Local News must be Heritage MPs’ priority C-11 amendment

June 13, 2022

CRTC commissioners have asked for a mandate to save local radio and TV news. Parliament must give it to them in C-11.

The stack of amendments waiting for Heritage MPs tomorrow no doubt includes the proposal Unifor submitted on local news [Disclosure: as Unifor’s Media Director from 2013-2021 I submitted a similar amendment to the Committee on Bill C-10].

The Unifor amendment mandates the CRTC to boost funding for local news by realigning existing industry cross payments flowing from broadcasting distributors (BDUs) to broadcasters.

Bill C-11 adds the option of tithing matching cross subsidies from foreign streaming platforms as part of their new obligations to support Canadian news, sports and entertainment, keeping in mind that Heritage Minister Pablo Rodriguez expects a $1 billion injection of cash value into the Canadian broadcasting system as a result of C-11.

Everyone —especially the Canadian public– agrees local news is at the core of our Broadcasting Act. While not indisputably the legislation’s first priority, it ranks at the top with Canadian drama and programming in the languages of our founding and Indigenous nations.

The authors of the 2020 “pre-C11” report of the Broadcasting and Telecommunications Legislative Review (BTLR) were emphatic about local news. Writing two years ago, before the pandemic, they said the financial plight of local news required action:

With the decline in BDU revenues averaging 1.5 per cent per year since 2014, the funding mechanisms currently in place are likely to be less effective over time. Conventional television stations — typically the bedrock of audiovisual spending on news and an important source of local news — have not been profitable since 2012 [see chart above]; they have lost over $600 million in revenues between 2013 and 2018. Revenues for radio have also been declining….

There is little doubt that the current model for supporting news is not sustainable. The traditional news industry in Canada, as in many countries around the world, is facing a crisis, which has serious implications for Canada’s democratic system and social values.

And so BTLR Recommendation #71 says:

We recommend that the CRTC consider that some or all of the levies on media aggregation and media sharing undertakings contribute to the production of news content. These contributions would be directed to an independent, arm’s length CRTC-approved fund for the production of news, including local news on all platforms. We further recommend that the CRTC consider redirecting a greater portion of the levy currently paid by broadcasting distribution undertakings to this same fund for the production of news.

The Report reflected a consensus about the importance of local news. It is the community hall where we see, hear and learn about each other. It’s where professional journalists hold power to account and provide fact-based reporting.

Despite the overwhelming case for saving local news, it’s often the case that significant regulatory change doesn’t attract unanimous support within the industry because some players fear losing funding in a zero sum game while some of the large media companies don’t operate enough local stations to make the BDU-to-broadcaster cross-subsidy worth their while.

Among Canadian media companies, only Bell is prepared to champion the Unifor amendment (CTV is the country’s biggest local TV provider with 36 out of 90 local stations).

Sadly, we almost had the local news funding problem sorted out ten years ago.

In the early ‘00s the cracks in the business model for local news began to show: broadcaster profit margins were dropping. The smaller the market, the more likely its local station was losing money.

The CRTC devised a solution. In 2008 it created the Local Programming Improvement Fund (LPIF) ——a $60 million news fund aiding “non-metropolitan” local stations —transferring cable profits to small and mid sized local TV stations. The fund was underwritten by a new levy of 1% of annual BDU revenues.

The 1% levy was on top of the 5% cable operators were already paying to support Canadian drama and community cable stations. Like those other obligations, LPIF was an industry cross subsidy moving from the more profitable BDUs to the less profitable broadcasters. 

Around the same time, the cash-squeezed broadcasters sought to put an end to the cable companies’ free lunch, earning subscriber dollars from station signals taken from local TV towers without compensating the broadcasters, especially in large metropolitan areas left untouched by the LPIF.

After saying no to the broadcasters twice, in 2009 the CRTC agreed to force the BDUs to the table to negotiate “fee for carriage” (FFC) payments to the broadcasters.

But before implementing its FFC order, the CRTC asked the courts to confirm it had the jurisdiction to order compensation in the first place. In December 2012 the Supreme Court of Canada said no and struck down FFC in a 5-4 split decision because of conflicts between the Broadcasting and Copyright statutes. Ironically the broadcasters found themselves cross subsidizing the wealthier BDUs with their free content.

But at least the broadcasters still had LPIF money to sustain their small and mid sized stations?

No such luck. By 2012 the industry had consolidated: the big cable and telco companies had splashed out millions to buy specialty channels and local stations. Bell and CTV. Rogers and City. Shaw and Global. Québecor and TVA. They became “vertically integrated” (VI) media companies with presumably a limitless ability to cross subsidize local news and Canadian drama from their cable and specialty profits.

Somewhere in this time frame the consumer-crusading Harper cabinet turned against the four-year old LPIF levy that cable companies had made a line item on Canadians’ monthly bills.

In July 2012 the Commission killed the LPIF news fund, ruling that vertically integrated media companies would just have to absorb the losses in local news, “innovate” (a signal for job cuts that soon followed) and keep ladling money from one side of the business to the other as a condition of keeping their licenses for overall TV operations. 

Asked to reconsider in the Commission’s 2015 “Let’s Talk TV” proceedings, Harper’s new CRTC Chair Jean-Pierre Blais was unmoved so far as the VI local stations were concerned.

Instead Blais made two tweaks to the regulation of local news. He allowed the VIs to defund their community stations and reallocate the money to their local stations; and he abolished the CRTC’s Small Market Local Programming Fund and recreated it as an independents-only news fund available to about 20 stations not owned by VIs.

But as for a dedicated stream of funding or cross subsidy for the vast majority of local news stations —-70 out of 90 are owned by the VIs—- not a penny.

That’s how things stand in 2022: an inexplicable regulatory asymmetry in which there is little relief for money-losing news journalism but a 4% revenue tithe supporting Canadian drama.

More to the point, our broadcasting economics have only gotten worse for conventional TV, meaning local news, as these 2020 CRTC statistics on PBIT/EBITDA margins demonstrate:

When asked by the Liberal government for advice on a new Broadcasting Act in 2018, the CRTC recommended “supporting television news production through increased access to subscription revenues,” advice that would be repeated by the BTLR Report eighteen months later.

It would be wishful thinking that the CRTC will venture forward on something so bold without an affirmative response to their recommendation.

It’s up to MPs from all parties to say yes.