Speaking notes for Hubert T. Lacroix, President and CEO, CBC/Radio-Canada, at The Economic Club of Canada’s luncheon

June 7, 2012

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Beyond Financial Plight to New Heights

Today we power up our smart phones, our tablets. We surf the web from anywhere, any time, on multiple devices. We connect with family, friends and colleagues via social networks. Almost everything’s available at the touch of a button, and there’s demand for even greater speed.

When I took this job in 2008, the iPhone had not yet come to Canada. The iPad didn’t exist. Facebook had only 100 million users.

Canada’s major broadcasters were more or less independent. TV shows were watched according to broadcasters’ schedules. HD television was in its infancy. Radio was something you had to tune into with a radio.

Lehman Brothers was still going strong; the world economy hadn’t yet collapsed; and Greece was a holiday destination, with blue waters and olive trees, surely not a subject matter for the first page of our papers or of their business sections. My first daughter wasn't yet born. Now I have two.

How times have changed.

These changes have been fascinating. And so has CBC/Radio-Canada’s biggest challenge: how to be relevant as a public broadcaster in the second largest country in the world, and one of the most diverse, at this particular time?

With all of this movement as a backdrop, we could not stand still or offer less compelling service. The broadcast environment certainly wasn’t standing still. So we needed to adapt, to evolve. And do so with the resources the government provided us on top of whatever revenue we could generate on our own. We would not – and have not since – asked for more money.

What came next was ours to shape: with and for Canadians. It’s what gave rise to Strategy 2015, Everyone, Every way. More on that in a bit.

2008 will be remembered for the global financial crisis, and with it came plummeting revenues for broadcasters worldwide. In 2009, we faced a budget shortfall of $171 million. We reduced the size of our workforce by 800 full-time equivalent positions, and sold various assets to secure the temporary funding that we required to see our way through it. We pushed cost efficiencies as far as we possibly could. And, two years later, we had managed ourselves out of a mess and balanced our budgets.

Meantime, our programs and services were connecting with more Canadians than ever before. Our people, the ones you see and hear every day (like Amanda or Dwight Drummond, or Jian Ghomeshi, or Anne-Marie Mediwake, or Anna Maria Tremonti) – and the ones behind the scenes – made all of this possible.

At the same time, we needed to adjust to our competitive landscape. In 2008, vertical integration was mainly limited to boardroom conversations across the country. The Canadian mediascape was still comprised of many independent companies spread across different media segments. Not anymore.

Today, the vast majority of media content in Canada is controlled by four companies – Bell, Rogers, Shaw and Quebecor – who have massive influence on our broadcasting system and dominant market power. Together, they control almost 85% of the entire television market. In fact, these four plus Telus companies control 83% of all broadcasting and telecommunications revenues, according to the latest CRTC report.

It’s a level of concentration never before seen. Before Bell’s bid to acquire Astral Media in March, CBC/Radio-Canada was the only national conventional television broadcaster in the country not owned by a cable or satellite company. Now, it’s also the only national radio network not owned by one.

Just this week, BCE extended its tentacles to buy Q9, one of Canada's largest providers of outsourced data centre services, thereby taking control of ancillary markets upon which the broadcast industry of tomorrow will rely. Video and audio are data intensive and the ability to make larger and larger quantities of digital content available to consumers quickly, cost effectively and on multiple devices will be essential to the success of media companies.

At stake are the diversity and range of voices in Canadian media, and that’s something every Canadian should be concerned about. Despite the almost unlimited quantity and choice of content available, very little of it is Canadian when it comes to English television, and very little of the rest is free from a small number of commercial agendas.

And that’s where public broadcasting comes in.

In this slide, which shows CBC’s, CTV’s and Global’s prime time schedules from last season, the red blocks are Canadian programming and the blue blocks aren’t.

This is where the national public broadcaster has a unique role to play, a role that no other broadcaster can, will or, frankly, could play for market-driven reasons and business models. Yet, it is precisely the role that we exist to play.

The ecosystem

Let’s stay on the topic of the broadcast ecosystem for few minutes, since it’s a misunderstood one.

CBC/Radio-Canada is not only unique in terms of its commitment to Canadian programming, but also unique in that we are the only major broadcaster that does not control distribution platforms.

