535 I know I speak for all of us when I say we appreciate the opportunity and we are aware of the responsibility it brings with it.
5536 I would like to ask the Chair, Dan Vandal, to do a few short opening comments and then I will resume my presentation.
5537 MR. VANDAL: Mr. Chairperson, Members of the Board, it is our privilege to appear here today to request the renewal of our broadcasting licence and the continued distribution of APTN as a basic service.
5538 Preparing our plan for licence renewal was a three-year process. APTN's board of directors, of which there are 21 members, worked closely with management and consulted broadly in our communities throughout Canada to make our plan concrete, achievable and relevant to Aboriginal Peoples and to all Canadians.
5539 Dans notre vision, APTN deviendra de plus en plus la plateforme multimédia vers laquelle les collectivités autochtones et les Canadiens se tourneront régulièrement pour apprendre les uns des autres, que ce soit dans des langues autochtones, en anglais ou en français. Nous irons chercher les jeunes Autochtones. APTN leur servira de lien commun et constituera une partie importante et pertinente de leur vie.
5540 Our renewal application reflects this vision, and on behalf of our board of directors I would like to thank you for the opportunity to be here and to present our vision to you.
5542 MR. LaROSE: Thank you, Dan.
5543 When APTN launched in 1999, there were fewer than 10 Aboriginal producers. They had very few outlets for their stories. Today, we have over 115 Aboriginal producers from coast to coast to coast who produce over 90 percent of all our programming. We have drama, children's, music, variety and documentary programs, many of which have won national and international recognition.
5544 Now, through a show like "Dene Journey" any Canadian can travel with a young Dene like Joseph Buffalo-MacDonald, a skateboarder raised in the city, to the woods and lakes in the North with a Dene elder -- in high definition and with solid production values.
5545 They can share the experience on Twitter and other social media on a second or third screen all at the same time. This conjunction of technology, tradition, youth, the land and our cultures makes the head spin a bit.
5546 Grâce à « Blackstone » et à d'autres dramatiques, comédies et émissions pour enfants primées que diffuse APTN, dont « Cashing In », « Fish out of Water » et « C'est parti mon tipi », les Canadiens voient les Autochtones d'un oeil nouveau.
5547 À l'aide de « APTN National News » et de « APTN Investigates », nous diffusons des reportages et présentons des points de vue qui autrement resteraient dans l'ombre.
5548 APTN was a world first for Aboriginal broadcasting and we continue to play a leadership role through The World Indigenous Television Broadcasters Network, of which APTN is a founding member.
5549 It is amazing to think back on the success Canadians have achieved with APTN and how the CRTC's decision in 1999 has paid off. This is where APTN is now.
5550 Our renewal application is about making sure we honour and build on this success and meet the coming challenges we all face as Aboriginal Peoples and as Canadians.
5551 We have set out a three-part strategy in our application for the next licence term.
5552 1. The first is to engage and serve as a priority the growing younger Aboriginal population of Canada.
5553 Commissioners, you are probably familiar with some of the demographic trends in the Aboriginal population:
5554 - the Aboriginal population is growing at a faster rate than the general Canadian population;
5555 - that population is much younger than the population at large;
5556 - the Aboriginal population is increasingly living in urban areas or connected to urban areas in some way through employment or family; and
5557 - Aboriginal Peoples are largest in proportion in Western Canada and the Territories, and we will grow over the coming years, exceeding 20 percent in Manitoba and Saskatchewan and Yukon, and more than 50 percent and 85 percent in Northwest Territories and Nunavut, respectively.
5558 APTN has to respond to these trends.
5559 Nous devons en priorité servir les jeunes Autochtones. Nos émissions doivent être populaires et pertinentes pour ce groupe de téléspectateurs, aborder des thèmes qui les touchent, être animées en pensant à eux et accessibles sur de multiples plateformes.
5560 Nous avons un objectif précis en tête pour la période couverte par notre prochaine licence, soit celui d'atteindre chaque semaine 50 pour cent des téléspectateurs autochtones âgés de 13 à 35 ans en nous servant de l'ensemble des activités et des plateformes d'APTN.
5561 It is important for APTN to connect with Aboriginal youth because that is a large segment of our population and they are our future.
5562 2. The second one is to solidify APTN's position as a national network in a highly competitive environment and to offer programming that reflects this position.
5563 APTN is a true national broadcaster that provides a first level of service for Aboriginal Peoples and acts as a bridge between Aboriginal Peoples and all Canadians.
5564 Our audience expects to see high-quality programming on APTN that is just as good as the programming they can see on other national networks. We have created an expectation for excellence in our programming and APTN has to continue to meet that expectation.
5565 We have identified a number of specific initiatives to solidify our position in the intensely competitive broadcasting environment.
5566 In the area of news and information programming, APTN will:
5567 - increase our newscasts to 7 days a week, not just 5;
5568 - provide three regional newscasts instead of one national newscast;
5569 - increase our news-gathering capacity by staffing each regional bureau with a reporter, a video-journalist and a camera editor and by maintaining three mini studios in Montreal, Yellowknife and Vancouver;
5570 - increase our in-depth analysis and reporting on "APTN Investigates" to a weekly format rather than the biweekly; and
5571 - build a structured community-based initiative to support user-generated content and community participation, which is an ideal means to gather raw material given the geographic challenges of serving the Aboriginal population.
5572 In the drama and other programming categories, APTN, which covers a full range of programming categories, must also change with the times and improve.
5573 APTN joue maintenant le rôle de télédiffuseur principal ou unique dans un plus grand nombre de projets qu'auparavant. En 2005, par exemple, APTN travaillait avec 22 télédiffuseurs différents à 45 émissions de toutes sortes. L'an dernier, nous n'avons pu collaborer qu'avec quatre télédiffuseurs à cinq émissions.
5574 Lorsqu'il dresse ses budgets de programmation, APTN est maintenant confronté à des pressions concurrentielles encore plus grandes que celles prévues au moment de la préparation de sa demande de renouvellement.
5575 À titre d'exemple, l'enveloppe de rendement du télédiffuseur que le FMC accorde à APTN a été réduite de plus de 50 pour cent au cours de la dernière année en raison des critères changeants du Fonds monétaire canadien. Il est donc essentiel qu'APTN attire et conserve ses auditoires.
5576 Over the next licence term, to improve and increase the attractiveness of our distinctive programming we will implement the following plans:
5577 Increase production budgets generally across all genres and create series with close to standard runs. Thirteen episodes rather than the six that most of the time we can now afford, increase development funding to a minimum of one million each year to generate innovate show ideas and support emerging producers.
5578 Produce and licence more exclusive content that is suited specifically to viewing on multiple platforms and targeted to our primary audience of Aboriginal youth, including variety and lifestyle programming as well as an additional awards program each year.
5579 Produce more regional content through shared use of our regional open studios and continue to partner with Canadian and non-Canadian broadcasters where possible to leverage second and third windows, although these opportunities at this time are declining, as I have mentioned.
5580 All of these initiatives share a common theme, to position our programming and quality and relevance among the kind of programming that Canadians expect to see on a national network.
5581 Without that type of programming consistently offered, we do not believe that APTN will be playing the role it should be as a national network nor would APTN continue to adequately reflect Aboriginal peoples and Canada and their interests.
5582 And the third is to position APTN for a multi-platform future. All of APTN initiatives are now undertaken with a view to the distribution platforms of the future. APTN is already fully engaged and employed exploiting the web through APTN.ca, social media tools and through enriched digital contents.
5583 Looking forward, we have identified two specific projects to serve the needs and interests of Aboriginal peoples.
5584 Tout d'abord, le projet "Digital Drum" de APTN est destiné au principal auditoire cible que sont les jeunes. Internet n'est pas nécessairement un endroit convivial pour les autochtones, comme j'en ai eu l'expérience et comme je l'ai constaté à maintes reprises.
5585 Nos jeunes ont besoin d'un endroit bien à eux où ils peuvent échanger. Digital Drum servira de lieu de rencontre vivant et rassembleur où les jeunes exploreront leurs intérêts culturels, sociaux et politiques dans un espace réservé.
5586 Digital Drum will leverage and feed into our broadcast activities and act as a cultural mixing pot and an essential link between APTN and Aboriginal youth. The second sheet digital media initiative involves placing more Aboriginal language content online for easier access. Any linear network faces a challenge these days in reaching viewers with scheduled programming.
5587 When you provide services in more than 20 different Aboriginal languages in any given year as well as English and French, as we do, those challenges are multiplied many times.
5588 Our audiences typically tell us that they want access to more Aboriginal language programming. Yet, Aboriginal language programming is always targeted at a smaller audience than our other programming. The answer to this conundrum is to make more programming available online and on demand.
5589 APTN will not cut back on all of our regular APTN Aboriginal language programming that we broadcast, but we will make sure that our programs are produced with an Aboriginal language version and that this programming is made available whenever possible on demand.
5590 APTN has heard consistently from educators, including through this proceeding, of the value of our Aboriginal language programming to youth. APTN will make this programming even more relevant and accessible.
5591 Les plans d'APTN sont essentiels pour lui permettre de s'acquitter de son rôle de télédiffuseur autochtone national dans le Canada d'aujourd'hui. Pour la planification de notre avenir, nous sommes sans cesse questionnés sur le rôle nécessaire d'APTN auprès des autochtones et de tous les Canadiens.
5592 The necessary role we have is to reflect Aboriginal peoples on television and on related digital platforms because otherwise Aboriginal peoples would be invisible. This role is as important to all Canadians we believe as it is to Aboriginal peoples.
5593 We know from our hard learned experience that invisibility and the lack of mutual understanding have not served Aboriginal peoples or Canadians well in the past.
5594 At APTN we believe that we are breaking down barriers between peoples and increasing understanding. This is a theme that is reflected in many of the interventions that we and you have received.
5595 We understand fully the exceptional nature of mandatory basic distribution and we have addressed the criteria set by the Commission in our renewal application. APTN meets these criteria.
5596 Dans le cadre de sa demande en vue du renouvellement de sa licence APTN sollicite une hausse de 0,15 $ du tarif de groupe, pour un montant total mensuel de 0,40 $ par abonné pour le service de base. Au tarif mensuel de 0,40 $ par abonné, APTN ne coûte aux Canadiens qu'une petite fraction de ce qu'ils paient pour leur service de base, probablement entre un et deux pour cent, dépendant de la moyenne.
5597 La plupart des Canadiens ne s'en tiennent pas au service de base, alors APTN leur coûte encore moins cher en proportion de leur tarif d'ensemble.
5598 Most importantly, though our proposed wholesale fee represents a fair price for our service and an amount of revenue that APTN, to APTN that is necessary for us to fulfil our role for the next seven years.
5599 We presented in our application a breakdown of how the incremental revenue from the proposed wholesale fee would be allocated among our initiatives for the new licence term and we would be pleased to review these with you today.
5600 APTN is very much aware of the pressures facing the Canadian Broadcasting industry and a consumer interest in the low cost basic level of service. APTN has advocated for such a service in the past.
5601 Our submission today is that APTN's proposed wholesale fee is reasonable and proportionate to our mandate. It is affordable and it is essential to ensure the meaningful reflection of Aboriginal peoples not only on basic service, but in the broadcasting system as a whole.
5602 En conclusion, la réaction enthousiaste des Canadiens de tout le pays et des autochtones à notre demande compte parmi les éléments les plus inspirants du présent exercice.
5603 Nous avons reçu près de 700 interventions positives de la population canadienne en général d'organismes, de représentants et de conseils autochtones, d'enseignants, de dirigeants et d'autres personnes qui n'entretiennent aucun lien avec le monde de la télédiffusion.
5604 We received another 140 interventions from industry stakeholders and a vast majority of these was also explicitly supportive in detail from Aboriginal producers, writers and actors amongst others.
5605 We want to thank these interveners and acknowledge their support. I found that many of these interventions move me personally and I can say the same for many others throughout APTN.
5606 This hearing and this process has given us at APTN a boost and affirm for us the importance of APTN's purpose and for broadcasting in general to the cultural, social and political life of Aboriginal peoples and all Canadians.
5607 Cela nous a rappelé qu'avant que le Conseil ne rende sa décision sans précédent en 1999, soit celle d'accorder une licence à APTN pour l'inclure dans les forfaits de base, les autochtones du Canada étaient invisibles à eux mêmes et aux autres Canadiens dans le système public de télédiffusion.
5608 Nous serons heureux de répondre à vos questions.
5609 LE PRÉSIDENT : Merci beaucoup, monsieur LaRose et monsieur Vandal pour votre présentation et le travail que vous et votre équipe ont accompli pour préparer ces demandes et il s'agit à la fois de demande de renouvellement de la licence et, évidemment, pour la distribution, les modes de distribution.
5610 I know perfectly well that you've worked very hard on this, but our job here is to be sceptical from the beginning and ask you difficult questions, but I understand you'll take that in the correct stride.
5611 So, your request is in fact, with respect to the wholesale fee, a request for essentially a 60 percent increase of your fee. And before the increase was awarded in 2005, you were $0.15 per month per subscriber and in 2005 it went to $0.25.
5612 So, if we were to give you this increase in a period since your original licence till today, it would be going from $0.15 to $0.40 per month. You will agree with me that's a large percentage increase over a rather short period of time.
5613 Why wouldn't Canadian subscribers ask themselves is this appropriate and sustainable?
5614 MR. LaROSE: Well, I think that in response to that -- first, I would like to mention that as a national service APTN believes that the $0.40 is a reasonable amount for what we produce in a range of programming and the population we represent.
5615 As you know, as a national service we are mandated to provide a full range of programming. We do dramatic series, we do children series, we do news, we have 11 bureaux across the country, we provide the full range of services that any other national broadcasters are expected to provide and sometimes with, you know, a different type of revenue, a different level of revenue, but certainly we think at $0.40, which is again, I mean, when you look at a percentage increase, the percentage number is high, but when you look at the actual value amount we believe that it's a very reasonable value for Canadians and for such wide ranging services and for the number of opportunities it provides to producers, youth and others who are employed within those industries.
5616 THE CHAIRPERSON: You didn't really address the sustainability issue because every time we renew there is a new arm. I mean at what point to you, as a broadcaster, have enough brand, presence and depth that you might, you know, think that instead of seeing constant increases, that we might see perhaps some decreases, once Canadian subscribers have invested over a period of time?
5617 MR. LaROSE: And that's a very fair question. We have mulled this one over many times over too. We have over the past licence period worked hard at establishing an advertising revenue base to slowly start developing opportunities for APTN revenue other than a subscriber fee.
5618 That level of advertising has increased by 300 percent since 2005, but it still only generates about $3 million a year. The reality of it is that a lot of our programming at 35 hours a week in Aboriginal languages is not necessarily the type of programming that will appeal to a mass audience and certainly not to an advertiser who is looking to reach a mass audience with their revenue, with their advertising dollar.
5619 At the same time, APTN is in a position where we are starting to see within our communities a growing base of corporate and other entities that we hope over time will be in a position to start supporting APTN either through the sponsorship of some programming through direct advertising or what have you, that will allow us to increase our revenue base outside the subscriber base and eventually at some point to be able to live either within the means of the actual fee increase, should we receive it, or even decrease that fee over time.
5620 Right now such opportunities don't exist. We have worked hard and I'll ask Ms Aimée Powell to give you a quick review of the work she has done to increase our advertising revenue and the challenges we face. Aimée?
5621 MS POWELL: Since the year 2000 which was our first full year of operations we have actually generated over $22 million in advertising revenue. Each year we have maintained or increased revenue versus prior year and for the past number of years, we still have all inventory on both the network and APTN.ca.
5622 Because mainstream advertisers rely on BDM statistics to determine pricing, we have had a plateau in our ad revenue due to our audience numbers. And according to BDM, APTN ranks in the mid-fifties out of all Canadian English commercial networks, so we have to price ourselves somewhere through our competition. We can't be over aggressive in our pricing because we are not a market leader.
5623 THE CHAIRPERSON: So that's what I was going to ask a little later on if I see basically a rather timid growth curve on your projections of advertising, you don't foresee the situation changing, even with this additional programming?
5624 MR. LaROSE: Well, I think with the suggested programming and the fact that we are aiming to go to a broader base with multi-platform, we hope like every other broadcaster right now to be able to generate and monetize the various productions that we do, whether it's online or on air.
5625 When we look at some of our key promotable shows like "Blackstone," "Cashing In" and what have you, we are slowly generating higher audience numbers.
