Notes for a speech by Hubert T. Lacroix, President and CEO of CBC/Radio-Canada, to the Canadian Club of Montreal

October 5, 2009

(Please check against delivery)

Ladies and Gentlemen,

Good day. Thank you for being here.

The last time I spoke to the Montreal business community was on March 26, 2009. By pure coincidence, the day before, I had announced to our employees that we had to cut 800 jobs to make up a shortfall of 171 million dollars. Well, things are less catastrophic today, since I can assure you that I made no announcements to staff this past Friday, nor this morning, about our financial situation.

I can also tell you that your national public broadcaster was hit hard by all these cuts, but thanks to the determination of our CBCers, well, we are still standing and standing proud.

Today, I would like to speak to you about the financial challenges we are facing and the key principles underlying the strategy we have adopted to stay relevant in a constantly changing media environment.

Let me start by highlighting that CBC/Radio-Canada today is much more than just a television and radio broadcaster. We now offer audiences a comprehensive range of services, from television and radio to the Internet and satellite radio, from digital broadcasting to streaming audio and video on mobile devices, and much more.

Now take a look at just a glimpse of what we offer.

What you just saw is what we managed to produce for television after the cuts – after slashing 171 million dollars, after absorbing additional costs of nearly 50 million dollars to cover the severance payments resulting from these cuts, and once other steps were taken in the final months of 2008 to counter the brutal, precipitous drop of around 60 million dollars in our ad revenue.

I hope this makes it clear why we had to cancel television shows like Le match des étoiles and radio programs like Vous êtes ici, the latter being replaced now by repeat broadcasts of Christiane Charrette,and why we now have more reruns in our schedules, on both television and radio. On the news front, we have closed our Dakar bureau and eliminated lunchtime newscasts in several regions. For shows that survived the cuts, funding has been reduced and formats have been modified. In particular, this is the case with Une heure sur terre. No service has been spared.

Despite these pressures, our programming has held up in every respect, and the fact you continue to tune in each day proves it. For your loyalty, dear friends, we thank you very, very much.

Rebalancing the system

But let us be realistic: the feat that Sylvain Lafrance’s team at Radio-Canada ― Louise Lantagne for television, Jean François Rioux for radio, Alain Saulnier for information programming, and Geneviève Rossier for new media ― managed to successfully pull off this year to preserve the quality of our schedules is not one we will be able to repeat indefinitely. Without the creation of a new equilibrium in the Canadian broadcasting system, it is clear that CBC/Radio-Canada will have serious problems fulfilling its mandate in the medium term.

Recent initiatives from the CRTC and Government will help address some of the challenges facing all conventional broadcasters.

For example, the new Canada Media Fund, on which sits Guy Fournier amongst other directors, should offer greater support for first-run, prime-time Canadian programming that is original, of high quality, and broadcast on a host of platforms – but only if the soon-to-be announced rules do not stray from these initial, publicly stated objectives.

Likewise, the Local Programming Improvement Fund (LPIF) will mean better local television. In fact, thanks to this additional money, Radio-Canada will start producing local news in the Eastern Townships on weekends. And we hope to consolidate our news presence in the medium term by providing local news, seven days a week, in Trois-Rivières, Saguenay and other regions of the country currently lacking this service.

We also hope that the situation will improve when, on November 16th, the CRTC begins to examine the proposal to permit conventional television broadcasters like us to negotiate compensation from cable and satellite companies for our signals.

You really need to understand this issue. This is, in fact, the third time that the CRTC will be looking at this question. I will try to simplify the details for you. When you pay your cable or satellite bill, not a cent goes to Radio-Canada for our main network signal that you receive at home, or to CBC for its English-language equivalent. This, despite the fact that we are the ones who created and produced these signals with our revenues (which obviously include our Parliamentary appropriation) and assumed these costs – signals that are simply intercepted by distribution companies for free and then resold to you at a premium.

Notably, last year, these distribution companies reported operating profits of approximately two billion dollars, whereas in the year before the financial meltdown, conventional broadcasters had aggregate profits of barely eight million dollars. What’s more, these same distribution companies pay 300 million Canadian dollars each year to US networks for their American content, but zero dollars to local stations in Canada for their Canadian productions. In fact, conventional broadcasters like us who produce the vast majority of original Canadian content do not receive any compensation for our signals.

In the meantime, your cable and satellite bills have increased at four times the rate of inflation in the past five years. Frankly, this is not my idea of a level playing field in what is supposed to be a regulated environment.

Finally, let’s not forget that specialty channels have received this compensation for their signals for years, on top of having access to ad revenues to supplement their income, without significantly contributing to the creation of original content.

