November 12, 2015 3 years 11 months ago

What on earth are we going to do about local TV?

THERE CAN BE LITTLE DOUBT that local TV is in a difficult spot. Declining ad revenue, audience fragmentation and erosion, the challenges of digital platforms, a lack of a dual revenue stream and the list goes on. But what to do about it? Some argue for a complete revamp of the local TV funding approach, while others are saying the CRTC only need to give local broadcasters more flexibility to work within existing rules.

The state of local TV is black and white, at least when looking at the revenue picture. As Bell Canada notes in its intervention into the CRTC’s review of the policy framework for local and community television programming (one of the many things to spring from the Commission’s Let’s Talk TV process), advertising revenue has declined precipitously in recent years – and a look over the last 35 years shows how the sector has gone from growth to maturity to decline. Advertising revenue growth in the 1979 to 1985 period was 12.4%; it was 2.3% during the 2000 to 2006 timeframe; and for the 2013-2014 viewing year, advertising revenue on local TV contracted 7.2%.

(Ed note: The CRTC will begin its eight-day public hearing into local  and community TV Monday morning in Gatineau and this story is one we ran in the fall when written submissions were due - before Channel Zero's CHCH went bankrupt and before Bell Media's last round of cutbacks. Surprisingly, VICE is scheduled to be the first presenter Monday, a day which will also see Channel Zero, Bell and Eastlink face the Commission. Click here for the agenda.)

This downward trend hasn’t gone unnoticed by the Commission either as it has taken several steps to try and alleviate the financial pressure faced by local TV. This has included deregulating advertising minutes per hour and decreasing Canadian content obligations by 5%. Even the introduction, and subsequent cancellation, of the Local Programming Improvement Fund (LPIF) didn’t seem to alter the dynamics of local TV, including local news.

Still, says Bell, “conventional television has a structural problem due to the fact that it has only one source of revenue.”

One option to fix the local TV and news dilemma, suggests the vertically integrated company, is for the Commission establish a local news fund (LNF) and that terrestrial BDUs begin contributing to the small market local programming fund (SMLPF). Money to set up the LNF would come from the $150 million that BDUs contribute annually to community TV. About $80 million would be shared by the LNF and the SMLPF.

“The conventional television system is broken, and there are no other options which have the potential to re-establish some sustainability for local television and in particular, the provision of local news.” - Bell

Bell acknowledges that this would be a hit to community TV, but local news should trump it.

“The conventional television system is broken, and there are no other options which have the potential to re-establish some sustainability for local television and in particular, the provision of local news. There is clearly an urgent need for change,” the company argues.

Rogers Communications joins Bell in calling for a change. The cable and media company says that local and community TV need to fall under a single framework. In that vein, it proposes to allow broadcast groups which operate both an OTA station and a community channel in one of Canada’s three largest markets – Vancouver, Toronto and Montreal – “to reduce significantly or close altogether its community channel in that market” and then be able to reallocate funding to OTA stations and community channels it operates outside those major markets.

There are some caveats associated with this approach, however. One is that local OTA stations governed under group-based licensing would maintain current Canadian Programming Expenditure (CPE) requirements. CPE would become a local programming expenditure (LPE). This would mean that 100% of that group’s OTA station CPE would be devoted to local programming. Those stations would have to follow specific exhibition requirements depending on the size of the market.

If local TV in general is suffering, local TV in Canada’s smallest markets is even worse, contends the Small Market Independent Television Stations Coalition (SMITS). It says that in 2011 revenue for SMITS topped out at nearly $100 million. In 2015, it was $78 million. Margin has dropped during that same period from 15% to 1.5%. This is why the organization supports changes to the local TV funding model.

“Specifically, we recommend the establishment of a new private local television fund from the current BDU 5% contribution.” - SMITS

“Specifically, we recommend the establishment of a new private local television fund from the current BDU 5% contribution, which includes a separate and distinct incremental contribution directed to SMITS,” it says. The group, which is comprised of Jim Pattison Broadcast Group (3 stations; 2 in BC & 1 in Alberta); Newcap (2 stations in Alberta); Thunder Bay Television (2 stations in Ontario); Corus (2 stations in Ontario); RNC Media (3 stations in Quebec); Télé Inter-Rives (4 stations in Quebec); Miracle Channel, Lethbridge; Newfoundland Broadcasting (ntv), St. John’s; and CHEK TV, Victoria B.C., didn’t provide details regarding its proposal.

Shaw Communications appears to agree with Rogers that local and community TV need to be viewed in a single light. The company argues that simply changing the funding model for local TV won’t work. Just as LPIF ultimately failed, so too will a new approach. For Shaw, the answer lies in providing local TV more flexibility to do things differently. This is where community TV comes into play.

Allowing partnerships, co-productions and program sharing among OTA stations and community channels could result in “more distinguishable, high-quality local news and current affairs that could garner audience on both local OTA and community television.”

While Shaw and Rogers see a link between local and community TV, other BDUs are opposed to any changes to community TV funding. Cogeco Cable and Telus (who own no TV brands or stations other than their community media) are among them. They believe community TV is a critical component of the Canadian broadcasting system and that any move to decrease funding would render these channels unviable while at the same time depriving Canadians of local stories.

Telus adds that local TV profitability issues should be dealt with another way. The Commission could alleviate local TV broadcasters’ obligations “to produce broad spectrum commercial local programming and instead rely on the community element to originate locally relevant and reflective programming in the various genres,” it says.

The Canadian Association of Community Television Users and Stations (CACTUS) notes in its intervention that it’s unable to provide substantive and detailed answers to the commission’s questions at this time. It says these answers won’t be clear until it fully consults its members and other stakeholders and concludes a major community TV gathering later this month in Ottawa.

The group was able to indicate it believes cable companies aren’t in compliance with the CRTC’s rules for community TV. One of the organization’s volunteers created a compliance database for English Canada and it found during certain weeks studied only 15 of the 88 cable systems were in compliance. Another member created similar database for Videotron’s market and found only one of its nine systems met the criteria for local and access programming.

CACTUS suggests in its intervention that the communities, not the cable companies, should have a much greater control over the money provided to community TV.

“Their focus is simply elsewhere, as it should be,” says the organization. “BDUs own their own national channels now... hundreds of them if they wish, which they can gatekeep to their hearts' content. They don't need to hold the purse strings and to have a stranglehold on the supposed 'community sector' as well.”

The Commission will hold a public hearing on local and community TV beginning January 25th.