ARCHIVED - Transcript, Hearing November 28, 2016
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Location: Gatineau, Quebec
Date: November 28, 2016
© Copyright Reserved
Attendees and Location
140 Promenade du Portage
- Chairman: Jean-Pierre Blais
- Vice-Chairperson, Broadcasting: Judith A. LaRocque
- Commissioners: Yves Dupras, Stephen Simpson, Linda Vennard
- Legal Advisors: Rachelle Frenette, Valérie Dionne
- Secretary: Lynda Roy
- Hearing Managers: Julie St-Pierre, Pierre-Marc Perreault
--- Upon commencing on Monday, November 28, 2016 at 9:00a.m.
1 LE PRÉSIDENT: À l’ordre, s’il vous plaît. Order please.
2 Bonjour, Mesdames et Messieurs, et bienvenue à cette audience publique.
3 Good morning, ladies and gentlemen, and welcome to this public hearing.
4 Avant de commencer, je tiens à reconnaître que nous sommes réunis aujourd’hui sur le territoire traditionnel des Premières Nations. Je remercie le peuple Algonquin et rends hommage à leurs aînés.
5 Last week, we held a hearing in Laval regarding the renewal of television licences held by the large French language ownership groups.
6 Today’s hearing is taking place in the context of the renewals of the television licences held by the large English language ownership groups, namely Bell, Corus and Rogers.
7 With these renewals, the Commission plans to put into effect certain policy decisions, including those set out in “Let’s Talk TV: A Conversation with
8 Canadians,” and those related to local and community television.
9 This is the first time the Commission is renewing group licences since the group-based
10 approach was implemented in 2011. We expect to adjust the approach to reflect changes in the environment since that time.
11 In the coming days, we will be discussing a number of issues with all the applicants and intervenors, and in particular those issues set out in the working document released on November 2nd, 2016. We will be also studying each group’s specific proposal and the possibility of imposing new standard conditions of licences, which were also published on the 2nd of November.
12 And finally, je voudrais vous informer que Shaw et Telelatino Network ne comparaissent plus dans le cadre de cette audience publique et donc les items reliés au renouvellement de leurs licences ne seront pas abordés ici cette semaine durant la phase orale.
13 I would like to make a few introductions before we begin. The panel for this hearing consists of:
14 Judith LaRocque, Vice-Chair, Broadcasting, our new Vice-Chair; and Stephen Simpson, Regional Commissioner for British Columbia and the Yukon; and Yves Dupras, Regional Commissioner for Quebec; Linda Vennard, Regional Commissioner for Alberta and the Northwest Territories
15 and myself, Jean-Pierre Blais, Chairperson of the CRTC. And I, of course, will be presiding over this hearing.
16 The Commission team assisting us includes Julie St-Pierre and Pierre-Marc Perreault, Hearing Managers; Rachelle Frenette and Valérie Dionne, Legal Counsel; and Lynda Roy, Hearing Secretary.
17 Alors, j’invite maintenant Madame Roy à expliquer la procédure que nous suivrons.
18 Madame Roy.
19 Mme ROY: Merci, Monsieur le président.
20 Good morning everyone.
21 Before we start, I would like to go over a few housekeeping matters to ensure the proper conduct of the hearing.
22 When you are in the hearing room, we would ask that you please turn off your smartphones, as they can cause interference on the internal communication system used by our translators. We would appreciate your cooperation in this regard throughout the hearing.
23 Interpretation services will be available throughout the duration of the hearing. We would like to remind participants that -- I’m sorry, I guess it’s the same paragraph here.
24 Je vais le dire en français maintenant. Le Service d’interprétation simultanée est disponible durant cette audience. Nous désirons rappeler aux participants d’allouer un délai raisonnable pour la traduction lors de leur présentation à vive voix tout en respectant le temps alloué pour leur présentation.
25 There is a verbatim transcript of this hearing being taken by the court reporter sitting at the table to my right. Please note that the transcript of each day will be made available on the Commission website on the next business day.
26 Participants are reminded that they must be ready to present on the day scheduled or, if necessary, the day before or after, depending on the progress of the hearing.
27 Just a reminder that pursuant to Section 41 of the Rules of Practice and Procedures, you must not submit new evidence at the hearing. If you wish to introduce new evidence as an exception to this rule, you must ask permission to the Hearing Panel before you do so.
28 Veuillez noter que les documents seront disponibles sur Twitter, sur le compte du Conseil à @CRTCaudiences, en utilisant le mot-clé #CRTC.
29 Please note that the Commission will also be Tweeting the documents during the hearing at CRTChearings, using the hashtag #CRTC.
30 Please note that if parties undertake to file information with the Commission in response to questioning by the Panel, these undertakings can be confirmed on the record through the transcript of the hearing or, if necessary, parties may speak with Commission legal counsel at a break following their presentation to confirm the undertakings.
31 Also, please note that the applicants Corus and Telelatino Network have submitted additional information which will be added to the public examination file of their applications.
32 Copies are available in the public examination room and will be on the CRTC website as well today.
33 Now, Mr. Chairman, we will begin with Phase I. The first item on the agenda is an application by Rogers Media on behalf of the licensee to renew and/or amend the broadcasting licences for its English language television services.
34 Please introduce yourselves for the record. You will then have 20 minutes for your presentation.
35 MR. BRACE: Good morning Chairman, Commissioners and Commission staff. My name is Rick Brace. I am the President of Rogers Media.
36 With me today, starting to my left, are Colette Watson, Senior Vice-President of Television and Broadcast Operations; Vic Maghakian, Finance Director, Television; Dave Budge, General Manager, City News; and Hayden Mindell, Vice-President, Television Programming and Content.
37 And to my right, are Susan Wheeler, Vice-President, Regulatory, Media; Scott Moore, President, NHL and Sportsnet Properties; and Alan Dark, Senior Vice-President of Media Sales.
38 In the back row, starting to my right, are Bart Yabsley, Senior Vice-President, NHL Properties and Content Distribution; Manuel Fonseca, Supervising Producer, OMNI BC and City Vancouver; Bin Wu, Community Liaison Officer, OMNI Alberta; Charmaine Wong, Supervising Producer, OMNI Ontario; Josh Cormie, CEO, Fresh Intelligence Research Corp.; and Sam Norouzi, Vice-President, General Manager, ICI Television.
39 It is our pleasure to appear before you today to discuss the future of our television services. While traditional business models for television continue to be challenged, we are encouraged by Canadians’ seemingly infinite appetite for content. As program creators and partners, we see this as an immense opportunity.
40 That is why we’ve continued to make strategic investments in television content and services. Our goal is to give and create the best viewing experience possible on the platform of their choice. Please take a look.
41 (VIDEO PRESENTATION)
42 MR. BRACE: As you can see from the video, we’re storytellers at heart. We always strive to provide our audiences with the very best content available.
43 At Rogers, we’re dedicated to ensuring that the content we offer meets the increasingly diverse programming needs of all Canadians.
44 We begin today by discussing our proposal for our group-based and sports licence renewals. We’ll then address our OMNI applications and, in particular, our proposal to operate a new national multicultural service that will be distributed pursuant to a 9(1)(h) order. This truly exceptional service will offer four regional feeds, including a dedicated feed for Quebec that, in partnership with our friends at ICI, will deliver French and third-language programming to Quebec audiences.
46 MS. WATSON: While Rogers has only operated under the group licensing framework for two years, we continue to fully support it. Even in that short period of time we have achieved several of the objectives of the Commission’s 2015 Create Policy.
47 For example, we have delivered compelling local programming that reflects a diversity of viewpoints, which includes our top-rated local news and information programs CityNews and Breakfast Television.
48 We have made significant investments in Canadian content, including our $100 million joint venture with Vice Media, which involved the launch of a state of the art production studio in Toronto and our millennially focused discretionary service VICELAND. Just this year alone, we commissioned over 80 hours of new original Canadian programming for VICELAND that will also reach audiences in the U.S. and Europe.
49 We have also responded to changes in consumer demand and content consumption by introducing digital “Television Everywhere” products for most of our services. We have launched Direct to Consumer products, such as Sportsnet Now, invested in new digital technologies like 4K TV, and City was the first over-the-air television station in Canada to launch on Apple TV.
50 We are proud of our accomplishments over the last two years and plan to build on this momentum over the next licence term by making strong commitments to local and scripted Canadian programming. Here are a few examples of our commitments.
51 First, as part of the standard requirements for English-language stations, City will produce a minimum of six hours of locally reflective news in each of Vancouver, Edmonton, Calgary, Toronto and Montreal, and three hours in Winnipeg. In making these commitments, we are proposing to remove the current requirement for our City stations to provide minimum amounts of “original” local programming. No other English-language television station, including those owned by Bell and Corus, are held to an original hours requirement.
52 Our commitments to locally reflective news programming will represent approximately 11 percent of City’s Canadian Program Expenditures and will be funded, in part, by monies redirected from our community channel in Toronto. We estimate this amount to be approximately $3 million in the 2017-2018 broadcast year.
53 With respect to expenditures on Canadian programming, we are committing to a CPE of 30 percent and to a Programs of National Interest of 5 percent for our Group, which includes the obligation to dedicate at least 75 percent of PNI expenditures to independent producers. As a matter of principle, we believe that each of Rogers, Bell, and Corus should have the same CPE obligations at the Group level.
54 We do not, however, support any proposal that would require Rogers to adhere to the historical PNI requirements of our competitors. Their PNI commitments are based on the specific mix and nature of services they operate and the historical requirements for their drama-based services. In contrast, our PNI commitment of 5 percent actually exceeded our historical expenditures when we accepted it in 2014, which means it is already a challenge for the unique mix of services we have in our Group.
55 We know that in today’s crowded content market, investing in content on its own is not enough to ensure the success of those programs. Promotion, marketing, and discoverability have never been more important in capturing viewers’ attention and loyalty to our programming. That’s why we’ve developed a strategic marketing approach that uses both internal and third-party advertising inventories to ensure we are reaching the largest potential audience.
56 Last year alone, we committed over $26 million of internal inventory to the promotion of content across all our services and platforms and used peak audience opportunities on Sportsnet and City to showcase and promote new Canadian productions. We also leveraged the distribution and reach of social media platforms like Facebook, Twitter, and Snapchat to help our content find new viewers and followers across the country.
58 MR. MOORE: Separate from our group renewal, Rogers is also requesting the renewal of our mainstream sports licences for Sportsnet and Sportsnet One.
59 Since appearing before you in 2014, Sportsnet has become the number one sports media brand in Canada. This success has allowed us to invest in a diverse range of sports content, including our ownership of the Grand Slam of Curling and our partnership with the Canadian Interuniversity Sports league, or USports Canada as they it’s now known, whereby we showcase the best in university sports.
60 More recently, we became the first official broadcast partner for the Canadian Women’s Hockey League. This represents a significant step forward in the coverage of women’s sports in Canada.
61 Sportsnet’s success has also allowed us to grow our digital presence and invest in innovative new technologies. This includes the new 4K TV format. In 2016, we were the first in Canada to broadcast in 4K and have aired 280 hours in the format. We plan to build on this investment in the coming years.
62 Sportsnet has also devoted significant funds to programming beyond the coverage of sports events. Our uniquely Canadian series Hometown Hockey visits 24 different communities across Canada each year with the aim of connecting Canadian communities through memorable moments and shared experiences at the grassroots level.
63 As part of this renewal, we are proposing to remove certain conditions of a licence that we believe are no longer necessary. These include the separate network licence for Hockey Night in Canada, which airs on CBC, and the provision of annual Specified Procedures reports on our NHL revenue and expenditure allocations. These requirements are costly and require a great deal of work and attention. We have proposed alternative solutions that will achieve the same objectives in a more efficient way.
64 We also note that despite the absence of complaints and any evidence of actual harm, some interveners in this proceeding are now calling for the imposition of additional obligations on mainstream sports services, beyond those set out in the Wholesale Code. In our view, those calling for special rules for sports are merely using the regulatory process to gain a competitive advantage in the marketplace. This should not be allowed.
65 MS. WHEELER: Turning to our OMNI applications, Rogers is requesting the renewal of our five over-the-air television licences and seeking a new licence to offer a national discretionary service called OMNI Regional, which would operate pursuant to a section 9(1)(h) order.
66 We believe OMNI Regional will make an exceptional contribution to the achievement of the policy objectives of the Broadcasting Act. It embodies the objective in paragraph 3(1)(d), which states that the Canadian broadcasting system:
67 “...[should] serve the needs and interests, and reflect the circumstances and aspirations, of Canadian men, women and children, including equal rights; the linguistic duality and multicultural and [the] multiracial nature of Canadian society; [and] the special place of Aboriginal [P]eoples within [that] society.”
68 Today, equal rights, linguistic duality and the special place of Aboriginal Peoples in society are all reflected on the basic service offered by BDUs. However, the multicultural and multi-racial nature of Canadian society is not. Our proposal addresses that deficiency.
69 We know it would not be practical to require BDUs to offer, as part of their small, basic service, a series of different ethnic channels that would serve Canada’s third-language communities. But we do believe it would make sense to authorize one channel that would serve multiple third languages that ensure that almost all ethnic Canadians can access programming, as part of the basic service, in their language of comfort.
70 OMNI faces unique challenges specific to its advertising-supported business model, the very niche nature of it programming, and the small size of its individual target audiences.
71 Our decision to request mandatory basic carriage for OMNI Regional is a long-term strategy for OMNI that will stabilize its revenue base and allow us to restore and maintain the high quality and relevant local and national programming its viewers have come to rely on.
72 It is simply not possible to do that under the current business model which has experienced a 74 percent decline in advertising revenues since 2010.
73 OMNI Regional will be a national service with a dual revenue stream that will operate in tandem with our five over-the-air television stations. By operating this way, we can ensure that none of our current viewers will be disenfranchised when the new service is launched.
74 Most importantly, OMNI commits to reinvest any profits earned by 9(1)(h) service back into programming aired on OMNI to ensure that the service is able to continue to exist and thrive.
76 MS. WATSON: We strongly believe that OMNI Regional exceeds each of the criteria established by the Commission for grating 9(1)(h) status:
77 OMNI Regional will make an exceptional contribution to achieving the policy objectives of the Broadcasting Act by servicing 20 different ethnic groups in 20 different languages with four distinct programming feeds that are specifically designed to reflect the multicultural and multilingual makeup of each region of the country.
78 OMNI Regional’s commitments to Canadian expression and reflection significantly exceed those of every other ethnic discretionary service operating in Canada today. No ethic category A service has committed to Canadian exhibition levels that come close to matching what OMNI Regional has proposed.
79 OMNI Regional will contribute in an exceptional manner to the objectives of the basic service, Canadian identity, cultural sovereignty, and ethno-cultural diversity by offering four national newscasts seven days a week in Punjabi, Mandarin, Cantonese, and Italian, third-language local news and information programming, and a cultural-affairs series in a variety of languages.
80 OMNI Regional’s commitment to direct 2.5 percent of its revenues to original, first-run Canadian programs of national interest is unmatched among ethnic broadcasters.
81 OMNI Regional has provided fact-based evidence that supports the extraordinary need for this service.
82 We commissioned the research company, Fresh Intelligence, to conduct a survey gauging support for our proposal. Our research demonstrates that close to 60 percent of all Canadians and more than 75 percent of Canadians who speak a third language support it.
83 We also filed a Strategic Inc. Study which assessed how Canadians access and consume third language programming. It found that many new Canadians obtain news and information programming from foreign sources, which means that they do not get a Canadian perspective on news and current events.
84 Finally, our application received support from thousands of Canadian consumers, businesses and community organizations that spoke directly to the importance of OMNI and the need for this service.
85 The sixth and seventh criteria require evidence that the business plan and commitments are dependent on broad distribution on the basic service and the likely impact on the price of the basic package.
86 The business model that had succeeded for OMNI for almost 25 years is no longer viable. With advertising revenues expected to decline by four percent year over year, the programming commitments we have made as part of our OMNI Regional application are simply not possible under the status quo.
87 Our proposed wholesale rate is based on the cost of our programming commitments and, based on our research, is supported by a majority of Canadians. At 12 cents, OMNI Regional’s rate will be well below those of most other 9(1)(h) services and will not increase the price of the basic package, which has been capped at $25. OMNI is more than just a business for Rogers; it is a part of our founder Ted Rogers’ vision for a Canadian broadcasting system that is accessible and relevant to all Canadians. That’s why we have fought so hard to keep OMNI going and why we are here before you today to ask for an exceptional designation for OMNI Regional.
88 Mr. Chairman and Commissioners, we did not take this decision to apply for mandatory carriage lightly. We chose the 9(1)(h) model only after all reasonable alternatives had been considered. It is a service we think truly embodies the exceptional qualities required by 9(1)(h) services. But don’t just take our word for it, take theirs:
89 (VIDEO PRESENTATION)
90 MR. BRACE: At Rogers, our priority is to tell great Canadian stories on all platforms, in all formats and for all audiences. We do so on our conventional stations, discretionary services, and digital media. Our objective is to offer programming that is compelling and interesting to Canadians. We believe that our City and OMNI stations, our mainstream sports services, and the discretionary services that are included in our group, serve the broader public interest by pursuing this objective.
91 Our proposal to launch OMNI Regional will also further the public interest by ensuring that Canadians who speak a third language can access a service that offers a range of high quality news, information and entertainment programming that is consistent with the Commission’s 9(1)(h) criteria and the broadcasting policy objectives.
92 Before we conclude, I’d like to thank our supporters for taking the time to lend their voices to this process. I’d also like to say that Colette Watson will be quarterbacking our panel today. And we that you for listening to our presentation and we look forward to answering your questions.
93 THE CHAIRPERSON: Good morning, ladies and gentlemen.
94 Thank you, Mr. Brace, Ms. Watson. Good to see you for your biannual checkup. This won’t hurt at all.
95 I’m going to organize my questions into three phases. First, I want to have -- this won’t come as any surprise because you probably saw how I asked my questions last week -- general questions about the context you foresee over the next five, six years in the television realm. Then I’m going to do the reverse of what you did and talk about the 9(1)(h); and then deal with the renewal applications more broadly.
96 So on the first subject matter -- and you’ll be operating, presumably, over the next five, six years in a television environment that -- and by television, I use that in a very broad sense, not necessarily in traditional television sense. So how do you see the future of the television environment over the next five, six years more generally but in the English-speaking part of the Canadian market?
97 MR. BRACE: And I think, Mr. Chair, that are we are experiencing, obviously, and witnessing the same things that the entire industry is seeing.
98 We’re seeing declining revenues, leaving the traditional legacy businesses that we have in media and migrating to other platforms -- in particular, digital.
99 The unfortunate thing is that the dollars aren’t migrating dollar for dollar; and we’ve talked about that and certainly that’s a well-known and understood concept for the Commission and for the industry in general.
100 We are seeing a -- we are seeing increased viewing on other platforms. We're seeing declining viewing in particularly the millennial area in -- with our services. What I would say is, I had a look at a U.S. study, and it's interesting and quite frightening, actually, when they had a look at how millennials have tracked from 2010 to 2016, and 42 percent have actually spent less time -- they've spent 42 percent less time viewing television throughout -- over that time period, so a significant change.
101 I think though that, you know, on the other side of the equation -- and when we talk about the five-year runway, still, the vast majority of our revenue is coming from legacy services. We think there is runway. We think there is opportunity. We have kind of focused our interest and our philosophy on certain areas within the basket of our assets. Sports would be one of those that kind of bucks the system a little bit because of its live nature. Because of the fact that it is the water cooler talk, people do want to see it live, and television is still a great place to see it. Having said that, millennials are even consuming sports in a much different way.
102 So from a Rogers perspective, our role and our ambition is to really make sure that we're in lock step with that transition, but not abandoning what we're doing, you know, from a traditional media standpoint, because it still is the main source of our profit and of our revenue, and I believe will continue to be, although in decline, it will continue to be, over the next five years.
103 I think, though, there's another component that is really important to talk about in the context of this hearing and where the industry is going, because as I see it, a priority for all of us -- whether it be Rogers or whether it be others within the industry -- is how we deal with content and content ownership. The real issue we're facing is that the traditional way of exhibiting and acquiring programming for broadcast, which has been really to rent content. Yes, we do produce some. We do work a lot through independent producers, but really, the ownership of that flows back to the independent producers, and then, of course, there's the U.S. programming, which is strictly a rental operation, where we rent the programming for a period of time to exhibit on certain platforms, you know, and under certain terms and conditions.
104 That is where we're really seeing a lot of difficulty, because that has become incredibly expensive, especially as the global players are coming into the market and really kind of moving in a big way in taking the viewers that we once enjoyed onto those global players.
105 So content ownership for us is something that is very much a focus at Rogers as to how we can morph our business into owning more content, creating more content, whether it's directly as an in-house opportunity or whether it's in concert with independent producers by way of joint ventures, partnerships, that sort of thing. And I believe it's where we really need to go as we move forward.
106 That is kind of the direction that we're facing, so kind of some guiding principles, that we need to migrate to digital, but we need to do it with our eyes wide open and understanding where our revenue and profit is coming from right now. We need to start getting more into content creation and ownership. I think that is going to be absolutely fundamental. We need, from a digital standpoint, to understand how to measure the audiences, so audience intelligent -- audience intelligence, rather -- is going to be something that's very important for us, going forward.
107 We need to look at this over the next five years, and at the end of that five years, I wish I had the crystal ball that could say exactly where we are in the axis of transition. I can't, but I still feel relatively confident that for the -- at least the next term, the next three to five years, the legacy systems will remain intact and viable.
108 THE CHAIRPERSON: Did you say three to five years?
109 MR. BRACE: I -- just five years, I would say, yeah, and ---
110 THE CHAIRPERSON: Okay, you are asking for at least a five-year renewal, aren't you?
111 MR. BRACE: Oh, yes, absolutely.
112 THE CHAIRPERSON: Okay. You mentioned, you know, the need to have an increased presence on other platforms. I presume you mean digital platforms. I take it that includes catch-up platforms and what many call OTT, a term I try to avoid -- I just call them streaming platforms?
113 MR. BRACE: That's correct, and in fact, we've gone down that road. You may, you know, I'm certainly cheering for the Sportsnet NOW, which is our first kind of foray into direct-to-consumer -- a direct-to-consumer offering that really says, "Okay, for cord-nevers and for cord-cutters, here's an opportunity to get your sports in another way."
114 What's really important, though -- and it's a very delicate process, Mr. Chair, as you can appreciate -- if I go back to the guiding principle, the vast majority of our revenue still comes from the distributors, the legacy distributors, the cable companies and others. It's important not to offend that, and so it really does become an analysis and an understanding of how do we set that up and how do we make it work, mainly through pricing models so that we're not, you know, encouraging people to migrate to that system. It's for people that actually were never there or intend to leave, and so it's an opportunity.
115 It's a market that's out there that we recognize we need to access, and so, you know, Sportsnet NOW -- I was going to say, "A toe in the water" but I think it's a little more than a toe in the water. And early days, quite frankly, we are seeing increases, month over month, and it really does track the, you know, kind of the sports seasons and the popularity of various sports. And certainly, we're seeing that, you know, more anecdotally, because I don’t have firm research, but certainly when the school year started, so we're taking from that colleges and that sort of thing that kind of focus on a way of getting that service in kind of a unique way.
116 So it is something that, for us, is very much, you know, on the forefront. I don't think it's a core strategy to what we're doing. It's kind of, "Let's see how this operates", but we want to make sure that we can access all audiences, you know, in every way we possibly can on all platforms, digital or otherwise.
117 THE CHAIRPERSON: In light of your career background and how much you've spent to acquire Sports Right, I'm not surprised you're talking a lot about sports, but I'm wondering, what's your strategy with respect to non-sports programming? You say on the one hand that streaming's important, but in light of your recent decisions, I'm wondering what's your streaming strategy ---
118 MR. BRACE: That's (inaudible) ---
119 THE CHAIRPERSON: --- for non-sports programming?
120 MR. BRACE: I'm taking, from what you're saying, Mr. Chair, that you're talking about SHOMI, and I think ---
121 THE CHAIRPERSON: You can't really call it SHOMI if you can't show me it any more, right?
122 MR. BRACE: So that probably goes to the fundamental heart of what I said about content ownership, and that was a glaring kind of example for us of how the cost of programs -- of programming -- of acquiring programming on a rental basis has increased so drastically as the global players become more and more dominant.
123 And with that service -- and I don't want to call it an experiment, because it certainly wasn’t; it was a superior effort to make something work as a partnership between Shaw and ourselves -- we went to a lot of effort to make a lot of investment. We made -- went to a lot of effort to get distribution on a broad basis, and although we enjoyed a significant number of subscribers over the two-year period, what was clear is that the cost of programming was never going to allow us to really profit from that enterprise.
124 And it wasn’t a case of saying, "All right, you know, it's been two years," but if we look at that, to use your example, Mr. Chair, over a five-year basis or longer, the analysis we did just didn’t support it. So that, to me, comes back to, "it's about content ownership". And so for us, getting into the content ownership business in a bigger way is vital, being able, outside of sports, to use that and to be able to distribute it on other platforms, whether it's On Demand, whatever the case may be, and use it in different ways.
125 We're also -- you know, it's interesting, when I think about SHOMI -- and it was kind of before my time, but when I came in, you know, the great work that had been done behind the scenes was really to set up something that was going to be kind of a buffer or our answer to the Netflix, Amazon Prime, whatever the case may be, that came in and kind of challenged our market.
126 And in point of fact, as I say, the business model didn’t work. But what's really turned around is, we're finding now that maybe it's better to partner with those services. Maybe it's better to understand that you’ve got global players that have the scope, have the scale. And rather than trying to maybe push water uphill in a small market like we have, relatively speaking, that maybe partnerships make a lot more sense.
127 And that, to me, goes not just from a partnership with a global player like a Netflix or an Amazon Prime, but also with U.S. studios in the U.S., with other players, with independent producers here in Canada, to really drive that content ownership structure.
128 It's interesting that there's a fellow named Ron Suter, who runs NBCUniversal Canada, and when I talked to Ron and said, "You know, from a big studio like that, what is -- what kind of drives your business?" I said, "Is it the first-run content? Is it --- ?"
129 He said, "Absolutely not. It's about the library. It's about building a library of content that has a long shelf life that has the ability to be displayed on many platforms over a long period of time? That's our key to success."
130 And I think that, you know, as a company with the asset mix that we have, and others, the big three, as you talk about -- you know, that’s really got to be the focus of direction. And I know that I’ve been dwelling on content a lot, but there’s always going to be a need for content. But I ---
131 THE CHAIRPERSON: Well, I hope we’re dwelling on content; that’s why we’re here.
132 MR. BRACE: But I just don’t want to leave it that it’s just content. It’s not about the cat playing the piano. It’s not about the user-generated. I mean, that has a place.
133 THE CHAIRPERSON: Ah.
134 MR. BRACE: It’s about quality content. And that’s the whole focus that we need to look at. There will always be an appetite for quality content. We need to understand how best to distribute that, whether it’s on our linear legacy services that we have now, whether it’s on other platforms, digital, and in what format; what does it look like on other -- because, you know, sometimes on your iPhone is viewed much differently than something on your desktop, than something on your television.
135 And so there’s a lot of work to be done behind the scenes through audience intelligence to really understand how to develop those formats and how to make sure that we deliver them in a way that resonates with consumers and continues to drive the system here in Canada.
136 THE CHAIRPERSON: What does partnership look like when you talk about Netflix and Amazon, and why not partnerships with Canadian companies that employ people in Canada ---
137 MR. BRACE: I did mention that, actually. Absolutely.
138 THE CHAIRPERSON: --- and actually pay taxes in Canada?
139 MR. BRACE: Thank you. And you’re absolutely right. An opportunity to partner with -- and I think we’ll get into this with some of our folks and maybe you want to comment on it, Susan. But certainly with independent producers we think that -- you know, we need to look at how that’s rolling out over the next few years.
140 I think that, you know, once again with independent producers we basically make a contribution -- it’s not a contribution -- we make an investment. They deliver the show but the copyright flows back. I think that, you know, the ability to deliver that content not just within Canada but on a global scale or in the U.S., Europe, whatever the case may be, needs some muscle behind it. And I think that in a partnership where we would have skin in the game, that makes some sense. We could then get behind it and put the resources, the amplifier that Rogers has or others in the industry has, and be able to really take it to market.
141 So you know, we talk about discoverability; we talk about marketing outside of our country. I think an independent producer has some ability to do that but I think we could bring a lot more heft.
142 That then creates bigger budgets; it creates, you know, better quality; and creates an opportunity to really grow the Canadian brands and the Canada programs internationally.
143 THE CHAIRPERSON: Mr. Brace, those are all the right words to us, but it seems to lack a little bit of specificity and the Commission is looking at giving you trust for the next five years. Can you put a little bit more meat on the bone of what you’re saying?
144 MR. BRACE: Well, I mean, without kind of revealing, you know, who we’re talking to and where we’re going, our intent is to first of all ---
145 THE CHAIRPERSON: Would you rather do it by way of undertaking?
146 MR. BRACE: I think that might be the better way to do it.
147 THE CHAIRPERSON: Because you know, I understand you don’t want to share your commercial strategy publicly; it is a competitive market. But we, the Commissioners, need to understand a little bit better how you plan to evolve in that -- what you describe and you describe a very competitive digital environment.
148 MR. BRACE: I would love to put that if we could do it as an undertaking, then.
149 THE CHAIRPERSON: Okay. So could you do that for the 9th of December? That will be standard date for undertakings.
150 MR. BRACE: That’s fine.
151 THE CHAIRPERSON: I’m just telling everyone in the room. And if for whatever reason that is a hardship, when we propose an undertaking that’s the time to suggest when you might not be able to meet that deadline.
152 MR. BRACE: All right. No, I think ---
153 THE CHAIRPERSON: I’m not addressing that to you but to the general audience.
154 MR. BRACE: And I think December 9 will be fine.
155 THE CHAIRPERSON: In your case. Thank you very much.
156 MR. BRACE: Okay.
157 THE CHAIRPERSON: Now, I know you may have lost a great deal of money trying what I think you did in good faith in your streaming service. In fact, it was, in my view, just as an individual, a good service; I, in fact, subscribed and enjoyed the content.
158 But I’m wondering if your founder, Ted Rogers, had the same attitude of a two-year horizon when he was first granted licenses in cable, whether you would be here in front of us today?
159 MR. BRACE: I mean, I don’t know. I knew Ted and I know that Ted was committed to what he wanted to do. I remember when he first said, “You know, we’ve got to get into HD.” I mean, I was not at Rogers at the time; I was, in fact, on the other side of the -- I was on the programming side. And we were of his first HD partners back then. And you know, that was very much ahead of the curve, you know, when it came to HD because, you know, nobody had an HD TV in particular; there was very little HD programming; and it was all speculative. But he had a belief in it and, I mean, HD is a standard now and we were taking the same sort of approach with 4K going forward.
160 But I think in this case -- and you know, we’re -- you know, as I knew Ted, where he was practical is in saying that, you know, if there really isn’t an -- if we really are pushing water uphill and not able to turn this around, if the subscriber base is not going to be there and content prices are going to continue to grow exponentially, I honestly believe Ted would have said, “Well, you know, we’ve given it a try. Yes, it’s been two years but I think the conclusion is going to be there.”
161 I mean, the last thing we wanted to do was close down a service. There’s a lot of pride. There’s a lot of desire when you launch a company to make sure that it works. In this case it was a lot of wringing of hands and a lot of late-night discussions debating how we could handle this, would more investment help, was there a way we’d get broader distribution. And at the end of the day we determined that it just wasn’t going to work. So you know, I don’t know what more I can say than that. It wasn’t something that was taken lightly.
162 THE CHAIRPERSON: And will your undertaking address what will be your streaming strategy and your discoverability strategy and your promotion strategy with respect to content ---
163 MR. BRACE: I’d like to just turn to Susan for a minute just to ---
164 THE CHAIRPERSON: --- beyond sports? Because I think, you know, sports being as important as it is but it’s not just a sports issue.
165 MR. BRACE: No, I understand. And I’d just like to turn to Susan for a moment just to make sure I’m not ---
166 MS. WHEELER: Yeah, certainly we can provide that as an undertaking. And if I understand correctly you’re looking at the non-sports services, what our online strategy and our discoverability strategy for the non-sports programming?
167 THE CHAIRPERSON: Yeah. Particularly in a streaming world.
168 MS. WHEELER: Sure. And I guess I just want to make clear that we’ve already identified that we have been pursuing a television-everywhere strategy that’s an authenticated extension of our linear services. So that’s certainly where our first focus is. But if I’m understanding, is it our intention to launch exempt services? Is that the -- is that ---
169 THE CHAIRPERSON: I’m not putting words in your mouth through a licensing window. There’s a business imperative here, is there not? I think I hear that you believe that there is a need for a streaming avenue for the content you want to be supportive of. And I’m trying to figure out what it is. I appreciate it you might not want to reveal that publicly, but that’s what I’m going for, okay?
170 MS. WHEELER: Okay, we’ll provide that to you.
172 THE CHAIRPERSON: And just as a reminder, and it’s not to you but apparently people have forgotten, when you file things and ask for confidentiality there is still, pursuant to the Rules of Procedure, a requirement to give an abridged version for the public record and to justify why you’re seeking confidentiality. Apparently people have forgotten about that. Again, not addressed to you but more to the audience in general.
173 So how do you see the future of over-the-air television in the environment of the next five to six years?
174 MR. BRACE: As I say, I think the, you know, over-the-air television is, you know, going to continue to decline. We’re seeing that. We talk about the revenue decline but the audience decline as well. And I talked about what we’re seeing from research in the United States and I would imagine that Canada is probably mirroring that to a great extent.
175 So I think within the next five years that will continue to happen. I think that we’re still, at the end of five years, fairly viable. But I wonder if -- and this is not certainty by any stretch -- but I wonder if over-the-air television -- and I’ve got there’s an exception to this -- from a dramatic programming standpoint from the produced content in that area -- isn’t more the picture window, isn’t more the introduction of new programs that then find their way to other platforms in kind of more of a hurry.
176 I think, though -- and this is where we really do commend and applaud the Commission in its policy, particularly where local news is addressed -- when we looked at our strategy and we talked about what our strengths were and what our opportunities were, particularly with conventional television, the great thing about local news -- and I know that you’ve been bludgeoned with the cost and, “How do we do it” and, “How do we deliver it” and, you know -- but the bottom line is that it’s a great bastion against what the global guys are doing because they’re not going to deal With local stories. They’re not going to deal with your weather; they’re not going to deal with your traffic; they’re not going to deal with city hall. And local news really gives us an opportunity to do that, I think, as an industry.
177 And so for Rogers, it is very much central to our strategy. You know, we were looking even prior to the Commission’s determinations at what we could do in that area. And I’d like to bring Colette in because her and Dave Budge, our Head of News, down the end, really were the architects of what we’re going to do in local news as an opportunity to really kind of combat and find our own niche; more finding our own niche, I suppose, against the global players. That’s our opportunity.
178 So I think from that standpoint, over-the-air television has an opportunity but, Colette, I’ll turn to you.
179 MS. WATSON: Thank you.
180 I do see revenue declines over the next four years, but my cup is half-full with respect to that. I believe it still has a very good solid grounding over the next five-year term. And to Rick’s point, our strategy is to be fiercely local.
181 Everything is very global. Social media is very global whereas local television can take everyone home.
182 So we are, as part of this renewal, proposing to launch additional local news products in our markets outside of Toronto. Our newscast in Toronto is different from everyone else’s newscast, where local is the first priority. We start at home and then we talk about the rest of the world, and we spend more time at home on our newscast. And we think that’s going to pay off. We firmly believe in it.
183 The next five years will be for me a way to manage the revenue decline and the costs. It is a bit of a science, but the premise of giving them local content, if you build it, I believe they will come.
184 And if you’d like to hear more about our local news philosophy, I’ll turn over to Mr. Budge.
185 MR. BUDGE: Thank you.
186 Over the last two or three years, at City Toronto, we’ve doubled down on City’s tradition of being untraditional and being innovative. And along with the emphasis on local news coverage that Ms. Watson mentioned, we’ve taken a fundamentally different approach to the presentation of the newscast and done so in a way that prioritizes original content, original local news coverage over style and sizzle.
187 The changes that we’ve made have resulted in dramatically different presentation style in the newscast, and that has been part of the reason why we’ve had significant ratings increases over the last three years, including -- especially significant increases among younger demographics; the age group that television generally is losing.
188 But we’ve had tremendous growth among 18 to 34, I think because we’re presenting a dramatically different alternative to what the current offer is from some of the other news outlets.
189 We’ve also been honoured this past year with the RTDNA award for the best local newscast in Canada, also as a result of these changes both in content and in presentation. And now, we are very excited to be planning to adapt the same approach to news and to local news coverage to our stations in Vancouver, Calgary, Edmonton, Winnipeg and Montreal with daily local news programs in prime time.
190 THE CHAIRPERSON: When I hear you talk about this hyperlocal news, local information, local weather, I am struck by how similar it is to what the radio industry did a few years back when they were being threatened, I guess, by the rise of BitTorrent legal sites of music being available outside the regular offerings of radio stations.