5626 In the last two years, we have had to cut back on advertising of our programming on air and elsewhere in order to live within our means and that has meant a slow loss -- a bit of a loss or lack of growth, I should say, in our audience numbers.
5627 Part of the increase that we're looking for is to help us address that, catch up to where we were in the past, be able to advertise our shows and put them front of mind of our audience to, again, bring them aboard APTN to watch the programming and generate higher numbers from BBM, which is, unfortunately, the only standard of measure that looks at our -- helps us generate any advertising revenue.
5628 And the BBM system is not set up to measure Aboriginal audiences across the country. BBM will look in major centres but a good part of our audience is located in rural and remote areas in the North and the northern area of provinces, and that audience is not measured at all.
5629 So from the outset, we face a huge challenge in that we know that we have a higher audience than what the system measures, but at the same time, that is not reflected in the BBM measurements and it doesn't allow the team -- to go out and sell based on an audience to an advertiser is nonexistent or very small.
5630 THE CHAIRPERSON: Right, but you've proven in the past that -- like "Blackstone," you don't take a backseat to other broadcasters with something like that. Your investigative journalism has broken stories that the main media have missed. I mean you've been able to deliver.
5631 If you were to get more potentially, more of those, surely the quality of the programming would also have an impact. No?
5632 MR. LaROSE: And we certainly know it will have an impact. How that will translate though in the way the Canadian audience, the measured audience watches us from that point on is at this point very hard to measure.
5633 Like I say, with shows like "Blackstone" and what have you, "Fish Out of Water" and others, we've seen an increase in mainstream Canadian viewers but not to the point that will trigger -- allow us to charge a higher rate for our airtime than what we currently can get from the advertisers.
5634 MS POWELL: I would just like to add that our approach has been to sell our programming that generates BBM numbers to mainstream advertisers and the remainder to Aboriginal businesses, direct response and government bodies who aren't so concerned with the BBM numbers but rather to reach our Aboriginal audiences, thus maximizing our revenue.
5635 THE CHAIRPERSON: The fact remains you're asking for the second-largest, at 40 cents, the second-largest wholesale fee of anybody in this proceeding.
5636 MR. LaROSE: I don't disagree, but at the same time we're the only service that is currently serving the Aboriginal population in Canada. We're the only service that is providing programming of a type that no one else does, and with that comes costs. The costs associated with any of our programming are very high.
5637 THE CHAIRPERSON: Okay. My understanding is that of the 15-cent increase, about 5 cents is related to inflation, production costs and new technology, about 7 cents to planned improvements for news and information over the full seven years, and about 3 cents to increase the Aboriginal language offer versions and your multiplatform strategy.
5638 So let me take that first one. Is that roughly the right breakdown?
5639 MR. LaROSE: That's a fair assessment, yes.
5640 THE CHAIRPERSON: Okay. So let's look at the 5-cent increase related to inflation adjustments.
5641 You know, there are many businesses in the country and not-for-profit organizations that face inflationary pressures and what they do to do that, they control costs, they try to seek productivity gains through improved methods.
5642 Why wouldn't Canadian subscribers expect you to have done that and continue to do that rather than ask for a rate increase of that 5 cents?
5643 MR. LaROSE: Well, in fact, and as I alluded to earlier, that's what we've been doing for the last two years. Over the last two years we've cut over $5 million from our operating budgets in order to be able to maintain the service within a balanced budget. We've had to cut positions in news and elsewhere. But some of our costs are beyond our control.
5644 As an example, Darcy can provide you with some of the areas where we've made cuts and I'll come back to the point after.
5645 MR. SMITH: So the reductions were -- in our network operations we've slashed about $2.2 million, going from $10 million in 2011 to $7.8 million in 2012. Network programming costs were reduced by $2.2 million as well, with the bulk of those reductions taking place in communications and marketing, program development costs, and film and program rights amortization. And administrative costs were reduced by about $600,000.
5646 So this is the summary of where we've reduced the $5 million over the last two years.
5647 M. LaROSE : Essentiellement, lorsqu'on parle de 5 sous, ce qu'on cherche à faire, c'est rattraper un peu le terrain qu'on a perdu ici au cours des deux dernières années pour maintenir le cap sur où on était et l'auditoire qu'on réussissait à rejoindre il y a deux ans, avec les dépenses qu'on faisait en publicité et autres. Toutes ces dépenses-là ont été coupées.
5648 Et on cherche aussi à s'assurer qu'on peut maintenir... au niveau de nos différents bureaux, les coûts ont augmenté. Les coûts de location, les coûts d'opération, tous nos coûts ont augmenté de façon substantielle dans les dernières années.
5649 Certaines des locations où on opère ne sont pas nécessairement les plus modiques au Canada non plus. Un bureau à Iqaluit, un bureau à Yellowknife, un bureau à Whitehorse, à Vancouver et ailleurs, tous ces endroits-là nous coûtent énormément cher, et pour maintenir le...
5650 C'est pour ça lorsqu'on fait référence à maintenir nos opérations de base ainsi, l'augmentation de 5 sous est vraiment pour nous permettre de parer à ça, de maintenir ce qu'on fait, en plus d'aller chercher les initiatives additionnelles qu'on vous présente aujourd'hui.
5651 LE PRÉSIDENT : Lorsque je regarde les trois paniers de 5 sous, 7 sous et 3 sous dont j'ai mentionné tout à l'heure, je le sais que ça va être une question difficile à répondre, mais si vous aviez à les mettre en ordre de priorité, advenant que le Conseil ne se sente pas à l'aise à octroyer toute l'augmentation ou même renouveler un tarif de base, comment vous les mettez en ordre?
5652 M. LaROSE : Essentiellement, il n'y a pas d'ordre parce que les trois sont interreliés. Lorsqu'on parle d'améliorer nos initiatives en programmation, les initiatives de programmation sont au coeur de ce qu'on fait. Si on ne fait pas la programmation que notre auditoire cherche à voir et s'attend de nous, nous allons perdre l'auditoire que nous avons en plus de celui que nous espérons aller chercher.
5653 Mais cette programmation-là aussi, ce qu'on cherche à faire pour rejoindre les jeunes, c'est qu'elle va avoir... des fois, elle va prendre vie dans un espace multiplateforme pour finir à la télé ou elle va commencer à la télé pour finir dans un espace multiplateforme, et toute cette programmation-là va avoir une composante non-autochtone.
5654 Alors, on ne peut pas séparer l'un de l'autre parce que je veux dire c'est quand même une priorité à notre égard, puis on sait aussi une priorité pour le gouvernement canadien, de protéger et de maintenir et de préserver les langues autochtones. Pour nous, c'est une très grande priorité.
5655 Pour ce qui est de rejoindre les jeunes, l'importance pour nous, c'est que toute notre histoire, nos langues, nos cultures, tout ça, doivent maintenant faire la transition à la génération qui suit, et pour ce faire, on doit s'assurer de les rejoindre là où ils sont, et souvent, on les attire à la télévision parce qu'on leur offre un produit ou une tentation en ligne qui les amène à la télé, ou la télé des fois les amène à l'Internet. Pour eux, il n'y a plus cette distinction-là entre les différents médiums. Tout ça...
5656 The lines are blurred between all of them and they will go to whichever one will draw their attention quicker and will generate their interest. So for us to try to break each of these three separately and say we could live without this one or we could live without this one would not work. They're all so closely interlinked in our strategy and what our audience and the young people have told us that all three need to happen together.
5657 THE CHAIRPERSON: Okay. So it's all or nothing?
5658 MR. LaROSE: If you were to put it that way, it's all or nothing --
5659 THE CHAIRPERSON: No, I'm just responding, you say you would have to do them all. I mean I'm trying to get a sense of --
5660 MR. LaROSE: No, I understand.
5661 THE CHAIRPERSON: You know, let's say we don't authorize the full 15 cents, if it's somewhat less, 5 cents, 10 cents, so what do you do, they're all priorities, you reduce them proportionally?
5662 MR. LaROSE: What would happen is it would be a proportional, you know, diminishment of every one, probably to the -- au détriment de tous les éléments. Il n'y en aurait pas un qui pourrait être maintenu à un niveau plus élevé que les autres.
5663 So there would be an overall reduction in everything and it would be an overall degradation of what we're trying to achieve.
5664 THE CHAIRPERSON: Is there a point where one of the initiatives, you can't shave anymore, you have to drop it off?
5665 MR. LaROSE: Well, I think in the area of programming, if we were to cut that too much, I mean with the losses we've experienced with CMF this year, our loss in envelope, what have you, and also the opening of the Aboriginal envelope to other initiatives like Internet TV, what have you, there will come a time when, you know -- and right now our concern is even this increase will in great part be used to pay for a lot of the type of programming we currently have, because the envelopes aren't here to help us subsidize some of those production costs.
5666 So, if we start attacking key envelopes like the programming and the language component of it, some of which will come from Internet initiatives, I think, you know, what we will see, and possibly much to the chagrin of the Commission when we come back, we may not have been able to improve our financial position or other advertising or other revenue opportunities because we will not have been able to grow the network to a level that will generate that level of support from the corporate or other sectors.
5667 THE CHAIRPERSON: So you mentioned this multiplatform approach. I wouldn't mind knowing a little bit more why, in your view, that initiative is required to accomplish your mandate.
5668 MR. LaROSE: Well, as I mentioned earlier, we have been focus testing and have had focus groups with our young aboriginal population all over the country for the last two years, and I think to that point, you know -- I'll ask Lisa, maybe, to give you an overview of the work we've done with young people in a few minutes.
5669 But it's clearly demonstrated that many of them will look to APTN, possibly, for some programming, but if it's not in the time slot that they are willing to watch the program, or if it's not at a time that is amenable to them, they will not watch it. But if it's offered either online or if there is an online component to it, or if it's streamed, or what have you, on-demand, then it becomes of interest to that community.
5670 So for us to focus on young people and to have an online component that has clearly been demonstrated as a key initiative that we need to achieve, we've traveled throughout the country in preparing this strategic plan, with the board and management team, and everywhere we've gone, the communities, the elders, and others we've talked to, they've made it very clear to us that we had to reach young people and we have to reach them where they were because they feared that all of the history, the language, the culture, was being lost because, you know, young people were drifting away from the usual communications methods, which often would, you know, in the past, meant spending time with elders, what have you, and now they're all over the map.
5671 So, for us, that component is really really critical in order to be able to reach them and make sure that they remain connected to the community, they remain connected to their community, through us, to the extent that we can. And maybe, to that point, Lisa, if you could speak a bit to some of the surveys we've done with young people.
5672 MS SQUIRE: Mr. Chairman, we've done a number of different studies amongst the aboriginal youth population over the years and, more specifically, in the past year we've done a lot around the Digital Drum platform which we're creating for aboriginal youth across Canada.
5673 We've looked at the platform itself and the use of it and how youth will be able to engage within this platform to provide content and to engage in almost a cultural evolution, to be able to have a place that's dedicated entirely to them, in terms of being able to express their own identity and communicate and connect with each other, as well as with the network.
5674 I thought that maybe I would just talk a little bit about our Digital Drum platform and what that means to us --
5675 THE CHAIRPERSON: In particular, I'd like to know -- I mean, if I understand you correctly, it is -- the rationale is that youth are abandoning the more traditional television platform, therefore you think that that's where you need to be. I'd like to understand exactly how much is in aboriginal languages, how you deal with the diversity of aboriginal languages.
5676 So just a bit more -- flesh that out.
5677 MS SQUIRE: Sure. Well, in terms of research that we've done in terms of original languages, we do know that, based on statistics that come out of existing research and StatsCan data, we have 60-plus aboriginal languages across Canada, and those are spread out across all regions. So the amount that we provide for language programming on multiplatform will be relative to that.
5678 When it comes to --
5679 THE CHAIRPERSON: How are you going to -- I mean, kids go on these platforms because it's where they want to be.
5680 MS SQUIRE: Yes.
5681 THE CHAIRPERSON: If it's too didactic or too trying-to-teach or -- I mean, how are you going to engage them, really?
5682 I mean, I don't want to second-guess that this is the need or not or how you're going to do it; you're probably in a better position than I am, but I'm a bit skeptical when we try to shape the Internet.
5683 MS SQUIRE: Well, Digital Drum becomes a cross-platform strategy that's specifically aimed at aboriginal youth and it becomes their forum and their place to put their own content up on that site.
5684 It's targeted at aboriginal youth who are 13 to 35, across Canada, and we know that that represents approximately one third of our entire audience. It's also a long-term sustainability approach for us in growing our audience, as we do know that a large proportion of aboriginal youth, and youth in general, are always turning to cross-platform as well as online content for their consumption.
5685 The site itself leverages the world of user-generated content and social media to engage youth in self-expression, identity, and cultural evolution, as I mentioned. But that is only one aspect of the overall content strategy that we'll be using.
5686 We do know, in the studies that we've done with youth, that they are destination content viewers. They have a minimum number of programs on television that they are watching and then -- but they are also using social media as a way to have that word of mouth and talk to other youth about what they are consuming, so that's why we've approached it this way, to ensure that we're providing them with a forum to create their own content, but also the other five-part strategy that we have in terms of content also puts destination content there and then ties it back to the broadcast.
5687 So we have worked out a strategy of licensed Web content and live production, we will have incentivized content for the user base where we would have four national incentives throughout the year, and four regional; of course, the user generated content aspect of having the membership base contributing their own content, interacting with each other.
5688 We're also looking at partnerships with youth media organizations across Canada and external companies that have youth mandates and want to bridge that communication with the audience, as well as basically building a Digital Drum army of regional producers and content contributors that are paid in every province and territory of the country.
5689 They would be creating exclusive content to Digital Drum which would also -- one of the greatest opportunities of the overall program is that contributor base will be our approach to cross-platform, which provides an opportunity for that youth content to be built back into the broadcast where they would find themselves as well on that APTN broadcast schedule.
5690 THE CHAIRPERSON: Okay. Well, explain to me how aboriginal youth are going to find something here that would draw them, rather than being drawn to generally-available other sites and other social media that are ubiquitous these days, and are cool, and they want to be there, presumably, as well.
5691 So what draws them to this particular one? Because if you can't reach them, all your good intentions won't have results, I don't think.
5692 MS SQUIRE: It comes down to community. It comes down to the ability for them to communicate with each other in a community that is specifically designed for them, where they are aggregated together.
5693 MR. LaROSE: And I think, if I can add to that a bit, too, one of the things we've realized in the past couple of years is that when we've built some of the sites, like the Facebook site that we have, APTN site, where young people will come and exchange, upload ideas, what have you, and then go back to wherever else they go, we've been able to start creating some connections with young people, through there, through Twitter, and through other sites where they feel that they can come exchange with each other or provide us some thoughts on programming or what have you, go back wherever they go, but there is now, at least, a relationship that's been created, and that's what we need to build on.
5694 When you spoke earlier about aboriginal languages, when young people have an opportunity on the site to upload video from their community in their language, that other communities of the same language can share, can hear, and can distribute amongst themselves, we have just become sort of the hub from which they have been allowed and they have had the opportunity to provide content, share with each other, and then interact, not only with us, but with each other, and provide us content that we can then use for some of our broadcasts.
5695 One of the things that we are hoping to create with that content would be, you know, some weekly broadcasts that would be the Best of the Drum, some of the best videos from young people that show, you know, the high points, the low points, the community life, what have you, to each other on the broadcast platform as well.
5696 So there are many -- now, when you look at how the industry is evolving, regular TV is interspersed with elements taken off the Internet, taken off Skype or what have you, you know, we're living in the same world and we have to reach that community in the same way as everybody else.
5697 THE CHAIRPERSON: Under the 40 cent wholesale rate, therefore with a 15 cent increase, I was noticing in your projections, your financial projections, that you're showing, in the early years -- granted, afterwards it changes -- but certainly in the early years, it's a positive, rather healthy PBIT percent.
5698 Do you think that's appropriate?
5699 MR. LaROSE: Well, it is because once we know what the increase is -- I mean, one of the first things we do is we go out to start commissioning programming, but those expenditures may not happen for two or three years. You know, the cycle of the program, basically, is you go out -- at least our cycle -- we'll put out a request for proposal, we'll let our producers know what type of programming we're looking for, what genres, what categories, what -- everything else. They'll come back with proposals, we assess them, evaluate them.
5700 The entire process, in itself, is about, you know, 4 to 6 months. And by then, once you start to license, once they start going through the system and then they go into production, you have a minimum of two years and up to three years.