For CBC/Radio-Canada, rebalancing the system is not only necessary, it is crucial if we are to maintain our television offering. That is why we are forming a common front with other conventional broadcasters in petitioning the CRTC on this issue. And if you think we are exaggerating the extent and seriousness of the situation, last Friday at 6:00 p.m., CTV shut down CKX-TV, its local station in Brandon, after the second buyer in the past three months withdrew its offer to purchase, citing that its business model was no longer valid because it could not convince the satellite companies to distribute that signal.

And, for the record, we believe that the amount which we would receive for the value of our signal should be paid to us without these same distribution companies simply passing on this amount to you, making you foot the bill once again.

In this regard, we are pleased that the CRTC decided last week to expand the scope of the public hearings to include such issues as consumer choice, the availability of low-cost basic television service, smaller packages of pay and specialty services, as well as the possibility of selecting pay and specialty services on a standalone basis.

$34 per capita/year: less than 10 cents per day

“But, Lacroix,” I am regularly told, “you’re already receiving over a billion dollars from the Government. Why are you complaining?”

That is true. And this substantial sum allows us to deliver many of our services – services that private broadcasters cannot or will not provide – and often to deliver them to parts of Canada where nobody wants to broadcast any signal at all, because no business model would justify the investment.

But let me talk to you about this billion dollars in a different light.

I’ll start by referring back to the 34 dollars discussed in our video. A lot of people to whom I talk have no idea what they pay for CBC/Radio-Canada. Did you know before watching our video? Did you also know that our annual budget is 1.7 billion dollars and that we generate nearly 600 million dollars in revenue through our own activities and initiatives which allow us to make up the difference between our Parliamentary appropriation and the cost of the services we provide to you?

Thirty-four dollars per person. Now consider what you pay every year for your cable service. I pay $187 a month, which translates to over $2,000 a year, whereas all the services that CBC/Radio-Canada provides to me on television, radio, the Internet, my iPod, and mobile phone cost me only $34 a year.

Or you might ask me: what is the situation in other major countries around the world? What do the residents of other countries pay for their national public broadcaster?

In a January 2009 study, the Nordicity Group found that among a sample of 18 major nations, average annual funding for public broadcasting was $76 per person. Canada ranked 15th, even though CBC/Radio-Canada broadcasts in two official languages, across six time zones, and also provides services in eight Aboriginal languages.

Over the past year, while we made Olympic-type efforts to balance our budget, I realised how little freedom we have to manage our own affairs. As I already told you, we have no financial flexibility, because we are not allowed to borrow any money, not even a dollar, to manage our cash flow. Needless to say, we do not have a line of credit.

So to cover this year’s shortfall, and pay for our severance payments, we have been forced to sell off some of our assets.

If you really want your public broadcaster to be able to deliver the services that you have come to expect, and keep pace with today’s technological and media revolution, it is paramount that CBC/Radio-Canada be given the basic management tools it requires: that is, stable multi-year funding, whatever the amount, and a degree of borrowing power relative to our balance sheet and the size of our company. And in return, we are obviously willing to be subject to reasonable disclosure and accountability provisions.

In this regard, we welcome the Government’s proposed initiative contained in last week’s Budget Implementation Bill. This should enable us to accelerate and conclude our asset sales and balance our 2009-2010 budget.

Around the world

These reflections on our financial situation have led me to take a closer look at the discussions currently under way in a number of countries about the role of public broadcasters and how they are funded to fulfil that role.

I would like to give you two examples in particular

In France — and it is pretty much the same story in Spain as well — they are in the process of eliminating all advertising on the France Télévisions airwaves. To offset the lost revenues, estimated at about 450 million euros (a little over 700 million Canadian dollars), the French Government has imposed a tax on the ad revenues of private networks along with other taxes on telecommunications companies and Internet service providers. This recent decision by President Nicolas Sarkozy is not merely an attempt to eliminate advertising on the public airwaves. It also reflects the fact that the public broadcaster can no longer fulfil its role under the current economic model.

It is interesting to note that, even before the decision to ban advertising on prime-time public television was made, France spent $65 per citizen on public television. This amount will now be increased to $77 ― twice as much as in Canada.

In Australia, where the situation is comparable to our own, the new national government will be investing an additional 167 million Australian dollars over three years to give the Australian Broadcasting Corporation the means to meet those broadcasting requirements of the country which are not met by the commercial sector and which have been abandoned by private broadcasters. Those services focus on three areas:

  • High-volume drama series that are the most effective platforms for “reflecting Australian culture and identity,” to quote my Australian counterpart;
  • A local, national and international news service that delivers comprehensive, high-quality content on every platform used by Australians;
  • The implementation of a hyper-local Web 2.0 strategy based on the current local radio network for the purpose of creating a sort of public forum facilitated as much by private citizens as by the broadcaster itself.

