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

October 14, 2009

(Please check against delivery)

Ladies and Gentlemen,

Good day. Thank you for being here.

I was last in Winnipeg, in February 2008. At that time, I had just begun my term as President and CEO of CBC/Radio-Canada. Things were going relatively well. I was settling in, had started to visit our stations across the country and was looking forward to the months ahead.

Then, the storm hit, the perfect storm… and everything around me went sideways or, in most instances, down. What a stretch these last 12 months have been.

And, when we thought that matters could not possibly get any worse in our industry, last week, CanWest – one of Canada’s great media empires and a company near and dear to many of you in this room, I’m sure – announces that it needs court protection to reorganise its affairs. Tough times indeed.

Your national public broadcaster has also been wounded by these times. Many of you know that, in March 2009, I announced to our employees and to Canadians that our Corporation had to cut 800 jobs to make up a 2009-2010 budget shortfall of 171 million dollars.

That being said, things are a bit better today as our revenue lines are holding against projections, our recovery plan is about completed and, if we get from Government and Parliament the last approvals we need to sell some of our assets, it looks like we’ll be able to balance our budget for our year ending March 31, 2010.

However, I want to make sure that you leave here today understanding the significant financial challenges that your national public broadcaster is facing and continues to face, and the key principles underlying the strategy that we’ve adopted to stay relevant in an industry that is undergoing one of the most fundamental shifts in its history.

First, you must realise that CBC/Radio-Canada is today much more than just a television and radio broadcaster. We now offer audiences a comprehensive range of services that extend to the Internet and satellite radio, to 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 the Fall season that just got underway. This is our offering after the cuts I referred to earlier – after taking out the 171 million dollars from our budget and absorbing additional costs of nearly 50 million dollars to cover the severance payments resulting from these cuts; and after taking steps in the final months of 2008 to counter the brutal and precipitous drop of around 60 million dollars in our ad revenue.

I hope you’ll understand now (i) why we’ve had to cancel television shows like the regional afternoon program Living that was produced in communities across the country, including the one produced here in Winnipeg; (ii) why we’re making fewer episodes of prime-time programs like Being Erica, The Border,This Hour Has 22 Minutes, and Little Mosque on the Prairie, amongst others; (iii) why we cancelled entertainment shows like Fashion File; and, (iv) why we thus have more reruns in our schedules.

On radio, we’ve had to cancel or reduce local noon shows across the country. We’ve also had to cancel network programs like The Point and Inside Track, and reduce the budgets of live music productions on both CBC Radio 2 and 3.

And I haven’t even touched on what we’ve had to do to our French Services, which, I don’t need to tell you, was a big deal here in Manitoba given that we’re the only broadcaster serving the province’s Francophone community.

In the end, no service was spared. Yet, despite the pressures, our programming has held up in every respect, and the fact that you continue to tune in each day proves it to us. More than 22 million Canadians either watch us, listen to us or use our services on a weekly basis.

For your loyalty, dear friends, we thank you very, very much.

Rebalancing the system

But let us be realistic: the feat that our people at CBC and Radio-Canada – folks like John Bertrand and Pierre Guérin and their teams, here with us today – managed to pull off this year to preserve the quality of our schedules is not one that we’ll be able to repeat year after year.

It's obvious to me that, without the rebalancing of the Canadian broadcasting system, we’ll have serious problems fulfilling our mandate in the medium term.

Yes, recent initiatives from the CRTC and Government will help address some of the challenges facing conventional broadcasters – initiatives like the new Canada Media Fund and the Local Programming Improvement Fund.

While these are encouraging steps in the right direction, they do not solve the fundamental problem plaguing the system: the need to develop a sustainable financial model for conventional television. That task is now at hand.

Starting November 16th, the CRTC will be holding public hearings to examine the proposal to permit conventional television broadcasters, like CBC/Radio-Canada, to negotiate compensation to actually receive fair value from cable and satellite companies for our conventional television signals.