191 So did you finally decide to talk to your radio unit?
192 MS. WATSON: We did.
193 THE CHAIRPERSON: And it is a strategy that is similar to what radio, as an industry, decided to do?
194 MS. WATSON: Yes, absolutely we marrying -- I also come from a local place. It’s part of -- it’s been a part of my career for almost the entire length of my career and so, yes, we are taking a page out of that and out of the radio playbook.
195 THE CHAIRPERSON: When you say that, you know, the environment will evolve over the next period of time, if you were to -- and I know you don’t have a crystal ball, none of us do, but you have to have business plans. And I’m sure, as a publicly traded company, you want to show people that you have a plan.
196 If you look at the programming you might have on day one of your new licence term and compare it to the sort of programming strategy you’ll have on the last day of that new licence term, how different would they be?
197 MS. WATSON: I think they would be similar in philosophy. Execution might be different. Technology will improve over the course of those five years. The next IPad might be invented in that five-year timeframe.
198 Our goal is to ensure that the stories we create, that we tell, are local and that we are able with whatever technology delivers over that timeframe, able to amplify and deliver from that perspective.
199 I still firmly believe that people like to be entertained and whether it’s September 1st, 2017 or August 31st, 2022, that they will want to be entertained when they come home; that they’re going to want to watch a really good program, whether it’s live sports, whether it’s their favourite serial, whether it’s in a language they want to watch it in. They still just want to come home and watch something.
200 You know, we’ve all evolved from thinking that if you have to press the remote more than three times, it’s an archaic medieval piece or garbage. And so we’ve lost our patience with respect to that. We have to employ technology to deliver seamlessly but always the content they want to watch. We need an ability to be able to move with that, as it gets -- as this technology gets involved.
201 And so I, too, read the transcripts from last week and I’m going to use the dreaded “flexibility” word, but that is really how we’re going to be able to meet the challenges over the next four years or five years.
202 THE CHAIRPERSON: Right. They do say yoga is good for you though.
203 MS. WATSON: Yes.
204 THE CHAIRPERSON: In moving forward, you obviously -- and again, at a higher strategic level, you have to have the right partners and there’s a couple of partners I want to talk to you about.
205 You’ve talked about the viewers. Obviously, they’re important. I think I’ve heard you start talking about the regulator as a partner, using the “flexibility” word.
206 What about the television service providers? You are one as well but you also have others to deal with and what are the opportunities and challenges with those partners?
207 MS. WATSON: I think we all have commercial strategies. We compete against each other. If I’m speaking over the air or a specialty service side, we compete against each other for ad dollars and eyeballs.
208 And so those partnerships are fewer and far between but they do exist. We have a wonderful partnership with the CBC. Outside of sports, we’ve done some deals on development with the CBC. We also partner with other broadcasters when it comes to developing new original dramas.
209 So they present themselves. We have been evaluating them on a case-by-case basis but I don’t see that changing over the next five years.
210 THE CHAIRPERSON: You referred to independent producers earlier in your presentation and I’d like to have your assessment of how they, as a group, as a class, are making and joining and partnering with you in what I believe you’re describing as a bit of a change of direction to less renting foreign content, more of an investment strategy, more of a discoverability strategy and more of a promotion strategy.
211 Do you think that, as a group, that those people in the independent sector -- I don’t want to say “bunch”, that’s sort of demeaning to them, but those folks that work in that sector are ready and willing to make the shift?
212 MR. BRACE: So Mr. Chair, I would say that it's a -- it's not a definitive answer. There are some that are -- and actually, some of the bigger ones that are most anxious to, you know, enjoy the resources and the shared benefits. I mean, it would be neutral and that's what they recognize.
213 I think we're -- independent producers are, at this point in time, is that they're in a position where they have more customers, they have more places that they can actually distribute their content; so that's a good thing. That's a check mark, whether it's selling to the -- as I say, the global players or whether it's selling to the, you know, the Canadian services. So they do have more places where they can sell.
214 But they -- what they don’t really have is the amplifier, the voice to really get the message out to create the discoverability, to take advantage of what Rogers would have, for example, across all of our, you know, kind of all of our platforms and with the number of people that we speak to on a weekly basis, which is immense -- the ability to promote, the ability to sell in foreign markets. I think that we bring a lot to the table in that respect, so that I think there is a mutual benefit.
215 I think now is, you know -- it's starting -- there's an awareness that's emerging. We're recognizing in this country that, you know, although we compete vigorously with our main Canadian competitors, there's a whole other dynamic that's appearing on the horizon, which, I mean, is not new to anyone. It's just, you know, how ominous is it going to get, and how do we actually react to it?
216 So there are needs, I think, for combining efforts for, you know, using our collective muscle in order to deal that, like discoverability promotion, creating an opportunity to develop higher-quality content and effectively selling it in other markets.
217 So I would think that, you know, depending on the organization you speak to -- and we've spoken with several -- you know, there's more or less of a willingness, but I think it will evolve.
218 THE CHAIRPERSON: And what do you do when they're -- you seem to see there's an unwillingness?
219 MR. BRACE: Sorry, it's your -- I'm just ---
220 THE CHAIRPERSON: Let's say there's an unwillingness of a particular independent producer. What do you do?
221 MR. BRACE: Well, if there's an unwillingness, I mean, we'll use the path of least resistance. Let's talk to the ones that, you know, are interested in partnering and see where we can go.
222 THE CHAIRPERSON: Right. To some independent producers, that's a -- that would be very scary. In fact, that's why they want us to intervene and provide a little bit more protection.
223 MR. BRACE: But we're not making a demand. We're suggesting there's an opportunity, and I think that's the dialogue we have to have. I think that at the end of the day, it's going to be difficult for independent producers alone in this environment to really kind of prosper. I mean, if you think of what you're foregoing, whether, as I say, it's ourselves or whether it's the other big players in the country, there's a lot of opportunity we can bring to the table by having skin in the game. And I think that that's -- that just makes good business sense. That's our view.
224 And I think that, as I say, with several of the organizations, the independent producers in this, they get that too. They recognize it.
225 THE CHAIRPERSON: Now, Mr. Brace, I know we're in a lean-back sort of a hearing, but you might get a little closer to your mic ---
226 MR. BRACE: I'm sorry.
227 THE CHAIRPERSON: --- for other people to follow you. You know, in telecom hearings, they tend to lean forward. I don't know why.
228 The -- so the overall strategy, if you had to say, "Okay, this is what Rogers will deliver from an overall programming strategy over the next five-year term," what would it be?
229 MS. WATSON: It will be more local. It will be more locally reflective, and it will be relevant.
230 THE CHAIRPERSON: Okay. Okay, well, let's come down from 30,000 feet to more regulatory-type issues, and as I announced earlier, we're going to start with the 9(1)(h) Regional OMNI aspect.
231 Now, you're proposing a 12 cents wholesale rate. In past 9(1)(h) hearings, we would be asking you questions about what -- well, what would that mean at the retail level, including sales tax? Do you think that that is still relevant in the new context?
232 MS. WATSON: We factored that in with respect to the price cap on basic cable, so no, we didn’t make the calculation with respect to that formula.
233 THE CHAIRPERSON: Because you're saying that if we were to just go ahead with your proposal, whether it's 10 cents, 6 cents, 12 cents, obviously the amount of the wholesale affects your business model and affects the economics of other cable, satellite, and IPTV providers, but the general public is protected from that because of your current cap?
234 MS. WATSON: That's the general premise. Perhaps Ms. Wheeler has anything to add to that, but yes.
235 MS. WHEELER: No, that's right. I think, distinct from the regulation of other wholesale rates outside the basic service where you do have a scenario where you could regulate the wholesale rate and have no control over what the ultimate price to the consumer is, in this case, we -- with the cap of $25 at the basic service, you can -- it will ensure that that cost doesn’t get passed on to the consumer.
236 THE CHAIRPERSON: It does seem to suggest, however, that that cap will not bring about lower-cost offerings in a competitive market.
237 MS. WHEELER: I think that when the Commission set the basic -- the price for the basic service, it prioritized local over-the-air television stations and 9(1)(h) services, and there wasn’t, at that point, a moratorium placed on 9(1)(h) services or the expectation that those -- that the costs of the -- the wholesale rates of the 9(1)(h) services within that basic service wouldn't go up or go down. So I think that was probably taken into consideration when the Commission set that cap at $25.
238 THE CHAIRPERSON: Very prescient as to what was going on in our heads when they make decisions, but I'm not sure that's exactly the case. But it does worry me that an unarticulated assumption is that there will not be price competition on that price point for the entry-level package.
239 MS. WHEELER: I think there is already price competition. The Commission set a cap of $25. We know that other -- that certain cable providers are offering it for less than $25, so I think there is still the ability to have price competition within that basic service. I guess more fundamentally, we actually think that an improved OMNI will provide more value to the basic service than what it's already offering now when it's carried as part of the basic service in its local over-the-air markets.
240 So as it -- more than being a cost to the BDU, it's actually now an ability for -- hopefully, for cable and satellite providers to attract new Canadians who may not choose a cable subscription as their first priority to actually enter the regulated system and get that kind of service, because it's -- we intend to make it very relevant and very important programming for them.
241 THE CHAIRPERSON: So tell me more -- I mean, the original OMNI model -- and I'm probably oversimplifying it because I think there was a genuine desire to produce multi-cultural, multi-lingual programming -- but it was basically using popular U.S. strip programming, which then crossed finance, ethnic, and including third-language ethnic programming.
242 Why does that not work any more, and you know, I've certainly heard Mr. Brace say earlier that U.S. executives said it's all about library. Might not be U.S. strip programming, but there's a lot of library popular programming out there. Why wouldn't that be the future?
243 MS. WATSON: For precisely the reason that it was library and the library was too expensive. We couldn't afford it any more. So the strip programming we rented, and at the time the programs were licensed that we negotiated those deals, the audiences were vast and many. And then streaming services started coming in. Many other independents started adding syndicated programming to their offerings, and it became unprofitable, so much so that we had to take that programming off and write it off.
244 It doesn’t appear anywhere else. It just -- it no longer brought in the revenue to let alone cover the costs of that programming, and then in addition, subsidize the creation of ethnic-language programming.
245 THE CHAIRPERSON: So do I take it, from what you're saying, that were the Commission to approve your model, that we would be unlikely to see U.S. popular programming during prime time?
246 MS. WATSON: That's correct. We -- I think we put in a cap of 10 percent in our application of U.S. programming, or English-language programming, not necessarily U.S.
247 THE CHAIRPERSON: Right, but non -- yes, but presumably a bit like the old model ---
248 MS. WATSON: Yes.
249 THE CHAIRPERSON: --- popular programming to a certain degree? But what was important in that previous model, I think, was -- and correct me if I'm wrong -- there was simultaneous substitution opportunities ---
250 MS. WATSON: Correct.
251 THE CHAIRPERSON: --- in that model, and that's what was driving it. So are you saying that you would not do any simultaneous substitution under the current model?
252 MS. WATSON: Correct, yes.
253 THE CHAIRPERSON: If we were to approve your application, would you agree not to, as a condition of licence, to do simultaneous substitution for English language programming?
254 MS. WATSON: Yes, we would.
255 THE CHAIRPERSON: Now, your proposal was largely developed before we published, I think, the Local and Community Television Policy and I was wondering why that policy did not help shift, perhaps, your plans with respect to your 9(1)(h) proposal?
256 MS. WATSON: For a couple of reasons. So let me start with the community channel money. The formula there, going from two percent -- we really only had $15 million we were proposing -- going from two percent to 1.5 took $10 million off the top, leaving us with five, two million in overhead, which we centralized to Toronto in order to keep, you know, Miramichi going, and that left ---
257 THE CHAIRPERSON: Miramichi needs all the help it needs these days; you’re talking to public servants here.
258 MS. WATSON: Yes.
259 THE CHAIRPERSON: That’s where the Phoenix Program is.
260 MS. WATSON: Yes, exactly. So they’ll have a vibrant community channel to watch when they move there.
261 THE CHAIRPERSON: Hopefully they’re dealing with the pay issues, but ---
262 MS. WATSON: Yeah.
263 THE CHAIRPERSON: --- anyhow.
264 MS. WATSON: And so that leaves $3 million. Three million dollars ($3 million), Mr. Chair, for OMNI is like putting a Band-Aid on a hemorrhage.
265 And I was very excited when we read the June 15th decision because I thought this was a fabulous opportunity for us to launch English language news on our city stations outside of Toronto. We love that product that we have in Toronto and I would love to roll it out in other markets; and this would go towards achieving that objective.
266 It’s also more monetizable. That English-language product is more monetizable than the news product would be on OMNI.
267 So I would be faced with $3 million on OMNI to which newscast would I do? It wouldn’t be enough to do anything well and so we looked at -- we made the decision, a business decision based on return, that that $3 million would deliver a bigger return in viewership, regulatory mandate, and commercialization with respect to that.
268 The other reason we filed the 9(1)(h) is I read the Commission’s decision on the Urban Alliance race relations complaint and Uniforce complaint on our -- on OMNI breaching its conditions of licence with respect to cancelling the local newscasts.
269 The Commission, in fact, validated that we had not breached out licence but did, in that decision, if I read the Regulatory Code, say that today you would be asking us why we’re not bringing news back outside of a 9(1)(h) Application.
270 THE CHAIRPERSON: Wait for it.
271 MS. WATSON: Yeah. And so I costed it out; I tried to make the budget work. Based on my experience with a 9(1)(h) that I ran for 15 years, understood what I could do, how I could do it, and that’s why -- this was the most reasonable way to bring back the news and do what we thought the Commission also wanted with more locally-reflective news in the English language outside of Toronto.
272 THE CHAIRPERSON: Right. And you’re referring to your experience at CPAC?
273 MS. WATSON: Yes.
274 THE CHAIRPERSON: Yes. Some parties in this proceeding have suggested that your request for a 9(1)(h) should have been the subject matter of a separate proceeding. What’s your view on that?
275 MS. WATSON: I’ll let Ms. Wheeler take that one.
276 MS. WHEELER: It could have been the subject matter of a separate proceeding but we were here before you to renew the licences for OMNI’s over-the-air television stations and this solution that we’ve put forward under the 9(1)(h) Application is really tied to our ability to renew and keep those stations going.
277 So I think that was recognized by the Commission when it declined to adopt the approach advocated by those certain intervenors and certainly it was recognized by the hearing today.
278 THE CHAIRPERSON: You said earlier that service to multicultural communities was part of Ted Rogers’ original vision. Why didn’t you apply for 9(1)(h) distribution when the Commission was actually doing a 9(1)(h) hearing?
279 MS. WATSON: You know, this is going to sound like a cop out. I wasn’t running it at the time and so I can’t speak for my predecessors. I would assume that we still wanted to see if there was a way out. And ---
280 THE CHAIRPERSON: It would have also put you in a horrible contradiction because you were saying ---
281 MS. WATSON: Yes.
282 THE CHAIRPERSON: --- we shouldn’t be giving 9(1)(h) out because it has an impact on affordability and it’s not consistent with a competitive model.
283 MS. WATSON: And we understand the irony we’re faced with and you’re faced with. It was not easy internally, as well, to get this to be moved forward.
284 The issue is that as a BDU we have support -- we have not objected to 9(1)(h)s, we just wanted to ensure that they met the criteria. Rogers owns 40 percent of a 9(1)(h) service; it is a difficult ---
285 THE CHAIRPERSON: Which one are you referring ---
286 MS. WATSON: CPAC.
287 THE CHAIRPERSON: CPAC, okay.
288 MS. WATSON: And so it’s ironic; I understand that. It is a difficult situation but it’s the only one we could come up with, and our BDU partners understood that, with respect to delivering what we think OMNI -- would make OMNI a 9(1)(h) service.
289 THE CHAIRPERSON: But some say it’s putting us in an awkward position because it’s almost as if you’re trying to -- oh, “blackmail” is such an ugly word -- so negotiate better terms for your licence renewal.
290 MR. BRACE: If I could just comment on that, Mr. Chair -- not at all. Just so we’re clear, the 9(1)(h) is really to give us the ability to produce the news component. I mean that’s the major focus of what we want to do going forward.
291 If in your view it’s not appropriate and we don’t receive the 9(1)(h), even despite the fact that we’ll file this year an EBIT loss of $8.3 million on OMNI the way it is delivered now, our intent is, at least for the next few years, to keep it going. So it’s not -- we’re not saying that, you know, that this is a gun to anyone’s head, by any -- we will endeavour to keep it going.
292 It’s really important to us. As I say, it was fundamental to something that Ted believed in and what I’ve learned in a short term at Rogers is that what Ted believed in is something that we really adhere to. So we are really trying to make this happen and I think that you see that, you know, particularly from Colette’s background and the sincerity and interest she has in community programming, that this is something that’s very important to her and certainly us.
293 So, you know, please, we would hope that you wouldn’t take it as something that’s a threat or any kind of a ---
294 THE CHAIRPERSON: I wasn’t suggesting that it’s my view but I’m suggesting maybe others might see it that way.
295 MS. WATSON: We’re really -- we understand the dilemma; we feel it. The issue is to return OMNI to its former state. In our opinion, it’s always been an exceptional service. The company has subsidized it for all those years. The commercial model doesn’t work anymore.
296 And so as an exceptional service, in order to restore it to that, or to create a service that would meet all of that exceptionality, because we have been serving Canadians in 20 different languages for different ethnic groups for 30 years now, we’d like to continue doing that but the only way to keep doing it and not carry these large losses in a shrinking industry was to do it with a 9(1)(h) Application.
297 MR. BRACE: And I think, just to make sure -- and it was in our opening remarks but to put a little emphasis on it, our intent is to not profit from this. I mean it’s to -- whatever we would earn that would be incremental to our cost would be put back into the service in an effort to drive it to even higher levels of quality. So that’s kind of a condition and a promise that we’re prepared to make.
298 THE CHAIRPERSON: That you operate on a not-for-profit basis?
299 MR. BRACE: Yes.
300 THE CHAIRPERSON: Even if that was a condition of licence.
301 MR. BRACE: We would accept that as a condition of licence.
302 THE CHAIRPERSON: You’ve made the case that there’s a need for this kind of multilingual, multicultural service in the Canadian ecosystem; you’ve cited parts of the Broadcasting Act in support of that. If indeed there is that need -- and I’m not questioning it for the purposes of this question, but why not make a call for others to see if they can meet that and they could propose a 9(1)(h) proposal? You would come in into that and talk about the synergies with your existing service but we would at least be focusing on the needs for that community and the appropriate licensee to deliver on that?
303 MS. WATSON: Well, I’d let our regulatory counsel jump in, but I would think that would be a decision the Commission could make.
304 MS. WHEELER: It is certainly an avenue that the Commission could take, but I guess I would argue that there’s a bit of a sense of urgency here to the restoring of OMNI’s programming and the quality that we’re proposing. We’d also argue quite confidently that we doubt other applicants would be able to make the commitments we’re making at the cost -- at the wholesale rate that we’re proposing. We’ve seen the price of 9(1)(h) services and they are considerably higher than what we’re proposing today.
305 So we would encourage the Commission to give consideration to the application before you today and weigh the benefits of having perhaps a broader service with a broader consultation with the benefits of, you know, being able to implement this programming in a timely manner at the low wholesale rate that we’re proposing.
306 MR. BRACE: And not for profit. I think that, you know, to ask other applicants to come in and making an application for a 9(1)(h) license, and if a conditioned precedent is that it be a not-for-profit service, I’d wonder how best used it is in terms of our time. How many people would actually be willing to do that?
307 And especially in the context of the resources that we bring to this service from other areas, you know, across the board. We’ve got a lot of resources, Rogers, and a lot goes into this. There’s a lot of help coming from other areas that supports this service. So I think that that is important as a consideration as well.
308 THE CHAIRPERSON: What would you say to those that say that this is nothing more than an equivalent to fee-for-carriage?
309 MS. WHEELER: So I think fee-for-carriage is something that related to the distribution of over-the-air television stations. What we’re proposing here today is anew discretionary service. So I think they’re two fundamentally different things. And certainly under previous fee-for-carriage proposals that we have heard before, none of the licensees or the applicants in those scenarios were ever committing to reinvest any type of revenue or profit back into programming to operate at a break-even level. So we think that is fundamentally one of the main differentiating parts of what we’re proposing today.
310 THE CHAIRPERSON: Others may disagree with that.
311 MS. WHEELER: They may. And if they’d like to launch other discretionary services and make the same commitments that we’re making, then ---
312 THE CHAIRPERSON: Right. But I guess that is the more important question for the Commission, is that, you know, what kind of a precedent are we setting here? How do we put a box around it so that it’s not everyone that decides to do this as well?
313 MS. WHEELER: And I get ---
314 THE CHAIRPERSON: Because if I’m not mistaken, I mean, how different will the 9(1)(h) regional discretionary service be from the over-the-air service in terms of programming?
315 MS. WHEELER: So we’re not disputing that the over-the-air television stations will benefit from the launch of this discretionary service. But the programming that’s going to be -- the commitments to programming that we’ve made -- the 40 percent CPE, the programs of national interest commitment, the newscast -- those will all be generated on the discretionary service and offered on the over-the-air television service. But the over-the-air television service won’t be originating that content.
316 And so we see that as a fundamental difference between a fee-for-carriage scenario where it’s an over-the-air television station asking for the ability to negotiate a wholesale rate for the carriage of its service and with the ability to withdraw that service and all of the other scenarios that have been put forward in the past. This is consistent -- you know, our proposal today is consistent with the applications, the other 9(1)(h) applications, that have been put before you in the past with the difference that it would also benefit the over-the-air television stations.
317 We see that as a benefit because it will reach over-the-air television viewers who may not be able to afford to subscribe to a cable system or a satellite distributor but would still benefit greatly from the news and information programming that this service purports to offer.
318 So if the Commission felt that it was important for us, you know, to not set a precedent and for us to shut down those transmitters in exchange for granting the 9(1)(h) license, that’s something that we could consider. But we don’t see how that would be at all helpful to those who may not be able to afford at this point to subscribe to our cable service.
319 THE CHAIRPERSON: So just so that I understand correctly, programming created on this new regional discretionary service would go to the regulatory obligation, for instance CPE, as original first-run? It would, however, be able to -- that programming could be found on the OMNI OTA services and would be accounted for as for the CPE but not original? Is that correct?
320 MS. WHEELER: On the OTA services?
321 THE CHAIRPERSON: Yeah, sorry, on the OTA services, yeah.
322 MS. WHEELER: That’s correct. Under our proposal, where OMNI is being carried as a local priority signal from an over-the-air television perspective, we’re proposing that in order to avoid a distributor having to carry two signals, that they can not carry the over-the-air television signal and only carry the regional feed.
323 THE CHAIRPERSON: Right. But I’m thinking from your licensing perspective and your spend on, for instance, CPE, there would be a double count?
324 MS. WHEELER: Currently OMNI doesn’t have a CPE requirement; it’s over-the-air television service. But yes, it would be a double count. If you were to impose a CPE on OMNI, it would go towards both.
325 THE CHAIRPERSON: But not count for original first run, correct?
326 MS. WHEELER: Correct.
327 THE CHAIRPERSON: The other thing that’s a bit odd here is -- and there aren’t a lot of exceptions but there are some, I guess, CPAC being one but that’s a bit of a different case -- of BDUs owning services with 9(1)(h) status. Is that the right way to go?
328 MS. WATSON: Well, Quebecor owns TVA.
329 THE CHAIRPERSON: Yeah. Okay. Six hours.
330 MS. WATSON: And then our -- agreed, it is unusual.
331 THE CHAIRPERSON: It’s quite minimal, right?
332 MS. WATSON: True.
333 THE CHAIRPERSON: And they’re not in that market, really.
334 MS. WATSON: We are ---
335 THE CHAIRPERSON: Good try, though.
336 MS. WATSON: I’m trying. We’ve partnered with an independent ethnic broadcaster on this venture and I’ll ask Susan to ---
337 MS. WHEELER: I think we recognize that it is a bit awkward and that’s why we’ve made the commitment to reinvest any type of profit or revenue back into our programming, so that we will operating at a not-for-profit basis. And that should assure the Commission and give comfort to the public that we’re not looking -- this isn’t a get-rich-quick scheme on our behalf. This is really to be able to sustain and reinvest in a programming service that we believe, from a company perspective, is very important and believe it’s very important to a number of Canadians as evidenced by the close to 4,000 supporters that we received for this application.
338 THE CHAIRPERSON: Well, that’s a great segue for my next question because indeed a large proportion of Canadians would benefit, I think, with what you’re saying from multi-ethnic multilingual programming. We have other commercial operations, ATN, Fairchild, others, that are in the marketplace. So why does the Commission have to intervene? Why can’t market forces make it that those communities will be served with a diversity of programming going forward?
339 MS. WHEELER: I think that goes back to the Commission’s approach and policy rationale behind offering the basic service. It was supposed to be a basket of services that are fundamental to the achievements of the Broadcasting Act. A number of the ethnic services that are offered currently, are discretionary services; they’re single language services; and they’re not offered as part of the basic service. They’re not allowed to be offered as part of the basic service. So I think that our application is really to complement and round out the basic service so that it caters to all of those policy objectives that were cited in our opening remarks in section 3(d)(1).
340 THE CHAIRPERSON: Although to be fair, everybody and his dog is in that section, correct? Well, except maybe the dog.
341 MS. WHEELER: In fairness ---
342 THE CHAIRPERSON: There’s women and children, adults, all the various diversities, ethno-cultural, Aboriginal and so forth.
343 MS. WHEELER: I think that’s true. I think who’s not included are third-language speakers. And that’s who we’re really focusing on in this application. They don’t have something on the basic service just for them and we think that’s a gap that should be filled.
344 THE CHAIRPERSON: How important would advertising revenues be for that proposed new discretionary service?
345 MS. WATSON: They continue to be important but they continue also, through our projections, to be insufficient to deliver what we’re proposing to deliver. So they are an integral part of the -- we’re not solely relying on the subscriber fee, but it does carry the vast majority of the revenue.
346 THE CHAIRPERSON: Now, you referred to your -- I can’t remember if you actually used the word “partnership” -- but your arrangements with ICI Montréal would be the fourth regional feed. Why do you think that is required?
347 MS. WATSON: I’ll let Susan take that one.
348 MS. WHEELER: Sure. So one of the omissions that -- when we were putting together the application we wanted to have separate feeds to be able to really reflect the unique, multicultural, multiracial makeup of the different regions. And one of the distinguishing characteristics in Quebec obviously is that a lot of the ethnic communities aren’t learning -- when they come to Canada they’re learning French as their first language as opposed to English and ICI offers a great deal of ethnic-focused programming in French language. And so that’s something that we didn’t have the expertise in and wouldn’t be able to offer but we thought was very important to the Quebec market. And so we approached Sam to partner with us.
349 THE CHAIRPERSON: Right. And last time you spoke of it, it seemed to be just an oral arrangement, which is a bit surprising for a sophisticate company like yourselves. Have we evolved anywhere beyond just an oral agreement?
350 MS. WHEELER: We have a term sheet. But again, it’s predicated on the approval of 9(1)(h); that’s why it hasn’t been full formalized. But we can certainly share the ---
351 THE CHAIRPERSON: But there’s a signed-off term sheet?
352 MS. WHEELER: Yes.
353 THE CHAIRPERSON: Would you be willing to undertake to file that?
354 MS. WHEELER: Yes, we would, in confidence obviously, because it is ---
355 THE CHAIRPERSON: It’s always open to you to ask for confidence and provide an abridged version. For the 9th of December as well?
356 MS. WHEELER: Yes, thank you.
358 THE CHAIRPERSON: And how important is that component to your application, to your business model and your programming strategy if the term sheet does not convert into something more binding and formal?
359 MS. WATSON: From a business model it would be important but not imperative. But it was mostly from a delivering the proper service and ensuring that the Province of Quebec was well-served in the same way that the rest of Canada was served ---
360 THE CHAIRPERSON: Right.
361 MS. WATSON: --- with regards to its ethnic population.
362 THE CHAIRPERSON: And the intention would be to finalize that agreement after a favourable decision from the Commission?
363 MS. WATSON: Yes.
364 THE CHAIRPERSON: And are you willing to undertake -- and although there might not be changes -- if there’s any changes between now and the filing of the decision in this matter, to file with us any developments with respect to that ---
365 MS. WATSON: Of course, yes.
366 THE CHAIRPERSON: --- in terms of reference ---
367 MS. WATSON: Certainly.
368 THE CHAIRPERSON: --- in terms of agreement? Yes?
369 MS. WATSON: Yes.
370 THE CHAIRPERSON: Okay. And that’s an ongoing requirement beyond the 9th of December, of course.
371 MS. WATSON: Understood.
373 THE CHAIRPERSON: Of the 12 cents per month that you’ve proposed, how much would be going to ICI?
374 MS. WHEELER: So that is one of the terms in the term sheet that we intend to file with you. And we would again be asking for confidence in that.
375 THE CHAIRPERSON: And the notion of operating the service on a not-for-profit basis would extend to ICI as well?
376 MS. WHEELER: No, it would be exclusively to the discretionary service that we’re asking you to license.
377 THE CHAIRPERSON: So ICI might make money on this partnership?
378 MS. WHEELER: I can let Sam respond to that, but I don’t see this as being a profitable endeavour for him in the short term.
379 MR. NOROUZI: Bonjour, M. Le Président, Membres du Conseil.
380 ICI so far, since we obtained their license, has endeavoured in producing quality programming to meet the needs of the different cultural communities in Montreal. We don’t know yet how much revenue this is going to generate for us so it will be difficult to say -- and in fairness, a lot of people, when we first applied for this license and we obtained it, told us, “Are you serious? Why would you go into an OTA in this market right now?” And as I sat before you in 2012 ---
381 THE CHAIRPERSON: I may actually have asked you that question.
382 MR. NOROUZI: Yes. I’ve been involved in ethnic medias, as I had mentioned back then, since the age of 14 on the production side when my dad was a local program producer on a cable access station. And he put a camera on my shoulder and he said, “Let’s go out and film and cover some stuff.”
383 So that being said, we really didn’t get into this as a get-rich-quick venture. You know, we got into it because we saw that there was a need. We’ve been involved in ethnic media on the production side for many, many years, knew a lot of the stakeholders, and wanted really to offer a service.
384 And I think since we launched this service in 2013 we’ve had a lot of firsts in ethnic broadcasting in Quebec. First HD broadcast -- it had never been done before before we came to the market. We were able to -- advancement of technologies do certain self-examples -- from our production facilities in Montreal do interviews with people all over the world that had never been done in ethnic media in the Province of Quebec prior. Whether it be from Mumbai to Manila to Lisbon to Boston or Toronto, some of our producers were able to do interviews with guests all over the world.
385 We also -- on the production side our production company has -- and this is not a condition of license, but just because we always try to do better -- invested in programming. Example, we partnered up on our production side with another independent producer and produce the only French-language show on fashion in the Province of Quebec, whose main mandate is to promote Canadian manufacturers and artists.
386 So we’re not in this to, you know -- it’s not a get-rich scheme for us, right? And to show that as well, in order to help that our venture be viable -- and in a great deal it’s been viable so far to the public benefits package that was provided by Rogers and approved by the Commission, as well as master control services being offered by Channel 0, as well as having some additional programming offered to us by Rogers on an annual basis.
387 And on top of that we’ve taken a lead-by-example as management of the company. We’ve taken salary cuts for upper management. Actually, our President and CEO does not take a salary at all just to make sure that the company’s cash flow is stable in going forward.
388 So the question of ICI making profit for this, well, first let’s see how much money is generated; let’s use those revenues to stabilize ICI’s future and finances and be able to do additional stuff above and beyond what we’ve been doing currently, and we’ll go from there.
389 THE CHAIRPERSON: And I guess we can revisit that when your license is up for renewal.
390 MR. NOROUZI: Absolutely.
391 THE CHAIRPERSON: Help me understand. I’m stepping back. So there’s the discretionary service and there’s the OMNI OTA service. Which is the mirror and which is the original, in your future vision?
392 MS. WHEELER: So the original will be the discretionary service and the mirror will be the over-the-air television service.
393 THE CHAIRPERSON: So we should be really focusing, in terms of programming commitments, on the discretionary service; is that correct?
394 MS. WHEELER: Correct.
395 THE CHAIRPERSON: Now, the Commission has been quite clear about the six criteria it wants to examine when looking at this. And the record is quite extensive on it so I didn’t want to delve into it other than to ask -- I mean, that policy framework was created a few years ago. Do you consider it still to be valid in the current environment?
396 MS. WATSON: Overall yes, I do. I don’t know if ---
397 THE CHAIRPERSON: And there’s nothing that you think has changed that makes it less relevant today?
398 MS. WATSON: No, not -- regulatory lawyers may have a different perspective, but philosophically no, I don’t see anything that needs to be improved on at this point.
399 MS. WHEELER: I guess I think if anything it’s become more relevant in the sense that since that time the Commission has established a new basic service with a cap, a retail cap for that basic service. So the types of programming that are given the privilege of being part of that basic service should have to reach an exceptional threshold as laid out in the criteria, and clear -- and obviously, we believe that the application that we've made before you does meet that criteria.
400 THE CHAIRPERSON: So what is the exceptional need that will be met? I mean, there's other third-language discretionary and ethnic services generally available in the system, so what is the exceptional need you're trying to meet?
401 MS. WHEELER: I think the exceptional need is the basic access to third-language programming at an affordable rate. A number of new Canadians who are coming to the country who want to understand the society that they're -- that they’ve emigrated to and understand the, you know, the new country that they've, you know, adopted, has -- you know, they need that access to information -- news and information programming. And that is available to them thanks to the Commission at a very accessible cost point.
402 The discretionary services, the ethnic discretionary services that are available in the system, they're terrific services, but they are expensive and they are single-language focus. This -- the benefit of OMNI is that it is able to cater to a number of third-language speakers as part of that basic service and give them a base-level entry point for news and information programming.
403 MS. WATSON: And I would only add, Mr. Chair, that we -- it also allows for these Canadians -- new Canadians to receive a Canadian perspective on what is going on in Canada, in their language.
404 THE CHAIRPERSON: And what is the exceptional news coverage?
405 MS. WATSON: Precisely that, that we are now going to be providing news. As I said before, we felt that OMNI has always been exceptional. We're just at a -- at the tipping point with respect to affordability at this point in time. But language newscasts, Canadian-language newscasts, is the exceptional product. It allows those viewers, in their language, to hear what is going on in Canadian news.
406 THE CHAIRPERSON: Right. And your view is that the flexibility provided in local and community TV policy is just not enough to meet that requirement; is that correct?
407 MS. WATSON: Correct.
408 THE CHAIRPERSON: When I hear you speak, I'm -- and you'd understand this, Ms. Watson -- that I could easily replace the word, you know, "Parliamentary debate" with "ethnic". I mean, there's a public policy, argument, you're making. You're saying, particularly for the integration of new Canadians to what is, essentially, a very multicultural, multi-ethnic reality in Canada -- particularly in our larger cities -- that that has been a success in Canada for integration while celebrating the diversity that these folks bring from around the world, but the need to tell them the Canadian story.
409 That seems like a very strong public policy argument, and I was wondering to what extent -- a bit in the spirit of CPAC -- you’ve sought to partner with others to offer that as a service to Canadians?
410 Now, I realize, you know, the associations like the cable association that existed at the time of CPAC has disappeared with greater competition, but is that a model you tried to explore, and if not, why not?
411 MS. WATSON: We did not explore that model, particularly. So a consortium of broadcasters would gather and create this programming. No other broadcaster in Canada, over the year, produces local programming. I know there are some ethnic channels that do some local programming. We did have conversations with two groups, if you will, one company, one group. And essentially, they were -- there was no real guarantee that they would restore what we were bringing -- what we had lost.
412 There was no -- they weren't looking at it from a public policy perspective, obviously. It was a commercial discussion. But there was no guarantee with respect to the amount of news that we were discussing, and the commercial arrangement just -- it wasn’t suitable.
413 THE CHAIRPERSON: Right. The CPAC arrangement is my last question before we take a break, is one that is with distributors. And you didn’t address that. You talked about broadcasters, unless you meant -- I mean, technically, yes, but I think there's a distinction between ---
414 MS. WATSON: Right, right, no ---
415 THE CHAIRPERSON: --- distributors, and have you explored that possibility in this case, or do you actually want it to be branded as a Rogers offering as opposed to from the cable industry or the BDU industry?
416 MS. WATSON: To be perfectly frank, it did not occur to me to look -- to create a consortium of BDUs to deliver this product. I -- that's the truth of it. I don't know if Susan has anything to add to that. I didn’t see it as something to bring to them, so it didn’t occur to me.
417 THE CHAIRPERSON: But in a sense, if the Commission says yes to this, they are partners, because they have to collect potentially 12 cents -- well, not collect -- they have to absorb ---
418 MS. WATSON: Yes.
419 THE CHAIRPERSON: --- 12 cents within their business model.
420 MS. WATSON: Agreed.
421 MS. WHEELER: And we think, as part of that partnership, we're bringing good quality programming to the basic service in a relevant type of programming that's currently not served by the basic service. So I think that's our contribution.
422 THE CHAIRPERSON: I'm not sure it's much partnership of the mandatory distribution, but ---
423 MS. WHEELER: That's fair.
424 THE CHAIRPERSON: Yeah. All right then, let's take a 15-minute break til 11 o'clock and we'll continue on the last theme that I announced earlier, okay, so nous sommes adjournés jusqu’à 11h00.
