February 23, 2018 1 year 7 months ago

Cartt.ca Investigates Altering the Acts: Pierre Karl Péladeau asks the federal government, where's the vision?

Part V in our series on rewriting the Broadcasting and Telecom Acts. An exclusive interview

BACK IN 1999, WHEN Pierre Karl Péladeau was the CEO of the world’s largest printer and a significant Canadian newspaper publisher, he didn’t know or care about the CRTC’s New Media Exemption Order, released that year. Why would he?

Back then, cell phones were still-new devices that primarily just made phone calls – which only about one in five of us owned.* Everyone got their TV off-air or via cable and just over a quarter of Canadians reported a home internet connection – upon which precious few could watch video since the network quality was low and there was little online video to speak of anyway. YouTube was still six years from launch. Facebook founder Mark Zuckerberg was in grade 11 and Google had been around for about a year. Netflix was all of two years old and sent DVDs by mail to Americans only. Three year old Amazon was a digital upstart trying hard to convince people to buy books online and Apple’s best tech were bulbous, fruit-colored iMacs.

The NMEO, an order exempting those broadcasting video via the web from all of the traditional CRTC regulations on video, made sense to most in the business then – and for Quebecor in 1999, it’s work was mostly on or about the printed page.

Fast-forward nearly 20 years and my oh my, the changes.

The digital evolution actually began for Quebecor in 2000, just a year after Pierre Karl officially took the helm of the company. With the support of La Caisse de dépot et placement du Quebec, Quebecor bought Vidéotron, the pioneering cable TV technology firm owned by Quebec’s Chagnon family, after a battle with Rogers. Given all that we have seen happen to the printing and newspaper business since (Quebecor has not been a commercial printer for a long time and now owns just three newspapers), the purchase marked one of the most significant business transitions ever made in Canada.

Broadcaster TVA also came to Quebecor along with Vidéotron, which was and remains the most watched TV channel in Quebec, airing a majority of the most popular French language TV shows in the province (18 of the top 30 this month according to Numeris). Vidéotron is the largest cable and broadband provider, a significant wireless competitor in Quebec – and its Club illico is a growing digital brand.

Given all this change inside Quebec and around the world, it’s time the NMEO (also often called the Digital Media Exemption Order, or DMEO) was re-examined, said Péladeau in an interview with Cartt.ca in his Montreal office earlier this month. “If we want to have strong capacity to compete against foreign players should we – and is it possible to – regulate foreigners… (because) Canadians are being regulated and the foreigners are not,” Péladeau said.

“I don't think that this kind of question has been asked by the Regulator. Probably they're never going to ask that kind of question, because it's quite rare that you're going to ask a body to think: ‘Should we reconsider our role or should we continue what we used to do for the last 10, 15, 20, 25 years’?”

“This is not the way that democracy works.” – Pierre-Karl Péladeau

As readers will be aware, Péladeau has led a very public fight in Quebec for what he and others say is tax fairness when it comes to foreign digital players like Netflix who do not have to collect sales taxes while Canadian companies must. This imbalance is just blatantly wrong and should be addressed by the federal government, he says. “Common ground and common legislation should apply,” he said. “Federal sales tax should apply. The laws should apply… This is not the way that democracy works.”

However, Péladeau of course knows the pat answer to why the federal government won’t force Netflix to collect sales taxes. Chuckling, the former politician (he was the leader of the Parti Quebecois from May 2015 to May 2016) scornfully points out: “They said they’re ‘not going to increase the tax burden for the middle class’. It’s a bit of a joke,” he said. “This is so stupid that at the end of the day, this will never disappear. It will stick to them.”

In Quebec, the Netflix issue has been a dominant topic, as we’ve reported. While Heritage Minister Mélanie Joly announced with much fanfare in September she had a new deal with Netflix where it will spend $500 million over five years making TV and movies in Canada, that commitment is contained in a confidential agreement and the announcement included no promises to create Francophone content (except for $25 million set aside for industry development by the U.S. streamer in Quebec) or what can be referred to as traditional Cancon. This has been spun by provincial pundits and others as an example of Joly being bamboozled by Netflix to the detriment of French culture and to the harm of Quebec businesses.

“Who are you talking about?”

So, we asked the Quebecor CEO what he would do if he woke up tomorrow with Mélanie Joly’s job. His disdain is palpable.

He laughed heartily. “Who are you talking about?”

“One of your Montreal MPs. I think you know her. She's had a lot of time to work through all this,” I said, playing along.

“Who is she?” he laughed again. “Oh you're talking about Justin Trudeau!”

PÉLADEAU’S LEVEL OF emotion when discussing the federal government on this issue makes it clear he’s angry (even though he’s laughing). His searing social media posts over the past several months have taken direct aim at Prime Minister Trudeau and his Heritage Minister. He’s angry at what he sees as a complete lack of vision when it comes to the cultural sector and the federal government’s plan to update the Telecom and Broadcasting Acts (he’s not alone in the industry in that belief). Instead, we have a federal government which just repeats the word “innovation” a lot and echoes a daily the mantra of not raising taxes on the middle class as a response to whatever question is asked.

