Speaking Notes for Hubert T. Lacroix before the Senate Transport and Communications Committee – The challenges faced by the Canadian Broadcasting Corporation in relation to the changing environment of broadcasting and communications

February 26, 2014, Ottawa

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Mr. Chairman, senators, thank you for inviting us this evening for your study into CBC/Radio-Canada and the changing broadcast environment.

I have asked Mark Allen, Director of Research and Analysis to join me this evening because he put together the environment scan document which we shared with you and will be able to answer any questions or comments you might have. I understand our scan has been useful for your work.

Your study is timely. You already know that our environment is changing. Let me tell you that it’s happening fast, it's furious and it's relentless. A good example of this is how we covered the recent Olympic Winter Games in Sochi.

Over 33 million Canadians tuned in to watch our athletes compete. Even more significant, more than 10 million Canadians – one in three – followed the Olympics on computers, tablets and phones; 2.5 million Francophones and Anglophones downloaded our Olympics app, consuming about 14 million hours of video content offered live and on demand. While the majority of Canadians still watched television, mostly in the evenings in prime time, on-line viewing grew significantly.

How, you may ask yourselves, could we afford to broadcast these games, and deliver our content on all of these platforms?

Let me start with the rights. Some observers say we competed with the privates to obtain the rights to these games, that we somehow outbid them with public funds. Wrong. When the bidding started for the rights to Sochi and Rio, CBC/Radio-Canada was in a partnership with CTV and Rogers. Our joint bid was rejected by the IOC and, over time, both private broadcasters chose to exit this partnership. They were no longer interested in broadcasting the games. CBC/Radio-Canada was the only broadcaster left at the table. If we didn’t step up, our Canadian athletes would have had no Canadian coverage. Think about that. These young women and men work to prepare for years and nobody in their home country gets to see them perform.

That could'nt happen. So, we went at this by ourselves and submitted our own bid, but to make the numbers work, completely restructured our relationship with the IOC; basically, we partnered with them. Then we turned around and created broadcast partnerships with TSN and Sportsnet, and a historic one with RDS and TVA Sports, to allow the Olympic coverage to be enjoyed by even more Canadians, in French and in English. All of these agreements also served to reduce our costs.

Then, we focused on the production of the events, and adapted the latest technology to improve our service and, again, lowered our costs. We sent 287 employees to work in Sochi; with that crew, we did 1,519 hours of TV coverage, and 1,500 hours of online coverage (with 12 feeds). NBC had around 2,800 people onsite, for only 539 hours of TV coverage (about one third of ours) and 1,000 hours of on-line coverage (about two-thirds of ours). The BBC had 100 people in Sochi for barely 200 hours of TV and 600 hours of online coverage (with only 6 feeds). So, how did we do it? Let me show you.

We managed to do all of the production (cutting, editing and switching) back in Canada with a team of 245 people divided between Toronto and Montreal. These employees used to travel to the games like the NBC and BBC employees. Well, they no longer do because we pioneered another way of producing the coverage of the Olympic Games. This is your modern public broadcaster. And, by the way, NBC and the BBC took notes throughout the games and now want to know how we did it.

We believe that covering our Canadian athletes in signature events like the Olympics is part of our mandate. During those 17 days, we told stories, and connected Canadians to real heroes, whether they made a podium, met their performance expectations or failed in their attempts to do so.

But, while we are able to shine in this kind of coverage, our environment is changing and so are the realities that come with it.

We have provided you with a copy of the 2013 Media Environment. This document gives an excellent overview of the current broadcasting system in Canada, CBC/Radio-Canada’s place in it, and some of our challenges.

Let me ask you a question: do you believe in Canadian content? If you do, well, there are really only two policy tools available to government to ensure its promotion; one is regulation through the CRTC, and the other is public investment.

As other witnesses have told you, regulation in an internet world is increasingly difficult.

That's why most western democracies have focused on investment, particularly in public broadcasting. In your folders is a chart which shows the per capita funding for public broadcasters in 18 western democracies. Canada ranks third from the bottom; above only New Zealand and the United States.

Canada’s funding to CBC/Radio-Canada is about $1 billion dollars. That money, which includes our capital budget, is divided among all of the 33 services we provide; English and French, eight Aboriginal languages; radio, television, online; across six time zones. Compare this with the BBC which receives close to $6 billion in public funds and works in one official language and one time zone.

Right now every Canadian pays about $29 per year, $2.33 per month, for all of the services we provide. That is a lot less than your monthly cable bill or the price that you pay for your newspaper (Globe $41.99 per month). A lot of people pay more than that for coffee per day.

We use our government appropriation to produce quality Canadian programs in every region of the country. These are shows audiences enjoy. Each week, 1.3 million Canadians tune in to Murdoch Mysteries; about a million watch Dragons’ Den, the Rick Mercer Report and Heartland; two million watch Unité 9; one and a half million watch Les enfants de la télé; over a million tune in to Les parent and L’auberge du chien noir.

Those programs in turn support an independent production industry as well as local businesses and communities. In fact, a 2011 study by Deloitte found that every dollar invested in CBC/Radio-Canada creates almost four dollars in economic value for the Canadian economy.