In some circles, conversations about us start like this: CBC/Radio-Canada – which receives $1 billion from the government – competes unfairly against all of the other private sector broadcasters who, supposedly, have to struggle from a position of unfair economic disadvantage, claiming they receive no public support.

This is false. All media organizations benefit significantly (i) from sources like the Canada Media Fund and the Local Programming Improvement Fund and (ii) through direct or indirect regulatory or fiscal advantages, which are specially designed and set up to help fulfill legislative objectives.

Look at these numbers.

Public subsidies and benefits – direct and indirect – that private broadcasters receive round out to about $900 million per year.

That's why I have been saying for months now, "there’s no such thing in this country as a purely private broadcaster." And I’m not saying that’s wrong or bad. I am not against private broadcasters having access to these amounts. I am simply stating a fact.

There is no sustainable free-market model that will support a significant Canadian broadcasting industry without public regulation and/or subsidy. Buying and airing American programming is just too easy and too profitable.

Canadian programs cost a lot of money. So why keep producing them? Because a big, diverse, geographically dispersed country that doesn’t have the means to tell its own stories, share its common experiences, debate its issues, doesn’t stay knitted together for long. Television and radio might not be the only means of bringing Canadians together. But they are surely, for now, the most effective and cost efficient ones.

It’s a simple, if unpleasant truth: Canadian content and culture would be the single biggest failed promise of a purely free-market broadcast model in this country – period.

Without the public broadcaster, there would be fewer Canadian stories being told, shared and experienced, and the viability of the Canadian media production sector would be in serious doubt.

The challenge is to ensure that both the public and private parts of our mixed system have the necessary capital, business models and resources to sustain evolution and give Canadians access to unique content across all platforms.

We’re all in this together. While it’s clear that we play different roles, we have a mutual interest in keeping Canadians connected and satisfied, and we should recognize that as such.

Local Program Improvement Fund and License Renewal

It’s a timely discussion to have, this one, for two reasons: first, a decision is pending on the future of the Local Program Improvement Fund, on which the CRTC is currently deliberating; second, the CRTC will be renewing our licenses this coming November after a number of false starts. In fact, the last renewal of our licenses dates back to 1999–2000.

With respect to the LPIF, it was created three years ago to improve the viability of television stations in smaller markets after a number of local stations were closed and more were threatened. The beneficiaries of the Fund are Canadian viewers in markets with populations of one million or less. It has been a tremendous success, having stabilized the financial position of local television stations and significantly boosted the level and quality of local programming in the television services of broadcasters, public and private.

It has enabled CBC to give local viewers 30% more high quality news and non-news programming, like the East Coast’s Land and Sea, one to one-and-a-half hours of supper-hour news shows in seven of eight eligible markets, the addition of new late-night newscasts in all eligible markets and enhanced coverage of local sports, special events, elections, breaking news and weather.

And Radio-Canada has this year broadcast a combined total of more than 5,000 hours of local programming in eligible markets – that’s 23% more than pre-LPIF levels.

We, the public, pay for the LPIF through our cable or satellite bills. On my personal cable statement it is marked clearly - $2.19 for LPIF. As you can imagine, if the CRTC decides to reduce or eliminate the LPIF, as they are being lobbied ferociously to do, that money will disappear and local programming will, once again, suffer.

Second, with respect to the renewal of our licenses, the CRTC has let us know that the Corporation’s license renewal hearings will be held this fall, starting November 19.

For us, we’ll be looking to see that our conditions of license enable the continued transformation of the public broadcaster. As the industry has trended and continues to trend towards greater deregulation, the public broadcaster absolutely needs a flexible regulatory framework that will support us as we move to become more distinctly Canadian, more regional and more digital.

LPIF and licence renewal: again, two reasons why it’s important now that Canadians understand how the ecosystem works and, more importantly, what it needs to keep working – a strong balance between public and private interest.

From a budget reduction to new debates about our role

Now that we’re on the subject of timely discussions, I’m going to take for granted that everyone in this room knows that in the last budget, our appropriations were reduced by $115 million over three years and that, when we add on unavoidable cost increases and the investments required to continue to transform ourselves, we’re actually having to reduce our annual budget by $200 million over the next three years, plus find $25 million more for severance.