5701 So basically what it does, what it shows as an excess -- we don't call it PBIT because as a not-for-profit, we don't have a PBIT, but what we do have is excess revenue, but that revenue is only excessive because it's already committed and it will be spent, so it's not money that's going to be --
5702 THE CHAIRPERSON: So, in your view, it wouldn't be appropriate to ramp up the wholesale rate, instead of going directly to the full 15 cent increase?
5703 MR. LaROSE: No, because if we were to ramp up, what it means is that we would note in maybe year two are your three we would be over there, and year four and year five. But it still means that then we have to differ everything by one or two years as we commission it, because we don't go -- I mean, we always try to end our fiscal year on basically a break-even basis; we wouldn't want to go into debt to commission programming that we will then receive revenues later on to pay for.
5704 We'd rather have a position that we know, from the outset, what the revenue base will be so we can commission accordingly and make sure that if our envelope drops or anything else, were in a position that were not going to put ourselves in a severe negative financial position.
5705 THE CHAIRPERSON: I swear, I wish sometimes I'd done for accounting, but it seems a little bit basic for me.
5706 MR. LaROSE: Well, that makes two of us, Sir. That makes two of us.
5707 THE CHAIRPERSON: But, you know, just reading it, you will have greater revenues year by year in the early years, than you will have operating expenses.
5708 MR. LaROSE: But that's not true to the end. Maybe --
5709 THE CHAIRPERSON: I agree. That's not -- that's what I said. Later on, it's --
5710 MR. LaROSE: No, and later on -- but I mean --
5711 THE CHAIRPERSON: But from a cash flow perspective, why do you need the full 15 cents in the early years? It's there eventually when the expenses occur.
5712 MR. LaROSE: But then that would assume that by the end we would need a higher rate than what we're proposing to catch up to everything else, or it means that we will not be able to develop the full range of programming and all the initiatives --
5713 THE CHAIRPERSON: Perhaps I didn't make myself clear. I mean, it would be clear what the rate would be, but it would ramp up rather than giving the full amount year one.
5714 MR. SMITH: Basically what it is, it's an investment in programming during the early part of the seven-year period, where the amortization of the fully-delivered program occurs at the end of the seven-year period.
5715 So we're spending the money now, but not incurring the expense until later.
5716 THE CHAIRPERSON: Okay, so it's an accounting issue, in the way the presentation --
5717 MR. SMITH: Yes. Exactly.
5718 THE CHAIRPERSON: That I get. Okay. Thank you.
5719 MR. LaROSE: Now you see why I didn't well in math.
5720 THE CHAIRPERSON: Wasted my time in law school.
5721 THE CHAIRPERSON: Now, to justify your 40 percent -- your 40 cent, sorry, not 40 percent -- 40 cent wholesale rate, you talk about the average among Cat A's being 38 cents, and I can't help but ask if that's the case, why can't you survive with just a Cat A? You're already there, you're already distributed.
5722 I'm taking your suggestion is that would be a good place where you could be able to negotiate with distributors.
5723 MR. LaROSE: Well, we did -- as you know, we put forward to you a scenario of what would our position probably be if we didn't have 9(1)(h), if we were strictly a Cat A, and we don't think that we would have the subscriber base -- we couldn't maintain that subscriber base that we currently have if we were strictly -- if we were not mandatory carriage.
5724 And I think, to that point --
5725 THE CHAIRPERSON: Because of the penetration percent, not because you don't think you could negotiate at least at that rate?
5726 MR. LaROSE: It would be probably an issue of penetration. We would never have the subscriber base that we have right now; no.
5727 THE CHAIRPERSON: Did you want to add anything?
5728 MR. SMITH: Well, Mr. Chairman, I was just going to add that we had modeled a 30 percent penetration with 3 million to 3 1/2 million subscribers, and a revenue of about $15 million, which wouldn't allow us to fulfill our mandate.
5729 THE CHAIRPERSON: Right.
5730 So were we to go down a Cat A scenario, just for the record, I take it you'd be okay with the standard Cat A conditions of license? You may not be happy with the consequence of that, but in terms of regulatory obligations?
5731 MR. LaROSE: In all honesty, I'm not fully aware of all the Cat A conditions of licence, but I suspect they're probably not much different than what we have now.
5732 THE CHAIRPERSON: Well, just to keep it moving, maybe you can come back and take that on as an undertaking.
5733 MR. LaROSE: Okay. I will
5734 THE CHAIRPERSON: At what rate -- you know, in case we don't go the full 15 cents -- at what point does the distinct regional feed become financially unmanageable?
5735 MR. LaROSE: Well, right now, the feeds are all in place; we have the east, the west, and the north feed, as well as the HD.
5736 THE CHAIRPERSON: I take it you're saying that that's not one of the first places you would trim.
5737 MR. LaROSE: Not initially, no. No, that would be -- you know, that's one of the things that would end up suffering. If we didn't have an increase, as an example, we'd have to consider that because the uplink costs and the operating costs of that feed would be -- we would have to cut that back in order to maintain some of the other services.
5738 But, certainly, at this point, we would like to maintain all the feeds because they do serve our population appropriately.
5739 THE CHAIRPERSON: Right. And what percentage of overlap is there between the programming on the regional and national feeds?
5740 MR. LaROSE: Well, to a great extent, the overlap is somewhat the similar programs, except that it is timed at different times of the day. It's not only a timeshift issue, but it's also a programming shift, in that we will aim some of the programming for a suspect region in the most appropriate timeslots.
5741 It would play at a different time slot or not as high viewing time slot on another one.
5742 THE CHAIRPERSON: So, in terms of completely different programming, I understand you may have shifted the order and differently, but in terms of completely different programming, it's a very small percentage?
5743 MR. LaROSE: It's a very solid percentage, one that we expect to grow in the next licence.
5744 THE CHAIRPERSON: Now, in your application, you talked about 166.5 hours of original first-run programming. Does that include your news programming?
5745 MR. LaROSE: No, and actually we were -- when we reviewed that data after submitting, we realized that we severely lowballed ourselves on that one.
5746 THE CHAIRPERSON: So what would be your original first-run, news and non-news, I guess, and drama.
5747 MR. LaROSE: Last year, we had 665 original hours, not including the aboriginal language. We had 365 hours from programming, and 300 from news.
5748 THE CHAIRPERSON: Okay. Right. Now another issue, the logs. Due to your conditions of licence and all the various aboriginal languages, it's very manually intensive when we verify the logs, it's manually intensive for you, and for us.
5749 Do you think it would be mutually advantageous if we required a senior officer to attest to some of the conditions of licence having been met for logging purposes?
5750 MR. LaROSE: Well, we believe we've met all our conditions, and to that point, maybe I will ask Lee to --
5751 THE CHAIRPERSON: Oh, there's no suggestion that you haven't, because we've done all the manual work --
5752 MR. LaROSE: Okay.
5753 THE CHAIRPERSON: I'm just thinking that perhaps we could be more efficient going forward.
5754 MR. LaROSE: Certainly. That would not be an issue.
5755 THE CHAIRPERSON: So you would have no problem with a senior official doing that.
5756 You'll recall that in 2005 there was a reporting requirement associated with the rate increase in that particular instance. So if we were to give all or part of the rate increase proposed here, I take it you would have no difficulty reporting on how those investments were spent?
5757 MR. LaROSE: Absolutely not.
5758 THE CHAIRPERSON: Okay, so your request to remove the old condition of licence was because it related to a previous rate increase, and not because you were against the principle?
5759 MR. LaROSE: Correct.
5760 THE CHAIRPERSON: Okay.
5761 Maybe this question I'm going to direct to Mr. Vandal just because, from a corporate governance, it's more one of his issues, as chair of the board, but some intervenors have suggested you have a very large board of directors, and that there may be some ways of trimming cost by having a more streamlined number of board members.
5762 First of all, do you agree with that? How much could be saved, and have you considered that?
5763 MR. VANDAL: Well, 21 members is a cumbersome board. I think the -- it's a large number, there's no denying that.
5764 I think the key consideration is properly reflecting the diversity of our aboriginal groups throughout Canada, the North, reflecting of diversity, making sure that everyone is properly reflected in APTN, but I think, on a going forward basis, we look at best practices and do what's best for the network.
5765 Having said that, how much money we could actually save by doing that, I couldn't tell you right off the top of my head but, I mean, I think what's key here is best practices going forward, while at the same time respecting the history, the culture and the diversity of our aboriginal peoples.
5766 THE CHAIRPERSON: So it's something you would -- despite the cost, you'd hesitate to get involved in because of the collaborative nature of the board?
5767 MR. VANDAL: Could you repeat that question?
5768 THE CHAIRPERSON: I take it you'd rather not reduce, even though there may be a minimum amount of savings?
5769 MR. VANDAL: I'm one of 21 members of the board. I think that would -- that certainly would be an interesting discussion. It's one that we've actually put on the table over the last year, I'd say.
5770 We do have a governance committee that looks at our bylaws and recommends changes, and certainly it's something that we've started to look at, and I think that if the result is a better reflection, a better best practices governance for the network, we look at it.
5771 THE CHAIRPERSON: Okay.
5772 Let me turn now to closed captioning.
5773 Since 2007, we pretty much require 100 percent closed captioning from year one, yet you seem to be proposing a phased approach. I was wondering why you think it's appropriate, especially were we to either do the increase or renew the 9(1)(h) status.
5774 MR. LaROSE: Well, the phasing-in is because we still have some programming that is on our schedule that was pre-condition -- in other words, it's not closed-captioned -- but everything, all of our new first-run, all of our new commissioned programming, everything that we've been doing for the past 3 to 4 years, has closed captioning.
5775 So the only reason we're asking for a phase-in is to allow us to run our old inventory.
5776 THE CHAIRPERSON: So it's more related to the lag in when things were produced, so it's not a -- anything new, newly-commissioned, would be 100 percent?
5777 MR. LaROSE: It already is, and we would maintain that.
5778 MS ILLE: And actually, even all the acquired programming -- so talking about acquisition -- we are closed-captioning that right now, so yes.
5779 THE CHAIRPERSON: What would you say if we converted that business practice into a condition of licence?
5780 MS TODD: I just wanted to add one thing. The phasing in of captioning is only for the French.
5781 We do plan to be 100 percent captioned in the English, but right now, our French is only 25 percent requirement, so we do have inventory that is not captioned.
5782 THE CHAIRPERSON: Okay. But to get back to my question of phasing it in through a condition of licence, related to when programming is either commissioned or produced?
5783 MR. LaROSE: If the condition was that any new or commissioned programming would meet all of the closed captioning conditions.
5784 THE CHAIRPERSON: Okay. Now, respect to described video -- and I am getting to questions that we may not have been asking before, because we are dealing with a licence renewal at the same time, which wasn't always the case for other applications.
5785 How much of your first-run English -- you might want to take these down and send them in as an undertaking, because you might be looking in books, and it might be more efficient for all of us.
5786 If you could identify how much first-run English drama you have, how much first-run French drama, and how much of those two numbers are closed captioned.
5787 There will be a transcript.
5788 MR. LaROSE: We might have --
5789 THE CHAIRPERSON: Oh, you might actually have the answers?
5790 MR. LaROSE: Yes.
5791 THE CHAIRPERSON: Okay. That will save you having to do that.
5792 How much of that is closed captioned, and will you maintain in the future, in the new licence term, that same level of drama going forward, and --
5793 Well, if you have those answers first --
5794 MS TODD: I have dug out the described video numbers. Right now 96.5 percent of our original drama is described video.
5795 THE CHAIRPERSON: So it is 96 percent, and what is the base number? How many hours?
5796 MS TODD: It's 69 hours, 67 of which are described.
5797 THE CHAIRPERSON: That's in English?
5798 MS TODD: That isn't broken down. We will have to get back to you on that.
5799 THE CHAIRPERSON: So maybe you could do it as an undertaking.
5800 MS TODD: Sure.
5801 THE CHAIRPERSON: So breaking it down into English and French, how much you are doing now, and how much is closed captioned.
5802 And I was wondering if the standard described video condition of licence would be appropriate in the next licence term.
5803 MR. LaROSE: Can we provide that to you on May 2nd?
5804 THE CHAIRPERSON: Sure.
5805 MR. LaROSE: I don't see why it would be an issue, but I want to make sure that --
5806 THE CHAIRPERSON: Sure.
5807 MR. LaROSE: Is that strictly for drama, or for everything?
5808 THE CHAIRPERSON: Well, it is the standard condition of licence, which --
5809 MR. LaROSE: Okay.
5810 THE CHAIRPERSON: Those are my questions. I am looking at my colleagues to see if --
5812 Again, as I mentioned, the number of questions has more to do with what needs to be clarified in the application.
5813 We thank you very much for your participation and for answering our questions.
5814 MR. LaROSE: Thank you.
5815 THE SECRETARY: I would now invite On Purpose TV to the presentation table, please.
5816 THE CHAIRPERSON: Welcome. As is usual, I would ask you to identify the members of your panel for the purpose of the transcript, and then make your presentation. You have 15 minutes.
5817 Please, go ahead.
5818 MR. THIESSEN: Mr. Chairman, Mr. Vice-Chair, Commissioners, Commission Staff, fellow broadcasters, ladies and gentlemen, my name is Jeff Thiessen and I am President and CEO of On Purpose TV. It is my pleasure to be here today to speak to this application for a new 9(1)(h) video-on-demand licence, which we have called Maximum Television Canada.
5819 Before beginning our presentation, I would like to introduce the expert advisers to OPTV who will make up our panel and be instrumental in launching this service, once approved.
5820 All members of our team, myself included, have substantial start-up experience. My 25-year background in television includes launching an OTA and operating as an independent producer, so I know both program acquisition and content production.
5821 It is my pleasure to introduce our team. I will start on your right.
5822 Paul East is President of SBL, a leading Canadian broadcast and communications engineering firm. Paul has engineered SD and HD broadcast facilities, digital studio and production facilities, and multi-channel automated master control facilities.
5823 Mark Prasuhn is President of Vantage Media, a broadcast, content and digital media consultancy. He has spent 25 years in executive management in Canadian broadcasting and content production, including a decade at Vision TV and ONE, during their ownership by both S-Vox and ZoomerMedia, where he served as COO and SVP Programming.
5824 Daphne Vaz, who happens to be right here, of Media Enhanced, is a programming and operations specialist, with a 20-year background in channel launch and programming. She has held management roles for Disney Channel in the Middle East, Alliance Atlantis, and most recently was Programming Director for High Fidelity HDTV's docutainment channels Oasis HD, eqhd, radX and hifi.
5825 Warren Olson is a senior financial executive, with a 30-year track record, including 10 years as the VP and GM of BCTV and CHEK TV.
5826 Pierre-Louis Smith is a consultant, with more than 20 years of experience in the field of broadcasting policy and regulation. He is assisting us on regulatory matters.
5827 By introducing competition to the video-on-demand sector, OPTV's proposed service will substantially improve the content offering to consumers within the regulated broadcasting system without affecting the price of the digital basic package or forcing consumers to pay for programming they don't watch.
5828 In addition to benefiting consumers, OPTV's service will contribute to the Canadian broadcasting system by keeping more viewing-related revenue within the system to support Canadian content.
5829 We will also provide more shelf space to Canadian content, to better promote it in the rapidly growing VOD environment.
5830 In submitting this application, we are putting a stake in the ground by addressing the sustainability of the regulated Canadian broadcasting system, in light of the explosive growth of on-demand viewing via over-the-top and other unregulated platforms.
5831 Certainly, the OTT genie can't now be put back in the bottle, and content owners and distributors must adapt to the broader array of platforms, greater rights complexities and window management.
5832 There is no question that consumer expectations about on-demand access to content have changed considerably in just the past few years.
5833 However, we believe that the manner in which the Canadian VOD sector has evolved has accelerated the explosive growth of OTT services just in the past few years.
5834 Going back to the beginning, the Commission's VOD Policy Framework 1997-83 clearly envisioned a dynamic and competitive environment for the new platform. The Commission expected that BDUs and VOD service providers would negotiate terms to provide subscribers with the best customer experience in terms of choice and pricing, so that the on-demand component of the Canadian broadcasting system would grow to the benefit of the industry and Canadian consumers alike.
5835 Unfortunately, it didn't turn out that way. Instead, BDU-owned VOD undertakings set themselves up as regionally based monopolies, and 16 years later what we have is a regulated VOD universe where BDUs, and only BDUs, are operating VOD services. This state of affairs has benefited unregulated OTT services, who are attracting Canadian viewing customers in droves by offering them greater choice and a better value proposition.
