TORONTO – In his speech to shareholders during Corus Entertainment’s annual general meeting on Thursday, company president and CEO John Cassaday decried the state of government policy when it comes to TV and radio regs.
“While it is true that companies such as Corus have performed well in the past, in this time of unprecedented technological change and global flows, we cannot take the future prosperity of our sector for granted,” he said.
What follows is an excerpt of his written speech:
Our view is that the agencies responsible for regulating our industry are not sufficiently aligned behind the broad government policy of competitiveness and prosperity.
Achieving such alignment is an important strategic priority for our new government regardless of which party is in power.
1. Canadian regulation of the communication industry is internally focussed and needs to be re-framed to consider our relative position versus successful media and communications companies in the U.S.
We compete with these companies for capital and thus the tools to innovate, create jobs and prosper.
The recent increase in SOCAN fees is a good example. Fees were increased despite the fact that the growth in this royalty payment had already increased by 19% over the preceding five years. In this fiscal year Corus will pay at least 25% more than we did last year.
So, our “social” costs in radio are now three times higher than in the U.S. The margin gap, and this significant contributor to its existence, does not go unnoticed by U.S. investors.
2. Canadian regulation is incremental and focuses on subsidizing failure as opposed to recognizing success. The recent policy to increase Canadian expenditure commitments in brackets based on operating margins represents the introduction of telecom rate of return regulation that has no place in a competitive environment like Canadian television.
Our success in television is due to programming excellence and customer service, not rate regulation.
It is almost impossible to find an example of a specialty TV service that has had a subscriber rate increase in the past 10 years. Our success, therefore, is due to effective cost control and excellent performance by our programming and sales and marketing teams.
The single most effective way to stimulate the distinctiveness of the Canadian broadcasting system is to encourage increased contributions to artists and producers through economic growth not through progressive taxes on profits.
3. Finally, a recommendation that we have made many times in the past. We need to rethink our policy on industry consolidation. Canada needs to encourage the creation of strong media companies.
We walk a tight rope in our industry. That tight rope has cultural obligations on one side in return for protection from foreign interests on the other. It’s a system cobbled together by a series of puts and takes recognizing our scale limitation, that on an isolated basis looks flawed but in total works reasonably well.
However, going forward, securing programming rights will be essential for continued success and we need companies strong enough to be viewed as viable partners in the delivering of expensive intellectual property.
While we assess the merits of allowing consolidation and the creation of large media companies to ensure survival, we also need to assess the on-going merit of high-public benefits taxes – 10% for TV, 6% for Radio instituted at a time when multi-billion dollar transactions were not contemplated.
So, in summary from a government policy point of view, there is a need to:
1. Embrace the merits of fostering a globally competitive industry.
2. Reward success.
3. Increase the probability of success by encouraging the creation of larger enterprises.
