Broadcasting industry needs relief from Covid, Netflix impacts
By Denis Carmel
GATINEAU – Back in July, the newly invigorated Canadian Association of Broadcasters (CAB) requested measures to provide regulatory relief to private Canadian broadcasters on an urgent basis in the face of the hardships presented by the Covid-19 crisis.
The Commission responded on September 17, by issuing a call for comments on the application – along with some of its own preliminary views on the CAB’s application – while also asking for comments on seven specific questions.
Of course, the CAB application represents the views of its members suffering serious ad revenue losses and its application predicts the closure of radio and TV stations if help is not granted.
Film and TV makers, while sympathetic, are not exactly on side with the broadcasters’ position. “While the proposal would certainly help to ensure the viability of the broadcasting sector by ‘wiping out’ any non-compliance with spending obligations in the 2019–2020 broadcast year and maintain the broadcast of news and information programming to Canadians, it fails to ensure that parties that currently benefit from the requirements imposed by the Commission on broadcasters are not unreasonably affected and there is no accountability from entities seeking relief to the Commission because the type and amount of non-compliance has not been identified,” said the Canadian Media Producers Association in its response.
“The CMPA proposes that the Commission provide regulatory relief by giving private broadcasters more time to meet COLs and other regulatory obligations relating to spending for the 2019–2020 broadcast year. Specifically, we propose that large private ownership groups be granted two years and all other private broadcasters be granted three years to coincide with the end of licence terms,” its application reads.
However, the CAB told the Commission in its application TV stations need relief from their 2020 and 2021 Canadian program expenditure (CPE) as well as programs of national interest (PNI) obligations because the impact of Covid-19 will leave them unable to meet them – nor will they be able to afford to make them up in the future.
It proposed due to the crisis and the dramatic drop in revenues the CRTC should simply deem broadcasters in compliance with their spending requirements until the crisis passes. The CAB also warns its members may not be able to meet exhibition requirements, too.
“ACTRA also notes, at the time of writing, Canada has entered the second wave of the pandemic. While the precedent of the 1918–1919 flu pandemic, where the second wave was substantially worse than the first, is worrisome, we fervently hope the vigilance of Canadians, combined with modern science and excellent healthcare, will prevent this in 2020-21,” their application reminds us.
“ACTRA is also mindful that CPE and PNI are minimum spending requirements, not maximums, although most broadcasters seem to consider them to be a ceiling.”
But the actors union also adds “An important element of the CPE and PNI spending requirements is they are calculated as a percentage of broadcasting revenues earned in the previous year. They are thus self-regulating over time—if revenues decline, spending on Canadian content does likewise—if revenues increase, more money must be spent on Canadian programs and PNI. ACTRA is also mindful that CPE and PNI are minimum spending requirements, not maximums, although most broadcasters seem to consider them to be a ceiling.”
While most of the discussion centres around television, on the radio side the music industry relies on the Canadian Content Development (CCD) and the Canadian Independent Music Association told the Commission in its response that it can’t weather major losses in contributions. “We respectfully ask the Commission not to allow Canada’s private radio broadcasters to walk away from their CCD obligations for broadcasting year 2019–2020, including as they relate to the tangible benefits contributions they are required to make as a condition of their broadcast license,” reads the CIMA response.
“Furthermore, these CCD requirements are based on a percentage of the previous year’s revenues and are already subject to year-over-year flexibilities that permit the carrying over of under-expenditures into subsequent broadcast years. Clearly, the policy regulating CCD contributions is built to be a flexible payment system that floats with fluctuating revenues so that the requirements remain fair and don’t become too burdensome for the licensees,” their application reads.
“Private broadcasters, small and large, independent and vertically integrated, continue to focus programming investments on local news and information coverage despite facing serious financial challenges to their businesses. We note this stands in stark contrast to stable funded CBC which decreased its local news investments at the start of the pandemic, and continues to compete with the private sector for advertising and subscription revenue.” – CAB
The CAB insists news is paramount. “Private broadcasters, small and large, independent and vertically integrated, continue to focus programming investments on local news and information coverage despite facing serious financial challenges to their businesses. We note this stands in stark contrast to stable funded CBC which decreased its local news investments at the start of the pandemic, and continues to compete with the private sector for advertising and subscription revenue,” reads its response to the Commission’s call.
