GREG O’BRIEN MAKES SEVERAL VERY valid points in his analysis earlier this week: “Why 5% PNI doesn’t matter” but I disagree with his conclusion.
Yes, the world is moving to a more transactional, ‘pick-and-pay media marketplace’ though not quite as quickly as some, including the CRTC, suggest. According to the CRTC’s own Communications Monitoring Report for 2016, the number of hours per week of traditional television watched by Canadians has dropped by only 1.3 hours in the past four years. Traditional television is still a primary source of entertainment and information. Average weekly hours of ‘Internet TV’ have increased by 2.2 hours in the same time so the other trend is that people are watching more television but are diversifying their sources of television programming (i.e. Netflix).
This means a couple of things. One, that traditional funding and delivery models of television are still relevant. Two, that there is more competition for audience than there once was. The second point supports Greg’s conclusion that Canadian broadcasters need to commission more original content and if they do not ‘they’re dead’ – and I have no dispute with that. If Canadian broadcasters want to stand out in a crowded universe they must become known for their high-quality content that no one can get anywhere else. That means shows like Cardinal and Mary Kills People and treaty co-productions like Vikings and non-traditional co-productions with Netflix like Travelers.
This all makes perfect sense to me but the problem is that I have been hearing this wisdom for years now. The CRTC keeps lowering regulations on broadcasters, lowering expenditure requirements and exhibition requirements and allowing them to pool expenditures across groups, in the name of the flexibility needed to compete with Netflix and now Amazon Prime. Have the broadcasters used this flexibility to spend more on Canadian dramas and documentaries so that they stand out for the uniqueness of their programming? No.
In the Notice of Consultation for the Group Licence Renewal hearing, the CRTC itself identified that there had been a drop in spending on Programs of National Interest (drama, docs, award shows): “The PNI expenditures of the large English-language designated groups saw an annual decrease of 12.7%, dropping from a cumulative sum of $158.5 million in the 2011-2012 broadcast year to $105.4 million in the 2014-2015 broadcast year.”
Year after year, Canadian broadcasters go down to Hollywood and buy U.S. programs. They are a cheaper investment than commissioning original programming and come with built in cross-border promotion. During the 2010 recession, before expenditure requirements were reinstated by the CRTC in 2012, the broadcasters addressed the drop in advertising revenues by cutting their spending on Canadian drama and increasing their spending on U.S. dramas. The PNI CPE puts a limit on that behaviour but it does not stop it. In fact, the Canadian broadcasters were in LA on their annual buying spree the week that the CRTC Group Licence Renewal decision was announced. Why then should the CRTC lower the PNI requirement and allow them to spend even less?
"It’s nice to talk about the great, big borderless world and how Canadian programs can compete internationally and bring in revenue, but they need to be financed and produced first."
Private broadcasters have built their businesses based on maximizing advertising dollars and keeping programming costs to a minimum. Advertising dollars are shifting increasingly to digital platforms not just because that is where audiences are but also because advertising on those platforms can be more targeted and get a better response rate.
To maintain the same profit margin, broadcasters seem to be responding again by cutting their most expensive costs – Canadian drama (Canadian documentaries have already been pretty much eliminated by the private broadcasters). Other strategies would be to grow audiences with unique programming or shift resources to digital platforms (which Bell Media is doing with CraveTV) but when CRTC regulation allows it, cutting those costs is the easiest path.
So, we go back to the first point. Traditional funding models are still important and ensure that during this time of transition there is still a minimum of quality Canadian drama and documentaries on broadcast television to ensure that Canadians have the choice to watch Canadian programming when they relax at night.
Broadcaster licence fees are needed to trigger Canada Media Fund backing, Certified Independent Production Funds and as eligibility for most federal and provincial tax credits. Lower PNI expenditure requirements will not mean that they spend less on each show as the Canada Media Fund has set minimum licence fees for eligibility, but instead it will mean fewer programs commissioned.
It’s nice to talk about the great, big borderless world and how Canadian programs can compete internationally and bring in revenue, but they need to be financed and produced first – and the Canadian broadcaster is an essential piece of that financing puzzle. Once the show is on the air and a proven success, then it can go on to sell around the world, as Canadian dramas have been doing for decades. A lower spend on PNI means that there will be fewer shows to export.
After years of hearing that it is in broadcasters’ best interests to invest in and nurture distinctive high quality Canadian PNI but instead seeing them stick close to their regulatory requirements, it is very discouraging to see the CRTC lower the bar and even further reduce the incentive to be forward-thinking and innovative.
Kelly Lynne Ashton is a Canadian media policy wonk who writes the Wonk Report for Tv, Eh? [www.tv-eh.com] and her own blog Butter Tarts and Brown Drinks [www.wonktacular.com], when she isn’t consulting for clients on policy, research and conference programming.