5836 We believe that this has accelerated the shift of viewing and revenues into the unregulated online space, which ultimately is not in the public interest. The combination of limited content options, dated navigation menus and search capabilities have driven Canadians away from the regulated system.
5837 OPTV's service will unlock incremental viewership and revenues, for the benefit of the regulated system, without adding to the cost to the consumer. We will do this by introducing competition in VOD and increasing the opportunity for consumers to access Canadian programming on their terms.
5838 We will use the universally available and robust distribution infrastructure that has already been built by BDUs and paid for by subscribers.
5839 Central to our application is the mandate to deliver our content to the head ends of vertically integrated BDUs, providing their customers with a choice of VOD providers and greater selection of content.
5840 Much has been made of the need to protect the independent broadcaster in the era of vertically integrated companies. Over the past few years the Diversity of Voices Hearings were held, new policy was written, and new regulations introduced to ensure diversity. While helpful, these policy changes have tended to focus on linear broadcast, at the very time when the market is pivoting to the on-demand model of program delivery.
5841 We submit that there is a pressing and immediate need to ensure that the large vertically integrated companies have independent competition in VOD as they have always had in linear specialty television.
5842 Our vision is to bring Canadians better content, more choice at better prices, and to create a VOD system that is proudly Canadian.
5843 There are simply so many programs that the VOD systems operated by vertically integrated BDUs haven't found shelf space for, or perhaps don't see as sufficiently profitable.
5844 Daphne will address these potentials in more detail.
5845 MS VAZ: Thanks, Jeff.
5846 Commissioners, I have spent my career in programming both here in Canada and abroad. As I was leading the programming team that opened Disney in the Middle East, I observed that people around the world simply want good programming that respects their intellect and reflects their viewing choice.
5847 All too often BDUs have just programmed their VOD services in the easiest possible way, with whatever the box office tells them they will make the most money on.
5848 Over the past several years they have failed to create an environment and user experiences that rival the best OTT services, and they often charge a price higher than that of leading online services.
5849 We will bring pick-and-pay choice into the current VOD landscape. We will focus more of our resources on securing underrepresented genres, including Canadian programming, francophone content, aboriginal and ethnic programming.
5850 We will showcase Gemini and Oscar-winning Canadian programs, the best work from the dozen film festivals across Canada, TV series made for independent specialty channels, arts, performance and cultural programming that is relegated today to YouTube and websites, and a rich variety of third language programming for all ages.
5851 As an example of what we believe are the shortcomings in the current BDU-owned monopoly, we reviewed the VOD lineup of a major BDU last week and found that, of approximately 3,000 feature films and documentaries on offer, only 11 were in the Chinese language, and only 2 out of 3,000 were Bollywood movies.
5852 OPTV's service aims to open choice to Canada's rapidly growing third language communities. Ethnic programming will make up 5 percent of inventory at launch. This will create a critical mass that will make our service a destination for consumers seeking this programming.
5853 We believe that there are hundreds, if not thousands of content suppliers in Canada and elsewhere who will welcome the opportunity to work with us and to offer content to millions of Canadians served by vertically integrated BDUs, using the set-top box infrastructure already in place, as opposed to trying to find their programming in the chaos of the open Web.
5854 As a national service, we will be able to offer one-stop shopping to suppliers, reducing their administrative and handling costs.
5855 Paul is now going to describe how our service can integrate with existing infrastructure.
5856 MR. EAST: Thanks, Daphne.
5857 To deliver our service, we will use state-of-the-art technology that is compatible with the BDUs' own VOD systems.
5858 Digital file-based deliver technology is now the norm in media content management. The OPTV content server at the BDU head end is no more an integration problem than any other content delivery system currently in use at numerous BDUs.
5859 To the consumer, the service will be transparent and will simply offer more choice.
5860 We see many parallels between our 9(1)(h) application and how the Commission has introduced competition in telephony, wireless, and cable.
5861 As well, the Commission has also mandated the integration of third party systems, such as simultaneous substitution, Pelmorex's national alert systems, and others.
5862 This is not a new approach. In fact, it is decades old.
5863 In VOD specifically, third party integration is commonplace and already working smoothly in many cable and IPTV systems. Big content providers like Comcast and Vubiquity are installing VOD content systems in cable operations throughout the United States and Canada.
5864 The technology used by BDUs has changed dramatically in the past few years. The complete transition to digital content and, importantly, the conversion to handling content as digital data have eliminated previous technology barriers.
5865 Serving VOD streams in a competitive environment to consumers is a natural evolution.
5866 Warren is now going to speak to the business components of our proposal.
5867 MR. OLSON: Thanks, Paul.
5868 As Jeff, Daphne and Paul have indicated, the appeal of OPTV's service does not come from a new VOD business model or a shift in the manner in which the product is delivered or accessed by the consumer.
5869 On the contrary, part of the appeal of the service is its ability to use existing infrastructure and methodology to deliver an enhanced and expanded product to the consumer.
5870 Thus, it is not surprising, as a number of the BDUs have pointed out, that our business model and financial projections utilize, build upon, and appear quite similar in design and format to existing BDU VOD services.
5871 Our revenue model reflects the reality that we are entering a market of established players, where our product and service will need to be appealing enough to customers that they are willing to explore, try, and ultimately come back to us for a portion of their viewing choices.
5872 As such, we expect that our revenue will start out quite small, compared to the VI BDU services, at approximately a 3 percent share in the first year, and then grow incrementally, as the service is recognized and accepted, to a market share of just under 9 percent.
5873 On the expense side, the vast majority of our expenses, over 69 percent of our revenues, are programming expenses. This includes our commitment to contribute 15 percent of our revenues to the CMF.
5874 We do not view this as a bad thing, nor do we view it as surprising that, as pointed out in the Giganomics study, our expense ratios are similar to the existing BDU VOD services.
5875 Our financial model is scalable, in that not all systems need to be or would be launched at the same time, well financed, and grounded in principles that have already been proven successful.
5876 In short, OPTV is ready to begin operationalizing its service.
5877 Mark is now going to speak to some of the other considerations that have been weighed as we developed this proposal.
5878 MR. PRASUHN: Thanks, Warren.
5879 Over the past 25 years, I have been involved in the production, financing, licensing and distribution of literally thousands of hours of Canadian content. I am excited by the new platforms and distribution models available to connect content creators and audiences. Advances in technology have driven down the cost of production and empowered creative talent.
5880 At the same time, I believe the ecosystem that has been carefully built over decades to support the production and exhibition of Canadian content is enormously important, and that we need to work to evolve and modernize it, but not to allow it to fall by the wayside.
5881 I know that our proposal can make an important contribution to CanCon, both through funding and access to audiences.
5882 OPTV's service will operate as a transactional VOD provider, offering consumers a choice of thousands of individual programs at competitive prices.
5883 We will negotiate a fair split of revenue with the content supplier, and in some cases provide advances against anticipated revenue.
5884 We will also offer some free VOD content with embedded advertising.
5885 We will abide by all regulatory requirements for VOD, including treatment of revenue from Canadian feature films.
5886 We will work closely with and in support of Canadian-licensed linear services, and also with unlaunched Category B services, many of whom have rights to programming not being seen in Canada, to help them gain an audience foothold and brand presence that may enable them to eventually launch.
5887 Our team has a proven track record of being nimble and resourceful and competing effectively with much larger, vertically integrated competitors.
5888 Unlike the big VI companies, this will be our core business, not a sidebar to other activities that might be more profitable.
5889 We are intensely motivated to keep viewing and viewing-related revenues within the regulated broadcast system, as we are not also Internet Service Providers garnering bandwidth revenue when consumers utilize OTT services.
5890 As someone who participated in the last 9(1)(h) process in 2007, I thought carefully about the exceptionality test in relation to OPTV's proposed service, and I am convinced, as is our team, that it is indeed of exceptional importance.
5891 MR. THIESSEN: And here is what we think is most exceptional about our proposal.
5892 The contribution to new Canadian production by our service through the CMF will be three times what is being done now by incumbent VOD services -- exceptional by any measure.
5893 Forty percent, not twenty percent, of our library will be Canadian content.
5894 Triple the normal funding and double the library represents and exceptional contribution to Canadian production.
5895 But most of all, our proposal will make VOD within the broadcasting system more appealing and will retain viewers within the regulated system.
5896 In an on-demand world, if a VOD offered within the regulated system is inferior to that available in the unregulated space, over time the very existence of the regulated system, and the revenues on which it relies to support the creation of Canadian content, will be at risk.
5897 I can't think of much that is more exceptionally important to the objectives of the Broadcasting Act.
5898 Furthermore, this application meets the Commission's VOD policy framework and Broadcasting Act objectives. The current VOD policy clearly allows for licensing new national VOD services. In fact, a number have been approved in just the past few years, including Canyon TV and Opportunity on Demand. It is just that, like so many of the Category B specialties, these services have been frustrated and remain unlaunched because BDUs haven't been willing to allow competitors to access subscribers in their system.
5899 There is no need for a new VOD hearing and/or another 9(1)(h) hearing in order to approve our application. After years of a de facto monopoly and the loss of audience to unregulated OTT providers, the system can't wait another year or two, or more, for additional hearings to be held and decisions rendered.
5900 No doubt, the Commission will have a great deal to ponder as you review the applications that have been presented these past few days. We believe it is noteworthy that ours is the only one that provides real choice at no additional cost to the consumer.
5901 OPTV is not asking the CRTC or the consumer to guarantee our business plan with a mandated fee.
5902 Mr. Chairman and Commissioners, we believe that this application is the right choice for Canadian content creators, as well as Canadian consumers.
5903 We are ready and eager to launch. We are fully funded. We know how to find attractive new programming. We will work closely and reasonably with the BDUs to ensure that they can continue to deliver an excellent standard of content delivery to subscribers.
5904 In closing, let me leave you with three key reasons to approve this application.
5905 First, competition will ensure that the consumer gets better VOD service.
5906 Second, the cost of the basic package will be unaffected.
5907 And third, the Canadian system will be healthier, since more money stays within the system and supports the production of Canadian content.
5908 We thank you for your attention, and we look forward to your questions.
5909 THE CHAIRPERSON: Thank you very much for your presentation.
5910 Commissioner Simpson will start off the questioning.
5911 COMMISSIONER SIMPSON: Thank you very much, Mr. Thiessen. I will let you stickhandle the questions on your end, so that you can have whoever on your team is best suited to answer the question do so.
5912 Before we get into the guts of your proposal, which is Option 3, I want to understand, as do all of us, what Option 1 and Option 2 are.
5913 Just for the audience at large, Option 1 is a proposal to allow your organization to add additional titles to the BDU's existing VOD services.
5914 Now, that sounds to me -- you were talking about over-the-top as a reference earlier -- that sounds like something that is going through the middle.
5915 How does that work?
5916 MR. THIESSEN: It actually is very simple.
5917 I have been involved in hearings like this, where the BDUs were very excited about their concern of what would happen within their infrastructure, and they were very excited about that.
5918 So we decided that, in order to mitigate any concern at all, this is a simple and easy- to-integrate system.
5919 Number one, if we were to take Option 1, that would be simply just highlighting our movies in the same menus, or on a similar set-top box configuration, and the movies could be placed internally inside their own configuration.
5920 So it is very simple for the consumer. There might be a logo that says OPTV and one that says Shaw beside it, or something like that.
5921 We think that would be probably a little complicated for viewers. We don't think that is necessarily the best system and the best way to do it.
5922 Another option would be, as Option 2 would be, which is just be to say here is -- in the same menu system that they have, they would just have the OPTV's menus, Maximum Television, which would have our top movies, our new releases and our Canadian content which would probably be the first on our list.
5923 The third option, of course, which is the one we prefer, when the consumer would push the on- demand button on their remote, they would have a choice of choosing ours which would be Maximum Television or Rogers on-demand. So they would be able to click between each one of those things.
5924 Again, the way technology has happened with the integration in terms of how these systems are now designed, it's a very simple thing to change those kinds of menu options.
5925 COMMISSIONER SIMPSON: So to help my simple mind here, if a BDU was a Starbucks, Option 1 is that --
5926 MR. THIESSEN: Tim Horton's. We're Canadian.
5927 COMMISSIONER SIMPSON: Okay, Tim Horton's.
5928 COMMISSIONER SIMPSON: That your proposal would be to have Tim Horton's offer their coffee and your coffee.
5929 And Option 2 would be for you to have a coffee stand, wouldn't it --
5930 MR. THIESSEN: Right.
5931 COMMISSIONER SIMPSON: -- a Tim Horton's?
5932 Option 3 would be to have the store next to Tim Horton's.
5933 MR. THIESSEN: And that's our -- our basic premise is our desire would be to have a separate store on the other side of the corner. That way the consumer would have a very effective means of deciding what they are choosing at that time.
5934 COMMISSIONER SIMPSON: Okay. Here is the question that -- answering on Option 1. Are you not just a wholesale program provider at that point in Option 1?
5935 MR. THIESSEN: Well, we're already. We are obviously going to be bringing more programming into the system, different programs. And Daphne would be delighted, I'm sure, in a few minutes to tell you about those programming offerings.
5936 COMMISSIONER SIMPSON: Sure.
5937 MR. THIESSEN: But we're wanting to, by condition of licence, change the way VOD is done.
5938 We're going to be a different look, a different kind of service. And we're not going to rely just on the top hits that currently those other BDUs are just -- they pick the top Hollywoods and that's what they focus on. They get their revenue out of that.
5939 That's not our business. Our business is to try to be much more distinct. That's again why we like Option 3. We can create a distinct brand and create a distinct environment where we can allow the consumer to actually come to our service for a good reason because --
5940 COMMISSIONER SIMPSON: But what I'm trying to -- but what I'm trying to understand, though, is if Option 1 is -- to beat this to death and understand it completely; if Option 1 is simply another type of programming option within their VOD environment, that doesn't sound like that's something that should come before the Commission. Isn't that just a business to business relationship?
5941 MR. THIESSEN: Well, it certainly -- because we are controlling the content that will be sent to the consumers, being offered to the consumers, as long as we're controlling the content itself it's under our licence purview, our control, then we're still a licensee and our conditions of licence would be such that it would guarantee that we would be different.
5942 So I'm not suggesting to you at all that Option 1 is our preference. We're trying to get past that.
5943 The reason why we concluded in the application in the first place is my background in coming to the Commission and them saying, "You know what? It's complicated because the BDUs just don't want to give that space up. They are a monopoly".
5944 COMMISSIONER SIMPSON: Okay. But let's bundle 1 and 2 together. Either --
5945 MR. THIESSEN: Yes.
5946 COMMISSIONER SIMPSON: -- is your product. One is more presence than -- Option 2 has more presence of your company. Option 1 is your presence is more through the product you're offering.
5947 But either way, I still don't understand why that isn't just a commercial transaction between you and the BDU.
5948 MR. THIESSEN: And I guess what I'd like to come down to is the basic premise of our application and what we mentioned in the reply, is that we want Option 3.
5949 COMMISSIONER SIMPSON: Yeah, I understand that. We'll talk about that.
5950 MR. THIESSEN: Okay.
5951 COMMISSIONER SIMPSON: I just want to know why you put 1 and 2 in front of us.
5952 MR. THIESSEN: It was only to get past the technological barriers that they may throw up in case of us not getting licenced.
5953 COMMISSIONER SIMPSON: Thank you.
5954 Okay. Let's talk about those barriers because they are quite diverse.
5955 It's been argued by BDUs that even the simple delivery to the headend of a digital signal, they have costs. We'll find out more next week about what those costs are but we're hearing that there are costs and those costs, one has to assume, and again we'll get testimony on this, that those costs would be passed on to the consumer.
5956 From the various interventions that we've had, it seems that there may be more costs than normal than the simple delivery of a signal. Because there is housekeeping costs, there is programming costs with respect to the directories, there is technological costs, device costs.
5957 Is your proposal as part of your no- cost option of 1 and 2 to pick up any and all costs that the BDU identifies that they would have to incur?
5958 MR. THIESSEN: We actually believe we have in our business model the ability to repay the BDU for their costs, their out-of-pocket costs. We're always -- it's always been on the table. We want to pay for their out-of-pocket costs, not things that they invent, which has happened in the past as well as a monopoly. They are good at that.
5959 But what we are saying is that there are certain costs that we will bear to get our product out and those would be related to our service.
5960 COMMISSIONER SIMPSON: Okay. But there is an acknowledgement that there is a very real issue in front of Options 1 and 2 which are cost-related and they have to be identified, negotiated.