425 Thank you.
--- Upon recessing at 10:44 a.m.
--- Upon resuming at 11:00 a.m.
426 THE CHAIRPERSON: À l'ordre s'il-vous-plaît. Order, please.
427 So as I said I would, I'm going to just move to the group renewal, and I must admit that most of my questions are assuming the negative on the 9(1)(h) scenario. So, I mean, if there's things you want to add in that respect, you should do so.
428 So on the OMNI licence -- and here, I'll be more specific -- so you intend to reinstate the local third-language newscast on the OMNI OTA, but only if the 9(1)(h) is granted; is that correct?
429 MS. WATSON: That is correct.
430 THE CHAIRPERSON: And you have found no way of doing it with respect to other options, as you’ve answered earlier; is that -- there really are no other options?
431 MS. WATSON: So just ---
432 THE CHAIRPERSON: What if the Commission were to just impose it by conditional licence?
433 MS. WATSON: So are you -- would you be -- is it national versus local, or is your question ---
434 THE CHAIRPERSON: I'm talking about local.
435 MS. WATSON: Local news, so we do local news. What we are proposing in the 9(1)(h) is a national newscast.
436 THE CHAIRPERSON: Assuming that there is no 9(1)(h) ---
437 MS. WATSON: Right.
438 THE CHAIRPERSON: --- what would you do, in terms of local third-language newscasts ---
439 MS. WATSON: Well, we would ---
440 THE CHAIRPERSON: --- OMNI OTA stations?
441 MS. WATSON: We would continue with the Category 2a) programming that we currently deliver.
442 THE CHAIRPERSON: And do you believe that that's -- not reinstituting the local newscasts, do you think that without it, you're actually serving the television viewers you're supposed to serve?
443 MS. WATSON: We would like to do more, which is precisely why we filed a 9(1)(h) application. This is all we can afford. As Mr. Brace indicated earlier, we're going to file an $8.3 million loss on OMNI this year, and that is with the three public affairs programs, five days a week.
444 We -- now, that's not to say that those programs aren't fabulous, because they are very local, they're very relevant, and we're very proud of what we do. And the communities have come around to embrace them. The issue is, ad revenue just isn't there to support them. I don’t have a cross-subsidization model that works any more.
445 THE CHAIRPERSON: So if the Commission were to impose specific exhibition and spending requirements requiring local programming, particularly local news programming on the OMNI OTA, what would that impact be on your programming strategy?
446 MS. WATSON: It would be very -- again, not knowing what the quantity is, it would be very difficult. Assuming that that programming requirement allowed for Category 2a), we would be fine, but if it didn’t allow for Category 2a), it would be a problem.
447 THE CHAIRPERSON: Why is that?
448 MS. WATSON: There’s just -- news gathering is more expensive than current-affairs programming and that -- it probably would triple our costs. And I don’t see it tripling our revenues so it would add to the debt load we are already carrying.
449 THE CHAIRPERSON: Help me understand the cost per newscast in third language versus English language.
450 MS. WATSON: Everything is ---
451 THE CHAIRPERSON: Just so you ---
452 MS. WATSON: Yeah.
453 THE CHAIRPERSON: And maybe this is going to be answered by undertakings -- I’m not sure after giving a general -- because ---
454 MS. WATSON: Yeah.
455 THE CHAIRPERSON: --- it would have been my assumption that you can create some synergies between your other stations, your English-language stations, and the OMNI OTA, in terms of news gathering.
456 I mean the stories that are occurring, are they that different? Is the news gathering that different? We’ve seen it on CBC using journalists that are multilingual to gather certain news stories. I’m just trying to understand what is the cost difference; is it a 100 percent equivalent as it would be on the English side?
457 MS. WATSON: I’d have to do the analysis with respect to the percentage equivalency but essentially, the perspective is different. So we can -- yes, there would be synergies on obtaining the b) role, and yes there would be synergies with respect to, perhaps, edit suites. But the perspective from the editorial side is completely different.
458 I’d like to ask Manuel to talk about a story where all of Canada is talking about the prices of real estate in Vancouver and English Canada, for lack of a better term, is viewing it in one particular way but the Asian population in Vancouver was seeing it completely differently.
459 THE CHAIRPERSON: Right.
460 MS. WATSON: And so that has to be the way we tell that story on that newscast as opposed to recycling what we believe was, you know, a foreign problem.
461 And so I can have Manuel describe that or ---
462 THE CHAIRPERSON: Yes, please, please, interesting.
463 MR. FONSECA: Thank you. The incident was a local politician in British Columbia who was suggesting that there were some people using the expensive real estate in Vancouver as a way to hide some of their money from taxes. And in the second media conference that he held he did some research and found that 20 properties were owned by -- new properties were owned by students or waiters with little or no income and all those names happened to be of Asian descent.
464 So mainstream media, as Ms. Watson mentioned, reported it as it was; whereas, with the ethnic media, we looked into it and questioned it and the MLA noticed that the Asian community was quite upset with this.
465 So he asked for a one-on-one meeting with us and we explained some of the cultural sensitivities around this and he came around and on-record said that what he did was wrong and he realized that he needed to do a lot more to learn about each ethnic community that he serves in his community. And mainstream media never did that.
466 And that’s not a knock on them it’s just the people that we have in our editorial newsroom understand what goes on in their communities.
467 THE CHAIRPERSON: Is that an exceptional case or is that a more common case because I mean that’s -- you know, we have to -- that’s an interesting anectodical piece of evidence but it doesn’t necessarily create a trend line in terms of the cost differences between third-language and regular -- English-language news programming?
468 MR. FONSECA: It is a common case. There are many other incidents where certain news happens and the way the ethnic communities receive that news, and also interpret the information that is being given by people not from their communities is quite different than if they were watching mainstream television. And that is a common occurrence.
469 THE CHAIRPERSON: Right. So if I were to ask to the cost per newscast to produce a third-language, 30-minute newscast, would you be able to provide that?
470 MS. WATSON: Yes, absolutely.
471 THE CHAIRPERSON: And you could do that through an undertaking?
472 MS. WATSON: Absolutely, yes.
473 THE CHAIRPERSON: For the 9th of December?
474 MS. WATSON: Yes.
475 THE CHAIRPERSON: Thank you. Could you do the same thing for current-affairs programming?
476 MS. WATSON: Yes.
477 THE CHAIRPERSON: Thank you.
479 Now, a few months ago, you made some changes to your third-language programming. How much money did you save by making that programming decision, excluding the one-time costs to put an end to, perhaps, some contracts you had or just, you know -- on an annual basis, how much did you save from that?
480 MS. WATSON: Fifteen million dollars ($15 million).
481 THE CHAIRPERSON: Fifteen (15), one-five?
482 MS. WATSON: Yes.
483 THE CHAIRPERSON: Will you be able to give us, by an undertaking, the breakdown of how that is?
484 MS. WATSON: Yes.
486 THE CHAIRPERSON: Now, if we deny the 9(1)(h) request, you said you would request amendments to your conditions of licence on OMNI. So assuming that there is a denial of 9(1)(h) and an approval of those new conditions of licence, where would the savings be spent on if the lower conditions of licence were allowed?
487 MS. WATSON: The savings would be just a decreased debt. So perhaps instead of losing eight million, we would lose six million.
488 THE CHAIRPERSON: So you’re still thinking you’ll be operating in a loss scenario going forward?
489 MS. WATSON: Absolutely, yes. And as Mr. Brace indicated, we’d be willing to continue to do that for the foreseeable future.
490 THE CHAIRPERSON: Why?
491 MS. WATSON: It’s the right thing to do. There’s just a limit to how much we can lose on this product.
492 THE CHAIRPERSON: So you’re able to lose some but not to the level you’ve had historically; is that correct?
493 MS. WATSON: That’s fair.
494 THE CHAIRPERSON: And you think your shareholders would accept that?
495 MR. BRACE: I think for the foreseeable future we try to manage our way and try to improve it.
496 THE CHAIRPERSON: I don’t know what “the foreseeable future” is anymore, by the way.
497 MR. BRACE: Well, I’d say two years, just to be clear.
498 THE CHAIRPERSON: Okay.
499 MR. BRACE: Okay, just so we put a fine number on it. But we’re pretty determined to try and make this work. We have our doubts that it will. We’re seeing a decline year-over-year of four percent against the amount we’re already losing in terms of revenue so unless we can turn that around it’s only going to get worse.
500 But I just don’t want to be definitive and say we’re closing it down and shutting it down the day we get the announcement. I’d like to take some time and see if we can work our way through this but I couldn’t give a commitment that it would be for the entire licence term.
501 THE CHAIRPERSON: Right. And you’re of a view that there are absolutely no synergies to be made between the OMNI station and the City Newsroom?
502 MS. WATSON: There will be some, absolutely. So let me describe it. In back end we could create some synergies. But on the editorial side, no; and that’s the expensive side.
503 THE CHAIRPERSON: You have some conditions of licence with respect to your Alberta station. What would be the costs of imposing a minimum amount of local programming on all OMNI stations?
504 MS. WATSON: By “local” do you mean independent -- local independent or in-house productions?
505 THE CHAIRPERSON: Well, depending on the strategy you would choose. I mean that’s your choice how you would deliver on it.
506 MS. WATSON: So OMNI, in its current state with the conditions we’ve proposed, we would continue to operate; we can manage that financial situation. Any additional production costs in Alberta would have to be cut from another market.
507 THE CHAIRPERSON: Okay, let me re-state the question; I think there was a misunderstanding. So what I’m suggesting is that we take the Alberta station conditions and impose them across the other ones. How much would that -- across all the OMNI stations -- how much would that cost?
508 MS. WHEELER: So the Alberta -- just to make sure that we’re ---
509 THE CHAIRPERSON: The current ---
510 MS. WHEELER: --- talking about the same thing ---
511 THE CHAIRPERSON: The current ones.
512 MS. WHEELER: So the three and a half and the one and a half hours?
513 THE CHAIRPERSON: Yes.
514 MS. WHEELER: So we currently exceed, though, that level of local programming in all of our markets.
515 THE CHAIRPERSON: And so should I take from that that ---
516 MS. WHEELER: So the cost of that local programming is the cost as we’ve filed in our annual return of ---
517 THE CHAIRPERSON: Right. So ---
518 MS. WHEELER: --- what that local programming is.
519 THE CHAIRPERSON: --- it’s -- you could do it, then, but you’d be losing money, obviously?
520 MS. WHEELER: Yeah, we would continue to lose money.
521 THE CHAIRPERSON: But you’re ready to do that because it’s the right thing to do?
522 MS. WHEELER: To a limit.
523 THE CHAIRPERSON: To a limit.
524 MS. WHEELER: Yes.
525 THE CHAIRPERSON: Fair enough. Now, you’ve proposed some changes, as well, in terms of the number of ethic groups to be served and the number of languages to be offered. You know, you also cited the Broadcasting Act and, as you’re aware of, the Commission’s Ethnic Policy. I mean why would it make sense to reduce the number of communities being served?
526 MS. WHEELER: So the broad-service mandate in the Ethnic Broadcast Policy requires that -- doesn’t actually set a number of groups of languages served. So ---
527 THE CHAIRPERSON: But people have gotten used to the level of service, have they not?
528 MS. WHEELER: Pardon me?
529 THE CHAIRPERSON: People have gotten used to the number of services, have they not?
530 MS. WHEELER: Absolutely. But I think the reality of how OMNI is currently operating is that there is a high level of repeat programming in order to achieve those 20 languages and 20 ethnic groups. So what we’re proposing is to reduce that to 15.
531 It’s not that we’re going to no longer serve ethnic communities or language groups that we’re currently serving; we’re just not going to have to hit that level or that number of programming on a monthly basis as we’re currently required.
532 And the idea behind the proposal is really to allow us to restructure our program schedule in a more efficient manner so that it perhaps will open up advertising opportunities for us that I can ask Mr. Dark to speak to. But essentially if we have less a number of languages or groups that we need to serve in a given month, we can create some block programming that we might be able to more efficiently or effectively sell to advertising clients.
533 THE CHAIRPERSON: So who would be losing out? Because theoretically there would be five language groups, five ethno-cultural groups that would no longer have the support of a clear condition of license.
534 MS. WHEELER: In a given month. But again, there’s no one ethnic group. Our commitment to 20 languages isn’t a static number; those languages -- there are 20 different languages each month.
535 THE CHAIRPERSON: But if you’re going after advertising, the demographic makeup of any given community would define that. That’s not going to change substantially. You’ll go towards, I don’t know, Punjabi and other larger ethnic third-language groups, would you not?
536 MS. WHEELER: Absolutely. That is definitely part of the strategy because those have the greatest revenue potential, which will allow us then to reinvest programming ---
537 THE CHAIRPERSON: Then let me ask the question differently. Who are the language groups or multi-ethnic groups that have less advertising clout that are likely to be excluded from your new model?
538 MS. WHEELER: I don’t think we can tell you who we would exclude because it’s all -- a lot of the language and community groups that we serve are done so through our partnerships with independent producers. So it’s really dependent on the supply of programming that we get from the independent production sector. So one month there may be a Syrian series that we’re able to air for two or three months, and then that series will end and we would commission another independent producer who would be able to fill another language. So it is very much a fluid approach to scheduling and programming. And maybe Colette has more to add on that?
539 MS. WATSON: Essentially it’s reducing the repeat ratio so it allows us to have a more marketable offering. We find ourselves programming from a regulatory 20 as opposed to creating blocks of programming that could enhance the commercial viability of the station.
540 And so they will all get their turn; they just won’t be repeated 12 times. We might consolidate so that month we have these 15 and they’ll be aired and then the next month as the, you know, Baltic states or the Slovenians come in, then it’ll be focused on that. It gives us an opportunity to perhaps promote it a little bit better. It’s a little bit more like the hamster in the wheel right now and we’re trying to put some sort of stability around it so that we can create some marketing and promotion in order to make it more commercially appetizing.
541 THE CHAIRPERSON: You also want to reduce the cap of the percentage of programming to be diverted to a single, third-language group. I think you’re proposing it to be calculated on a monthly basis. It’s sort of the backstop, in a sense, from a regulatory perspective, of converting -- even if you were reducing from 20 to 15, it prevents the risk of it going, I don’t know, unfairly towards Mandarin or Punjabi.
542 So is the percentage 16 or 30 now? What’s your proposal? Because there was a shift, I believe.
543 MS. WHEELER: So under our current conditions of license it’s 16. If we are granted 9(1)(h) we would maintain that at 16. If we are not granted 9(1)(h) we would propose to increase that to 30 percent.
544 THE CHAIRPERSON: Why 30?
545 MS. WHEELER: I think 30 percent is the natural limit that we would be able to actually offer in any given language in any event and still meet our broad service mandate of serving those other groups and communities within the 15.
546 But again, as we said earlier, you know, the largest ethnic groups have the largest revenue potential. And so that revenue allows us to help fund the other languages so it does act as somewhat of a cross-subsidization model, albeit not a very lucrative one at this point.
547 THE CHAIRPERSON: Right. Assuming 30 percent, which languages would be losing out in light of that potential advertising model?
548 MS. WHEELER: Again, I think it’s the same concept that it’s not ---
549 THE CHAIRPERSON: There’s only 100 percent so at one point if one is at 30, potentially, somebody is going to lose out. The letters the Commission will receive will come from whom?
550 MS. WATSON: We haven’t done that analysis. If we can take that as an undertaking we’ll go back and do that.
552 THE CHAIRPERSON: Please do because yes, it may be economic test to go towards the larger communities, but there is a public interest aspect of the broad service obligations, is there not?
553 MS. WHEELER: Absolutely. But I think the Commission has to recognize that some of the languages and the groups that we’re serving through the programming -- this is programming that’s, you know, old programming and it’s dated and so it’s not all that relevant. So yes, we’re ticking the regulatory box by saying it’s 20, but we’re not actually serving these communities with new, fresh programming. So I’m not really sure how invested they are in OMNI to begin with.
554 So if we’re able to have the flexibility to serve fewer communities better on a rotating basis so that no one’s left behind, we actually think that will create a more relevant service.
555 THE CHAIRPERSON: For the Alberta OMNI station you’re asking for flexibility -- there’s that word -- to calculate your local programming on an annual basis. Could you explain to me why you want that?
556 MS. WATSON: Again, it’s the partnership with the independent producers in that they don’t have the kind of scale that larger markets do in Toronto and Vancouver with respect to the size of their communities. And they are finding it a bit of a burden to meet our timetable. So if we are able to measure it in a different way, then they can deliver us the program when it’s ready and something that they’re more proud of.
557 THE CHAIRPERSON: Okay. Actually, perhaps some of my colleagues may not have as much experience on the independent production model for the ethno-cultural third language, so how does it work and how different is it from the more traditional independent production?
558 MS. WATSON: The way OMNI works with independent production is independent producers create a 30- or 60-minute program and they keep the advertising inventory. It’s a barter system. So we will keep two out of six minutes per half hour or three out of six minutes per half hour; the producer keeps the rest. And that is how that producer monetizes that program.
559 THE CHAIRPERSON: And why is this change you’re trying to make in Alberta -- how does that serve the viewers in Alberta well?
560 MS. WATSON: Fewer repeats and more relevant programming.
561 THE CHAIRPERSON: But we have to trust you on that?
562 MS. WHEELER: Well, actually, we have our community liaison officer from Alberta here and she can speak to the practical challenges that she and her team are facing in terms of helping to produce independent local programming.
563 MS. WU: Thank you.
564 So In Alberta currently, because we don’t have any in-house local production, as a community liaison in Alberta we’re trying very hard to help our independent producers in Alberta.
565 So currently we exceed all the license commitments. So in Calgary we have five hours produced by independent producers. The commitment minimum is 3.5. In Edmonton we have three hours. The minimum commitment is 1.5 hours.
566 So what we do is, you know, this spring we work our engineer system -- engineer department to create a media shuttle delivery system to help with producers so it’s easier for them to deliver the files through their computer to our server directly.
567 But another side, as my colleagues mentioned, the independent producers are really ‘-- they’re working hard but really struggling to meet the deadlines, so ---
568 THE CHAIRPERSON: So am I correct to assume that the changes you are proposing are more to respond to the needs of the independent producers than for the viewing audience; is that correct?
569 MS. WATSON: Both. The viewing audience, let's -- these independent producers kind of come with their own viewing audience. It's very much ---
570 THE CHAIRPERSON: From their community, because of the model?
571 MS. WATSON: Yes.
572 THE CHAIRPERSON: Okay.
573 MS. WATSON: And so if it helps them, it helps the viewers. So we view them -- we view these independent producers, actually, more like the viewers of that programming.
574 THE CHAIRPERSON: Okay. But you will agree with me that any loss of a minute of programming will be seen as controversial for the television audience that has been relying on it historically, correct?
575 MS. WATSON: It's tough to take things away, but I don’t view it as a loss in this case.
576 THE CHAIRPERSON: Okay. So you’ve requested a number of changes for the OMNI OTA on conditions of licences. If we were -- if the Commission were to agree to all these, what would the global -- be the global impact on the OMNI OTA stations over the next five years, both in terms of programming and financially?
577 MS. WATSON: Well, I'll speak to programming and I'll let my colleague, Mr. Maghakian, speak to the financials.
578 We would continue with OMNI in its present state, and I'm quite proud of what we've delivered. We've -- we're no longer worried about whether it will survive to live another day. It has local relevant in-house production in Vancouver and in Toronto. We are implicated, as you saw in the video, in our communities. If you could see the line-ups outside our station doors on doors-open day in Toronto, you would see, there's a very valuable part. We would continue to do that.
579 But it is -- it's a challenged business. Al Dark will be able to reaffirm that advertising is shrinking in the best of conditions. This -- we are talking about fragmented, small niche markets that are not measured. We have no currency to trade with agencies, and we'll continue to provide what we do, but it faces a lot of uphill battles finally.
580 THE CHAIRPERSON: Even on the barter side? Because I would -- I mean, it's a very different model.
581 MS. WATSON: They'll -- we'll -- and the barter side, frankly, won't change either 9(1)(h) or in the -- over the year. We will continue to work with them. We've got a very strong team on -- in the back panel here who work at improving the quality. We just -- as Bin just mentioned, we added -- we invested in some new technology in Alberta to help them, because they don’t all convert to the latest broadcast format as efficiently and quickly as large corporations do, so we have to find a way to help them transition to those formats, which we've done in Alberta, and we'll continue to do that. They are an integral part and we don’t see that changing.
582 THE CHAIRPERSON: Okay, so on the quantum.
583 MR. MAGHAKIAN: So looking at our five-year projections, assuming that there's a four percent decline in revenue, we don’t see a significant improvement over the five years. In fact, we do see a continued decline in our PBIT, another three million by the end of the fifth year.
584 THE CHAIRPERSON: Sorry, what's the number?
585 MS. WHEELER: It's still growing.
586 MR. MAGHAKIAN: The loss increasing by another three million in the fifth year.
587 THE CHAIRPERSON: A loss increasing by three million?
588 MR. MAGHAKIAN: Yes.
589 THE CHAIRPERSON: Assuming all your other assumptions are stable, so there's no ---
590 MR. MAGHAKIAN: Correct.
591 THE CHAIRPERSON: Even with all the those changes, you're forecasting still an increase of three million; is that correct?
592 MR. MAGHAKIAN: That's correct.
593 THE CHAIRPERSON: So there's no question of you reinvesting any "savings" anywhere as a result of these conditions of licence modifications; is that correct?
594 MR. MAGHAKIAN: That's correct.
595 THE CHAIRPERSON: And I take it the approval of these conditions of licence would not be sufficient either to reinstate local third-language newscasts on OMNI; is that correct?
596 MS. WATSON: That's correct.
597 THE CHAIRPERSON: If the OMNI OTA were part of the group, what would be the impact?
598 MS. WATSON: I'd let Susan take that.
599 MS. WHEELER: That's not a model that we would -- or not something that we've modelled, but assuming it would be grouped in with our conventional stations, I guess there would still have -- we don’t really see that as a model that's viable, because we're assuming the Commission would want firm commitments to OMNI and firm commitments to City, given the very distinct nature of both of those services.
600 So a combined CPE wouldn't assure you that we were giving any -- investing in OMNI at all, that we would be directing all of that investment to City. So I don’t really ---
601 THE CHAIRPERSON: Right.
602 MS. WHEELER: --- see that as something that would ---
603 THE CHAIRPERSON: So -- and it certainly wouldn’t help, I take it, to reinstate local third-language newscasts?
604 MS. WHEELER: I don't think so, because where City currently helps OMNI is -- and correct references -- is in the technical and back end and in shared facilities area, which is already something that they're benefiting from, regardless of being part of the group.
605 MS. WATSON: And Mr. Chair, we already benefit from being part of the family, if you will. "Hockey Night in Canada" and "Punjabi" is fully funded by Sportsnet and airs on OMNI. And so we do try and get ---
606 THE CHAIRPERSON: So it happens then on a business level without necessarily having ---
607 MS. WATSON: Without regulatory requirements.
608 THE CHAIRPERSON: --- to be reflecting in the regulatory spirit?
609 MS. WATSON: That's correct.
610 THE CHAIRPERSON: Is that correct? Okay.
611 So under what circumstances would it be feasible for Rogers to reinstate local third-language newscasts on OMNI, short of the demise of Facebook and all the other media platforms, which I don’t think we can assume is going to happen?
612 MS. WATSON: I don’t see anything feasible, outside of the 9(1)(h) applications. I wouldn't have come to you with that application if I'd found another way.
613 THE CHAIRPERSON: And the Commission is been sort of clear that news is a quite high priority. Even by making programming choices of less of other categories of programming on the OMNI stations, you still don’t think you could find a way to do -- reinstate the news programming?
614 MS. WATSON: The category -- the programming we buy -- and Mr. Mindell can follow up on that -- the programming we buy for OMNI, the entertainment programming, if you will, is much less expensive than creating a newscast and delivers some margin, with respect to that, because it's not that expensive. So you know, a Brazilian novella, for example, isn't all that expensive and we can sell that.
615 THE CHAIRPERSON: I see.
616 MS. WATSON: And so the metrics just aren't there, with respect to the costs of in-house local news programming. I don't know if Mr. Mindell wants to give you a few examples of -- we have tried to look at creating a -- the philosophy was, if we make diversity mainstream, perhaps we can create some new energy around it.
617 We looked at creating programs or buying programs like "Chinese Glee", "24" from India, "Everybody Loves Raymond" from India, as well.
618 MR. MINDELL: "Everybody Loves Raymond", India and "Mad About You", China, formats like that.
619 THE CHAIRPERSON: They're actually different formats, based -- not just dubbed versions?
620 MR. MINDELL: They're not dubbed. They're ---
621 MS. WATSON: No, no, no. They ---
622 MR. MINDELL: --- localized versions of ---
623 MS. WATSON: Yes.
624 MR. MINDELL: --- those, yes.
625 MS. WATSON: There's another -- there's no Jack Bauer. It's someone from India.
626 THE CHAIRPERSON: Interesting. I'm obviously not part of your target audience. Thanks for that.
627 Okay, let me shift now to the non-OMNI --well, the City and specially -- so you're proposing the non-renewal of your network licence, and can you explain to me why?
628 MS. WHEELER: So the network licence was imposed, based on the determinations in the Commission's last licence renewal decision out of concern that the public would not understand who ultimately had editorial control over the program, "Hockey Night in Canada". So since then, we have -- and so it was at that point that they requested that we apply for a network licence. It wasn’t something that the Commission felt was necessary to adhere to your broadcast laws, but it was something that was seen to address a potential public concern or public confusion.
629 We've had two years of operating "Hockey Night in Canada" under our editorial control, and all programming-related complaints go through the Canadian Broadcast Standards Council. And so -- and also, we obviously promote a number of Rogers activities within "Hockey Night in Canada" as well as CBC activities. So we think the public is well-aware of Rogers' involvement in that program.
630 And from an administrative burden and a simplicity perspective, we think that you can accomplish the goal of ensuring that Rogers maintains ultimate responsibility for that program by imposing a condition of licence on Sportsnet's licence as opposed to requiring an additional network licence to achieve that purpose.
631 THE CHAIRPERSON: Is this your hill to die on?
632 MS. WHEELER: Pardon?
633 THE CHAIRPERSON: Is this your hill to die on?
634 MS. WHEELER: It’s not our hill to die on but it is a very costly proposition for something that we don’t really actually think involves a lot of administrative burden on the Commission’s behalf but does cost over $1 million in order to -- in industry fees.
635 THE CHAIRPERSON: Oh, so it’s the industry fees that drives the costs?
636 MS. WHEELER: Absolutely. That’s money that we’re no reinvesting in programming.
637 THE CHAIRPERSON: Okay. And you estimate it to about 1 million every year?
638 MS. WHEELER: Well, I don’t want to give the exact number because obviously it can be calculated based on the revenues of that program, but yes, it’s over $1 million.
639 THE CHAIRPERSON: Could you provide an undertaking, therefore, how you’ve calculate whatever number you think it is?
640 MS. WHEELER: Absolutely.
641 THE CHAIRPERSON: Thank you. By the 9th of December, please.
643 THE CHAIRPERSON: Now, under the hypothesis that we would maintain the network license -- so you may not have one, this one; that’s the hypothesis for this question -- could you comment on how, in your aggregate reports the financial results should be reported for the network activity? Should it be on all TV services or on the discretionary services, the pay-in specialities?
644 MS. WHEELER: So the network licence -- it’s a question whether we’re including the network licence in our conventional aggregate returns?
645 THE CHAIRPERSON: Yes. And where should it be reported in the aggregate reports? On the OTA side or on the discretionary side, in your view, going forward?
646 MS. WHEELER: I don’t think it would make a difference to us provided that it’s not broken out as specific to the network licence because the network licence, as you know, only involves one program. So that would disclose, obviously, the revenue associated with one particular program, which we ---
647 THE CHAIRPERSON: Right. But you have no strong views as to whether it’s on the OTA or discretionary?
648 MS. WHEELER: If we include it with conventional -- the only concern that I would have is that it could distort the performance of our conventional stations by adding that additional revenue because this is, you know, a program that’s not really aired on our conventional stations.
649 THE CHAIRPERSON: Right, so ---
650 MS. WHEELER: It’s produced by Sportsnet.
651 THE CHAIRPERSON: So it may make more sense to put it on the discretionary side, therefore?
652 MS. WHEELER: I think so.
653 THE CHAIRPERSON: Okay. Standard condition of licence that was published recently, are you accepting those generally or do you want to make exceptions?
654 MS. WHEELER: Standard condition of licence?
655 THE CHAIRPERSON: Yes.
656 MS. WHEELER: For our City stations were accepting those.
657 THE CHAIRPERSON: Right. And for the discretionary ---
658 MS. WHEELER: And for the discretionary as well. Yes, yeah.
659 THE CHAIRPERSON: As well, okay. It’s just when you ---
660 MS. WHEELER: Yeah, it’s just OMNI that we’re not.
661 THE CHAIRPERSON: Yeah.
662 MS. WHEELER: Yeah.
663 THE CHAIRPERSON: Okay, I get that.
664 You may have heard me have a discussion with others at the Laval hearing about how one monitors and enforces obligations calculated on a five-year term when, whether or not compliance has occurred, it is being calculated outside the five-year term, and any remedial action would have to also occur outside the five-year term.
665 Have you given some thoughts on -- I know this may seem to some people as “la cuisine” but it’s also very important to those that have come to our table in asking for these regulatory support mechanisms and they may be finding themselves, because of the flex, a bit short-changed at the end of licence.
666 MS. WHEELER: Sure. We have given a bit of thought to that.
667 So the first thought we had is that we already file a number of annual reports that are disclosed to the public that outline our investment in programming and in different types of programming, whether it’s programs of national interest or regional production or independent production. So we think that provides a good level of transparency.
668 But in terms of a checkup mid-licence term, we think that the Commission could adopt an approach similar to what is done on the radio sector where you issue random performance assessment audits asking the licensees to provide a week of programming and break down how they’ve complied with their various licence conditions. That would allow the Commission some insight as to whether an licensee is adhering to the commitments that it’s made.
669 THE CHAIRPERSON: Right. But that provides us directional assurance. But with the flex from year to year, we could be at last day in August of your licence term and not know whether or not you have actually made up the directional gap. And how do we make that up outside the licence term?
670 MS. WHEELER: And so this would be with respect to expenditures?
671 THE CHAIRPERSON: For instance.
672 MS. WHEELER: I guess if there’s an expenditure shortfall the Commission would know that upon review of the annual returns and that’s something that they could ---
673 THE CHAIRPERSON: But that might occur after the licence term. See that’s the conundrum on the very last licence.
674 MS. WHEELER: Oh, on the last year ---
675 THE CHAIRPERSON: Last year, yeah.
676 MS. WHEELER: --- of the licence term.
677 THE CHAIRPERSON: Yeah.
678 MS. WHEELER: You know, that’s I guess a probability. But the Commission always has the ability to come and address an issue of noncompliance with the licensee.
679 THE CHAIRPERSON: Outside the original licence term of wherein there is the noncompliance? You see, let’s assume a five-year licence term. We’re assessing compliance for the purpose of renewal probably at the beginning if not before that final year. And we won’t have a definitive statement as to whether or not you are in compliance, and if not -- I’m not saying you will be -- but if not -- but we have to think that way -- if not, how do we make up the shortfall?
680 MS. WHEELER: I understand that. Perhaps an undertaking or a commitment filed by the licensee that it has complied with its requirements? That could be then audited by the Commission.
681 THE CHAIRPERSON: Yeah, but that undertaking is only valid for the next licence term and not the one we’re actually analyzing.
682 MS. WHEELER: Only if the Commission requires. They could ask a licensee. I don’t think that is outside of your powers to ask a licensee to commit to making up any shortfall that the Commission would have deemed ---
683 THE CHAIRPERSON: Right. Can you see a situation where we would impose a condition of licence for the next licence term that specifically deals with potential shortfall?
684 MS. WHEELER: Certainly if the Commission is concerned that that’s an issue that is active in the industry, then I think that we would be willing to accept a condition of licence along those lines.
685 THE CHAIRPERSON: Right. Do you have a particular draft that you might want to suggest to us on that condition of licence?
686 MS. WHEELER: Not at the moment but we certainly can.
687 THE CHAIRPERSON: Yeah, that would be grand for the 9th of December. We would much appreciate it. And others then could comment and we can get the ball rolling on that very detailed issue.
688 MS. WHEELER: Sure.
690 MS. WHEELER: And I assume that any such condition of licence would be standard amongst all licensees?
691 THE CHAIRPERSON: You can assume that we hear you that you would want it to be, okay?
692 And are you also familiar with CRTC Exhibit Number 1 that we produced in Laval? We’ll give you a copy now, but I think if you’re familiar with it you’re generally aware of it. And would you be able to provide for the 9th of December a response to that undertaking?
693 MS. WHEELER: Yes, we will.
695 THE CHAIRPERSON: Thank you.
696 One of the benefits that PNI provides, as Ms. Watson outlined, is some flexibility. One of the downsides, in an era where job requirements aren’t as prevalent, is that there is, in the view of some, a risk of diversity in the PNI categories. Do you think that’s a legitimate risk and if yes, how could we deal with that?
697 MS. WATSON: I think I can see why they view it as a legitimate risk but I don’t -- on our side we don’t view is as a legitimate risk. We are all -- producers, creators, exhibitors -- aiming for the same thing and that’s the big hit or programming that delivers an audience and is monetizable.
698 And so we have been trying. We have for the last couple of year working with VICE Media to create a station, a service that meets a certain demographic that we think perhaps offers new -- or can broaden the viewership of the system in general. So we focused on that. Over the next five years we may change our focus depending on where we see that next big audience growth coming.
699 And we have not lacked for requests with programming with respect to that. And so I think good independent producers will see that -- they’ll follow where the industry is going with respect to that.
700 THE CHAIRPERSON: So you don’t see a decrease, for instance, in drama or documentary programming despite this growth of flexibility?
701 MS. WATSON: I can’t speak for my peers in the industry. We as a broadcaster have not invested a lot in dramatic programming. We have one coming next fall that we’re quite excited about, but we’ve focused on different types of scripted programming and we don’t see that changing over the course -- but I’d like Mr. Mindell to jump in, here. That’s really his area of expertise.
702 MR. MINDELL: Sure. Thank you, Colette.
703 Yes, we have a variety of program categories, dramas, comedies and documentary-style programming that tries to anticipate the needs of viewers and sometimes delight them with things they didn’t know they wanted.
704 We have always in production a couple of dramas and a comedy as well as numerous documentaries. We are going to produce 80 hours of original programming in the upcoming broadcast year.
705 THE CHAIRPERSON: So you think the market force is in a sense because you want to remain relevant, but the diversity of programming, including PNI programming, will arise?
706 MS. WATSON: That’s exactly what we’re saying.
707 THE CHAIPERSON: I’m trying to understand your approach to the flexibility proposed by the Commission in the local and television sector.
708 Now, if I’m not mistaken, in your opening remarks, you said in the next year, I guess, in 2017-18, you’re proposing to flex about 3 million. Is that correct?
709 Can you explain to me how you will be doing this going forward? Is it an annual review, and what factors are you considering when you do so?
710 MS. WATSON: So first, we start with the philosophy that we are creating this new news product and we are funding it as we see through the business and through the community channel contributions.
711 The community channel contributions, as you know, are managed retroactively. They’re based on revenues. So as the revenue declines or increases, we will absolutely look at that.
712 At the 30,000-foot level, I would say that any increase in cable revenues that would deliver more community channel money would be diverted to local news on the OTA. But at this point in time, we don’t see that. The cable company is still projecting declines over the next five years.
713 THE CHAIPERSON: So how did you come to the 3 million number in ’17-’18? I mean, explain to me more because I take it, if I ask you for a forecast what it will be throughout the licence term, you’ll be telling me that you’re unable to provide that to me. Is that correct?
714 MS. WATSON: I can provide you forecasts.
715 THE CHAIPERSON: But you’re saying it’s not going to be very valuable.
716 MS. WATSON: Well, I’m saying we don’t think it will be a whole lot more than $3 million.
717 THE CHAIPERSON: Okay.
718 MS. WATSON: It could grow, but I don’t see -- I see it as in a range around $3 million over the course of the licence term. And as I mentioned earlier, we had $15 million we wanted to convert; the 2 to 1.5, took 10 million for the small independent station fund; 2 is in overhead for our small community channels; and then 3 -- and any growth beyond that would then go to City.
719 THE CHAIPERSON: I see. So can you -- I’m going to read you a paragraph from your final reply in the local and community and just ask you to explain to me to square that circle. So you said at paragraph 14 of that, and I’ll read it completely:
720 “For Rogers, this would mean that if we ceased operating our Toronto Community Channel but maintain our channels in Mississauga, Brampton and Richmond Hill, we can reallocate almost $4 million annually to our City stations and community channels operating in smaller centres. During our appearance at the hearing, there was a misunderstanding about the amount of money that Rogers could reallocate if we were to close our Toronto Community Channel. Commissioner Molnar was mistakenly led to believe that Rogers would only be reallocating $1 million to City stations other than Toronto and Vancouver. The number would in fact be 4 million annually. We regret not addressing this at the hearing. If approved, this will allow Rogers to make firm commitments to the production and exhibition of regional local programming, including news and information as part of the licence renewal for our City stations.”