This is, in fact, the third time that the CRTC will be examining the imbalance that exists between broadcasters and distributors. It has twice rejected the idea of imposing a “fee-for-carriage” on the distributors. This time, the discussion will be on establishing what the CRTC is calling a “value-for-signal” solution.

You’ve surely caught wind of the issue by now. A high-profile PR war is currently being waged between the broadcasters and the cable companies. I will try to simplify the details for you because this matter affects everyone in this room.

Most of us pay cable and satellite companies to receive a package of channels that include a mix of local stations, like CBC, Global and CTV, and specialty channels, like TSN, The History Channel or The Movie Network.

As far as you’re concerned, when you watch television in your home, you’ve purchased and paid for your local channels and the specialty channels of your choice, right? Well, not quite. And therein lies the issue.

Cable and satellite companies pay a fee for every signal they carry and send you – all of the specialty channels you receive – except for those signals provided by local stations. They even pay US specialty networks 300 million Canadian dollars annually. So even though you pay for receiving your local TV signal, the entire amount that you pay each month stays with the cable and satellite companies.

This is what I mean: I pay $187 a month for my cable bill. Yet, not a cent of that money goes to paying for CBC Television even though we produced that television signal at our own cost. Our signal is simply intercepted by the cable company for free and resold to you at a high price.

The cable and satellite companies are thus making substantial profits, thanks in large part to this fundamentally unfair arrangement.

Last year, these companies reported operating profits of approximately two billion dollars. Their margins – more than 30 per cent in 2008 – are higher than those of the oil and gas industry. Private conventional broadcasters, on the other hand, posted profits of barely eight million dollars, all in, for a profit margin of less than one per cent. And that was before the financial meltdown.

If you think that we are exaggerating the extent and seriousness of the situation, go back to a few days ago: CTV shut down CKX-TV, its local station in Brandon, just down the road, after the second buyer in the past three months withdrew its offer to purchase, citing that its business model was no longer valid.

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 have formed a common front with other conventional broadcasters to make sure that these issues are understood by the Canadian public.

And for the record, we believe that any amount that we would receive for the value of our signals should not be simply passed on to you by these cable and satellite companies, so that you end up picking up the bill once again.

That’s why we’re pleased that the CRTC announced last week that it will be holding additional public hearings to focus on the impact that these deliberations could have on consumers. There doesn't seem to be enough competition in the television distribution sector: maybe it's time to start thinking about regulating rates again.

$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 Government. Isn't that enough? Aren't you simply asking for more hand-outs? Why are you complaining?”

It’s true that we receive an important amount from government. This important amount 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 per Canadian discussed in our video. Those dollars represent our Parliamentary appropriation and total approximately $1.1 billion.

A lot of people I talk to have no idea what they pay for CBC/Radio-Canada and its 29 services. 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, including about $350 million in ad revenue, through our own activities and initiatives? What we generate ourselves allows 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 again what you pay every year for your cable service. Remember that I just told you that I pay $187 a month, which translates to over $2,000 a year, whereas all the services that CBC/Radio-Canada provides to me, in English and in French, on television, radio, the Internet, my iPod, and mobile phone cost me only $34 a year.

Then, you might ask me: “alright, we understand that you receive $34 per Canadian per year. But 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 – third from the bottom – even though CBC/Radio-Canada broadcasts in two official languages, across six time zones, provides services in eight Aboriginal languages, and broadcasts internationally in seven languages.

If you really want your public broadcaster to be able to deliver the services that you have come to expect, it is paramount that CBC/Radio-Canada be given basic management tools: that is, stable multi-year funding, whatever the amount, and an ability to borrow and have access to commercial credit lines relative to our balance sheet and the size of our company, in order for us to be able to manage our cash flows. CBC/Radio-Canada does not have a line of credit. So to cover this year’s shortfall and pay for our severance payments, we’ve been forced to sell off some of our assets. In return for these basic management tools, we would be obviously willing to be subject to any and all reasonable disclosure and accountability obligations.