We are not able to be all things to all people. Some activities, further from the core of our mandate or nearing the end of their life cycle, are actually being shuttered. The challenge remains, through one service or another, to be something for and mean something special to, every Canadian.

We expect to be able to offset that $200 million hole with $50 million in new revenues doubling our digital revenue, increasing television advertising inventory, introducing advertising to two music radio networks that were ad-free, and leasing excess real estate.

That will leave a challenge of about $150 million. Obviously, this will have a significant impact on our services, organization and staff. We expect that up to 650 positions will be eliminated over three years, including about 475 this year.

We’ll save $20 million by discontinuing services that are nearing the end of their life cycle: shutting down all of our 620 analogue television transmitters – the largest transmission infrastructure in the world.

And discontinuing the shortwave transmission of our international radio service. Instead, we’ll completely transform RCI, and broadcast on the web – in French, English, Spanish, Arabic and Mandarin.

We’re going to take $100 million out by doing 100 things differently, from leveraging digital technologies, to reducing production expenses by eliminating outdated processes, to selling bold, one of our few specialty channels, and cancelling the development of three others. We’ll also reduce the range of programming in music, sports and even news, and decrease our real estate footprint by 800,000 square feet by 2017.

However, even having done all that, we’re going to have to scale back on the ambitions of Strategy 2015 to the tune of $30 million. The public, not having received these new services, might be more upset about some of the other things we are doing – like having to cancel Connect or Dispatches, narrowing the focus of our amateur sports programming, shutting down analog transmitters or introducing ads on Radio Two, for example – but, for me, slowing Strategy 2015 is what hurts the most because it impacts our future.

But even with all that, it is our intention over the next three years, as our per capita funding declines from $34 per Canadian per year to $28.60 per Canadian, to hold to our commitment to be more Canadian, more regional and more digital.

Here’s a clip that showcases what Canadians today get in return for that investment…

I find it interesting to see that in the lead-up to, midst and wake of the budget announcement a number of discussions and debates about the role and future of public broadcasting have sprung up across the country. Whether it’s at The Toronto Star, via Friends of Canadian Broadcasting, or Reimagine CBC.

I have listened and have been interested by people’s passion, and sense of ownership and belonging. Everyone should feel free to express opinions about our strategy, programming or mandate, our existence, the services we provide or the cost of them. I believe it’s healthy and vital and I appreciate the new and diverse perspectives.

Value for money

Expanding our service to multiple platforms while seeing our budgets dwindle annually has obliged us to become a remarkably lean and efficient organization. We’re proud, given the financial resources at our disposal, of the value we offer Canadians.

A recent study by Deloitte (that we published in June 2011) showed that, for every dollar we received from Canadians, we generated almost $4.00 for the Canadian economy.

The study also concludes that, under privatization, CBC’s contribution to the economy would be $1.3 billion less than it is now. Why? Because, according to the study, a privatized CBC would compete more heavily with other broadcasters for ad revenue, commission less home-grown content and spend more money on foreign programming.

Along with the financial impact, the industry would lose the stable and predictable investments we make in Canadian programming. For the 2011 broadcasting year, we invested $704 million in Canadian programming, a sum that is more than the $512 million invested by all major private conventional broadcasters combined.

An elitist or popular CBC

There’s also the question of whether the public broadcaster should be elitist or popular, that the number one thing that needs to be done to fix CBC is for the government to choose between an elite CBC with arts programming in prime time or a popular CBC.

This is one that’s been around for ages. It tends to be advanced by people looking exclusively at CBC Television and not at the full range of our services. Canada’s far too complex and diverse a country to be divided into two such simple segments. Nor is public broadcasting an either/or proposition. We offer 30 services today and classical music, kids programming and reality TV all have their place and serve the needs of some Canadians.

My job, and the job of everyone at CBC/Radio-Canada, is to serve the broadcasting needs of all Canadians. Scan our services. Peruse our schedules and online offerings. There, across the whole range of everything we do for Canadians, you will find a broad range of services and program offers that are much more than a reflection of the values of a narrow elite, and that seek to build audiences among Canadians without sacrificing cultural meaning, relevance or the quality that they have come to expect of us. And we’ll do that by continuing to evolve to deliver on our mandate in a new and modern way.