721 Four (4) million or 3 million?
722 MS. WATSON: It is 3 million now because of -- we have more actuals based on the broadcast year.
723 THE CHAIPERSON: Any other corrections you want to make? We don’t -- it’s not useful to have them in reply comments, if you get me.
724 MS. WATSON: Understood.
725 THE CHAIPERSON: Okay? And you think the 3 million is a floor --
726 MS. WATSON: Yes.
727 THE CHAIPERSON: -- a ceiling or an indication?
728 MS. WATSON: Right now, it’s a floor and we’ve built our news product on that floor.
729 THE CHAIPERSON: Okay. Thank you for that.
730 My last area of questioning before I turn to my colleagues. You know, last night, I was having -- I had a lot of free time to reflect, because my original plan was to watch the Grey Cup, but I’m not a subscriber to TSN and RDS. So I had free time.
731 As I understand it, about 30 percent of Canadians roughly don’t subscribe to Sportsnet, but you have a pretty important sports property in hockey. And I just wanted to have your views as to the likelihood of the Stanley Cup not being on free-over-the-air television the next licence term.
732 MR. MOORE: Mr. Chairman, we feel very passionately about the Stanley Cup and about the importance of hockey in Canada. It’s why we felt very strongly that, as part of our purchase of the NHL rights in Canada, that we keep a large amount of hockey on CBC, and that led us to do a deal with CBC.
733 That deal was extended by a year, so the first five years of our 12-year commitment is on CBC. That will be a bilateral discussion as to whether or not we renew that. Certainly, we feel very strongly about reaching as many Canadians as possible.
734 Now, looking forward three, four, five years, I don’t have a crystal ball. I can’t tell you whether the CBC will want to renew it. We think they will, but that will be a discussion with them, but it’s also why we launched Sportsnet now. We want to make sure that we’re able to provide our programming, which we think is of interest to a large number of Canadians in a number of different ways.
735 So as the industry evolves, we’ll evolve with it to make sure that that programming is available.
736 MR. BRACE: There’s also a commercial reason to do it. As Mr. Dark ---
737 THE CHAIPERSON: To do -- what is the “it”? To leave it on -- over the air?
738 MR. BRACE: To leave it over the air, yes.
739 THE CHAIPERSON: Yes.
740 MR. BRACE: Because of the reach that CBC has, obviously, you’ve got the opportunity to draw a bigger audience, and that makes it more attractive from an advertiser standpoint.
741 So outside of any philosophical reason, there’s actually a business reason to keep it there, but it is an ongoing discussion with CBC. It has to be an agreement on both sides, but certainly our druthers and our preference would be to keep it on conventional television.
742 THE CHAIPERSON: So in the video, in fact, the quote I wrote down is “Life’s best experiences are the ones that we like to share.” Would you agree that includes Canada’s sport, at least, winter sport in terms of the Stanley Cup?
743 MR. BRACE: I would say so, yes, absolutely.
744 THE CHAIPERSON: And what kind of assurances can you give us from a regulatory perspective that the Stanley Cup Playoffs would be widely available on over-the-air television?
745 MR. BRACE: I can’t because it’s a discussion that we have to have, and we have to come to an agreement with the CBC. So there is no guarantee that it would be available ---
746 THE CHAIPERSON: But you have over-the-air stations as well, do you not?
747 MR. BRACE: Yeah, I suppose, yeah. I mean, from that standpoint, I suppose that we could ---
748 THE CHAIPERSON: And maybe not have as much reach as the CBC in every market, but you do have an over-the-air licence or I think you’re asking for one.
749 MR. MOORE: We do, Mr. Chairman, and ---
750 THE CHAIPERSON: In fact, you’re asking for two.
751 MR. MOORE: We will go to where the bulk of viewers are, but we also have to be aware that in the business of sports that more and more product has internationally gone to pay television providers because in order to be able to afford some of the rights fees, we need two revenue streams. It’s a little different than in the United States ---
752 THE CHAIPERSON: Yeah, but weren’t not talking here about the Monte Carlo table tennis tournament. We are talking about the Stanley Cup Final.
753 MR. MOORE: Yes.
754 THE CHAIPERSON: And you’re not ready to make a commitment that, despite your other best efforts, that at the very least that Final will be available on an over-the-air platform?
755 MR. MOORE: To the extent that we control it with our discussions with CBC, we’ve committed to it to the end of our current contract and ---
756 THE CHAIPERSON: But I’m not ---
757 MR. MOORE: But as we say, it’s our philosophy to ---
758 THE CHAIPERSON: Regardless of that, Mr. Brace just admitted that you do have both the OMNI and the City platforms; do you not?
759 MR. MOORE: We do.
760 THE CHAIPERSON: It’s all within your realm.
761 MR. MOORE: We’ll make what decision makes the most sense for our viewers and for our business.
762 MR. BRACE: I think at this point, we haven’t sat down and had that conversation internally, because we’re hoping that, you know, we can come to terms with CBC and so it won’t be an issue.
763 So we’re kind of -- we weren’t anticipating the question.
764 THE CHAIPERSON: You realize that this conversation we’re just having is going to make a lot of people nervous.
765 MR. BRACE: Well, I think that, you know, because we are in conversations and our preference, as I say, is to keep it on conventional television we could do that. We could do that even if it was on City. I mean, it doesn’t have the reach and the breadth -- albeit it’s over the air on that case, but I think that it’s something we need to talk about internally. Just see what the best opportunity for both us and for viewers at large is.
766 THE CHAIRPERSON: Okay. Well, perhaps we’ll have a chance to talk a little bit more about that as the hearing goes on.
767 I’m now turning to my colleagues to see if they have some questions.
768 No? Okay. I was led to believe there was.
769 From legal? Easy for you folks then.
770 Any last comments you’d like to make, Ms. Brace, Ms. Watson?
771 MS. WATSON: I do have one.
772 THE CHAIRPERSON: Yes? Did I forget to ask a question you had an answer prepared for?
773 MR. BRACE: Is it four million or three?
774 MS. WATSON: Yeah.
775 On that, there’s a regulatory timing issue I’m hoping you can clarify for me. The compliance on the community channel still needs to be maintained until August 31st, 2017. I’m expected to flip a switch the next morning and have the local news ready to go.
776 We were wondering if we could come to you with a proposal to accelerate some of that transfer prior to September 1st in order to build these newscasts?
777 THE CHAIRPERSON: With respect to a licence that’s currently before us or the distribution licences?
778 MS. WATSON: The distribution licence.
779 THE CHAIRPERSON: I’m not sure what we can do in this particular hearing to deal with it.
780 MS. WATSON: Yeah.
781 THE CHAIRPERSON: But we’d be open ---
782 MS. WATSON: It may come outside the hearing, but just so that you’re aware.
783 THE CHAIRPERSON: Yes, I appreciate that.
784 MS. WATSON: There’s a logistical timing issue with the two broadcast years.
785 THE CHAIRPERSON: Right. Well, I invite you to have conversations with particularly legal staff if there’s a solution you’re thinking of to implement that.
786 MS. WATSON: We will, thank you.
787 MR. BRACE: We will. Thank you, Mr. Chair. Thank you, Commissioners.
788 THE CHAIRPERSON: Okay. No other comments?
789 Thank you, okay. Almost perfect timing. So it’s almost noon, so why don’t we take a lunch break until 1:00 o’clock? Thank you.
--- Upon recessing at 11:56 a.m.
--- Upon resuming at 1:02 p.m.
790 MS. ROY: À l’ordre, s’il vous plaît. Order, please.
791 LE PRÉSIDENT: À l’ordre, s’il vous plaît. Order, please.
792 Madame la secrétaire.
793 THE SECRETARY: Merci, M. le Président.
794 We will now proceed with item two on the agenda, which is an application by Corus Entertainment Inc. on behalf of the licensees to renew and/or amend the broadcasting licences for its English language television services.
795 Madame Courtemanche, please introduce your colleagues. Oh, sorry, Mr. Murphy.
796 MR. MURPHY: Merci beaucoup.
797 THE SECRETARY: And you have 20 minutes for your presentation.
798 MR. MURPHY: Merci.
799 MR. MURPHY: Good afternoon Mr. Chairman, Commissioners, and Commission staff. My name is Doug Murphy, and I am the President and CEO of Corus Entertainment.
800 With me today to my immediate left is Barb Williams, Executive Vice President and Chief Operating Officer. To her left is Karen Phillips, the Senior Director of Government Relations and Compliance. To my right is Sylvie Courtemanche, Vice President and Associate General Counsel, Government Relations and Compliance.
801 To Sylvie’s right is Doug Spence, Vice President, Finance, Planning and Analysis. And to Doug’s right is EVP and General Counsel Gary Maavara. At the back -- no, to his right, excuse me, they changed my order around here, Mr. Chair. To his right is Troy Reeb, who is our Senior Vice President, News, Radio and Station Operations.
802 And behind me, I’ve got Lisa Godfrey who’s Vice President, Original Content. And last but certainly not least, Jeff Naphin, Vice President, Technology Planning and Strategy. And we’re pleased to be here today.
803 In fact, this is our first time before the Commission since the acquisition of Shaw Media. We look forward to the opportunity to discuss our plans for the upcoming licence term.
804 Corus established three guiding strategic priorities that we believe are relevant to today’s proceedings, and will be borne out in our remarks this afternoon. These are, one, to own and control more content; two, to engage our audiences; three, to expand into new and adjacent markets.
805 And these strategic priorities are supported by three initiatives. Namely, selective mergers and acquisitions, building scale through partnerships, and executional excellence in how we operate our company.
806 The acquisition of Shaw Media was absolutely on strategy and was transformational for Corus. We achieved the scale necessary to compete in the dynamic, evolving media marketplace.
807 Before we continue, we have a short video to show you which demonstrates the new Corus.
808 (VIDEO PRESENTATION)
809 MR. MURPHY: Mr. Chairman and Commissioners, consumer habits are changing, markets are colliding, boundaries have fallen, and new digital technologies are constantly emerging. Old business models no longer apply or are fading in terms of their merits and relevance.
810 Corus believes that innovation is the way to embrace these changes. They are highly disruptive, but we will meet it head-on to succeed both here at home in Canada and abroad.
811 The New Corus, as an integrated media and content company, is well positioned to embrace and innovate within this environment. So what does that mean?
812 Simply put, we want to engage and grow our audiences in Canada, and in so doing, offering our advertisers and distributors highly valued services to advance their respective businesses.
813 Which takes us back to content. Winning as a media company is a Canada specific aspiration. Winning as a content company speaks to our commitment to create and license an ever-increasing amount of programming for that content-hungry global content marketplace.
814 We will create stories about Canada for Canadians while generating value for Canadian producers. Broadcasting is still the only vehicle that delivers sustainable value for Canadian programming and producers.
815 Our owned content will not only drive audiences in Canada, but will in turn generate an important third international revenue stream for our company beyond just domestic advertising and subscriber revenue.
816 This is not new for Corus. Nelvana has been producing and licencing content internationally for 47 years. It is in our DNA. Our growth as a global content company will key off our success as a broadcaster in Canada.
817 The media environment has changed drastically since the last group based licence renewals in 2011, so much so that we must assume that the market realities we’ll be facing from now until the end of the next licence term six years later will bear very little resemblance to the past.
818 In 2011 Netflix had but a few hundred thousand subscribers. It is now in more than five million Canadian homes. Now we have many other players in the unauthenticated marketplace such as Crave TV, Google/YouTube, Amazon, Apple and others. More competition is on the horizon. Audience fragmentation is now a fact of life. In fact, we have seen a steady erosion of people watching television over the licence term.
819 In spite of that, we have moved quickly to ensure all of our consumers and viewers benefit from the scale of the new Corus. Cross-promotion using our increased scope and scale has resulted in increased discoverability for all of our great content.
820 MS. WILLIAMS: To fully innovate and meet the many changes over the next licence term, we will need to invest in the best content that will attract the greatest audience share. The reality is we don’t know today where and how we will make such investments, but we need to be nimble and we need a licencing framework that permits us to make the quick decisions as to how or where CPE investments will be made.
821 Innovation and change is at the heart of the Corus television licence renewals application and we believe that with the right licencing framework we have the best chance at achieving the objectives set out in the Commission’s Create and Local Television policies.
822 This licencing framework includes the recognition that we must be able to react quickly and invest where the best opportunities exist within this marketplace. Truthfully, some of our existing conditions of licence were established in an environment that is now gone forever. And so, they too need to go.
823 Our CPE and PNI proposals will support our strong content strategy. We will continue to build scale through our strategic partnerships with some of the world’s largest media companies like Disney, Scripps, Viacom, AETV, and Fox.
824 And we are committed to working with the talented independent production sector to develop and produce the Canadian programs that people want to watch.
825 Of all of our accomplishments over the last licence term, the one we are particularly proud of is our success with Canadian Content programming.
826 In our Women, Lifestyle and General Entertainment portfolio, we focused on our original production signature shows to maintain our number one position in the very competitive women 25-54 demographic. W Network was named “Channel of the Year” by Playback Magazine in its Winter 2015 issue because of its success with Canadian series.
827 These Canadian content properties have been successful not only in Canada but also abroad. The Love It or List It franchise has two spin-offs in Canada and has format deals in the U.K. and five other countries and several more in negotiations. It has been sold consistently in over 100 territories.
828 And we have been involved in a number of top quality, internationally successful dramas, including for Global, Rookie Blue, Bomb Girls, and of course our new hit Private Eyes starring Jason Priestley; as well as History’s tent-pole international co-production drama, Vikings; and Showcase’s hits Lost Girl and Continuum, both of which were acquired by the U.S. channel, Syfy.
829 And of course Lifestyle has been successful around the world too, from Mike Holmes, to the Property Brothers, to Income Property.
830 And in the Kids segment, well, Corus operates the top five most watched kids services across Canada. And this success is largely supported by our continuing focus on creating original animation and live-action productions that have also achieved international acclaim and distribution.
831 Corus Kids live-action original independent productions -- including Some Assembly Required, Max & Shred, and Make It Pop -- can be seen through broadcast partners in the U.S., the U.K., Latin America, Asia, France, Germany and Australia.
832 Our commitment to world-class content is evident in the success of our latest international co-production, Ride, a collaboration between Canada, the U.S. and the U.K., along with our original Movie of the Week, Anne of Green Gables, sold to PBS, and winner of the Shaw Rocket Prize 2016.
833 Our Nelvana Studio content is available in over 160 countries including some of the world’s leading networks such as Disney Channel, Nickelodeon, Cartoon Network, ITV in the U.K., and TF1 in France, and have received over 70 major international programming awards.
834 This is exactly the type of success envisioned by the Commission’s Create Policy.
835 Our CPE proposal sets the framework for accomplishing these goals and in the face of our many challenges we believe that we can reach these goals. But we caution the Commission that only by remaining relevant to our customers can we generate the requisite value to meet these levels of spending.
836 Our proposals represent our best thinking on both what we need to do and what we can do.
837 MR. REEB: You have heard from Canadians that they place tremendous value on the local news provided by our television stations. And we have heard from you that the provision of local news is part of our social contract with the public. In both cases we couldn’t agree more. It is why we have worked so hard over the last licence term to innovate and develop a more sustainable model for local television.
838 Global News has invested millions in new technology and industry-leading production methods. The goal has always been to protect and enhance the number of professional news-gatherers in the field, while maximizing efficiency, and serving an audience that wants news at all hours and on all platforms, and not just every night at 6:00. Indeed, across our television stations we now produce 367 hours of local news and public affairs programming every week.
839 As a newly combined company, we’re leveraging this innovation in even our smallest stations. Just this fall, thanks to our Multi-Market Content initiative, we have launched new morning shows on CKWS Kingston and CHEX Peterborough, and for the first time have added a local, Global News program on CHEX-2 in Oshawa. These are real newscasts with real reporting and analysis that proudly uphold the highest professional standards.
840 When Global National won the 2013 Edward R. Murrow Award for Overall Excellence, the first Canadian news organization to ever do so, it did it while being produced with no studio crew, a control room staffed by just two people, and a set that exists only in virtual reality. It is the journalism that counts.
841 Our investments are also helping Globalnews.ca continue its run as the fastest-growing major news site in Canada, and a dominant source of Canadian news on Facebook. And we are now looking at ways to utilize our expertise in revitalizing radio news as well, as our audiences rely on it as much as ever. Our plan aims to support our local communities and provide our viewers and listeners with what they need. And we’ve invested to reach our audiences wherever they are and have been successful in that effort. But the economics remain challenging.
842 MR. MAAVARA: The Commission issued its working document for the group-based licencing hearing on November 2nd.
843 It starts with discussion of issues related to CPE, PNI, programming diversity, and production.
844 The Commission recognized that CPE and PNI obligations might require possible adjustments to reflect the realities of the market. We agree, and this is at the heart of the Corus application.
845 We believe that such adjustments are warranted given the many changes that have already taken place in the broadcasting industry since 2010, and that will continue during the next licence term. Our CPE and PNI proposals align with these market realities. Meeting the challenge of change must be the lens by which the Commission reviews all the proposals contained in our licence renewal application.
846 Mr. Chairman, you said this in Banff and we were listening. Group-based licencing was established in recognition of the fact that the changing media environment necessitates greater flexibility in how to invest CPE across a suite of services. This was a great first step forward. But we need to accelerate that forward momentum. More rules to constrain our approach to the market will not work.
847 Maintaining the conditions of licence that we seek to change, or establishing new ones, will simply shift market risk to licencees like Corus. But the reality is that these rules will not serve to insulate other stakeholders such as our producer suppliers from these shifting environments. We need to build ladders to success, not ineffectual walls.
848 A two-tiered system where the regulated sector shoulders all the substantive and administrative obligations towards various industry stakeholders is no longer tenable in a global media market.
849 The proposals contained in our group-based application are designed to help us to succeed.
850 MR. SPENCE: At the core of this hearing is spending on the creation of Canadian Content. In order to respond to an increasingly complex multi- platform competitive landscape, a much more flexible BDU packaging environment, and the removal of genre protection, broadcasters need the flexibility to adapt our spending in these rapidly changing market conditions. Therefore, our proposal is to set the individual CPE for our basic and discretionary services at 27 percent of the previous year’s revenues. We have proposed the addition of six services to the Corus group. These would have a CPE obligation of 10 percent of the previous year’s revenues. It is important to note that these new services currently do not have any CPE requirement.
851 We have also proposed that our PNI spending commitment be set at five percent of revenues, of which at least 75 percent will continue to be directed to independent producers.
852 On November 9th, Corus filed its proposed conditions of licence for locally-reflective news exhibition and expenditures. Our expenditure commitment for locally reflective news is 11 percent of our basic television group’s past year’s revenues, with customary adjustments for over and under expenditures.
853 This level of expenditure will support our exhibition commitments of six hours of locally-reflective news in major markets, three hours in non-major markets, and one hour for CHNB in New Brunswick and CHEX-2 in Oshawa.
854 MR. SPENCE: We are optimistic about the future but we cannot deny that those heady years of revenue growth are behind us.
855 Going forward it’s a multidimensional share game between existing and new players. Many of our competitors do not have the same or any regulatory obligations, and we continue to see dramatic changes in audience behaviour.
856 Mr. Chairman and members of the Commission, what do we need for the next licence term?
857 We need full flexibility to innovate in how we invest our substantial CPE funds to adjust to the new market realities. This will enable us to better compete with both domestic and foreign services that do not have CPE requirements.
858 We need standardized PNI spending at five percent given the new environment where there is no genre exclusivity.
859 And we need to establish that our commitment to the independent production sector will be achieved by allocating 75 percent of our PNI requirement to independent producers.
860 In sum, what we need from the Commission for the next licence term is a continuation of the insight that was apparent in the 2011 GBL decisions. With the right licensing framework, we will be able to achieve the objectives of the Commission’s Create and Local Television Policies. Corus can and will compete with all players in the system, both regulated and unregulated, in Canada and around the world.
861 We would like to thank the Commission for this opportunity to outline our proposal. We ask that you approve our application and renew our licences for a five-year term and we will be more than happy to answer any questions you may have. Thank you.
862 THE CHAIRPERSON: Thank you very much for being here. It’s good to see you all here. I’ll pass you on to Commissioner Simpson to start off the questions.
863 COMMISSIONER SIMPSON: Thank you.
864 If I adopt a plodding approach to a lot of these questions, it’s because I have trouble reading my writing. I was writing fast and furious and I stopped at about 51 pages; but I won’t go through everything today. It was an undertaking.
865 I’m going to start by taking a cue from our Chair this morning when he asked Rogers for an 80,000-foot-level view of where it’s going. And I’m hoping that your answer will embrace conventional, specialty, and streaming services, the whole gamut, because I want to get a sense of what you see that justifies your approach to more gloves-off with respect to regulation.
866 MR. MURPHY: Thank you, Mr. Commissioner.
867 First off, let’s talk about the consumer. It’s our view, a strongly-held view, that TV will remain very relevant to Canadian, both specialty television and conventional; and TV, in that regard, is always premium created content.
868 Programmers though, such as Corus, must realize that they are -- we are not in control; the consumer is in control. And I think it was Mr. Chairman who said that if content is king, then the consumer is emperor; and we completely subscribe to that notion.
869 So one of things that we believe very strongly at Corus is we have to follow the consumer; we talk about it all the time. We need to go where the consumers are; wherever, whenever, however they want to consume television content, we’ve got to be there.
870 So -- I think we all know this -- while television viewership might be down on the traditional television screen in home, in truth, the consumption of television content is up.
871 What’s happening is people are still watching television at home in front of their big 55-inch screen; it’s still the preferred place to watch, you know, premium content.
872 But there’s also a lot of content that happens in what -- or a lot of content viewing that happens on tablets in what Howard Schultz at Starbucks calls “the third place”. I go into Starbucks all the time and I see tons and tons of iPads, people watching content in there. And then there’s the mobile, on-the-go, more snackable content consumption.
873 And so we think that’s the way of the future and it’s emblematic of what we have to do to sort of follow the consumer. So that’s just kind of our point of view on the consumer.
874 Now, one thing that’s really true today, and perhaps even more so than ever, is that a hit is still a hit. The value of a hit piece of content -- and we’re in the hit business -- has never been greater. So for us, the content aspiration is clearly because there’s great economics out there for us and we need to make sure that we’re always working to try to find the next hit that comes out of the Canadian system.
875 One of the things that’s also true is that a hit can come from any place. As I think many of you know, I started my careers in the kid’s business. Hits are coming out of toy companies now for kids’ animation; they’re coming out of publishing, Manga in Japan. There’s no -- no one’s got a monopoly on hits.
876 And so one of our ambitions is that more and more hit content comes out of Canada and that Corus is a part of that. So that’s clearly part of our ambition going forward.
877 I mentioned in my opening remarks that we want to win as a media company in Canada so we can aspire to become a content company globally, and that remains at the root of what I’m talking about today. But what that also means is the business models around which we have to operate need to be continually reviewed and revised and, you know, it requires us to look forward with an agile system that’s not based on what happened in prior years. It’s got to be based on where we think the business is going.
878 So let me just give you some examples of new business model realities that we’re contending with in the coming licence term. The first one, of course, is competition.
879 And, you know, Barb, later -- I’d invite you to follow up with Barb or I can answer the question, too, but we were at the LA screening this year and there’s some very interesting behaviour we saw about some of these big unregulated SFOD players, streaming players, who may well be setting bigger targets on the Canadian marketplace.
880 So number one, new competition is coming on the streaming businesses for sure, and they’re competing with us for our rights.
881 Number two is audience-shifting is dynamic right now. We’re seeing it -- you know, we’re seeing it all over the spectrum in varying degrees. We heard about the millennials this morning. Kids are at the Vanguard of behavioral changes and we see that firsthand because of our position in the kids’ market. So we’re at a sort of an interesting point in time where there’s lots of audience movement across different forms of consumption of premium content media.
882 Number three, digital advertising. There’s -- no one’s going to try to argue today that, you know, digital is not here to stay. It’s here to stay. It’s bigger than television now is in our marketplace and it’s a fundamental reality that we have to contend with that.
883 Now, there’s lots of reasons to be optimistic, that television with its great reach and frequency, can compete with digital, and I’d be happy to discuss that today as well, but there’s no doubt that we have a much stronger competitor in the digital advertising platforms.
884 And so one of the things, number four, that TV’s got to do is measure our audiences better. You know, we need to be able -- and Radio 2 for that matter -- I know we’re not here today to talk radio but we need to be better at segmenting, measuring on a more real-time basis, our audiences because that’s what the digital players are doing at out expense.
885 Number five, as I said, TV is still a great ROI medium for advertisers and so we can’t lose sight of that.
886 Number six, pick and pay -- as you well know, December 1st is this week, I think, so we’re at the beginning of the new era. We are certain that our business is going to be stable over the licence term but there’s no doubt that over the five years some of our smaller services in question.
887 And number seven, we need to look to launching new products. You know, we’ve got a number of new digital products that we’re launching. I know Mr. Chairman was asking earlier about that. We can talk about that today as well. But that’s an investment. And we’re also making investments in other types of ad tech which costs quite a bit of money and the return isn’t immediate at this point in time.
888 So all that means that the cost structures of our business are shifting underneath us as we speak and so there’s a fixed-cost reality which is kind of rising in our model and so we need to recognize that with TV everywhere, ad-tech marketing and all of this fact -- the fact that content is so valuable now, we're also seeing -- because there's so much great Canadian content -- is that the costs -- the input costs of content in Canada is rising as well.
889 So that speaks to, you know, our kind of -- I'll conclude by saying, there's a lot at stake, but there's a lot in play here, and we're very confident that Corus can succeed in this new environment, and in so doing, meet the goals of the Commission.
890 COMMISSIONER SIMPSON: Thank you. Going back to your opening statements with respect to the three points in your strategic priority, the first question I have has to do with content ownership. I mean, content is king and it's great to own the king.
891 So when it comes to how Corus has been applying this strategy of either ownership through development or acquisition of rights, does this -- for the Commission's thinking with respect to our attempts to support the creative industries -- does that strategy in any way, shape, or form conflict with how you approach and work with independent producers?
892 MR. MURPHY: Not at all. The independent producers are a key part of our success in Canada. They have been, and they always will be, going forward. If you look at most of our CanCon commissions, they are material factors that drive our ratings, and we're proud of that. We've been proud of that for many, many years now. So we see in the independent community, a very, very fertile so opportunity to work to drive great shows.
893 So there's no doubt about it. If there's an independent producer who has a fantastic idea for a show and they pitch us, we want that show -- you know, it could well go to Bell Media too, it could well go to Rogers -- there is healthy competition for content -- and CBC for that matter as well -- in the Canadian marketplace.
894 So the truth of it is, on commission shows, we want the best to drive our ratings. On the shows that we develop internally, well, we will produce those using a variety of different kinds of mechanisms. And then there's a middle ground where we work with independent producers who want to partner with Corus, because they recognize that we have world-wide relationships with the big, you know, broadcasters out there, and we can be their partner in how we distribute content and we mutually benefit.
895 COMMISSIONER SIMPSON: But if you're not -- just thinking about scale here -- if you -- when you look at the common complaint we've been hearing about Canadian broadcasters getting outbid for content ---
896 MR. MURPHY: Yeah.
897 COMMISSIONER SIMPSON: --- because content's going global, in terms of this marketing. It's no longer that "pack your bags at the can" kind of thinking. Everything is produced with global rights in mind. Doesn’t it, though, lend to your need to curate and incubate your own content, because what's being offered to you by independent producers -- particularly the stuff you really want to buy -- is just getting too pricey, and it kills your PBITs?
898 MR. MURPHY: I'll lead off and I'll invite Barb to chime in here. The -- our desire to make our own content is not necessarily a function of managing our costs of content. It's a function of the fact that we've been lucky enough, if you put these two great companies together, to build a fantastic original production team, and we have Lisa here as a leader of that. And so we have some really talented creative people inside of our business. Many of them came from production communities and now come inside the broadcaster but they live in our original production world.
899 So our desire to build content is really a function of the fact that we've got some great ideas and we want to bring them to life. So that -- I would just hit that note right away and have Barb jump in afterwards.
900 MS. WILLIAMS: Yeah, thanks, Doug. I think part of the challenge here is that things are moving quickly and there's a ton of different models to get content made and out there and enjoyed by consumers and monetized as quickly as possible. So there are some business models where the idea is obvious. We're going to 100 percent finance it because there isn't any other obvious financing to come to it. We can move on that idea quickly, get it made, get it on the air, and hopefully get it sold. And in those cases, when we're 100 percent financing something, it makes sense, and we're -- and we've got the idea, we just want to run with it.
901 At the other end of the spectrum, there are big, complex dramas that take years to develop and many, many different funding sources to support, and international co-productions and CMF and producers, you know, are bringing some of their own risk to those projects. And those, we need to work with any number of partners on to try and mount and make successful, again, in Canada and around the world. And then there's -- every number of models in between that.
902 But what I think we're looking for is the ability to be able to acknowledge that all ideas aren't the same, all financing structures aren't the same, all processes aren't the same. And we need to be able to find the right model for the right idea at that right moment to make it happen and make it fast, because as fast as you come up with the best idea, somebody else has done it and they're onto the next thing.
903 And some of this, absolutely to your point, is about we want those best ideas to come to us. We don’t want those best ideas to go to Netflix first or somebody else. But to be relevant in that bidding process for the best of ideas, we have to be able to make a business model that makes sense. So again, it's not about shutting out any one aspect of this whole process. It's about being wide open in our possibilities to make content happen and make it happen appropriately and quickly for the marketplace.
904 And then I think you have to accept a little bit -- we certainly have come to this -- that in a shrinking audience world of traditional television, and in a compromised advertising world on traditional television, that second life of a show that -- you know, that library life that actually was referenced this morning, becomes more and more important to make the project, as a whole, successful financially, over time. You can't make your money back, you know, in the Canadian market alone, and it's becoming tougher and tougher to even contemplate that you could do that.
905 So the ability to be able to find that second window, whether that be internally or domestically or internationally, becomes more and more important. And again, it's about us being sure that we can put that right business model together to see ultimate success in the financial viability of the content, even beyond its audience success.
906 MR. MURPHY: This is maybe an interesting example and you know, "The Property Brothers", great show, produced by Cineflix, is basically HGTV's signature show in the U.S. And some of the light bulb went off for us a number of years ago when I was down in a Spanish-speaking vacation locale and trying to find an animated channel in English for my kids, and I stumbled across HGTV en Espanol, and there were the brothers speaking Spanish. And that's when all of a sudden, the wheels started turning, and thinking, wow, that's amazing. They were global -- that's a global product.
907 So we've subsequently evolved our thinking now to -- and we're not reaching over the fences. It's a very measured, sort of calculated approach, where we're doing the kids' animated half hours out of Nelvana, and we're doing factual reality lifestyle programming for our women's networks.
908 So at the moment, we're not getting too aggressive on doing big scripted bets. Those are more on commissions, not on the owned side of the equation.
909 COMMISSIONER SIMPSON: M'hm. What I'm getting from what you said is that you're not necessarily always shopping for a big idea that has a big price tag, but a good idea that generates a good return on investment, both from an audience delivery and a profitability standpoint, and I accept that.
910 But if you -- why is there always a but -- when it comes to Corus' DNA, prior the Shaw acquisition, you seem to have figured that out almost to art form, because a lot of the programming that you were getting into was women-directed, lifestyle-directed, children's programming-directed. You carved out your niches. The product that was being developed for those categories weren't always blockbuster programs. They were informative, instructive, high-quality programs that obviously produced results.
911 But my question is this. In looking for -- and a little of which was drama, so in looking at -- and not wanting to call them "reality television" -- but this type of programming that isn't necessarily blockbuster budget, are you not just -- really just converting international brands to regional variation because it's a smart buy because it's a proven product already?
912 And what is that -- even though it may be produced by a Canadian production company, is it really the kind of Canadian content that goes to building the fabric of this country?
913 MS. WILLIAMS: I think maybe what you're referring to, in some cases, is the work we do with formats, with international formats ---
914 COMMISSIONER SIMPSON: Yes, Ma'am.
915 MS. WILLIAMS: --- that we bring to Canada, so whether it's "Big Brother Canada" or it's "Top Chef Canada", and those are a piece of our offering to the domestic marketplace. And we've actually found them to be fantastically successful with Canadian audiences. There is something inherently interesting to Canadians about a show that they know from another marketplace -- typically the U.S. -- and then to find that their neighbour down the street is actually in that show, has actually proven to be a wonderful, successful model for us.
916 So it's a piece of what we do. We do a handful of those format shows. But many of our lifestyle shows that really drive the success of an HGTV, or a Food, or a W are homegrown ideas, whether it’s the Property Brothers, or whether it’s all the Mike Holmes shows that we’ve done over the years, or the Scott McGillivray shows of which are now, you know, a number of spin offs. Those are Canadian talents that have been discovered, and groomed, and grown here that have built great franchises that then have gone externally.
917 So again, I think what it comes back to is -- particularly in the Corus portfolio that we have today -- it is a wide variety of content. Yes, we have a unique focus on kids, and families, and women; that’s true. We’re clearly not in -- the sports game is a clear, you know, piece that’s not in our portfolio.
918 But within those broad segments of women and families and kids, we touch all types of content. Whether it be true children’s programming, whether it be documentary about reality, lifestyle, high price drama we do it all. And the ability to do that broad range and find the right producer, the right model, the right financing structure, the right timeline, the right platform, the right marketing, the right -- get all those stars to align all the time that’s the business we’re in. And we’re just looking for the freedom to be able to do that the best we can.
919 MR. MURPHY: And to the extent to which you’re also inquiring about more Canadian stories -- and, Lisa, maybe you can after me follow-up with some of our great Remembrance Day programming -- we do look for great stories that have global appeal. Anne of Green Gables is one we just did, a great movie of the week. And (inaudible) the second and the third is fantastic.
920 So there’s still a number of things that we’re doing. It’s not just about sort of using Canadian talent, although that’s good too. It’s also where we can find great content that’s Canadian in terms of its ethos, its storyline; that’s important to us.
921 And maybe, Lisa, you can give us a couple of examples?
922 MS. GODREY: Sure. I mean, I think we’re extremely proud of the content that we’re doing on History channel with our days of remembrance programming. I mean, these are stories that are about Canadians. They’re first-person stories. They’re celebrated in the press as quality Canadian content.
923 And, you know, we showcase this in Ottawa, as you know. We meet at the lieutenant governor’s office to showcase this incredible, incredible wealth of talent and stories. And then we go broad-based on our History channel with shows like Border Security Canada and Yukon Gold and Klondike Trappers.
924 These are stories about Canadians in Canadian landscapes, Canadian environments, Canadian jobs, that are truly powerful and we see ourselves reflected in that. But I think it really does go to the lifestyle content as well where we are talking about Canadian real estate when we’re on an HGTV program, and we’re seeing Canadian stars and we make stars here.
925 I think that Canadians, with having Canadian stars fronting their shows and seeing that exported in the U.S. and hitting a People magazine front cover, is pretty powerful stuff. And we’re quite proud of that.
926 COMMISSIONER SIMPSON: When I think of Corus, I think of a specialty television company that has figured out the power of building brands and how you can develop programming within a brand category that really reinforces that brand. You may have seen something long before we did because I guess I’m asking, you know, are brands the new genres?
927 MR. MURPHY: I think it always starts with a show, quite frankly. But to your question, Commissioner, I think we have worked hard over the many, many years that Corus has been around since 1999 to either build our own made-in-Canada brands; Treehouse, YTV, Teletoon, for example.
928 Or when we talk about owner controlling more content, the control piece means securing high-quality content from typically the U.S. to bring in an HGTV on an exclusive basis with all the requisite rights to follow the consumer.
929 So what we have an opportunity as the new Corus is to basically further define those brands with the shows. And so one of the things we’ve done most recently is we’ve moved all of our property programming which was on W -- excuse me -- is now over on HGTV.
930 So you’ll find Property Brothers, and Love It or List It, and Masters of Flip, and Buying the View and all those shows are now moved over there. And we’re seeing some really nice performance on HG accordingly because it’s more of a destination for that kind of content.
931 So I think we think about the show and the brand almost -- it’s almost sort of you can’t do one without the other, but I think it’s got to start with a hit show.
932 And, Barb, feel free to jump in here too if you’d like.
933 MS. WILLIAMS: No, I agree with all that you’re saying, Doug. And I think you’re right, that brands in some ways do sort of speak to the genre you can find there. Brands are signposts for people. They’re guideposts for people to find shows. They help with discoverability.
934 And that’s why making sure that on HGTV you found all the very best of all the property shows was a good idea. Not having them spread across a number of brands, but trying to make sure people can find all of what they want in place. It really does help with that discoverability point.
935 But I think also what we are recognizing is in the evolution of the marketplace. As consumers make more and more personalized decisions about what they want, when they want, how they want, where they want that we are more and more of a show-based environment. And the brand is still meaningful, but it’s not the total front-end driver the way it maybe was once upon a time.
936 People now select shows and sometimes are not even aware of the brand that they’re on because they’re not attaching that show to a channel because they are finding it on another platform in any way. And so we have to recognize that that’s one of the big changes that’s going on with audience fragmentation is that the power of a single show may be more important than ever, but it doesn’t necessarily flow through and sustain a whole channel for you anymore in the way it might have in those good old days, right?
