Under the radar, Canadian broadcasters want to spend less on Canadian content

June 21, 2023

Last week’s Bell announcement of 1300 job cuts and closings of six AM-radio station woke up a lot of people who may have acclimatized themselves to the steady drip-drip of television layoffs over the last ten years. The number of bodies headed out the door in Bell Media CTV is — a guesstimate— around 340. There is no fudging the impact of a six per cent staffing reduction on productivity and programming .

So naturally Bell chose last week as the right time to file an application to the CRTC asking to eliminate their twin regulatory requirements for weekly hours of local news on its 35 CTV stations and the minimum news spending to support them.

But no worries, Bell’s application says it will be fine, it’s really they just don’t like being told where to allocate their budgets:

Bell Media’s local television stations have always been committed to ensuring the coverage of such stories and if our Application is approved, we will continue to do so.  Having the flexibility on how to achieve those goals rather than Commission mandated rules will allow us to provide a better news service to the local communities that we serve. 

There is something much bigger going on here.

Bell simultaneously filed CRTC papers asking for reductions in all other television commitments to Canadian programming. It asked for a reduction in its Canadian Programming Expenditures (CPE) —which includes spending on local news and entertainment— from 30% of revenues to 20%. It also wants to reduce its obligations to air shows in the prestige (and expensive) categories of dramas, comedy, documentaries and award shows, this time from 7.5% to 5% (this spending on ‘Programs of National Interest’ (PNI) is an envelope within the larger CPE budget, as is the 11% spending envelope for local news).

And for good measure, Bell wants to reduce its cable division’s contributions to the Canada Media Fund and local news from 5% of annual revenue to 4%.

Guess what, Corus wants something very similar. Back in November 2022 the Shaw family-owned broadcaster quietly filed a request to have its CPE reduced from 30% to 25% and its PNI from 8.5% to 5%. The Commission hasn’t scheduled a hearing yet.

Wait, not done yet. This month Québecor filed CRTC papers asking to cut its TVA local news programming in the Quebec City region and —before the CRTC could do so much as establish a file number— cut its weekend shows as a cheeky fait accompli. Rebuked by the CRTC, Québecor CEO P.K. Pélédeau reinstated the programming and announced layoffs instead.

Here’s how this all fits together.

Now that Bill C-11 is law, the CRTC has begun a lengthy public consultation on a long list of regulatory issues flowing from the new legislation.

Two issues entwined helix-like are what Netflix and the foreign streamers are going to pay into the financing of Canadian programming and how that will be ‘equitable’ to what licensed Canadian broadcasters are already doing with their CPE, PNI and spending on local news. That ‘equitability’ is at the heart of C-11. At the moment, the streamers pay nothing. So the gap is, well, 30% or so.

The ‘30% of revenue’ figure understates the pride of place for Canadian content in programming budgets. In 2021, the ratio of broadcasters’ expenditures on Canadian programming compared to acquisitions of foreign programming was $1.95 billion to $1.35 billion for private broadcasters and $638 million to $25 million for CBC-Radio Canada which has an 85% CPE. Overall, those programming expenditures favour Canadian programming at a rate of two to one. 

By now, you’ve figured it out what’s happening here. The Canadian broadcasters want the gap between them and the streamers closed from both ends, including a reduction of their own spending commitments. Hence, their CRTC applications noted above.

As tales of woe go, the broadcasters have a good one and the fair minded cannot disagree.

Here’s some industry context to demonstrate it.

The CRTC’s tracking of local news dollars falls in the ‘conventional television’ bucket, meaning local stations that are stand-alone or belong to the major networks. Conventional TV has been in the red every year since 2012, usually in double-figure percentages.

For the network stations like CTV, Global, City or TVA, their operations have always been directly cross-subsidized by their profitable ‘specialty’ TV channels and indirectly by their cable operations.

That specialty TV profit margin hasn’t declined too much since 2013 in percentage terms (steady at approximately 25% operating profit) but the revenue has declined 25% from $5.2 billion to $4 billion. As you can’t eat margin, only dollars, there is less profit available to cross subsidize programming that loses money: chiefly, PNI and local news. And that specialty TV blood bag is getting drained by the rising costs of acquiring the cheap US programming that audiences demand.

Bell, Corus and Québecor —we haven’t heard from Rogers as yet— say they can’t wait for the Bill C-11 hearings to result in lower regulatory obligations (presumptuous, yes). They want relief now, and so their applications are for mid-term license relief (to be fair, their five-year licenses expired in 2022 but have been extended twice by the CRTC until August 31, 2024).

Besides wanting to pay less, both Bell and Corus have something more structural in mind and of central importance to how we have always financed Canadian content. They want to shift their mandatory PNI spending to popular genres like lifestyle and reality TV where they think they can make money and not lose money competing head-on with the dramas streamed by Netflix, Disney and Amazon.

But reducing PNI has a knock-on effect upon the independent Canadian producers who make the bulk of Canadian television dramas.

More to come.

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