“I'll try an answer,” Péladeau said to our query about being Heritage Minister. “Should we need to continue to regulate all of this, or should we not stop ourselves and think about having a real vision?” he asked. “What should we do to make sure that the broadcasting players, other participants, will be stronger in the future? What should we do to give them the capacity to compete world-wide?” he said.

“What should we do to make sure that at the end of the day we’re going to have a commercial balance” with foreign OTT players?

“That would be much better, with the amount of money that we're investing as a country, as a system, in this industry. What is the international landscape that we're competing against? I think that in Canada and Quebec we have a very significant amount of talent in all sorts of things. Obviously cultural talents, but technology talent like here in Montreal, as you probably know, with artificial intelligence,” Péladeau continued.

“We should try to find out how can we get all those participants – instead of focusing on legislation and regulation – to focus on the fact we need a policy. A policy is not a legislation. A policy is a thinking, it's a vision. A company will have a policy or a vision to where we are going, and if we want to go there what should we do to go there?”

All things being equal, Quebecor’s CEO says his company knows its market and can compete with anyone there, but not when the federal government lists aimlessly with little clear vision for the future, waffling with no stated firm direction or goals. Instead, the government and the Minister have mostly repeated tired old bromides dating back to an election won more than two years ago.

“At the end of the day, we know what our market is all about. We're not against Netflix coming in obviously. If they're coming here, and they think it’s worth it to invest, who's going to stop this? We have all the infrastructure, the production infrastructure from studios, to post production, and all that stuff here.

“We're always going to welcome investment in this business. But again, when they're free from paying sales tax, this is not understandable.” – Péladeau

“We're always going to welcome investment in this business. But again, when they're free from paying sales tax, this is not understandable. At the end of the equation, we know we don't need the CRTC to tell us we need to put 25%, 32%, 17%, and 52% in Canadian production. We know what our market is all about. If Netflix succeeds here, it will succeed because they will have the capacity to find out what the market is looking for.”

Péladeau also noted that his company’s position favours relaxing foreign ownership restrictions on telecom in Canada, too – as long as other countries have reciprocal rules. “I'm still for the fact that if foreign companies want to come, buy, or build, they should have the right to do so. I don't think that we should have any foreign limitation on ownership,” he said.

But what about him pushing into the United States like Cogeco has, as an avenue for more growth? He was noncommittal. “I don’t think that we’re going to buy Verizon tomorrow,” he laughed.

AS NETFLIX CONTINUES to gain strength and spend massive amounts of money on content (more than US$8 billion this year alone, which is more than double Quebecor’s annual revenue) worldwide, it will start to compete with TVA for access to the best Quebecois content, too. Until now, if you wanted to produce a TV show for the Quebec market, you likely asked first for a meeting with TVA or CBC. With Netflix in the mix able to reach French markets all around the globe, that changes the equation and will make content more expensive for Quebecor.

“We anticipated this, and this is why we created Club illico. We're going to push forward in exclusive series that will be broadcast not only on conventional television, or specialty television, but also available to the internet,” Péladeau explained. “Did we wait for the Telecom and the Broadcasting Act to be combined, or stay separate or for the CRTC to tell us? No, we did what we considered the right thing to do.”

“Legacy is of importance because it brings the capacity to springboard yourself in the future. But, if you always think about protecting your legacy, then you forget to build the future.” – Péladeau

While some Quebec politicians have, over the years, advocated for separate cultural rules and institutions for the province – even for Quebec to have its own Commission, if you will. This is not something Quebecor wants.

“It's already too complicated,” said Péladeau. “We don’t want to add something else.”

Besides, he believes technology has already overwhelmed the regulations we have. “The Internet has provided freedom. You watch what you want, you’re going to pay for what you want and no one is forcing you to pay for something that you don’t ever watch,” he explained. “The legacy system was forced to accommodate what the technology was at the time,” a legacy system which is now under serious stress.

Not that legacy business models are all bad, however. “Legacy is of importance because it brings the capacity to springboard yourself in the future. But, if you always think about protecting your legacy, then you forget to build the future.”

This is why Videotron was first to launch a-la-carte, years before the Commission told everyone to, built Club illico and decided to dive into wireless.

However, will the company take that next step – and try to become a global content player? “Do we have the financial means to go elsewhere? Certainly,” he said, but “not next week.” Through Quebecor Contenu, the company making content which is marketable around the world, something Péladeau wants to see expanded.

“Are we aggressive enough? I would say that we can push little bit more, and my role is to consider that I need to push the train stronger in the future,” he said.

“This is what is specific to the French market, is that we've been able to build our own cultural environment, which is on one side is protecting us, on the other side giving us also the opportunity to continue to invest and make sure that we will provide and propose to our customers, to our citizen, to our people, what they're looking for.”

All of this is to explain any overhaul of the Acts may not matter very much when it comes to the day-to-day pressures, challenges and opportunities inherent in Quebecor’s TV, online, cable, broadband and wireless businesses.

“Broadcast was an environment, Telecom was another one, and because of the digital revolution there's no such a thing like a completely separate environment. Should we stop ourselves and say ‘this is a new piece of legislation and therefore this will fix everything’? I would say, ‘I don't think so’."

* Data from the Canadian Wireless Telecommunications Association and Statistics Canada.

Original artwork by Paul Lachine, Chatham, Ont.