937 So brands are still very important but unique show-by-show hits are probably on the forefront of success today.
938 COMMISSIONER SIMPSON: Throwing you a bouquet, I have to say that if market forces are a guiding principle for some of the things we do here it’s, you know, an example of how you can dominate a genre through market forces rather than through regulation.
939 But that said, it brings me to my next question which is going back to the thing I mentioned earlier about your DNA being a specialty operator with a conventional -- five, I think -- on your books before the Shaw Media acquisition.
940 Corus was a very easy company for me to grasp, to understand in terms of how you operated and where you were going. And with the Shaw Media acquisition you have, you know, stepped off the cliff into the VI world. And with that you’ve bought yourself a basket of OTAs that form a network, and they have their own DNA, and you’ve bought yourself a passel of specialties that aren’t necessarily in the scope of how you choose to operate specialties, you know.
941 I’m being a little categoric here, sort of general in this observation, but they’re not quite in the same framework of the way you’ve chosen to build specialty services. And I’m curious if you can give me a go-forward view as to how you’re going to sort of rationalize the fleet?
942 Because when you mention things like Border Services and other product that is in that basket, those seem very interchangeable with conventional OTA broadcasting; whereas, a lot of the stuff you were doing in the women’s and children’s and lifestyle field perhaps not so much. Better to covet those for your branded stations.
943 So how’s the DNA mix going to work going forward so that you can, as you say, execute excellence in how you operate the company but do it in a way that’s coherent with the Corus that we came to know?
944 MR. MURPHY: Our supports is kids, women, and families. That’s how we like to think about it. So we’re happy really not being in the sports position. We’ve got a little bit of golf on Global but otherwise, you know, we’ll let the other players be in the sports game. So that’s kind of how we think about it.
945 So then it’s about having discreet offerings. So a great example would be the most recent announcement of our launching of the Cooking channel. So the Cooking channel was going to go -- is a rebrand of W Movies. And that’s a perfect opportunity given the flexibility accorded to Corus from the Commission for us to launch a flanking brand to the Food Network, which is clearly leveraging our scale partnership with scripts, one of our strategic initiatives.
946 And it’s very differentiated, it’s great programming. We know that Canadians love shows about food and cooking. So that’s one example of how we can look at our services and sort of tune them up a little bit to be more specific to where we’re choosing to play.
947 And I think over the coming, you know, few years we’ll be looking at portfolio optimization within the services we currently own and control. Obviously we’re in no hurry to walk away from any revenue right now given the acquisition and integration and the fundamentals of how we structured the financing of same.
948 But I would offer that in the next licence term we’ll likely have fewer channel by the end of the term than we do at the beginning.
949 MS. WILLIAMS: Yeah, I think delightfully I would say for the most part the bringing together of the two specialty portfolios was well-matched.
950 So we, I think, from Shaw Media felt we contributed significantly to that expertise in Women and Lifestyle by adding HDTV, by adding Food, by adding Slice, by adding Lifetime to recognize that women and families don’t only watched unscripted but they also watch scripted shows, so you know, Lifetime being primarily a scripted service, Showcase actually being a scripted service that skews female.
951 So I think for the most part we actually delighted in the affinity of these portfolios.
952 We do step a little bit beyond that in the Shaw Media world, it’s true, when you go to National Geographic or to History, although you’d be surprised at how many times History Network ranks in the top five women’s services because actually History is just a very, very big channel. And a lot of men watch History, it’s true, but so do a lot of women and actually so do a lot of kids.
953 So you may be equally delighted by how much audience crossover there is.
954 Then I think what we’ve also experienced is bringing Global to the mix is just a powerful promotional platform. And we’ve been able to cross-promote and encourage and push a lot of specialty shows through the Global platform that otherwise might not have had that same promotional heft.
955 So I think the portfolio has worked together quite nicely.
956 COMMISSIONER SIMPSON: We’ll get into it in greater depth later, but is this maybe one of the underpinnings for your recommendation that we consider 100 percent flex between conventional and those services?
957 MS. WILLIAMS: Yes.
958 COMMISSIONER SIMPSON: Yeah, okay. See? I read my notes.
959 Now, when you look at, you know, the nasty business of having to merge balance sheets and you know, go through all that stuff, going through all the fun stuff, you may not have been in a hurry to rationalize a fleet, Mr. Murphy, but time was upon us when it came to the renewals. And we were asking you to perhaps rush to us your best guesses as to your financials and particularly your go-forward information with respect to the filings we asked you to do.
960 And we had a lot of to-ing and fro-ing, as you know; I was getting -- knowing when I was going to be doing -- that I was going to be doing this questioning, stuff was coming in significantly after closing dates. And that’s understandable.
961 But just, you know, when you take the general counting principles and put them aside, can you explain to us the challenges that you’ve had with respect to, you know, the filings related to the spending on program categories? Like, you know, what were you really dealing with? Because, you know, you were doing your level best, I concede, to try and get us what we needed to know, but it seemed to be a considerable pain on your side.
962 MR. MURPHY: I’ll speak for a moment and then invite Sylvie or Gary or Doug to chime in here.
963 The truth of it is we’re in the middle of the integration right now and it’s a heck of a lot of work. We have differing systems, different programming systems, different sales advice systems, different traffic systems, different play out systems. I can go on. I won’t; I’ll spare you that.
964 And in addition to which on April 1st we announced a whole new organization right down to the ground. And so we have new bosses, new subordinates, new peers; the whole place is an equal measure of both Shaw Media and Corus. We’ve been pretty, you know, just passionate about picking the best on both teams.
965 So there has been a lot of challenges just in general as we’re putting everybody together and that has made the sourcing of the requested information sort of challenging.
966 MR. SPENCE: Yes, just to follow on what Doug was saying, is that we’ve only recently even integrated our financial systems. So when we were filing our original applications, it was about pulling numbers from two separate systems and two different ways of reporting the CRTC returns as well as our programming expenses. So combining that into a single file for yourselves, it just made it difficult to kind of aggregate across the two companies.
967 COMMISSIONER SIMPSON: Okay. You’re not unfamiliar with having to issue guidances as part of the stock and trade of a public company. But there’s a lot of stakeholders -- some in this room, some listening to the hearing, some are in competition with you, and then there’s us. And with respect to their determinations and their go-forward plans based on the information you’ve filed and how we come to preside over this hearing with a decision, thinking about guidance again, can we trust these figures?
968 MR. MURPHY: Yes.
969 COMMISSIONER SIMPSON: Okay. I was hoping for a longer answer. On -- Oh. This is called the “hanging” question.
970 MR. SPENCE: I know there’s been some back and forth with the Commission on some of the numbers and I think that speaks to also how historically we’ve also reported. So as recently as October we’ve resubmitted some numbers. The numbers we’d filed historically had been in accordance with our historical practice. So you know, in order to effectively resubmit those numbers under this new practice, we’re trying to keep to apples in comparisons between our previous reporting and our projections along both companies.
971 But we were happy to provide you these revised numbers. They didn’t make a material impact in terms of the shape of the business as we looked forward. So I believe you can count on the numbers as they’ve been provided to you.
972 MS. COURTEMANCHE: The other complexity we have to remember is that in addition to combining two companies over the last licence term, the Corus properties have been very dynamic. You know, we stopped; we vacated the pay area; we acquired some services. We went from cash -- let’s remember that going from cash to accrual really complexifies things. And we launched, you know, four Disney channels.
973 So I would tell you that a lot of this static has to do with the fact that we’re always moving forward and we’ve made a lot of changes. We’re always looking for, you know, the next opportunity. And you know, in the old days, you know, everybody pretty much -- once you had a licence you pretty much kept it forever. And you know, it was usually not -- there was some, you know, tuck-in applications, but normally, you know, you continued with the same portfolio.
974 I would tell you that of all the groups that are before you in this hearing, ours has the most static within one-language-based group. So that, I think, contributes a lot to, you know, getting the numbers -- you know, sort of understanding the numbers and complexfying the exercise in getting you the right numbers.
975 But having said that, you know, we understand that the Commission needed, you know, good information. And certainly, you know, that’s exactly what we endeavoured to do, to provide you with the most accurate and precise and truthful information.
976 COMMISSIONER SIMPSON: This is an undertaking which I believe you have now. This is Exhibit 3.
977 MS. ROY: No, they don’t.
978 COMMISSIONER SIMPSON: Okay, you don’t.
979 MS. ROY: I will distribute it now.
980 COMMISSIONER SIMPSON: Ah. Well, then we have a surprise for you.
981 And I would like to enter it into the record as CRTC Exhibit 3. Thank you.
982 COMMISSIONER SIMPSON: What you have in front of you is a seven-part ask on behalf of the Commission that you file an undertaking by December 9th in answer to questions regarding your financial projections on flex, that wonderful word; issues of non-telecast expenditures, which we would like to better understand both in their current form and in historical form; cash versus accrual, which you talked about a minute ago; the French Language SCB with respect to Teletoon; question five, Teletoon revenues by French and English feeds; six, Teletoon English and French services programming and production expenses; and question seven, the revision of figures.
983 I know you just got the document, but is there anything that you have some questions on that we might be able to answer?
984 MS. COURTEMANCHE: I think we need some time ---
985 COMMISSIONER SIMPSON: Okay.
986 MS. COURTEMANCHE: --- to sort of digest it a little bit. There’s quite a bit of ---
987 COMMISSIONER SIMPSON: Perhaps we can revisit this on Thursday?
988 MS. COURTEMANCHE: Sorry?
989 COMMISSIONER SIMPSON: I was going to suggest that I’m sure we’ll take a break before you’re finished your questioning ---
990 MS. COURTEMANCHE: Yeah, we could that.
991 COMMISSIONER SIMPSON: --- and during the break we can have a reflection and we can hear it back after that, right, in terms of scope and timing?
992 MS. COURTEMANCHE: Yeah, I was going to say it’s not because we -- it’s more the time required. I’m mindful of your comments this morning because I know I’m the guilty party so ---
993 COMMISSIONER SIMPSON: I didn’t mention
994 anyone. But it’s true; you may have two accounting systems and several companies being brought together. But the fact is you have one renewal hearing and one regulator.
995 MS. COURTEMANCHE: Oh, absolutely, I totally agree that you need to understand how we came to our numbers ---
996 COMMISSIONER SIMPSON: Right.
997 MS. COURTEMANCHE: --- and you want us to drill down. And I -- we absolutely get that.
998 COMMISSIONER SIMPSON: Yes, please.
999 MS. COURTEMANCHE: That’s not an issue.
1000 COMMISSIONER BLAIS: So why don’t we park timing because I think you’re okay with the concept. Then we can park the timing as you look at this during mid-afternoon break.
1001 MS. COURTEMANCHE: Okay. We will do that. Thank you.
1002 COMMISSIONER SIMPSON: And to qualify, this is because of the intermittent nature of the filings and the like that we think that it’s the best way for you to be able to -- given what we all know today, to be able to just close the book on that particular aspect of the application.
1003 MS. COURTEMANCHE: We understand and thank you.
1004 COMMISSIONER SIMPSON: Okay. If I may, I’d like to ask a few questions -- and again, we’ll drill down later, but you chose to shutter the movie central on Encore services and I can’t find it, Mr. Murphy, but there was a great quote from you that -- I believe it was in one of your guidance documents or something that was in response to an interview so I’ll paraphrase. And you can correct if I’ve got it wrong. But you had I think essentially said that the movie business in that format of pay is just not working for you.
1005 And yet I couldn’t help but notice that, you know, to try and make those services work, you had spent something like 34 million bucks in -- buying 300 titles for that service, which is a lot of money and a lot of titles.
1006 What part of it didn’t work? Or did it all not work?
1007 MR. MURPHY: The part that was difficult for us -- and this was all part of the strategic priorities which we too you through.
1008 COMMISSIONER SIMPSON: Yeah.
1009 MR. MURPHY: And we put these together two years ago.
1010 COMMISSIONER SIMPSON: Yeah.
1011 MR. MURPHY: The part that was the most difficult was we realized that we didn’t have the direct-to-consumer relationship. And so we were kind of a wholesaler in a way.
1012 On our commercial networks, you know, our -- you know, we have the advertising and we have the subscription revenues. But at the end of the day, we are beholden to the BDUs to market the pay business ---
1013 COMMISSIONER SIMPSON: Yeah.
1014 MR. MURPHY: --- and there is very little we could to advance that as a priority in their world because they had other things that were bigger for them to focus on.
1015 And so that was -- the principle reason was -- and it also was kind of a funky situation where we had half of the country and we had always been very close and Astral and Bell in terms of comanaging the business in Canada, if you would.
1016 And then, the quite honest fact was that we knew there’d be a really big inflation on the renewal of that HBO deal and we frankly didn’t want to be there at that point in time. And we had some other plans we were thinking of and so it made a lot of good sense to us to shutter that business.
1017 I’d also say that on account of the flexibility accorded us from the group-based licensing in the last term, we were able to redirect some of the CPE spending from the movie services to our kids’ and women’s services to great performance, great results for us.
1018 COMMISSIONER SIMPSON: M’hm.
1019 MR. MURPHY: And so the service was helpful in that regard. But in terms of a growth business, we just didn’t see it in terms of the current -- as it being part of the constellation of the then Corus.
1020 COMMISSIONER SIMPSON: And I think, again paraphrasing you, you know, there were just too many sources for that kind of content, content that you didn’t have great rights-ownership of.
1021 MR. MURPHY: And that’s another one. In addition to the renewal of the HBO contract, we also had -- we had encountered some bidding wars on some of that Pay Window 1, as they call it in the world ---
1022 COMMISSIONER SIMPSON: Yeah.
1023 MR. MURPHY: --- and it was getting increasingly expensive. So, you know, part of that was a function of the, sort of, streaming rights piece. And again, you know, we have to pick our spots and it felt to us like this was opportune time to look at making a bit of a pivot with a focus on the commercial network.
1024 COMMISSIONER SIMPSON: You mentioned in you -- just now that one of the handcuffs that you were operating under was it was that the BDUs weren’t really doing a super great job at marketing VOD, and I probably wouldn’t disagree with you.
1025 But it begs asking the question, then, that now that you’re a VI without a BDU, where does that put you with respect to the go-forward on a general basis? And I’m thinking about promotion of your product, discoverability, that, you know, one hand washing the other with respect to an ongoing relationship with a BDU you that don’t have any control of let alone any of the others; I’m thinking Shaw here, of course.
1026 MR. MURPHY: One of the benefits of the increase scope and scale of a new Corus is that we matter a lot more to BDUs now in Canada because of the ---
1027 COMMISSIONER SIMPSON: Yeah.
1028 MR. MURPHY: --- bouquet of services that we offer. So I do think that when we come to sit down with BDUs and distributors on various carriage agreements or otherwise, as ever, our approach to business is to grow each of our respective business. And as I alluded in my opening remarks, increasingly we want to be flexible with our rights offerings wherever the BDUs are going.
1029 The roadmap in Canada for the BDUs is very exciting right now; everybody’s launching some pretty neat stuff so we’re making sure we’re right there. So I think in many ways our position was the distributor community has been enhanced because of the two companies coming together.
1030 COMMISSIONER SIMPSON: But on the question of discoverability and promotion to your products, can you just open that up a bit more for me because I don’t think I got what I wanted.
1031 MR. MURPHY: We -- setting aside the BDU question because I may have to ask you to re-state the question -- I’m not sure I understand it entirely -- but we are doing a lot of cross-promotion within the new Corus.
1032 So we launched our new fall schedule on Global; we promoted some of those shows across all the networks; every single commercial break, we ran a 30-second tune-in spot to go that night to Global at nine o’clock and watch a certain show; that certain show is number one on that week. We used radio; we used digital; we used, you know, all the scale of our business, the new business, to enhance the discoverability. So we’ve been doing that quite successfully.
1033 And I’m happy to give you a couple more examples; I’m just not clear on how the BDU question relates to that.
1034 COMMISSIONER SIMPSON: It’s presuppositional on my part but it’s been my impression that when a network -- when a service operator has a show that it’s proud of, particularly if it’s a Canadian that it’s built and it’s getting traction, that it may have been easier to coordinate the resources of the BDU to be able to really get -- you know, to light the fuse on that show outside of what you do through third-party or your own networks programming.
1035 I mean, you know, I’m just trying to understand whether you have the same kind of dynamic that a Bell or a Rogers does with respect to being able to put all hands on deck when it comes to promotion and discoverability.
1036 MR. MURPHY: I think the answer would be no.
1037 COMMISSIONER SIMPSON: Okay. Okay, that’s what I wanted to know.
1038 Now, also, because you’re not a BDU, there’s a lot of speculation, particularly with the potential unbundling of the setup boxes in the States, that this going to pull the cork on letting the genie out of the bottle on apps.
1039 And I guess we’re getting back into distribution of services other than through conventional BDU means. But is this, in your framework of thinking, that apps are going to become a way to get back into streaming and on-demand and subs in a different way other than through conventional distribution?
1040 MR. MURPHY: Are first stop on this journey is to understand what our BDUs are doing.
1041 COMMISSIONER SIMPSON: Yeah.
1042 MR. MURPHY: We’ve, in the last couple of months, had complete reveals with all the big players as to what their roadmaps are and where they want to go and it’s -- as I mentioned a moment ago, it’s very exciting. Quite frankly, I think the viewer -- the Canadian consumer is going to be very well served by the next generation of build-out we’re seeing with the various telcos and cable companies.
1043 COMMISSIONER SIMPSON: M’hm.
1044 MR. MURPHY: So we’re going to want to serve and work to serve, as much as we can, and the new capabilities and competencies of those platforms, whatever they may be. So that’s kind of like the first stop.
1045 From there, of course it’s all about how we assess the requisite value of our service vis-à-vis what we’re receiving in compensation from those same distributors as to what we do with those channels. Our bias is to work within the system and to offer our big channels on TV, or an app, a companion app, to a paying subscriber on authenticated basis. So we’ve increased that value proposition and we offer that consumer wherever she goes, and we have the ability to kind of be there all the time.
1046 Now, we have launched a couple of unauthenticated apps this year quietly. We’ve got a Treehouse app, which is a collection of about 1,500 episodes of Treehouse animated content. It’s different content that’s on the linear service. It’s got, you know, a few thousand subscribers. So it’s not shooting the lights out, but we’re okay with that; we’re just learning.
1047 And we have launched a History vault app, which is deep library from the History Channel. Our approach to the streaming world is measured. Again, we’ve been watching with interest what’s been going on there in the marketplace both domestically and globally. I would echo some of the comments made this morning that we think partnerships are interesting. There’s a lot of interesting players kind of coming to the market or in the market.
1048 So these initiatives on our behalf are really to learn about what it means to have that direct consumer relationship and to try to get another data point on evaluation conversation perhaps. But at this point in time, we’re doing a lot of strategy work but we’re not doing a lot of investment on streaming at the moment.
1049 We’re focusing really on TV everywhere, value propositions with our existing services. We’re investing in what’s call the “audience intelligence platform”, which is a database we’ve built with all of our viewers so we can have a two-way conversation with them via email -- they’ve opted in -- so we can market our shows.
1050 And we’re making investments in trying to have a better measurement of our audiences for the purposes of selling and competing against the digital advertising community.
1051 COMMISSIONER SIMPSON: Thank you. With respect to Corus DNA again, you’ve been a very experienced radio operator. And I’m wondering, as you now look at this new basket of services that you can control, as programmers -- not just program producers and looking at content ownership objectives in mind -- but what have you learned from radio that you can apply to these new television assets that you’ve got under your belt?
1052 MR. MURPHY: I’ll make a couple of comments then I’ll invite Troy to chime in.
1053 First of all, we love our radio business. It’s a smaller part of the new Corus than it was before, but it’s a very part of our business. It’s an important part of our commitment to local broadcasting. And we are very much of the view that I know the Commission is. That we have a public service to provide the community with radio and local television where we have them.
1054 We’re actually especially excited about the five markets where we have both Corus Radio and Global Television. And part of the insight in pointing Mr. Reeb -- to his role -- was we wanted to marry the radio clusters with the Global TV operations clusters, and in particular the news gathering service to see what could come of it.
1055 And we think there’s some really exciting and promising developments there, and I’ll let Troy take it from here.
1056 MR. REEB: Thanks. Thanks, Doug.
1057 I think there’s good learning going on in both directions, Commissioner. We certainly have learned from our radio stations that the one-size-fits-all approach to local communities doesn’t work. We’ve seen that happen in the United States, where a lot of programming on local radio has gone network; it has not preserved audiences. In fact, it has just rapidified the fragmentation. And we have no intention of repeating that.
1058 But at the same time, we’re learning the other way that in the back end there are lots of things that can be consolidated, efficiencies that can be found. And we certainly want to see what we can do in the new space to really boost what has been a decline over the last couple of decades in the number of news gatherers who have been attached to radio news. I was someone who started out in radio news in a day that every local radio newsroom used to have a handful of reporters at least, and some had many, many more than that. And that is a very rare thing these days, even in large markets.
1059 So one of the things that we’ve been working in-depth on is trying to provide the reporting power that Global News brings to support radio and breathe life back into AM radio. And we’re having some early success in that area.
1060 COMMISSIONER SIMPSON: Well, I know that news and talk are both expensive compared to -- I want to say discs, vinyls, MP3s -- but you get my point. But radio has always been really good at local reflection, not just because it is local -- you know, network radio doesn’t seem to work in Canada like it did in the States.
1061 But when I think of radio, and particularly the kind of radio that you guys have been doing, it very nicely compartmentalizes in my mind as the difference between news, the news you need, the news you use, and talk, which is the greatest example of local reflection. You know, when you turn on the talk show at nine o’clock in the morning and you start hearing about Mayor Tory and his suggestion for imposing tolls in Toronto, all of a sudden Toronto can weigh in on how they feel about it. And it’s just a shining example of local reflection.
1062 And I’m curious as to why that kind of division of news and content isn’t more popular in some segments of OTA television given that it obviously works in radio?
1063 MR. REEB: Part of it is the immediacy and the somewhat smaller more neighbourhood reach of the radio platform versus television, which generally targets a larger audience by the necessity to aggregate that for profitability. And part of it is just what plays to the medium. Call-in shows don’t work very well on television because having the host stare at the screen for a while isn’t particularly effective. We’ve seen some other players play in that territory.
1064 But you make a very good point about striking that right balance between what is local news and what is community reflection. I think more and more what we’ve been doing with our morning shows -- for instance, across the Global stations and brand new in Kingston and Peterborough -- is playing in that territory. Where you’re delineating between that news, which is very much guided by the code of conduct that we have for our journalistic principles and practices as well as RTD and ACODE, and then the broader conversation of the community which is open for people to give their feedback. And it’s partly the amount of real estate that’s available.
1065 COMMISSIONER SIMPSON: We’re seeing newsrooms -- I’m thinking CBC here -- who were one of the first to jump into converged newsrooms. And argumentatively to some, they could be considered a publisher today as opposed to a broadcaster. I’m thinking of how some private broadcasters have been putting radio on television, or in the instance of Corus in Vancouver putting television on radio for your six o’clock news package, which is, I think, a bold experiment.
1066 But is the format of what you learned in spite of your testimony here about what works on TV or what works in radio doesn’t work on TV -- is there an avenue for more coordination of the radio and television resources either in the back or actually making it on to the air with a local OTA?
1067 And you will, you know, figure out why I’m asking this question in a minute.
1068 MR. REEB: Well, we’ve embarked on a massive training program within our newsrooms across the country, whether they be radio or television, to bring our journalists who have come out of a single platform environment into a multi-platform world.
1069 That doesn’t mean that we just want to repurpose, you know, the exact same programming on each platform. We know from audience behaviour that news which is consumed in one way on television doesn’t work online. Online audiences are much more inclined to eschew the traditional two-minute package or the anchor environment, and prefer to read their news interspersed with social media bytes as well as, you know, shorter clips of newsmakers.
1070 So you do need to tailor the content differently for different formats, but that doesn’t mean that the back end gathering apparatus has to be triple the price. You can do it in an efficient way.
1071 COMMISSIONER SIMPSON: There is efficiency for sure.
1072 MR. MURPHY: I may just add a couple of things, if I could, Commissioner?
1073 COMMISSIONER SIMPSON: Yeah.
1074 MR. MURPHY: We moved the morning show, the Global Morning Show down to Corus key I think it was just last week, wasn’t it, two weeks ago? And all the radio talent wants to get on television now. So we had Josie Dye who wanted to go the Edge. She was down and she was filling in for Carolyn Mackenzie, who was on a holiday, and she's at -- with Jeff McArthur, and so there's a line up for the radio folks that want to get into TV and vice versa. So we're having fun on not just the news piece and the back-end deficiencies, but we're also looking at widening the opportunity for our talent to participate in all these different medias.
1075 And the other thing I would just say, not really related to the content, but I think it's a note I wanted to share with everybody is, we've been doing, I think, exceptional work on looking to sell local radio and local news together. So in those five markets, again, Vancouver, Winnipeg, Calgary, Edmonton, and Toronto, we are basically -- we took the two different sales teams, we picked the best of the both to put them together, and now we're teaching heretofore radio folks how to sell a TV spot and vice versa. And that's got a lot of dynamism, as you can imagine, with the troop. So there's a lot of fun stuff happening in the local world right now at Corus.
1076 COMMISSIONER SIMPSON: Well, part one of why I'm asking this question is that I don’t see a huge appetite for streaming in your basket right now, because it's a -- you know, it's a black hole into which everyone seems to be peering and nobody can tell whether there's a train coming or what's going to happen. But I see broadcasters like BBC experimenting, I think successfully, and argumentatively, they -- they're well-subsidized, but they're using product like Periscope to counter the problem you cited, which is that a call-in show doesn’t work very well on TV, but it does when a streaming environment comes into play here.
1077 And I'm trying to get a sense for whether these are nice to do's but not in your realm of thinking right now, or whether they're a need to do and you just haven't rolled-out for our understanding that that need's present.
1078 MR. REEB: I will say on that that the -- that we are actually driving a lot of content through those types of things, and you're correct. The kind of sort of live event coverage, it doesn’t necessarily work on television to a broad audience, generates significant audience through things like Facebook Live or through Periscope, which we do use to target those kinds of audiences. The monetization on those is almost nil, but we've taken the position that we want to follow audiences where they go, so we're doing everything we can and hoping that some monetization will follow.
1079 COMMISSIONER SIMPSON: Will -- second part of the question is, you know, WiFi is becoming again, another interesting avenue for broadcasters to pursue because it's not necessarily the streaming environment we all think of right off the bat, but you know, with Shaw's efforts to make WiFi more ubiquitous and now seeing Mr. Musk from Tesla fame now talking about something like 4,000 geosynchronous satellites in orbit around the world to start bringing information and possibly programming in an entirely different way. I'm thinking millennials, who are apt to go to their devices before they go to a screen on a wall.
1080 Is this, again, something that you think is very much an essential part of the mix, going forward, or are you thinking more conventionally at this point, because you’ve already got your plate full trying to, you know, merge two companies and you'll get back to it later?
1081 MS. WILLIAMS: You know, I think we have an innovation strategy that speaks to what you're talking about, and we fondly refer to it as "test and learn".
1082 COMMISSIONER SIMPSON: Yeah.
1083 MS. WILLIAMS: And it's an acknowledgement that there are a million new things out there that we have to experiment with, we have to try a little bit of, we have to dip our toe into, we have to see where audiences really gravitate. We have to be ready to try them, test them a little bit, learn from them, do more of them if they work, bail fast if they don’t. Like, there is not a world any more where you can set a five-year strategy and say, "I know in five years we're going to be here, so we'll march along a path and execute on that." We're lucky if we know where we think this world is in six months.
1084 So it's very much about trying a little bit of this and a little bit of that and then building on what works and abandoning what doesn’t. So you know, Facebook Live six months ago didn’t exist. We did a whole handful of Facebook Lives in the last couple of months, from "ET Canada" to bands down at Chorus Key to news segments. Like, so we're experimenting like crazy with it, and maybe it will turn into something big, or maybe by Christmas we won't be doing it any more. I don't know.
1085 But these are all places that we absolutely have to be and they take investment. They take actual cash investment, they take people, they take resources. It's taking a piece of our base of cost to experiment in all these places. It's important to do, but there's no money in it yet. Like, that's -- it's sort of the key statement in all this, so we have to keep experimenting. We think we're doing it the right way so we don’t get in too deep on anything and find ourselves at the bottom of that hole with no way to get out.
1086 COMMISSIONER SIMPSON: You sound like you're arguing for a shorter licence term.
1087 MS. WILLIAMS: Well, or at least a recognition that our cost base is shifting.
1088 COMMISIONER SIMPSON: Yeah.
1089 MS. WILLIAMS: And so, you know, it used to be pretty simple. You spent on Canadian programming ---
1090 COMMISSIONER SIMPSON: Yeah.
1091 MS. WILLIAMS: --- you spent on foreign programming, you got sub revenue, and you got ad revenue. There were really only four pieces to the business before. There's a lot more pieces to it all now, and they all have to take their piece of the pie. But the percentages that go to each are shifting as the cost base shifts, so ---
1092 COMMISSIONER SIMPSON: Okay.
1093 MS. WILLIAMS: And yeah, in some ways, what's a five-year licence term? But I appreciate that we're going to give it our best shot to do five years. I get that.
1094 MR. MURPHY: Just to come back to NW for a second, so and Troy, just one minute, this is -- it's interesting, the millennials, younger people, and news, and social media. That's -- you know, it's -- we just saw what happened recently, you know, south of the border and what people think is news, this shows up on their feeds, which is not accredited news. And one of the things that we've done extremely well in CKNW is work to leverage the professional news gathering association we have there to age down that audience.
1095 So we've got, you know, I think NW is now the number 6 ranker -- it's an AM in Vancouver. That's something to sing and shout about, and a lot of that is because of what we've done to age down the IR talent, make the news -- the accredited news content accessible to younger people, where they're consuming it, and we're starting to see some results, which is on a kind of a challenged signal, coincidentally.
1096 So did I miss anything there? Is it good? Okay.
1097 COMMISSIONER SIMPSON: Yeah. Now the third part of why -- oh, Mr. Maavara, did you want to say something? Okay.
1098 On the third part of why I asked that question, our June 15th decision was based on a notion that news gathering and distribution needed some help, and in the way we formulated that decision, it opened the door to be able to flex some money between a BDU and a broadcaster. And given the structure of the Corus/Shaw acquisition, I was given the impression at the time that it didn’t work out so well for you.
1099 Now, has that changed? Have you guys got your ducks in a row with respect to how this is going to work with Shaw?
1100 MR. MURPHY: We are having discussions as we speak today with Shaw regarding the DTH monies and the community cable monies, so ---
1101 COMMISSIONER SIMPSON: Because I'm going to ask more questions on this a little later, but -- a little foreshadowing here -- but you know, I'm really interested in how that money gets apportioned, because local reflection isn't necessarily local news. And you know that, as a radio broadcaster, because you know, that balance has been nicely struck over the years in the way you operate your stations. And I'm going to want to try and do a little more investigating on that later.
1102 The last question I've got, and then maybe we can take a break, has to do with your programming council. I found the council innovative, intriguing, and as I understood it from the licensing application, all 1,544 pages -- which I did read -- it was a Corus creation, and it was mandated, as you very proudly stated, to really make sure that you fulfilled your CPNI as well as to be a great clearing house for adjudicating the merits of good programming decisions.
1103 Now, is that widening out to take all the products of the Shaw acquisition into its scope?
1104 MR. MURPHY: So the programming council was put together to make sure that we invested our CPE at the highest and best use across the Corus system.
1105 COMMISSIONER SIMPSON: Right.
1106 MR. MURPHY: And we've taken the idea, and it was a very effective idea for us. It was, you know, it was -- resources available. Every programmer always wanted to kind of spend more, so they got in a room with a finance leader or two and kind of duked it out and came to the right decision. So we're going to -- we're continuing that discipline inside the company with the new merged entity to make sure we continue to make smart investment decisions.
1107 COMMISSIONER SIMPSON: Is it going to wrap its head around news and local information, because that's CPE.
1108 MR. MURPHY: Yeah, it will. Yeah.
1109 COMMISSIONER SIMPSON: Okay. I think that we should probably take a health break, and we'll pick this up in 15 minutes or so.
1110 THE CHAIRPERSON: Yeah, let's take a 15-minute break and we'll be back at 2:45. Thank you.
1111 COMMISSIONER SIMPSON: Okay, thanks.
--- Upon recessing at 14:45 p.m.
--- Upon resuming at 2:45 p.m.
1112 THE CHAIRPERSON: A l’ordre s’il vous plaît. Order, please.
1113 Alors, M. le Conseiller Simpson, s’il vous plaît.
1114 COMMISSIONER SIMPSON: Merci beaucoup.
1115 Okay. We’re going to go from first to fourth gear. I’ve set the framework for a lot of the questions by the preamble that went on earlier. And thank you for indulging my questions. I know you have to but it’s always polite to say “thank you”.
1116 I would like to get into the Pro’s Group composition, please. And the first question out of the gate has to be with our friend at BC1.
1117 Now, this service -- you’ve come to the well twice now for its inclusion in various processes and I would like to ask you one more time why now? Why does it work now and it didn’t before?
1118 MR. REEB: Well, I think we’ve heard loud and clear from the Commission the importance that’s placed on local and regional news and reflection. It is one of only a very small number of local all-news channels in the country and it stands out as one that’s not included in group-based licencing. The folks will be appearing tomorrow I know do have one that’s included as part of their group.
1119 The channel does face financial hardship; there is no doubt about it. Part of that has to do with lack of carriage on one of the providers in the market and a part of it has to do with the fact that it is a channel with a relatively small sub fee in a relatively small market.
1120 But we’re committed to supporting the service that it provides. It’s been an important lifeline. When the Port of Vancouver caught fire and toxic fumes spread across the lower eastside, the downtown eastside, the channel broadcast live on location for hours on end; it had a tremendous spike in viewership, and it provided an important emergency alerting function.
1121 When the royals came to visit recently it had its highest-ever viewership just because we were able to provide live event coverage, which we couldn’t do in a traditional, conventional environment.
1122 And it covers community events large and small across the Province of British Columbia. We think from the kind of programming it provides and the situation it finds itself in, that its inclusion in the Group at this time would be more than appropriate.
1123 MS. COURTEMANCHE: It’s the citizen type of programming that, you know, we think serves the public interest. The subscriber base is just shy of a million. It’s about 870,000. So you know, given the region it serves -- you know, the regional news services serves, you know, the Golden Horseshow so obviously the population basis is much greater.
1124 But you know, having said that, I think that yeah, it’s really a public-interest service. But to make it work it needs to be part of the Group.
1125 COMMISSIONER SIMPSON: Is what it is today what was its inspiration at creation or has it morphed?
1126 MR. REEB: I think all channels evolve over time. And in fact, to take us back to our conversation from before the break, it actually had more of the types of programming you were talking about prior to at least a couple of years ago, at inception. That didn’t quite as well as we had wanted. And we have transitioned the channel to be very much a breaking news service and live-event channel that also then provides touch points to communities across B.C. throughout the rest of the schedules when there aren’t those two things happening.
1127 COMMISSIONER SIMPSON: Okay. It looks to me, if we were to accept your premise that BC1 is essentially a little CPE machine in that it has potential to generate a lot of contribution to the system -- but my question I guess is how would you avail yourself of CPE flex to the extent that it would fund programming to broadcast on that service?
1128 MR. REEB: Sorry, Mr. Commissioner, can you help me with the question a little bit more?
1129 COMMISSIONER SIMPSON: It could become quite a prolific contributor to CPE but how much CPE would it get to produce more the programming you just spoke of?
1130 MR. REEB: That’s a great question. The reality is that the channel is in a loss position right now, so clearly it would be taking more of CPE if it was included in the Group. We certainly don’t intend to operate the channel at a loss forever; we’ve made substantial programming improvements as well as operational improvements over the last year, even, and see some opportunities for synergies with CKNW to improve that channel further. But obviously its inclusion in the Group gives us not only flexibility but the ability to increase investment on the channel.
1131 MR. SPENCE: Just to follow up on that point. Yes, news coverage is expensive; we know that from our local stations. And so the BC1 model does have a higher CPE expenditure than its requirement. So this is one of the channels where we choose to invest our CPE dollars.
1132 COMMISSIONER SIMPSON: If you were to throw more CPE at BC1 what would be the effect on the other services?
1133 Where I’m coming from is I’m trying to understand whether BC1 is a net contributor or a net beneficiary when it comes to the output of news gathering and distribution. Because it seems to me, sitting in the market, that, notwithstanding the exceptions of major events the two of which you spoke of, I see it essentially recycling a lot of content, whether it’s your Global National or your major news package. It seems to me to be a way to simulcast your news and solicit other advertising. That’s an impression I want you to change that I have right now.
1134 MR. REEB: Well, as you maybe know CPMs on advertising on speciality are nowhere near what they are in conventional. So there’s no significant advantage in simulcast.
1135 The reality is we see BC1 as an opportunity to do the kinds of things that we talked about in our opening statement, and that is to ensure that we can serve viewers with news at the time and place of their choosing and not try to fit them into the old model that you have to make an appointment at six o’clock for the news hours.