In this regard, we welcome the Government’s proposed initiative contained in the Budget Implementation Bill tabled a few weeks ago. The initiative should, in effect, 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.

Let me give you one example.

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 which are not met in Australia by the commercial sector or which have been abandoned by private broadcasters. Those services focus on three areas:

  • High quality, home-made drama series that are "integral to the ABC's role to reflect Australian culture and identity,” to quote Mark Scott, 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 really local Web 2.0 strategy built around their current local radio footprint and “able to act as not just a host, but a catalyst, encouraging and educating audiences to create and publish their content through the ABC,” again quoting my Australian colleague.

What I find fascinating in this Australian example, as in others from France and Spain, is not just the concept of rethinking public-broadcaster funding models. It is, rather, the reasons for which other countries are reflecting on these issues.

In almost 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 encouraging a diversity of voices, to promoting the values of their countries, and to providing access to the tools that citizens 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 Canadians, at any time, and to allow our citizens to interact with one another.

Canadians have now reached the “what I want, when and how I want it” stage. 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. And consequently we have to reinvent our model and practices.

So 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 and 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. That’s critically important, because in an environment of overwhelming media choice, no one else in the world or in Canada does what we do.

Unlike our private sector counterparts, which rely primarily on US programming to attract audiences, CBC Television’s prime-time schedule is overwhelmingly Canadian and that schedule has now reached its highest peak in five years to become the second most popular network in Canada. Think about it. The second most popular network in Canada on a dial that now includes hundreds of schedules dominated by American programming. It’s remarkable.

On to our second guiding principle to be the undisputed leader in reaching Canadians on new platforms.

Take a show like Q, for example. You can catch it on CBC Radio One or Sirius Satellite Radio, or you can watch it on our television network bold. You can also get it by regular or video podcast, or interact with the show on YouTube, Twitter, Facebook, or MySpace.

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.

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. For that to happen, we have to make it a priority, even when funding is in short supply. And we are.

Let me illustrate what CBC/Radio-Canada means to local communities by using Winnipeg as an example.

We partner with community groups to sponsor and promote local events and charity campaigns – things like the Winnipeg Fringe Festival, The Winnipeg Aboriginal Film Festival, the Manito Ahbee Festival for All Nations, the Saint-Boniface Hospital and Research Foundation radiothon, and the benefit concert we supported and helped create last spring for the victims of the flood.

We act as a cultural catalyst for the province. Through our work with Manitoba Film and Sound, the National Screen Institute, and the NFB, we’ve invested more than $250,000 over the past five years in the next generation of Manitoba television writers, producers and directors. We offer opportunities to Manitoban musicians through development initiatives, concert series, contests, studio recordings, and of course broadcast. And we’ve contributed to the rapid growth of the province’s independent production community by generating close to 12 million dollars in development and production over the past five years.

We also help reflect Winnipeg, its people and its culture back out to the rest of Canada through national coverage of events like the CBC Winnipeg Comedy Festival, the 2008 Hockey Day in Canada broadcast out of Winkler, and the Festival du Voyageur.

And I can’t stress enough the critical importance of our Radio-Canada station here. It is the only French-language media outlet serving Manitoba’s Francophone community; the only one tackling the issues that matter to them. It is the main source of information in French about Manitoba to the rest of Canada.

Clearly, a strong regional presence is key to fulfilling our role as Canada’s public broadcaster, particularly in an environment where the private sector will be pulling out of communities because local broadcasting is no longer financially viable.

A content company that is the home of Canadian programming and a multimedia leader with a growing presence in the regions. That’s the leadership role that your public broadcaster is playing as it makes sure that you continue to see yourselves – your lives, your values, your realities – shared and reflected in an environment where your voice might otherwise get lost. Never before has there been such a strong need for us to play that leadership role. We embrace the responsibility and are ready to deliver.

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