“Operators truly wish to avoid station closures, particularly during times of crisis, as is evident in their conduct to date and their willingness to operate despite losses. These losses, that for private local TV have been ongoing for six years, combined with the most recent aggregate financial data for both private local radio and TV, paint an unsustainable picture.”
“The Commission’s proposal factors in none of this. It just returns to the ‘normal’ regulatory principle of the entitlement of the Beneficiary,” adds the CAB.
The individual broadcasters present a united front, all supporting the CAB position, something of a change form the past.
“News is a high-cost, high-value production, and Rogers was able to sustain our news investment with help from the CEWS (Canadian Emergency Wage Subsidy) program. However, in the face of the drastic reductions in advertising revenue, we will be required to find cost savings, which will include reducing program costs… Accordingly, Rogers is asking the Commission to consider granting licensees the flexibility to make up CPE shortfalls without having to make-up specific PNI commitments in the 2019–2020,” reads the company’s submission.
“It should be noted that Rogers has not made its 2019–2020 television payments to FACTOR. As part of our proposal, we request the suspension of the condition of licence (COL) that requires us to direct 0.17% of prior year’s broadcast revenues to FACTOR, for the 2019–2020 provided that the same amount is directed to news and information programming by the end of licence term,” adds the Rogers submission.
“The harm for the 2019–2020 broadcast year has already been felt. It should not be further compounded by forcing broadcasters to make up for shortfalls they can ill afford during these difficult financial times let alone be forced to invest in programming that is non-core to their mandate,” says Rogers.
Corus Entertainment paints a dark picture. “Covid-19 has exacerbated our pre-existing financial and competitive challenges. Television and radio advertising revenues have been declining steadily over the past five years; we continue to see erosion of the traditional television subscriber base; and, new foreign direct-to-consumer digital services continue to enter the market, thus driving down audiences and driving up the cost of foreign and Canadian programming.”
The company which runs Global Television also takes a shot at the Canadian Programming Expenditure (CPE). “It appears the Commission is placing inordinate weight on a potential loss of ‘funding [that] directly benefits Canada’s creative and artistic communities’ in this process. To our knowledge, the dominant policy rationale for CPE is not the funding of Canada’s creative and artistic communities. Rather, recent regulatory policies and statements have aimed to promote successful, high-quality content that entertains and informs Canadian audiences.”
“CPE is not a levy designed strictly to support dependent groups,” Corus offered. “A dollar spent hastily is likely to be a dollar wasted on content that will struggle to find an audience and provide minimal returns. Corus cannot afford to waste any dollars in this environment.”
“Indeed, we took a $448M impairment charge in Q2 2020 to reflect the diminishing value of our media assets.” – Bell Media
Bell Media is also feeling the pressure. “The fact is that requiring the CPE spend to be made up will undoubtedly compound the instability of the broadcasting sector, which apart from reeling from the impacts of the Covid-19 pandemic, has already been set back by the emerging dominance of the unregulated foreign digital giants who take a significant share of Canadian viewers and listeners, all without contributing to the Canadian broadcasting system. Indeed, we took a $448M impairment charge in Q2 2020 to reflect the diminishing value of our media assets.”
In contrast, Blue Ant Media took the heat down a notch. “As nobody can definitely know exactly how or for how long Covid-19 will affect broadcaster revenues, concrete decisions regarding regulatory relief on a go-forward basis should not be made at this time.”
This outlook is shared by the Independent Broadcast Group. “Our main concerns are: first, it is premature to make a determination on the future regulatory obligations for broadcasters; and second, any such determination would need to take into account the specific circumstances of different broadcasters—especially the circumstances of broadcasters in the highly diverse independent sector (for which there is not likely to be a ‘one size fits all’ solution).”
Unifor, a union representing many workers in the industry, calls the CAB application “a cry for help and it is authentic. There is no small measure of brinksmanship in it. The broadcasters are telling the CRTC they are not complying with their obligations in 2019–2020 and, if the Commission does not like it, they can slap them on the wrist when licences come up for renewal.”
It went on to criticize the Commission. “Whatever action the CRTC takes, it has to accept that it has long been contributing author to this broadcasting crisis. Given the CRTC’s historic refusal to terminate the DMEO [the digital media exemption order, which exempts the likes of Netflix and others from regs like mandated CPE], which has allowed foreign streaming giants to undermine the Canadian broadcasters’ business model, it would be perverse and counterfactual for the CRTC to regulate on the assumption that the Covid crisis is just a revenue blip that will even out given enough time.”
Final replies are due October 29th.