1136 And we’ve seen significant uptake particularly amongst younger viewers for BC1. While it does simulcast largely the programming which is produced for conventional, it then produces original programming throughout the rest of the schedule, some of which is a repurposing of other news content, some of which is live, some of which is local reflection, some of which is community content from across the province.
1137 COMMISSIONER SIMPSON: But getting into this whole distribution question, does it produce content that is used elsewhere other than on BC1?
1138 MR. REEB: Yes, it produces content that is then used online and on the radio to some extent.
1139 COMMISSIONER SIMPSON: Okay. And its consumption of content is principally from Global?
1140 MR. REEB: Correct.
1141 COMMISSIONER SIMPSON: So if you were to start topping up just losing operation with CPE expenditures, it’s got to have an impact on where that money would otherwise go on more conventional services?
1142 MS. WILLIAMS: I think part of the challenge here, though, is what we appreciate so much about the flexibility is that it gives you the opportunity to address a particular challenge or need of a station at a particular time and it doesn’t mean you permanently shift the money to that place. And so you’re right; we might divert some of that CPE to BC1 for a year here and see if we can kick start it, push again at distribution, do a little more original programming than we can afford to do right when it’s outside the Group, and see if we can get that thing going and then rebalance it all again after the fact.
1143 But that’s what the great joy is to this flex, is that you don’t set your determination of what channel is going to get what at the beginning of the licence term and then live with that for five years. We’re shifting those dollars, frankly, quarterly practically as we see where the audience is, what they want, what ideas we have, what opportunities we have, what shows are coming. And it’s that ability to have that huge oversight and make the most of every dollar spent. And we really believe that BC1 is doing something unique.
1144 To Troy’s point, we have a huge news-gathering machine that we’re trying to make sure we give every Canadian an opportunity to find the news they want at some time on some platform, in some way that works for them, of which BC1 is a piece of that puzzle.
1146 CHAIRPERSON SIMPSON: Okay, but let me -- but from the standpoint of assets within the newsroom, what is the distribution of those assets? Are they all conjoined to the extent that you’re able to make BC1 go on the air with content because of assets that are mutually shared between Global and BC1, or does BC1 have its own assets?
1147 MR. REEB: BC1 operates entirely in a conjoined way -- to use your word -- with the Global B.C. newsroom. Obviously there are certain talent who are dedicated to BC 1 but -- you will know some of them -- you do see popping on Global B.C. at times.
1148 The newsrooms, along with our digital newsroom, operates as a single entity. That’s how we maximize efficiency.
1149 CHAIRPERSON SIMPSON: But if it doesn’t have any human assets and the technical assets are functionally Global’s and it doesn’t produce any content, then if it were to not exist other than another vehicle to sell advertising what would be the downside of it if we say no?
1150 MR. REEB: Well, first off, I don’t think that we operate the channel on behalf of assets or content or the people that work in it. We operate it on behalf of the viewers who have shown a real appetite for it. And the downside of saying no is that the financial viability of the channel becomes jeopardized.
1151 It does have dedicated people and assets. Certainly if the channel went away tomorrow, the size of our operation in Vancouver would shrink markedly.
1152 CHAIRPERSON SIMPSON: Sure.
1153 MR. REEB: And there would be a loss to the broader community of the ability to provide a lot of live coverage, a lot of breaking news coverage, and a lot emergency coverage.
1154 MR. MAAVARA: And if I could add to that, build on what Ms. Williams said about the machine. There’s a public service aspect of this. Obviously we want to have a vital news operation on a local basis but -- and the suggestion that somehow this is a CPE drain is a little bit like pulling into the local fire station and saying, “You know what guys, why don’t you just come in when there’s a fire?” And it’s all good. “We’ll pay you when you’re here for the fire and otherwise, you know, we won’t do that.”
1155 We need to have the machine in place in order to have the vital news operation that we do have, and this is just one aspect of that. And maybe it’s not always important, but sometimes there’s a fire and you have to have the place to go to for it.
1156 CHAIRPERSON SIMPSON: Well, if it’s not providing content but repackaging or rebroadcasting content, I guess I have to keep coming back to the notion that its greatest value to me seems to be its ability to contribute to the CPE.
1157 MS. WILLIAMS: I think it’s important -- sorry -- we need to emphasize how much original content is coming from BC1 in between when the Vancouver station -- when CHAN ends its morning show at 9:00 and doesn’t come on again until a noon newscast and the fire is happening at the docks in Vancouver. If BC1 didn’t exist, Vancouver viewers would have no opportunity to get that live event coverage other than wait until noon and see a clip of what happened at 10:00.
1158 But with BC1, there’s a fire -- not to play off of Gary’s analogy too closely, but it does provide absolute unique content that otherwise would not be seen, would not be enjoyed, would not be discovered by the folks in BC. So it also then at 6:00 o’clock will simulcast that newscasts -- I believe that the regional service in Ontario does the same -- but it doesn’t take away from the value of the unique content in between those simulcasts that otherwise wouldn’t happen.
1159 MR. DEEB: And to be clear, BC1 provides more hours of original news content than any of our conventional stations.
1160 CHAIRPERSON SIMPSON: Okay, all right. Two-part question. What’s the go-forward then? If you’re able to get a yes from us, what’s going to substantially be the picture for BC1 over this next five-year period that isn’t happening today; more of the same? More better, better, what?
1161 MR. DEEB: We’re constantly tweaking and trying to improve the programming recipe on BC1, not only to boost the ratings and the revenue but to improve its effort to reach not just -- reach beyond the channel and stand out more as an independent brand.
1162 I think my colleagues at Bell would say that CP24, which is a very successful local regional channel in Southern Ontario, struggled pretty mightily -- albeit under previous ownership -- for almost a decade before it really took off. We haven’t had a decade with BC1; we don’t think it’s going to take a decade. But we do need to continue working on the right recipe there.
1163 And as Ms. Williams said, inclusion in the Group allows us to do that and to invest in what we think is one of the most important categories of programming we can provide.
1164 CHAIRPERSON SIMPSON: Okay, thanks. No harm, no foul; just trying to understand.
1165 Now, with respect to the addition of new services -- and I guess I’m drifting into CPE here -- right now your proposal is to -- let me back up.
1166 We’ve been hearing about legacy broadcasting still being extremely viable. But I’d like in terms of reference, in terms of what legacy is. Is legacy conventional broadcasting à la OTA and specialty is speciality, not conventional? Or has specialty been around long enough now that it’s part of legacy broadcasting and everything else is new?
1167 MS. WILLIAMS: I think the way we speak about it we consider legacy to be linear channels, be they conventional or specialty.
1168 CHAIRPERSON SIMPSON: Okay.
1169 MS. WILLIAMS: And new to be on demand, streaming, everything other than those linear channels.
1170 CHAIRPERSON SIMPSON: Okay. So when you look at revenues, we know that specialty has been in the performance category doing substantially better than conventional OTA as a general across-the-board statement with respect to services. When you look at the mix, it seems that when you have a broad portfolio such as you do that what you lose in the swings you make up in the merry-go-round more or less in terms of your overall revenue and your PBIT performance.
1171 So right off the bat, if your position is that revenues are under threat these days, doesn’t that automatically by calculus contribute less into CPE and PNI on the basis of the existing percentages that we like to see? In other words, we’re not holding our own. Revenues are declining, so therefore contributions to the system are declining.
1172 You seem to want to double-down on this and say, “You know, gosh, we’re uncertain about the future. There’s so much uncertainty.” And I’d like you to answer more about that in a minute, but is it that overwhelming uncertainty that’s causing you to want to double indemnify yourself by reducing your PNI and CPE just to be safe?
1173 MS. WILLIAMS: Yeah. No, it’s two things. Because you’re exactly right, we are essentially doubling down. Because you’re right, as a percentage-based system, CPE floats -- if you will -- with the business. So in theory, the business rises so does CPE, the business falls so does CPE; so it floats.
1174 And I think in the legacy world that actually was pretty good because, as I think I mentioned earlier, the legacy world was pretty straightforward. There were only a few pieces to that puzzle. You bought Canadian shows or non-Canadian shows for your linear service, and you got advertising revenues and you got sub-fees on the revenue side. And there were only those four pieces to the puzzle, and so the CPE floating within that environment actually was pretty successful for a long time.
1175 What’s happened now is we’ve inserted a fifth piece into that puzzle. So that fifth piece is everything we’ve been talking about here, about all the investments in this test-and-learn environment we have to make to play in the digital world, to play with webisodes, to play with short-form content, to try some streaming services -- be that the Treehouse one or the History vault one that Doug suggested. To experiment with AD-Tech so that we can think about even with the linear audiences we have how do we learn more about them, how do we learn to target them, what software are we going to need, who are we going to partner with?
1176 There’s a whole fifth piece in our business now that falls on the cost side -- because it’s all investment right now in that test-and-learn space -- that doesn’t have a revenue equivalent. That means over on that cost side, CPE now has to share in the cost side not only with non-Canadian content for linear but also with this whole other world. And so that’s why, as a percentage of that whole cost side, the CPE needs to come down a little bit from where it was.
1177 COMMISSIONER SIMPSON: But you’re closing services that were contributing to CPE like the movie -- well, the VOD. I mean, that was 37 million that Movie Central and Encore was contributing. And that disappears; that’s gone.
1178 So that, in and of itself, it doesn’t affect the percentages against the quantum of the revenue, but in pure dollars that’s money that’s not there now.
1179 MS. WILLIAMS: And it fell in those traditional piece of cost and revenue. And so things floated pretty nicely in that traditional setup. It’s this whole new set of costs that we have that has no revenue attached that’s throwing off those percentages. And it’s really why we believe that the appropriate amount of CPE is a little bit less so that we can continue to contribute to the system in a whole bunch of new ways. Because every time we contribute with digital content, with short-form content, with webisodes for our dramas, with any of those other content pieces, they’re still contributing to the Canadian system; they’re not contributing to CPE; and they aren’t coming with much revenue at the moment.
1180 But we want to be able to continue to do them. So we need to kind of squeeze some of the other areas of cost to find room for this new investment set.
1181 COMMISSIONER SIMPSON: Well, I hear you saying “need” and I heard you saying very convincingly that you’re committed to the Canadian broadcasting system; I get that. I’d never take that away from you.
1182 But what I’m a little perplexed is that there’s a difference between need and ability. And I guess I have to move into -- if the present 30 percent was imposed on you, what would that do in terms of how you would shift your CPE? Going back to brands versus -- you know, that whole analogy of genres -- would you start very decidedly shifting your money into where you know you’re going to get the best bang for you buck? How would that work given that you put all these new assets that you’ve got to -- you know, you’ve got many more mouths to feed and it’s the old favourite something. How would that work if you had that imposed on you?
1183 MS. WILLIAMS: I think the first thing I would say is that before we even got to that decision we would have another whole set of decisions to make, if we’re up at 28 or 29 or 30 percent, because that decision you’re asking about is all about linear television. It’s about how we’re going to shift the spending around on the linear services that we have.
1184 But if the demand to spend on CPE were to climb higher than what we’re suggesting, the first set of decisions we would have to make is can we afford to invest anymore in the future? Can we afford to innovate? Are we going to have to stop all of that innovation in an effort somehow to try and just manage what is now a very, very constricted financial environment for just the traditional legacy business?
1185 And I think we believe, and we believe you believe, that we have to stop depending on the legacy business for our future, that we want to do the very best we can with it for as long as possible. Believe me; we’re going to wring every dollar out of it that we can find, every viewer, every advertiser. It will mean the best of content; it means the most sophisticated of advertising. Because we aren’t running away from that business. But we’ve got to be in the new business and we need some money to play there.
1186 COMMISSIONER SIMPSON: Did you just misspeak or did you really -- you know, going back to the definition of “legacy” you just said that, you know, you can’t rely on legacy broadcasting anymore.
1187 MS. WILLIAMS: Not forever.
1188 COMMISSIONER SIMPSON: You’re talking the whole basket of television? Because I asked you very specifically whether specialty and conventional constituted legacy. So ---
1189 MS. WILLIAMS: They are legacy.
1190 COMMISSIONER SIMPSON: So overall you’re saying that you’ve got to go to other income sources other than broadcasting?
1191 MS. WILLIAMS: Absolutely. I mean, one of Doug’s key three strategies was to find adjacent markets and adjacent businesses. Absolutely.
1192 COMMISSIONER SIMPSON: And that gets back to levering brands, whether it’s merchandising, selling off-shore ---
1193 MS. WILLIAMS: All of that stuff, absolutely.
1194 MR. MURPHY: Yeah. I mean ---
1195 COMMISSIONER SIMPSON: I’m starting to get this now. I’m a little slow. I’m from the west.
1196 MR. MURPHY: Sorry, just a couple comments and we’ll do this together if you want, Barb.
1197 So when Barb’s talking about you can’t rely on legacy, just to reiterate what she was saying before, is that we can’t do like we always used to do. And everybody’s got to do that, including the producers. And in fact, everybody’s got to change their game. We just went through a huge reorganization of our business and we took out a whole bunch of costs and that was a lot of people.
1198 And we’re looking at other things. We’ve not standing still. We’re not looking at it the same way we always used to do it. Everybody’s got to change in this world. You’ve got to take money out of your cost structure and put it on the screen and that’s how you’re going to win.
1199 So for us, you know, those investments we’re making, whether or not it’s the Audience Intelligence platform, AD-Tech, you know, short-form content webisodes, other marketing activities that are outside of CPE, those are legitimate cost investments. And it helps us to be more vital which in the long-haul we all want this company to be a vital company because we’re going to spent $1.7 billion over the licence term. And that 27 percent, it’s not a ceiling; it’s a floor.
1200 COMMISSIONER SIMPSON: But aren’t you bouncing back into that whole area of discussion we had about streaming and OTT?
1201 MR. MURPHY: No.
1202 COMMISSIONER SIMPSON: Because I didn’t hear an appetite for that in terms of your planning but you’re just saying that you’ve got to look at that?
1203 MR. MURPHY: We’re looking at things -- one of the internal mantras is if a dollar goes out the door let’s get a cash-on-cash return this year, if possible, this year. So we’re looking at making investments on AD-Tech where we know we can get a return. We know now -- we spent multiples of millions on building this Audience Intelligence platform. We now have a million-three Canadians who have opted in to hear from us. That’s a huge, huge asset. And we’re going to keep investing in that because in this new world of a-la-carte, we have to become almost a retailer of channels.
1204 Now, we’re not abdicating the existing distribution system to be a true retailer of channels today. But we’re going to work to market our wares because we have that one-to-one relationship. And that’s an important investment. I think you’d agree it’s an essential investment for this company to make to remain vital and relevant in the upcoming new a-la-carte world.
1205 And I can give you three or four more similar examples of investments that are absolutely essential today. And we’re looking for flexibility within the system to help us fund those for the long-term vitality of the company.
1206 COMMISSIONER SIMPSON: But CPE can’t go into helping you with that cause outside of the broadcasting system. So I guess I’m missing something.
1207 MR. MURPHY: That’s a second topic. The outside of the broadcasting system doesn’t have anything to do with the CPE. That’s things like this summer we trialed Corus Live CMT Music Fest. So we had a big country music festival for two days in Kitchener-Waterloo. I could go on if you’d like but it was a fantastic learning experience.
1208 COMMISSIONER SIMPSON: No, it’s okay.
1209 MR. MURPHY: We love the live business and we’re going to do more of that sort of stuff. But that’s a separate bucket of investments.
1210 COMMISSIONER SIMPSON: I’m trying to turn the dotted line into a solid line between what you’re saying about levering your investments to the extent that you need to be on broadcasting and how CPE is somehow in that equation. Because that’s -- you know, we’re on the subject of CPE right now and I’m just picking off where you left off, which is we’ve got to go beyond broadcasting to be viable. And I’m trying to figure out how that circles back to CPE.
1211 You want to help me oh, wise one?
1212 MR. MAAVARA: Well, Commissioner Simpson, one of the interesting things about how we’re going through this transition is some of the thinking that’s around the regulatory construct. And there are times when we kind of all slide back into the good old days and at times we slide into the future and we use words like the “consumer” and that sort of flies by everybody’s head.
1213 But one of the things that I wanted to remind the Commission about is -- and this goes to the notion of having some sort of a CPE synch where you’re just going to drop -- in the context of BC1 you’re just going to drop CPE in there because it’s a convenient place to spend a lot of money or how are you going to decide how you allocate funds?
1214 The thing that we all have to remember is there is the pool of CPE but there are a number of really strong governors on how that CPE is used. And it’s particularly apparent that that’s going to be crucially important starting on December the 1st because it starts with the customer.
1215 But I’ll back away from that for second. The first thing with respect to CPE spend, in terms of regulation, is Canadian content. Each channel that we operate, pursuant to a licence granted to us by the CRTC, has to have a certain volume of content and that has a cost that our auditors require us to attribute value to. So there’s some CPE there.
1216 But more importantly, as we sit down with BDUs now -- and Doug talked about channel optimization and we may have less than more -- the BDUs are saying, “I’m not going to carry all of that stuff anymore because there’s the cost of carriage. And if my customers have the right to decide on anything, I’m not going to carry something that they don’t want.”
1217 That is a fundamental governor on where our spending is going to be, whether it’s CPE or otherwise.
1218 COMMISSIONER SIMPSON: But you’re not getting the value signal here; you’re talking broader than that?
1219 MR. MAAVARA: No, no, I’m talking broader than that. I’m talking about the fact as to whether, if there is no must-carry, and the BDU has a right to say Sayonara to any channel, then every channel has to have value to the consumer ultimately.
1220 So the governor on our CPE spend is partially a regulatory construct, Canadian content spend as well as the CPE rules. But it also gets back to the customer, and we have to spend our CPE, because it’s a really important part of what we do, as well as the other spend, in a very sensitive way to that customer. Because if we don’t, the conversation is kind of academic.
1221 COMMISSIONER SIMPSON: So if I can put it in my terms, what I think I heard you say, Mr. Maavara, is that -- maybe it’s back to the Programming Council, the wisdom of that elite group of the “Club of Rome” that when you spend on CPE, you’re looking for the knock-on effect that it can have on the greater build of the value of that program asset in terms of what it represents to the company overall.
1222 Even though all the money spent in the programming component of it, it’s the precision and the wisdom of how that money is spent that really builds the greater.
1223 Is that correct?
1224 MR. MAAVARA: One of our three strategies underlying is superb execution. We have to be perfect at everything we do now.
1225 COMMISSIONER SIMPSON: Right.
1226 MR. MAAVARA: There’s no more, Oh, we’ll take Saturday afternoon and just slide a bunch of stuff in there.
1227 Because the consumers are saying, if I don’t see what I want in a manner very quickly, whether it’s on a linear, and the linear is kind of the base or if it’s not on-demand, we have tremendous pressure now for on-demand, whether it’s in a kind of a traditional on-demand or a new on-demand. If we don’t do that, the Commissioners just say, I’m gone.
1228 And it’s not only that, but you have -- you know, there’s a whole business now around the notion of denigrating what we do to say, I’m a cutter; I’m a shaver. I’m an illegal or something, but I’m not going to put up with this anymore.
1229 But what we’ve been saying kind of all afternoon is people still love television. They still love it, but there’s so much of it that we have to be extremely good at it. And that’s why one of our tenants as part of our strategy is we have to be superb at execution.
1230 CPE is part of that, and I’ll just make the observation, for me, this room is fascinating. I was here in 1986 with CTV, 30 years ago. We used to sit over there, some of you will remember, and we were being -- yes, well, you were giving me a hard time at that time, as I recall.
1231 MR. MAAVARA: And we were being criticized for not doing enough and we had one show. It was -- you’ll remember the show, it was Mount Royal, Robert Lantos. And we were going to do that show, and the criticism was about that.
1232 Now, we’re here 30 years later, and people are worried about us doing too much. It’s fascinating transition for me at least.
1233 COMMISSIONER SIMPSON: The land of plenty.
1234 Well, one of the -- somebody once so wisely said that, you know, your greatest strength is your greatest weakness. But in this instance, as you’ve emerged into a pretty formidable V.I., one of the concerns that I have, and I’m sure is shared by the Commission, is that you’re arguing for exception. And the exception is probably based on asset mix and programming types and strategy, which I totally understand.
1235 But if you look at this whole system from our standpoint, you know, we love certainty. We love certainty and we love consistency, and one of the things we’ve been trying to define is a formula that we can apply to the industry that deals fairly with all players but not unfairly to some.
1236 And so I have a two-part question here: If we were to adopt your formula and try and apply it universally, it would mean something like $114 or $117 million in decline to CPE over the licence period if we were to apply it universally. And yet if we were to try and apply our 30 percent formula, it would obviously have a negative outcome, and so my -- to you.
1237 And so my question is what would be the financial impact? This may not be something that you want to go public with but what would be the financial impact of a 30 percent CPE to your organization over the next term?
1238 MR. MAAVARA: While they’re talking, I would make the observation that whatever the number is, we have to generate the revenue in order to get the result, and that is the challenge of the Canadian industry going forward. It’s generating that revenue.
1239 And as Mr. Murphy mentioned earlier, we certainly -- we filed what we thought was a confident application in terms of the revenue, but it’s a whole lot tougher to get it these days. As we watch the advertising market, the market is not only fragmenting but the unit cost is dropping. And on the subscriber side, you just had a BDU hearing, but forget about the BDUs.
1240 Think of any business in Canada. Is there a single business in Canada that has -- is watched looking at increases in revenue? Probably none. We’re in the same boat.
1241 COMMISSIONER SIMPSON: I’ll give them another minute by asking you a follow-on question, Mr. Maavara.
1242 Just on this theme of standardization or consistency, there has been several opinions waged that the removal of genre protection and the carriage guarantees that go with it creates yet another level of uncertainty with programmers and broadcasters such as yourself and could be the source of a lot of the hand-wringing that I’ve sensed from you with respect to the future.
1243 But if there is that uncertainty that comes with genre removal, doesn’t a standard CPE for everyone make sense?
1244 MR. MAAVARA: I guess we would question the premise about the uncertainty.
1245 You know, we’ve talked a lot about -- and I’m not going to bring out a Yoga mat to talk about flexibility, but we do need to be nimble. But look at what’s happened with genre exclusivity. It’s been gone now since -- well, this is the eleventh month and it was March of last year. So we’re crawling up to two years now and look what we’re seeing.
1246 We’ve had fantastic results in -- for drama, long-form scripted drama, all over the place. We’ve got fantastic results -- and by “results,” I’m talking about viewer and quality acceptance in the area of children’s programming.
1247 As we mentioned earlier, you know, our top shows in the lifestyle section are Canadian and those shows are traveling well.
1248 Sports, it’s a phenomenon across the board. News, you look at the audiences that we’ve had for news and the success that Global is having as well as other services.
1249 So when people say to me, Oh, we’re going to have a rush to the middle because the CRTC did away with genre protection, I think what really happened there was it gave services the ability to move as they felt that they needed to. But if you look and you’ve got the data in front of you, you look at each pool of programming, there’s fantastic pools. And in each area, we’re getting not only more volume but also better quality.
1250 And when you correlate that with the production numbers, last year, the production community grew by 8 percent in Canada. What other industry in Canada grew by 8 percent?
1251 So it questioned the premise about genre being a bad thing. I think what’s happened is it has allowed every operator to move into new areas and also it’s allowed people to come into the industry who may have been blocked out before.
1252 MR. MURPHY: Maybe if I can make a couple of comments, Commissioner.
1253 THE CHAIPERSON: Go ahead.
1254 MR. MURPHY: You know, Corus’ collection of assets on portfolio is, I think you’d agree, pretty unique in the Canadian marketplace. And there’s a handful of players and that’s all we have.
1255 So in our particular instance, given our demonstrable history of owing and investing in content, both independent producers and our own, you know, we often times spent way more than we’re required to spend because it was the right interests of our business. And so just a comment, our, you know, history will -- has, I think, borne out well for that, as an example.
1256 I'd add also that we weren't even at 30 percent. We're -- you know, we're currently at 29 and whilst I'm not advocating a rear-view mirror regulatory approach here, we're actually lower than that when you include the 10 exempt -- or the 6 exempt services, we're actually 28. So the actual gap we're asking you to bridge is not 30 to 27, it's 28 to 27.
1257 COMMISSIONER SIMPSON: Well done.
1258 I was just cleaning up on a few issues on CPE. The new services that you are bringing online, the Disney channels and et al., you're proposing a 10 percent CPE on these, and I guess I'm -- my curiosity really goes back to the whole issue of flexibility provisioning and why 10 percent -- with the new assets you’ve got and the fact that you're asking for less CPE, less PNI, more flex, how does this translate into a 10 percent provision for these services, from a rational standpoint?
1259 MR. SPENCE: Those services currently don’t have a CPE requirement, and when we look at the amount of Canadian programming that they might require, we thought a 10 percent CPE requirement was in line with the Commission's expectation that ---
1260 COMMISSIONER SIMPSON: Yeah.
1261 MR. SPENCE: --- each service would have a minimum 10 percent requirement, going forward.
1262 COMMISSIONER SIMPSON: M'hm.
1263 MR. SPENCE: In terms of how we allocate that spend, that becomes part of our strategic decisions for the programming council, in terms of where to most appropriately spend that money, whether that be on that service or whether it's on a lifestyle show for W or HGTV, or some might for History or local news.
1264 COMMISSIONER SIMPSON: My impression is that the Disney products are sort of self-contained. Is that a fair assumption?
1265 MR. SPENCE: Meaning?
1266 COMMISSIONER SIMPSON: That there's not a lot that CPE would be used for to create programmers for those services, or is that ---
1267 MS. MURPHY: We have -- the vast majority of the content on those services come through our relationship with the Walt Disney Company; that’s correct.
1268 COMMISSIONER SIMPSON: Yeah. But the other three services, I seem to recall reading somewhere, are already creating programming from -- for those services, and it seems to me that I also recall reading that those equivalencies of spend are somewhere just hovering under the 10 percent window; is that correct?
1269 MR. SPENCE: That's correct. For ABC Spark and Nat Geo Wild, their historical Canadian expenditure is ---
1270 COMMISSIONER SIMPSON: Yeah.
1271 MR. SPENCE: --- hovers just below 10 percent.
1272 COMMISSIONER SIMPSON: So the closing part of this question is, you know, if -- what would you do or what proposals would you put forward to try and see those -- the other three channels, the other Disney channels, produce programming? Is that within the negotiated licensing, to produce Canadian versions of some of their stuff?
1273 MR. MURPHY: So no, it's not within the existing negotiated relationship for our carriage of the Disney channels. But we have services, but we do obviously have a privileged relationship with many of the world's biggest kids' broadcasters, you know, net cartoon and Disney, for that matter. And we are always in dialogue about producing content, either for the Disney Channels Worldwide or with the Walt Disney Company as a co-production venture.
1274 Two examples, I'd cite, Mr. Simpson, are "Hotel Transylvania", which we're -- which we are producing with Sony for Disney Channel Worldwide. We're very proud of that. We want that TV series spinoff of the feature film by the same name, which is a real feather in the team's cap.
1275 And we also recently launched on the Disney Channel Worldwide, a show called "Zhu Zhu Pets". You may recall it was a toy that was -- an annoying toy, by the way; I had a bunch of them in my house when my kids were younger -- and now that's on the air and the Disney Channel there.
1276 So there are an ongoing dialogue, which enables us to consider using those resident Canadian branded services to commission content that could help in our aspiration to go global with our shows.
1277 COMMISSIONER SIMPSON: But you know, in reality, going to Disney to produce programming for them is kind of coals to Newcastle, isn't it really?
1278 MR. MURPHY: That's correct.
1279 COMMISSIONER SIMPSON: Okay. Just trucking right along here, at the Laval hearing, you indicated that -- there was a great discussion about -- did I say something wrong?
1280 MS. COURTEMANCHE: Just that I was at Laval and he wasn’t. That's all.
1281 COMMISSIONER SIMPSON: Oh, okay.
1282 MS. COURTEMANCHE: I said, "I'll answer the question."
1283 COMMISSIONER SIMPSON: I wasn’t there either, so -- but as part of the ---
1284 MR. MURPHY: It's part of what was talked about.
1285 COMMISSIONER SIMPSON: There's a bit of boilerplate here I'm trying to get through, but there was an interesting discussion about sort of a bilateral nature of some of your children's programming, and I think the Cartoon Network was the subject matter here, where some -- you were sort of intimating that some programming, perhaps even within a certain brand of show, actually, like "Peanuts", I guess, had dual audience, that some of it may be programmed or produced for a lower age group and there's an opportunity or you are programming some Cartoon Network product for older -- dare I say -- adult audience?
1286 MS. COURTEMANCHE: That's mostly Teletoon, Teletoon At Night.
1287 COMMISSIONER SIMPSON: Oh, it's TELETOON, okay.
1288 MS. COURTEMANCHE: Yeah, it's not Cartoon Network, but you're absolutely correct. That relates to -- we have a night schedule that starts at 9:00 that really goes to SKUs mail, adult mail.
1289 MR. MURPHY: It's called adultswim.
1290 MS. COURTEMANCHE: Yeah.
1291 MR. MURPHY: In the U.S. it's -- Cartoon Network has its own adultswim channel, and it's a block on -- so at night.
1292 COMMISSIONER SIMPSON: Okay, so at the same time -- this is the boilerplate -- for the Cartoon Network in particular, you indicated that in its original application, that the -- that you view Cartoon Network as a lifestyle brand. This is about kids, not adults. So is what was said at Laval in contrast or in contradiction to that, in terms of the strategy?
1293 MR. MURPHY: Just for Sylvie's benefit, can you just re-ask the question? Thank you.
1294 COMMISSIONER SIMPSON: There seemed -- again, I wasn’t there either, so this is awkward -- but Cartoon Network seemed to have the potential of having two different audiences at certain day parts. And yet, in your original application for Cartoon Network, it was a program service that was directed to kids, not adults. Has that changed the nature of the service?
1295 MS. COURTEMANCHE: That's -- sorry, that's Teletoon, it's not Cartoon Network.
1296 COMMMISSIONER SIMPSON: Ah.
1297 MS. COURTEMANCHE: Yeah.
1298 MR. MURPHY: Sorry, guys. So just let me clarify ---
1299 MS. COURTEMANCHE: Just -- and if this ---
1300 MR. MURPHY: --- because I wasn’t at Laval, but I can answer this question.
1301 MS. COURTEMANCHE: Yeah, but just to be clear, if we misspoke, we meant the -- we really meant Teletoon. We may have misspoke. I don't remember.
1302 COMMISSIONER SIMPSON: That is very gracious of you.
1303 MS. COURTEMANCHE: I thought we were talking about Teletoon.
1304 COMMISSIONER SIMPSON: That was very gracious of you. I owe you one.
1305 Not throwing staff under the bus, but I wasn’t there either, but it was perplexing to me too. So it is Teletoon that you were in reference to?
1306 MS. COURTEMANCHE: The Teletoon's the one that has the bifurcated audience, yeah.
1307 COMMISSIONER SIMPSON: And in your application, just to close the book on this, you did not have Teletoon earmarked as a lifestyle brand that's about kids, not adults? That reference would apply to Cartoon Network, or did we get that wrong too?
1308 I'm trying to understand whether there's a nature of service change here.
1309 MS. COURTEMANCHE: Can we undertake, because I think what we're going to need to do is to go back and re-read the record and make sure that whatever we said, you know, that we categorize it correctly at this point in time. So we'll undertake by December 9th to provide those clarifications that you're looking for. Sorry, just, I was going by memory and ---
1310 MR. MURPHY: I'll go with that.
1311 MS. COURTEMANCHE: Thank you.
1312 COMMISSIONER SIMPSON: Okay, also by the same date of December 9th; is that right?
1313 MS. COURTEMANCHE: Yeah.
1314 COMMISSIONER SIMPSON: Right.
1316 COMMISSIONER SIMPSON: Okay, going back to the dreaded standardization clause, if we were to impose a 30 percent across the board, what happens to Disney?
1317 MR. MURPHY: Disney is part of our portfolio of services.
1318 COMMISSIONER SIMPSON: So you'd run with it? It was just, you were asking for 10.
1319 MR. MURPHY: I -- we'd still ask for 10.
1320 COMMISSIONER SIMPSON: But if you don't get it?
1321 MS. COURTEMANCHE: Meaning, do we want to operate it outside the portfolio? That's ---
1322 MR. SPENCE: Would there be an option to operate it outside the portfolio with a zero percent or a 10 percent or a lower CPE?
1323 MS. COURTEMANCHE: No, zero percent, because it's ---
1324 COMMISSIONER SIMPSON: Well, I'm just saying that, you know, you're not taking the 30 percent, but just if there was a higher criteria than the 10 percent you're asking for, does that ---
1325 MS. COURTEMANCHE: Well, one of the things I said last week in Laval and I'll say it again ---
1326 COMMISSIONER SIMPSON: Yeah.
1327 MS. COURTEMANCHE: --- is if the Commission was going to do that, it -- you know, when it licensed its framework for Category B services, the Canadian content was increased over a three-week period. So I guess, you know, if it’s going to be maintained in the Group -- which is the way we’d like it happen -- if that was going to happen, you know, don’t do the jump all in one year, sort of escalate. And we could certainly look at that.
1328 And the other option would be to determine whether it would be better to operate it outside the portfolio but ---
1329 COMMISSIONER SIMPSON: Well, stair stepping is not new because, you know, that was done in the past when it came to new services. That stair stepping was ---
1330 MS. COURTEMANCHE: Yes, it’s a tried-and-true practice. Absolutely.
1331 MR. MURPHY: I’d just like to follow-up and remind the Commission that these channels currently don’t have a CPE requirement. And our existing portfolio that we are renewing wasn’t even rolling up to 30 percent. So by asking for a 30 percent on the Group including these new channels, you’re asking for not just the increment, the marginal increment on the existing portfolio but also a 30 percent on all of these new services, which is a significant increase to our CPE obligation.
1332 COMMISSIONER SIMPSON: Not running short of analogies, we’d be looking a gift horse in the mouth is what you’re saying. Yes, I understand. It had to be asked, folks.
1333 Can I just ask a curiosity question before I close off CPE? You know, Mr. Murphy, you said a little while back that you don’t want to get into historical references but, you know, as you approached a lot of CPE, you know, you touched on past performances and past regulatory requirements. But in your application, it really stuck for me because it gets back to this whole notion of unsurety.
1334 It was said that -- I’m paraphrasing here -- that for a variety of reasons, including that history is not a reliable teacher and looking forward is just as sketchy as looking back. That history was not really that informative to help you figure out where you’re going in the future. Again, I paraphrase.
1335 But I’m curious as to whether that applied specifically to Corus, or is that more applicable as a statement to the complexity of what you’re dealing with now which is the merger of the two companies?
1336 MR. MURPHY: It’s kind of more applicable to a third topic, and that is the fact that we’re building a new company. And we feel that to be successful, which we’re bound and committed to be, we have to be agile and fleet-footed.
1337 And we’re competing with companies that don’t have annual operating plans, like, you know, Facebook and Netflix they have 90-day operating plans. These people move quick and they’re not up against any restrictions whatsoever.
1338 So all we’re trying to do is share with the Commission, remind the Commission that if I was to go historical at all it would be simply to say that we have demonstrated year over year over year that we believe in the content business, and that we completely embrace and uphold the Commission’s Create in local TV policies. You know, if you can take some comfort in that then we’d ask that you do so.
1339 But really what we’re trying to do is build a company that can move quickly and that can respond to the market forces that we’re facing, while at the same time realizing that everybody has got to take a little bit of water with their wine these days. It’s a new world. No one is standing flat-footed anymore in the media business. If they are they’re not going to be successful.
1340 And so we’re just trying to find the right mix of accommodations in that regard so we all can be successful, all constituents of the system going forward.
1341 COMMISSIONER SIMPSON: Okay, thank you.
1342 Okay, on to our next favourite subject, which is PNI. Sort of working the four corners of the box here.
1343 Shaw was five percent, 75 percent independent production; Corus was nine. And when you acquired Teletoon and Cartoon Network, that had the net effect of raising PNI to something like 12 percent back in 2013. These are figures that I’m not asking you to trust.
1344 So when you just add them all up and you do a little averaging, how do you get five?
1345 MS. COURTEMANCHE: We don’t get to five based on the historical -- absolutely -- there’s no doubt about that. That’s not how we get to the five. We get to the five because we believe that the five was derived -- or sorry, excuse me. The higher historical number was derived from the fact that the spends in PNI were tied to a particular format and a genre that we had committed to as part of a Category A licence.
1346 In the next licence period, we don’t have that same level of commitment or restriction as to when it comes to that particular type of content. So if we do make, you know, format changes or, you know, over the time, you know, change of service from Movie Network to the Cooking Channel like we’ve done that would impact our ability to make that change because we would be committed to a particular level of spending. We’d have an envelope that we’d have to fulfill.
1347 So basically it would take away our ability to take advantage of the policy that you created last year. So on that basis, we thought that if there is going to be some standardization, yeah, the PNI needs to be standardized because it’s so tied to that component of the policy, you know. To tie us back to our history and then say, “But by the way, you can do anything you want” -- it’s incongruent -- is that an English word? Yeah.