What I find fascinating in these foreign examples is not just the concept of rethinking public-broadcaster funding models. Rather, it is the reasons for which other countries are reflecting on these issues that I find interesting.

In both cases, the governments have recognised that the public broadcaster has no other option than to become a “total media organisation,” but that it really does not have the resources to do so in a world where content must be produced for a host of platforms that do not generate sufficient advertising revenues. In every case, those governments have come to understand that, far from losing relevance in the current media landscape, public broadcasters have become even more essential to preserving a diversity of voices and providing everyone with access to the tools they need to participate in a democratic society.

Our strategic directions

The same goes for us. To remain relevant in this new world, CBC/Radio-Canada must continue its transformation into a “total media organisation”; that is, a company able to supply content on every platform used by citizens, at any time, and to allow those citizens to interact with one another.

Canadians have now reached the “what I want, when and how I want it” stage. Today it is less about television versus radio, or the newspaper versus online. Rather, thanks to technology, it has become a question of “my time” versus real time.

The development of Web 2.0 and applications such as blogs, wikis, tube videos, torrents, and social networking sites have turned the media into tools that allow people to be both creators and consumers of content available on demand.

More specifically, here are the key principles that underpin our strategy for defining what the future CBC/Radio-Canada will have to look like to reflect this new reality:

  • We must be a content company ― the home of Canadian programming.
  • We must be the undisputed leader in reaching Canadians on new platforms.
  • We must remain deeply rooted in all regions of the country.

First, on being a content company: No matter what the platform, we are and we must be the most important creator and broadcaster of Canadian content. For us, the notion of content is explicitly linked to our remaining the home of Canadian programming. I hope that you do not think that we are the same as the private networks?

Télévision de Radio-Canada is the only conventional television network that has a totally Canadian prime-time schedule on weekdays from 7:00 to 11:00 p.m. during the peak fall/winter viewing season. We offer youth programming, unlike the conventional private networks. We produce nine current affairs magazines, four of which — L’épicerie, La facture, Enquête and Une heure sur terre — are aired in prime time. This means that 20 per cent of our weekday prime-time schedule is devoted to current affairs.

In fact, you just have to take a quick look at our schedules from the seventies and eighties to realise that Télévision de Radio-Canada is now more distinctive than ever. Think back to what we used to air: I Dream of Jeannie, Mission Impossible, Bewitched, and Marcus Welby, M.D., dubbed into French. Compare this to Aveux, Les Parent, Sophie Paquin, and Tout sur moi. Now that is distinctive public television for you.

Our second guiding principle is to be the undisputed leader in reaching Canadians on new platforms.

Take Tout le monde en parle, for example. Originally a television program, Tout le monde en parlealready had a presence on the Web and now there is a radio program that gives listeners an opportunity to immediately comment on what they have seen and heard. The idea is not to reproduce the same content on each platform, but to create new content that grows and develops from one platform to the next. That is our vision of the future of the Corporation and the future of the public broadcaster that is transforming itself into a total media organisation.

Our third principle is to be deeply rooted in all regions of the country. If there is one thing that I have heard loud and clear in my conversations with Canadians, it is that they want us to have a stronger presence in the regions.

Finding the right balance between what we know we need to do in the regions and what our budget allows us to do will be difficult to attain and to sustain, but we are making – and will continue to make – a concerted effort to maintain our presence in the regions. For that to happen, we have to make it a priority, even when funding is in short supply. That is what we did last year, when we took steps to ensure that regional stations were much less severely affected by cost-cutting measures, proportionately speaking, than were the networks: at Radio-Canada, the national network absorbed 86.3 per cent of the cuts, even though it accounts for only about 60 per cent of our total budget. That regional presence is key to fulfilling our role as Canada’s public broadcaster.

A content company that is the home of Canadian programming and a multimedia leader with a growing presence in the regions: that is the road your public broadcaster intends to follow to achieve its objective of becoming a comprehensive and publicly owned “total media organisation.” And we will consider carefully how we get there as we embark, in the next months, on a thorough review and detailed strategic exercise setting our course towards 2015.

In a media landscape that is both chaotic and extremely exciting, never before has there been such a strong need for Canadians to see themselves ― their lives, their values and their realities ― shared and reflected. That is the leadership role that the public broadcaster is ready to play and that we are working to articulate in our strategic plan going towards 2015: helping to usher in a social and technological revolution across Canada that puts Canadian voices at the forefront.

I believe that this is what you expect from CBC/Radio-Canada, and it is also what you deserve from us.

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