CRTC Hearings: CBC: We Spent $900 Million On Cancon Last Year. It’s Not Enough to Sustain the Marketplace

The CBC was before the CRTC in one of their hearings. They admitted to burning $900 million and did some hand wringing about sustaining the marketplace.

We are continuing our world class coverage of the CRTC hearings. These hearings are on the implementation of the Online Streaming Act.

Our coverage so far has been wide, covering the hearings of Spotify, Paramount, Netflix, Amazon, Apple, Google/YouTube, Bell, Rogers, Corus, Shaftesbury, Digital First Canada, ACTRA, Unifor, FRIENDS, Michael Geist, and Tubi.

Today, we are continuing that coverage with the CBC. For those who are wondering about the source we are using, that source is the CRTC transcript which can be found here. We’ll offer some excerpts and thoughts on what was said.

In their opening statement, the CBC said this:

9648 We are one of the single largest supporters of the Canadian creative community. Last year we spent over $900 million on Canadian content, including news and creating work with thousands of independent writers, directors, producers, actors, composers, musicians and filmmakers. We provide a national and international stage for the Canadian and Indigenous creative communities. Our journalists provide trusted news and verified information on important stories to Canadians about their communities, their country and the world.

Indeed, $900 million is quite a chunk of change to spend on Canadian content (AKA “Cancon”). If one organization is able to spend that much money on such content, then you would think that Canadian content is more than sustainable. According to the CBC, however, the sky is falling on that front:

9649 Looking ahead to a modernized regulatory framework, we believe that the following considerations should be top of mind:

9650 First, the Canadian marketplace cannot on its own address the programming objectives set out in the Broadcasting Act. This fact has long been recognized by the Commission. Without support, domestic production of virtually all genres of Canadian programming is not sustainable, given the size of our market.

It’s quite the eyebrow raiser to say in one breath that $900 million was spent on this content, then in the next, say that the marketplace cannot achieve the programming objectives set out ion the Broadcasting Act. It’s blatantly obvious that there was considerable waste involved if $900 million in a year isn’t enough to get the job done.

Well, one of the controversies surrounding the CBC executive pay. When pressed on what kind of bonuses CEO’s get, the president, Catherine Tait, pushed back and said that they don’t get bonuses, but rather, “incentive pay“. This as some are questioning why the CBC is poised to layoff 10% of its workforce while Tait could receive $120,000 in bonuses- er “incentive pay” over top of her six figure salary.

While that explains a small part of the problem, it doesn’t necessarily explain the whole issue. Somewhere along the line, it is clear that a huge portion of that money was wasted if the problem is financial. If you can blow $900 million in a year and decry the lack of funding to help sustain the marketplace, then it’s clearly a you problem and not a marketplace problem.

From there, the CBC demanded the notorious base contributions which is causing a number of streaming services to consider a market exit:

9651 Second, the Broadcasting Act requires the Commission to oversee Canadian broadcasting using a system‑wide approach. As a result, some parts of the system obtain a contribution from other parts in order to fulfill their obligations to the system. While there is room to improve the existing funding mechanisms to better align with the expanded policy objectives in the Act, a system‑wide approach is still required. Furthermore, mandating base contributions to specified funds will ensure that the full breadth of the policy objectives in the Act can be met.

“Base contributions” is essentially a ransom payment scheme. In order to access the Canadian marketplace, traditional media companies are demanding that the streaming services pay tens of millions just for the privilege. That money would then get redirected to their operations afterwards – money that many streaming services clearly do not have in the first place.

Astonishingly, the CBC then went even further:

9652 Third, it is critical that contributions to the system be incremental to, and for the benefit of, the whole Canadian broadcasting system. These contributions should not be self‑serving and parties should not be permitted to offset their contributions in any way.

One of the things that the streaming services have been saying all along is that they already make contributions to the Canadian economy and the Canadian marketplace. So, if they are already spending, say, $12 million in producing Canadian content, then that should count towards helping to fulfill their obligations in contributing to the system. Here, the CBC is saying that this idea should not be allowed to proceed. In doing so, the CBC has basically admitted that this whole charade was never about sustaining Canadian culture or sustaining any marketplace. Instead, this is simply about a scheme of getting free money from another industry and ransoming Canadian citizens in a massive shakedown attempt to get it.

Incredibly, the CBC went on to nakedly say that they are entitled to the money that would flow into the system. Even funds that are supposed to be directed at “local news” should be funds that can be pillaged by the CBC:

9669 Our fourth set of recommendations are about the funds to which contributions should be directed during the financing of an initial base.

9670 In our written submissions we proposed video and audio funds that could receive monies from these contributions. We recommend that such contributions flow to existing funds and that funds be accessed under existing rules. The reason for this is simple. Given the urgent need, our objective is to implement the initial base contribution quickly. Existing funds have a track record of success, are fully operational and can handle initial contributions for the benefit of the Canadian broadcasting system.

9671 We have grouped funds under the following categories: creation of content, support for local news and information, and other public policy objectives.

9672 On the video side we recommend that funds go to the CMF and to CIPFs, using the existing 80/20 rule. As the largest fund, the CMF is intended to ensure stable and significant funding of quality Canadian content. It remains a key tool to enable CBC/Radio‑Canada to deeply support the creation of Canadian programming.

9677 Some parties are requesting to transform the Independent Local News Fund to a “Local News Fund” that would support more recipients and support news on television and radio. Some parties have suggested that a new fund be created to support services of exceptional importance. If funds are established to support local news programming, services of exceptional importance or any other areas of programming that are deemed important to the system, these funds should also be accessible to CBC/Radio‑Canada.