1348 COMMISSIONER SIMPSON: Yeah.
1349 MS. COURTEMANCHE: Because in French it is so -- okay, thank you.
1350 COMMISSIONER SIMPSON: Well, it’s a better word than some that we’ve been using today which have been multiple compounding of words that I think challenge linguists all over the world.
1351 MS. COURTEMANCHE: Sorry, I was just going to ---
1352 COMMISSIONER SIMPSON: Yeah, go ahead.
1353 MS. COURTEMANCHE: Just for the record though, you’re right with respect to the Corus numbers. But when you combine it, the combined historical requirement -- if you took the two companies was seven percent, right?
1354 UNKNOWN SPEAKER: Yes.
1355 MS. COURTEMANCHE: So just I wanted to make sure that we’re not going from 12 to ---
1356 COMMISSIONER SIMPSON: No, no, no.
1357 MS. COURTEMANCHE: --- 5.
1358 COMMISSIONER SIMPSON: There was the -- what do they call it? The description field that Stephen ---
1359 MS. COURTEMANCHE: Sorry.
1360 COMMISSIONER SIMPSON: Which was caused by ---
1361 MS. COURTEMANCHE: Sorry, I just wanted to sort of put that on the record.
1362 COMMISSIONER SIMPSON: No, that’s fair.
1363 MS. COURTEMANCHE: Yeah.
1364 COMMISSIONER SIMPSON: Okay, so ---
1365 MS. COURTEMANCHE: Thank you.
1366 COMMISSIONER SIMPSON: --- that argument, yeah, you’re right. You know, when you take five and nine and you average it you get seven, so how did we get it to five?
1367 Now, let me ask a question that may answer that. Is it again because of the mix? Because when you look at the categories of PNI, I would have thought that the portfolio you’ve got of operations would give you a little artificial courage to up your PNI, given what Mr. Maavara said a little while ago that, you know, all these expenditures are always made with building brands in mind. And if you could do that and keep the regulator and the industry happy, it’s a win for everybody.
1368 MS. WILLIAMS: Yeah. I mean, I guess the way we’re thinking about it is we have a portfolio of channels that today are identified by certain programming lineups and certain brands.
1369 COMMISSIONER SIMPSON: Yeah.
1370 MS. WILLIAMS: Tomorrow may not be. We have flexibility now to evolve content lineups and brands into what we think will be most successful in the world going forward. And everybody has that same flexibility now to play in each other’s, you know, what used to be fenced off backyards. So I think we really believe that standardizing across the industry is what makes sense here.
1371 And it is a floor for us, it’s not a ceiling. So if we continue to play in spaces that actually really warrant a higher PNI because we get the audience out of it and the value out of it then, believe me, that’s what we would decide to do.
1372 But we don’t want to be handcuffed into staying into a place that actually we have to be there because that’s where PNI works at a higher number and not allow ourselves to transform into something new if the audiences demand it. Nor do we understand how it would work if someone else moved into the kids’ space or whatever where PNI was maybe thought of differently and yet they’re still at five percent.
1373 So the standardization seemed to make a lot of sense in this open environment that we’re all competing in today.
1374 MS. COURTEMANCHE: But it’s a floor so, you know, if it makes more sense to spend on the PNI that’s where it’s going to get spent.
1375 COMMISSIONER SIMPSON: Right. But it’s back down to that doubling down scenario because you also have another stakeholder in the mix, which is the shareholder. And, you know, you are not in business to lose money. I understand that. But it just seemed that it was a safe -- you know, PNI being what it is it was a safer spend given the asset mix you had.
1376 May I just do a little tangent on PNI spending and go back to the closure of the VOD services?
1377 What is your programming go-forward appetite with respect to longer form drama? I’m thinking movies here. Because, you know, going back to what you said, it’s a tough -- it’s a high-ticket item potentially but it’s an important item when it comes to PNI.
1378 And I’m just wondering how movies, given your asset mix of outlets and the flex that you’re asking for, whether it increases your appetite or not with respect to movie funding?
1379 MR. MURPHY: So just for the record, Movie Central was linear and VOD. We keep referring to VOD just to make sure that we’re crystal clear. And I know you are, Commissioner, but just for the record.
1380 COMMISSIONER SIMPSON: Okay.
1381 MR. MURPHY: So movies are still a very important part of our world and as is, quite frankly, you know, scripted on our services. They’re important.
1382 What is true, before I ask Barb to kind of speak much more intelligently, is that movies are kind of everything when they’re “library”. I mean, there’s no, you know, exclusivity anymore for anything that’s more than, like, two years old, maybe. So the question really becomes, you know, where you want to define yourself.
1383 But remarkably even now, even when movies are everywhere, notwithstanding my last statement, when you rent Home Alone, you know, on YTV, even though it’s been around for 27 years we pull 180,000 AMAs which is just remarkable to me because there’s a billion places you can get Home Alone. So movies are still an important part of our world.
1384 COMMISSIONER SIMPSON: I’ve got to go back to a question I missed on Disney. And could you explain to me the relationship between the Disney portfolio you’re acquiring and Nelvana? Is there a relationship there?
1385 MR. MURPHY: There’s no relationship other than Disney Worldwide is a licenced owner of our content. So part of our content global strategy is that they’re one of our partners for global broadcast of the shows we make at Nelvana. Those shows, however, just to be crystal clear, they’re not destined for Disney. They’re made and then we pitch them to all of our partners and then we go to the best partner.
1386 COMMISSIONER SIMPSON: So it doesn’t fall under the capture of PNI ---
1387 MR. MURPHY: No.
1388 COMMISSIONER SIMPSON: --- because it’s totally a product-output structure that you’re marketing to anybody that wants to pick up a Nelvana product and does not produce ---
1389 MR. MURPHY: No, Nelvana is PNI just to be -- sorry.
1390 COMMISSIONER SIMPSON: It is?
1391 MR. MURPHY: Yeah, it is PNI, just that the relationship is different.
1392 COMMISSIONER SIMPSON: Ah. Well, then wouldn’t your ask on 10 percent put you at a bit of a competitive advantage?
1393 MR. MURPHY: Sorry?
1394 COMMISSIONER SIMPSON: Wouldn’t a 10-percent PNI put you at a bit of a competitive advantage given that?
1395 MS. COURTEMANCHE: You mean a five percent?
1396 COMMISSIONER SIMPSON: No, I’m talking the 10 percent -- sorry, the 5 percent. Sorry, I forgot we’re on PNI.
1397 MR. MURPHY: This just goes to the notion that five percent is a floor.
1398 COMMISSIONER SIMPSON: Yeah.
1399 MR. MURPHY: So again, if we had an opportunity to commission a show that Disney wanted to live on the Disney channel, then in that give year that five percent might be higher.
1400 COMMISSIONER SIMPSON: Okay. I’m still having trouble how a five percent PNI is helping the system. I know it helps you. But this is the one last shot at this. Given that it has financial implications but it assuages your great concern about the unsurety of the market, taking the consumer -- which we’ve been fixated with at this Commission for quite a while now -- how is a five percent PNI fair?
1401 MS. COURTEMANCHE: Well, you’re assuming the consumer is only going to be attracted by PNI content and we would argue that that’s not necessarily the case.
1402 The way it’s in the public interest, we believe, is that it ensures that when we make those programming choices, we’re going to make the programming choices on behalf of the consumers, that we are going to make sure that we provide the most compelling content that they’re going to watch, wherever they want to watch. So I guess I ---
1403 COMMISSIONER SIMPSON: But PNI is not created for the purpose of making hits. You know, you hope you have hits. PNI is created for the purpose of creating the kind of content that is part of the quality and the value of the Canadian system. But it isn’t for the purpose -- I mean, everybody wants to have a Canadian hit; who doesn’t? But my question really came back to how is a reduced PNI, given the size of your organization now -- because I think between you and Bell you’re, like, 80 percent of the whole enchilada -- how does a five percent reduction ---
1404 MS. COURTEMANCHE: It’s not a five percent reduction.
1405 COMMISSIONER SIMPSON: Huh?
1406 MS. COURTEMANCHE: It’s a two-percent reduction because the new combined portfolios had seven percent.
1407 COMMISSIONER SIMPSON: No. How does a five percent PNI fulfill, you know, the objectives of creating programs of national interest for the Canadian system?
1408 MS. WILLIAMS: Well, I think we think about it from a couple of different perspectives, one being that for many years Shaw Media had a five percent PNI and it was the right amount. We made a lot of really great shows that served those underserved categories, I think, really well and it seemed to serve the system very well. We lived up to our commitment to independent producers within that and did some, I think, really, really terrific programming through it.
1409 Bell also has a five percent PNI across their set of assets and the too, I think, have used that commitment really wisely and made some great shows. So I think five percent is proven to live up to the expectation of supporting those categories of programming that we all agree are so important to the country.
1410 Corus has a different set of assets that at the time were deemed to be more necessary to be supported at a higher level of PNI, the pay services in particular and then the kids’ services. Those two reasons we would argue have changed significantly and in a go-forward basis no longer apply. Specifically, Pay is gone, although the fact that Bell has Pay hasn’t risen their PNI, actually, I guess, when I think about it. But Pay is gone from the Corus story.
1411 And Kids, although we are absolutely still in the kids business today and believe in it strongly and will overspend on PNI if we stay in that kids business, today in the open environment we’re in, anybody could be in the kids business. And if Bell launches a kids services tomorrow, does their PNI suddenly change? Or if we take a kids service and it’s half kids and it’s half something else or we start to blend all this, how does one keep a unique story of a unique PNI around a unique genre of content when there is no longer genre exclusivity?
1412 So we would argue that the system has proven itself well in the last five years to have been well-served by five percent, and that that’s what we too should have in this standardized world. And then we will, you know, appropriately overspend on particular categories of content if that’s making sense to the product mix that we have.
1413 COMMISSIONER SIMPSON: Okay. I wanted you to get the last word.
1414 We’re moving to ad restrictions now, folks.
1415 Right off the bat, the question that pops out at me given the balance of your specialty assets is how this would work given that you have some pretty unique COLs with respect to your children’s programming.
1416 MS. COURTEMANCHE: Okay, we just want to go on the record to say that our kids channels would still be required to comply with the CAB Kids Code and that would limit our advertising to eight minutes an hour for kids under 12. So that we understand and we would continue to adhere to.
1417 COMMISSIONER SIMPSON: Thank you. That applies to which channels?
1418 MS. COURTEMANCHE: Karen, can you specify which services offer content for kids under 12?
1419 MS. PHILLIPS: Yeah. It would YTV; it would be Treehouse, which would have its own differences. It’s branding with the preschool audience, however.
1420 COMMISSIONER SIMPSON: Yeah.
1421 MS. PHILLIPS: What else have we got there?
1422 COMMISSIONER SIMPSON: That’s the two minutes per hour between ---
1423 MS. PHILLIPS: That’s two minutes per hour on Treehouse right now, yes.
1424 COMMISSIONER SIMPSON: Right.
1425 MS. PHILLIPS: Teletoon would also be on the kids side.
1426 COMMISSIONER SIMPSON: Okay. Now, first question -- and thank you very much for that; that helps and breathes a sigh of relief that we may not be here until 6:00.
1427 MS. COURTEMANCHE: We thought you’d ask that question, actually. We saw that one coming.
1428 COMMISSIONER SIMPSON: Okay. Oh, I’m telegraphing my punches now; this is not good.
1429 When it comes to, you know, what makes speciality work, specialty is specialty, although it’s legacy now. One of the things that I’d like you to address for me is that it has been rather unique; it’s been a cultured and curated segment of television broadcasting. And pulling the cork on ad limits, you’ve obviously considered the impact it might have on audience. Could you just give me the 360 on why you think this is necessary? I’ll ask the question about denying -- having to turn down clients, in a minute, but just generally speaking?
1430 MR. MURPHY: Okay. Well, when we stepped back and considered our renewal, we looked at the world. And we noted that, you know, conventionals had no airtime restrictions now for 20 years -- radio 20 years, conventional for more than 5. And we asked ourselves, in this world of content consumption where, you know, the market forces will dictate what is acceptable in terms of ad load, why are we regulating an ad load? I think the Chair himself said, you know, if the market forces can regulate, you know, the decision why do we have to do it? I’m paraphrasing badly, excuse me.
1431 But the fact of the matter is if we put too much ad load on a show we’re going to walk our audiences. We’re not going to do that, right, that’s not a sensible business strategy.
1432 On the flip side, if we have a hit show like the finale of Bachelorette Canada -- which was CanCon by the way, great show -- and we want to put a couple of more minutes in there to eke out a little more revenue then that’s really at the crux of what we’re asking for here. It’s just a little more flexibility to take advantage of those big event tent pole broadcast opportunities that reach and frequency of TV gives you, but it will all be conditional on the reaction of the audiences. And quite frankly, the advertisers don’t want to be buried in a bunch of extra minutes either.
1433 So it’s more consistent with our general theme of allow us to have a little more adaptability, flexibility to the new world we’re competing in.
1434 COMMISSIONER SIMPSON: Great. There’s been reference or inference that you’ve had to turn away some ad buys because of lack of avails; is that correct?
1435 MR. MURPHY: Those are nice problems to have when they occur. But, yes, occasionally that does happen.
1436 COMMISSIONER SIMPSON: Okay. When you look at the quantum of additional ad revenue that would come from lifting these restrictions, it’s looking like over the licence period it would be about another $36 million; is that correct?
1437 MR. MURPHY: I don’t believe we’ve run those numbers specifically.
1438 MS. COURTEMANCHE: No. No, we’d have to undertake to provide that.
1439 MR. MURPHY: We can come back to you with that one.
1440 COMMISSIONER SIMPSON: Okay.
1442 MR. MURPHY: Where did Steve get that figure?
1443 COMMISSIONER SIMPSON: So let’s take it as a conjecture that there is going to be some amount of money that may be in the multiples of tens of millions that could result, not just for you but for others, if there was a restriction lift on ads spent.
1444 Given that you’re aiming low on PNI, would you be interested in a little give and take on PNI expenditure and return for additional ad expenditure? I know it’s a piece of string question so you can say maybe.
1445 MR. MURPHY: I think we’d be happy to consider that and come back to the Commission with a thought on that one.
1446 COMMISSIONER SIMPSON: Okay.
1447 MR. REEB: As an undertaking?
1449 COMMISSIONER SIMPSON: As an undertaking, that’s correct.
1450 MR. REEB: For the ninth. Yes, undertaking, yes, by December 9th.
1451 MS. COURTEMANCHE: We would want to know -- if I understand the question correctly, you would want us to say, “Okay, we would commit to a higher PNI at this level in return for that.” And so we would be establishing what level that we’re comfortable at.
1452 COMMISSIONER SIMPSON: You would have to know what you’re saying yes to, yeah.
1453 MS. COURTEMANCHE: Yeah. I just want to correct ---
1454 COMMISSIONER SIMPSON: Yeah.
1455 MS. COURTEMANCHE: Yeah, thank you. We can do that.
1456 COMMISSIONER SIMPSON: Can I just do a little deep dive on BC1 again, our favourite subject, Mr. Reeb?
1457 With respect to local ads, you say that there isn’t a local ad revenue to that station right now that’s -- but I know that you are selling local ads but there’s a percentage; there’s a fixed amount that you can sell; is that correct?
1458 MR. REEB: Correct. We’re subject to the same limits as other specialty services.
1459 COMMISSIONER SIMPSON: Yeah.
1460 MR. REEB: We do have an additional advertising opportunity in just the way the channel is structured in that it has an alphanumeric portion of the screen that can be used for small banner ads.
1461 COMMISSIONER SIMPSON: Right. Okay, yeah. So you don’t see this lifting of ad time changing that COL? You still would do what you’re doing now because the ad time would be strictly non-local expenditures that would increase?
1462 MR. REEB: Presumably if there was an increase in the amount of advertising that was allowed on the service that could be, well, I mean there is a limit on the amount of local -- there’s a national local split on this service.
1463 COMMISSIONER SIMPSON: Well, that’s my point.
1464 MR. REEB: Yeah.
1465 COMMISSIONER SIMPSON: So would the proportion then grow in direct proportion to the amount of increased ---
1466 MR. REEB: I think that’s what we would presume, yes.
1467 COMMISSIONER SIMPSON: Okay. That was the last question I had in the subject matter. It’s a perfect time for a break, health break, so may we?
1468 THE CHAIRPERSON: Yes. So we’ll adjourn for a short 10-minute break. We’ll be back at 4:10 to continue the questioning. Thank you.
--- Upon recessing at 4:00 p.m.
--- Upon resuming at 4:10 p.m.
1469 THE CHAIRPERSON: À l’ordre, s’il vous plaît. Order, please.
1470 Commissionner Simpson?
1471 COMMISSIONER SIMPSON: Thank you.
1472 Next on the hit parade is -- I think we’re done with ad restrictions, by the way. But next on the hit parade is Teletoon. I have a few questions. I’m also running out of table space here.
1473 Now, I know that we kind of threw you a curve at Laval when we asked about whether or not it would be appropriate to consider Teletoon having two licences, one English and one French. And I gather you didn’t think that was a good idea?
1474 MS. COURTEMANCHE: No, and we still don’t think it’s a good idea.
1475 COMMISSIONER SIMPSON: Okay. Well, it just goes to show sometimes time doesn’t alter things.
1476 MS. COURTEMANCHE: Firmly convinced.
1477 COMMISSIONER SIMPSON: Now, I was looking at Teletoon and the way it’s functioning. And it seems that why this question was raised in the first place -- and I wasn’t the troublemaker here, I was just the water boy. But it seems that there might have been some concerns over CPE contributions to the French service.
1478 And I was just wondering, now that you’ve had a chance for the last few days to reflect on it, whether you think this is a valid concern?
1479 MS. COURTEMANCHE: No, it isn’t because under the licence requirement we’re supposed to do 9 percent. But in fact, we’ve done I think -- is it 13 or 14? Fourteen (14), we’ve done 14 percent.
1480 So, you know, we’ve exceeded the minimum requirements on the French CPE side. So, no, we don’t think it’s a valid concern, at least if you’re looking at it just from that perspective.
1481 COMMISSIONER SIMPSON: Okay. And that was part of your testimony at Laval. I wasn’t tapped into that part of the hearing that you had exceeded ---
1482 MS. COURTEMANCHE: No I don’t think I got that on the record, quite frankly, so thank you for the opportunity of doing it now.
1483 COMMISSIONER SIMPSON: All right.
1484 MS. COURTEMANCHE: I don’t believe I got that number on the record.
1485 COMMISSIONER SIMPSON: A little procedural advice here, folks. Is that testimony sufficient to your concerns or do you want to do an undertaking?
1486 THE CHAIRPERSON: Well, if you keep going on questions on Teletoon -- which is fine ---
1487 COMMISSIONER SIMPSON: Yeah.
1488 THE CHAIRPERSON: --- what we will do, as we did with the other one, is take the transcript of these proceeding and put it on the Laval hearing.
1489 MS. COURTEMANCHE: Which is what you did for Laval. You said that the transcript on the Teletoon was coming on this hearing, right?
1490 THE CHAIRPERSON: Yeah, but ---
1491 MS. COURTEMANCHE: So you’re doing it vice-versa?
1492 THE CHAIRPERSON: --- I’m doing it across ---
1493 MS. COURTEMANCHE: Vice-versa?
1494 THE CHAIRPERSON: Yes, we will do a cross ---
1495 MS. COURTEMANCHE: You’re cross-fertilization? We are absolutely ---
1496 THE CHAIRPERSON: On this issue because it’s two separate hearings.
1497 MS. COURTEMANCHE: Correct. Okay, thank you.
1498 COMMISSIONER SIMPSON: So just beating this horse to death on the idea of two Teletoon licences, other than -- to use my words -- that this is a really silly idea, could you put it into your universal regulatory translator and give me your reasons for the record as to why we should drop this notion?
1499 MS. COURTEMANCHE: Okay. And thank you for the opportunity to do that.
1500 I will be, just for the record, on the French side I will be giving those explanations in writing on December 2nd.
1501 COMMISSIONER SIMPSON: Okay.
1502 MS. COURTEMANCHE: But I will go on the record, and if we need to say more then maybe we can undertake to provide some more information by the 9th.
1503 But the real question that we thought about, Commissioner Simpson, is what is it we’re trying to fix? You know, Teletoon as a bilingual service has been a success for the last, you know, 22 years. And I go back to my practical thinking and I’m thinking if it’s not broken then we don’t have anything to fix, right? It’s simple, it works.
1504 I recognize that the bilingual licence is an anomaly in the system and, you know, it was an exception. But it’s not an exception, you know, that is widely applied and certainly the Commission can control its future application. So it’s not like somebody can come in and start telling you, “Well, you’ve got this service so I should have it too.” I think in French we say “l’exception fait la règle”. Well, you know, I think in this circumstance, you know, we think that there were good reasons back in 1994 to do this. It was to create a structure that would allow for the provision of high-quality Canadian animation across Canada both in English and the French-language market.
1505 It is a particularly technically and costly type of content to produce. For independent animation producers this was very good for them. It means that they can get funding for both the English and French-language markets through knocking on one window. And an independent producer in Laval said that, “Hey, they don’t want the licence to be split themselves.” And they talked about the fact that they were getting commissions for the French side and they thought that, you know, it was a great thing.
1506 And legally normally under a licencing system you usually have a legitimate expectation that if you’ve been a good boy or good girl you’re entitled to get renewed, you know, essentially under the same structure again. If you’ve been a bad boy or bad -- that’s a different story. But essentially we don’t think we’ve been bad and so legally we think that there is, you know, the legal notion that there’s a legitimate expectation that we could be licenced again on a bilingual basis because that’s what you’ve done for the last 22 years.
1507 You know, we have been looking, you know, at the different models that the Chairman asked us to look at. You know, we were asked, you know, is there a possibility that you can come up with a regulatory model either through revamping your group -- so for instance if you included, you know, Teletoon Franco with La chaîne Disney and Historia and Série+, you know, could you make it work then, you know? And if we did, you know, what would be, you know, the PNI and the CPE and you know, all of those things?
1508 Well, the reality is that we had weeks to, you know, create what we thought would be the right group for our French-language services. We had weeks to, you know, develop the business models and the financials, you know, that supported it. And essentially if we have to sort of come up, you know, between now and December 2nd and say, “Okay, if I’m going to create a new GBL group that would include these,” I’m basically completely revamping my GBL application; I’m basically ripping everything up that I thought.
1509 So I’ve got to rethink about the 17 and the 30 that I’ve committed for Historia and Série+. Does it still make sense in that environment of a new group? I don’t know. I didn’t look at it that way. I looked at it this way. So it’s very difficult for us to completely revamp and say, “Yeah, it might or might not work.”
1510 I guess what I’m concerned about is that it’s a theory that I honestly don’t -- you know, I don’t know that we can make it work because, like I say, we would need a lot more time to completely restructure a group-based licencing application in the French-language market and it wouldn’t be fair, you know, to everybody else to hold back on our decision because, you know, we can’t do this in a timely manner.
1511 I think that we also have to assess the withdrawal, you know, of splitting up the licence, what impact that has on the English GBL application.
1512 So I guess I see this as not being necessary, having the clear potential to delay the assessment of both our English and French applications, and you know, for a regulatory anomaly that I understand is an anomaly -- but it works. And I think it serves a clear public interest. It’s the model that ensures that in the French-language market you have high-quality animation. Anything else you put into jeopardy, the continuation of the provision of that type of content in the French language.
1513 So you know, we’ll be saying more, I guess, on Friday, but that’s pretty much, you know, in a nutshell how we feel about it. But like I say, we have been exceeding the nine percent. So I thought that was important to get on the record.
1514 COMMISSIONER SIMPSON: But coming off of your statement about high quality, I think what triggered a lot of this was the notion that a lot of English content was being dubbed and then rebranded as French content. And the first think I learned, and they also say this in French, that when it came to doing advertizing, which is an industry I came from when I came to the Quebec market, they said, “Translation, non; adaptation, oui.” And dubbing seems like ---
1515 MS. COURTEMANCHE: It works. Dubbing of ---
1516 COMMISSIONER SIMPSON: Exactly. It works.
1517 MS. COURTEMANCHE: --- animation content it’s not like ---
1518 COMMISSIONER SIMPSON: But it solves the linguistic problem. Does it solve the cultural problem that the way a lot of the content is written, I would presume, for the English market and then dubbed, that it would not be exactly the way it would be if it was produced for the French market to begin with by French Canadians for French Canadians?
1519 MS. COURTEMANCHE: The producer that creates the content, the independent producer knows -- when we commissioned our content they know that it’s going to be both in the English and French market so they initially come to the project with that sensitivity. They don’t come to the project saying, “Oh, my God; it’s only for the English market. Oh, and by the way, we’re going to dub it.” That’s not how we do it.
1520 We do it because it’s a pan-Canadian service -- that’s English, eh? And that’s how we commission it. We commission it with the sensitivity that, you know, “By the way, this is going to be seen in Quebec or French Canada and, you know, the content has to appeal to everybody.”
1521 And them of course -- but I just want to remind you, Mr. Commissioner. You weren’t there at Laval but we do have content that goes the other way. So you know, we’ve had Les Grandes Geules, Têtes à Claques -- and there’s another one; I’m sorry. So sometimes the idea comes from the French market but we say to them, “That’s such a great idea. We think it will work in the English market as well.”
1522 So that type of commissioning works both ways, albeit, you know, probably, you know, maybe the independent producers in Quebec will argue maybe it goes more one way. But independent producers in Quebec come to us knowing that if they come up with an idea for the entire service they have two financing windows with which to go for. So they understand that the project has to be good in both markets.
1523 COMMISSIONER SIMPSON: Well, I believe in your testimony at Laval you had said that one of the other reasons why this dog doesn’t hunt or this bird doesn’t fly, as a notion of two licences, is that there really isn’t the capacity in the Quebec market to produce the animation needs until after?
1524 MS. COURTEMANCHE: Well, not on its own. I mean, it’s still -- there was nothing in ’94 and it’s still a -- I wouldn’t say it has a robust independent production sector in Quebec, that the quality that we need. But that doesn’t mean we don’t take chances. In Laval, you know, you were told that, you know, we commissioned a producer in Quebec City that had never produced animation ever, had no history, absolutely no record of it, and we commissioned a series with them.
1525 So as with any other content commissioned, we’re going to look to get the best regardless of where it comes from. That’s the testimony, is it’s not who provides us with the idea; it’s what is the idea and is it, you know, really something that’s going to resonate with our viewers.
1526 COMMISSIONER SIMPSON: Thank you for that.
1527 Back in 2014 when you were acquiring control of the service, part of the testimony then was that 84 percent of the French-language programming was produced by independent producers and/or non-related producers. So how has that balance shifted? Because it seems to me -- this is some smarty pants from our group has pulled this forward from 2014 when you were taking control of the service -- that it was a statement on the record that 84 percent of French-language programming was produced by independent and/or non-related French-language producers.
1528 And I’m trying to understand whether something dramatic has changed in the marketplace with respect to the quantum of producers or this is a misquote. But it seems to have come from ---
1529 MS. COURTEMANCHE: I’d have to go back and check that. But I guess my off-the-top thinking -- and honestly I don’t want to give you a correct response -- but I’m wondering if it’s 84 percent of the 9 percent is what I think it probably relates to. So I'd have to go back and double check, but I believe that what we were trying to tell you is, of that 9 percent, 84 percent is that.
1530 COMMISSIONER SIMPSON: Fine. Would you do that then, please, as yet another undertaking ---
1531 MS. COURTEMANCHE: Yeah.
1532 COMMISSIONER SIMPSON: --- for December the 9th?
1534 COMMISSIONER SIMPSON: I think this is the last part.
1535 You were saying that if, in the worst of all worlds, the service was split into two licences, that you'd have to double your retail rate in the French Canadian market. So in light of having to substantially up the rates of the service in that market, are there any positives that come out of synergies with respect to the various related services you control and you know, I'm thinking Nelvana and others, and dubbing of programs from both feed?
1536 You referred earlier to the fact that some programming is coming from the French Canadian market to the English market, but is there anything that we haven't heard yet on a positive note that would come out of two services rather than one that would have, other than your financial hardships, some net benefits by way of production synergies, stimulation of more French-created programming into the English market to help satisfy PNI and CPE and so on?
1537 MR. MURPHY: Benefits by having two licences versus the one?
1538 COMMISSIONER SIMPSON: Yeah.
1539 MR. MURPHY: I would say no.
1540 COMMISSIONER SIMPSON: Okay.
1541 MR. MURPHY: The best benefit that exists, and you know, having been, you know, to Canada a number of times over my career course selling kids' content is, if a French Canadian animation producer can get the show sold in English and French Teletoon ---
1542 COMMISSIONER SIMPSON: Yeah.
1543 MR. MURPHY: --- they've got a ticket to ride internationally. And many of them have done quite well accordingly, so I think it actually is -- it may -- it obviously has -- presents some challenges, because the community, as Sylvie described, is sort of the nascent in manner compared to other parts of Canada, but it also provides a great launching platform for those instances when they successfully place a show on the -- on both of the services.
1544 MS. COURTEMANCHE: Yeah, so by placing a show on our service that was offered across the country, this producer from Quebec was able to turn around and create a long-form film that was then sold to Universal, so I guess what we're saying is that this is the best platform for both, you know, French-language producers as well as English-language producers, for them to succeed, not only here, but abroad.
1545 MR. SPENCE: And if I can just add, in terms of the CPE requirement for a French service, even Teletoon French on its own could not commission a French-language production on its own, so the producer would have to go and get English content. So us having that one-stop shop is an efficiency, not just for us, but also for the production community.
1546 So regardless of whether the licences are split or together, we have to make that decision because if we're approving that show, we want to know that it can be -- actually get made.
1547 COMMISSIONER SIMPSON: Okay. I think that covers that.
1548 We're on the home stretch, folks. Don't give up hope.
1549 We are now going to move into updated local programming and you know, aka local news and non-standard programming requirements. Why did it -- I know this is picking at a wound here, but why did it take until two weeks ago to submit your revised local programming proposals?
1550 MS. COURTEMANCHE: We were -- we've been in discussions for several weeks, but that -- we knew that we would have to come to the hearing and you know, commit ourselves. So for the purposes of, you know, putting on the record, you know, notwithstanding that we haven't finished our discussions with Shaw, we thought that it was important that we establish, you know, after reviewing our financials and what we thought we could or could not do, and then we said, "Okay, well, we, you know, we've just -- we have to come to the hearing with our commitment."
1551 So basically, we thought, well, we won't wait til the actual hearing. We'll do it before the hearing so you have an opportunity to look at it, other people have an opportunity to look at it, and we'd go from there.
1552 COMMISSIONER SIMPSON: Okay. I think, in spite of everyone's best efforts, that there still is a little unclarity -- unclear notions on our part with respect to what your stations are actually doing with respect to local programming in terms of both exhibition and expenditures. Now, what we've been looking at is a basket of issues, including your six and three proposals, but I'm just curious as to what kind of evidence that you were using to base your proposals for what you're going to be doing in local news?
1553 MR. REEB: Yeah, thanks, Commissioner.
1554 Essentially, well, the Commission will know that on exhibition hours, we're significantly over-delivering in most, if not all, of our licensed markets. In addition to that, we have some benefit-supported local programming in six eastern markets with morning shows. At least, we have over the last year; some of that's now coming off of benefits and we're obviously hoping to maintain that programming.
1555 COMMISSIONER SIMPSON: M'hm.
1556 MR. REEB: As we came up with the split between locally reflective and other local programming, and what we'd be prepared to commit to, you know, there were two principles at play, the first one being -- you know, I've been a journalist for 25 years, and I don't think I've ever been as concerned about the funding mechanisms for journalism in this country. But I'm also equally concerned about the idea that an arm of government could reach into the newsrooms and start to have influence over, you know, what kind of programming goes on the air.
1557 We've got a long track record of producing local programming and locally-reflective programming and almost all of it is news, most of it hard news. And we're super proud of it. But there are times that -- and over the last several weeks has been a great example -- when there's been tremendous interest at a local level in what's going on in other parts of the world, with the U.S. election being a great example.
1558 So I don't think we want to go over a certain floor, in terms of the amount of required locally-reflective programming that we would have, because it would potentially have impacts on the other types of news programming that could be delivered in that newscast.
1559 But over and above that, as we looked at what the right number would be, it was simply, you know, sort of trying to strip away all of the extra stuff we've -- that we do. We talked in our opening presentation about how we're basically going out and covering news and then we try to look for as many different places that we can air that news and as many different platforms and ways that we can repurpose that news to reach a maximum audience.
1560 But if you take it down to sort of the nuts and bolts of covering a community, that's where we came up with what that 11 percent figure was.
1561 COMMISSIONER SIMPSON: Well, when you did come back to us, you know, I had thought we were kind of prescriptive in terms of what we were looking for in the way of a report from you on your planned expenditures. And what we got back was a sampling that looked more like an algorithm than a report. And this had to do with, you know, using examples, I think of Lethbridge, Halifax, and Toronto and Montreal. Why did you use the sampling approach, when it came to ---
1562 MS. COURTEMANCHE: Well, because it's the issue that we have and we spoke about that last week.
1563 COMMISSIONER SIMPSON: Yeah.
1564 MS. COURTEMANCHE: We didn’t because we don’t have any conventionals in -- but the issue was discussed at the hearing in Laval last week. It's because of the fact that our broadcast measurement systems don’t allow us to distinguish between what would be categorized as locally relevant or locally reflective. That requires a subjective assessment.
1565 So for instance, if we were to do -- and I gave this example in our record, so I'm not inventing anything new; it's already on the record, but I'll repeat it today. If you have a news segment that talked about Brexit, well, that news wouldn't be locally reflective. But if, at the end of that news segment, you went into the local pub, found some expats, and said, "Hey, you live in Ottawa now. By the way, what do you think of the decision in England about Brexit?" Well, that would be locally reflective.
1566 Well, unless you have somebody who's watching, well then, you know, if it's a two-minute segment and it's 20 -- I don't know, 20 seconds is locally reflective in the other one, that requires a subjective assessment. We cannot create a broadcast measurement system that would allow us to do that subjective assessment.
1567 COMMISSIONER SIMPSON: M'hm.
1568 MS. COURTEMANCHE: Other than having a person that's going to sit down with a stopwatch and, you know, do all of that calculation. We can’t do it today and we can’t develop a system that could do that subjective assessment.
1569 If we were to -- you know, we looked at this and we said, okay, how much would it cost from an operational perspective to do that, because we can’t have the broadcast measurement system? It’s roughly about, you know, $600,000, and we think that that’s an investment that would take away from boots on the ground.
1570 So what we’re -- it was just -- it was a time and the energy required and the, like I say, you literally have to sit down and stopwatch it.
1571 So we said, okay, well, instead of doing that, we’ll come up with some sample markets. We picked large markets. We picked smaller markets, you know, East, West. It was -- is it arbitrary? Yeah, some East, some West.
1572 COMMISSIONER SIMPSON: Yes.
1573 MS. COURTEMANCHE: You know, and we just came up with that and we said, you know, on a sample basis, was it a guestimate? Yeah, absolutely.
1574 But I can tell you that Troy is, as he said, he’s been doing news for 25 years and when we saw the results, even though it was a sample, he honestly believed that that was a true reflection of what we do. That we do, do -- a majority is locally reflective content, except for on the occasions that it happened, you know, when there were extreme events or events that -- you know, such as the U.S. election where there’s an unusual interest in stories that are not specifically locally reflective that occur.
1575 But on a -- if you look at it on a yearly basis, that number made sense. And we thought, you know, on a going-forward basis we have no problems with the Commission saying that this is its policy and this is what it wants us to do.
1576 How you measure our performance is I think is what the issue here. And I ---
1577 COMMISSIONER SIMPSON: Yes, it is. And how do we know ---
1578 MS. COURTEMANCHE: Right.
1579 COMMISSIONER SIMPSON: When you use a sampling methodology, ---
1580 MS. COURTEMANCHE: Right. Yes.
1581 COMMISSIONER SIMPSON: How do we know that in the wisdom ---
1582 MS. COURTEMANCHE: I get what your problem is. Trust me.
1583 COMMISSIONER SIMPSON: How do we know you don’t rob one market to pay another with respect to distribution, like a smaller market to a bigger market?
1584 MS. COURTEMANCHE: Well, you’ll always have fluctuations, right? I mean, that’s the nature of the business.
1585 So what you, -- you know, you don’t want to look at the fluctuations on a weekly basis. You want to think that on average, over the year, this is what we’re going to achieve, right?
1586 I mean and you know, like I say, depending on the stations, there may be for that particular market, there may be, for whatever reason, you know, you’ll only have reflective content. And in another market, because of what’s happening in that market or within the region that it operates, there are different reasons to sort of change your content.
1587 But on average, this group of stations produces this percentage of locally reflective content and then the number of dollars that are used are X.
1588 COMMISSIONER SIMPSON: Yes.
1589 MS. COURTEMANCHE: I mean, now, when it comes to the measurement, like I say, we cost it out; how it would cost to sort of give you that absolute, minute-by-minute correct data for each individual station.
1590 We think that Commission has said that, you know, it is looking to find some ways that are administratively less complex and more efficient and so on and so forth.