5961 But what happens if your no-cost service winds up because of our judgment to say yes to one of these, going as they probably will, as a pass-on cost to the consumer?
5962 MR. THIESSEN: We do not believe, and we cannot see, there being any costs being passed onto the consumer at all for our service. It's never been predicated on that and we are paying the out-of-pocket costs to the BDUs to carry our service.
5963 COMMISSIONER SIMPSON: Okay.
5964 When you referenced in your oral presentation what Comcast is doing with their distribution systems, is that an Option 1 or 2 example or is that an Option 3 example?
5965 MR. THIESSEN: It's actually -- it can be any option you want it to be, because that's happening today in all the BDUs in North America. All of them are receiving their program delivery.
5966 I'd love to have Paul explain to you very quickly how that happens so then maybe we can follow up the question, if that may answer it?
5967 COMMISSIONER SIMPSON: Yeah, I would like that.
5968 Okay, go ahead, Paul.
5969 MR. EAST: Sure. Thanks, Jeff.
5970 In the last few years as the industry transitioned entirely to digital, we are all familiar with the digital content we see, but in the background it's really transitioned as well to digital transport systems. In the case of VOD, the movies, the content is viewed as digital files that are distributed typically into a receive server, a catcher at the headend.
5971 So distributors such as Comcast and Vubiquity, they place a server at the headend of the BDU. They basically load it with the content that they have rights to sell to the BDU in that location and then the BDU -- and in fact, they can even pre-load it with the content in the proper format for the compression systems in place.
5972 There is a large body of standards there. It's complex, but basically the content is then ingested into the BDU's VOD system.
5973 So it's a standard process, a standard step that all content goes through. And what we are proposing is basically a very similar system. That's the point we're trying to make by comparing it to Vubiquity and Comcast.
5974 COMMISSIONER SIMPSON: So your view is, though, that the VOD systems of the vertically- integrateds right now, is a half-hearted programming attempt and you could essentially become a programming service much like a programming service provides content to a radio station. So that the VOD becomes inert, relies on you to format, program and provide programming and promotion on their service.
5975 Is that where this goes? I don't quite get it.
5976 MR. EAST: Well, certainly from a technical standpoint it really is a case of loading the proper formatted digital files for the content into the BDU.
5977 COMMISSIONER SIMPSON: That's on the technical side.
5978 MR. EAST: Exactly, but from the --
5979 MR. THIESSEN: And in terms of our particular servers that we have, the BDU can point to our server and say this is -- you're allowing the consumer to choose that content on that server which Paul has outlined how that gets to there.
5980 COMMISSIONER SIMPSON: Okay.
5981 MR. THIESSEN: So the set-top box, the STB can chose either, you know, Server A or Server B. And, in our case, Server B would be the Tim Horton's with the great Canadian content that's going to provide more choice to the consumer.
5982 COMMISSIONER SIMPSON: I just have one more question, I think, on Options 1 and 2 and then we'll get to why you're here.
5983 There is issues that we have identified with respect to compliance. If you were to start going through the middle, as I said earlier, into a VOD service that is regulated by us, how do you see your role and how would you conduct your role with respect to making sure that your participation in that VOD is compliant with all the requirements that we have put on that VOD as part of licensing?
5984 MR. THIESSEN: Number one is -- I'll let Paul answer probably because there is a technical side to this, but number one is we would always ensure that our content -- that we load onto our servers which we would be sending from our central system. We go into these in one of the deficiencies, I believe.
5985 We will be sending the content from our central server and that will be -- we'll know exactly what gets placed into our server that's located there at those BDU headends. So we'll know exactly what's there.
5986 We'll know exactly the next day. We can fulfill the log-in requirements that you have for each server to know what actually was placed there and what was -- if the BDU moves it to a different location, we would have in our agreements with them an understanding that they would report back to us if they were to, for some reason, take it away from us.
5987 Actually, I should put back on the record -- or they would say on our server and they would be -- we would be responsible for our content.
5988 So in all the cases we have to be responsible for our content as the licence holder.
5989 COMMISSIONER SIMPSON: So there would be mutual compliance responsibility.
5990 MR. THIESSEN: There has to be responsibility on our part to ensure that, you know, if we are meeting our COLs related to Canadian content.
5991 There has been some problems in the past with some of the BDUs not meeting their conditions of licence and closed caption requirements. We want to make sure that we fulfill all of our COLs.
5992 COMMISSIONER SIMPSON: Okay. Let's talk programming now.
5993 You rationalized that one of the primary reasons why this service is necessary for consideration for 9(1)(h) is that other VODs are not providing a full service solution. I'd like an explanation of what that means.
5994 MR. THIESSEN: Well, if you take a look at what's being offered right now, and I'm a consumer. I'm sure all of you have tried VOD at various different times when you've gone to your set-top box and clicked on it.
5995 There is not always all the product that you're looking for and, in some cases, for some of the ethnic people there is very little that's available to them.
5996 And when it comes to French from out of -- like, out of Quebec who are living in Toronto, perhaps, they may not have that much available to them. So we are addressing those things.
5997 And we are also addressing the fact that there is not enough Canadian content. You know, we heard from Starlight today there has got to be more opportunities for Canadians to watch Canadian television and we're making that a special COL for us, our service.
5998 And we think that part of that is if there is enough momentum in certain directions you are going to find that there is going to be people who will go and realize that there is great content and find it then. And if you keep burying it, instead of putting it in the forefront, you'll find that people just don't access it.
5999 But I'd love Daphne to spend a little more time talking about it.
6000 MS VAZ: Thank you, Jeff.
6001 OPTV is going to be a general entertainment VOD service. But I'd like to liken it to -- I would get away from Starbucks and Tim Horton's and I could go to the BDUs, being the Walmarts of the retail world.
6002 And there is no one in that lane apart from what BDUs offer. Just across the road you'd find us. Yes, we'd offer some content that's similar and there is some that's different.
6003 But the environment we create and the programming we'd create would be focusing on the different. So when you enter our store you would highlight three key aspects that is currently underrepresented.
6004 We built this philosophy based on two aspects. There are several programming opportunities that are not tapped. There are underrepresented genres and we would like to bring that to the forefront. So right now there are just three.
6005 The first is Canadian content. There is just not enough Canadian content out there, especially as it's placed against Hollywood firms or reality-based TV from the U.S.
6006 The second is Francophone content and our focus on Quebec.
6007 And the third is ethnic programming.
6008 So if I could go into a little detail on each of these three?
6009 Canadian content. We do realize that there are hundreds if not thousands of untapped archived content that has been paid by the taxpayer that is currently archived for lack of a distribution outlet. There are iconic shows like Trailer Park Boys and Degrassi Junior High. There could be opportunities that we could provide to them.
6010 And then there are quintessential Canadian organizations, particularly around film festivals like TIFF and Hot Docs, who would love to have a partner they collaborate with to reach the national audiences.
6011 And then we know of Canadian heritage organizations like the museums and Canada Heritage Minutes that for want of a regulatory platform currently have presence on YouTube channels. We would like to give them opportunities on our landscape.
6012 And then there is the focus on Quebec. All of the options we have just identified for Canadian content is also relevant to Quebec. In relation to that there is ethnic programming that is lacking in Quebec.
6013 There is aboriginal programming in the VOD landscape that's lacking.
6014 There is opportunities for OTT services like Turning Point TV. You know, we'd like to give them opportunities as they produce content for their service in the regulated space.
6015 And then there is French-Canadian content for Francophones and English content for Anglophones.
6016 And coming to ethnic, in the current overpriced programming bundles that are out there, really, a lot of the ethnic channels are out of reach to a lot of the -- a huge section of the ethnic community, particularly the low income section.
6017 And if you look at one of the BDUs we analyzed in Ontario which make up a large section of these station audiences, of 3,000 movies only two were Bollywood films. We would like to open that up. We definitely are going to offer a lot more diversity in our programming lineup.
6018 And then there are new areas in ethnic. For instance, there is the ethnic kids. And we do believe there is a huge lineup for pre-school genres, particularly in the ethnic kids block.
6019 So we provide opportunities particularly on ethnic communities with deep ethnic roots like India, China, Philippines and Portugal. There are popular shows in India like Pinali Ram(ph) and Chhota Beem which is usually popular in India, bring them opportunities here.
6020 And we all know that all of our popular international content is being dubbed in the ethnic languages. So you would have Fraggle Rock which is one of the popular shows in India. We could get the Hindi version here and we could get all of the international versions of Sponge Bob here and create an ethnic kids channel.
6021 So in terms of innovation and trying to get these really new genres -- I'd like to list a few more because they make sense for a national VOD network. Because they make not make sense for a linear network but they do make sense for a national linear network.
6022 New genres, like we could create a collection called "The Greatest Collection" where we would show some of the greatest sporting moments. Maybe the U.S., Canada women's soccer 2012 moment and you want to watch it when there's nothing to watch on TV. You come to Maximum and you'll get it there.
6023 There are opportunities in the arts and everything that you see on VOD right now is concert-driven but the arts stretch beyond that. We'd like to collaborate with CBC Music, bring them classical music, ballet to the forefront.
6024 And then there are all of the world heritage or cultural opportunities. We collaborate with ORF out of Austria. We collaborate with RT out of Ireland, BBC Scotland. Bring some of those smart and intellectual content to our landscape and provide opportunities in that landscape.
6025 The point here is we are trying to create an environment that is different in terms of thinking out of the box, being innovative in selecting our genres.
6026 We, as programmers, have been -- have tremendous experience in going deep into the recesses of the Canadian and global landscape, really digging deep and finding those untapped genres and bringing them to Canada.
6027 Once you've created that environment and there are opportunities for creation too, we do plan to present all of the content. We could have highlights per week in each of the Canadian Francophone and ethnic genres, create relevance around it and contextualize content around that.
6028 So when a person walks into our retail space, so to speak, they see a difference. And right there the back wall they do -- we will get some of the Bollywood firms and things, but that's not what we would be promoting. And I think you need to promote the Canadian content enough to build a buzz around it so when they come into your store, time and again, they will be hooked onto your network.
6029 Those are the channels which I have been associated in actually building.
6030 COMMISSIONER SIMPSON: M'hmm. You know, if I was writing an ad for this service it sounds to me that the business model is leaning towards helping consumers be a little more capable of cutting services because you are aggregating so many -- such a divergent amount of programming into one VOD. So one might not need an Asian satellite service or a kids channel.
6031 Is that what you're really saying, that you're really becoming a non-linear aggregator of content in general?
6032 MR. THIESSEN: No, not at all. I think what we're doing is providing choice for those who just can afford basic, number one.
6033 We're also -- when you think of choice and people going to an OTT world, you want to keep them in our world. And so it's important to do whatever we can to -- you know, to do that.
6034 You know, again, with our 15 percent contribution to CTF we are creating better and more Canadian content which keeps them in the regulated world.
6035 COMMISSIONER SIMPSON: And let's talk about cost because in the testimony of Starlight, they had said that content, particularly Canadian content, was unaffordable because VOD, in the VOD world it was five, six, seven dollars a download.
6036 So what's your pricing model? If I was to buy into your service and have such a vast array of stuff I want to watch, you know, would your cost to me not be equivalent to the entire cost of basic over the course of a week, let alone a month?
6037 MR. THIESSEN: Well, and obviously consumers make choices, right? They get to pick and pay so they get to choose whether they will do a whole service which it makes sense for them or if they pick a certain program that makes sense for them just because they want that one.
6038 So you asked a couple of different questions.
6039 From my point of view, to focus on one of them, it would be yes, there is lots of choice and diversity. It's still pick and pay, though, so it may be more cost-beneficial for you to get a whole tier of, say, ATN's Asian channel which provides some of the content that we may have.
6040 I should back up. We're not in any way competing with Category As. That's important, I think, to notice and to note that there is -- our service doesn't do that.
6041 So we would be in -- we would not be in competition. We would be actually working with them to -- if they would like some of their programs on ours; on our service we would find ways of helping them do what they want to do.
6042 MR. PRASUHN: If I could --
6043 MS VAZ: We find --
6044 MR. PRASUHN: -- sorry, Jeff, if I could just add to that?
6045 The transactional model that we envisage will have a wide range of pricing and, as I mentioned in the opening remarks, including free in some cases. So there is -- there will be plenty of breadth.
6046 Certainly, yes, there would be some movies that might be at the price points that the group from Starlight was talking about this morning. Absolutely, that's the case. But it is pick and pay. It's completely 100 percent consumer choice and discretion whether they would wish to pay that or not.
6047 But we will -- obviously, we also understand that when we offer programming that is of niche interest or programming that's more back catalogue or older, the price point for that can't be six or eight dollars. Just no one would buy it at that price point. It has to be much more modest.
6048 COMMISSIONER SIMPSON: Okay. I'm going to ask -- you're dangling attractive percentages of Canadian programs and contributions to CMF. But I want to understand how this works.
6049 In a linear environment when you make a percentage commitment, you know, you're stuck with it because of the program wheel. But in a non-linear world you're loading content onto a server.
6050 Now, the question I've got, is your commitment conditional upon the download or the uptake of that Canadian content that has a direct relation to what you contribute back to CMF?
6051 Because we were hearing earlier today -- the Starlight people were saying Canadian content doesn't have the star-making machinery to be generating the kind of downloads in a VOD environment or in an online environment that a linear environment would be able to push onto people.
6052 So is your commitment conditional upon consumption or is there a dollar figure that's fixed?
6053 MR. THIESSEN: Our commitment to the CMF is based on the revenue that comes into our service, so say it's $100, $15 of that would go to the CMF.
6054 In terms of the commitment, what we are trying to do is, you know -- Mark, maybe you should answer.
6055 MR. PRASUHN: Well, I think it's answered. It's a variable cost, it's a 15 percent level and of course for Canadian feature film again, as I said in the opening remarks, it's the 100 percent which is the current regime in the VOD framework rule and policy so we would follow that. But in terms of the general revenues of the service from all transactions that occur, whether Canadian or foreign, programs that viewers choose to watch, we would remit the 15 percent.
6056 COMMISSIONER SIMPSON: So if Canadian content is a poor performer financially then you are off the hook on your commitments?
6057 MR. PRASUHN: No, because we are still paying the 15 percent --
6058 MR. THIESSEN: No, not at all.
6059 MR. PRASUHN: -- sorry, on any foreign that is sold as well.
6060 So actually it's the cross-subsidy that was mentioned in this morning session that, you know, as the system has done for 50-odd years, sometimes popular foreign programming can cross subsidize and support the production and creation of Canadian content and we see that as definitely an outcome of the service we propose.
6061 COMMISSIONER SIMPSON: Staying with programming, you hadn't intimated that there would be a percentage of third language and you sort of ran the table on the options, but do you have anything specific that we can hang our hat on with respect to programming in third language?
6062 MR. THIESSEN: Yes. In our application we say 5 percent would be geared to third language ethnic programming.
6063 COMMISSIONER SIMPSON: But not language-specific at this point? It could be Punjabi, it could be --
6064 MR. THIESSEN: It could be anything because we are user-driven. Obviously we will be providing the languages in those areas where those servers are located to best suit those needs, and also French, of course we have a large commitment towards French as well beyond the ethnic.
6065 COMMISSIONER SIMPSON: The evidence that we look for in 9(1)(h) determinations are pretty specific and exceptionality is one. But the determination between want and need is always one that sticks in everybody's mind.
6066 Did you submit research to determine that there was a need for this or a want?
6067 MR. THIESSEN: We referenced in our application the navigating the convergence which the CRTC actually put on the record and noted how important -- well, how much impact OTT was having and the directions that the whole world was going towards.
6068 COMMISSIONER SIMPSON: Yes.
6069 MR. THIESSEN: So we did put that on the record, as you know.
6070 COMMISSIONER SIMPSON: Yes.
6071 MR. THIESSEN: You know, in terms of going forward and more market-driven, I haven't heard a single conversation happen this week that hasn't pointed to the fact that the world is changing and it is driving towards the pick-and-pay model. So I don't think that that's in dispute at all. The demand is there.
6072 Netflix came out this week with some pretty significant gains again in Canada or worldwide in terms of impact on the OTT and there are numerous studies that are out there and lots of information and I can go on if you would like about them, but I don't think there is any dispute the demand is here for a service, the demand is here for consumers to have their choice and the fact that we are providing it with no cost as a 9(1)(h) is a very important -- we believe an incredibly important thing that allows the consumer to be the winner here.