Vision for the future

Strategy 2015: Everyone, Every way is our vision for becoming the leader in expressing Canadian culture and enriching democratic life.

It was the result of a full year’s work, and is all about focusing on three thrusts: (i) becoming even more Canadian and differentiated in our prime-time programming, (ii) being more regional than ever as we seek to deliver services to six of the seven-and-a-half million Canadians who are either not served or underserved by our local services, and (iii) being more and more digital in the delivery of our services, all of this while being cost-effective and accountable.

Where we are going has never been clearer; getting there is our focus.

Let’s take a look at how are we doing so far on implementing the plan.

With vision and focus – and relentless work – comes success

We’ve announced plans to introduce or improve regional and local services to more than six million Canadians and add new weekend local news programs on television, radio and online in key regional markets.

As part of this, just last month, we launched CBC Hamilton, a new digital service that provides a robust, up-to-date experience with content specific to the residents of Hamilton and the city’s neighbourhoods, and is now available at CBC.ca/Hamilton. It’s not TV or radio – there are no available frequencies in Hamilton. Instead, we’re using the web to its full potential to provide the up-to-date local information people in the community want.

New local service for Kamloops, London, and the Waterloo region is coming later in 20122013 and Saskatoon will be up and running in the summer of 2013.

We’ve launched CBC Music – Canada's free new digital internet and mobile music service: 40 web radio stations, 14 distinct genre-based communities, concerts, features, and more to unite Canadian music lovers online at cbcmusic.ca. Over 29,000 Canadian artists have uploaded their content to CBC Music. Over 130,000 Canadian songs are available on the site. It’s the kind of world-class, ground-breaking service that Canadians should expect from their public broadcaster.

Radio-Canada has also launched two new microsites, Radio-Canada.ca/Rive-Sud and Radio-Canada.ca/Rive-Nord. This is an experiment in a hyper-local service where residents of Montreal’s North and South Shores, who have a vibrant life outside the city core, can now go to stay informed, exchange views and react to local events affecting their daily lives.

Radio-Canada has also launched Explora, a new specialty channel focused on health, environment, nature and science.

And we’ve done all of this and a lot more in the year since announcing our strategy.

2015 and beyond

So, where to from here for CBC/Radio-Canada?

Public broadcasting is today at the centre of Canadian cultural and democratic life, and it’s pushing ahead the way a modern public broadcaster should – quickly and in concert with Canadians’ evolving expectations.

A February Ipsos Reid poll indicated that Canadians rank CBC as Canada’s sixth most influential brand – and the only media brand in the top 10. Criteria included: (i) leading edge, (ii) trustworthiness, (iii) relevance, (iv) presence, (v) corporate citizenship and (vi) engagement with Canadians.

Radio-Canada’s brand has a presence in the French market.

That is a vote of confidence. And that same confidence and support has been echoed in the wake of the budget reduction and the changes we’ve had to make. That’s not something we take for granted; rather, it’s what motivates us to move forward.

In the short term, securing access to LPIF and flexible regulation from the CRTC is key. We appreciate your support in that. Canadians need to let decision makers know that the Canadian broadcasting system works — and that it needs public broadcasting to be empowered to serve their needs in new and modern ways.

Longer term, we know that the digital world never stops; it never sleeps. And neither does CBC/Radio-Canada. 2015 is just a sign post, and it’s not far off. While there’s still a lot of work to be done to get us there – and indeed many challenges along the way – we also have to start looking beyond 2015 and planning for it.

The mediascape is evolving in ways that will make the future much more about people’s experience than just the content. Sharing it, interacting and engaging with it. Co-creating and re-recreating it, being a part of it. The future of media is participatory and collaborative.

The public broadcaster will need to devise new ways to collaborate with and complement everyone and everything else that’s out there to ensure that we are, and can continue to be, the first place that Canadians think of when it comes to the Canadian experience, Canadian culture, and Canadian democratic life. Anything short of that isn’t good enough.

With all this in mind, our commitment is to create public spaces where you can better understand the world, your country, your province, your city, your community and your neighbours while securely and confidently expressing your opinions and sharing your experiences.

Together, we can continue to create and nurture the culture and democracy we want to see.

Thank you for listening.

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