9678 We also recommend that contributions be mandated to support the Broadcasting Participation Fund and the Broadcasting Accessibility Fund in Step 1.

9679 We would be pleased to provide more details about the allocation of contributions to these funds in Step 1.

The CBC then went into another controversial part of the debate surrounding the Online Streaming Act. They want to tighten down what is considered “Cancon”:

9680 We are proud of our partnerships with foreign streamers. During the hearing they have focused on the benefits that they do provide to the Canadian economy, but this is not a substitute for Canadians owning and controlling the content. And to be clear, that means creative control, owning the IP and owning the exploitation of the rights. Simply put, a sustainable Canadian broadcasting system must be Canadian‑owned.

So, if a foreign streaming service makes a major investment, investing exclusively in Canadian employees, producing content that tells Canadian stories, and offers the end product to Canadians as well as showcasing that product to the rest of the world, the CBC says that this should not count as “Cancon”. This proposal is generally considered another way of driving investment towards the exits because it creates a hostile environment to international investment.

The CBC then wrapped up their opening remarks with this:

9683 As one intervenor put it, this isn’t about going too fast, it’s about catching up. Establishing initial base contributions in Step 1 will help support a diversity of voices and maintain a wide variety of Canadian programming choices while the Commission consults, develops and modernizes the system. It is a crucial first step towards establishing a Contribution Framework to support a diverse, vibrant Canadian broadcasting system for years to come.

The problem with this statement is that the Online Streaming Act is actually quite unprecedented. There isn’t really any equivalent out there. So, when they say that they are seemingly “catching up”, what are we catching up to? Who knows? The more likely scenario, however, is that the CRTC is moving fast and breaking things. The legislation was rammed through the regulatory process, the CRTC is holding hearings at breakneck speed, offering little time for anyone to issue a response of any kind, and the CRTC even went to the extreme of clearing its schedule for two years just to focus on slapping booster rockets to this process on top of it all. with streamers saying that they are considering leaving the country, breaking things is also an obvious result of this as well.

During the question and answer section, the CBC was forced to confront the impending job cuts. The CBC defended their actions by saying that the details are being worked on, but in cutting those jobs, they are trying to defend those jobs:

9686 COMMISSIONER NAIDOO: Hi there. Thank you so much for being here.

9687 It’s only Tuesday and you’ve had a really busy week already. This week you announced some major cuts, including 600 jobs. I know that despite the cuts, you have said that journalism is being protected, so I wanted to find out if you can expand on what you’re doing to ensure that that remains the case.

9688 MS. WILLIAMS: I’ll start. Some of my colleagues here may want to add in, though.

9689 Yes, it was a difficult day yesterday and we wish that it didn’t have to be that way. We have a lot of concern about supporting our employees both that will be leaving over this next year and those that will be staying.

9690 We have an obligation to try to spend the money that we do have, that we’re grateful for, that we get from the government, along with the earned revenue that’s substantial in our organization, we have a responsibility to spend that as wisely as we can. So at this stage, we are looking at how we best continue to support the key responsibilities of our mandate to serve all Canadians coast to coast to coast in English and in French and in many Indigenous languages.

9691 And so, the work that we’re doing right now as we work to the specifics of the cut that you’ve mentioned is to understand how we can work differently, how we can work more efficiently, how we can make changes to process, and how we can best use our content dollars to continue to best support Canadians in that need that we have at the CBC/Radio‑Canada that’s different from the mandate of anybody else.

9692 We have not figured out all the details on this, so we can’t give you today the specifics, but we are looking to protect local, we are looking to protect news. We have a key investment in the kinds of shows that we have on our prime time. We have a strong and loyal audience to radio. We have a young, diverse audience that’s looking for us on digital. We need to be on those platforms where that audience is. So it’s complicated and it’s important. So we’re working on it.

Bearing in mind, this is a corporation that gets roughly $1.3 billion a year in subsidies. They also get advertising dollars over top of this. So, when you know that, it makes the statements even more bizarre.

Generally speaking, there are probably loads of stories where creators are able to turn a profit at a fraction of the more than $1.3 billion budget. If the CBC is continuing to say that such endeavours are never profitable, then maybe that is a question of whether or not the strategy being employed is necessarily the best strategy. Does the CBC understand their audience? Are they serving their audiences well and offering what their audiences want? Clearly, based on the answers provided, the answer is, without a doubt, “no”. If you’re spending $900 million and not making a cultural impact, then that is clearly a CBC problem, not a market problem.

Knowing this, it is extremely difficult to picture a scenario where streamers fork over, say, another $200 million and saying that this will be the difference maker a corporation like the CBC needs to make Canadian culture sustainable. If $900 million in spending isn’t enough to do it, what hope does another $200 million even have? There is clearly a structural problem going on here that is causing money to go up in smoke.

The CBC clearly went in to this seemingly thinking that they can make the case that what is needed is free money flowing their direction. Ironically, however, what they presented actually made a very strong case for the exact opposite. You get the impression that the money is basically being thrown into a pit, never to be seen again. This raises a very good question: will throwing even more money into this pit make the situation any better? The answer here is, probably not. With the pitfalls associated with streamers exiting the market, it sounds more like a situation where Canada is basically kneecapping its innovation future for nothing.

Drew Wilson on Twitter: @icecube85 and Facebook.