6073 COMMISSIONER SIMPSON: On the subject of OTT, is your service a candidate for an alternate platform like an OTT, like a Netflix, or do you find that you would not be able to compete with that on head-to-head basis?
6074 MR. THIESSEN: Ours is not subscriber based its transactional, so right off the bat we are not a candidate for Netflix. In fact, there are studies that came out on April 10th where they see the subscription-based model as actually moving down. Even though Netflix is so popular the transactional model is the way of the future, so we don't see that that is the direction we should be going.
6075 We think that if there is a national transactional system it's a much better alternative because people get what they are wanting at that moment in time. They are able to pick and pay.
6076 COMMISSIONER SIMPSON: My last question or questions is on the issue of what do you currently own in the way of rights?
6077 To go from 0 to 100 you would have to have a significant amount of content.
6078 Do you currently own rights for at least part of what you are proposing?
6079 MR. THIESSEN: At this time we do not. We are a new applicant.
6080 However, if you wanted to take -- there are certain catalogs that I know of myself and in others in Winnipeg who have lots of content who are Indie producers, there are going to be lots of people that have it. So I guess what I would lead off to say is that people at this table have literally taken care of those kinds of issues.
6081 Daphne started up the Disney Middle East and that was a big project; Mark has taken on huge projects as far as finding content, and we find as we have talked to independent producers, they want more options. I don't think you are going to find anybody saying, "No, we don't want more places to put content on".
6082 So yes, it would be a great big job, but these guys are up to the task.
6083 COMMISSIONER SIMPSON: And the financing of these rights to purchase them is in place?
6084 MR. THIESSEN: The financing of the purchasing rights?
6085 COMMISSIONER SIMPSON: Yes.
6086 MR. THIESSEN: Actually Mark should speak to that, because he has had so much experience as to how that actually happens.
6087 MR. PRASUHN: Yes. I have started up two program sales companies in Canada and in the early days of this entity we would certainly be -- our preferred model would be a revenue share obviously. That's a pretty common model, especially online, and one that not all suppliers will go with, so we understand that and we will limit in some areas the content.
6088 But, as Jeff said, we believe we have the network contacts and knowledge of the industry, the traditional television and online and new suppliers to be able to find the sources who will play ball with us in that context.
6089 In terms of the advances which I mentioned in the opening remarks, that would also be a component because some programming suppliers will require guarantees. Again, in a program sales context, the way that's usually done is through staged payments over a period of time and the art of it then is really to match up the release, the cash flow of those payments to when you expect the activity to ensure that you are earning the money back. So you might say, "Well, we will give you an advance of $100, $25 is payable now, $25 in six months and the other $50 in a year" and then you try to match it to where you expect the cash flow to happen. So it becomes more of a cash flow management issue than anything else.
6090 COMMISSIONER SIMPSON: On cash flow, there is a general feeling that there is a deficiency in providing evidence as to why you needed the term that you needed. The idea is that there is a turning point and we usually look for a pretty solid case to measure up against your request for a license term and I'm wondering why that direct evidence wasn't given to us.
6091 MR. THIESSEN: I'm sorry, I'm a little puzzled by your question. Could you repeat it?
6092 COMMISSIONER SIMPSON: Well, the license term is not only hinged on the programming model but the business case and the term can be up to seven years, it could be five, but usually the application or the applicant has a financial reason why they are asking for the term they are asking for. We felt we didn't get that.
6093 MR. THIESSEN: If you are asking -- he can help me here, but what I understand you are saying is because we are asking for a five-year term you are saying that we wouldn't need a full license to get to that five years?
6094 COMMISSIONER SIMPSON: Why do you think you need a 5-to-7 year term to be able to get this thing off the ground?
6095 MR. THIESSEN: Well, I think five years is reasonable. I don't think we are asking for seven, if we do. We are very happy with five and we would limit it to five because, you know, in a situation, unless there is a problem that we spend years negotiating with BDUs, which I hope we get a 9(1)(h) order for and eliminate that problem, but when you talk but actually being able to implement and execute, with the VIs there's standstill clause and others that would work really well for us and once we get our service launched and licensed and going with momentum with the consumer, we believe we will do just fine going forward.
6096 COMMISSIONER SIMPSON: Okay. Those are my questions, sir.
6097 THE CHAIRPERSON: Those are all our questions. Thank you very much.
6098 MR. THIESSEN: Thank you.
6099 THE CHAIRPERSON: We will take a 10-minute break. Come back at 4:20 for ZoomerMedia, please.
6100 Thank you.
--- Upon recessing at 1612
--- Upon resuming at 1625
6101 THE CHAIRPERSON: Welcome to our last applicant in this Phase I of the hearing.
6102 As usual I would ask you to introduce your panel and start your presentation. I believe you have 20 minutes, please.
6103 Thank you.
6104 MME LAFONTAINE: Bonjour Monsieur le Président, membres du conseil, Commission Staff. My name is Monique Lafontaine and I am Corporate General Counsel and VP Regulatory and Business Affairs for ZoomerMedia Limited.
6105 Before we begin our presentation today, I would like to introduce the members of our panel.
6106 To my left is Moses Znaimer, founder and President of ZoomerMedia Limited.
6107 To Moses' left is Tony Greco, Vice President of Television Program Distribution and Block Time Sales for ZoomerMedia.
6108 Beside Tony is Beverley Shenken, Vice-President Programming at ZML.
6109 Next to Beverley is Joan Jenkinson, Vice President of Independent Production and Multi-faith Content at ZoomerMedia Limited.
6110 Over to my right, is Mark Lewis our external regulatory counsel. Mark is a Partner at the law firm of Lewis, Birnberg, Hanet LLP.
6111 Beside Mark is George Kempff, the Chief Financial Officer of ZoomerMedia Limited.
6112 In the second row, starting at the far left is Susan Eng, VP Advocacy for CARP -- a new Vision of Aging for Canada.
6113 Beside Susan Eng is Dan Hamilton, Vice President, Broadcast Sales at our company.
6114 Beside Dan Hamilton is Dr. Rebecca Goldfarb and Dr. Goldfarb is a Principal at Goldfarb Intelligence Marketing. Dr. Goldfarb conducted the market research that we filed in support of our application. She also reviewed and reported on the market research conducted by the Strategic Counsel for the BDUs. Dr. Goldfarb is here to respond to any questions the Commission may have about her study and her analysis of the BDU study.
6115 Beside Dr. Goldfarb is Harpreet Singh, a Mosaic producer whose program airs on VisionTV. Mr. Singh is the host and producer of the program "The Harpreet Singh Show" a religious program focusing on the Sikh faith, which airs on VisionTV.
6116 We are very pleased and proud to come before you today.
6117 The first big idea we would like to get across is that we are literally unique in these proceedings in that we are already on basic and we are not asking for an increase. All other applicants are either already on basic and asking for more money, or they want to get into basic and are asking for new money.
6118 However, VisionTV has been on basic for 25 years and this is where we propose that Canada's multi-faith and multicultural service remain.
6119 Without a doubt VisionTV is a literally unique programming service and makes an exceptional contribution to the attainment of the objectives of the Broadcasting Act. We most certainly meet the CRTC criteria for a 9(1)(h) service as we have set out in our written submissions.
6120 We would now like to show you a video about the exceptional work that VisionTV is doing to reflect Canada's diversity on-air.
--- Video presentation
6121 MR. ZNAIMER: Chairman, Vice-Chairman, Madame Poirier, Ms Molnar, Mr. Simpson, we had prepared different remarks than the ones you have in front of you, which I was going to read into the record. We had written them out over many drafts and they read okay on paper, but when I read them over out loud this morning I decided to drop them because I found them too depressing and I felt they would set the wrong tone for what I think should be a celebration of Vision's 25 years of service and our recent stewardship.
6122 A licence renewal is not only a time of giving account but a time for looking forward with energy and optimism. We have a great story to tell and some great people here to tell it, and instead, we're pleading for our life. How could that come to be? Why should that be?
6123 The stuff I'm sparing you was a list of all the ways, large and small, in which we are being run around and pressured by the Big Guys and how that's making it increasingly difficult for us to fulfill not only our overall mission but also the specific and very significant obligations you've given us.
6124 Suffice it to say that the industry is hanging back, waiting for your decision, but they have clearly telegraphed their intentions and it's not good news for Vision's over 15 million viewers, our hundreds of stakeholders, our staff or our shareholders. That's why we're here looking for what we see as simply a renewal of the dual status that we've had all along and that we think should come along with the renewal of our licence.
6125 Commissioners, we go beyond just hoping that you will help us. We think that given our noble mission, given our record, our momentum, given that nothing new is being asked of the consumer and given that distributor intentions have been clearly made known, we think you actually have a "Duty to Protect" and that the simplest way for you to do that is to add us to that very special list of exceptions that speak to Canadian values and not just VI BDU profits.
6126 Mr. Blais, in a recent speech you said:
"We need successful companies, large and small, national and local, competing in the marketplace. We have confidence in the business sector. For the most part we will get out of your way. However, we won't hesitate to intervene when there's market failure or a need to protect Canadians."
6127 If ever there was a time and a place to do just that, now is that time, this is the place and Vision is the channel.
6128 With that said, we await your questions.
6129 THE CHAIRPERSON: Well, thank you very much for your presentation. Commissioner Molnar will start the questions. Thanks.
6130 COMMISSIONER MOLNAR: Good afternoon, everyone.
6131 I do have a number of questions. I have questions under a scenario where you would receive a 9(1)(h) order as you're requesting and under a scenario where you wouldn't, and we will go through both of those.
6132 As you may know if you have been following this hearing, and I expect you have been, the questions are really intended to clarify the record and fill the record and they're not a time when we review the full evidence you put in or have you justify every element that you've put in.
6133 Before I get to those though, I just want to give you -- perhaps it's an opportunity. You stated at the end that we have a duty to protect. Can you tell me where you see we have that duty? Where does that duty come from?
6134 MR. ZNAIMER: Well, to begin with, we were licensed as a creature of this Commission 25 years ago. More than any other broadcaster than I can think of, the fingerprints of the CRTC are all over this channel.
6135 If I can cast your minds back to the early 80s, I don't know whether you were in the trade then, but it was a time for the advent of specialty channels. That subject was widely discussed, mammoth hearings were held, and I believe in 1981 there was an extensive hearing into the question of religious broadcasting in this country.
6136 At the time there was a great deal of effort. Many applications were being proposed by various denominational groups, particularly American evangelists who wanted to get their broadcast services into Canada, and I don't know if anybody at the Commission here remembers that.
6137 There was even a pirate television station, I believe in Lethbridge at the time, that was rebroadcasting the service of Trinity Broadcasting from the United States.
6138 Clearly, something had to be done, and in extensive consultations throughout the country the Commission came to the conclusion that what was best for Canada would be not a series of single-faith broadcasters but one, a multi-faith broadcaster, a multicultural broadcaster.
6139 And what was extraordinary about that time, and perhaps our friends in cable and satellite have forgotten it, but there was some enthusiasm for this proposal from the cable sector. They too were concerned. They didn't have as much bandwidth at the time and they were concerned that they would be flooded with all manners of single-faith broadcasters. So they found great merit in this proposition.
6140 From '81 through to '87 when the licence for Vision TV was granted, it was the Commission that --
6141 COMMISSIONER MOLNAR: Mr. Znaimer, I'm sorry, in the environment that exists today --
6142 MR. ZNAIMER: Yes.
6143 COMMISSIONER MOLNAR: -- where do you see our duty to protect?
6144 MR. ZNAIMER: Well, we're under threat and we can detail that threat. Would that address your question?
6145 COMMISSIONER MOLNAR: No. My question is not your threat, my question is our duty to protect.
6146 MS GOLDFARB: Can I speak to the research on that, please?
6147 COMMISSIONER MOLNAR: I'm looking for something within the regulatory framework, legislation or something that says we have a duty to protect.
6148 MS LAFONTAINE: Well, first of all, I mean the Chairman himself used those words at a speech, that he had stated that the Commission would intervene and protect Canadians and there has been, you know, an extensive conversation with the Commission of late about the consumer interests and the needs of consumers so I think that this is part of that dialogue, the needs, you know, the protecting the Canadians and protecting the consumer.
6149 But in terms of what we are submitting and why we have put it forward is because it's our view that the Commission has an obligation to regulate the broadcasting system in accordance with the public policy objectives of the Act and there are numerous objectives in the Act that our service attains that services a significant audience that is largely disenfranchised, lower income, older Canadians, new Canadians, immigrant communities, and these individuals need and want to have access to our programming and the only way they are going to have access to this programming is if the Commission regulates and by extension protects their interests.
6150 COMMISSIONER MOLNAR: Thank you for that clarification, the clarification being we have a duty to protect the citizens who are watching this and we don't have a duty to protect a particular licensee; correct?
6151 Is that what you have just said?
6152 MS LAFONTAINE: I think the Commission's mandate is to regulate a system that ensures that there are a broad range the voices available in the system. You have Diversity of Voices Policy, the Broadcasting Act includes provisions that state that there should be a wide range of elements, content, programming. And so again, I think by extension these obligations include the availability of these diverse voices, which are more than just the vertically integrated voices. It's a system that has more than just three or four players that are now recycling all of their content across many platforms.
6153 So to answer your question, Commissioner Molnar, I think it's part of the duty and part of what makes the system rich is to ensure that Canadian citizens, consumers have access to a broad range of programming, but for that to happen we need to have the outlets. So I don't think you can actually have one without the other.
6154 COMMISSIONER MOLNAR: I'm going to go on to questions regarding your application. I'm going to start under the scenario where you are granted 9(1)(h).
6155 You put forward some changes to some of the conditions that you would propose under a scenario of being granted 9(1)(h) and one of the proposed amendments was a reduction in the requirement to -- I'm sorry, let me start this again.
6156 You would reduce the amount of support for Canadian production by requesting to have removal of the requirement to expend 25 percent of previous year revenue, essentially one cent, the 25 percent of 4 cents of the total wholesale rate and so you have actually in fact requested a reduction in your CPE -- proposed CPE under this scenario where in fact you would be granted 9(1)(h) and I want to just give you an opportunity to explain to me the rationale for that.
6157 MS LAFONTAINE: Yes. I'm going to ask George Kempff to speak to that.
6158 MR. KEMPFF: So when we look forward to how Vision is going to perform over the next seven years, one of the major tasks that we have facing us is we are currently on SD and we plan to move to HD in the next year or so, in January 2015, and one of our major costs is not just the investment in HD equipment, but is many of the fees that we have to pay to get our signal out. Currently those fees we anticipate will almost triple in value in terms of our satellite uplink fees and backhaul feeds and so that is one of the major reasons why we are just requesting that we stay at the 47 percent and no longer have the 25 percent or the 4 cent increase that we have had in the past.
6159 MR. LEWIS: The other aspect is that we never got the 4 cent increase. That was a maximum rate. Since 2000 -- for the last number of years there has been a significant erosion of that $.12 rate.
6160 And we can go into the reasons why the rate has been eroded, but one of the things is that certain BDUs have refused to pay the rate, they have also come up with a series of charges, requirements, MFN clauses -- which I know were outlawed in 2011 in the vertical integration policy, but they persist -- and so I believe that Mr. Kempff or Mr. Greco can actually speak to the rate that we are getting, but we did not get that rate overall.
6161 MS LAFONTAINE: What I would also add is that, you know, we haven't asked for a rate increase, we haven't had a rate increase since 2004 and so the $.12 is really worth $.10 today and so the wholesale rate hasn't increased with inflation so we effectively have a lower rate than what we had nine years ago.
6162 So I think that was part of the rationale for focusing more on a 47 percent CPE, because of the costs that we had.
6163 What I will also just add in terms of these overhead charges to transition to HD, it actually goes beyond transitioning our facility.
6164 Part of the difficulties in the competitive or commercial market that we face is that we are now having to sign on to BDU agreements that require $750,000 in uplink fees for HD for services that are not provided. So it's basically, you know, sort of -- yes. So it's $750,000 --
6165 MR. GRECO: $750,000 times 2, one for each, Bell and for Shaw Direct.
6166 MS LAFONTAINE: But there was only one of the two that actually provides the service, but in terms of the oppression in the marketplace that we as a small broadcaster experience is having to pay the uplink fees to two uplink services when we are only provided with uplink services by one undertaking.