Four years ago; we looked at the broadcasting environment and we developed a 5-year strategic plan: 2015: Everyone, Every way, which set out three key priorities and a roadmap to get there. We needed to be more Canadian, more anchored in Canada’s regions, and more digital. Let me tell you where we are today.

Canadian programming now makes up 86% of CBC television’s prime time schedule and 91 per cent of Radio-Canada’s, both well above the minimum condition of license. Let’s look at that for a second. These charts are in your folders, they show you our prime time television schedules compared to private broadcasters. The red represents Canadian programs. If creating and showcasing high quality Canadian programs is important to you, CBC/Radio-Canada is your only solution. Private broadcasters can’t do it; they can't afford to do it. Their business models don't allow them to do that. In the 2013 broadcast year, CBC/Radio-Canada’s combined investment for Canadian programming totaled $732 million while the Canadian programming expenditures for all of the private broadcasters combined totaled $614 million.

We are more firmly anchored in Canada’s regions. We expanded our local news programs and created new regional radio services in communities like Kitchener-Waterloo, Saskatoon, Kamloops and Rimouski. (A list of our 2015 investments is in your folders)

We have invested in innovative digital services in Hamilton and the south and north shores of Montreal. We created new online music services; CBCMusic.ca and espace.mu – giving Canadian artists greater exposure than they get anywhere else.

We established a safe online place for children. With kidscbc.ca, pre-schoolers create their own customized play space. Radio-canada.ca launched a new web series, Le chum de ma mère est un extra-terrestre, which helps children aged 9–12 develop their internet skills. Our new educational portal, curio.ca, puts our archives in the hands of teachers and students, informing, enlightening and entertaining children across the country.

I am very proud of what we’ve done but the truth is it is less than we had planned to. We had to scale back our plans in order to absorb budget cuts including the $115 million reduction in our parliamentary appropriation. Our contribution to the government’s Deficit Reduction Action Plan.

In 2014-15 alone, we will be dealing with a $45.5 million cut from DRAP; a $14 million cut from an additional freeze on inflation funding for salaries, and $27 million less for local programming because of the elimination of the CRTC’s Local Programming Improvement Fund.

And, yes, we will have to deal with the loss of the NHL hockey contract. This will create a ripple effect in our ability to package and sell advertising on our other television programs.

I’ve told our staff we will have to make some tough decisions this year and in our next 5-year strategic plan; not just to balance our budget but more fundamental decisions about who we are and what we do. We can’t keep resizing the public broadcaster every second year.

We need to develop a long-term sustainable financial model for public broadcasting in Canada. That is a key part of our thinking as we are presently developing the strategic plan Beyond 2015. And we need government, the CRTC, and the stakeholders who have an interest in public broadcasting, to realize that we need more flexibility in order to shine.

This is what I meant when I referred to “dark clouds on the horizon” in a note to our employees last month.

I do not believe that the answer is to become some kind of niche broadcaster, limited to doing only what private broadcasters will not do or have no business incentive to do. No other public broadcaster in the world is put in this kind of a box.

Canadians continue to show that they rely on CBC/Radio-Canada for news and current affairs, for quality Canadian drama and comedy, and for thoughtful, provocative radio programs. The Broadcasting Act mandates us to deliver a “wide range of programming that informs, enlightens and entertains”. By the way, that was the first comment from the new CRTC chair to me when he set out his expectations of us as we started our license renewal in November 2012: "a wide range of programming".

But don't take my word for it. Talk to Canadians for yourselves. We do. Find out what they want. Visit CBC/Radio-Canada facilities across the country and see all the things we do for communities. Talk to our staff.

You will find that the broadcast industry is changing, and CBC/Radio-Canada is changing with it.

Senators, before I close, I would like to address one other issue that’s been in the media and that some of you have already commented on.

I hope we can devote most of our time this evening to the many challenges facing CBC/Radio-Canada but I feel that first, I should say a few words about my expenses.

An error was made; by myself and by the Corporation, in the way my Ottawa business expenses were reimbursed: expenses that had been signed-off, posted and audited quarterly.

As someone committed to the highest standards of integrity and transparency, and who has devoted his career to the development of corporate governance, I can tell you that this has been deeply embarrassing.

The error was discovered last summer, in the course of a Human Resources inquiry on another subject. When I was told, I was stunned. I immediately asked for a full accounting and I voluntarily paid back every penny. We notified our Board of Directors, the Auditor General of Canada and the government.

I am angry at myself for not having clarified the rules surrounding my expenses when I was first appointed. I am deeply distressed that this could damage the integrity of CBC/Radio-Canada and its management of public resources.

And I want to apologize to my fellow employees at CBC/Radio-Canada. I have preached transparency and accountability for six years. We are now entering a period of great challenge. I want to assure our CBCers and Radio-Canadiens that they can continue to have faith in their leaders.

I also want to apologize to all those Canadians who support CBC/Radio-Canada for this careless error.

I have taken measures to ensure that this kind of mistake will not happen again. We will continue our commitment to openness and transparency; that has been one of my priorities at CBC/Radio-Canada.

Thank you for your time. I would be happy to take your questions.

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