CBC/Radio-Canada Annual Public Meeting (PDF - 112 Kb)
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I’m here today to provide you with an overview of CBC/Radio-Canada’s financial situation. Our 2008–2009 Annual Report has been submitted to Government but has not yet been tabled in Parliament; it should be within a few weeks, and will then be available on our corporate website.
For now, however, I can present certain elements related to the sources and allocation of our operating funds for 2008–2009. I will then discuss the budget shortfall with which we entered 2009–2010, as well as the measures taken to address it.
2008–2009 FINANCIAL RESULTS AND POSITION
As most of you know, CBC/Radio-Canada operates with a mix of public and self-generated revenue. In the 2008–2009 fiscal year, total funds available for operations amounted to $1.7 billion, which allowed our nearly 10,000 employees to deliver a wide array of distinct services across multiple platforms in English, French and eight Aboriginal languages.
Of that amount, $1.1 billion, or roughly 65 per cent, came from our Parliamentary operating appropriation. As Hubert mentioned, this equates to $34 per Canadian per year. The remaining $600 million, or 35 per cent, was generated by advertising revenues, specialty services and other sources. Under our funding model, our Parliamentary appropriation increases each year for salary inflation, but not to cover inflation on the approximately 45 per cent of our spending that is for goods and services. This is funded through cost efficiencies and out of our self-generated revenues.
Looking at the allocation of our $1.7 billion in funds, a total of $1.4 billion went directly to our radio, television and Internet services, and specialised channels costs in 2008–2009. Expenditures relating to the maintenance of our technology, transmission and real estate infrastructure amounted to $189 million, while administrative expenditures were $93 million.
In response to the economic crisis, we have significantly cut the expenditures set out in our Business Plan in 2008–2009.
Both Tim and Hubert have spoken to the significant challenges facing CBC/Radio-Canada. Despite the pressures, however, we contained our operating loss on a budgetary basis to $11 million for the 2008–2009 fiscal year, through cost-containment and deferral measures. Then, thanks to accumulated surpluses from prior years, we ended 2008–2009 with a surplus of $33 million, which is 1.9 per cent of our total operating budget. Maintaining a relatively modest level of reserves is necessary to manage unforeseen pressures and since CBC/Radio-Canada does not have access to normal banking lines of credit for its operations. This is how we were able to balance our budget in 2008–2009.
Of course, we can’t talk about our financial position without talking about the economic crisis and the severe impact it had – and continues to have – on one of our most important sources of revenue, which is advertising.
The ad market in Canada began to rapidly deteriorate in July 2008. On an actual-to-planned basis, commercial revenues were down $65 million last year.
Which brings me to the current fiscal year.
THE $171 MILLION SHORTFALL
The Corporation entered 2009–2010 facing a budget shortfall of $171 million. That represents approximately 10 per cent of our overall operating budget, and it has been a significant challenge to deal with.
The shortfall is attributable to a convergence of factors.
First â€• revenue shortfall. We forecasted that to be approximately $94 million for 2009–2010. Of this amount, $71 million is related to sustained weakness in the advertising revenue market, while the remaining $23 million is attributable to lower-than-expected salary inflation funding in our appropriation from Government and to other reductions in funding and miscellaneous revenues.
The second factor is increasing costs for unavoidable items such as utilities, the costs of an aging infrastructure and programming and other cost increases. Those add up to $64 million.
Finally â€• a further $13 million is needed to fund programming investments deemed strategically imperative. These are relatively modest investments in online services, new media and specialty channels that are required in order to maintain CBC/Radio-Canada’s relevance in a changing market, to protect our audience share and to ensure that revenues will not be further eroded.
That brings the total to $171 million.
THE RECOVERY PLAN
To address this shortfall, we developed a financial Recovery Plan that was approved by our Board of Directors in March 2009.
As Hubert mentioned, the Plan includes the elimination of approximately 800 full-time positions, reductions and cancellations to our programming schedule, permanent reductions in discretionary spending, as well as compensation freezes or reductions for senior management.
It also includes plans for the sale of long-term receivables to generate $125 million. This is to support programming activities until the savings from our budget reductions begin to materialise. It is also needed to fund the severance costs that will be triggered by the Plan, on top of the $171 million shortfall.
I’m pleased to report that earlier this week, we realised proceeds from the sale of one of our long-term receivables. We continue to work closely with Government officials and our advisors to complete our remaining asset sales.
Before we turn to our question period, I’d like to briefly touch on some of the key risks that we’ll need to manage to achieve our objectives.
Like all broadcasters, we must recognise and adapt to technological changes, competitive forces, shifts in demographics, evolving consumer demands, as well as structural changes in the industry. As a public broadcaster with a statutory mandate to serve all Canadians, CBC/Radio-Canada also faces a unique set of financial risks.
These are all significant challenges that we will be addressing this year and into the future. As we near the half-way mark in our fiscal year, our Recovery Plan is on track, and with our strategies and the commitment of our people, we will continue to deliver the high-quality content Canadians want, when, where and how they want it.