6167 So I will just take a step back. We have to pay right now $250,000 to Shaw, which is part of -- you know, we understand that for the uplink fees to have our service made available across the country, but we also have to pay those fees to Bell has an equalization payment, but they are not providing us those uplink fees. So there's $250,000 a year that we give them for no service, no consideration, and those fees will also increase to $750,000 a year once we transitioned to digital.
6168 So the point where trying to make here is that the costs for us are increasing astronomically when we are not getting anything in return for these expenses.
6169 MR. LEWIS: And I am going to add, and I am going to go out on a bit of a limb, but I have seen the U.S. agreements with the BDUs, I have negotiated a number of them. The U.S. service providers do not agree to these charges, they are only thrust on Canadian independent services.
6170 I would dare say that I am skeptical whether any of the VI's own services are paying these charges.
6171 And this was allowed in 2004-19 where they were given the green light -- these are the BDU's -- to go after Canadian independent services. But it is a very significant erosion of the monthly service fee to the subscriber.
6172 So we are hit with two whammies, one is these extra fees which whittled down below the $.12 and then the fact that the BDUs won't pay the $.12.
6173 MS LAFONTAINE: Tony...?
6174 MR. GRECO: I see some confusion so maybe I will just clarify it.
6175 If an independent pays Shaw Direct for uplink, it's Bell's position that we must also pay them. So if you can get uplink by Shaw direct without having to pay them, then you don't have to pay Shaw, but if you do secure Shaw direct signal and pay for it, then you must pay that duplicate fee regardless of whether there is any benefit to you.
6176 COMMISSIONER MOLNAR: Thank you.
6177 I do understand that a little bit and I think what we are talking about here is on a go-forward basis why is it you had to reduce your commitments to Canadian programming expenditure. I think what you said is your costs will increase because the uplink fees will go from $250,000 to $750,000, so essentially $1.5 million you will be paying going forward that you don't pay today.
6178 MS LAFONTAINE: Well, they will be going from $250,000 to $1 million because we will have to pay the SD as well.
6179 MR. GRECO: As well. The extra penny and change we pay the (indiscernible) regulation.
6180 COMMISSIONER MOLNAR: Oh, I see, yes.
6181 So your decision is the best way to address those increasing costs is to reduce your Canadian programming commitments?
6182 MR. ZNAIMER: Excuse me, they remain at 47 percent, which is quite exceptional.
6183 Tony, did you explain that we really -- we are suffering in a number of ways.
6184 One is by inflation. So the posted rate of $.12 is actually worth about $0.09 in today's real money. On top of that, by negotiation we are having another penny and a half whittled away by people who simply have superior negotiating power. So we are actually taking in something in the order of 7.5 to 8 cents net today.
6185 It's very hard to keep up with increasing cost when our revenues have stayed unchanged and in fact have actually been reduced over the last eight years.
6186 So all we are saying there is instead of paying out an exceptional 51 percent CPE, we would appreciate some relaxation to 47 percent. 47 percent compares with 30 percent that is CPE required by the major broadcast groups in this country and over-the-air stations, as you know, that are owned by these major groups have CPE's as low as the 20s.
6187 COMMISSIONER MOLNAR: Okay, I'm going to move on.
6188 I have just looked at your revenues and they didn't appear that they went down over the last period.
6189 One of the questions here and I'm going to ask it anyway, but I think you've gone all around here, but the Writers Guild has suggested that for 9(1)(h) there should be a threshold of 50 percent CPE. Where are you on that?
6190 MS LAFONTAINE: We did look at that, at that scenario, and it would have been again a significant contribution, but I think that George had run some numbers on the Writers Guild's 50 percent CPE proposal?
6191 MR. KEMPFF: Yes. So we ran numbers and, you know, that three percent over the 47 represents another $750,000 to a $1 million in CPE. So, again it goes back to the issues that we have just talked about in terms of, you know, our costs and what we expect in terms of costs going forward.
6192 MS LAFONTAINE: I think I just also want to state for the record that, although there's this, you know, the delta between the 51 and the 47, you know, we are a service that is highly, highly committed to Canadian programming and to a broad range of Canadian programming and we give opportunities to producers just who really don't have any other door to knock on.
6193 You know, last year, we had 90 different faith producers that had an opportunity to use our platform to access their viewers, their audience, and in addition to those faith producers, we have Canadian and independent producers who commissioned original thought-provoking documentaries.
6194 So, we really are a company and a service that is committed strongly to Canadian programming.
6195 COMMISSIONER MOLNAR: Okay. I have a question of clarification. You indicated in your application that you have outstanding and prospective commitments of four million and close to two million in assumed transfer benefits that need to be directed to independent producers.
6196 Can you indicate the deadline by which these benefits must be paid?
6197 MS LAFONTAINE: I am going to ask Joan to speak on this, but we do have transfer benefits that are associated with an acquisition that were assumed and we have transfer benefits that ZML had pledged when they acquired the service and so, Joan will speak to the two types of transfer benefits.
6198 MS JENKINSON: Some of that two million has already been paid since we submitted those numbers. But the assumed benefits, we have $253,000 left to spend in this fiscal year and they will be spent. And over the next five years, we have $1.5 million left to spend on our transfer benefits, which we are on track to doing now.
6199 COMMISSIONER MOLNAR: And that is all over and above the commitments you've made in this application?
6200 MS JENKINSON: Absolutely, absolutely.
6201 COMMISSIONER MOLNAR: Thank you. So, your application speaks of $73 million related to programs of national interest and total programming expenditures of approximately $122 million over the next seven years, separate and apart from all your transfer benefits and everything else.
6202 And we just need confirmation that that is your commitment, assuming a reduced CPE. Is that true?
6203 MR. ZNAIMER: Yes, that's correct, yes.
6204 COMMISSIONER MOLNAR: Okay. Thank you. I expect Mr. Znaimer has been waiting for the opportunity to talk a little bit more about potential issues related to carriage under a scenario with a 9(1)(h) and I am going to give you that opportunity.
6205 You have said that the BDUs are holding back, but they have telegraphed their intentions. Can you just give us a little bit more detail around what has been going on with your negotiations?
6206 MR. ZNAIMER: May I ask Tony Greco who deals with BDUs on a daily basis, a man of infinite patience, if he could respond?
6207 COMMISSIONER MOLNAR: Okay.
6208 MR. ZNAIMER: Thank you.
6209 MR. GRECO: Yes, I think since the announcement of deregulation it was like ringing the dinner bell. Basically, once deregulation was announced, we were unable to secure a single BDU even interested in sitting down and discussing contract re: negotiations. We did renew several contracts, many of them were based on we will sign a contract, but they will go to the end of the dual status period, which was I guess initially August 2011, August 31st 2011 and so they would expire in 2012.
6210 So, that was the first indication that our BDU friends were waiting to see what would happen once that dual status expired and what commitments we might make after that. Notwithstanding that we did get contracts signed during that period, they referred to that period as the "protection period". So, you will pay us some monies and we will in fact keep you on basic service, notwithstanding the fact you remained dual status until August 31st.
6211 And that was three or four year, depending on how much the financial commitment on our part was, that we would have our rate reduced each year as we got closer to the final protection period and I think a total of two and a half to three million dollars.
6212 London didn't ask any trial basis. Rogers has -- in their intervention has advised that all the BDUs are going to carry Vision on basics so why do they need 9(1)h). Yet, when Rogers did its basic in London, we weren't on skinny basic. Notwithstanding the fact we were administratively renewed by this Commission as dual status until August 31st 2013.
6213 We advised the BDU that in point of fact it was required by the Commission that we be carried and basically said, well, we don't recognize that. We went back and said, well, we have a contract with you, an affiliate agreement with you, goes to December 21st 2012. How about that? Take us to Court. Take us to -- call it undue preference, call it whatever you want, you know, take it to arbitration.
6214 So at the end of the day, we have to assume that if while we are under dual status with the Commission, if we are under contract with the BDU and VI, and they would take us off of basic, we are not in any of the marking content that they have provided to the public, at the end of the day, they finally relinquish, and we advise, we go back to the Commission and get the decision for undue preference and then they say, well, we will put you back, but you can't be in any of the marking material.
6215 So, we think that's an indication of where things may go if we don't have dual protection.
6216 Videotron has taken us off two or three times. Typically, we get taken off, we go back. Here are the commitments we want, we can make these commitments, typically they are about rates, et cetera, we can probably put you back on. So, and so we play the game again and, in fact, contracts have expired right now and I can go on and on. I have got a file on BDUs gone wild that I can share with you.
6217 COMMISSIONER MOLNAR: Okay. And I understand you have been working for quite sometime on that file, so we probably don't have time to hear all of it, but --
6218 MR. ZNAIMER: May I add just one point?
6219 COMMISSIONER MOLNAR: Of course.
6220 MR. ZNAIMER: Rogers had a thing called -- what's the --
6221 MS JENKINSON: Oh, it's the PD everywhere, they are online service.
6222 MR. ZNAIMER: Yes, and there are 77 channels listed in that, but not ours. So, you think that I'd be irritated and upset and I am in a way, but at the same time, I want to thank Rogers because they could have, you know, hung back and waited in the weeds until after this hearing and then done what they intended to do, but they have been honest and upfront and they have let us know and they have shown you exactly what they intend to do.
6223 And what they intend to do is very bad for our health and puts some complete jeopardy or our ability to do the kinds of things that you have licensed us to do.
6224 COMMISSIONER MOLNAR: The other thing they did and you mentioned it, is they put on the record of this proceeding that you are likely to continue to be carried on Basic and while they used the word "likely", they did -- they nonetheless have, you know, provided some indication in this hearing that they are not going to dump you to what I think you believe to be the very very small an elite here of services.
6225 And your assumption if I am correct, you would assume that without 9(1)(h) you will be placed in a tier with 10 per cent penetration?
6226 MS LAFONTAINE: Our concern is that -- we have two concerns. One is that we can get some to a tier with low penetration, but we are also very concerned about remaining on Basics with no wholesale fee because that's what could happen.
6227 So, they are all saying, oh! don't worry, we are not going to move them from Basic, they will probably stay there, but we are just waiting for the results of this proceeding because then we are going to know how we can negotiate this affiliation agreement that is outstanding. This is all negotiations, negotiating package, this is negotiating rate.
6228 So, if they are going to keep us on Basic, they could keep us there and, you know, they can get us, you know, one way or the other. Either they move it to the small package and we don't get sub-revenues there or we stay on the large package and don't have sub-revenues.
6229 And for Vision-TV to work and to do all of the things that we do, we need to have three sources of revenue.
6230 MR. LEWIS: And Father Rosika mentioned in the video, but it's very important to understand that there is a policy right now within the BDUS and they are going to come before you next week and many of them will be in Montreal the following week, selling off real estate to single faith service providers. And let me just take a step back and explain what I am talking about.
6231 When the Commission licensed single faith broadcasters, it was strictly to be offered on a discretionary basis because they didn't have balanced programming and because they didn't have all of the obligations that Vision has.
6232 What has happened now is that single faith broadcasters can pay to have carriage on Basic or under discretionary Basic, but -- and so, the pressure is now coming to Vision to pay the BDUs for distribution on Basic.
6233 And this is completely counter of course to what is going on with the BDUs and subscriber rates because the US services year over year are getting on average 4.7 increases, which are reflected in the subscriber fees and subscribers are paying.
6234 They have lower viewership in Vision, lower household penetration, lower AHA and yet, they step up to the plate and they get much higher rates.
6235 For example, headline News Network which has the Nancy Grace Show that essentially does murders and kidnapping and that sort of programming is up to $1 and that rate has increased 28.5 percent over the last four years.
6236 So what is happening is, obviously to us, we're getting pushed back on our regulated rate of 12 cents under the dual status. Now, that we're in negotiations there is further push backs of additional fees and possibly no fee whatsoever to us, no subscriber fee. And these American services are making out like bandits.
6237 COMMISSIONER MOLNAR: I just want to ask, because I wanted you to do an undertaking to tell us what you felt would be your financial projections under a scenario where you remained on basic and under a scenario where you were on extended basic. There is three scenarios.
6238 Let me tell you this undertaking: Provide your financial projections reflecting both current and proposed spending obligations assuming that VisionTV is distributed on the basic service and extended basic service of all of the major BDUs.
6239 MR. LEWIS: And when you say extended basic, I just want to clarify, which tier are you speaking of? Are you speaking of -- when you say extended basic a tier such as the scenario we presented, the low penetration tier?
6240 COMMISSIONER MOLNAR: No, extended basic would be a high penetration tier.
6241 MR. LEWIS: A high penetration tier.
6242 COMMISSIONER MOLNAR: So you're either on basic or you're on the high penetration tier.
6243 Just write down the undertaking.
6244 MR. LEWIS: Yes.
6245 COMMISSIONER MOLNAR: At the same time under those same scenarios where you would either remain on basic or extended basis or be relocated to a popular discretionary package.
6246 I guess maybe I did -- no wonder I confused you. I said it wrong.
6247 Whether you're on the basic or extended basic or you're in a popular discretionary package, can you also please indicate to us what level of Canadian programming exhibition would be feasible for you and also what level of CPE would be feasible, assuming that you are under those?
6248 Now, what you would also need to do for us because, well, it's not here. I think the very important and critical element there is at what rate you would be on those as you're just stating.
6249 And so if you have any evidence at all to support your assumption that you would be at a rate of zero or near zero, I think you should undertake to provide that as well.
6250 MR. GRECO: Well, I think we have two Cat As, VisionTV and One Body Mind Spirit.
6251 If we look at our other Cat A which is, again, apparently in the widest distributed package of this genres, it has a 10 percent penetration.
6252 And then I guess one of our concerns is even if we could forecast a 20 or a 30 or 40 percent penetration and we look at that same Cat A that we have, and let's take two VIs, Bell and Rogers.
6253 One was in 100 percent more homes than Bell. Bell changed the packaging because it was competitive and now it's lost 350,000 customers.
6254 In the case of Rogers they changed their packaging and it has 50 percent fewer subs in the past two years than it had previously.
6255 So even if we could accomplish a 20 or 30 or 40 percent penetration, we have no assurance of the BDUs who said, to quote a BDU:
"The Commission forces us or manages us or requires that we carry you, but the packaging and distribution that's in our bailiwick and we can put you. And anybody want to buy some doo-doo package?"
6256 So our concern is even if we had 40 percent.
6257 So I think at the end of the day it's not about customer choice. It's all about money.
6258 So the BDUs they'll reduce our rates. They've already done that.
6259 They'll change our packaging. They've already done that.
6260 They'll divert our viewers.
6261 We have requirements that we aren't allowed to put series on our sites but they can put it on their sites. So we can give it to them. We just can't use it ourselves.
6262 They have poached some of our most popular programming and I think, at the end of the day, they'll even want to purchase some of our equity in our companies. I think it has nothing to do with the subscriber.
6263 If you look at the subscriber and choice, if we just think about it while the BDUs are writing to the Commission, most typically channels 29 and 56, Tier 1, 2 and 3 in the case of Rogers, discretionary packages. So on one hand we're saying there is no bandwidth and customer choice, but now we've taken these 29 channels -- 26 channels, I believe, and put them on extended basic. So a customer had a choice of buying these and now the customer has to pay for them. So basic cable goes from $23 to $38 or $40.
6264 It's not about the customer. The customer never had choice. The Commission can direct where we go and the BDU can direct where it'd be going. I guess with the regulations only the BDU that really regulates where we go, how much we get paid and our package in terms of channel placement.
6265 MS LAFONTAINE: Commissioner Molnar, I just want to clarify that you're looking for evidence that would show that the rate would drop to zero. Is that...?
6266 COMMISSIONER MOLNAR: In order to meet these undertakings to tell us what is the feasible amount of programming exhibition or CPE, you need to make an assumption as it regards what wholesale rate you'd receive under a negotiated situation.
6267 Now, if your assumption is zero, I think you need to provide some evidence as to why that's reasonable.
6268 MS LAFONTAINE: Thank you.
6269 I just also want to quickly add, in terms of the low penetration tier and the subscriber rate that would be appropriate for VisionTV to continue to operate and offer, you know, an acceptable level of programming to meet our obligations, the problem with that is that it's a rate of about $1.20. We ran those numbers. That is an extremely high wholesale rate for the communities that we service.
6270 We're also very cognizant of the need to keep prices down for consumers and, in particular, for these older Canadians, these again new immigrants. You know, most of VisionTV or an extensive amount of VisionTV's audience is lower income.
6271 And so we'll provide you with these scenarios. But I just wanted to make it clear and put it on the record that we're very concerned about that high sub-fee for our audience for these citizens that we service.