1591 COMMISSIONER SIMPSON: Yes.
1592 MS. COURTEMANCHE: So we understand that the policy needs to be measured and you want some barometers. And we would say, well, you know, probably, you can do it a lot along the lines of, you know, what you do with radio. Although I would argue that you would do it with a frequency ---
1593 COMMISSIONER SIMPSON: Yes.
1594 MS. COURTEMANCHE: --- that’s more, you know, -- higher than radio.
1595 But for a radio station, you know, when it comes time to licence renewal, you send us a nice letter and you say, by the way, that week that you broadcast three weeks ago, you’re going to measure your CanCon, you’re going to measure everything you’ve done and you’re going to -- we are going to measure your compliance with the various regulations on that basis.
1596 So what we would suggest is, obviously, I wouldn’t say only one licence term because I don’t think that would work. I get that part. But perhaps, you know, once a quarter, the Commission could identify the week and a group of stations, you know, and say, you need to account for those weeks.
1597 That would be a method that wouldn’t be as costly and I think would provide you with the level of assurance that people are delivering on their reflective content, you know, based on what they’ve promised they would do.
1598 COMMISSIONER SIMPSON: I get your point.
1599 THE CAMERAMAN: Sorry!
1600 COMMISSIONER SIMPSON: That’s all right.
1601 THE CHAIPERSON: I think that’s your cameraman, isn’t it?
1602 MR. REEB: Who’s been on our screenshot and now on the record.
1603 COMMISSIONER SIMPSON: Who just photobombed the hearing a few minutes ago, but that’s -- and that doesn’t qualify as any Canadian content, I’m sorry.
1604 But I take your point on sitting there with a stopwatch and trying to parse out local news and local information content.
1605 But can I at least ask you for a commitment on this; that when you do submit, that all of your content calculations would be absent of advertising, promos and PSAs?
1606 I mean you can do that just by doing a calculation of your traffic log.
1607 MS. PHILLIPS: The problem with doing it as a calculation of the traffic log is that the traffic log has entire segments, not partial segments.
1608 So you know, going back to Sylvie’s example, where 30 seconds of a segment or one minute of a segment was the part that we want to measure, that’s where it takes somebody actually sitting down and reviewing it, basically with a stopwatch. That’s not something we can put in to a traffic system ---
1609 COMMISSIONER SIMPSON: Because a segment might be sponsored; is that ---
1610 MS. PHILLIPS: Sorry?
1611 COMMISSIONER SIMPSON: Is that the problem? That you might do a locally reflective segment and within that segment, there’s a sponsorship? Is that the problem?
1612 MR. REEB: Sorry, no, it’s -- I should be clear. I think, absolutely, we can -- we can assure that the commercials and ---
1613 COMMISSIONER SIMPSON: Yeah.
1614 MR. REEB: --- promos, PSAs, those would not be included. That’s not a problem.
1615 What we were referencing here was the fact that our logging systems, you know, if there’s a weather segment, ---
1616 COMMISSIONER SIMPSON: Correct.
1617 MR. REEB: --- that’s in for a minute and a half, that may be split between doing a local forecast and talking about a hurricane.
1618 COMMISSIONER SIMPSON: Yeah. No, I very specifically said, you know, ads, promos, PSAs, which the traffic log would reveal because that’s how you schedule them in the master, right? And it was not to do with trying to parse out the legitimate content.
1619 That was my question. So I’m satisfied with what I heard. Okay.
1620 However, another surprise for you, it’s almost Christmas. We have a request for another undertaking. This is Exhibit 1.
1621 MS. ROY: I believe Corus already has a copy.
1622 COMMISSIONER SIMPSON: Good. Okay, good.
1623 MS. COURTEMANCHE: (Off mic)… a copy last week. We’re working on it.
1624 COMMISSIONER SIMPSON: All righty. Okay.
1625 MS. COURTEMANCHE: We’ve got our homework.
1626 COMMISSIONER SIMPSON: Yes, you do. Thank you. It was not clear.
1627 MS. COURTEMANCHE: December 9th, correct?
1628 COMMISSIONER SIMPSON: Yes, Ma’am.
1629 MS. COURTEMANCHE: O.k., Monsieur. Merci.
1631 COMMISSIONER SIMPSON: Okay. And on the non-standard, I’m going to try to be quick about this, but with respect to the exceptions you’re looking for in New Brunswick, I have ---
1632 MS. COURTEMANCHE: And Oshawa.
1633 COMMISSIONER SIMPSON: And Oshawa.
1634 Let’s start with New Brunswick, you know, what we’re asking for there is content that is about the market, for the market, and branded for the market.
1635 So we’ll start with the easy part. When New Brunswick is getting its feed, I presume, with Halifax, right? It’s seen visibly that this is New Brunswick content, not just the subject matter but it’s branded as such?
1636 MR. REEB: Yes. The New Brunswick feed, there’s a number of historical licences which had split feeds in them. This is one of them.
1637 Our competitor in the market, the CTV station simply does a single feed for all of the Maritimes.
1638 COMMISSIONER SIMPSON: Right.
1639 MR. REEB: We historically had a split feed, which I believe had 10 minutes a day, a 10-minute-a-day split feed commitment.
1640 In the last round of licensing we voluntarily said we’d actually like to make that a full New Brunswick newscast daily supported by our three bureaus in New Brunswick. We have journalists in Moncton; we have them in Fredericton; we have them in Saint-John. And some -- and so we volunteered last time around to do that two and a half hours of exhibition of specific New Brunswick content.
1641 It is very specific to the New Brunswick market. It is New Brunswick local news. It’s New Brunswick local weather.
1642 COMMISSIONER SIMPSON: And when it comes to -- I know that this problem, this isn’t what you want to do. It’s what you have to do, I presume, as a business case, but how does that request for exception match up to the expectation of the viewer in New Brunswick who -- I don’t know the market. I know that you know you’re coming up short with respect to what you can do from a financial liability standpoint operationally.
1643 But you know do you -- I need you to do a little bit of a defence as to why you think this request ---
1644 MR. REEB: For sure.
1645 COMMISSIONER SIMPSON: --- is justified, given all factors on the table?
1646 MR. REEB: Yes, absolutely. And there are multiple other instances where the split feed broadcasts took place. I can think of a number here in Ontario, whether it was, you know, the stations in southwestern Ontario that were one time part of Baton in Windsor. In Sarnia they had split feeds of local programming.
1647 There were some in Northern Ontario where they was, you know, quasi-stations in Sault Ste. Marie and Timmins. Most of those have now gone away and they’re just taking the central feed from a place like Sudbury for Northern Ontario.
1648 We decided to go the other way and we actually increased the amount of programming that we put into that split feed in New Brunswick. Well, and conceivably I guess we could have come before the Commission and said we’d like to back away and just, you know, pump the Halifax signal into New Brunswick as our competitor does.
1649 But we decided we wanted to actually use that split feed as a point of difference and do more local programming, so we upped it from that 10 minutes of split feed a day to a full newscast on a daily basis. So it remains an anomaly but it’s one that we’ve committed to have increased and not to have decreased and walked away from.
1650 MS. COURTEMANCHE: And the thing for the public interest is that, you know, instead of the residents of New Brunswick get some content that is local to them as opposed to just having one broadcast for the entire region. So we think there’s a high public interest in the model that we’ve developed.
1651 COMMISSIONER SIMPSON: And, you know, this is the shoe that drops, I suppose, but the tangible benefits expire from the Shaw CanWest transaction in 2017. So what happens then? All of a sudden are you going to throw your hands up in the air and say, “We can’t do it anymore”?
1652 MR. REEB: I’m assuming you’re not speaking about New Brunswick anymore because it has nothing to do with tangible benefits that particular ---
1653 COMMISSIONER SIMPSON: No, no, the tangible benefits in the Maritimes.
1654 MR. REEB: Those tangible benefits relate specifically to the production of the morning program which comes out of Halifax and is a part of region-wide morning program.
1655 COMMISSIONER SIMPSON: Yeah. I’m just trying to get a sense of generally what’s going to happen in the Maritimes when those expire.
1656 MR. REEB: Well, there’s six markets where we have morning shows that, in the Commission’s wisdom, were supported by tangible benefits. Viability on those shows is difficult economically. We want to maintain them, and we’re certainly doing everything we can to make them viable long-term.
1657 And the Commission will note that we very proudly actually attached two more local morning shows on to sort of the framework that we developed for those shows with the addition of Kingston and Peterborough.
1658 So clearly we continue to invest there. We’d like to maintain them. Some of those shows, Saskatoon and Regina, have already come off benefits. They remain on the air.
1659 COMMISSIONER SIMPSON: Yeah.
1660 MR. REEB: And we’d like to stay in that space, and obviously some of that is dependent on what happens with our discussions with Shaw.
1661 COMMISSIONER SIMPSON: So CHIF is viable but NB is it precarious, or is it viable on the basis of your plan going forward for the full licence term?
1662 MR. REEB: Well, there’s no specific benefits-related programming on CHNB other than that which is generated from CHIF. And we believe that the two and a half hour commitment that we have for exhibition -- it’s actually we do two newscasts a day so actually we’re doing five hours currently of specific New Brunswick local programming on that signal. We believe that’s viable, but to take it to a higher level would not be.
1663 COMMISSIONER SIMPSON: And if it was in someone’s wisdom to go to a higher level, again, does it put the viability of that operation in question? I mean, that’s maybe not a question you want to answer but somebody does.
1664 MR. REEB: No I think I can fairly answer it. It does put the viability of that as a distinct service in operation. I think we’re committed to serving the people of New Brunswick, but serving them with a specific programming becomes more challenging. And it’s asymmetrical to what our competitor does on the market. Our competitor on the market has, you know, a bureau operation that provides stories back. They go into a region-wide newscast. Where we’re actually producing a very specific provincial newscast, the only private broadcaster that does for New Brunswick.
1665 COMMISSIONER SIMPSON: Okay. Finally, on accessibility, described video, again you’re asking for exceptions to described video COLs. And I’m just curious as to how you justify that request in a way that I would understand?
1666 MS. COURTEMANCHE: It’s a limited exception that we’re asking for, and it’s because of the operational reality that it takes 120 hours from writing a script to delivering, you know, the actual DV content.
1667 COMMISSIONER SIMPSON: Yeah.
1668 MS. COURTEMANCHE: So the issue that we have is that this doesn’t work for late delivered or live programming. So we suggest that the exception be that you have to meet the 7 to 11 DV for all programs received at least 120 hours prior to broadcast. So it’s just to recognize the operational reality of that, otherwise it would restrict our ability to offer that kind of programming.
1669 We’d certainly make every best efforts but that’s the reality. It takes time.
1670 COMMISSIONER SIMPSON: And the three years on the procurement agreements isn’t enough to work with?
1671 MS. COURTEMANCHE: Sorry, I missed that. I didn’t hear that, sorry.
1672 COMMISSIONER SIMPSON: Well, I was asked to ask you whether having three years to adjust your procurement agreements to reflect the new requirement is something we have to consider?
1673 MS. PHILLIPS: So we do request that DV is delivered where -- and when we do our original productions, we request that it be delivered with DV. We’re talking about those rare instances where we do receive something that isn’t DV’d and it is a late delivery ---
1674 COMMISSIONER SIMPSON: And that’s the strain on your present system?
1675 MS. COURTEMANCHE: It’s just so that we don’t get penalized for, you know, being just slightly under. It doesn’t happen very often. It’s on an exceptional basis. But we just thought that, you know, so that we can ensure that we are compliant in the fact that we’re not sort of making some tough choices, you know, when it comes to described -- you know, we would like to have that little window of opportunity to still offer those programs. But, you know, that’s why we asked for it; that’s just the reality.
1676 COMMISSIONER SIMPSON: Okay. Just cleaning up on one more surprise, maybe two. We have another exhibit that I’d like to -- where is our hearing secretary?
1677 Okay, I’m going to move to the other one.
1678 Given that you are moving into the realm of being a VI but weren’t before, you are now a VI.
1679 MR. MURPHY: From a regulatory point of view, yes.
1680 COMMISSIONER SIMPSON: Yes. One of the things that we love chew on is the financial data that normally comes with being a VI as opposed to the type of operation that you have been. Would it be possible to get complete financial information for all of your discretionary services for the year ending October 31st, 2016, in a manner that would be consistent with a vertically integrated entity?
1681 MS. COURTEMANCHE: I don’t think we understand what that means.
1682 COMMISSIONER SIMPSON: My understanding is that discretionary services have a more limited financial filing to the Commission than a VI would, and that greater depth of the financials à-propos the requirements of a VI might help us understand your application going forward. And we’re asking that the financials for the year end ---
1683 MR. REEB: October ---
1684 COMMISSIONER SIMPSON: August 31.
1685 MR. REEB: August 31st ---
1686 COMMISSIONER SIMPSON: Two thousand sixteen (2016). I didn’t ---
1687 MR. REEB: I have to say this ---
1688 COMMISSIONER SIMPSON: --- make this up; I’m reading.
1689 MS. COURTEMANCHE: Yeah, I guess ---
1690 MR. REEB: This is completely foreign. I mean, we file the form that’s given to us by the Commission.
1691 MS. COURTEMANCHE: Yeah.
1692 COMMISSIONER SIMPSON: Okay, let me read the thing. I’m not afraid to just be the water boy again.
1693 “Up until this point, Corus has not been considered a VI entity under the practice established under the broadcast regulatory policy 2011-601. This limits the amount of financial information published for Corus’s discretionary services. However, in the most recent transactions between Shaw and Corus, the Commission reiterated that it has always considered Shaw Communications and Corus to be effectively controlled by the same person, namely, Mr. J.R. Shaw.
1694 “Given that Shaw and Corus are ultimately controlled by the same individual, please comment on the possibility that the Commission publish consistent with the Commission’s practice applied to vertically integrated entities complete financial information for all of Corus’s discretionary services, starting with the broadcast year that ended August 31st, 2016.”
1695 MR. MAAVARA: We’re going to have to think about that question. I’m not sure that we agree with the legal assumption that’s being made there. That just doesn’t sound right. But I guess the other thing is that I’m not sure how what we’ve been doing would be any different than your question. Because we simply fill the form and file with the CRTC as everybody else does. We’ll undertake to ---
1696 MS. COURTEMANCHE: Unless there’s a different form that we don’t know? Like, I think that’s where the issue is. We fill out the forms that the CRTC sends us and I guess, if I understand what you’re telling me correctly, there’s a different type of form that’s sent to the VI entities. I think that’s what I’m hearing.
1697 COMMISSIONER SIMPSON: Go ahead.
1698 THE CHAIRPERSON: No, you have to turn your mic off.
1699 COMMISSIONER SIMPSON: Oh.
1700 THE CHAIRPERSON: It’s a question of what is published.
1701 MS. COURTEMANCHE: Oh. Oh, okay.
1702 MR. MAAVARA: So you’re looking for a ---
1703 MS. COURTEMANCHE: Oh, the level of disclosure.
1704 MR. MAAVARA: The level of disclosure.
1705 COMMISSIONER SIMPSON: It’s a disclosure issue.
1706 MS. COURTEMANCHE: Oh, that’s where I get -- okay, that’s where I was confused because I thought, “I’m not sure what we’re not providing to the Commission.”
1707 COMMISSIONER SIMPSON:
1708 “That the Commission publish, consistent with the Commission’s practice, implying all VIs, complete financial information for all of Corus’ discretionary services starting…” (As read)
1709 MS. COURTEMANCHE: Yeah, we’ll have to come back on that because we’ll have to look at that and make sure ---
1710 COMMISSIONER SIMPSON: Okay.
1711 MS. COURTEMANCHE: Okay, so it’s the disclosure level, okay.
1712 COMMISSIONER SIMPSON: Yeah.
1713 MS. COURTEMANCHE: Yeah, I had a question on the disclosure level last week as well. So now I see the consistency. Thank you.
1715 COMMISSIONER SIMPSON: No problem.
1716 Last but not least another undertaking. Madam Roy was not here to assist me with this, but this is an undertaking marked CRTC Exhibit 2. And here we are saying that:
1717 “The Commission requires that licencees respond to the following undertaking by December 9 -- historical children programming financial data.” (As read)
1718 I’ll let you just read it and take it under advisement, okay?
1719 MS. COURTEMANCHE: We’ll do that by the 9th, yeah.
1721 COMMISSIONER SIMPSON: And I am extremely pleased to say that I am finished.
1722 MS. COURTEMANCHE: Are you done? Okay.
1723 COMMISSIONER SIMPSON: Yeah, I’m done like dinner.
1724 MS. COURTEMANCHE: Always a pleasure.
1725 THE CHAIRPERSON: Commissioner Simpson is done but we’re not done yet.
1726 MS. COURTEMANCHE: Absolutely. I know.
1727 THE CHAIRPERSON: M. le Conseiller Dupras, s’il vous plaît.
1728 COMMISSIONER DUPRAS: In your Create Policy and the notice of consultation for this hearing, we emphasize the need for broadcasters and the independent production community to work together to create a robust Canada production sector.
1729 At this hearing you’re proposing to have a minimum expenditure on PNI of 5 percent and 75 percent to independent producer. At the same time you’re looking to remove some of your other conditions of licence that were in place to support independent production.
1730 By relying only on the strict minimum percentage of PNI to establish your relationship with independent producers, how are you adequately building the necessary partnerships?
1731 MS. WILLIAMS: Yeah, that’s a great question and I think it’s an important one. And I would come at it from a couple of different perspectives.
1732 One would be that we do believe that the PNI content -- that those programs that are made in that category are critical to our system and it’s where the independent producer most and best belongs. And so the commitment to doing 75 percent of that type of content with the independent producer I think really supports the key creative community that we’re trying to support in the independent sector, the writers, the directors; it speaks to the drama world that we’re in, the documentary work that PNI supports.
1733 So I think it’s well-placed that that commitment to the independent community is in those categories of content that are defined by PNI.
1734 I think there are many other types of content outside of PNI where -- and we touched on some of this earlier -- the independent producer brings in some cases a terrific idea and some great financing to the table and then absolutely we are keen to work with them in partnership. In some other instances, whether it’s a format, you know, that’s being brought to the country and we’re delivering that format to an independent producer, the relationship is different and we think it should be different.
1735 When we’ve created the idea all on our own because we know our audiences best and we’ve dreamed it up, then we’re looking for yet again a different relationship with the independent producer.
1736 So we really believe that the commitment to, you know, fully embracing the independent producer is best made at the PNI level and we’re happy to live up that commitment.
1737 Additionally I would say that in a world of standardized conditions where genre exclusivity is gone and all of the other, sort of, definitions that used to sort individual licences and make them distinct from each other -- as that world opens up, I think it’s very hard to understand why unique licences would have unique commitments to any variety of things, including independent producers.
1738 So I think, you know, we look forward to a world where the competition is open and the system is freer and we’re all doing our best to make the very best shows possible, which to a great degree always will demand the opportunity to work with independent producers because we couldn’t possibly come up with all the ideas ourselves; we couldn’t possibly finance it all ourselves even if we wanted to. So those partnerships will always be key. But we believe the best and most important commitment is in that content that is defined by PNI.
1739 MS. COURTEMANCHE: I just have a good statistic here for you Commissioner Dupras. It’s just to tell you that across all of our English-language services, this year 94 percent of our CPE is independent -- series. Sorry, series CPE is independent, sorry. So you know, that shows you that that kind of content, it’s not just the 75 percent; it’s much north of that just because of their unique expertise.
1740 And to us, we can’t -- we will never be able to fill our schedules enough, you know, with the content that we need unless we are, you know, working with our partners. We will rely on -- we rely on them today and we will continue to rely on them for the foreseeable future. I mean, you know, the next licence term that’s not going to change; we can’t come up with all the good ideas.
1741 COMMISSIONER DUPRAS: So when you say you want to become a global content company, you’re counting on the Canadian production industry to help you get there?
1742 MS. MURPHY: We see a collaborative situation where we work in concert with independent producers on a number of different approaches. So there may be situations where a producer comes to us and they’ve got a really solid idea and it’s well-developed -- they’ve spent all the development money themselves -- and it’s kind of their’s so we’ll commission that and we don’t participate.
1743 There may be a conversation with an independent producer that comes to us and says, “I’ve got the beginnings of an idea but I really would like Corus to be my partner in that. And to it I would like you to be my distribution partner internationally, leveraging your infrastructure. Because I want to just make shows; I don’t want to travel around the world trying to sell shows.”
1744 And then we would come to an agreement, mutually acceptable, that would recognize the merit to the economics between both parties.
1745 There will be other situations -- and I’m setting aside Nelvana; that’s a different animal -- there’s other situations wherein we will develop our own idea, taking advantage of our talented team, and then we’ll figure out how to make that work. And we may reach out to an independent producer who we like and have that independent work with us but we will keep control of the copyright. All those vary. We just want to have flexibility to build the business with the producer partner and to assess the merits of each project individually.
1746 COMMISSIONER DUPRAS: So the partnership you’re talking would be on a project-by-project basis only? You wouldn’t have, like, partnership to produce, I mean, an output deal for a great number of ---
1747 MR. MURPHY: Yeah. As I said off the top, and I purposefully talked through some of our key priorities and initiatives, you know, building scale through partnerships also speaks to partnerships with the independent production community. And there are some producers we really enjoy working with and our track record is there that we go back and back again because we’ve got a really good working relationship and a great partnership. So that is essential.
1748 But we’ve also said often and always -- and Commissioner Simpson was talking about guidance and (inaudible) calls and such and I’m not going down that road today -- but I’ve always described every deal should be like a snowflake unique to itself. Every deal, inasmuch as every piece of creative that you put on the screen, the script, the actors, all that, it’s all unique to itself. And the magic of making a hit show is not just what’s on the screen; it’s the back end; it’s the deal you make. And that’s what we look to do. And our intentions to work highly collaboratively and proudly promote the Canadian content in partnership with the producers in Canada.
1749 COMMISSIONER DUPRAS: Okay. Otherwise your intention is to grow your own production operations by acquisitions or other types of partners, partnering with other players?
1750 MR. MURPHY: For this year, Commissioner Dupras, we’re not going to be doing many acquisitions; we have a pretty intense focus on paying down our debt. So we’re working on organic growth right now. So we have a very exciting slate at Nelvana which we’re going to double our delivery of episodes this year. And if those first seasons get picked up for a second season then we’ll have another big growth leg the year after that.
1751 We’ve announced that we’re doing five series of factual reality internationally, which is keying off of our lifestyle networks. But those are all -- those were -- that's organic. It's not by acquisition or building out our studio.
1752 COMMISSIONER DUPRAS: Okay, thank you.
1753 THE CHAIRPERSON: Okay, we're getting to the home stretch. So just a few -- Mr. Reeb, you said just a few moments ago -- you used the expression "the Commission's wisdom". It reminded me when I used to be in the Court of Appeal and I used to refer to my colleagues as "my learned colleague" with all the subtexts there. I take it you were taking that you didn’t necessarily agree with that decision at the time?
1754 MR. REEB: No, actually, I fully agreed with it at the time, so ---
1755 THE CHAIRPERSON: Oh, okay.
1756 MR. REEB: So no, there was no sarcasm intended in that whatsoever.
1757 THE CHAIRPERSON: Okay, just to be clear.
1758 Now, just to build on what Commissioner Dupras was asking, about four hours ago when we started, I think you said something about growing global audiences, that you definitely saw a role for your group in the non-kids' -- sorry, in the kids' world and in the lifestyle. But what about non-kids and non-lifestyle?
1759 MR. MURPHY: I think those are certainly open for assessment. I mean, what's true right now, Mr. Chairman, is -- we've all heard the expression "peak oil". They're saying it's "peak drama" right now. There's 500 in the count, 500 series in production right now in drama in North America and you know, we just don’t want to get too ahead of ourselves. So what we like to do is -- as I've -- I've used this term consistently this afternoon -- we're going to be very measured in how we approach.
1760 So I would love us to expand into new genres beyond just lifestyle and kids' animation. I'd love us to look at -- family features, I think, is an area that's ripe with opportunity, maybe test some scripted, but this isn't the year to get too far ahead of ourselves, just because, as I mentioned earlier, we've got some other stakeholders we have to pay careful attention to.
1761 MS. WILLIAMS: So again, I would just add respectfully, that they will require different kinds of partnerships to step into those more expensive, more risky genres, in some ways, and so it's -- you know, I agree with you, it's not what we're trying to do in this immediate time. But I do think it -- that's part of why we will expand our ideas about the kinds of partnerships we'll have and the kinds of relationships we'll have, because as you step into other genres, you need different kinds of deals to be done.
1762 THE CHAIRPERSON: Okay. Is the production rate for scripted drama that we're seeing, not just in Canada but internationally, sustainable?
1763 MS. WILLIAMS: You know, we've had some pretty interesting success with scripted shows in partnership with independent producers who have been, you know, really keen to see what we could do together and sell around the world. We have a track record of them that we spoke of in the opening remarks. We've got a couple of them coming this year that will come to Global that already have international dollars in them as pre-sales, not only as co-productions through the treaties.
1764 So you know, I think the way we sort of approached it to date is on a case-by-case basis. When there's an idea that we think can really resonate in Canada, and has a global opportunity, and has the right, you know, deal to be done with the right partner, then I think it's wonderful for Canada and wonderful for the world, and I wouldn't want to cut ourselves out of those opportunities too quickly.
1765 But there's not hundreds of them ---
1766 THE CHAIRPERSON: Right.
1767 MS. WILLIAMS: --- so we need to be selective and balance it with the other pieces of the business.
1768 MR. MURPHY: And if I just can follow on, my perspective, from the macro looking down, I think that's probably -- the question was, we have a lot of actors in the business -- Netflix, Amazon, Hulu -- who operate in rarefied air, in terms of economic business models. You know, their share prices are helping to fuel aggressive expansion in the investment in scripted. And thus far, it worked. But you know, it's hard to say ---
1769 THE CHAIRPERSON: Thus far?
1770 MR. MURPHY: Huh?
1771 THE CHAIRPERSON: Thus far?
1772 MR. MURPHY: Thus far.
1773 THE CHAIRPERSON: (Inaudible) suggest that you think that they may be coming up to some issues, the way they account for their future liabilities or at what point they're trading above their current revenues?
1774 MR. MURPHY: I'm not a stock market expert, but when I look at some of the forward multiples of some of these publicly traded companies that are acquiring all this scripted drama, they've got to be perfect in execution and so I would like to think that they'll make great shows because they have made great shows.
1775 THE CHAIRPERSON: M'hm.
1776 MR. MURPHY: I just think it's an interesting parlour conversation as to the evaluations of those respected entities on the public stock markets.
1777 THE CHAIRPERSON: Well, hopefully the people that invest in those companies are getting the proper advice to those choices.
1778 Mr. Maavara, please?
1779 MR. MAAVARA: Chairman, last week we were proud to announce the formation of the Canadian Association of Content Distributors and Exporters -- Association Canadienne des Exporteurs de Contenu -- and that founding group was 9 Story, Blue Ant Media, Cineflix Media, Corus, DHX Media, Entertainment One and its Quebec subsidiary, Les Films Séville. And the purpose of this group isn't so much targeted out of this side of the river, but on the other side of the river. We've made some submissions to the Heritage ---
1780 THE CHAIRPERSON: Well, it depends where the minister's office is. She's sometimes on this side and sometimes on the other side.
1781 MR. MAAVARA: Well, just -- but the laws ---
1782 THE CHAIRPERSON: (Inaudible) there.
1783 MR. MAAVARA: --- get changed over there.
1784 THE CHAIRPERSON: Okay, of course.
1785 MR. MAAVARA: That's the way I always refer to it. You're absolutely correct. We'll go down the street first and then we'll go across the river.
1786 THE CHAIRPERSON: There you go.
1787 MR. MAAVARA: But this was an initiative that those conversations started before Banff and they continued at Banff and it was really a recognition by some of the larger producers -- and DHX is both a producer and a broadcaster such as us and Blue Ant -- that we wanted to try to find another voice to talk about developing a vibrant content industry that develops, creates, and exports world-class content that is shared with audiences around the world. And the point being to just try to start developing studios in this country.
1788 So I think that's a pretty good illustration of the kinds of things and the thinking that's going on to try to grow this business.
1789 THE CHAIRPERSON: Right. Of course, the Commission can't disagree with that, because we sort of said that in our Create policy, so thank you for that -- adding that to the record. That's excellent input.
1790 Can I get back to Exhibit 3, which we had left, as to ---
1791 MS. COURTEMANCHE: Yes.
1792 THE CHAIRPERSON: -- when you would be able to respond to that one?
1793 MS. COURTEMANCHE: Yes, unfortunately, we've been emailing back and forth with our colleagues, but there are some -- I would say the majority, we can do by the 9th, but there are some that we can't. So I -- if it's okay, we'll come back and reply ---
1794 THE CHAIRPERSON: Right.
1795 MS. COURTEMANCHE: --- and we'll give you the precise questions that we can do by the 9th and which ones we require a little additional time.
1796 THE CHAIRPERSON: Right, and perhaps tell me if you could work with the option of eight o'clock on the -- Monday the 12th?
1797 MS. COURTEMANCHE: Eight o'clock Monday -- 8:00 a.m.? So we get the week ---
1798 THE CHAIRPERSON: At the p.m., 8:00 p.m.
1799 MS. COURTEMANCHE: Oh, 8:00 p.m. Oh, okay, end of the day of the 12th?
1800 THE CHAIRPERSON: Right, because that's ---
1801 MS. COURTEMANCHE: Okay, yes.
1802 THE CHAIRPERSON: That's -- sorry, 8:00 p.m. Vancouver time. No, this time, which means 5:00 p.m. ---
1803 UNKNOWN SPEAKER: 5:00 p.m. Vancouver time.
1804 THE CHAIRPERSON: --- Vancouver time. So end of -- yes, that's right. It's a bit late right now ---
1805 MS. COURTEMANCHE: Yes, thank you. That's -- yeah, obviously, it's the weekend that's going to make the difference.
1806 THE CHAIRPERSON: Yeah.
1807 MS. COURTEMANCHE: So ---
1808 THE CHAIRPERSON: But you end up, unfortunately, working on the weekend so that the public ---
1809 MS. COURTEMANCHE: That's what I'm doing already.
1810 THE CHAIRPERSON: So a little extra. It's not great for families and everything, but unfortunately, we have to be fair to others, and so I wouldn't want to have to change their reply for you.
1811 MS. COURTEMANCHE: Understood, and just so for the record, I think the -- la vaste majorité -- the vast majority -- thank you -- I get tired, I speak French -- we can do by the 9th.
1812 THE CHAIRPERSON: I've -- I live the same reality as well, so we probably should -- I'm going to keep going so we end before I completely shift to French.
1813 The standard conditions of licence, just to be clear, other than the exceptions you've mentioned, you can live with the standard conditions of licence?
1814 MS. COURTEMANCHE: Yeah, the two exceptions that we identified. One was for the advertising and the other one for the described video, yes, correct.
1815 THE CHAIRPERSON: In the letter dated 9 November -- this is about the BDU flex -- you outlined your position on that BDU flex, and you said, you know, what you're intending or not -- it was unclear as to what you're intending, but why should the Commission accept it, because clearly, even on the paragraph 3 of that submission, you're responding to Bell's position and Rogers' position. It's somewhat out of process, isn't it?
1816 MS. COURTEMANCHE: Well, we --you know, we understood that the Commission would ask us the question and would require as a commitment, so I don’t see the difference between filing it on the 9th and if we'd come to the hearing, you would have said, "Okay, what's your commitment?" So I'm not exactly sure that from a procedural perspective, you know, we're in breach of anything. I think the -- you know, when we, you know, most of the parties, you know, did commit. We didn’t commit at the time.
1817 You know, is it -- the Commission saying that, you know, because we didn’t commit back when -- the same time as Bell and Rogers did that they won't accept anything? Like, it's -- I'm not exactly sure what the procedural issue is.
1818 THE CHAIRPERSON: I'm asking you whether we should accept it?
1819 MS. COURTEMANCHE: Yes, I think so, because you would have asked it at the hearing and you would have accepted it at the hearing. I don't see what's the difference. I mean, I think you want a public record that is -- that sets out, you know, our points of view of what we should or should not do in order to have a fulsome record I think it’s correct, yes.
1820 THE CHAIRPERSON: Your discussions with Shaw I guess are still ongoing?
1821 MR. REEB: Yes, they are.
1822 THE CHAIRPERSON: And would it be possible for you to undertake to keep the Commission apprised of the developments in that regard?
1823 MS. COURTEMANCHE: Absolutely. And it’s -- yeah.
1825 THE CHAIRPERSON: So this is an ongoing undertaking.
1826 MS. COURTEMANCHE: Yeah.
1827 MR. MURPHY: We have ongoing conversations with both -- pretty much in support of local televisions. And once our discussions are complete, we’re happy to undertake with the Commission on a confidential basis -- and I understand the abridged piece as well -- as soon as possible.
1828 THE CHAIRPERSON: If nothing else, we’ve learned that today.
1829 MR. MURPHY: I don’t know if we can get this for the December 9th timing though, Mr. Chairman. I’m not sure, I can’t speak for ---
1830 THE CHAIRPERSON: I didn’t expect that for the 9th.
1831 MR. MURPHY: Okay.
1832 THE CHAIRPERSON: But I appreciate you had learned the need for abridged versions; that’s all I was saying.
1833 MR. MURPHY: I took some notes earlier.
1834 THE CHAIRPERSON: And but it is an ongoing obligation or undertaking that goes well beyond this licencing hearing, right?
1835 MS. COURTEMANCHE: Correct. And yes -- the answer is correct and yes.
1836 THE CHAIRPERSON: Now, we had discussions in the hearing in Laval about the challenge of compliance monitoring when obligations, particularly financial ones, are calculated over a five-year licence term and you can’t really measure it until the licence term is over. Can I take it that you’ve done some reflection on that, or would you rather undertake to provide the answer you’re providing on December 2nd in the context of this hearing?
1837 MS. COURTEMANCHE: Well, we’re going to definitely provide an answer on December 2nd. And we’ll repeat it on December 9th because I think it’s just in fairness that -- but having said that, the reflection that we’ve come to is, yeah, we think you can do it.
1838 But we would ask the Commission to say that, yes, you want to make sure that under expenditures are fulfilled, but we think that at the same time over expenditures should be recognized over more than the licence term. So that’s what you’re going to hear from us. It works both ways.
1839 THE CHAIRPERSON: We’ll see your submissions before we make decisions.
1840 MS. COURTEMANCHE: I just thought I’d let you know the context.
1841 THE CHAIRPERSON: Yes, of course. So for the 9th of December on that. Okay, good.
1842 MS. COURTEMANCHE: We’ll do it on the 2nd but we’ll repeat it in English on the 9th.
1843 THE CHAIRPERSON: Yes, because I -- yeah, I realized that obviously you’d be doing that second in French.
1844 MS. COURTEMANCHE: In French, yeah.
1845 THE CHAIRPERSON: People will know what you’re doing, but you will do an English version on the 9th.
1846 MS. COURTEMANCHE: And I will do an English version on the 9th, correct.
1847 THE CHAIRPERSON: Excellent. All right, I think that -- legal has one more question or two, or a few? There you go.
1848 MS. DIONNE: Thank you, Mr. Chair.
1849 With regard to Exhibit 2 on children programming financial data, can you undertake to provide for the public record an abridged version that contains the aggregated CPE expenses related to children’s programming that are included in total Canadian programs telecast, total other Canadian program expenses, and non-Canadian programming expenses?
1850 And can you undertake to provide these aggregated CPE expenses by age group, as reported in your annual return again for December 9th?
1851 The exhibit, the information is by service ---
1852 MS. COURTEMANCHE: Because it’s going to be ---
1853 MS. DIONNE: --- and we’d like to have aggregated for the public record.
1854 MS. COURTEMANCHE: You just want us to add it up; is that what you’re saying? And then provide the added up version on the public record; is that what you’re saying?
1855 MS. DIONNE: Yes, exactly. And by age group.
1856 MS. COURTEMANCHE: Yes. The answer is yes.
1858 THE CHAIRPERSON: And I’m sure the spreadsheet will do that automatically for you.
1859 MS. COURTEMANCHE: Yeah, I was going to say -- yeah, yes, oui.
1860 THE CHAIRPERSON: Okay?
1861 MS. COURTEMANCHE: Yeah.
1862 MS. DIONNE: Thank you, Mr. Chair.
1863 THE CHAIRPERSON: All right. C’est tout? Oui. Merci, Maître Dionne.
1864 So I think we’ll adjourn but before -- listen up. We will be adjourning and reconvening at 8:30 tomorrow morning.
1865 And just to be clear, there’s a forecast of freezing rain so leave early. We’re starting at 8:30 whether the applicants are here or not, so I hope they have made plans as a result of that. It’s not necessarily you before us but just be warned. You might want to listen to the weather forecast of one of the other licensees because it’s going to be messy tomorrow morning, okay? So 8:30.
1866 Donc, nous sommes en ajournement jusqu'à huit heures et demie matin.
1867 Madame Roy, est-ce qu'il y a quelque chose à ajouter? Non?
1868 LA SECRÉTAIRE: Non, je n'ai rien à ajouter.
1869 LE PRÉSIDENT: Merci bien.
1870 LA SECRÉTAIRE: Merci.
1871 THE CHAIRPERSON: So we’re adjourned until 8:30. Merci.
--- Upon adjourning at 5:20 p.m.
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