6272 COMMISSIONER MOLNAR: I actually think you do have that on the record.
6273 Once again, these questions -- these questions are just to clarify certain elements. I mean, you have a lot on the record and I believe you made that clear.
6274 MS LAFONTAINE: Thank you.
6275 MR. ZNAIMER: If I may add, Commissioner, we have three sources of revenue.
6276 Sub fees is just one. Then we secure revenue by selling block time to individual reducers and ethnic -- excuse me -- ethnic ministries. They require complete access to the Canadian market as do advertisers.
6277 So even if we could negotiate a rate on the way down where the sub fee would grow as the distribution would diminish; for example, if we were to go into a 10 percent year, notionally the BDUs would have to pay us $1.20 to keep us whole on sub fees.
6278 But our entire commercial revenue and our entire block of sale revenue, which is the essence of our obligation under this licence -- it's the whole point and purpose of why Vision was created in the first place -- those two sources of revenues would disappear. Two-thirds of our revenue, more actually, would disappear.
6279 So we do these scenarios because you ask us to, but the fact is they're not realistic. They're just exercises.
6280 The reality is if we are removed from basic, or if our rate is driven much below where it is today, we cannot continue.
6281 COMMISSIONER MOLNAR: Okay.
6282 So under a scenario without 9(1)(h) you actually requested removal of the condition limiting the amount that you could -- the amount of advertising or solicitation of funds in Mosaic programming.
6283 Now, what I think you just said is that's not useful because there won't be any.
6284 MR. ZNAIMER: That's right.
6285 COMMISSIONER MOLNAR: But you requested that.
6286 Did you want that same removal as it regards your cornerstone programming or was that just a request?
6287 MS LAFONTAINE: In terms of the solicitation? We don't do solicitation in cornerstone programming typically, so it relates more to the Mosaic programs.
6288 MR. ZNAIMER: And it's not solicitation for us.
6289 MS LAFONTAINE: Right, no, exactly. It's solicitation for the Mosaic producers, yeah. It allows them to monetize their programs.
6290 COMMISSIONER MOLNAR: Okay, thank you. I guess, as noted, it may not actually be a useful removal.
6291 Okay. This is another question of clarification.
6292 You indicate in your application for mandatory distribution that the service has provided 2,300 hours of original first-run Mosaic programming within broadcast year 2010-2011 and 1,176 hours of first-run documentaries in the last licence term. In your reply, you indicate that 3,000 hours of first-run Mosaic programming was broadcast in each broadcast year and 560 hours of original first-run documentaries were commissioned.
6293 So can you confirm to us what the correct numbers are?
6294 MS LAFONTAINE: Yes, we will.
6295 COMMISSIONER MOLNAR: And you can do that as an undertaking?
6296 MS LAFONTAINE: Okay.
6297 COMMISSIONER MOLNAR: Thank you. Good. Thank you.
6298 Okay. One other thing that we wanted to talk to you about were issues regarding the Category 4 religious programming and some of the difficulty that has occurred over the term and perhaps frustrations for you and work for the Commission in trying to clarify that in fact you're meeting the conditions of your licence related to what is in fact religious programming.
6299 So there's a couple of options here that have been provided. So one of them is determining maybe the potential of filing quarterly reports demonstrating beforehand that the services meet the conditions of Category 4.
6300 What do you think of that as a potential?
6301 MS LAFONTAINE: I mean, as the individual who has written a lot of the correspondence with the Commission on this 040 issue, I would welcome that, actually. Because it's much easier on a quarterly, on a shorter term basis to say here are the programs that we have aired that we consider to be 040 on, as you say, on a quarterly.
6302 COMMISSIONER MOLNAR: I believe this would be prospective.
6303 MS LAFONTAINE: Oh, okay, sorry. I didn't understand that.
6304 COMMISSIONER MOLNAR: Before it is aired to get it cleared as Cat 4.
6305 MS LAFONTAINE: Excuse me.
6306 MR. ZNAIMER: Yes, Commissioner Molnar, we've discussed this with the Commission time and time and time again. We've explained that most of the producers that we deal with do not like to have an 040 designation for their work because it impedes their further distribution and sale.
6307 We've put on the record titles. We can read them into the record again that do not carry 040 coding, but are clearly religious in their nature. Maybe we should do that again.
6308 Having discussed it with the Commission three times, we were hoping that we wouldn't have to continue to deal with it because it is an administrative and bureaucratic burden. If you insist, we will of course supply these reports, but I don't think the question of whether or not we are meeting our target is open. We clearly are. We are doing more than 90 percent of religious content.
6309 Joan, could you deal with some of those titles?
6310 COMMISSIONER MOLNAR: No, I don't think it is necessary to actually read into the record the titles. That's work and I'm not here suggesting you have not been compliant.
6311 I think, you know, your frustration is just really what we are talking about: How do we address this in a better manner?
6312 MS LAFONTAINE: I just want to say something and then I'll pass it onto my programming colleagues.
6313 Just to make sure that I've understood the question is, would we file quarterly reports, as you say prospective of what we plan to air on the service in terms of 040 programming? That's correct?
6314 And I think that that could be quite problematic, because we can't always foresee for a service like ours when we have new programs every week. So our Mosaic producers, for example, they typically will do a new program 52 weeks of the year. And so it's quite difficult for us to submit that kind of report.
6315 But let me pass it over to my programming colleagues who can talk about from an acquisitions perspective and Mosaic.
6316 MS SHENKEN: Good afternoon, Chair and Commissioners.
6317 We actually do forecast how we're meeting all of our COLs. We can go on weekly, monthly. We can get as granular as the day because we take them very seriously in the programming department.
6318 We could forecast for you, but it would be a forecast, for not just the reasons Monique mentioned with regards to the Mosaic producers who sometimes deliver on the day of broadcast, but also for the reason that sometimes Joan's productions come in just a few days before air, only just enough time for me to get them captioned.
6319 And oftentimes we plan things around events that might happen in the calendar, so for example we may take a stunt week because something is happening with regards to maybe the Pope and I have removed all the movies and made them all movies about basically the Catholic faith.
6320 So if there were leeway and we could write some sort of attestation that said, "This could change but we assure you that we'll meet the 040" we could it, as long as there was an understanding about that.
6321 COMMISSIONER MOLNAR: Okay. I guess maybe an alternative to that is what I believe that you folks have proposed and that is to reduce that Category 4 level from 90 to 75 percent so you have some leeway and you're not --
6322 MS LAFONTAINE: We only made that proposal if we weren't granted 9(1)(h). We are committed to the 90 percent obligation with 9(1)(h).
6323 COMMISSIONER MOLNAR: Yeah, maybe I misunderstood. I thought the purpose of that was almost that administrative problem that --
6324 MR. ZNAIMER: Yes, it would be helpful and in that regard, if we didn't have to chase these codes which sometimes are not indicative of the nature of the program.
6325 MS LAFONTAINE: Because I can say that we do typically reach sort of that 75 percent with the code or with the 040. That's about where we are, yeah.
6326 MS SHENKEN: Yeah, if you just went straight to the logs and looked at the coding we actually meet about 74-75 percent on average. So it's a very small margin of programs that are coded something else, like an 02B that are religious in nature that are not -- if you just, you know, because the computer will read the logs and tell you, "Oh, this isn't right".
6327 So from that perspective, yeah, 75 we'd probably match every time with the coding.
6328 COMMISSIONER MOLNAR: Okay. So if we were to accept that and it is, as you noted, 75 percent now and you have done all the work on the other programs to prove that your religious programming meets the 90 percent, if we were to accept the 75 percent how could we be assured that you won't really stray much from your intended nature of service?
6329 MR. ZNAIMER: Well, again, if the Commission had concerns about particular programs you could ask us the question or we could file these logs with explanations of each program which is what we've already done in the past.
6330 I don't know how else we could assure you other than we understand our mission. We understand our audience. We understand that we build audience by being consistent and honourable and we have no other reason to change that.
6331 MR. GRECO: Also, with regard to our Mosaic programming, what we typically do in our new ministries coming on, is to have them produce a template of their show, send it to the Commission. It would be approved in advance.
6332 So before they even get on the air it goes to the Commission. It takes four to six weeks for the back and forth and you issue the 040 to us and 55 percent of our content is Mosaic.
6333 MS LAFONTAINE: Beverley?
6334 MS SHENKEN: I'd like to answer that question maybe from more of a story perspective.
6335 I've been working at VisionTV for 12 years and when Moses Znaimer bought the company one of the first things he said to me is, "Not only are we going to be a religious broadcaster but we are going to celebrate it and we're going to be the best at it." That was the first time I had heard that in my time at the channel.
6336 And for most of us who work at VisionTV we're very proud of that diverse, multi-faith genre of programming. For most of us, for a lot of us, it's our lifestyle or the way we've raised our children.
6337 We take great pains to actually look at every program, my team and I, and screen the entire thing and make sure that it fits with what our viewers expect from us. We take the responsibility seriously in programming.
6338 COMMISSIONER MOLNAR: Thank you. Those are my questions. Thank you.
6339 THE CHAIRPERSON: Commissioner Pentefountas.
6340 COMMISSIONER PENTEFOUNTAS: Thank you.
6341 Maitre Lewis, did I understand correctly that the wholesale rate for HLN is a dollar and, if so, with whom?
6342 MR. LEWIS: We have obtained from some BDUs a list of rate increases. For HLN in 2010 it was 76.5 cents. It went to 95.0, a dollar and 2013 $1.05.
6343 COMMISSIONER PENTEFOUNTAS: Whom with or is that a rate with --
6344 MR. LEWIS: I don't -- it's a rate that we've obtained from BDUs. But I don't think I'm at liberty to disclose the BDU.
6345 Now, I don't know how many other BDUs are paying this price but, certainly, we have a full set of rates that are being paid in the Canadian marketplace.
6346 It seems that -- and again, this is anecdotal. But I did get some recent bills and increases from other people in other BDUs -- served by other BDUs to see what the rate increases have been. I got a bill recently from a Shaw customer in Alberta and they had a major rate increase. When they called it was attributed to a very large increase for news services and their news package.
6347 I went -- and I'll just give you some other background. I'm a Bell customer and my rate just hit $141. I went into a Bell store on March 1st with my bill to try and (a) decipher why these increases had gone up so much. I asked, because we're not sports viewers, what it would cost me to -- what rate reduction I would have if I eliminated the sports programming. I was told my service would go to $145 from $141 if I eliminated the sports programming.
6348 I consulted with a manager in the store. It was a Bell-owned store. It wasn't you know, something in a strip mall. They went to --
6349 COMMISSIONER PENTEFOUNTAS: It could have been in a strip mall but it's a Bell store.
6350 MR. LEWIS: But it was a real Bell store. It wasn't an agent or something of that nature. And there was just no transparency.
6351 But it's very clear that -- and this goes back to Commissioner Molnar's question earlier. I was told I'm on a Legacy 11 package but now people are in the Genesis. Some people are in the Genesis package and basically you can't get there from here if you're in these Legacy packages. It didn't mean I have a lower rate. It just means I can't change services.
6352 Again, an anecdote, when Hollywood Suite came on and they left their trial period, I tried to buy Hollywood Suite and I was denied the service. I was told I couldn't buy it at any price. Hollywood Suite is a client of mine. I wanted to see the service. So eventually the client, the president of the company who I think was here earlier today, contacted very senior people at Bell and they were told that I was in a Legacy package and I was unable to buy this Canadian service.
6353 So --
6354 COMMISSIONER PENTEFOUNTAS: Not even as part of a bundle?
6355 MR. LEWIS: I'm not even on a bundle. You know, I'm --
6356 COMMISSIONER ENTEFOUNTAS: But the service you couldn't buy as part of a --
6357 MR. LEWIS: No.
6358 COMMISSIONER PENTEFOUNTAS: -- bundle?
6359 MR. LEWIS: That's correct. And I'm at the top of the food chain at $141 right now. I have everything. I have SuperChannel. I have TMN.
6360 The difficulty is that there is no transparency. I brought my bills and I'm happy to provide the bills as an undertaking.
6361 COMMISSIONER PENENFOUNTAS: We have our own bills. We have some idea.
6362 MR. LEWIS: There is no transparency at all for the consumer as to what tier I'm in, what tiers I'm buying, what services I'm buying.
6363 And I've gone to CSRs because I was rather steamed about the price increase to drop sports services. No one would decipher the bill. It was just, "You can't get there from here".
6364 COMMISSIONER PENTEFOUNTAS: Okay.
6365 Thank you, Mr. Chair. I got off topic a bit.
6366 THE CHAIRPERSON: Well, okay.
6367 Commissioner Molnar has some follow-up, so we will go with her first.
6368 COMMISSIONER MOLNAR: I don't actually have follow-up, I have correction.
6369 I have been informed that when I was talking to you about the condition regarding the quarterly monitoring report, so your Cat 4, in fact it would be after-the-fact and not prospective.
6370 MS LAFONTAINE: Okay. No problem.
6371 COMMISSIONER MOLNAR: No problem.
6372 Whether you want to file quarterly or not I guess you can think about a little more.
6373 MS LAFONTAINE: Right. And we will address it in our reply comments.
6374 THE CHAIRPERSON: Actually it would better to do on the May 2nd undertaking --
6375 MS LAFONTAINE: Sure.
6376 THE CHAIRPERSON: -- so that others have a chance to comment.
6377 MS LAFONTAINE: Sure.
6378 THE CHAIRPERSON: -- but the purpose is to make all our lives a little easier on that and we appreciate it. So it's after-the-fact.
6379 Commissioner Simpson...?
6380 COMMISSIONER SIMPSON: Thank you very much, Mr. Chair.
6381 A question going back to your demographics. When we received our assignments we prepare on the basis of the work ahead of us and I have not had the benefit of getting into any submissions you may have had regarding your audience.
6382 Did you submit or do you have data with respect to your audience by economic levels, and I'm thinking of mobility issues as well, because I have always been concerned with shut-ins, those who are not capable of getting out, because television's benefit is to get into the home, and if you had not submitted that information is it available as a May 2 submission?
6383 MS LAFONTAINE: Well, we have some data that I have with me here today and I can again come back with some more data to address this point, but we have information about the age of our audience and the socioeconomic situation in that more than half or 54 percent of VisionTV's audience has an income level of $50,000 or less, and a third of our average audience has household incomes of less than $30,000. So this really is a community that does not have a lot of resources at hand, but we will address this point.
6384 And I don't have anything on hand about mobility, but perhaps I can ask my colleague, Susan, who may have some information on this.
6385 MS ENG: Thank you very much.
6386 I'm happy to address the focus on low income households, and so on. Some of the numbers that Monique has already mentioned are before me.
6387 The audience for VisionTV is generally over 50. Seventy-eight percent of the average audience is over the age of 50 and 57 percent are over the age of 65. Women form two-thirds of the VisionTV audience and 55 percent are retired. As Monique has mentioned, they are generally lower income.
6388 That is not to say that they are then by definition homebound, but it is an indicator of the degree and we can certainly provide the detail as to the people who are in fact homebound either by reason of disability, but also by reason of age, the tendency not to be out and about at night.
6389 It is a group of people for whom the programming at VisionTV is important and it is something that was represented in the letters of support that we found, that that was particularly the audience that found it important and felt threatened by the removal of VisionTV from basic.
6390 COMMISSIONER SIMPSON: Perfect. Thank you.
6391 MR. LEWIS: Perhaps Dr. Goldfarb also would like to comment, because her research also penetrated some of the income levels and perhaps she could have a brief comment.
6392 MS GOLDFARB: Sure. Our research looked at responses across income levels and what was interesting is across income levels our respondents consistently supported it 86 percent, paying $.12 a month. So the importance of that is that that number, it's a small number and acceptable to those who make $35,000 and it's acceptable to those who make $75,000 and above, almost the same, statistically the same, and if we change some of these pricing scenarios there's a big concern that that would really change, especially for that 35,000 level and below household income because other research we have done consistently shows that for things they need everybody wants to pay for them and if they think they can put it into their budget they will, but obviously lower incomes are much more sensitive towards price and much more sensitive towards budget and would be impacted by that.
6393 COMMISSIONER SIMPSON: Thank you.
6394 THE CHAIRPERSON: Those are our questions.
6395 Thank you very much.
6396 MS LAFONTAINE: Merci.
6397 THE CHAIRPERSON: We are adjourned until 9 o'clock tomorrow morning.
6398 Thank you.
--- Whereupon the hearing adjourned at 1741, to resume on Friday, April 26, 2012 at 0900
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